Qualified Institutional Buyers (''Qibs' R

IMPORTANT NOTICE THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) QUALIFIED INSTITUTIONAL BUYERS (‘‘QIBS’’) IN RELIANCE ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), PROVIDED BY RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’) OR (2) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT (‘‘REGULATION S’’). IMPORTANT: You must read the following before continuing. The following applies to the offering memorandum following this disclaimer (the ‘‘Offering Memorandum’’), and you are therefore advised to read this carefully before reading, accessing or making any other use of the Offering Memorandum. In accessing the Offering Memorandum, you agree to be bound by the following terms and conditions, including any modifications to them, any time you receive any information from us as a result of such access and you agree that Petkim Petrokimya Holding A.¸S., together with its subsidiaries and affiliates and others will rely upon the truth and accuracy of the following representations, acknowledgements and agreements. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE NOTES (AS DEFINED IN THE OFFERING MEMORANDUM) HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE NOTES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE OFFERING MEMORANDUM IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of your representations: In order to be eligible to view the Offering Memorandum or make an investment decision with respect to the Notes, investors must either (1) be QIBs (within the meaning of Rule 144A) or (2) be outside the United States in compliance with Regulation S. The Offering Memorandum is being sent at your request and by accepting the e-mail and accessing the Offering Memorandum, you shall be deemed to have represented to us that (1) you and any customers you represent are either (a) QIBs or (b) you and the electronic mail (or e-mail) address that you gave us and to which this electronic mail has been delivered are not located in the United States and (2) you consent to delivery of such Offering Memorandum by electronic transmission. You are reminded that the Offering Memorandum has been delivered to you on the basis that you are a person into whose possession the Offering Memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver the Offering Memorandum to any other person. The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and any of Goldman Sachs International and J.P. Morgan Securities plc (each, a ‘‘Joint Global Coordinator’’ and together, the ‘‘Joint Global Coordinators’’), Citigroup Global Markets Limited (together with the Joint Global Coordinators, the ‘‘Joint Bookrunners’’) and Societ´ e´ Gen´ erale´ and VTB Capital plc (together with the Joint Bookrunners, the ‘‘Joint Lead Managers’’) or any affiliate of the Joint Lead Managers is a licensed broker or dealer in that jurisdiction, the offer shall be deemed to be made by the Joint Lead Managers or such affiliate on behalf of the Issuer (as defined in the Offering Memorandum) in such jurisdiction. No person may communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by it in connection with the issue or sale of the Notes other than in circumstances in which Section 21(1) of the FSMA does not apply. The attached Offering Memorandum may only be distributed to, and is only directed at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘‘Order’’), (b) high net worth bodies corporate falling within Article 49(2) of the Order, and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as ‘‘relevant persons’’). Any person who is not a relevant person should not act or rely on this Offering Memorandum or any of its contents. The Offering Memorandum has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of the Issuer, the Joint Lead Managers or any person who controls them, nor any director, officer, employee or agent of any of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Offering Memorandum distributed to you in electronic format and the hard copy version available to you on request from the Joint Lead Managers. 8JAN201811595616 Petkim Petrokimya Holding A.¸S. U.S.$500,000,000 5.875 per cent. Notes due 2023 The U.S.$500,000,000 5.875 per cent. Notes due 2023 (the ‘‘Notes’’) are issued by Petkim Petrokimya Holding A.¸S. (the ‘‘Issuer’’ or ‘‘Petkim’’ and together with its subsidiaries, the ‘‘Group’’).

Interest on the Notes is payable semi-annually in arrear on 26 January and 26 July in each year and the first payment shall be made on 26 July 2018. The Notes mature on 26 January 2023.

All payments in respect of the Notes shall be made without withholding or deduction for, or on account of, taxes imposed or levied by or on behalf of a Relevant Jurisdiction (as defined in ‘‘Terms and Conditions of the Notes—Taxation’’) to the extent described under ‘‘Terms and Conditions of the Notes— Taxation’’. Under current Turkish tax law, withholding tax at the rate of 0 per cent. applies to payments of interest on the Notes. See ‘‘Taxation—Certain Turkish Tax Considerations’’. The Issuer may, at its option, redeem the Notes in whole, but not in part, at any time at par plus accrued interest, in the event of certain tax changes as described under ‘‘Terms and Conditions of the Notes—Redemption and Purchase—Redemption for Taxation Reasons’’. On the occurrence of a Change of Control (as defined in the terms and conditions of the Notes (the ‘‘Conditions’’)), each Noteholder shall have the option to give notice requiring the Issuer to redeem or, at the Issuer’s option, purchase (or procure the purchase of) each Note held by the relevant Noteholder on the purchase date, at 101 per cent. of the principal amount of the Note together with accrued interest (if any). See ‘‘Terms and Conditions of the Notes— Redemption at the Option of the Noteholders upon a Change of Control’’. Application has been made to the Irish Stock Exchange plc (the ‘‘Irish Stock Exchange’’) for the approval of this document (this ‘‘Offering Memorandum’’) as listing particulars. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the official list of the Irish Stock Exchange (the ‘‘Official List’’) and to trading on the Global Exchange Market of the Irish Stock Exchange (the ‘‘Global Exchange Market’’). The Global Exchange Market is not a regulated market for the purposes of the European Union (‘‘EU’’) Directive 2004/39/EC (as amended) (the ‘‘Markets in Financial Instruments Directive’’). References in this Offering Memorandum to Notes being listed (and all related references) shall mean that such Notes have been admitted to trading on the Global Exchange Market and have been admitted to the Official List. Application has been made to the Capital Markets Board (the ‘‘CMB’’) of the Republic of Turkey (‘‘Turkey’’), in its capacity as competent authority under Law No. 6362 (the ‘‘Capital Markets Law’’) of Turkey relating to capital markets, for its approval of the issuance and sale of the Notes by the Issuer outside Turkey. The Notes cannot be sold before the necessary approvals are obtained from the CMB and an approved issuance certificate (ihra¸c belgesi) is published on the Public Disclosure Platform and the Issuer’s website. The CMB’s approval of the issuance certificate (ihra¸c belgesi), based upon which the offering of the Notes will be conducted, was obtained on 22 December 2017, and the written approval of the CMB relating to the issue of the Notes (which may be in the form of a tranche issuance certificate (in Turkish: tertip ihra¸c belgesi) is expected to be obtained from the CMB on or before the Issue Date (as defined below). The Notes are expected to be rated B1 (stable outlook) by Moody’s Investors Service Ltd. (‘‘Moody’s’’) and B (stable outlook) by Fitch Ratings Limited (‘‘Fitch’’). Each of Moody’s and Fitch is established in the EU, domiciled in the United Kingdom, and is included in the list of credit rating agencies registered in accordance with Regulation (EC) No. 1060/2009 on Credit Rating Agencies as amended by Regulation (EU) No. 513/2011 (the ‘‘CRA Regulation’’). This list is available on the European Securities and Markets Authority (‘‘ESMA’’) website (https://www.esma.europa.eu/supervision/credit-rating-agencies/risk) (last updated 29 March 2017). A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating organisation.

Issue Price: 99.467 per cent. plus accrued interest, if any, from the Issue Date.

The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’), or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold or delivered within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, the Notes are being offered, sold or delivered: (a) in the United States only to qualified institutional buyers (‘‘QIBs’’) (as defined in Rule 144A under the Securities Act (‘‘Rule 144A’’)) in reliance on, and in compliance with, Rule 144A; and (b) outside the United States in reliance on Regulation S under the Securities Act (‘‘Regulation S’’). Each purchaser of the Notes will be deemed to have made the representations described in ‘‘Subscription and Sale’’ and is hereby notified that the offer and sale of Notes to it is being made in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A. In addition, until 40 days after the commencement of the offering, an offer or sale of any of the Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if the offer or sale is made otherwise than in accordance with Rule 144A. The Notes will be issued in registered form in minimum denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes will initially be represented by two global certificates in registered form (the ‘‘Global Certificates’’), one of which will be issued in respect of the Notes (the ‘‘Rule 144A Notes’’) offered and sold in reliance on Rule 144A (the ‘‘Restricted Global Certificate’’) and will be registered in the name of Cede & Co., as nominee for The Depository Trust Company (‘‘DTC’’) and the other of which will be issued in respect of the Notes (‘‘Regulation S Notes’’) offered and sold in reliance on Regulation S (the ‘‘Unrestricted Global Certificate’’) and will be registered in the name of a nominee for a common depositary of Euroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking S.A. (‘‘Clearstream, Luxembourg’’). Interests in the Restricted Global Certificate will be subject to certain restrictions on transfer. See ‘‘Selling and Transfer Restrictions’’. Beneficial interests in the Global Certificates will be shown on, and transfers thereof will be effected only through, records maintained by DTC, Euroclear and Clearstream, Luxembourg and their participants. It is expected that delivery of the Global Certificates will be made on 26 January 2018 or such later date as may be agreed (the ‘‘Issue Date’’) by the Issuer and the Joint Lead Managers (as defined under ‘‘Subscription and Sale’’). Except in limited circumstances, individual certificates will not be issued in exchange for beneficial interests in the Global Certificates. An investment in Notes involves certain risks. Prospective investors should have regard to the factors described under the heading ‘‘Risk Factors’’, beginning on page 21 of this Offering Memorandum.

Joint Global Coordinators Goldman Sachs International J.P. Morgan Joint Bookrunners Goldman Sachs International J.P. Morgan Citigroup

Joint Lead Managers Societ´ e´ Gen´ erale´ VTB Capital The date of this Offering Memorandum is 22 January 2018. IMPORTANT NOTICES We accept responsibility for the information contained in this Offering Memorandum. To the best of our knowledge (having taken all reasonable care to ensure that such is the case) the information contained in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. Any information sourced from third parties contained in this Offering Memorandum has been accurately reproduced and, as far as we are aware and are able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. This third-party information is presented in the following section of this Offering Memorandum: ‘‘Industry Overview’’. Where third-party information has been used in this Offering Memorandum, the source of this information has been identified. Neither the Joint Lead Managers nor BNY Mellon Corporate Trustee Services Limited (the ‘‘Trustee’’) has independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Joint Lead Managers or the Trustee as to the accuracy or completeness of the information contained in this Offering Memorandum or any other information provided by us in connection with the offering of the Notes. No Joint Lead Manager nor the Trustee accepts any liability in relation to the information contained in this Offering Memorandum or any other information provided by us in connection with the offering of the Notes or their distribution. The contents of this Offering Memorandum are not, are not to be construed as, and should not be relied on as, legal, business or tax advice and each prospective investor should consult its own legal and other advisers for any such advice relevant to it. No person is or has been authorised to give any information or to make any representation not contained in or not consistent with this Offering Memorandum or any other information supplied in connection with the offering of the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by us, any of the Joint Lead Managers or the Trustee. Neither this Offering Memorandum nor any other information supplied in connection with the offering of the Notes constitutes an offer or invitation by or on behalf of us, any of the Joint Lead Managers or the Trustee to any person to subscribe for or to purchase any Notes. Neither the delivery of this Offering Memorandum nor the offering, sale or delivery of the Notes shall in any circumstances imply that the information contained herein concerning us is correct at any time subsequent to the date hereof or that any other information supplied in connection with the offering of the Notes is correct as of any time subsequent to the date indicated in the document containing the same. The Joint Lead Managers and the Trustee expressly do not undertake to review our financial condition or affairs during the life of the Notes or to advise any investor in the Notes of any information coming to their attention. This Offering Memorandum does not constitute an offer to sell or the solicitation of an offer to buy the Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Offering Memorandum and the offer or sale of Notes may be restricted by law in certain jurisdictions. We, the Joint Lead Managers and the Trustee do not represent that this Offering Memorandum may be lawfully distributed, or that the Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by us, the Joint Lead Managers or the Trustee which is intended to permit a public offering of the Notes or the distribution of this Offering Memorandum in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Memorandum nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Offering Memorandum or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Offering Memorandum and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Offering Memorandum and the offer or sale of Notes in the United States, the United Kingdom, Turkey and Canada. See ‘‘Subscription and Sale’’. The offering of the Notes has been authorised by the CMB only for the purpose of the issuance and sale of the Notes outside Turkey in accordance with Article 15(b) of Decree 32 on the Protection of the Value of the Turkish Currency (as amended from time to time, the ‘‘Decree 32’’) and the Communique,´ No. VII-128.8 on the Debt Instruments (the ‘‘Communique´’’). The Notes (and any beneficial interests

i therein) must be offered or sold only outside Turkey, and the CMB has authorised the offering of the Notes on the basis that, following the primary sale of the Notes, no transaction that may be deemed as a sale of the Notes (or any beneficial interests therein) in Turkey by way of private placement or public offering may be engaged in. Pursuant to Article 15(d)(ii) of Decree 32, there is no restriction on the purchase or sale of the Notes (or beneficial interests therein) by residents of Turkey, provided that they purchase or sell such Notes (or such beneficial interests) in the financial markets outside Turkey and such sale or purchase is made through banks and/or licensed brokerage institutions authorised pursuant to CMB regulations and the purchase price is transferred through Turkish banks. As such, Turkish residents should use banks or licensed brokerage institutions when purchasing any Notes (or beneficial interests therein) and transfer the purchase price through Turkish banks. The Issuer has obtained the CMB approval letter dated 22 December 2017 and numbered 29833736-105.02.02.02-E.14302 and the CMB approved issuance certificate (onaylanmı¸s ihra¸c belgesi) and the approved tranche issuance certificate (tertip ihra¸c belgesi) will be obtained from the CMB before any sale and issuance of the Notes. Pursuant to the Communique,´ we are required to notify the Central Registry Agency (Merkezi Kayıt Kurulu¸su A.¸S.) (the ‘‘CRA Turkey’’) within three business days from the issue date of the Notes of the principal amount, the issue date, the ISIN (if any), the interest commencement date, the maturity date, the interest rate, the name of the custodian and the currency of the Notes and the country of issuance. IN CONNECTION WITH THE ISSUE OF THE NOTES, GOLDMAN SACHS INTERNATIONAL AS STABILISING MANAGER (THE ‘‘STABILISING MANAGER’’) (OR PERSON(S) ACTING ON BEHALF OF THE STABILISING MANAGER) MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE STABILISING MANAGER (OR PERSONS ACTING ON BEHALF OF THE STABILISING MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE STABILISING MANAGER (OR PERSONS ACTING ON BEHALF OF THE STABILISING MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, WE MAY NOT (WHETHER THROUGH OVER-ALLOTMENT OR OTHERWISE) ISSUE MORE NOTES THAN HAVE BEEN APPROVED BY THE CMB. This Offering Memorandum is being provided in the United States to a limited number of QIBs for informational use solely in connection with the consideration of the purchase of the Notes. It may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents disclosed to anyone other than the prospective investors to whom it is originally submitted. Each purchaser or holder of interests in the Notes will be deemed, by its acceptance or purchase of any such Notes, to have made certain representations and agreements as set out in ‘‘Selling and Transfer Restrictions’’. In this Offering Memorandum, the terms ‘‘Group’’, ‘‘we’’, ‘‘us’’ and ‘‘our’’ refer to the Issuer and collectively to the Issuer and its subsidiaries on a consolidated basis as the context requires. Neither this Offering Memorandum nor any other information supplied in connection with the offering of the Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer or any of the Joint Lead Managers that any recipient of this Offering Memorandum or any other information supplied in connection with the offer or sale of the Notes should purchase the Notes. Each person contemplating making an investment in the Notes must make its own investigation and analysis of the creditworthiness of the Issuer and its own determination of the suitability of any such investment, with particular reference to its own investment objectives and experience, and any other factors that may be relevant to it in connection with such investment. In particular, each potential investor should: • have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Offering Memorandum or any applicable supplement;

ii • have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact such investment will have on its overall investment portfolio; • have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal and profit payments is different from the potential investor’s currency; • understand thoroughly the terms of the Notes and be familiar with the behaviour of financial markets in which they participate; and • be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. None of the Issuer, the Joint Lead Managers or any of their respective representatives is making any representation to any offeree or purchaser of the Notes (or beneficial interests therein) regarding the legality of any investment by such offeree or purchaser under applicable legal investment or similar laws. Each investor should consult with its own advisers as to the legal, tax, business, financial and related aspects of an investment in the Notes. MIFID II product governance / Professional investors and Eligible Counterparties only target market—Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in Directive 2014/65/EU (as amended, ‘‘MiFID II’’); and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a ‘‘distributor’’) should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels. PRIIPs Regulation / Prohibition of sales to EEA retail investors—The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (‘‘EEA’’). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the ‘‘Insurance Mediation Directive’’), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the ‘‘PRIIPs Regulation’’) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.

NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED STATES THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY IN THE UNITED STATES, NOR HAS ANY SUCH COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES. THE NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. AS A PROSPECTIVE INVESTOR, YOU SHOULD BE AWARE THAT YOU MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. PLEASE REFER TO THE SECTIONS IN THIS OFFERING MEMORANDUM ENTITLED ‘‘SUBSCRIPTION AND SALE’’ AND ‘‘SELLING AND TRANSFER RESTRICTIONS.’’

iii NOTICE TO PROSPECTIVE INVESTORS IN CANADA The Notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal, that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), or section 1.1 of National Instrument 45-106 Prospectus Exemptions and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this Offering Memorandum (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal adviser. Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the initial purchasers are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

iv FORWARD-LOOKING STATEMENTS This Offering Memorandum includes forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Offering Memorandum, including, without limitation, certain statements regarding our operations, financial position, and business strategy, may constitute forward- looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as ‘‘may’’, ‘‘will’’, ‘‘expect’’, ‘‘intend’’, ‘‘estimate’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘continue’’, or similar statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable at this time, we can give no assurance that such expectations will prove to be correct. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations are contained in cautionary statements in this Offering Memorandum, including, without limitation, in conjunction with the forward-looking statements listed below, and include, among others, the following: • the cyclical nature of the petrochemicals industry; • Turkish and global economic and financial market conditions; • volatility in the price of oil and natural gas; • disruption in the supply of raw materials and access to electricity; • competition in the petrochemicals industry; • changes in environmental and other laws and regulations; • pipeline leaks and ruptures, explosions, fires, mechanical failures, transportation interruptions or truck accidents, chemical spills, discharges or releases of toxic or hazardous substances or gases, storage tank leaks or other similar events; • challenges in connection with the construction of the STAR Refinery (as defined herein); • fluctuations in exchange rates and inventory prices; • natural disasters, terrorist activities and disruptive geopolitical events; • interruptions or failures in our information technology systems; • deterioration in employee relations; and • adverse political or economic developments in Turkey. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements.

HISTORICAL AND CURRENT MARKET AND INDUSTRY DATA Historical and current market data used throughout this Offering Memorandum were obtained from internal company analyses, consultants’ reports and industry publications. In particular, information has been provided by Nexant, Inc. (‘‘Nexant’’), an industry consultant. Industry surveys and publications generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of information contained therein is not guaranteed. While we accept responsibility for the accurate extraction and reproduction of this market data, we have not independently verified such data and cannot guarantee its accuracy or completeness. In addition, certain statements in this Offering Memorandum regarding the petrochemicals industry, our position in that industry and our market share are based on internal company estimates, our experience and investigations of market conditions and our review of industry positions. We cannot assure you that any of the assumptions underlying those statements are accurate or correctly reflect our position in the industries. Similarly, internal company analyses, while believed by us to be reliable, have not been verified by any independent sources, and neither we nor any of the Joint Lead Managers make any representation as to the accuracy of such information. While we are not aware of any misstatements regarding any industry or similar data presented herein, such data involve risks and uncertainties and

v are subject to change based on various factors, including those discussed under the ‘‘Risk Factors’’ section in this Offering Memorandum. Nexant conducted its analysis and prepared its reports utilising reasonable care and skill in applying methods of analysis consistent with normal industry practice. All results are based on information available at the time of review. Changes in factors upon which the review was based could affect the results. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen, including the actions of governments, individuals, third parties and competitors. There is no implied warranty of merchantability or fitness for a particular purpose to apply. Some of the information on which the Nexant reports are based has been provided by others. Nexant has utilised such information without verification unless specifically noted otherwise. Nexant accepts no liability for errors or inaccuracies in information provided by others.

AVAILABLE INFORMATION We are not currently required to file periodic reports under Section 13 or 15 of the United States Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’) with the United States Securities and Exchange Commission. To permit compliance with Rule 144A in connection with any resales or other transfers of Notes that are ‘‘restricted securities’’ within the meaning of the Securities Act, we have undertaken to furnish, upon the request of a holder of such Notes or any beneficial interest therein, to such holder or to a prospective purchaser designated by him, the information required to be delivered under Rule 144A(d)(4) under the Securities Act if, at the time of the request, we are neither a reporting company under Section 13 or 15(d) of the Exchange Act nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder.

ENFORCEABILITY OF JUDGMENTS We are a corporation organised under the laws of Turkey. Certain of the officers and directors named herein reside in Turkey and all or a substantial portion of our assets and of such officers and directors are located outside the United Kingdom and the United States. As a result, it may not be possible for investors to effect service of process in the United Kingdom or the United States upon us or such persons, or to enforce judgments against them obtained in the courts of the United Kingdom or the United States. In order to enforce such judgments in Turkey, investors should initiate enforcement lawsuits before the competent Turkish courts. In accordance with Articles 50 to 59 of Turkey’s International Private and Procedure Law (Law No. 5718), the courts of Turkey will not enforce any judgment obtained in a court established in a country other than Turkey unless: (a) there is in effect a treaty between such country and Turkey providing for reciprocal enforcement of court judgments; (b) there is de facto enforcement in such country of judgments rendered by Turkish courts; or (c) there is a provision in the laws of such country that provides for the enforcement of judgments of the Turkish courts. There is no treaty between Turkey and the United Kingdom or between Turkey and the United States providing for reciprocal enforcement of judgments. Turkish courts have rendered at least one judgment confirming de facto reciprocity between Turkey and the United Kingdom; however, since de facto reciprocity is decided by the relevant court on a case-by-case basis, there is uncertainty as to the enforceability of court judgments obtained in the United Kingdom by Turkish courts. There is no de facto reciprocity between the United States and Turkey. Moreover, there is uncertainty as to the ability of an investor to bring an original action in Turkey based upon any non-Turkish securities laws. In addition, the courts of Turkey will not enforce any judgment obtained in a court established in a country other than Turkey if: (a) the defendant was not duly summoned or represented or the defendant’s fundamental procedural rights were not observed; (b) the judgment in question was rendered with respect to a matter within the exclusive jurisdiction of the courts of Turkey;

vi (c) the judgment is incompatible with a judgment of a court in Turkey between the same parties and relating to the same issues or, as the case may be, with an earlier foreign judgment on the same issue and enforceable in Turkey; (d) the judgment is not of a civil nature; (e) the judgment is clearly against public policy rules of Turkey; (f) the judgment is not final and binding with no further recourse for appeal or similar revision process under the laws of the country where the judgment has been rendered; or (g) the judgment was rendered by a foreign court that has deemed itself competent even though it has no actual relationship with the parties or the subject matter at hand. Furthermore, to be enforceable under the laws of Turkey, the choice of laws of a foreign jurisdiction or submission to the jurisdiction of the courts of such a foreign jurisdiction should indicate the competent courts with sufficient precision. Therefore, lack of precision while determining the competent court of a foreign jurisdiction may render the choice of foreign court unenforceable. As a result, it may not be possible to: • effect service of process outside Turkey upon any of the directors and executive officers named in this Offering Memorandum; or • enforce, in Turkey, court judgments obtained in courts of jurisdictions other than Turkey against us or any of the directors and executive officers named in this Offering Memorandum in any action.

vii PRESENTATION OF FINANCIAL AND OTHER INFORMATION Financial Information As we are listed on the Istanbul Bourse (the ‘‘Borsa Istanbul’’), our consolidated financial statements are required to be prepared in conformity with the accounting standards issued by the Public Oversight Accounting and Auditing Standards Authority in Turkey (‘‘POA’’), which contain Turkish Financial Reporting Standards and its addendum and interpretations (‘‘Turkish Accounting Standards’’). The consolidated financial statements have not been prepared in accordance with the international accounting standards adopted pursuant to the procedure of Article 3 of Regulation (EC) No. 1606/2002. There may be material differences in the financial information had Regulation (EC) No. 1606/2002 been applied to our historical consolidated financial information. Our consolidated financial statements include: • the unaudited interim condensed consolidated financial statements as at and for the nine months ended 30 September 2017, which include comparative financial information as at and for the nine months ended 30 September 2016 (the ‘‘2017 Unaudited Interim Financial Statements’’); • the unaudited interim condensed consolidated financial statements as at and for the nine months ended 30 September 2016, which include comparative financial information as at and for the nine months ended 30 September 2015 (the ‘‘2016 Unaudited Interim Financial Statements’’ and, together with the 2017 Unaudited Interim Financial Statements, the ‘‘Unaudited Interim Financial Statements’’); • the audited consolidated financial statements as at and for the year ended 31 December 2016, which include comparative financial information as at and for the year ended 31 December 2015 (the ‘‘2016 Audited Financial Statements’’); and • the audited consolidated financial statements as at and for the year ended 31 December 2015, which include comparative financial information as at and for the year ended 31 December 2014 (the ‘‘2015 Audited Financial Statements’’, and together with the Unaudited Interim Financial Statements and the 2016 Audited Financial Statements, the ‘‘Financial Statements’’). The 2015 Audited Financial Statements and 2016 Audited Financial Statements have been prepared and presented in accordance with Turkish Accounting Standards and the Unaudited Interim Financial Statements have been prepared and presented in accordance with Turkish Accounting Standard 34 ‘‘Interim Financial Reporting’’. Unless otherwise indicated, the financial information presented in this Offering Memorandum is extracted or derived from the Financial Statements, which appear beginning on page F-1 of this Offering Memorandum. Turkish Accounting Standards differ from International Financial Reporting Standards (‘‘IFRS’’) as promulgated by the International Accounting Standards Board (‘‘IASB’’). See ‘‘—Summary of Differences between IFRS and Turkish Accounting Standards’’ below. For future periods, we intend to continue to use Turkish Accounting Standards as our sole basis for reporting and not to publish or otherwise report financial statements in accordance with IFRS. Guney¨ Bagımsız˘ Denetim ve Serbest Muhasebeci Mali Mu¸¨savirlik Anonim Sirketi¸ (‘‘E&Y Turkey’’), a member firm of Ernst & Young Global Limited, independent auditors, have audited the 2015 Audited Financial Statements and the 2016 Audited Financial Statements, as stated in their reports thereon appearing elsewhere herein, without qualification, in accordance with the Standards on Auditing as issued by the CMB and the Auditing Standards, which are part of the Turkish Auditing Standards as issued by the POA. E&Y Turkey was not reappointed as our independent auditor and effective 1 January 2017, PwC Bagımsız˘ Denetim ve Serbest Muhasebeci Mali Mu¸¨savirlik Anonim Sirketi¸ (‘‘PwC Turkey’’), a member firm of PricewaterhouseCoopers, was appointed as our independent auditor. PwC Turkey have reviewed the 2017 Unaudited Interim Financial Statements in accordance with the Standard on Review Engagements 2410, ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ as issued by the POA. This Offering Memorandum also contains certain unaudited financial information for the twelve months ended 30 September 2017, which has been prepared by adding the audited financial information for the year ended 31 December 2016 extracted from the 2016 Audited Financial Statements to the unaudited financial information for the nine months ended 30 September 2017 extracted from the 2017 Unaudited Interim Financial Statements, and then subtracting the unaudited financial information for the nine months ended 30 September 2016 extracted from the 2017 Unaudited Interim Financial Statements. The unaudited financial information for the twelve months ended 30 September 2017 contained in this

viii Offering memorandum has not been prepared in accordance with any generally accepted accounting standards, has not been audited or reviewed in accordance with any generally accepted auditing or review standards and has been prepared for illustrative purposes only and is not necessarily indicative of our results of operations for any future period and is not prepared in the ordinary course of our financial reporting. This Offering Memorandum also includes certain unaudited financial information that has been adjusted to give effect to the offering of the Notes and our acquisition of an 18 per cent. stake in STAR Rafineri A.¸S. from STEA¸S with respect to pro forma cash and cash equivalents, pro forma debt (excluding project finance), pro forma debt, pro forma net debt (excluding project finance), pro forma net debt and pro forma interest expense as at and for the twelve months ended 30 September 2017. This unaudited pro forma financial information has been prepared for illustrative purposes only and does not purport to represent what our actual consolidated financial position would have been had the offering of the Notes and our acquisition of an 18 per cent. stake in STAR Rafineri A.¸S. from STEA¸S occurred on 30 September 2017, nor does it purport to project our financial position at any future date. The unaudited pro forma financial information included in this Offering Memorandum is based on available information and certain assumptions and estimates that we believe are reasonable but may differ from the actual amounts.

Reclassifications 2017 Unaudited Interim Financial Statements In preparing the 2017 Unaudited Interim Financial Statements, we made a number of reclassifications to the comparative information contained therein in respect of the consolidated statement of financial position as at 31 December 2016 and the consolidated statements of financial position and cash flows as at and for the nine months ended 30 September 2016. These related to the reclassification of (1) certain payables with letters of credit to financial institutions from trade payables to third parties to other financial liabilities and (2) certain investments from investment properties to property, plant and equipment. We have evaluated the impact of these revisions both individually and in the aggregate and concluded they are not material to any previously reported annual or interim financial statements. The following tables illustrate the adjustments that would have been made to the consolidated statements of financial position and cash flows as at and for the years ended 31 December 2014, 2015 and 2016, and the nine months ended 30 September 2016 as a result of the reclassifications in the 2017 Unaudited Interim Financial Statements.

Consolidated Statement of Financial Position as at 30 September 2016

As Previously Impact of Reported revisions Adjusted (TL millions) Trade payables ...... 762 (541) 221 Short term borrowings ...... 377 541 918

Consolidated Statement of Cash Flows for the nine months ended 30 September 2016

As Previously Impact of Reported revisions Adjusted (TL millions) Cash flows from operating activities ...... 154 291 445 Cash flows from financing activities ...... (449) (291) (741)

ix Consolidated Statement of Financial Position as at 31 December 2016

As Previously Impact of Reported revisions Adjusted (TL millions) Trade payables ...... 1,085 (702) 383 Short term borrowings ...... 462 702 1,164 Investment properties ...... 928 (927) 1 Property, plant and equipment ...... 1,904 927 2,831

Consolidated Statement of Cash Flows for the year ended 31 December 2016

As Previously Impact of Reported revisions Adjusted (TL millions) Cash flows from operating activities ...... 461 270 732 Cash flows from financing activities ...... (310) (270) (581)

Consolidated Statement of Financial Position as at 31 December 2015

As Previously Impact of Reported revisions Adjusted (TL millions) Trade payables ...... 1,106 (838) 268 Short term borrowings ...... 320 838 1,157

Consolidated Statement of Cash Flows for the year ended 31 December 2015

As Previously Impact of Reported revisions Adjusted (TL millions) Cash flows from operating activities ...... 860 (513) 348 Cash flows from financing activities ...... 319 513 832

Consolidated Statement of Financial Position as at 31 December 2014

As Previously Impact of Reported revisions Adjusted (TL millions) Trade payables ...... 631 (275) 356 Short term borrowings ...... 353 275 628

Consolidated Statement of Cash Flows for the year ended 31 December 2014

As Previously Impact of Reported revisions Adjusted (TL millions) Cash flows from operating activities ...... (31) 50 19 Cash flows from financing activities ...... 295 (50) 245 In this Offering Memorandum, unless stated otherwise, the financial information as at and for the years ended 31 December 2014 and 2015 are derived from the 2015 Audited Financial Statements, the financial information as at and for the year ended 31 December 2016 are derived from the 2016 Audited Financial Statements, the financial information as at and for the nine months ended 30 September 2016 is derived from the 2016 Unaudited Interim Financial Statements, rather than from the 2017 Unaudited Interim Financial Statements, and the financial information as at and for the nine months ended 30 September 2017 is derived from the 2017 Unaudited Interim Financial Statements.

x 2016 Audited Financial Statements In preparing the 2016 Audited Financial Statements, we made a number of reclassifications to the comparative information contained therein in respect of the year ended 31 December 2015. The reclassifications made to our consolidated statement of profit and loss and other comprehensive income statement for the year ended 31 December 2015 are as follows: • trade receivable rediscount income amounting to TL 8 million netted off under other operating expense were classified to other operating income; • deferred finance costs related to trade payables amounting to TL 2 million netted off under cost of sales were classified to other operating loss; and • rent income amounting to TL 11 million shown in other operating income was classified to income from investment activities. The reclassifications made to our consolidated statement of financial position as at 31 December 2015 are as follows: • Social Security Institution (‘‘SSI’’) premium payables to employees amounting to TL 5 million shown in trade payables to third parties were classified to short-term liabilities for employee benefits; and • a payable to the Energy Market Regulatory Authority (‘‘EMRA’’) amounting to TL 2 million shown in short-term provisions was classified to other payables to third parties. The reclassifications made to our consolidated statement of cash flows for the year ended 31 December 2015 were made in accordance with the Turkish Accounting Standards taxonomy published on 6 June 2016. These reclassifications are as follows: • there is a classification in the amount of TL 194 million in relation to ‘‘adjustments related to unrealised foreign exchange translation differences’’ between cash flow generated from operating activities and impact of foreign currency translation differences on cash and cash equivalents; and • there is a classification in the amount of TL 55 million in relation to advances given for fixed assets between cash flow from operating activities and cash flow from investment activities. In this Offering Memorandum, when the year ended 31 December 2015 is being compared to the year ended 31 December 2016, the reclassified financial information for the year ended 31 December 2015 is presented. When the year ended 31 December 2015 is being compared to the year ended 31 December 2014, the un-reclassified financial information for the year ended 31 December 2015 is presented.

Summary of Differences between IFRS and Turkish Accounting Standards The Financial Statements are prepared in accordance with Turkish Accounting Standards. Turkish Accounting Standards require the use of International Reporting Standards (‘‘IAS/IFRS’’) endorsed by the European Union with certain exceptions, including with respect to the application of inflation accounting for the period between January 1 to 31 December 2005. We do not believe that the application of IFRS inflation accounting would not have had a material effect on the Financial Statements.

Non-TAS Financial Measures This Offering Memorandum includes certain measures that are not measures of performance under Turkish Accounting Standards. These include EBITDA and other related measures. Although EBITDA is not a measure of operating income, operating performance or liquidity under Turkish Accounting Standards, we have presented EBITDA because we understand that EBITDA and EBITDA-based indicators are used by some investors to determine a company’s ability to service indebtedness and fund ongoing capital expenditures. EBITDA should not, however, be considered in isolation or as a substitute for operating income as determined by Turkish Accounting Standards, or as an indicator of operating performance, or of cash flows from operating activities as determined in accordance with Turkish Accounting Standards. In addition, EBITDA as reported by us may not be comparable to similarly titled amounts reported by other companies.

xi EXCHANGE RATE INFORMATION The following table sets forth, for the periods indicated, information concerning the high, low, period average and period-end exchange rates for U.S. dollars, expressed as the number of Turkish Lira per U.S. dollar. The rates set forth below are provided solely for your convenience and were not used by us in the preparation of our Financial Statements included elsewhere in this Offering Memorandum. No representation is made that Turkish Lira could have been, or could be, converted into U.S. dollars at that rate or at any other rate.

Exchange Rates High Low Average Period End (TL per U.S.$1.00) 2012 ...... 1.8951 1.7424 1.8008 1.7848 2013 ...... 2.1549 1.7490 1.9058 2.1494 2014 ...... 2.3680 2.0670 2.1880 2.3371 2015 ...... 3.0580 2.2788 2.7255 2.9189 2016 ...... 3.5475 2.7955 3.0248 3.5195 2017 ...... 3.9620 3.4067 3.6472 3.7982 Nine months ended 30 September 2016 ...... 3.0936 2.7955 2.9352 3.0020 Nine months ended 30 September 2017 ...... 3.8822 3.4067 3.5944 3.5641 Twelve months ended 30 September 2017 ...... 3.8822 3.0510 3.5174 3.5641 January 2018 (to 18 January) ...... 3.8046 3.7353 3.7717 3.7677

Source: Bloomberg

xii SUMMARY This summary highlights some information from this Offering Memorandum. It does not contain all of the information that is important in making a decision whether to invest in the Notes. You should read the following summary together with the more detailed information regarding the Group and the Notes being sold in this offering included and incorporated by reference in this Offering Memorandum.

Overview of the Group Petkim was established on 3 April 1965 by the Turkish government and is currently the sole petrochemicals producer of size in Turkey. We produce basic and intermediate petrochemical raw materials with an annual average gross production capacity of 3.6 million tons. In 2016, we operated at 88 per cent. capacity, producing 1.7 million tons of saleable products from a total gross output of 3.1 million tons, and in the twelve months ended 30 September 2017, we operated at 94 per cent. capacity, producing 1.8 million tons of saleable products from a total gross output of 3.3 million tons. The Petkim complex has 14 production plants and one masterbatch unit, as well as seven auxiliary processing units, and covers 19 million square metres. We produce petrochemicals across the integrated value chain based on naphtha and related feedstock, including an ethylene cracker with capacity of 588,000 tons per year, downstream integration into polyolefins and vinyl chain products and direct sales of selected cracking co-products (e.g. aromatics). Our products are used by customers in a wide range of industries, including the plastics, chemistry, packaging, pipe, paint, construction, agriculture, automotive, textiles, pharmaceuticals and detergents industries, among others. Approximately 64 per cent. of our products by value were sold in the domestic market in the nine months ended 30 September 2017, with the remaining 36 per cent. being sold in export markets, where the main destination is Europe. Based on management estimates, as at 31 December 2016, we had a direct domestic market share (based on production capacity) in Turkey of approximately 18 per cent. from our own production, with additional involvement in the domestic market through third party trading. Our facilities are located on the Petkim Peninsula in Aliaga,˘ Turkey on the coast of the Aegean Sea, approximately 50 kilometers from Izmir, which is one of the few coastal areas in Turkey dedicated to industrial activity. As an integrated company, Petkim is located in a strategic area logistically in terms of both sales and procurement of raw materials. Our logistics capabilities are one of our greatest strengths given the strategic location of our assets. Aliaga’s˘ proximity to Izmir, its connection to a large number of Organised Industrial Zones and its access to motorways and railways make it an advantageous location. In addition, sea shipping connections and proximity to ports in the Eastern Mediterranean make it an attractive platform to serve regional and global trade. Additionally, our facilities are very close to the main naphtha exporting regions, including the Black Sea region and Russia, and our operations are located near the Tupra¸¨ s refinery, which is also located at Aliaga.˘ Since the acquisition of Petkim by the SOCAR Group through a privatisation process (as further described under ‘‘—History and Development’’ below), we have undertaken several operational efficiency programmes and investments with the aim of enhancing our competitiveness in the petrochemicals sector. In 2014, for example, we increased the capacity of our main facility ethylene cracker by 13 per cent., bringing its capacity to 588,000 tons per year, and we also increased our PTA production capacity by 50 per cent., bringing the capacity to 105,000 tons per year. This involved investments of approximately U.S.$118 million in our ethylene cracker and U.S.$20 million for the expansion of our PTA production capacity. Following the acquisition of Petkim, the SOCAR Group has been focused on creating an industrial hub on the Petkim Peninsula in Aliaga˘ via various projects. This has included the construction of the STAR Refinery, Turkey’s first privately established refinery, which is intended to provide us with raw material security. It is the first part of the integration chain, with an investment value of U.S.$6.3 billion and a refining capacity of 10 million tons per year. As at 30 November 2017, approximately U.S.$4.9 billion had been invested, of which approximately 46 per cent. was financed by equity and the remainder by debt. As of November 2017, overall construction on the STAR Refinery was approximately 97 per cent. complete and it is expected to come onstream in the third quarter of 2018. On 9 January 2018, we signed a share sale and transfer agreement with STEA¸S for the purchase of an 18 per cent. effective stake in STAR Rafineri A.¸S., and we intend to use the net proceeds from the offering of the Notes to fund a portion of the purchase price. See ‘‘Integration—STAR Refinery’’, ‘‘Strategy—Capitalise on potential for synergies and additional, diversified cash flows through the STAR Refinery, Petlim and other projects’’ and

1 ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’. Another major project was the construction of the Petlim Container Port, which was commissioned in 2016 with an initial capacity of 0.8 million TEU. The terminal’s capacity was expanded to 1.5 million TEU in September 2017, making it Turkey’s third largest port, and is expected to be fully operational in 2018. This investment was undertaken by Petlim, 70 per cent. of which is owned by Petkim, with the remaining 30 per cent. being owned by Goldman Sachs, which acquired this stake in 2014 for U.S.$250 million. The total cost of the development and its financing was approximately U.S.$400 million. In February 2013, Petlim signed a 28-year concession agreement with an optional extension period of 4 years with APM Terminals, which allows APM Terminals to operate the port in exchange for an annual payment, comprising a fixed and a variable component. Under this agreement, APM Terminals is responsible for all operational aspects of the port and associated deliverables, including obtaining permits, while Petlim is responsible for all construction-related aspects of the port, including dredging. The expansion of the port to its current capacity was completed in September 2017, and APM Terminals is expected to obtain all necessary permits for use of the port’s full capacity in the first quarter of 2018. In order to diversify our sources of revenue, we have also invested in a wind farm with a total capacity of 51 MW. The wind farm has 17 new turbines, each able to generate 3 MW of electricity. The construction of all turbines was completed in September 2017, and while the wind farm is currently licensed to generate 25 MW of electricity, we have applied for an amendment to the license which would allow it to generate 51 MW. We plan to sell electricity produced by the wind farm to Turkey’s national grid with a guaranteed tariff. The wind farm is expected to reduce carbon emissions by 120,000 tons per year. The investment in the wind farm amounts to e55 million. Petkim holds a Regional Incentive Certificate for modernisation and replacement investments, as well as a Strategic Incentive Certificate for capacity increases and new investments. These certificates were granted within the scope of the Decree published by the Turkish government in 2012 pursuant to a decision by the Council of Ministers regarding ‘‘State Assistance for Investment’’. These certificates entitle us to certain tax benefits, including VAT exemptions, customs duty exemptions and tax reduction, among other benefits. The incentive certificate regime is intended to support economic development and address Turkey’s current account deficit. Our shares have been listed on Borsa Istanbul since 1990. We had a market capitalisation of approximately U.S.$3.1 billion, or approximately TL 11.7 billion, as at 31 December 2017.

Strengths We believe that we have the following key strengths:

Sole petrochemicals producer in an attractive and growing market We are the sole petrochemicals producer of size in Turkey, with an annual average gross production capacity of 3.6 million tons and an 18 per cent. share of the domestic market (based on production capacity) as at 31 December 2016, based on management estimates, with additional involvement in the domestic market through third party trading. In addition, our market share has been driven primarily by our production capacity, given that we have historically been able to sell everything we have produced. As a result, we are well positioned to benefit from expected growth in the Turkish petrochemicals market. Demand for petrochemicals products in Turkey grew at a compound annual growth rate of 6.6 per cent. during the period from 2012 to 2016 and we expect that it will grow at a compound annual growth rate of 7 per cent. between 2016 and 2023. This reflects growth for the petrochemicals industry of 1.4 times overall projected GDP growth over that period. We believe in particular that growth in demand for petrochemicals products will be underpinned by two trends, the emergence of a ‘‘new middle class’’ in developing countries and the expansion of the usage of petrochemicals products, including new technologies in plastics processing.

2 packaging, pipe, paint, construction, agriculture, automotive, textiles, pharmaceuticals and detergents industries, among others. We have long-standing supply arrangements with our customers and as a local producer in Turkey, are able to offer customers just-in-time inventory management. We are also able to make sales in much smaller volumes than importers, which represents a key competitive advantage. We have sought to strengthen our customer relationships through sectoral meetings, trade shows and customer visits, where we share domestic production capacity and technical know-how with customers. We believe that we benefit from barriers to entry as a result of the burdensome process to obtain licences, permits and approvals from the government for the production of petrochemicals. There are limited suitable locations for a petrochemicals complex and the requirements for country-wide distribution channels and extensive human know-how also represent barriers to entry. As a result of the foregoing factors, no domestic competition is expected to come onstream in Turkey in the near future. While Turkey is an open market, with no customs duties applicable to imports from the European Union, EFTA and/or FTA countries, we are able to protect ourselves against import threats in extraordinary circumstances. We currently benefit from anti-dumping restrictions, including a rate of 16 per cent. to 18 per cent. for PVC for Germany and the United States and a rate of 8.44 per cent. for PA for South Korea. In the event of unfair competition, under World Trade Organisation rules, we can demand the imposition of anti-dumping duties on countries and/or companies engaging in dumping. In addition, the Turkish market is currently protected against imports as a result of import duties. A customs duty of 3 per cent. is applicable to imports from GSP countries and a customs duty of 6.5 per cent. is applicable to imports from all other countries. We also benefit from tariff restrictions for all LDPE imports. In relation to PTA, we have also initiated anti-dumping proceedings and expect a decision later in 2018.

Strong operational track-record across an integrated value chain and well-invested asset base strategically located on the Petkim Peninsula We have a strong operational track record, as evidenced by our ability to maintain our capacity utilisation following an expansion of our ethylene cracker by 13 per cent. and an increase in our PTA production capacity by 50 per cent. in 2014. The operational efficiency projects we have undertaken have also contributed to our ability to maintain and increase our capacity utilisation. For instance, we have been able to increase our polypropylene production in recent periods without any capacity expansions as a result of utilisation improvements. Our total capacity utilisation rates were 87 per cent. and 88 per cent. for the years ended 31 December 2015 and 2016 and 98 per cent. and 100 per cent. for the first and second quarters of 2017, respectively. This is compared to average industry-wide capacity utilisation rates in Europe of 81 per cent. and 78 per cent. in the first and second quarters of 2017, respectively, according to Nexant. Capacity utilisation rates at our ethylene facility were 95 per cent. and 94 per cent. for the years ended 31 December 2015 and 2016 and 100 per cent. for the nine months ended 30 September 2017, respectively. The capacity expansions we have undertaken have also enabled us to increase our energy efficiency, with a reduction in energy costs per ton of 52 per cent. from 2014 to 2016. These factors, along with lower oil prices, tightening availability of steam crackers in the region and weakness of regional currencies, have contributed to significant improvements in our EBITDA margin in recent periods. Our EBITDA margin and average gross profit per ton improved to 24.6 per cent. and U.S.$246/ton in the nine months ended 30 September 2017, compared to 1.9 per cent. and U.S.$43/ton in 2014, respectively. We have systematic and consistent health, safety and environment (‘‘HSE’’) policies which are based on industry best practices. We have adopted an HSE management system, SAFE, which is focused on four pillars: continuous improvement, leadership, risk management and implementation. Our HSE management is focused on four sub-disciplines: occupational health and safety, environment, process safety and plant protection. We employ over 75 full-time HSE professionals across our operations. Our focus on HSE has enabled us to decrease our total recordable injury rate (‘‘TRIR’’) (based on a 12-month rolling average per 200,000 man hours) from 3.22 in June 2016 to 1.11 in November 2017, and we seek to further decrease our TRIR to 0.3 in the short- to mid-term, in line with global petrochemical industry best practice levels. We have a well-invested asset base with well-maintained, custom-built facilities which we have expanded in recent years, including through investments in our ethylene cracker and PTA production capacity. In comparison with European naphtha-based producers, we have a relatively young ethylene cracker which has had very few unplanned stoppages.

3 The strategic location of our assets also provides us with a competitive advantage. Our facilities are located on the Petkim Peninsula in Aliaga,˘ Turkey on the coast of the Aegean Sea, approximately 50 kilometres from Izmir. Its connection to a large number of Organised Industrial Zones and its access to motorways and railways make Aliaga˘ an advantageous location. The Gebze-Izmir Motorway Project, which is currently under construction and is expected to be completed in 2020, is expected to enhance the competitiveness of our location by connecting the area around Istanbul with Izmir. In addition, sea shipping connections and proximity to ports in the Eastern Mediterranean make the Petkim Peninsula an attractive platform to serve regional and global trade. The SOCAR Group is focused on achieving the integration of refineries, petrochemicals production, energy, logistics, distribution and transmission in the Petkim Peninsula. This is expected to further contribute to our strategic location. The project is aimed at transforming the Petkim Peninsula into Turkey’s first Chemical Industry Park and enhancing the competitiveness of the petrochemicals industry in Turkey. This project includes the construction of the STAR Refinery, which is expected to be our main supplier of naphtha and mixed xylene once it comes onstream in 2018. Additionally, our facilities are located very close to the main naphtha exporting regions, including the Black Sea region and Russia, and our operations are located near the Tupra¸¨ s refinery, which is also located at Aliaga.˘ The following map shows the location of our assets:

8JAN201819110297

* The EBITDA used to calculate the ratio of pro forma net debt (excluding project finance) to EBITDA does not exclude the contribution to EBITDA from the Petlim Container Port of TL 38 million for the twelve months ended 30 September 2017, the inclusion of which would result in a ratio of pro forma net debt (excluding project finance) to EBITDA of 1.9x.

4 We benefit from favourable foreign exchange dynamics as a result of our U.S. dollar denominated revenues. Approximately 45 per cent., 40 per cent. and 15 per cent. of our sales are invoiced in Turkish lira, U.S. dollars and euro, respectively, although most of our sales in Turkish lira are indexed to the U.S. dollar exchange rate on the relevant day announced by Turkish Central Bank. Approximately 90 per cent. of our variable costs are denominated in U.S. dollars, with the remainder being denominated in Turkish lira, and our fixed costs are mainly denominated in Turkish lira. As a result, most of our foreign currency exposure is naturally hedged. We also have efficient working capital management, with inventory and payables controls that allow us to maintain favourable working capital metrics in terms of inventory days, receivables days and payables days. On average, our inventory days and receivables days are each 45 days and our payables days are 90 days, although we expect our payables days to decrease once the STAR Refinery comes onstream due to the contractual terms of the offtake agreement. We manage our receivables through a guarantee system via a direct debit system (‘‘DDS’’), guarantee letters and receivable insurance tools. These strong receivables risk management capabilities enable us to sell our products to small- and medium-sized customers, which typically provide us with higher margins in comparison with larger customers. As at 30 September 2017, substantially all of our receivables from local customers were backed by bank guarantees, a system which is accepted by local customers and which enables us to minimise our collection risk, with approximately 86 per cent. of our total receivables being backed by bank guarantees as at the same date. The remaining receivables are with reputable firms which management believes represent relatively low credit risk. This approach represents an important competitive advantage in the local market particularly during periods of economic instability. Our close relationships with local banks as well as our strong receivables risk management capabilities contribute to our ability to achieve stable cash conversion.

Further operational improvement from synergies and integration of the STAR Refinery into our supply chain In 2008, STEA¸S and Turcas, a Turkish oil and energy investment company, established a project company, STAR Rafineri A.¸S., to develop, construct, own and operate a complex crude oil refinery with a processing capacity of 10 million tons of crude oil per annum on the Aegean coast of Turkey (the ‘‘STAR Refinery’’). The refinery is located adjacent to Petkim on the Aliaga˘ industrial peninsula north of Izmir and is expected to employ 750 staff. On 9 January 2018, we signed a share sale and transfer agreement with STEA¸S for the purchase of an 18 per cent. effective stake in STAR Rafineri A.¸S. (by purchasing 30 per cent. of STEA¸S’s stake in a holding company which owns 60 per cent. of STAR Rafineri A.¸S.), and we intend to use the net proceeds from the offering of the Notes to fund a portion of the purchase price. The state of Azerbaijan and STEA¸S currently hold 40 per cent. and 60 per cent. stakes, respectively, in STAR Rafineri A.¸S. (though STEA¸S’s stake is expected to decrease to 42 per cent. following our acquisition). See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’. Since 2014, we have paid an average premium of approximately U.S.$30/ton over the market price for our imported naphtha. When the STAR Refinery comes onstream, we expect to pay a premium of approximately U.S.$6/ton due to logistical synergies, resulting in cost savings of approximately U.S.$24/ton. Based on a weighted average premium cost, we expect to benefit from annual cost savings of approximately U.S.$38 million per year in naphtha premiums. Additionally, we expect cost savings of approximately U.S.$30 million per year in relation to reformate supplied by the STAR Refinery. We also expect the STAR Refinery to provide us with a steady dividend stream over the medium-term. The refinery is a strategic project for Turkey, as it is expected to reduce Turkey’s dependence on imports and decrease the current account deficit. The strategic importance of the STAR Refinery has been confirmed by the fact that it was the first project to receive the ‘‘Strategic Investment Incentive Certificate’’ from the Turkish Ministry of Economy in December 2012. The refinery is located in close proximity to crude oil production sites in the Middle East and the CIS and also benefits from access to key product demand centres in the west of Turkey. It has access to existing port facilities, as well as utilities supply, via our existing infrastructure, which also provides substantial capital cost savings. In addition, the refinery will benefit from on-site offtake by us for naphtha and mixed xylenes. Naphtha is a key feedstock for us and the offtake arrangements with the refinery will provide logistics cost savings for us (compared to imports) and ensure long term reliable supply. Naphtha production and sales to us also mean that the STAR Refinery is not required to produce any gasoline.

5 As of November 2017, overall construction on the STAR Refinery was approximately 97 per cent. complete, and it is expected to come onstream in the third quarter of 2018 with a total investment value of approximately U.S.$6.3 billion. As at 30 November 2017, approximately U.S.$4.9 billion had been invested, of which approximately 47 per cent. was financed by equity (approximately U.S.$2.4 billion invested out of U.S.$2.7 billion committed) and the remainder by debt (approximately U.S.$2.5 billion invested out of U.S.$3.3 billion committed). Approximately U.S.$2.6 billion of the debt financing has a maturity of 18 years with a four year grace period, while the remaining U.S.$600 million has a maturity of 15 years with a four year grace period.

Diversified business profile through ancillary infrastructure and energy investments We also plan to diversify our business profile through the Petlim Container Port and our investment in our wind farm. Petlim, in which we own a 70 per cent. stake, was established in 2010 with the aim of developing land already owned by us, thereby diversifying our sources of revenue. It is now the largest container terminal in the Aegean region and the third largest port in Turkey. In addition, Petlim offers deep water capacity and addresses commercial demand from shipping lines for more efficient access to Turkey’s high growth market. In addition, we have invested in a wind farm, which is expected to result in a 22 per cent. increase in Petkim’s electricity generating capacity and a 120,000 ton reduction in annual carbon emissions. In addition to meeting a portion of our electricity requirements, we plan to sell electricity produced by the wind farm to Turkey’s national grid with a guaranteed tariff. As a result, we expect the port and the wind farm to provide additional stability to our cash flows.

Experienced senior management team and strong support from controlling shareholder Our senior management team has extensive experience in the energy and petrochemicals industry as well as other sectors in Turkey, Azerbaijan and the broader region. Our general manager, Anar Mammadov, has worked at the SOCAR Group since 2009, including as the CEO of SOCAR Georgia and SOCAR Greece. Riza Bozoklar, our Deputy General Manager and CFO, has experience as a CFO at various companies in Turkey, including Fiat-GM Powertrain, TOFAS, Atas Holding, Delphi Automotive and Cimko Cement and Concrete. See ‘‘Directors, Senior Management and Corporate Governance’’. In addition, we enjoy strong support from our controlling shareholder, the SOCAR Group, which is the leading oil and gas company in Azerbaijan with vertically integrated upstream, midstream and downstream operations. The SOCAR Group has made a commitment to Turkey, with the aim of becoming one of the three largest companies in the country. The SOCAR Group has already invested approximately U.S.$18 billion in pursuit of this goal (having invested approximately U.S.$2.8 billion in equity financing into its Turkish operations from 2008 to 2015 through STEA¸S), and expects this investment to increase to U.S.$19.5 billion by 2020. These aims are underpinned by the strategic relationship between Azerbaijan and Turkey, which share historical, linguistic, cultural and political similarities, as well as the geo-strategically important location of Turkey as a transit country in key energy corridors. The National Assembly of Azerbaijan has ratified an agreement for cooperation and mutual assistance, including economic cooperation, military-political and security issues, military and military- technical cooperation and humanitarian issues. In the energy sector, a key agreement was reached on a package of issues relating to the Shah Deniz gas field in 2013 and successful joint projects have included the Trans-Anatolian Natural Gas Pipeline (‘‘TANAP’’) and the Trans-Adriatic Pipeline (‘‘TAP’’). The initial capacity of TANAP is expected to be 16.5 billion cubic metres of gas annually. SOCAR Group is expected to inject further capital in TANAP in the medium term to fund its construction capital expenditure.

6 The graph below sets forth the SOCAR Group’s contribution to Turkey’s gross total and industrial foreign direct investment (‘‘FDI’’) from 2010 to 2016.

Turkey gross FDI inflow (billion US$) Total FDI Industrial FDI SOCAR’s Share in Industrial FDI (%) SOCAR’s Share in Total FDI (%)

18.0 FDI stands for transactions in the external assets and liabilities Industrial’s share out of total FDI 60% 16.1 of an economy, which in SOCAR’s case, means greenfield & is on the decline due to the 51% 16.0 18 brownfield investments. increasing interest in the financial Industrial FDI stands for agriculture, mining, manufacturing services industry 50% 14.0 and energy 12.1 12.0 10.8 40% 9.9 10.0 8.6 8.0 30% 8.0 23% 6.9 6.3 5.8 5.5 4.8 20% 6.0 16% 16% 20% 16% 4.3 12% 4.0 2.9 6% 2.7 8% 8% 8% 10% 3% 2.0 0 0.0 0% 2010 2011 2012 2013 2014 2015 20168JAN201823195294 The graph below sets forth the SOCAR Group’s historical equity contributions in Turkey from 2008 to 2016 (in U.S.$ millions).

1,938

1,361

928

680 689 513 189 420 341 324 680 577 90 500 420 415 107 341 80 234 80 107 2008 2009 2010 2011 2012 2013 2014 2015 2016 STEAS1 TANAP 10JAN201815424920

Note: (1) STEA¸S historical equity contributions include contributions in connection with the Petkim acquisition (including debt service). The SOCAR Group is focused on achieving the integration of refineries, petrochemicals production, energy, logistics, distribution and transmission by 2023. The project is aimed at transforming the Petkim Peninsula into Turkey’s first Chemical Industry Park and enhancing the competitiveness of the petrochemicals industry in Turkey. We also benefit from the expertise of our shareholder in the development and implementation of our strategy. Hayati Ozturk, who worked at Petkim in various roles from 1977 to 2015 and now acts as CEO Adviser at STEA¸S, and Teymur Abasguliyev, the CFO of STEA¸S, provide valuable operational support. Our key financial policies and governance are closely coordinated with STEA¸S, including in relation to our dividend policy, leverage target, liquidity management and foreign exchange management. Finally, the SOCAR Group has demonstrated its commitment to Petkim through a cross-default clause in relation to its outstanding bonds.

7 Strategy Continue to pursue operational efficiency programmes We are focused on achieving operating efficiencies across our organisation, including through the integration of our sales, trading, manufacturing, procurement and maintenance functions. We have also improved productivity at our plants, including through energy efficiency projects, an initiative we intend to continue to pursue. We have developed an integrated optimisation model, which will monitor a wide range of factors across our production facilities to optimise maintenance schedules. Digitisation is also an area of focus for us. For example, the digitisation of our production facilities has enabled us to monitor and control the temperature of our furnaces more efficiently, which has resulted in significant cost savings. In January 2017, we also introduced an operational excellence programme (called ‘Petkim Benim’, translated as ‘My Petkim’) which is aimed at creating a working environment in which employees and other stakeholders throughout our entire business are involved in the decision-making process around improving operational efficiency across four main areas of focus. The first area of focus is improving production and energy efficiency and reducing maintenance costs; the second is digitisation with a view to improving the integration of our business functions through advanced analytics; the third is promoting commercial excellence to increase sales force effectiveness and revenues; and the fourth is implementing a dynamic procurement strategy which results in optimal solutions with vendors and better inventory management. As a result of current and planned investments in the operational excellence program, we aim to realise financial savings of approximately U.S.$50 million by the end of 2018. Finally, we have implemented certain efficiency measures aimed at enhancing profitability. These have included, for example, working capital measures designed to improve inventory days and payables days, as well as measures intended to facilitate efficient and secure receivables collection. We will continue to implement these types of programmes in future periods in order to improve our working capital position.

8 We also plan to pursue additional cash flow streams in order to diversify our sources of revenue, including through Petlim, in which we own a 70 per cent. stake. Petlim was established in 2010 with the aim of developing land already owned by us, thereby diversifying our sources of revenue. It is now the largest container terminal in the Aegean region and the third largest port in Turkey. In addition, Petlim offers deep water capacity and addresses commercial demand from shipping lines for more efficient access to Turkey’s high growth market. In February 2013, Petlim signed a 28-year concession agreement with an optional extension period of 4 years with APM Terminals, which allows APM Terminals to operate the port in exchange for an annual payment, comprising a fixed and a variable component. The operations agreement between parties has been drafted in a way which seeks to apportion the primary risks to those parties in the best position to manage those risks. In this respect, the operational criteria, operational performance and associated deliverables, such as requisite permits, rest entirely with APM Terminals while all construction responsibilities, including dredging, lie with Petlim. Construction of the port has been completed. While the completion of Petlim has not resulted in an operational benefit to our core petrochemicals business since it is a container port that does not ship chemicals or feedstock, we believe that it represents a significant potential cash flow stream due to the positive outlook for container traffic in the Aegean region. We also expect cost savings on shipments for any expansion projects which we may undertake in the future. Petlim shareholders will be the sole beneficiary of cash flows from Petlim once the Petlim project finance loan is fully amortised. Finally, we plan to develop an additional cash flow stream through the wind farm in which we have invested. The wind farm is expected to result in a 22 per cent. increase in Petkim’s electricity generating capacity and a 120,000 ton reduction in annual carbon emissions. In addition to meeting a portion of our electricity requirements, we plan to sell electricity produced by the wind farm to Turkey’s national grid with a guaranteed tariff. As a result, we expect the port and the wind farm to provide additional stability to our cash flows.

Continue to invest in improving our asset base We intend to continue to invest in our asset base in order to increase capacity to meet demand for our products and increase efficiency across our operations. In particular, although we do not plan to increase production capacity in the near term, we plan to add capacity in Petkim Specialities, with expansions coming onstream in 2018 and 2019. Petkim Specialities will produce advanced masterbatch and compounds for which Turkey currently has a significant net import position. We have continuously invested in the Aliaga˘ Complex since its inception, increasing capacity, renovating, modernising and improving energy efficiency. In 2005, for example, we completed expansions of our ethylene, LDPE and polypropylene plants. We also increased capacity at the aromatics plant. In 2014, we increased the capacity of our main facility ethylene cracker by 13 per cent., bringing its capacity to 588,000 tons per year, and we also increased our PTA production capacity by 50 per cent., bringing the capacity to 105,000 tons per year. This involved investments of approximately U.S.$118 million in our ethylene cracker and U.S.$20 million for the expansion of our PTA production capacity. We have been able to maintain our capacity utilisation following these investments and have improved our energy efficiency, with a reduction in energy costs per ton of 52 per cent. from 2014 to 2016.

Expand our trading business We are focused on continuing to grow our trading business through the utilisation of excess capacity across our sales team in Turkey. Through our trading business, we import products from Azerbaijan as well as third parties in Saudi Arabia and South Korea. In addition to polypropylene, we also trade in products that we do not produce, including styrenes. We believe that the expansion of our trading business will not only help us to increase our sales but will also aid us in maintaining our market share in the Turkish market.

The Issuer The Issuer, Petkim Petrokimya Holding A.¸S., was incorporated in Turkey on 3 April 1965 with registration number 314 in the Aliaga˘ Trade Register. The address of the Issuer’s registered office is Siteler Mh. Necmettin Giritlioglu Cd. No:6, Aliaga˘ 35800 ˙Izmir, Turkey and its telephone number is +90 232 616 12 40. SOCAR Turkey Petrokimya, a wholly-owned subsidiary of STEA¸S, owns 51 per cent. of the Issuer’s shares. STEA¸S is in turn owned by SOCAR and Goldman Sachs, who hold 87 per cent.

9 and 13 per cent. of STEA¸S’s shares, respectively. The remaining 49 per cent. of the Issuer’s shares (other than the Group share owned by the Turkish Privatisation Administration) are owned by third party shareholders (free float) pursuant to the Issuer’s listing on Borsa Istanbul, which occurred in 1990.

Corporate Structure The following diagram depicts our corporate structure as at the date of this Offering Memorandum:

State Oil Company of Goldman Sachs Azerbaijan Republic International (“SOCAR”) 13% 87%

70% The Republic of SOCAR Turkey Rafineri Holding A.S¸. Azerbaijan Ministry of Enerji A.S¸ .(“STEAS¸ ”) Petkim will acquire 30% of Economy and Industry STEA S’ stake in Refinery Holding which owns 60% of 60% STAR. Effectively Petkim will end up owning 18% of STAR 40% SOCAR Turkey 100% 30% Yatirim A.S¸.

100%

The Turkish Government holds SOCAR Turkey a golden share in Petkim STAR Rafineri A.S¸. Petrokimya A.S¸ . (“SOCAR (“STAR Refinery”) Turkey Petrokimya”) Issuer 51% SOCAR and related parties 49% The Notes Free Float ISE Ticker: PETKM Petrokimya Holding A.S¸. External Shareholders (“Petkim”) Bank Loans and Trade Finance STAR Refinery 70% Akbank Project Bank Facilities Goldman Sachs 30% Petlim Limancilik Ticaret Finance Credit International A.S¸ . (“Petlim”) Agreement The Notes8JAN201823195160 The Turkish Privatisation Administration holds a Group C preferential, or ‘‘golden’’, share in the Issuer that carries special rights. In particular, the validity of decisions taken by the Board on the following matters depends on the affirmative vote of the member of Board elected from holders of the Group C shares: (i) modifications of the Articles of Association that will affect the privileges assigned to Group C share; (ii) registration of the transfer of registered shares on the share ledger; (iii) determination of the form of power of attorney indicated in the Article 31 of the present Articles of Association; (iv) decisions stipulating a decrease of at least 10 per cent. in the capacity of any plant owned by the Issuer; (v) the Issuer’s establishment of a new company or partnership, acquisition of a company being partner to and/or merging with an existing company, separation, dematerialisation, annulment and liquidation of the Issuer. The project finance credit agreement with Akbank in relation to the Petlim Container Port, which is guaranteed by us, is an obligation of Petlim and all other loans and trade financing commitments are obligations of Petkim. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Facilities’’.

10 Overview of the Offering The following is a summary of the terms of this offering. For a more complete description of the terms of the Notes, see ‘‘Terms and Conditions of the Notes’’ in this Offering Memorandum. Capitalized terms used herein without definition shall have the meanings ascribed thereto in ‘‘Terms and Conditions of the Notes’’.

Issuer ...... Petkim Petrokimya Holding A.¸S. Description of Notes ...... U.S.$500,000,000 5.875 per cent. Notes due 2023. Issue Price ...... 99.467 per cent. Issue Date ...... 26 January 2018. Currency ...... U.S. dollars. Final Redemption and Maturity Date ...... Unless previously redeemed in accordance with Condition 7 (Redemption and Purchase), the Notes will be redeemed at their principal amount on 26 January 2023 (the ‘‘Maturity Date’’). Interest ...... The Notes will bear interest from and including the Issue Date at the rate of 5.875 per cent. per annum, payable semi-annually in arrear on 26 January and 26 July in each year. Yield ...... 6.000 per cent. Risk Factors ...... An investment in the Notes involves risks. Investors should read carefully the risks described in more detail in ‘‘Risk Factors’’ and all of the information contained in this Offering Memorandum before deciding whether or not to purchase any Notes. The order in which these risks are presented is not intended to provide an indication of the likelihood of their occurrence or of their severity or significance. This Offering Memorandum also contains forward-looking statements that are subject to future events, risks and uncertainties. The actual outcome could differ materially from the outcome anticipated in these forward-looking statements as a result of many factors, including but not limited to the risks described in this Offering Memorandum. See ‘‘Forward- Looking Statements’’. Joint Global Coordinators ...... Goldman Sachs International and J.P. Morgan Securities plc. Joint Bookrunners ...... Citigroup Global Markets Limited, Goldman Sachs International and J.P. Morgan Securities plc. Joint Lead Managers ...... Citigroup Global Markets Limited, Goldman Sachs International, J.P. Morgan Securities plc, Societ´ e´ Gen´ erale´ and VTB Capital plc. Trustee ...... BNY Mellon Corporate Trustee Services Limited. Principal Paying Agent ...... The Bank of New York Mellon, London Branch. Registrar ...... The Bank of New York Mellon SA/NV, Luxembourg Branch.

11 Redemption for Taxation Reasons . The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (subject to certain conditions), at their principal amount (together with interest accrued to the date fixed for redemption) if, as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction, or any change in the application or official interpretation of the laws or regulations of a Relevant Jurisdiction, we would be required to pay additional amounts as provided or referred to in Condition 8 (Taxation) and we cannot avoid the requirement by taking reasonable measures available to us. Redemption at the option of the Noteholders upon a Change of Control ...... If at any time a Change of Control occurs, each Noteholder shall have the option to give notice requiring the Issuer to redeem or, at the option of the Issuer, purchase (or procure the purchase of) that Noteholder’s Note(s) at 101 per cent. of the principal amount of the Note(s) together with interest (if any) accrued to (but excluding) the purchase date. Status of the Notes ...... The Notes will constitute direct, general, unsubordinated, unconditional and (subject to the provisions of Condition 4(b) (Limitation on Liens)) unsecured obligations of the Issuer and will rank pari passu amongst themselves and at least pari passu in right of payment, without preference among themselves, with all other unsecured and unsubordinated obligations of ours, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights. Gross up for Withholding Tax .... All payments of principal and interest in respect of the Notes made by or on behalf of the Issuer shall be made without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed or levied by or on behalf of a Relevant Jurisdiction, unless such withholding or deduction is required by law. In that event, we shall pay such additional amounts as may be necessary in order that the net amounts received by the Noteholders after the withholding or deduction shall equal the respective amounts which would have been received in the absence of the withholding or deduction, except that no such additional amounts shall be payable in the circumstances described under Condition 8 (Taxation). Listing, approval and admission to trading ...... Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on the Global Exchange Market, however no assurance can be given that such applications will be accepted. The Global Exchange Market is not a regulated market for the purposes of the Markets in Financial Instruments Directive. The Notes are expected to be listed on or around 26 January 2018. Governing Law ...... The Notes, and any non-contractual obligations arising out of or in connection therewith, will be governed by, and construed in accordance with, English law. See Condition 17 (Governing Law and Submission to Jurisdiction).

12 Form, Transfer and Denominations The Notes will be issued in registered form in minimum denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes will initially be represented by two global certificates in registered form, one of which will be issued in respect of the Notes offered and sold in reliance on Rule 144A, the Restricted Global Certificate, and the other of which will be issued in respect of the Notes offered and sold in reliance on Regulation S, the Unrestricted Global Certificate. The Restricted Global Certificate will be in registered form, without interest coupons attached, will be deposited with a custodian for, and registered in the name of, Cede & Co. as nominee for DTC. The Unrestricted Global Certificate will be in registered form, without interest coupons attached, will be delivered to a common depositary for, and registered in the name of a nominee of, Euroclear and Clearstream, Luxembourg. Except in limited circumstances, certificates for Notes will not be issued in exchange for beneficial interests in the Global Certificates. See Condition 2 (Transfers of Notes and Issue of Definitive Certificates). Interests in the Rule 144A Notes will be subject to certain restrictions on transfer. See ‘‘Summary of Provisions Relating to the Notes While in Global Form’’ and ‘‘Selling and Transfer Restrictions’’. Interests in the Global Certificates will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg, in the case of the Regulation S Notes, and by DTC and its direct and indirect participants, in the case of Rule 144A Notes. Expected Credit Ratings ...... The Notes are expected to be assigned on issue a rating of B1 (stable outlook) by Moody’s and B (stable outlook) by Fitch. Each of Moody’s and Fitch is established in the EU and is registered under the CRA Regulation. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Neither the assigning rating agency nor the Issuer is obliged to provide the holders of the Notes with any notice of any suspension, change or withdrawal of any rating. Fitch and Moody’s are established in the EU, domiciled in the United Kingdom and are included in the list of credit rating agencies registered in accordance with Regulation (EC) No. 1060/2009. This list is available on the ESMA website (https://www.esma.europa.eu/supervision/credit-rating- agencies/risk) (last updated 29 March 2017). Selling Restrictions ...... The Notes have not been nor will be registered under the Securities Act or any state securities laws and may not be offered or sold within the United States, except to QIBs in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A or otherwise pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes may be sold in other jurisdictions only in compliance with applicable laws and regulations. The offer and sale of the Notes (or beneficial interests therein) is also subject to restrictions in the United States, the United Kingdom, Turkey and Canada. See ‘‘Subscription and Sale’’.

13 Use of Proceeds ...... We intend to use the net proceeds from the offering of the Notes, expected to amount to approximately U.S.$491.8 million after deducting fees and expenses, along with cash on hand, to acquire an 18 per cent. stake in STAR Rafineri A.¸S. from STEA¸S pursuant to the share sale and transfer agreement we signed with STEA¸S on 9 January 2018. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’ and ‘‘Use of Proceeds’’. Regulation S Security Codes ..... • ISIN: XS1747548532 • Common Code: 174754853 Rule 144A Security Codes ...... • ISIN: US71638YAA47 • Common Code: 175955658 • CUSIP: 71638Y AA4

14 Summary Financial and Operating Information The tables below show our selected historical consolidated financial information as at and for the nine months ended 30 September 2017 and 2016 and as at and for the years ended 31 December 2016, 2015 and 2014. Unless otherwise indicated, this information has been extracted without material adjustment from the Unaudited Interim Financial Statements, the 2016 Audited Financial Statements and the 2015 Audited Financial Statements. In connection with the preparation of the 2017 Unaudited Interim Financial Statements and the 2016 Audited Financial Statements, certain line items were reclassified. In this section, unless otherwise indicated, the consolidated statement of financial position information as at 31 December 2016 is derived from the 2016 Audited Financial Statements and the consolidated statement of cash flows information for the nine months ended 30 September 2016 is derived from the 2016 Unaudited Interim Financial Statements, rather than from the 2017 Unaudited Interim Financial Statements. In addition, the reclassified comparative financial information as at and for the year ended 31 December 2015 contained in the 2016 Audited Financial Statements is presented. See ‘‘Presentation of Financial and Other Information’’ for further detail on the reclassification. The 2015 Audited Financial Statements and the 2016 Audited Financial Statements have been prepared and presented in accordance with Turkish Accounting Standards and the Unaudited Interim Financial Statements have been prepared and presented in accordance with Turkish Accounting Standard 34 ‘‘Interim Financial Reporting’’. The following selected historical consolidated financial information should be read in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and the Financial Statements, including the notes thereto, included elsewhere in this Offering Memorandum.

Consolidated Statement of Profit or Loss and Comprehensive Income

Nine months ended Year ended 31 December 30 September Twelve months ended 2014 2015 2016 2016 2017 30 September 2017(2) (TL millions) (TL (U.S.$ millions) millions)(1) Revenue ...... 4,133 4,533 4,533 3,253 5,402 6,682 1,900 Cost of sales ...... (4,047) (3,814) (3,575) (2,585) (4,023) (5,013) (1,425) Gross profit ...... 85 718 958 668 1,379 1,669 474 General and administrative expenses ...... (100) (118) (138) (103) (148) (183) (52) Marketing, selling and distribution expenses ...... (27) (32) (42) (31) (43) (54) (15) Research and development expenses ...... (12) (12) (13) (10) (12) (15) (4) Other operating income ...... 119 128 204 113 163 254 72 Other operating expense ..... (127) (180) (240) (66) (100) (274) (78) Operating profit/(loss) ...... (61) 505 729 571 1,238 1,396 397 Income from investing activities . 3 11 17 1 38 54 15 Expenses from investing activities ...... — — (4) — — (4) — Operating profit/(loss) before financial income and expense (58) 516 742 572 1,276 1,446 411 Financial income ...... 141 422 379 195 384 568 161 Financial expense ...... (145) (364) (339) (174) (432) (597) (170) Profit/(loss) before tax ...... (62) 574 782 592 1,227 1,417 403 Current tax expense ...... — (19) (163) (113) (177) (227) (65) Deferred tax income/(expense) . 70 85 113 35 (23) 55 16 Profit for the period ...... 9 639 732 515 1,027 1,244 354

Note: (1) The results for the period are based upon the blended quarterly average exchange rate of TL 3.5174 = U.S.$1.00 for the twelve months ended 30 September 2017. See ‘‘Exchange Rate Information’’. (2) The unaudited financial information for the twelve months ended 30 September 2017 has been prepared by adding the audited financial information for the year ended 31 December 2016 extracted from the 2016 Audited Financial Statements to the unaudited financial information for the nine months ended 30 September 2017 extracted from the 2017 Unaudited Interim Financial Statements, and then subtracting the unaudited financial information for the nine months ended 30 September 2016 extracted from the 2017 Unaudited Interim Financial Statements. See ‘‘Presentation of Financial and Other Information’’.

15 Consolidated Statement of Financial Position

As at 31 December 2014 2015 2016(1) As at 30 September 2017 (TL millions) (TL millions) (U.S.$ millions)(2) Assets Current assets Cash and cash equivalents ...... 702 1,342 1,267 1,208 339 Financial investments ...... — 160 — — — Trade receivables ...... 522 551 674 824 231 Other receivables ...... 21 262 31 90 25 Derivative financial assets ...... 1 2 7 — — Inventories ...... 432 364 604 750 210 Prepaid expenses ...... 56 52 32 66 19 Other current assets ...... 32 35 44 46 13 Total current assets ...... 1,768 2,768 2,660 2,984 837 Non-current assets Financial investments ...... — 9 9 9 3 Other receivables ...... 52 105 423 430 121 Investment properties ...... 1 1 929 1 — Property, plant and equipment ...... 1,817 2,277 1,904 3,036 852 Intangible assets ...... 17 18 22 24 7 Prepaid expenses ...... 55 110 64 79 22 Deferred income tax assets ...... 44 133 245 225 63 Other non-current assets ...... 34 39 12 14 4 Total non-current assets ...... 2,021 2,693 3,609 3,818 1,071 Total assets ...... 3,788 5,461 6,269 6,802 1,908 Liabilities Current liabilities Short term borrowings ...... 353 320 462 1,040 292 Short term portion of long term borrowings ...... 43 42 55 830 233 Derivative financial instruments ...... — 11 0.4 2 1 Trade payables ...... 669 1,137 1,115 562 158 Payables related to employee benefits ...... 26 13 25 20 6 Other payables ...... 12 6 39 14 4 Deferred revenue ...... 18 26 39 70 20 Short term provisions ...... 9 14 4 15 4 Current tax liabilities ...... — 10 49 48 13 Other current liabilities ...... 6 6 8 10 3 Total current liabilities ...... 1,137 1,584 1,797 2,611 733 Non-current liabilities Long term financial liabilities ...... 325 914 1,172 463 130 Derivative financial instruments ...... — — 9 11 3 Deferred revenue ...... 65 69 130 129 36 Long term provisions ...... 79 89 91 95 27 Total non-current liabilities ...... 468 1,071 1,402 698 196 Total liabilities ...... 1,605 2,655 3,199 3,309 928 Equity Equity attributable to owners of the parent company . 2,132 2,741 3,002 3,434 963 Share capital ...... 1,000 1,500 1,500 1,500 421 Adjustment to share capital ...... 487 239 239 239 67 Share premium ...... 466 214 214 214 60 Other comprehensive (expense)/income not to be reclassified to profit and loss ...... (15) (24) (24) (24) (7) Other comprehensive (expense) to be reclassified to profit and loss ...... 1 (7) 1 (5) (1) Restricted reserves ...... 8 37 105 193 54 Retained earnings ...... 178 156 242 280 79 Net profit for the period/year ...... 6 626 726 1,037 291 Non-controlling interest ...... 51 64 68 59 17 Total equity ...... 2,183 2,805 3,069 3,493 980 Total liabilities and equity ...... 3,788 5,461 6,269 6,802 1,908

Note: (1) The consolidated statement of financial position as at 31 December 2016 has not been reclassified to reflect the reclassification in the 2017 Unaudited Interim Financial Statements of (1) certain payables with letters of credit to financial institutions from trade payables to third parties to other financial liabilities and (2) certain investments from investment properties to property, plant and equipment. See ‘‘Presentation of Financial and Other Information’’. The reclassified consolidated statement of financial position as at 31 December 2016 is presented on pages F-80 to F-156. (2) The results as at 30 September 2017 are based upon the spot exchange rate of TL 3.5641 = U.S.$1.00 as at 30 September 2017. See ‘‘Exchange Rate Information’’.

16 Consolidated Statement of Cash Flows

Nine months Year ended ended 31 December 30 September Twelve months ended 2014 2015 2016 2016(1) 2017 30 September 2017(3) (TL millions) (TL (U.S.$ millions) millions)(2) Net cash generated by/(used in) operating activities ...... (31) 860 461 154 978 1,285 365 Net cash generated by/(used in) investing activities ...... 159 (735) (405) (256) (332) (481) (137) Net cash generated by/(used in) financing activities ...... 295 319 (310) (449) (706) (567) (161) Net increase/(decrease) in cash and cash equivalents ...... 423 445 (253) (551) (60) 238 67 Foreign exchange differences on cash and cash equivalents ...... — 194 179 17 1 163 3 Cash and cash equivalents at the beginning of the period ...... 279 702 1,342 1,342 1,267 807 269 Cash and cash equivalents at the end of the period ...... 702 1,342 1,267 807 1,208 1,208 339

Note: (1) The consolidated statement of cash flows for the nine months ended 30 September 2016 is derived from the 2016 Unaudited Interim Financial Statements and has not been reclassified to reflect the reclassification in the 2017 Unaudited Interim Financial Statements of (1) certain payables with letters of credit to financial institutions from trade payables to third parties to other financial liabilities and (2) certain investments from investment properties to property, plant and equipment. See ‘‘Presentation of Financial and Other Information’’. The reclassified consolidated statement of cash flows for the nine months ended 30 September 2016 is presented on pages F-43 to F-79. (2) The results for the period are based upon the blended quarterly average exchange rate of TL 3.5174 = U.S.$1.00 for the twelve months ended 30 September 2017, except that cash and cash equivalents at the beginning of the period are based upon the spot exchange rate of TL 3.0020 = U.S.$1.00 as at 30 September 2016. See ‘‘Exchange Rate Information’’. (3) The unaudited financial information for the twelve months ended 30 September 2017 has been prepared by adding the audited financial information for the year ended 31 December 2016 extracted from the 2016 Audited Financial Statements to the unaudited financial information for the nine months ended 30 September 2017 extracted from the 2017 Unaudited Interim Financial Statements, and then subtracting the unaudited financial information for the nine months ended 30 September 2016 extracted from the 2017 Unaudited Interim Financial Statements. See ‘‘Presentation of Financial and Other Information’’.

Other Financial Data

As at and for the nine Twelve months As at and for the year months ended ended ended 31 December 30 September 30 September 2014 2015 2016 2016 2017 2017(8) EBITDA(1) (TL millions) ...... 72 664 890 609 1,331 1,612 EBITDA (U.S.$ millions(2)) ...... 33 244 294 207 370 458 EBITDA margin(3) ...... 1.7% 14.7% 19.6% 18.7% 24.6% 24.1% Capital expenditure(4) (TL millions)...... 425 575 567 353 339 553 Capital expenditure(5) (U.S.$ millions)...... 194 211 188 120 94 162 Capital expenditure(6) (U.S.$ millions)...... 192 218 179 135 104 148 Maintenance capital expenditure(6) (U.S.$ millions) ...... 40 29 61 50 43 55 Investment capital expenditure(6) (U.S.$ millions) ...... 152 189 118 85 61 93 Cash conversion(7) ...... (22)% 88% 79% 76% 88% 88%

Note: (1) EBITDA is defined as operating profit excluding other operating income and other operating expense, plus depreciation and amortisation (including amounts capitalised as cost of inventories) and provisions.

17 The increase in EBITDA to TL 1,331 million for the nine months ended 30 September 2017 from TL 609 million for the nine months ended 30 September 2016 was attributable to an increase of TL 145 million from changes in the quantity of products sold, an increase of TL 711 million from changes in sales prices, an increase of TL 238 million from changes in foreign exchange (‘‘FX’’) rates and an increase of TL 135 million from other, offset by a decrease of TL 507 million from changes in naphtha prices. The increase in EBITDA to TL 890 million for the year ended 31 December 2016 from TL 664 million for the year ended 31 December 2015 was attributable to an increase of TL 463 million from changes in naphtha prices, an increase of TL 142 million from changes in FX rates and an increase of TL 97 million from other, offset by a decrease of TL 473 million from changes in sales prices and a decrease of TL 4 million from changes in the quantity of products sold. This reconciliation of EBITDA for the nine months ended 30 September 2017 to EBITDA for the nine months ended 30 September 2016 is based on indicative calculations prepared by us, and has not been audited or reviewed by our auditors. (2) EBITDA (U.S.$ millions) for each period is based upon the average exchange rate for each respective period as set out in ‘‘Exchange Rate Information’’. (3) EBITDA margin is defined as EBITDA divided by revenue. (4) Capital expenditure comprises cash outflows from purchases of property, plant and equipment. (5) Capital expenditure, maintenance capital expenditure and investment capital expenditure (U.S.$ millions) for each period is based upon the average exchange rate for each respective period as set out in ‘‘Exchange Rate Information’’. (6) Capital expenditure, maintenance capital expenditure and investment capital expenditure are presented on an accrual basis. (7) Cash conversion is defined as EBITDA less maintenance capital expenditure divided by EBITDA. (8) The unaudited financial information for the twelve months ended 30 September 2017 has been prepared by adding the audited financial information for the year ended 31 December 2016 extracted from the 2016 Audited Financial Statements to the unaudited financial information for the nine months ended 30 September 2017 extracted from the 2017 Unaudited Interim Financial Statements, and then subtracting the unaudited financial information for the nine months ended 30 September 2016 extracted from the 2017 Unaudited Interim Financial Statements. See ‘‘Presentation of Financial and Other Information’’.

Pro Forma Financial Data The table below sets forth certain financial data as at and for the twelve months ended 30 September 2017, as adjusted to give effect to the offering of the Notes and our acquisition of an 18 per cent. stake in STAR Rafineri A.¸S. from STEA¸S.

As at and for the twelve months ended 30 September 2017 (TL millions, (U.S.$ millions)(2) unless ratio) Pro forma cash and cash equivalents(1) ...... 395 111 Pro forma debt (excluding project finance(3)) ...... 3,359 943 Pro forma debt ...... 4,115 1,155 Pro forma net debt (excluding project finance(3)) ...... 2,965 832 Pro forma net debt ...... 3,720 1,044 Pro forma interest expenses ...... 700 199 Ratio of pro forma net debt (excluding project finance)/EBITDA(4) . . . 1.8x — Ratio of pro forma net debt/EBITDA ...... 2.3x — Ratio of EBITDA to pro forma interest expenses ...... 2.3x —

Note: (1) The adjustment corresponds to the aggregate of (1) the amount paid to STEA¸S using available cash reserves for the uses set forth in ‘‘Use of Proceeds’’ pursuant to the STAR Refinery Share Sale Agreement and (2) total estimated fees and expenses associated with the offering of the Notes. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’. Actual fees and expenses may vary. (2) The results for the period are based upon the blended quarterly average exchange rate of TL 3.5174 = U.S.$1.00 for the twelve months ended 30 September 2017 or the spot exchange rate of TL 3.5641 = U.S.$1.00 as at 30 September 2017, as applicable. See ‘‘Exchange Rate Information’’. (3) Project finance represents the amount outstanding under Petlim’s project finance credit agreement with Akbank in relation to the Petlim Container Port. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources—Facilities’’. (4) The EBITDA used to calculate the ratio of pro forma net debt (excluding project finance) to EBITDA does not exclude the contribution to EBITDA from the Petlim Container Port of TL 38 million for the twelve months ended 30 September 2017, the inclusion of which would result in a ratio of pro forma net debt (excluding project finance) to EBITDA of 1.9x.

18 Reconciliations The following table presents a reconciliation of EBITDA to operating profit for the nine months ended 30 September 2017 and 2016 and the years ended 31 December 2016, 2015 and 2014:

Nine months Year ended ended 31 December 30 September Twelve months ended 2014 2015 2016 2016 2017 30 September 2017(4) (TL millions) (TL millions) (U.S.$ millions)(3) Operating profit ...... (61)505 729 571 1,238 1,396 397 Depreciation and amortisation(1) 90 114 125 82 133 176 50 Other operating income ...... (119) (128) (204) (113) (162) (253) (72) Other operating expenses .... 127 179 240 66 100 274 78 Provisions(2) ...... 35 (6) — 3 22 19 5 EBITDA ...... 72 664 890 609 1,331 1,612 458

Note: (1) Depreciation and amortisation includes amounts capitalised as cost of inventories. (2) Provisions relate to employee benefits, impairment on inventories and the reversal of these impairments. (3) The results for the period are based upon the blended quarterly average exchange rate of TL 3.5174 = U.S.$1.00 for the twelve months ended 30 September 2017. See ‘‘Exchange Rate Information’’. (4) The unaudited financial information for the twelve months ended 30 September 2017 has been prepared by adding the audited financial information for the year ended 31 December 2016 extracted from the 2016 Audited Financial Statements to the unaudited financial information for the nine months ended 30 September 2017 extracted from the 2017 Unaudited Interim Financial Statements, and then subtracting the unaudited financial information for the nine months ended 30 September 2016 extracted from the 2017 Unaudited Interim Financial Statements. See ‘‘Presentation of Financial and Other Information’’. The following table, which is based on indicative calculations prepared by us, and has not been audited or reviewed by our auditors, presents a reconciliation of free cash flow to revenue for the twelve months ended 30 September 2017:

Twelve months ended 30 September 2017 (TL millions) (U.S.$ millions)(1) Revenue ...... 6,682 1,900 Cost of sales ...... (5,013) (1,425) Selling, general and administrative expenses ...... (237) (67) Research and development ...... (15) (4) Provisions(2) ...... 18 5 Depreciation and amortisation(3) ...... 176 50 EBITDA(4) ...... 1,612 458 Change in net working capital ...... (394) (112) Capital expenditure(5) ...... (562) (162) Free cash flow ...... 651 185

Note: (1) The results for the period are based upon the blended quarterly average exchange rate of TL 3.5174 = U.S.$1.00 for the twelve months ended 30 September 2017. See ‘‘Exchange Rate Information’’. (2) Provisions relate to employee benefits, impairment on inventories and the reversal of these impairments. (3) Depreciation and amortisation includes amounts capitalised as cost of inventories. (4) EBITDA is defined as operating profit excluding other operating income and other operating expense, plus depreciation and amortisation (including amounts capitalised as cost of inventories) and provisions. (5) Capital expenditure comprises cash outflows from purchases of property, plant and equipment.

19 Other Operating Data

As at and for the nine As at and for the year months ended ended 31 December 30 September 2014 2015 2016 2016 2017 Overall capacity utilisation rate(1) ...... 68% 87% 88% 89% 96% Ethylene ...... 63% 95% 94% 93% 100% Thermoplastics ...... 74% 89% 89% 93% 96% Fibres ...... 66% 70% 85% 79% 98% Other products(2) ...... 68% 85% 83% 86% 91% Total production (kilotons)...... 2,247 3,118 3,129 2,360 2,558 Ethylene ...... 328 558 551 409 441 Thermoplastics ...... 546 662 662 512 530 Fibres ...... 164 196 241 167 207 Other products(3) ...... 1,209 1,701 1,675 1,272 1,380 Gross profit per ton(4) (U.S.$/ton)...... 27 150 181 175 251 Thermoplastics ...... 92 368 395 391 447 Fibres ...... 14 105 138 95 308 Other products(3) ...... (18) (1) 33 26 106

Note: (1) Overall capacity utilisation rate takes into account production across all of our production facilities. (2) Other products utilisation rate takes into account production of aromatics products and derivatives, as well as VCM, CA and MB. (3) Other products include, among others, PA, benzene, P-X, propylene, C4, py-gas, aromatic oil, chlorine, VCM and EDC. (4) Gross profit per ton is calculated as gross profit divided by sales volume.

20 RISK FACTORS An investment in the Notes involves a high degree of risk. Any of the following risks could adversely affect the Issuer’s or the Group’s business, results of operations, financial condition and prospects, in which case the trading price of the Notes could decline, resulting in the loss of all or part of an investment in the Notes, and our ability to pay all or part of the interest or principal on the Notes could be negatively affected. We believe that the following factors may affect our ability to fulfil our obligations under the Notes. All of these factors are contingencies which may or may not occur and we are not in a position to express a view on the likelihood of any such contingency occurring. Factors which we believe may be material for the purpose of assessing the market risks associated with the Notes are also described below. We believe that the factors described below represent the principal risks inherent in investing in the Notes, but we may be unable to pay interest, principal or other amounts on or in connection with the Notes for other reasons, and we do not represent that the statements below regarding the risks of holding the Notes are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Offering Memorandum and reach their own views prior to making any investment decision.

Risks Relating to our Industry and Business The cyclical nature of the petrochemicals industry may reduce our sales and gross margin. Margins in the petrochemicals industry are heavily influenced by industry utilisation, which is in turn influenced by the cycles of expansion and contraction of the global economy, creating volatility in the prices of both inputs and finished products. Due to this cyclical nature, historically the international petrochemicals industry has experienced alternating periods of limited supply, which have caused utilisation to increase, followed by an expansion of production capacity, which has resulted in oversupply and decreased utilisation. Historically, the relationship between margins and utilisation has been highly cyclical due to fluctuations in supply resulting from the timing of new investments in capacity and global economic conditions affecting the relative strength or weakness of demand. Generally, capacity is more likely to be added in periods when current or expected future demand is strong and margins are, or are expected to be, high. Investments in new capacity can result, and in the past frequently have resulted, in overcapacity, which typically leads to a reduction in margins. In response, petrochemicals producers typically reduce capacity or control further capacity additions, eventually causing the market to be relatively undersupplied. In addition, prices of products are set by reference to international market prices and international price trends of key commodities such as oil and natural gas. In line with the high correlation between naphtha prices and oil prices, prior to June 2014, the costs of naphtha based producers such as ourselves were significantly higher than those of their ethane based peers, which resulted in lower EBITDA margins. Subsequently, however, as oil prices declined, the cost of ethylene production for both naphtha based and ethane based producers correspondingly declined, making naphtha based production more competitive in relative terms. Although we expect pricing across our products to remain similar in 2018 and beyond, there can be no assurance that these trends will continue. See ‘‘—Volatility in the price of oil and natural gas may adversely impact our business, results of operations or financial condition’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Operating Results—Supply and Demand Cycle in the Petrochemicals Industry’’. Current market volatility, along with the increased cost of capital in the emerging markets, has resulted in a decline in new investments in the petrochemicals industry as compared to the last ten years. This trend is likely to continue in the short to medium term, with the majority of such investments expected to originate from China, the United States, India and the Middle East, where access to capital in the emerging markets may be an issue. Despite the decline in new investments, the industry may nonetheless experience a period of oversupply depending on demand dynamics. In addition, our performance is particularly influenced by economic cycles affecting companies in the plastics, chemistry, packaging, pipe, paint, construction, agriculture, automotive, textiles, pharmaceuticals and detergents sectors, among others, as our products are used as chemical intermediates in the manufacturing process of such companies. Cyclicality and volatility of earnings in petrochemicals continues to be one of the greatest challenges facing the industry. Unpredictable energy markets, changes in economic growth, capacity expansions,

21 operating performance of existing assets, unplanned supply interruptions, and geopolitical influence on markets represent key variables that are difficult to predict and yet have a significant impact on market cycles and the performance of petrochemicals companies. We cannot predict with any measurable accuracy these pricing trends or economic cycles or the duration and dates of such trends and cycles. Our business, results of operations and financial condition could be adversely affected in the event of oversupply and excess capacity in the petrochemicals industry. Furthermore, increased volatility in industry margins could have a significant impact on our short-term results. In such cases, we would have to absorb any losses or borrow additional funds. If we experience significant margin volatility or if we generate losses over a prolonged period and are unable to obtain additional funds, our liquidity could be materially adversely affected and our ability to make payments on our debt obligations would be impaired.

Unfavourable Turkish and global economic and financial market conditions could adversely affect our business, results of operations and financial condition. We face risks in relation to changes in Turkish and global economic conditions, consumer demand for goods that incorporate our products, changes in interest rates and instability in securities markets globally, among other factors. We cannot predict the future effects of adverse conditions in the Turkish or global economy and financial markets on market demand for our products. In particular, a worsening economic climate can result in decreased industrial output and decreased consumer demand in sectors including plastics, chemistry, packaging, pipe, paint, construction, agriculture, automotive, textiles, pharmaceuticals and detergents, all of which incorporate our products. Adverse economic conditions can affect consumer and business spending generally, which would result in decreased demand for goods that incorporate our products. Our results of operations are dependent upon economic conditions in Turkey, where approximately 64 per cent. of our products by value were sold in the nine months ended 30 September 2017. Turkey’s economy has recorded growth during the past five years, with real GDP growth of 11.1 per cent., 4.8 per cent., 5.2 per cent., 6.1 per cent. and 2.9 per cent. for 2012, 2013, 2014, 2015 and 2016, respectively, according to TURKSTAT. Nonetheless, the pace of growth has slowed, and any further slowdown in growth or the emergence of adverse economic conditions or changes in public perception that result in adverse economic conditions could substantially decrease demand for our products and adversely affect our business. See ‘‘—Risks Relating to Turkey—We are subject to risks associated with Turkey’s political and economic environment’’. Factors that could hinder long-term macroeconomic conditions include an aging population, low population growth and increasing barriers to trade and globalisation. Many of our customers rely on access to credit to adequately fund their operations. The inability of our customers to access credit may adversely affect our business by reducing our sales, increasing our exposure to accounts receivable bad debts and reducing our profitability. Our results of operations are also dependent upon economic conditions in Europe, where approximately 36 per cent. of our products by value, primarily comprising aromatics, were sold in 2017. The global financial and economic crisis resulted in a severe recession in the European Union, followed by a recovery in 2010 and in 2011, with real GDP growth in the Eurozone of 2.1 per cent. and 1.7 per cent., respectively, according to Eurostat. In the wake of the sovereign debt crisis, real GDP contracted by 0.4 per cent. in 2012. This was followed by steady growth of 0.3 per cent., 1.8 per cent., 2.3 per cent. and 1.9 per cent. in 2013, 2014, 2015 and 2016, respectively. There can be no assurance, however, that this growth will continue, particularly given geopolitical risks in the region such as the impact of the United Kingdom’s vote to withdraw from the European Union in June 2016. Moreover, adverse conditions in the credit and financial markets could prevent us from obtaining financing or credit at favourable terms in order to fulfil our financing needs (including the need to refinance or repay our debt obligations, including the Notes). If we are unable to refinance or repay our debt obligations or access the credit and/or capital markets, we may not be able to pursue certain aspects of our business plans, which could materially adversely affect our business, financial condition and results of operations.

22 Volatility in the price of oil and natural gas may adversely impact our business, results of operations and financial condition. Our business is subject to volatility in the prices of crude oil and natural gas. International prices of oil and natural gas fluctuate due to various factors beyond our control. These factors include but are not limited to: • changes in the global supply and demand of crude oil and natural gas as well as the petrochemicals and chemical products derived therefrom; • an increase or decrease in oil or natural gas reserves; • global petrochemicals production capacity trends; • geopolitical developments; • alternative sources of energy; • global economic trends; • currency exchange fluctuations, inflation, local and foreign regulations and political developments in major oil and natural gas producing and consuming countries; • actions by members of the Organisation of Petroleum Producers and Exporting Countries (‘‘OPEC’’), and other oil exporting countries; and • the use of derivative financial instruments related to oil and natural gas. Increases in the prices of oil and natural gas could result in increases to the cost of feedstock for our operations. On the other hand, a decrease in oil prices may reduce the price of our final petrochemicals products. The price of crude oil has fluctuated significantly during the past five years. According to OPEC’s website, the year-end figure for a barrel of crude oil as measured in accordance with OPEC’s reference basket (which represents a weighted average of oil prices collected from various oil producing countries) rose from U.S.$107.46 in 2011 to U.S.$109.45 in 2012, before declining to U.S.$105.87 in 2013, U.S.$96.29 in 2014 and U.S.$49.49 in 2015. Oil prices increased in 2016 and 2017, with a year-end figure of U.S.$40.68 and U.S.$51.64, respectively. The decline in oil prices during the period from 2012 to 2015 led to a decline in the cost of ethylene production for both naphtha based and ethane based producers. There can be no assurance, however, that oil prices will not continue to rise. The prices of oil and natural gas impact our results indirectly through inventory effects, working capital requirements and demand dynamics. Sharp increases in oil and natural gas prices typically lead to significant inventory gains, while rapid decreases in prices typically result in inventory losses. These inventory gains and losses impact our cost of sales and accordingly, our profitability. Higher oil and natural gas prices also lead to an increase in working capital requirements for us, because payments for supplies increase. Higher absolute prices or rapid price increases can also negatively impact consumer demand for our products. As a result of the foregoing factors, any movements in the price of oil and natural gas could adversely affect our business, results of operations and financial condition.

If our contractual arrangements do not enable us to effectively respond to and pass through increases in raw materials to our customers, or we are not able to negotiate required price increases for our products to pass through such increased costs, our results of operations may be negatively affected. Since the value of our chemical products is to a significant extent determined by the raw materials that are required for the production of these products, our profitability strongly depends on the relationship between the sales prices for our products and the costs we incur for raw materials. As prices for most of the raw materials we require tend to be volatile, we constantly need to adjust sales prices, in particular in an environment of rising raw material prices, in order to maintain our profitability. The most significant direct cost associated with the production of our products is naphtha. We purchase naphtha from a range of suppliers, primarily including refineries located in the Black Sea region, pursuant to supply agreements or on the spot market. We intend to rely on feedstock supplied by the STAR Refinery, with which we have signed a contract for the purchase of between 1,300,000 tons and 1,600,000 tons of naphtha per year (which can be increased upon bilateral agreement) and 270,000 tons of mixed xylene per year, once it comes onstream in the third quarter of 2018.

23 In terms of our contracts with our customers, we have long-standing arrangements which include basic terms such as quantities and price formulae relying on global publications such as Nexant, ICIS and PLATTS. In order to protect our profitability, most of these contracts contain features that permit regular price resetting, which in principle enables the pass-through of increasing raw material costs to customers, albeit this is subject to a time lag. However, we may be unable to fully pass through increasing raw material prices to our customers in such negotiations. Any inability to pass through cost increases to our customers could have a material adverse effect on our business, results of operations and financial condition.

Any disruption in our supply of raw materials or access to electricity may have negative consequences for our supply and production chain. Our ability to achieve our strategic objectives and our overall performance and prospects depend and will continue to depend, in large part, upon the successful, timely and cost-effective acquisition of raw materials, in particular naphtha, and access to electricity. We currently source the majority of our supply of naphtha through spot contracts from suppliers in the Black Sea region of Russia and the remainder from the Aliaga˘ refinery of Tupra¸¨ s, Turkey’s only domestic oil refiner, both of which are located near our facilities or are accessible via direct transportation routes. Nevertheless, the availability of these raw materials may be negatively affected by interruptions in production; industrial actions, accidents or other similar events at suppliers’ premises or along the supply chain; wars and natural disasters; and the availability of transportation. Our supply of naphtha is expected to become more stable as a result of the STAR Refinery coming onstream in the third quarter of 2018. On 26 May 2014, we signed a contract with STAR Rafineri A.¸S., whose main shareholder is SOCAR Turkey Enerji A.¸S. (‘‘STEA¸S’’), for the purchase of a minimum of 1,300,000 tons and a maximum of 1,600,000 tons of naphtha per year (which can be increased upon bilateral agreement) and 270,000 tons of mixed xylene per year, which is expected to be sufficient to sustain our current production levels. Nonetheless, there can be no assurance that there will not be delays in the STAR Refinery coming onstream or that production from the STAR Refinery will sufficient to meet our needs in future periods. Given that we hold a limited number of days of inventory, any significant disruptions in the supply of raw materials will result in delays in the delivery of products to our customers. In addition, our operations consume a significant amount of electricity and are dependent to a large degree on the electricity generated by our power plant, which has a total electricity generation capacity of 226 MW. In the past, there have been infrequent short-term disruptions in the supply of electricity from our power plant, during which have we relied on our access to Turkey’s national electricity grid, and our supply and production chains have not been materially adversely affected to date. However, we may experience more substantial and frequent disruptions in the supply of electricity from our power plant in the future and, notwithstanding any disruptions, such supply of electricity may be insufficient to meet our future requirements. There can be no assurance that we will be able to access the Turkish national electricity grid or any other back-up electricity sources in a timely or cost-effective manner in either of these scenarios. Any disruption in our supply of raw materials or electricity could adversely affect our business, results of operations and financial condition.

We face competition in our industry, which may increase due to the emergence of new competitors or the actions of current competitors, and may adversely affect our market position, sales and overall operations. We sell our products in highly competitive markets. Competition in the markets for a majority of our products is based primarily on price. As a result, we may not be able to protect our market position by product differentiation. As a result of competition, increases in raw material costs and other costs may also not necessarily correlate with changes in product prices, either in the direction or the magnitude of the price change. Although we strive to maintain or increase our profitability by reducing costs through improving production efficiency, energy-saving measures, emphasising higher margin products and controlling selling and administration expenses, we cannot provide any assurance that these efforts will be sufficient to offset fully the effect of any pricing changes on our results of operations. In addition, we are exposed to competitive dynamics across several sectors. As the only petrochemicals producer in Turkey, we face competition primarily from imports from large global petrochemicals companies, primarily from the United States and the Middle East, as well as, to a lesser extent due to the extensive lead-time required, the introduction of new PTA (as defined below) and aromatics production capacity in the domestic market. Some of our global competitors are larger and more vertically

24 integrated than us (in terms of their upstream and/or downstream processes), are able to source feedstock at lower costs (in particular ethane-based producers) and receive the benefit of substantial government subsidies. Therefore, such competitors may be able to manufacture products more economically than we can, although we expect to achieve greater vertical integration following the completion of the STAR Refinery project. In addition, certain of our competitors may have greater financial, technical, research and technology and marketing resources than we do. As the markets for our products expand, existing competitors may commit more resources to the markets in which we operate, which would have the effect of increasing competition. Global competitors may also engage in dumping in order to gain market share in the markets in which we sell our products, and, though we do not rely on them, we currently benefit from certain regulatory measures in response to such imports (such as anti-dumping duties). However, there can be no assurance that such regulatory measures will remain in place, that new such measures will be implemented or that they will be implemented in a way that is beneficial to us. Moreover, new products and technologies may develop in the future which compete with the products manufactured and technologies we utilise in our plants, which, while well-maintained and refurbished in line with those of our peers in Europe, were originally built in the mid-1980s for the most part. Any of the above could hinder our ability to compete effectively in the markets in which we operate in the future and our business, results of operations and financial condition may be adversely affected as a result.

Our operations are subject to various environmental and other laws and regulations, including those related to greenhouse gases. We are subject to various environmental protection and health and safety laws and regulations governing, among other things, the generation, storage, handling, use, remediation, disposal and transportation of hazardous materials, the emission and discharge of hazardous materials into the ground, air or water, and the health and safety of our employees. Changes in such laws and regulations, the enactment of new laws and regulations that are stricter than those currently in force, or a stricter interpretation of existing laws and regulations, may impose new obligations on us or result in the need for additional investments related to environmental controls, which could adversely affect our business, results of operations and financial condition. In addition, as a petrochemicals producer, we are sometimes subject to unfavourable market perceptions as a result of the environmental impact of our business. As a result, the regulatory requirements applicable to our operations may become more stringent over time, which may in turn adversely affect business, results of operations and financial condition. In addition, over the past few decades, concerns about the relationship between emissions such as carbon dioxide and other greenhouse gases (‘‘GHG’’), and global climate change have resulted in increased levels of scrutiny from regulators and the public alike, and have led to proposed and enacted regulations on both national and supranational levels, to monitor, regulate and control carbon dioxide and other GHG emissions. In Turkey, we are required by the Ministry of Environment and Urbanisation (the ‘‘Ministry of Environment’’) to monitor GHG emissions from our facilities and prepare an annual GHG monitoring plan for approval by the Ministry of Environment. See ‘‘Certain Regulatory Matters’’. Although we believe that we have been fully compliant with this monitoring requirement to date, there can be no assurance that we will be able to maintain full compliance in the future. In addition, compliance with future GHG regulations governing our operations may result in significantly increased capital expenditure for measures such as capital expenditure to install more environmentally efficient technology or the purchase of allowances to emit carbon dioxide or other GHG. In particular, Turkey has made certain commitments under its Nationally Determined Contribution (NDC) plan in connection with the Paris Agreement on Climate Change which recently came into force, which may affect our operations. While we have budgeted for future capital and operating expenditures to maintain compliance with environmental laws, we cannot assure you that environmental laws, including those related to GHG regulations, will not change or become more stringent in the future, forcing us to make additional expenditures, or that we have been or will be at all times in complete compliance with environmental protection and health and safety law, regulations and permits. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators. We could also be held liable for any and all consequences arising out of human exposure to hazardous substances or other environmental damage. Therefore, we cannot assure you that our costs of complying with current and future environmental and health and safety laws, or arising from stricter or different interpretations of

25 such laws, and our liabilities arising from past or future releases of, or exposures to, hazardous substances will not adversely affect our business, results of operations and financial condition.

We are required to obtain, maintain and renew governmental permits and approvals to operate our businesses. Any failure to obtain, maintain and review such permits and approvals may negatively impact the way in which we conduct our business. We require permits and approvals to operate our businesses and/or construct and operate our facilities. In the future, we may be required to renew such permits and approvals or to obtain new permits and approvals. In particular, downstream and midstream activities in the Turkish petroleum market are regulated by EMRA. Therefore, we are subject to supervision by EMRA and are required to maintain a processing license and an eligible consumer license in the petroleum market and a production license in the electricity market. Under current environmental legislation, we are also required to obtain permits from governmental authorities for certain operations at our facilities, including, but not limited to, those involving emissions, wastewater discharge, noise control and hazardous waste. See ‘‘Certain Regulatory Matters’’. While we are currently fully compliant with the requirements of all of our required permits and approvals, including those issued by EMRA, and have not experienced any difficulty in renewing and maintaining these permits and approvals in the past, there can be no assurance that the relevant authorities will issue or renew any such permits and approvals in the time frame anticipated by us, or at all, in the future. Any failure to renew, maintain or obtain any of these permits and approvals, or the revocation or termination of existing permits and approvals, may subject us to penalties or fines, or interrupt our operations or delay or prevent the implementation of any capacity expansion programmes, and could adversely affect our business, results of operations and financial condition.

Our production facilities process some volatile and hazardous materials that subject us to operating risks. We are committed to fostering a culture of industry-leading health and safety best practices, which we believe is essential to the continued safe operation of our production facilities. Our operations are subject to the usual inherent hazards associated with the manufacture of petrochemicals and the handling, storage and transportation of petrochemical materials, including: • pipeline leaks and ruptures; • explosions; • fires; • mechanical failure; • transportation interruptions and truck accidents; • chemical spills; • discharges or releases of toxic or hazardous substances or gases; • storage tank leaks; and • other environmental risks. These hazards can cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage. A major accident at one of our facilities could force us to suspend our operations temporarily or, in severe circumstances, permanently, cause production delays and result in significant remediation costs and lost profits as well as liability for workplace injuries and fatalities. We may also incur litigation related expenses and may face reputational damage as a result of any such incidents. We cannot assure you that our insurance will be sufficient to cover fully all potential hazards incident to our business. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, this could result in significant additional capital expenditure for us and could have a material adverse effect on our business, results of operations and financial condition.

26 We may be unable to implement our business strategies or fully capitalise upon our investments in production capacity. Since the acquisition of Petkim by the Azerbaijan State Oil Company (‘‘SOCAR’’ or the ‘‘SOCAR Group’’), we have undertaken several operational efficiency programmes and investments with respect to our existing systems with the aim of enhancing our competitiveness in the petrochemicals sector. In 2014, for example, we increased the capacity of our main facility ethylene cracker by 13 per cent., bringing its capacity to 588,000 tons per year, and also increased our PTA production capacity by 50 per cent., bringing the capacity to 105,000 tons per year. This involved investments of approximately U.S.$118 million in our ethylene cracker and U.S.$20 million for the expansion of our PTA production capacity. We may in the future continue to undertake such programmes and investments. There can be no assurance that we will recognise the benefits of these investments, particularly if demand for our products does not continue to expand or if it were to contract. We may also experience unforeseen technical difficulties in completing any capacity expansions, which could give rise to unanticipated costs or capital expenditure overruns. Furthermore, we may be required to seek additional external financing in order to meet our capital expenditure requirements in connection with any such expansions. There can be no assurance that such financing will be available, or, if available, that the terms thereof will be attractive to us. If we are unable to fully capitalise upon our investments or obtain adequate financing for such investments, or if we experience technical difficulties in expanding our capacity, our business, results of operations and financial condition could be materially adversely affected.

We are subject to a number of risks in relation to our acquisition of a stake in the STAR Refinery. In 2008, STAR Rafineri A.¸S. was established by the SOCAR Group and Turcas, a Turkish oil and energy investment company, to develop, construct, own and operate the STAR Refinery, a complex crude oil refinery with a processing capacity of 10 million tonnes of crude oil per annum on the Aegean coast of Turkey. The refinery is located adjacent to Petkim on the Aliaga˘ industrial peninsula north of Izmir and, as of November 2017, overall construction was approximately 97 per cent. complete. It is expected to come onstream in the third quarter of 2018 with a total investment value of U.S.$6.3 billion, of which U.S.$4.9 billion has already been invested as at 30 November 2017. On 9 January 2018, we signed a share sale and transfer agreement with STEA¸S for the purchase of an 18 per cent. effective stake in STAR Rafineri A.¸S., and we intend to use the net proceeds from the offering of the Notes to fund a portion of the purchase price. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’. However, our offering of the Notes is not conditional upon the consummation of this acquisition, which is subject to the satisfaction or waiver of customary closing conditions, and there can be no assurance that the acquisition will be consummated in the anticipated time frame or at all. In particular, the conditions precedent for the acquisition include the successful and timely construction and testing of the STAR Refinery, in respect of which we have no involvement and over which we have no control. Factors that could negatively impact this include difficulties in obtaining necessary licenses and/or complying with applicable regulations, the occurrence of unforeseen technical difficulties (including technical problems that may delay the start-up of, or interrupt production from, the project or lead to unexpected downtime of the plans) and delays resulting from the actions of third parties. See ‘‘—Our business and operations are subject to business interruption risks due to the actions of third parties’’. Although we believe that the implementation schedules of the STAR Refinery project are reasonable, we cannot assure you that the actual time required to complete the implementation of the project will not substantially exceed the current estimates of the SOCAR Group for such completion. Furthermore, the conditions precedent for the acquisition include the signing by us and STEA¸S of a shareholders’ agreement with respect to our ownership of Rafineri Holding A.¸S. Although we have agreed in principle the key terms of the shareholders’ agreement with STEA¸S, such shareholders’ agreement has not yet been signed and there can be no assurance that it will be finalised in a timely manner or on terms consistent with the agreed principles (details of which are set out in ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations— Commitments—STAR Refinery Share Sale Agreement’’). Moreover, even if we do conclude the shareholders’ agreement with respect to our ownership of Rafineri Holding A.¸S, our interest in the STAR Refinery itself will be limited to an indirect economic interest only, as the power to decide all shareholder, board and other management-related matters at the STAR Refinery-level will continue to be controlled by the SOCAR Group and the Republic of Azerbaijan Ministry of Economic and Industry.

27 In addition, under the terms of the share sale and transfer agreement, the purchase price will be paid in three equal instalments, the first of which was paid by us on 9 January 2018, the second of which is due on the date on which testing at the STAR Refinery commences and the third of which is due on the closing date, being the date on which the shares are to be transferred by STEA¸S to us (which is currently expected to occur in the third quarter of 2018). If, for any reason, STEA¸S fails to transfer the shares to us, or the agreement is terminated, we will have an unsecured claim against STEA¸S for reimbursement of the payments made and there can be no assurance that we will be able to recover such amounts successfully. Even if the acquisition successfully closes, the STAR Refinery may not perform in accordance with expectations, and the anticipated synergies and cost savings from the integration of the STAR Refinery into our supply chain may not be achieved on a timely basis, or at all, or may be lower than projected. A failure to deliver the anticipated synergies and cost savings, as well as any of the factors mentioned above, could hinder or prevent the implementation of our strategy and result in higher than expected costs.

Our business and operations are subject to business interruption risks, including in relation to Petlim. We are subject to the risk of business interruption due to required maintenance on our facilities as well as the actions of third parties on which we rely, including the failure of third-party suppliers or contractors to meet their obligations in a timely and cost-effective manner, delays in the delivery of third-party equipment and the failure of the equipment supplied by these vendors to comply with the expected capabilities of the equipment. For instance, given ethylene’s place in the value chain of our products, major overhauls and maintenance shutdowns (both scheduled and unscheduled) at our ethylene cracker may result in disruptions to our operations. In July 2016, for example, we had an unscheduled 15-day shutdown at our ethylene cracker due to a technical problem in the unit’s chimney, which had an adverse impact on our production levels and capacity utilisation. Our production facilities typically undergo scheduled shutdowns for major maintenance, which last approximately one month, every four years. Furthermore, we are exposed to these risks in relation to the Petlim Container Port, which was commissioned in 2016 with an initial capacity of 0.8 million TEU (Twenty Foot Equivalent, which is a standard metric for measuring cargo capacity), which was subsequently expanded to a maximum capacity of 1.5 million TEU, making it Turkey’s third largest port. This investment was undertaken by Petlim Limancılık ve Ticaret A.¸S. (‘‘Petlim’’), 70 per cent. of which is owned by us, with the remaining 30 per cent. being owned by Goldman Sachs International (‘‘Goldman Sachs’’). The total cost of the development and its financing was approximately U.S.$400 million. In February 2013, Petlim signed a 28-year concession agreement with an optional extension period of 4 years with APM Terminals, which allows APM Terminals to operate the port in exchange for an annual payment, comprising a fixed and a variable component. Under this agreement, APM Terminals is responsible for all operational aspects of the port and associated deliverables, including obtaining permits, while Petlim is responsible for all construction-related aspects of the port, including dredging. The expansion of the port to its current capacity was completed in September 2017, and APM Terminals is expected to obtain all necessary permits for use of the port’s full capacity in the first quarter of 2018. Although we are entitled to a fixed share of income from APM Terminals, the variable component of the income we receive from APM Terminals may decrease if volumes handled at the port do not grow as expected. In addition, there can be no assurance that we would be able to replace APM Terminals, or any other third party on which we rely, in a timely and cost-effective manner should it terminate the contract, which it is entitled to do in certain circumstances, or fail to make payments to us under the concession agreement or perform its obligations in a manner satisfactory to us. Any of the foregoing factors could adversely affect our business, results of operations and financial condition.

All of our production facilities are located in the Petkim Peninsula and as a result any adverse events or occurrences could cause significant disruption to our business. Our production facilities and the Petlim Container Terminal are located on the Petkim Peninsula in Aliaga,˘ Turkey on the coast of the Aegean Sea, approximately 50 kilometres from Izmir. In addition, following its completion, we expect to rely significantly on the STAR Refinery for the purchase of naphtha and reformate to sustain our current production levels. The refinery is located adjacent to Petkim in Aliaga.˘ Although our facilities are spread across 19 million square metres, our operations may be subject to significant disruption if severe weather or other natural disasters were to occur in the Petkim Peninsula. Any disruption experienced at our production facilities or at the STAR Refinery could have a material adverse effect on our business, results of operations or financial condition.

28 Uninsured losses, losses in excess of our insurance coverage for certain risks and unanticipated changes in our insurance costs could have a material adverse effect on our business, results of operations and financial condition. Our plant, equipment and other assets are insured for property damage and business interruption risks. However, such insurance may not cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We may incur losses beyond these maximum limits or outside the coverage of our insurance policies. If this occurs, and we face liability, our business, results of operations and financial condition could be materially adversely affected. In addition, from time to time, various types of insurance for companies in our industries have not been available on commercially acceptable terms or, in some cases, have not been available at all. In the future, we may not be able to obtain coverage at current levels, and/or our premiums and deductibles for certain insurance policies may increase significantly on the coverage that we currently maintain. If insurance is not available at economically acceptable premiums, there is a risk that our insurance coverage does not cover the full scope and extent of claims against us or losses that we incur, including, but not limited to, claims for environmental or industrial accidents, occupational illnesses, pollution and product liability and business interruption. Furthermore, we could be required to increase our debt or divert resources from other investments in our business to discharge an uninsured claim. Costs associated with unanticipated events in excess of our insurance coverage, or a failure to maintain such coverage could materially adversely affect our business, results of operations and financial condition.

We are exposed to the effects of fluctuations in exchange rates and inventory prices that could adversely affect our profitability and ability to repay indebtedness. We are exposed to currency risk on assets or liabilities denominated in foreign currencies. Approximately 45 per cent., 40 per cent. and 15 per cent. of our sales are invoiced in Turkish lira, U.S. dollars and euro, respectively, although most of our sales in Turkish lira are indexed to the U.S. dollar exchange rate on the relevant day announced by Turkish Central Bank. Approximately 90 per cent. of our variable costs are denominated in U.S. dollars, with the remainder being denominated in Turkish lira, and our fixed costs are mainly denominated in Turkish lira. As a result, most of our foreign currency exposure is naturally hedged. However, we are exposed to currency risk on foreign currency- denominated sales to the extent the exchange rate of the Turkish lira versus the relevant foreign currency fluctuates between the date of the invoice and the date of payment. As at 31 December 2016, a 10 per cent. appreciation of the U.S. dollar versus the Turkish lira would have had an adverse effect of approximately TL 50 million on our profit for the year. Conversely, a 10 per cent. depreciation of the U.S. dollar versus the Turkish lira would have a positive effect of approximately TL 50 million on our profit for the year. In addition, we are exposed to currency risks in relation to our inventory and adverse movements in currency exchange rates may lead to us being required to recognise impairments in respect of our inventory. Any significant adverse fluctuations in currency exchange rates could have a material adverse effect on our business, results of operations and financial condition.

Following the issuance of the Notes, our indebtedness will increase, which could limit our financial flexibility and our ability to access additional financing. As at 30 September 2017, our total gross debt was TL 2,333 million. Following the offering of the Notes, our indebtedness will increase. Our level of debt may have important consequences for our business. Among other things, it may: • make it more difficult for us to generate sufficient cash flow to satisfy our obligations to make payments on the Notes; • limit our ability to use our cash flow, or obtain additional financing, for future working capital, capital expenditure, acquisitions or other general corporate purposes; • require a substantial portion of our cash flow from operations to make debt service payments; • limit our flexibility to plan for, or react to, changes in our business and industry conditions; and • increase our vulnerability to the impact of adverse economic and industry conditions and, to the extent of our outstanding debt under our floating rate debt facilities, the impact of increases in interest rates.

29 We cannot assure you that we will continue to generate sufficient cash flow in amounts that enable us to meet our working capital, capital expenditure and other requirements. To the extent that we are unable to generate sufficient cash flows from operations, or if we are unable to borrow additional funds, we may be required to reduce capital expenditure, refinance all or a portion of our existing debt, or obtain additional financing through equity or debt financings. We cannot assure you that we will be able to refinance our debt, sell assets or obtain additional financing on terms acceptable to us, if at all. We are also subject to certain restrictive financial covenants and ratios under Petlim’s project finance credit agreement with Akbank in relation to the Petlim Container Port, and if additional funds are raised by incurring debt, we may become more leveraged and subject to additional or more restrictive financial covenants and ratios. In addition, the Trust Deed governing the Notes will contain certain covenants, including covenants restricting our ability to incur additional indebtedness and to engage in transactions with affiliates. Such covenants may limit our ability to engage in future transactions, thereby limiting our ability to grow our business. A breach of any of these covenants could also give rise to a default. There can be no assurance that we will be able to comply with our covenants in the future or that or that the Trustee or the holders of the Notes would not seek to enforce any remedies following any breach of covenants. Any of the foregoing events could adversely affect our business, results of operations and financial condition.

We may experience difficulties in raising additional capital on favourable terms or at all in the future. In the event that our existing cash balances and cash generated from our operations, together with the financing transactions we undertake, are insufficient to make investments, acquisitions, expand our activities, achieve our growth objectives or provide the working capital we need in the future, we may find it necessary to obtain additional financing from other sources. Our ability to obtain such additional financing on favourable terms or at all will depend in part on prevailing conditions in the international capital and banking markets, the condition of the petrochemicals industry and our results of operations. Moreover, any downgrade in our credit ratings could adversely affect our cost of borrowing and our access to the international capital and banking markets. In the event that we are unable to obtain additional financing on acceptable terms or at all, our ability to make investments, acquire companies, expand our activities, achieve our growth objectives or obtain working capital could be adversely affected which would, in turn, adversely impact our business, results of operations and financial condition.

We may be subject to natural disasters, terrorist activities and/or disruptive geopolitical events and their consequences. Natural disasters, such as earthquakes, hurricanes, storms, floods or tornadoes may disrupt our business or the businesses of our suppliers and customers. A significant portion of Turkey’s population and most of its economic resources are located in a first degree earthquake risk zone and Turkey has experienced a large number of earthquakes in recent years, some quite significant in magnitude. For example, in October 2011, the eastern part of the country was struck by an earthquake measuring 7.2 on the Richter scale, causing significant property damage and loss of life. In February 2017, two earthquakes with preliminary magnitudes of 5.3 on the Richter scale jolted Turkey’s northern Aegean coast, damaging dozens of homes in at least five villages and injuring at least five people. In March 2017, an earthquake with a magnitude of 5.5 hit south-eastern Turkey, damaging buildings and injuring five people and, in June 2017, an earthquake with a magnitude of 6.2 on the Richter scale hit Turkey’s northern Aegean coast, which resulted in building damage in surrounding areas. If earthquakes or other natural disasters occur in the future, we may suffer business interruption or shutdown or damage to our production facilities and other infrastructure, which could materially adversely affect our business, results of operations or financial condition. Furthermore, the impact of any such events may be heightened due to the geographic concentration of our operations and the operations of our suppliers. See ‘‘—All of our production facilities are located in the Petkim Peninsula and as a result any adverse events or occurrences could cause significant disruption to our business’’. Turkey has also experienced a significant level of terrorist activity in recent years, including an attack at Ataturk¨ Airport in ˙Istanbul in June 2016, a series of suicide bombs during 2016 and an attack in a nightclub in ˙Istanbul in January 2017. See ‘‘—Risks Relating to Turkey’’. Strategic infrastructure targets, such as energy-related assets (which could include our facilities), may be at greater risk of future terrorist attacks than other targets, and such terrorist attacks or the threat of terrorism may cause significant disruptions to our business. Related political events, as well as political and economic instability in other

30 regions of the world, may also indirectly adversely affect our business, results of operations and financial condition.

We may be subject to interruptions or failures in our information technology systems. We rely on sophisticated information technology systems and infrastructure to support our business. Any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures and similar events. Information technology system failures, network disruptions and breaches of data security could disrupt our operations by causing delays or cancellation of customer orders, impeding the manufacture or shipment of products, processing transactions and reporting financial results, resulting in the unintentional disclosure of customer information and/or damage to our reputation. Such failures could adversely affect our business, results of operations and financial condition, and we cannot assure you that our business continuity plans will be completely effective during any information technology failure or interruption.

We are dependent on maintaining good relations with our employees and any deterioration in employee relations could impact our ability to supply our products. As at 30 September 2017, we employed approximately 2,400 people (measured as full-time equivalents) across our operations. Approximately 1,900 of our employees are members of a trade union. Our management and human resources department negotiate a collective bargaining agreement with the relevant trade union every two years. Any significant increase in labour costs, deterioration of employee relations, slowdowns or work stoppages at any of our locations, whether due to union activities, employee turnover or otherwise, could have a material adverse effect on our business, results of operations or financial condition. Although past work stoppages have not had a material adverse effect on our ability to supply our products to customers, there can be no assurance that this will continue to be the case in the future. Any increase in labour costs or work stoppage could have a material adverse effect on our business, results of operations and financial condition.

We depend on our ability to attract and retain key personnel to implement our business strategy and develop existing or new businesses. Our success is dependent upon our ability to attract and retain key personnel. In particular, our senior managers have considerable experience and knowledge of the industry, and the loss of any of them, or the inability to attract and retain enough additional qualified staff, could adversely affect the ability to implement our business strategy or develop existing or new businesses. In addition, our future success depends on our continued ability to identify, hire, train and retain qualified personnel in sales, marketing, operations and administration positions, among others. Our business, results of operations and financial condition could be adversely affected if we fail to attract and retain the necessary personnel.

The Turkish Privatisation Administration holds a ‘‘golden share’’ in the Issuer and its interests may conflict with our interests or the interests of the Noteholders. The Turkish Privatisation Administration holds a Group C preferential, or ‘‘golden’’, share in the Issuer that carries special rights. In particular, the validity of decisions taken by the Board on the following matters depends on the affirmative vote of the member of Board elected from holders of the Group C shares: (i) modifications of the Articles of Association that will affect the privileges assigned to Group C share; (ii) registration of the transfer of registered shares on the share ledger; (iii) determination of the form of power of attorney indicated in the Article 31 of the present Articles of Association; (iv) decisions stipulating a decrease of at least 10 per cent. in the capacity of any plant owned by the Issuer; (v) the Issuer’s establishment of a new company or partnership, acquisition of a company being partner to and/or merging with an existing company, separation, dematerialisation, annulment and liquidation of the Issuer. In addition, as we are the sole domestic supplier of petrochemical products in Turkey, the Turkish Privatisation Administration can require us to maintain certain production levels, whether or not such production is economical or profitable. While the Turkish Privatisation Administration has not exercised the rights conferred upon it as a result of its holding of the golden share to date, if it were to do so, this could have a material adverse effect on our business, results of operation and financial condition.

31 STEA¸S and the SOCAR Group exert a significant degree of control over us and their interests may conflict with our interests or the interests of the Noteholders. STEA¸S indirectly owns 51 per cent. of our share capital through its wholly-owned subsidiary SOCAR Turkey Petrokimya A.¸S. (‘‘SOCAR Turkey Petrokimya’’), as well as a 60 per cent. stake in STAR Rafineri A.¸S. (which is expected to decrease to 42 per cent. following our acquisition of an 18 per cent. stake therein using, in part, the net proceeds from the offering of the Notes). Accordingly, the SOCAR Group is able to exercise control over, among other things: • election of our board of directors; • our business policies and strategies; • budget approval, including personnel costs; • the issuance of securities; • mergers, acquisitions and disposals of our assets or businesses; and • amendments to our constitutional documents. The SOCAR Group is also able to influence the STAR Refinery, which is expected to be our main supplier of naphtha and mixed xylene when it comes onstream in 2018. There can be no assurance that the resolution of any matter that may involve the interests of the SOCAR Group will be resolved in a manner that Noteholders would consider to be their best interests. In certain circumstances, the interests of the SOCAR Group may conflict with our interests since the SOCAR Group effectively has the power to influence the outcome of any vote of shareholders, including for example amending the articles of association, due to the percentage of shares it owns. Furthermore, the SOCAR Group may have different views on important matters such as our objectives, strategy, operations, investments or financing and it may not act in our best interest.

Risks Relating to Turkey We are subject to risks associated with Turkey’s political and economic environment. Turkey has been a parliamentary democracy since 1923. Unstable coalition governments have been common and, in the 94 years since its formation, Turkey has had numerous, short-lived governments, with political disagreements frequently resulting in early elections. The Justice and Development Party (Adalet ve Kalkınma Partisi) (the ‘‘AKP’’) has been in power since 2002 and is the first party since 1987 to have a parliamentary majority and has thus been able to govern without reliance upon a coalition partner. Turkey held its inaugural presidential election on 10 August 2014 based on the constitutional changes implemented following the referendum held on 21 October 2007. Recep Tayyip Erdogan,˘ leader of the ruling AKP, won the election in the first round with 51.8 per cent. of the vote. On 15 July 2016, a coup d’etat´ was attempted in Turkey against state institutions, including, but not limited to, the Turkish government by a faction within the army with ties to the Gulen¨ movement that, in May 2016, was officially designated by the Turkish government as a terrorist organisation (‘‘FETO¨ ’’). The Turkish government and Turkish security forces (including the Turkish armed forces) took control of the situation in a short period of time and the ruling government remained in control. Under Article 120 of the Turkish Constitution, in the event of serious indications of widespread acts of violence aimed at the destruction of the free democratic order, a state of emergency may be declared in one or more regions of, or throughout, the country for a period not exceeding six months; however, this period may be extended. On 20 July 2016, the Turkish government declared a three-month state of emergency in the country, entitling it to exercise additional powers. The Grand National Assembly of Turkey extended the state of emergency five times subsequently. The latest extension was approved on 18 January 2018, which extended the state of emergency for an additional three-month period. There can be no guarantee that the state of emergency will not be extended again. The state of emergency entitles the Turkish government to exercise additional powers. In this respect, investigations and similar actions have been initiated to identify members of FETO¨ and a significant number of the suspects (numbering in the thousands) across various sectors (including government, business, the military and the judiciary) have been dismissed from their roles and/or arrested. There may be further arrests and

32 actions taken by the governmental and judicial authorities in relation to these investigations, including changes in policies and laws. Following the attempted coup, several SOCAR Turkey Petrokimya and Petkim executives, including Petkim’s CEO, Saadettin Korkut, resigned from their posts following a raid of Mr. Korkut’s house and Petkim’s offices by the Turkish Counterterrorism Unit, which was based on suspicion of his ties to FETO.¨ Anar Mammadov, an Azeri national, was subsequently appointed as CEO of Petkim. Several other Petkim employees were also subsequently arrested. On 28 July 2016, STEA¸S, Petkim and Petlim’s Chairman Vagif Aliyev announced that the SOCAR Group was committed to Turkey and was undergoing a corporate restructuring and reorganisation involving the re-shuffling of a number of high-ranking posts in line with their international operational consolidation plans. The attempted coup and its aftermath have had a significant impact on the political and social environment in Turkey (including ratings downgrades of Turkey) as well as on Turkey’s foreign relations. For instance, the United States and Turkey temporarily suspended non-immigrant visa applications to either country in October 2017 as a result of the arrest of a Turkish worker at the U.S. consulate in Istanbul with alleged ties to FETO,¨ though visa services between the two countries have fully resumed as of December 2017. In addition, tensions remain over the extradition of the leader of FETO,¨ who has lived in exile in the United States since 1999, as well as the arrest of and proceedings against certain Turkish individuals, including a former Turkish economy minister, for evading U.S. sanctions on Iran (the findings of which that implicate Turkish banks and government officials may lead to the imposition of sanctions on the Turkish banking sector). These tensions, as well as any further deterioration in U.S.-Turkish relations, or any other foreign relations of Turkey (including any potential political or financial sanctions), may have a material adverse impact on the Turkish economy (including the value of the Turkish Lira, international investors’ willingness to invest in Turkey, the cost of financing and domestic demand). On 16 April 2017, a majority of Turkish voters approved a referendum amending certain articles of the Turkish Constitution. The amendments expand the powers of the president to create an executive presidency and are expected to be implemented gradually by November 2019, the expected date for the next general and presidential election. Following the entry into force of the package of constitutional amendments: • the current parliamentary system will be transformed into a presidential system; • the president will be entitled to be the head of a political party and to appoint the ministers; • the office of the prime minister will be abolished; • the parliament’s right to interpellate ministers (that is, to submit questions requesting explanation of an act or a policy) will be annulled; • the president will be entitled to issue decrees as the head of the government (except for certain matters such those relating to the fundamental rights and liberties and political rights); and • the president will be entitled to dissolve parliament and call for new general elections along with presidential elections. There can be no assurance that the political situation in Turkey will not deteriorate. Actual or perceived political instability in Turkey or any negative changes in the political environment, including further conflicts between senior politicians in Turkey or the failure of the government to devise or implement appropriate economic programmes, may individually or in the aggregate adversely affect the Turkish economy and, in turn, our business, financial condition and results of operations.

Volatile international markets and events as well as the threat of terrorism may have a negative effect on the Turkish economy, and hence our business, results of operations and financial condition. Turkey is located in a region that has been subject to ongoing political and security concerns, especially in recent years. Political uncertainty within Turkey and in certain neighbouring and nearby countries, such as Iraq, Syria, Iran, Georgia, Cyprus, Egypt, Tunisia, Israel, Armenia and Russia has historically been one of the potential risks associated with an investment in Turkish securities. Turkey experiences ongoing tensions with domestic terrorist and ethnic separatist groups, such as the People’s Congress of Kurdistan, known as the PKK, and jihadist terrorist groups in neighbouring countries, such as DAESH, also known as ISIS. In the past several years, these have resulted in a

33 number of bombing incidents in several Turkish cities and regions, including in Reyhanlı, Suru¸c, Istanbul and Ankara, as well as attacks against Turkish armed forces in the south-eastern part of Turkey. On 17 February 2016, a large explosion in Ankara killed over 20 people and injured over 60 people. On 1 January 2017, a gunman attacked a nightclub in Istanbul, with ISIS later claiming responsibility for the attack. If additional attacks occur in the future, Turkey’s capital markets, levels of tourism and foreign investment, amongst other things, may suffer, which could have a material adverse effect on our business, financial condition and results of operations. Since December 2010, political instability has increased markedly in a number of countries in the Middle East and North Africa, such as Syria, Iraq, Egypt, Libya, Tunisia, Jordan, Bahrain and Yemen. Unrest in these countries, as well as global tensions with Iran and between Russia and Ukraine, may have political implications in Turkey or otherwise have a negative impact on the Turkish economy, including both the financial markets and the real economy. Furthermore, military activities in Ukraine and on its borders, including Russia effectively taking control of Crimea (followed by Crimea’s independence vote and absorption by Russia) have combined with Ukraine’s very weak economic conditions to create great uncertainty in Ukraine and in the global markets. Resolution of Ukraine’s political and economic conditions may not occur for some time, and the situation could deteriorate into increased violence and/or economic collapse. While not directly impacting Turkey’s territory, the disputes could negatively affect Turkey’s economy, including through its impact on the global economy and the impact it might have on Turkey’s access to Russian energy supplies. On 24 November 2015, a Turkish fighter jet shot down a Russian military aircraft near the Turkish-Syrian border. The incident resulted in political tension, and Russia imposed certain economic sanctions on Turkey. This led to a decrease in export-import and investment activity between the countries and an escalation of geopolitical tensions. Although the restrictions have since been lifted, there can be no certainty that the relationship between the countries will not worsen in the future. The impact on Turkey’s economic relationship with Russia and the geopolitical implications remain uncertain. In addition, on 24 August 2016, Turkey began military operations in Syria in an effort to remove ISIS from the Turkish-Syrian border. These operations have resulted in, and may continue to lead to, retaliatory attacks by terrorist groups, such as ISIS or others, and create additional security risks in Turkey. There is on-going tension in the region, which was elevated following a request by Iraq on 5 October 2016 for the UN Security Council to hold a meeting to discuss the presence of Turkish troops in northern Iraq and certain Syrian border regions. Regional instability has also resulted in an influx of displaced persons into Turkey, which is expected to increase. On 25 September 2017, the residents of Kurdish-controlled areas within Iraq voted in favour of independence for the Kurdistan Region of Iraq, a semi-autonomous region within Iraq’s current borders, which has substantial cross-border trade with Turkey and an oil pipeline to the Mediterranean via Turkish territory. While we do not conduct business with the Kurdistan Regional Government, in the event that Turkey or another stakeholder decides to close the border or cut the Kurdistan Region’s export pipeline, this could have a negative impact on the economy in the region and the supply of energy to Turkey. The circumstances stated above have had and could continue to have a material adverse effect on the Turkish economy, and could in turn have a material adverse effect on our business, financial condition and results of operations.

Economic instability in Turkey could have a material adverse effect on our business, financial condition and results of operations. In spite of its economic development since 2001, Turkey has experienced recent economic difficulties and remains vulnerable to both external and internal shocks, including volatile oil prices and terrorist activity, as well as domestic political uncertainty and changing investor sentiment. In 2016, Turkey’s GDP growth slowed to 2.9 per cent., compared to 6.1 per cent. in 2015 and 5.2 per cent. in 2014, as the attempted coup, an increase in terrorist attacks and rising foreign exchange rates contributed to economic uncertainty. In addition, tourism revenues declined and economic growth in the EU, Turkey’s biggest export market, remained slow. Turkish exports to Russia fell significantly and the Middle East export market weakened as a result of security concerns. See ‘‘—Volatile international markets and events as well as the threat of terrorism may have a negative effect on the Turkish economy, and hence our business, results of operations and financial condition’’. These factors also contributed to

34 the Turkish Lira’s depreciation against major currencies, including the Turkish Lira’s 17.3 per cent. depreciation against the US Dollar on a nominal basis in the fourth quarter of 2016. However, Turkey’s GDP growth rate grew to 11.1 per cent. in the three months ended 30 September 2017 compared to a year earlier. Furthermore, since the global financial crisis, the Turkish unemployment rate has remained high (10.6 per cent. as at September 2017) (Source: Turkstat), and the unemployment rate may increase in the future. Continuing high levels of unemployment may adversely affect the demand of retail customers for petroleum-based products, which could have a material adverse effect on our business, financial condition and results of operations. The Turkish economy has experienced significant inflationary pressures in the past and may be subject to similar pressures in the future. Consumer price inflation was 8.2 per cent., 8.8 per cent. and 8.5 per cent. in 2014, 2015 and 2016, respectively, and the year-on-year rate reached an eight-year high of 13.0 per cent. in November 2017. Any inflation-related measures that may be taken by the Turkish government or the Central Bank, such as the tightening of monetary policy, may reduce liquidity in the Turkish market and could have an adverse effect on the Turkish economy. If the level of inflation in Turkey were to continue to fluctuate or increase significantly, this could have a material adverse effect on our business, financial condition and results of operations. On 20 July 2016, S&P downgraded Turkey’s sovereign credit rating to ‘‘BB’’ from ‘‘BB+’’, and assigned its outlook as ‘‘negative’’, citing, amongst other reasons, the polarisation of Turkey’s political landscape. On 23 September 2016, Moody’s downgraded Turkey’s sovereign credit rating to ‘‘Ba1’’ from ‘‘Baa3’’ with stable outlook. On 27 January 2017, Fitch downgraded Turkey’s sovereign credit rating to sub-investment grade in line with the ratings of S&P and Moody’s. On the same date, S&P revised its outlook for Turkey’s sovereign credit rating from ‘‘stable’’ to ‘‘negative’’ and affirmed its credit rating at ‘‘BB’’. On 17 March 2017, Moody’s revised its outlook for Turkey’s sovereign credit rating from ‘‘stable’’ to ‘‘negative’’. Following the constitutional referendum in Turkey, on 18 April 2017 Fitch issued a statement noting that while the outcome of the referendum reflected a political shift that was negative for credit ratings, it could facilitate credit-positive economic reforms. On 19 April 2017, Moody’s issued a report stating that the ability of the Turkish government to implement structural economic reforms may be limited by the potential government’s focus on the domestic political agenda and geopolitical security risks. These changes in ratings and outlook may materially affect our ability to obtain financing and may result in an increase in our borrowing costs. It is not certain whether Turkey will be able to remain economically stable during any periods of renewed global economic weakness. Future negative developments in the Turkish economy could impair our business strategy and have a materially adverse effect on our business, financial condition and results of operations.

Turkey’s current account deficit could have negative repercussions for the Turkish economy and thereby our business, results of operations and financial condition. Turkey’s current account deficit has widened considerably in recent years mainly due to its widening trade deficit. The current account deficit increased from U.S.$44.6 billion (5.76 per cent. of GDP) in 2010 to U.S.$74.4 billion (8.94 per cent. of GDP) in 2011, but decreased to U.S.$48.0 billion (5.48 per cent. of GDP) in 2012. In 2013, the current account deficit increased to U.S.$63.6 billion (6.70 per cent. of GDP), then decreased to U.S.$43.6 billion (4.66 per cent. of GDP) in 2014. In 2015, the current account deficit decreased to U.S.$32.1 billion (3.75 per cent. of GDP). Between January and December 2016, Turkey had a current account deficit of U.S.$32.6 billion, compared to a current account deficit of U.S.$32.1 billion in the same period in 2015. The current account deficit in October 2017 rose to U.S.$3.8 billion, an increase from U.S.$1.6 billion in October 2016. A widening current account deficit may result in an increase in the levels of borrowing by Turkey, a decline in the Central Bank’s reserves to finance the current account deficit and/or depreciation of the Turkish lira. In addition, in recent years the financing of the current account deficit has become more reliant on volatile portfolio investment, which is highly sensitive to changes in investor sentiment. As a result, any increase in Turkey’s current account deficit could have a material adverse effect on the financial and economic condition of Turkey, which could in turn adversely affect our business, results of operations and financial condition.

35 Risks associated with the foreign exchange rate of Turkey’s currency could affect our business, results of operations and financial condition. The depreciation of the Turkish lira against the U.S. dollar or other major currencies might adversely affect the financial condition of Turkey, such as through potential unhedged foreign currency positions of Turkish banks and the deterioration of bank asset quality. The Turkish corporate sector may also be susceptible to additional foreign exchange risk because a large volume of corporate loans is denominated in foreign currencies, resulting in additional risk if the Turkish lira depreciates. Turkish corporate borrowers such as us or our customers may not have sufficient foreign currency reserves or adequate hedging, particularly if Turkish lira depreciation is compounded by macroeconomic factors that impact certain sectors or clients (such as the potential combined impact of Turkish lira depreciation and global oil price reductions on the energy sector). An exchange rate shock could have negative implications for the Turkish banking sector, the main lenders of corporate debt, as well as the credit quality of Turkish corporate entities. Accordingly, Turkey’s economy faces risks associated with the refinancing of private sector debt, which constituted 70.5 per cent. of Turkey’s gross external debt at 30 September 2016, which risks are exacerbated by Turkish lira depreciation. In addition, depreciation of the Turkish lira may increase the price of imported goods, which may increase the trade deficit and the current account deficit. Due to market volatility, the Turkish lira has fluctuated, appreciating or depreciating to TL 1.7776 per U.S. dollar at 31 December 2012, TL 2.1304 per U.S. dollar at 31 December 2013, TL 2.3269 per U.S. dollar at 31 December 2014 and TL 2.9181 per U.S. dollar at 31 December 2015. In the aftermath of the failed coup d’etat,´ on 21 July 2016, the Turkish lira depreciated significantly to TL 3.0727 per U.S. dollar. In addition, after the U.S. presidential election on 8 November 2016, the U.S. dollar strengthened while the Turkish lira continued to depreciate significantly against the U.S. dollar. As at 31 December 2017, the Turkish Lira depreciated to TL 3.7603 per U.S. dollar compared to the previous year. The depreciation of the Turkish lira against the U.S. dollar has led to a significant increase in the share of dollar deposits in total deposits in the Turkish banking system and an increase in foreign exchange hedging costs for Turkish banks and the Turkish corporate sector. From time to time, the Turkish lira may be subject to increased volatility. For example, in connection with the depreciation of the Turkish lira, the Central Bank on 10 January 2017, cut the foreign exchange reserve requirement ratios for lenders in an effort to increase liquidity.

Risks associated with delays or other adverse developments in Turkey’s accession to the EU may have a negative impact on Turkey’s economic performance, which could in turn adversely affect our business, results of operations and financial condition. Turkey has a long-standing relationship with the EU. In 1963, Turkey signed an association agreement with the EU, and a supplementary agreement was signed in 1970 providing for a transitional second stage of Turkey’s integration into the EU. Turkey commenced negotiations on its accession to the EU in October 2005. However, Turkey’s accession depends on a number of economic and political factors relating to both Turkey and the EU. Although the shared objective of these negotiations is accession, they constitute an open-ended process, the outcome and timing of which cannot be guaranteed. The EU decided in December 2006 to suspend negotiations in eight out of 35 parts, or ‘‘chapters’’, and not to ‘‘close’’ the other 27 chapters of Turkey’s accession negotiations because of Turkey’s restrictions with respect to the Greek Cypriot Administration. On 24 November 2016, the European Parliament voted to temporarily suspend accession negotiations with Turkey. This decision, however, is not legally binding. On 25 April 2017, the Parliamentary Assembly of the Council of Europe voted to restart monitoring Turkey in connection with human rights, the rule of law and the state of democracy. This decision might result in (or contribute to) a deterioration of the relationship between Turkey and the EU. Although Turkey continues to express a desire to become a member state of the EU, it may not become one for several more years, if at all. Delays or other adverse developments in Turkey’s accession to the EU, such as the dismantling of the customs union agreement, may have a negative effect on Turkey’s economy in general, and Turkey’s economic performance and credit ratings in particular and could, as a result, have an adverse effect on our business, financial condition and results of operations. There can be no assurance that the EU will continue to maintain an open approach to Turkey’s EU membership or that Turkey will be able to meet all the criteria applicable to becoming a member state or that Turkey will become a member state.

36 Turkey is an emerging market economy and may continue to be negatively affected by uncertainty regarding the global macroeconomic environment. Emerging market investment generally poses a greater degree of risk than investment in more mature market economies because the economies in the developing world are more susceptible to destabilisation resulting from domestic and international developments. Turkey’s economy also remains vulnerable to external shocks, including turmoil in the markets for sovereign and other debt, foreign currencies and equities. If there is a significant decline in the economic growth of any of Turkey’s major trading partners, such as the EU, or any euro area member experiences difficulties issuing securities in the sovereign debt market or servicing existing debt or ceases to use the euro as its national currency, it could have a material adverse impact on Turkey’s balance of trade and adversely affect Turkey’s economic growth. EU member states, particularly Germany, comprise Turkey’s largest export market. A decline in demand for imports from any member of the EU could have a material adverse effect on Turkish exports and Turkey’s economic growth. Furthermore, Turkey’s economy is vulnerable to external events that increase global risk aversion, which could include such events as U.S. Federal Reserve interest rate decisions. The U.S. Federal Reserve began to normalise its monetary policy by raising the U.S. federal funds rate in December 2015, December 2016 and March and June 2017. Any increase or expected increase in the U.S. federal funds rate may encourage outflows of capital from emerging markets, a reduction of external financing to corporate entities in emerging markets, foreign currency depreciation against the U.S. dollar and higher long-term interest rates. Companies with U.S. dollar-denominated debt may also face higher costs of borrowing due to currency depreciation. As a result, market reaction to increases in the U.S. federal funds rate may indirectly adversely affect our business, financial condition and results of operations. Emerging markets, including Turkey, experienced volatility in 2016 amid concerns that the level of foreign investment inflows would decline substantially as the liquidity-enhancing measures in the United States were tapered down. There can be no guarantee that such volatility will not continue if the U.S. Federal Reserve raises interest rates or if market participants anticipate any further increases. Further, any slowing or reversal of accommodative monetary policies in developed economies or other events may also cause capital outflows from emerging economies and generate a negative impact on emerging economies, such as Turkey. In addition, because international investors’ reactions to the events occurring in one emerging market country sometimes appear to demonstrate a ‘‘contagion’’ effect, in which an entire region or class of investment is disfavored by international investors, Turkey could be adversely affected by negative economic or financial developments in other countries, including emerging market countries. Turkey has been adversely affected by such contagion effects on a number of occasions, including following the two financial crises in 1994 and 2000/2001 and the recent global economic crisis. Recent volatility in the markets stemming from concerns over China’s economic growth may adversely affect economic growth in other emerging economies with close trade links with China. Although China is not a major trading partner of Turkey, no assurance can be given that these developments will not have a negative effect on the economic or financial condition of Turkey. In addition, similar developments can be expected to affect the Turkish economy in the future. There can be no assurance that any crises or external shocks such as those described above or similar events will not negatively affect investor confidence in emerging markets, the economies of the principal countries in Europe or Turkey. In addition, there can be no assurance that these events will not adversely affect the Turkish economy and therefore our business, results of operations and financial condition.

Turkish financial disclosure standards differ in certain significant respects from those in more developed markets, leading to a relatively limited amount of information being available. The reporting, accounting and financial practices applicable to Turkish companies differ in certain respects from those applicable to similar companies in the United States. There is also less publicly available information regarding the securities of listed Turkish companies than the securities of public companies in the United States, the United Kingdom and other more developed markets.

37 Risks Relating to the Notes The Notes will constitute unsecured obligations of the Issuer. Our obligations under the Notes will constitute unsecured obligations. Accordingly, any claims against us under the Notes would be unsecured claims. Our ability to pay such claims will depend upon, among other factors, our liquidity, overall financial strength and ability to generate cash flows, which could be affected by (inter alia) the circumstances described in these ‘‘Risk Factors’’.

Claims of Noteholders under the Notes will rank behind those of certain other creditors and those of our subsidiaries on an insolvency. The Notes are direct, unconditional, unsecured and unsubordinated obligations of the Issuer. Accordingly, any claims against us under the Notes would be unsecured claims. The Notes will rank equally with all of the Issuer’s other unsecured and unsubordinated indebtedness. However, the Notes will be effectively subordinated to the Issuer’s secured indebtedness and securitisations, if any, to the extent of the value of the assets securing such transactions, and will be subject to certain preferential obligations under Turkish law, such as wages of employees. Any such preferential claims might reduce the amount recoverable by the Noteholders on any dissolution, winding up or liquidation and might result in an investor in the Notes losing all or some of its investment. Generally, lenders and trade and other creditors of the Issuer’s subsidiaries are entitled to payment of their claims from the assets of such subsidiaries before these assets are made available for distribution to the Issuer, as direct or indirect shareholder. Any debt that the Issuer’s subsidiaries may incur in the future will also rank structurally senior to the Notes. Moreover, our ability to make payments from Turkey will depend upon, among other factors, the Turkish government not having imposed any restrictive foreign exchange controls, our ability to obtain U.S. dollars and our ability to secure any necessary approval that may be required as a result of the imposition of or any change to Turkish exchange controls.

The Notes may not be a suitable investment for all investors. Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Offering Memorandum or any applicable supplement; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio; (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor’s currency; (iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant financial markets; and (v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate-related and other factors that may affect its investment and its ability to bear the applicable risks. The Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in the Notes unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio.

38 Redemption prior to maturity. We may redeem all outstanding Notes in accordance with the Conditions in the event that we have been or would become obligated to pay additional amounts as a result of certain changes in tax laws or their interpretation and we cannot avoid such obligation by taking reasonable measures available to us. On any such redemption, Noteholders would receive the principal amount of the Notes that they hold, together with interest accrued on those Notes up to (but excluding) the date fixed for redemption. The redemption at the option of the Issuer may affect the market value of the Notes. During any period when we may elect to redeem the Notes, the market value of the Notes generally will not rise substantially above the price at which they can be redeemed. In addition, it may not be possible to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes. See ‘‘Terms and Conditions of the Notes—Redemption and Purchase—Redemption for Taxation Reasons’’.

We may not be able to finance certain mandatory redemptions required by the Conditions. Upon the occurrence of a Change of Control (as defined in ‘‘Terms and Conditions of the Notes— Redemption and Purchase—Redemption at the Option of the Noteholders upon a Change of Control’’), we will be required to offer to repurchase all outstanding Notes at a purchase price in cash equal to 101 per cent. of the principal amount of the Notes plus any accrued and unpaid interest, if any, in the case of a Change of Control, plus additional amounts, if any, to the date of the repurchase. If any such Change of Control were to occur, there can be no assurance that we would have sufficient funds available at the time to pay the price of the outstanding Notes or that restrictions in agreements governing other indebtedness would not restrict or prohibit such repurchases. The Change of Control may cause the acceleration of other of our or our subsidiaries indebtedness that may be senior to the Notes or rank equally with the Notes. In any case, we expect that it would require third party financing to make a change of control offer. There can be no assurance that we would be able to obtain this financing.

The Trustee may request Noteholders to provide an indemnity and/or security and/or prefunding to its satisfaction. In certain circumstances (including without limitation pursuant to Condition 14(a) (Indemnification)), the Trustee may (at its sole discretion) request Noteholders to provide an indemnity and/or security and/or prefunding to its satisfaction before it takes action on behalf of Noteholders. The Trustee shall not be obliged to take any such action if not indemnified and/or secured and/or prefunded to its satisfaction. Negotiating and agreeing an indemnity and/or security and/or prefunding can be a lengthy process and may impact on when such action can be taken. The Trustee may not be able to take action, notwithstanding the provision of an indemnity or security or prefunding to it, in breach of the terms of the Trust Deed and in circumstances where there is uncertainty or dispute as to the applicable laws or regulations and, to the extent permitted by the agreements and applicable law, it will be for the Noteholders to take such action directly.

The Conditions contain modification and waiver provisions. The Conditions contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders, including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. The Conditions also provide that the Trustee may, without the consent of Noteholders, agree to (i) any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of Notes or (ii) determine without the consent of the Noteholders that any Event of Default (as defined in the Conditions) or potential Event of Default shall not be treated as such, in the circumstances described in Condition 12 (Meetings of Noteholders; Modification, and Waivers).

Noteholders’ rights may be adversely affected by a change of law. The Conditions are governed by English law in effect at the date of this Offering Memorandum. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of this Offering Memorandum.

39 Turkish insolvency laws to which the Issuer is subject may not be as favourable to the holders of the Notes as United States or other insolvency laws. We are incorporated and organised under the laws of Turkey. Any insolvency proceedings relating to us, can be brought only before the Turkish courts and in accordance with Turkish insolvency laws, the procedural and substantive provisions of which may differ from comparable provisions of United States federal bankruptcy law. If we become insolvent, there is a risk that holders of Notes may not be able to fully enforce their rights under the Notes and that any claims may be considerably delayed. Turkish insolvency laws may not be as favourable as insolvency laws in the United States or in any other jurisdiction with which the investors may be familiar.

Investors may experience difficulties in enforcing foreign judgments under laws other than Turkish law, including under United States federal securities laws. We are a corporation organised under the laws of Turkey. Certain of our officers and directors are residents of Turkey and all or a substantial portion of our assets and of our officers and directors are located outside the United Kingdom and the United States. As a result, it may not be possible for an investor to effect service of process in the United Kingdom or the United States upon us or such persons, or to enforce any judgments against us or such persons obtained in the courts of the United Kingdom or the United States. There is no treaty between Turkey and the United Kingdom or between Turkey and the United States providing for reciprocal enforcement of judgments. Turkish courts have rendered at least one judgment confirming de facto reciprocity between Turkey and the United Kingdom; however, since de facto reciprocity is decided by the relevant court on a case-by-case basis, there is uncertainty as to the enforceability of court judgments obtained in the United Kingdom by Turkish courts. There is no de facto reciprocity between the United States and Turkey. Moreover, there is uncertainty as to the ability of an investor to bring an original action in Turkey based upon any non-Turkish securities laws. See ‘‘Enforceability of Judgments.’’

An active trading market for the Notes may not develop. The Notes will not have an established trading market when issued and we cannot assure investors that an active trading market for the Notes will develop or be maintained. In addition, there may be a limited number of buyers when an investor decides to sell the Notes, which can affect the price an investor receives for such Notes or the ability to sell such Notes at all. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. Illiquidity may have a severely adverse effect on the market value of the Notes.

Transfers of interests in the Notes will be subject to certain restrictions. Although the CMB has approved the issuance certificate authorising the issuance of a maximum amount of Notes pursuant to Decree 32, the Capital Markets Law and the Communique´ with its letter dated 22 December 2017 and numbered 29833736-105.02.02.02-E.14302, the Notes will not be offered in Turkey. The Notes have not been and will not be registered under the Securities Act or any United States state securities laws. Prospective investors may not offer or sell the Notes, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Similar restrictions will apply in other jurisdictions. Prospective investors should read the discussion under the headings ‘‘Subscription and Sale’’ and ‘‘Selling and Transfer Restrictions’’ for further information about these transfer restrictions. It is the obligation of the investors to ensure that offers and sales of the Notes within the United States and other countries comply with any applicable securities laws. Pursuant to the Communique,´ we are required to notify the CRA Turkey within three business days from the issue date of the Notes of the principal amount, the issue date, the ISIN (if any), the interest commencement date, the maturity date, the interest rate, the name of the custodian and the currency of the Notes and the country of issuance.

40 Investors may be exposed to exchange rate risks and exchange controls. We will pay principal and interest on the Notes in U.S. dollars. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the ‘‘Investor’s Currency’’) other than U.S. dollars. These include the risk that exchange rates may significantly change (including changes due to devaluation of the U.S. dollar or depreciation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the U.S. dollar, would decrease (i) the Investor’s Currency-equivalent yield on the Notes, (ii) the Investor’s Currency-equivalent value of the principal payable on the Notes and (iii) the Investor’s Currency-equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

Investors may be exposed to interest rate risks. Investment in Notes bearing interest at a fixed rate involves the risk that subsequent changes in market interest rates may adversely affect the value of the Notes.

Any credit ratings assigned to us or the Notes may not reflect all the risks of an investment in the Notes. One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised, suspended or withdrawn by the assigning rating agency at any time. In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory purposes, unless such ratings are issued by a credit rating agency established in the EU and registered under the CRA Regulation (and such registration has not been withdrawn or suspended), subject to transitional provisions that apply in certain circumstances whilst the registration application is pending. Such general restriction will also apply in the case of credit ratings issued by non-EU credit rating agencies, unless the relevant credit ratings are endorsed by an EU-registered credit rating agency or the relevant non-EU rating agency is certified in accordance with the CRA Regulation (and such endorsement action or certification, as the case may be, has not been withdrawn or suspended). The list of registered and certified rating agencies published by ESMA on its website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant rating agency and the publication of the updated ESMA list. Certain information with respect to the credit rating agencies and ratings is set out on the cover of this Offering Memorandum.

Certain covenants may be suspended upon the occurrence of a change in our ratings. The Conditions will provide that, if at any time following the Issue Date, the Notes receive a rating of ‘‘Baa3’’ or better from Moody’s or ‘‘BBB-’’ or better from Fitch and no Potential Event of Default or Event of Default (each as defined in the Conditions) has occurred and is continuing, then beginning that day and continuing until such time, if any, that the Notes receive a rating of below ‘‘Baa3’’ from Moody’s or ‘‘BBB’’ from Fitch, certain covenants will cease to be applicable to the Notes. See ‘‘Terms and Conditions of the Notes—Covenants—Suspension of Covenants when Notes rated Investment Grade.’’ If these covenants were to cease to be applicable, we would be able to incur additional indebtedness or make payments, including dividends or investments, which may conflict with the interests of Noteholders. There can be no assurance that the Notes will ever achieve an investment grade rating or that any such rating will be maintained.

Legal investment considerations may restrict certain investments. The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (i) the Notes are legal investments for it, (ii) the Notes can be used

41 as collateral for various types of borrowing and (iii) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules.

Reliance on DTC, Euroclear and Clearstream, Luxembourg procedures. The Rule 144A Notes will be represented by the Restricted Global Certificate, which will be deposited with a nominee for DTC. Except in the circumstances described in the Restricted Global Certificate, investors will not be entitled to receive Notes in definitive form. DTC and its direct and indirect participants will maintain records of beneficial interests in the Restricted Global Certificate. While the Notes are represented by the Restricted Global Certificate, investors will be able to trade their beneficial interest only through DTC and its participants, including Euroclear and Clearstream, Luxembourg. The Regulation S Notes will be represented by the Unrestricted Global Certificate, which will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in the Unrestricted Global Certificate, investors will not be entitled to receive Notes in definitive form. Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants will maintain records of beneficial interests in the Unrestricted Global Certificate. While the Notes are represented by the Unrestricted Global Certificate, investors will be able to trade their beneficial interest only through Euroclear and Clearstream, Luxembourg and their respective participants. While the Notes are represented by the relevant Global Certificate(s), we will discharge our payment obligations under the Notes by making payments through the relevant clearing systems(s). A holder of a beneficial interest in a Global Certificate must rely on the procedures of the relevant clearing system and its participants to receive payments under the Notes. We have no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in any Global Certificate. Holders of beneficial interests in a Global Certificate will not have a direct right to vote in respect of the Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant clearing system and its participants to appoint appropriate proxies.

The Notes may be delisted in the future. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on the Global Exchange Market. The Notes may subsequently be delisted despite our best efforts to maintain such listing and, although no assurance is made as to the liquidity of the Notes as a result of listing, any delisting of the Notes may have a material effect on a Noteholder’s ability to resell the Notes on the secondary market.

42 SELECTED HISTORICAL AND OTHER FINANCIAL INFORMATION The tables below show our selected historical consolidated financial information as at and for the nine months ended 30 September 2017 and 2016 and as at and for the years ended 31 December 2016, 2015 and 2014. Unless otherwise indicated, this information has been extracted without material adjustment from the Unaudited Interim Financial Statements, the 2016 Audited Financial Statements and the 2015 Audited Financial Statements. In connection with the preparation of the 2017 Unaudited Interim Financial Statements and the 2016 Audited Financial Statements, certain line items were reclassified. In this section, unless otherwise indicated, the consolidated statement of financial position information as at 31 December 2016 is derived from the 2016 Audited Financial Statements and the consolidated statement of cash flows information for the nine months ended 30 September 2016 is derived from the 2016 Unaudited Interim Financial Statements, rather than from the 2017 Unaudited Interim Financial Statements. In addition, the reclassified comparative financial information as at and for the year ended 31 December 2015 contained in the 2016 Audited Financial Statements is presented. See ‘‘Presentation of Financial and Other Information’’ for further detail on the reclassification. The following selected historical consolidated financial information should be read in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and the Financial Statements, including the notes thereto, included elsewhere in this Offering Memorandum.

Consolidated Statement of Profit or Loss and Comprehensive Income

Nine months Twelve months Year ended ended ended 31 December 30 September 30 September 2014 2015 2016 2016 2017 2017(2) (TL millions) (TL (U.S.$ millions) millions)(1) Revenue ...... 4,133 4,533 4,533 3,253 5,402 6,682 1,900 Cost of sales ...... (4,047) (3,814) (3,575) (2,585) (4,023) (5,013) (1,425) Gross profit ...... 85 718 958 668 1,379 1,669 474 General and administrative expenses ..... (100) (118) (138) (103) (148) (183) (52) Marketing, selling and distribution expenses (27) (32) (42) (31) (43) (54) (15) Research and development expenses ..... (12) (12) (13) (10) (12) (15) (4) Other operating income ...... 119 128 204 113 163 254 72 Other operating expense ...... (127) (180) (240) (66) (100) (274) (78) Operating profit/(loss) ...... (61) 505 729 571 1,238 1,396 397 Income from investing activities ...... 3 11 17 1 38 54 15 Expenses from investing activities ...... — — (4) — — (4) — Operating profit/(loss) before financial income and expense ...... (58) 516 742 572 1,276 1,446 411 Financial income ...... 141 422 379 195 384 568 161 Financial expense ...... (145) (364) (339) (174) (432) (597) (170) Profit/(loss) before tax ...... (62) 574 782 592 1,227 1,417 403 Current tax expense ...... — (19) (163) (113) (177) (227) (65) Deferred tax income/(expense) ...... 70 85 113 35 (23) 55 16 Profit for the period ...... 9 639 732 515 1,027 1,244 354

43 Consolidated Statement of Financial Position

As at 31 December As at 30 September 2014 2015 2016(1) 2017 (TL millions) (TL (U.S.$ millions) millions)(2) Assets Current assets Cash and cash equivalents ...... 702 1,342 1,267 1,208 339 Financial investments ...... — 160 — — — Trade receivables ...... 522 551 674 824 231 Other receivables ...... 21 262 31 90 25 Derivative financial assets ...... 1 2 7 — — Inventories ...... 432 364 604 750 210 Prepaid expenses ...... 56 52 32 66 19 Other current assets ...... 32 35 44 46 13 Total current assets ...... 1,768 2,768 2,660 2,984 837 Non-current assets Financial investments ...... — 9 9 9 3 Other receivables ...... 52 105 423 430 121 Investment properties ...... 1 1 929 1 — Property, plant and equipment ...... 1,817 2,277 1,904 3,036 852 Intangible assets ...... 17 18 22 24 7 Prepaid expenses ...... 55 110 64 79 22 Deferred income tax assets ...... 44 133 245 225 63 Other non-current assets ...... 34 39 12 14 4 Total non-current assets ...... 2,021 2,693 3,609 3,818 1,071 Total assets ...... 3,788 5,461 6,269 6,802 1,908 Liabilities Current liabilities Short term borrowings ...... 353 320 462 1,040 292 Short term portion of long term borrowings ...... 43 42 55 830 233 Derivative financial instruments ...... — 11 0.4 2 1 Trade payables ...... 669 1,137 1,115 562 158 Payables related to employee benefits ...... 26 13 25 20 6 Other payables ...... 12 6 39 14 4 Deferred revenue ...... 18 26 39 70 20 Short term provisions ...... 9 14 4 15 4 Current tax liabilities ...... — 10 49 48 13 Other current liabilities ...... 6 6 8 10 3 Total current liabilities ...... 1,137 1,584 1,797 2,611 733 Non-current liabilities Long term financial liabilities ...... 325 914 1,172 463 130 Derivative financial instruments ...... — — 9 11 3 Deferred revenue ...... 65 69 130 129 36 Long term provisions ...... 79 89 91 95 27 Total non-current liabilities ...... 468 1,071 1,402 698 196 Total liabilities ...... 1,605 2,655 3,199 3,309 928 Equity Equity attributable to owners of the parent company ...... 2,132 2,741 3,002 3,434 963 Share capital ...... 1,000 1,500 1,500 1,500 421 Adjustment to share capital ...... 487 239 239 239 67 Share premium ...... 466 214 214 214 60 Other comprehensive (expense)/income not to be reclassified to profit and loss ...... (15) (24) (24) (24) (7) Other comprehensive (expense) to be reclassified to profit and loss . . 1 (7) 1 (5) (1) Restricted reserves ...... 8 37 105 193 54 Retained earnings ...... 178 156 242 280 79 Net profit for the period/year ...... 6 626 726 1,037 291 Non-controlling interest ...... 51 64 68 59 17 Total equity ...... 2,183 2,805 3,069 3,493 980 Total liabilities and equity ...... 3,788 5,461 6,269 6,802 1,908

44 Consolidated Statement of Cash Flows

Nine months Twelve months Year ended ended ended 31 December 30 September 30 September 2014 2015 2016 2016(1) 2017 2017(3) (TL millions) (TL (U.S.$ millions) millions)(2) Net cash generated by/(used in) operating activities ...... (31) 860 461 154 978 1,285 365 Net cash generated by/(used in) investing activities ...... 159 (735) (405) (256) (332) (481) (137) Net cash generated by/(used in) financing activities ...... 295 319 (310) (449) (706) (567) (161) Net increase/(decrease) in cash and cash equivalents ...... 423 445 (253) (551) (60) 238 67 Foreign exchange differences on cash and cash equivalents ...... — 194 179 17 1 163 3 Cash and cash equivalents at the beginning of the period ...... 279 702 1,342 1,342 1,267 807 269 Cash and cash equivalents at the end of the period ...... 702 1,342 1,267 807 1,208 1,208 339

Other Financial Data

As at and for As at and for the the nine year ended months ended Twelve months 31 December 30 September ended 2014 2015 2016 2016 2017 30 September 2017(8) EBITDA(1) (TL millions)...... 72 664 890 609 1,331 1,612 EBITDA (U.S.$ millions(2))...... 33 244 294 207 370 458 EBITDA margin(3) ...... 1.7% 14.7% 19.6% 18.7% 24.6% 24.1% Capital expenditure(4) (TL millions) ...... 425 575 567 353 339 553 Capital expenditure(5) (U.S.$ millions) ..... 194 211 188 120 94 162 Capital expenditure(6) (U.S.$ millions) ..... 192 218 179 135 104 148 Maintenance capital expenditure(6) (U.S.$ millions)...... 40 29 61 50 43 55 Investment capital expenditure(6) (U.S.$ millions)...... 152 189 118 85 61 93 Cash conversion(7) ...... (22)% 88% 79% 76% 88% 88%

45 The increase in EBITDA to TL 1,331 million for the nine months ended 30 September 2017 from TL 609 million for the nine months ended 30 September 2016 was attributable to an increase of TL 145 million from changes in the quantity of products sold, an increase of TL 711 million from changes in sales prices, an increase of TL 238 million from changes in FX rates and an increase of TL 135 million from other, offset by a decrease of TL 507 million from changes in naphtha prices. The increase in EBITDA to TL 890 million for the year ended 31 December 2016 from TL 664 million for the year ended 31 December 2015 was attributable to an increase of TL 463 million from changes in naphtha prices, an increase of TL 142 million from changes in FX rates and an increase of TL 97 million from other, offset by a decrease of TL 473 million from changes in sales prices and a decrease of TL 4 million from changes in the quantity of products sold. This reconciliation of EBITDA for the nine months ended 30 September 2017 to EBITDA for the nine months ended 30 September 2016 is based on indicative calculations prepared by us, and has not been audited or reviewed by our auditors. (2) EBITDA (U.S.$ millions) for each period is based upon the average exchange rate for each respective period as set out in ‘‘Exchange Rate Information’’. (3) EBITDA margin is defined as EBITDA divided by revenue. (4) Capital expenditure comprises cash outflows from purchases of property, plant and equipment. (5) Capital expenditure, maintenance capital expenditure and investment capital expenditure (U.S.$ millions) for each period is based upon the average exchange rate for each respective period as set out in ‘‘Exchange Rate Information’’. (6) Capital expenditure, maintenence capital expenditure and investment capital expenditure are presented on an accrual basis. (7) Cash conversion is defined as EBITDA less maintenance capital expenditure divided by EBITDA. (8) The unaudited financial information for the twelve months ended 30 September 2017 has been prepared by adding the audited financial information for the year ended 31 December 2016 extracted from the 2016 Audited Financial Statements to the unaudited financial information for the nine months ended 30 September 2017 extracted from the 2017 Unaudited Interim Financial Statements, and then subtracting the unaudited financial information for the nine months ended 30 September 2016 extracted from the 2017 Unaudited Interim Financial Statements. See ‘‘Presentation of Financial and Other Information’’.

46 CAPITALISATION The following table sets forth our unaudited interim consolidated cash and cash equivalents, total short- and long-term borrowings and equity as at 30 September 2017 (i) on an actual basis and (ii) as adjusted to give effect to the offering of the Notes and our acquisition of an 18 per cent. stake in STAR Rafineri A.S. from STEA¸S. There have been no material changes to our capitalisation as presented below since 30 September 2017.

Adjusted, Adjusted, As at As at As at 30 September 30 September 30 September 2017 2017 2017(1) (TL millions) (U.S.$ millions) Cash and cash equivalents ...... 1,208 395(2) 111 Short-term borrowings (including current portion of long-term borrowing) ...... 1,870 1,870 525 Long-term borrowings ...... 463 2,245 630 Notes offered hereby ...... — 1,782 500 Total debt ...... 2,333 4,115 1,155 Share capital ...... 1,500 1,500 421 Adjustment to share capital ...... 239 239 67 Share premium ...... 214 214 60 Other comprehensive income/(expense) not to be reclassified to profit or loss ...... (24) (24) (7) Other comprehensive income/(expense) to be reclassified to profit or loss ...... (5) (5) (1) Restricted reserves ...... 193 193 54 Retained earnings ...... 280 280 79 Equity attributable to owners of the parent company . 3,434 3,434 963 Non-controlling interest ...... 59 59 17 Total equity ...... 3,493 3,493 980 Total capitalisation(3) ...... 5,826 7,608 2,135

Notes: (1) The results as at 30 September 2017 are based upon the spot exchange rate of TL 3.5641 = U.S.$1.00 as at 30 September 2017. See ‘‘Exchange Rate Information’’. (2) The adjustment corresponds to the aggregate of (1) the amount paid to STEA¸S using available cash reserves for the uses set forth in ‘‘Use of Proceeds’’ pursuant to the STAR Refinery Share Sale Agreement and (2) total estimated fees and expenses associated with the offering of the Notes. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’. Actual fees and expenses may vary. (3) Total capitalisation represents the aggregate of total debt and total equity.

47 USE OF PROCEEDS We intend to use the net proceeds from the offering of the Notes, expected to amount to approximately U.S.$491.8 million after deducting fees and expenses, along with cash on hand, to acquire an 18 per cent. stake in STAR Rafineri A.¸S. from STEA¸S pursuant to the share sale and transfer agreement we signed with STEA¸S on 9 January 2018. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’. The following tables present the expected estimated sources and uses of the funds with respect to the acquisition of an 18 per cent. stake in STAR Rafineri A.¸S. from STEA¸S, including the Notes offered hereby. Actual amounts are subject to adjustments and may vary from estimated amounts depending on several factors, including differences from our estimates of fees and other expenses and fluctuations in the exchange rate between the Turkish lira and the U.S. dollar.

Sources (TL millions) (U.S.$ millions) Notes offered hereby ...... 1,772.6 497.3 Cash(1) ...... 813.2 228.2 Total sources ...... 2,585.8 725.5

Uses (TL millions) (U.S.$ millions) Purchase of stake in STAR Rafineri A.¸S. from STEA¸S...... 2,566.2 720.0 Fees and expenses(2) ...... 19.6 5.5 Total uses ...... 2,585.8 725.5

Notes: (1) Corresponds to the aggregate of (1) amount paid to STEA¸S using available cash reserves for the uses set forth above pursuant to the STAR Refinery Share Sale Agreement and (2) total estimated fees and expenses associated with the offering of the Notes. Actual fees and expenses may vary. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’. For cash and cash equivalents as of 30 September 2017, see ‘‘Capitalisation’’. (2) Represents total estimated fees and expenses associated with the offering of the Notes. Actual fees and expenses may vary.

48 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Unaudited Interim Financial Statements, the 2016 Audited Financial Statements and the 2015 Audited Financial Statements, appearing elsewhere in this Offering Memorandum. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Offering Memorandum, particularly in ‘‘Risk Factors’’ and ‘‘Forward-Looking Statements’’. Unless otherwise indicated, the financial information set out below and referred to in this section has been extracted without material adjustment from the Unaudited Interim Financial Statements, the 2016 Audited Financial Statements and the 2015 Audited Financial Statements. In connection with the preparation of the 2017 Unaudited Interim Financial Statements and the 2016 Audited Financial Statements, certain line items were reclassified. When comparisons are made between the nine months ended 30 September 2017 and 2016, the un-reclassified financial information for 2016 included in the 2016 Unaudited Interim Financial Statements is presented. When comparisons are made between the years ended 31 December 2016 and 2015, the reclassified financial information for 2015 contained in the 2016 Audited Financial Statements is presented. When comparisons are made between the years ended 31 December 2015 and 2014, the un-reclassified financial information for 2015 contained in the 2015 Audited Financial Statements is presented. See ‘‘Presentation of Financial and Other Information’’ for further detail on the reclassification.

Overview Petkim was established on 3 April 1965 by the Turkish government and is currently the sole petrochemicals producer of size in Turkey. We produce basic and intermediate petrochemical raw materials with an annual average gross production capacity of 3.6 million tons. In 2016, we operated at 88 per cent. capacity, producing 1.7 million tons of saleable products from a total gross output of 3.1 million tons, and in the twelve months ended 30 September 2017, we operated at 94 per cent. capacity, producing 1.8 million tons of saleable products from a total gross output of 3.3 million tons. The Petkim complex has 14 production plants and one masterbatch unit, as well as seven auxiliary processing units, and covers 19 million square metres. We produce petrochemicals across the integrated value chain based on naphtha and related feedstock, including an ethylene cracker with capacity of 588,000 tons per year, downstream integration into polyolefins and vinyl chain products and direct sales of selected cracking co-products (e.g. aromatics). Our products are used by customers in a wide range of industries, including the plastics, chemistry, packaging, pipe, paint, construction, agriculture, automotive, textiles, pharmaceuticals and detergents industries, among others. Approximately 64 per cent. of our products by value were sold in the domestic market in the nine months ended 30 September 2017, with the remaining 36 per cent. being sold in export markets, where the main destination is Europe. Based on management estimates, as at 31 December 2016, we had a direct domestic market share (based on production capacity) in Turkey of approximately 18 per cent. from our own production, with additional involvement in the domestic market through third party trading. Our facilities are located on the Petkim Peninsula in Aliaga,˘ Turkey on the coast of the Aegean Sea, approximately 50 kilometers from Izmir, which is one of the few coastal areas in Turkey dedicated to industrial activity. As an integrated company, Petkim is located in a strategic area logistically in terms of both sales and procurement of raw materials. Our logistics capabilities are one of our greatest strengths given the strategic location of our assets. Aliaga’s˘ proximity to Izmir, its connection to a large number of Organised Industrial Zones and its access to motorways and railways make it an advantageous location. In addition, sea shipping connections and proximity to ports in the Eastern Mediterranean make it an attractive platform to serve regional and global trade. Additionally, our facilities are very close to the main naphtha exporting regions, including the Black Sea region and Russia, and our operations are located near the Tupra¸¨ s refinery, which is also located at Aliaga.˘ Since the acquisition of Petkim by the SOCAR Group through a privatisation process, we have undertaken several operational efficiency programmes and investments with the aim of enhancing our competitiveness in the petrochemicals sector. In 2014, for example, we increased the capacity of our main facility ethylene cracker by 13 per cent., bringing its capacity to 588,000 tons per year, and we also

49 increased our PTA production capacity by 50 per cent., bringing the capacity to 105,000 tons per year. This involved investments of approximately U.S.$118 million in our ethylene cracker and U.S.$20 million for the expansion of our PTA production capacity. Following the acquisition of Petkim, the SOCAR Group has been focused on creating an industrial hub on the Aliaga˘ Peninsula via various projects. This has included the construction of the STAR Refinery, Turkey’s first privately established refinery, which is intended to provide us with raw material security. It is the first part of the integration chain, with an investment value of U.S.$6.3 billion and a refining capacity of 10 million tons per year, or 214,000 barrels per day. As at 30 November 2017, approximately U.S.$4.9 billion had been invested, of which approximately 46 per cent. was financed by equity and the remainder by debt. As of November 2017, overall construction on the STAR Refinery was approximately 97 per cent. complete and it is expected to come onstream in the third quarter of 2018. On 9 January 2018, we signed a share sale and transfer agreement with STEA¸S for the purchase of an 18 per cent. effective stake in STAR Rafineri A.¸S., and we intend to use the net proceeds from the offering of the Notes to fund a portion of the purchase price. See ‘‘Business of the Group—Integration—STAR Refinery’’, ‘‘Business of the Group—Strategy—Capitalise on potential for synergies and additional, diversified cash flows through the STAR Refinery, Petlim and other projects’’ and ‘‘—Contractual Obligations— Commitments—STAR Refinery Share Sale Agreement’’. Another major project was the construction of the Petlim Container Port, which was commissioned in 2016 with an initial capacity of 0.8 million TEU. The terminal’s capacity was expanded to a maximum of 1.5 million TEU in September 2017, making it Turkey’s third largest port, and is expected to be fully operational in 2018. This investment was undertaken by Petlim, 70 per cent. of which is owned by Petkim, with the remaining 30 per cent. being owned by Goldman Sachs, which acquired this stake in 2014 for U.S.$250 million. The total cost of the development and its financing was approximately U.S.$400 million. In February 2013, Petlim signed a 28-year concession agreement with an optional extension period of 4 years with APM Terminals, which allows APM Terminals to operate the port in exchange for an annual payment, comprising a fixed and a variable component. Under this agreement, APM Terminals is responsible for all operational aspects of the port and associated deliverables, including obtaining permits, while Petlim is responsible for all construction-related aspects of the port, including dredging. The expansion of the port to its current capacity was completed in September 2017, and APM Terminals is expected to obtain all necessary permits for use of the port’s full capacity in the first quarter of 2018. In order to diversify our sources of revenue, we have also invested in a wind farm with a total capacity of 51 MW. The wind farm has 17 new turbines, each able to generate 3 MW of electricity, paving the way for a 22 per cent. increase in Petkim’s electricity generating capacity. The construction of all turbines was completed in September 2017, and while the wind farm is currently licensed to generate 25 MW of electricity, we have applied for an amendment to the license which would allow it to generate 51 MW. We plan to sell electricity produced by the wind farm to Turkey’s national grid with a guaranteed tariff. The wind farm will reduce carbon emissions by 120,000 tons. The investment in the wind farm amounts to e55 million. Petkim holds a Regional Incentive Certificate for modernisation and replacement investments, as well as a Strategic Incentive Certificate for capacity increases and new investments. These certificates were granted within the scope of the Decree published by the Turkish government in 2012 pursuant to a decision by the Council of Ministers regarding ‘‘State Assistance for Investment.’’ These certificates entitle us to certain tax benefits, including VAT exemptions, customs duty exemptions and tax reduction, among other benefits. The incentive certificate regime is intended to support economic development and address Turkey’s current account deficit.

Key Factors Affecting Results of Operations Our results of operations are affected by a range of factors affecting the petrochemicals industry generally, including general economic conditions, pricing for raw materials and supply and demand for our products, as well as factors specific to our operations. These factors are discussed in detail below.

General Economic Conditions Our results of operations are affected by general economic conditions in Turkey, where we sell substantially all of our products. Turkey’s economy has recorded growth during the past five years, with real GDP growth of 11.11 per cent., 4.79 per cent., 8.49 per cent., 5.17 per cent., 6.06 per cent. and

50 2.10 per cent. for 2011, 2012, 2013, 2014, 2015 and 2016, respectively, according to TURKSTAT. 2016 saw divergent developments in different country groups. The failed coup attempt in July 2016 heightened political uncertainty and Russian sanctions have also negatively affected confidence, which has in turn adversely affected economic growth. In 2016, Turkey’s credit rating was downgraded by Fitch and Moody’s to below investment grade, with S&P’s rating remaining one notch below investment grade. Turkey’s economy is also affected by developments in the global economy, particularly in relation to the monetary policies of advanced economies, whose monetary policy was largely accommodative in 2017, with generally low policy rates. Average balance sheets are expected to expand significantly due to ongoing asset purchases by the Bank of Japan and the European Central Bank. In the United States, however, the Federal Reserve increased its policy rate three times in 2017 and market commentators are forecasting expect three rate hikes from the Federal Reserve in 2018. The European Central Bank has extended the maturity of its quantitative easing program to December 2017 but is expected to curtail its easing in 2018. The Turkish lira depreciated by 21.0 per cent. against the U.S. dollar in 2016 and depreciated by a further 3.2 per cent. in the nine months ended 30 September 2017. Furthermore, Turkey’s PPI and CPI for the year ended 31 December 2015 were 5.71 per cent. and 8.81 per cent., respectively, and, for the year ended 31 December 2016 were 9.94 per cent. and 8.53 per cent., respectively. Inflation increased after the attempted coup in July 2016 as a result of an increase in food prices and pass-through effects of the depreciation of the Turkish lira along with political uncertainties and geopolitical risks. In its April 2017 inflation report, the Central Bank revised its inflation forecast for 2017 from 8.0 per cent. to 8.5 per cent. and increased its inflation forecast for 2018 from 6.0 per cent. to 6.4 per cent., as a result of various inflationary pressures. Turkey’s current account deficit remains sizeable, as the decline in tourism offsets savings from low energy prices. Progress on structural reforms also remains slow. In 2015, the current account deficit decreased to U.S.$32.1 billion (3.75 per cent. of GDP). Between January and December 2016, Turkey had a current account deficit of U.S.$32.605 billion, compared to a current account deficit of U.S.$32.118 billion in the same period of 2015. Potential capital outflows due to a decrease in global U.S. dollar liquidity and rising U.S. interest rates may have a negative impact on the Turkish economy if not counterbalanced by the actions of the European Central Bank and the Bank of Japan.

Supply and Demand Cycle in the Petrochemicals Industry Margins in the petrochemicals industry are heavily influenced by industry utilisation, which is in turn influenced by the cycles of expansion and contraction of the global economy, creating volatility in the prices of both inputs and finished products. Due to this cyclical nature, historically the international petrochemicals industry has experienced alternating periods of limited supply, which have caused utilisation to increase, followed by an expansion of production capacity, which has resulted in oversupply and decreased utilisation. Historically, the relationship between margins and utilisation has been highly cyclical due to fluctuations in supply resulting from the timing of new investments in capacity and global economic conditions affecting the relative strength or weakness of demand. Generally, capacity is more likely to be added in periods when current or expected future demand is strong and margins are, or are expected to be, high. Investments in new capacity can result, and in the past frequently have resulted, in overcapacity, which typically leads to a reduction in margins. In response, petrochemicals producers typically reduce capacity or control further capacity additions, eventually causing the market to be relatively undersupplied. Currently, there is excess supply in the global petrochemicals industry. Ethane-based investments in the United States and the Middle East, which are rich in natural gas, have been the key factor contributing to excess supply. This has led to a concentration of investments in ethylene and its derivatives. While investments in Asia have continued in order to maintain self-sufficiency, there have been very few investments in Europe. There is also an increased need for maintenance of production plants in Europe due to the age of such plants. Within the petrochemicals industry, the highest growth potential has been for thermoplastics, including LDPE, PP, polystyrene (‘‘PS’’) and ABS. This is largely due to growth in demand for these products as a result of increased usage. While growth in demand for general purpose products is higher in less developed countries, demand for specialty products such as engineering plastics is increasing in developed countries.

51 Demand for fibers, including ACN and ethylene glycol, has been increasing at a faster rate compared to other petrochemicals products, although growth rates for these products have been gradually decreasing in recent years due to the increasing substitution of natural raw materials such as cotton for these products. Other products such as C. Soda and PA have the lowest growth potential mainly due to environmental restrictions. We have experienced positive pricing for most of our products during the past few years, which has contributed to higher margins, and we expect pricing to remain stable across all of our products in 2018 and 2019. The following graphs presents Nexant’s view of expected growth for our various products over the period from 2016 to 2025:

PP (2016-2025 CAGR) PVC (2016-2025 CAGR) HDPE (2016-2025 CAGR)

5.1% 4.2% 4.9% 5.2% 3.7% 5.1%

1.6%

1.0% 1.3%

Western Europe Middle East Tur key Western Europe Middle East Turkey Western Europe Middle East Turkey

LDPE (2016-2025 CAGR) PTA (2016-2025 CAGR) MEG (2016-2025 CAGR)

4.8% 7.5% 4.8% 4.6% 4.4%

5.2%

2.4% 1.5%

0.2%

Western Europe Middle East Tur key Western Europe Middle East Turkey Western Europe Middle East8JAN201819105472Turkey

Competition Until a decade ago, the Turkish petrochemicals industry was growing at a rate of over 10 per cent. per year. Recently, this has decreased to 5 per cent. to 6 per cent., which is still above GDP growth. Although the overall market has been growing, our market share (based on production capacity), which management estimates is approximately 18 per cent. as at 31 December 2016, has declined during the same period. This decrease is solely due to constraints in our production capacity, given that we are the sole petrochemical producer in Turkey and have historically been able to sell everything we have produced. The Turkish petrochemicals industry is one of the most competitive markets in the world due to several factors. First, Turkey has applied liberal foreign trade policies, including the customs union with the EU, a high volume of trade agreements and an open fiscal regime. Moreover, there are export incentives, especially for finished products, that make imports of raw material more attractive. For example, because of the advantage of the aforementioned trade agreements, producers in Middle Eastern countries, which have cost advantages due to their supply of natural gas and oversupply conditions, are increasingly focusing on the Turkish market. On the other hand, the Turkish petrochemicals industry mainly operates on a spot basis and therefore does not provide exporters an attractive and permanent net-back. Therefore, potential exporters are effectively required to track our prices, although they may engage in dumping in order to gain market share. As a result, we have from time to time demanded the imposition of anti-dumping duties on countries and/or companies who are engaging in these pricing strategies. However, while our operations have benefitted from anti-dumping duties in the past and may continue to do so in the future, we do not rely on such measures as a general matter.

52 The following table sets forth detail on customs duties and anti-dumping duties by country and product:

United States Iran South Korea Germany Customs Anti-dumping Customs Anti-dumping Customs Anti-dumping Customs Anti-dumping duty duty duty duty duty duty duty duty LDPE ...... 6.5% N/A 6.5% N/A N/A N/A N/A N/A PA...... 6.5% N/A 6.5% N/A 0.0% 8.44% N/A N/A PVC...... 6.5% 18.1% N/A N/A N/A N/A 0.0% 16.4% In addition, in relation to PTA, we have also initiated anti-dumping proceedings and expect a decision later in 2018. In the international market, both the slowdown in general demand and the rise in supply with new capacity coming on-stream have led to a contraction in regional arbitrage and a decline in global trade. To address these issues, some companies, particularly multi-national companies, have increased their vertical and horizontal integration and have increasingly pursued a strategy of increasing production of higher value added products. There has also been an acceleration in research and development and innovation activities in order to diversify the product range.

Oil and Gas Price Movements In general, oil and gas price movements can affect our results of operations and, in particular, our margins, in a number of ways. The price of crude oil and natural gas is historically correlated to a certain extent with sales prices for our products. As crude oil and natural gas prices decrease, the sales prices of our products tend to decrease as well, and vice versa. In addition, oil and gas price movements have an impact on the cost of our feedstock, which is primarily naphtha. In recent periods, our feedstock costs have decreased in tandem with lower crude oil and natural gas prices. The decrease in our feedstock costs has been disproportionately greater than the decrease in sales prices for our products, resulting in a significant increase in our EBITDA margin and average gross profit per ton during the periods under review. This is generally the case for naphtha-based producers such as ourselves, whereas ethane- based producers tend to experience margin erosion as a result of declining oil and gas prices. The price of crude oil has fluctuated significantly during the past five years. According to OPEC’s website, the year-end figure for a barrel of crude oil as measured in accordance with OPEC’s reference basket (which represents a weighted average of oil prices collected from various oil producing countries) rose from U.S.$107.46 in 2011 to U.S.$109.45 in 2012, before declining to U.S.$105.87 in 2013, U.S.$96.29 in 2014 and U.S.$49.49 in 2015 and reaching a low of U.S.$26.01 in January 2016. The price of the OPEC reference basket as at 31 December 2016 was U.S.$53.30 per barrel.

Asset Utilisation and Capacity Expansions Our results of operations are influenced by the degree to which we utilise our assets. We seek to operate our facilities at full capacity and in 2016, we operated at 88 per cent. overall capacity utilisation, with capacity utilisation of 94 per cent. for ethylene and 95 per cent. for aromatics. This is compared to overall capacity utilisation of 87 per cent. in 2015, with capacity utilisation of 95 per cent. for ethylene and 100 per cent. for aromatics, and overall capacity utilisation of 68 per cent. in 2014, with capacity utilisation of 63 per cent. for ethylene and 85 per cent. for aromatics. The increase in utilisation across these periods has had a positive effect on our sales and margins.

53 The graph below illustrates capacity utilisation rates at our ethylene facility on a quarterly basis for the period from 1 January 2014 to 30 September 2017.

Petkim Ethylene Cracker Facility Utilisation Rates 2014 − Q3 20171

120%

100%

80% Average: 88.6%

60%

40% Drop in production due Drop in production due to to ethylene cracker 15-day shutdown of Capacity Utilisation Rates 20% shutdown for c.100 days ethylene cracker for for construction work maintenance work 0% Jan-2017 Jan-2014 Jan-2015 Jan-2016 Sep-2016 Sep-2017 Sep-2014 Sep-2015 May-2016 May-2017 May-2014 May-2015 8JAN201823195024

Note: (1) For 2014, our overall capacity utilisation is used instead of Petkim’s ethylene cracker capacity utilisation due to lack of available individualised data for the ethylene facility during this period. The capacity expansions we undertake also have an impact on our results of operations. In November 2014, we completed the expansion of our ethylene cracker, increasing ethylene production capacity by 13 per cent. from 520,000 tons per year to 588,000 tons per year. In 2014, we completed our investments in improving production processes at our PTA plant, which resulted in capacity increasing by 50 per cent. from 70,000 tons per year to 105,000 tons per year. We have also made investments to increase efficiency at our production plants. In 2015, we completed several energy efficiency projects, with significant gains obtained in particular with projects in the VCM, ethylene, ACN, aromatics and LDPE plants. In 2016, general maintenance at our aromatics production plant, ethylene cracker and LDPE production plant contributed to higher utilisation. We are continuing our focus on operational efficiency, including through the development of an integrated optimisation model, which will monitor a wide range of factors across our production facilities to optimise maintenance schedules. Digitisation is also an area of focus for us. For example, the digitisation of our production facilities has enabled us to monitor the temperature of our furnaces more efficiently, which has resulted in significant cost savings. Our asset utilisation can also be affected by the number and length of ‘‘turnarounds’’ (scheduled outages of a unit in order to perform necessary inspections and testing to comply with industry regulations and to permit us to carry out any maintenance activities that may be necessary). Our production facilities typically undergo major turnarounds every four years, which last approximately one month. Unplanned outages can also impact our results of operations, even if such outages are covered by insurance. Similarly, planned or unplanned outages of our competitors can positively affect our results of operations by decreasing the supply of products in the market.

Foreign Exchange Rate Fluctuations Our results of operations may be affected by foreign currency exchange rate fluctuations. Most of our foreign currency exposure is naturally hedged, with the vast majority of our customers invoiced, and our expenses paid, in U.S. dollars. However, we are exposed to currency risk on foreign currency- denominated sales to the extent the exchange rate of the Turkish lira versus the relevant foreign currency fluctuates between the date of the invoice and the date of payment. As at 31 December 2016, a 10 per cent. appreciation of the U.S. dollar versus the Turkish lira would have had an adverse effect of TL 50 million on our profit for the year. In addition, we are exposed to currency risks in relation to our inventory and adverse movements in currency exchange rates may lead to us being required to recognise impairments in respect of our inventory.

54 Results of Operations Nine Months Ended 30 September 2017 and 2016 The following table sets forth our results of operations for the nine months ended 30 September 2017 and 2016 (for purposes of this discussion, the un-reclassified financial information for the nine months ended 30 September 2016 included in the 2016 Unaudited Interim Financial Statements is presented. See ‘‘Presentation of Financial and Other Information’’):

Nine months ended 30 September 2016 2017 (TL millions) Sales ...... 3,253 5,402 Cost of sales ...... (2,585) (4,023) Gross profit ...... 668 1,379 General and administrative expenses ...... (103) (148) Marketing, selling and distribution expenses ...... (31) (43) Research and development expenses ...... (10) (12) Other operating income ...... 113 163 Other operating expense ...... (66) (100) Operating profit/(loss) ...... 571 1,238 Income from investment activities ...... 0.6 38 Expense from investment activities ...... — — Operating profit before financial income and expense ...... 572 1,276 Finance income ...... 195 384 Finance expense ...... (174) (432) Profit/(loss) before tax ...... 592 1,227 Current tax expense ...... (113) (177) Deferred tax income/(expense) ...... 35 (23) Net profit for the period ...... 515 1,027

Net Sales Our net sales increased by TL 2,149 million, or 66 per cent., to TL 5,402 million for the nine months ended 30 September 2017 from TL 3,253 million for the nine months ended 30 September 2016. The increase was primarily due to increased demand across our products and trade goods sold, higher oil prices and the depreciation of the Turkish Lira against the U.S. dollar. The following table presents a breakdown of our net sales for the nine months ended 30 September 2017 and 2016:

Nine months ended 30 September 2016 2017 (TL millions) Domestic sales ...... 2,309 3,432 Export sales ...... 982 2,065 Other sales ...... 18 29 Sales discounts ...... (56) (124) Net sales ...... 3,253 5,402

Domestic sales Domestic sales increased by TL 1,123 million, or 49 per cent., to TL 3,432 million for the nine months ended 30 September 2017 from TL 2,309 million for the nine months ended 30 September 2016. The increase was primarily due to an increase in overall capacity utilisation at our facilities from 89 per cent. to 96 per cent. in the nine months ended 30 September 2016 and 2017, respectively, as well as an

55 increase in demand for PTA, MEG, P-X and certain trade goods, in particular thermoplastics and styrene. Additional factors that contributed to the increase in domestic sales during this period included higher oil prices and the depreciation of the Turkish Lira against the U.S. dollar.

Export sales Export sales increased by TL 1,083 million, or 110 per cent., to TL 2,065 million for the nine months ended 30 September 2017 from TL 982 million for the nine months ended 30 September 2016. The increase was primarily due to the increase in capacity utilisation at our facilities, as well as an increase in demand for thermoplastics, MEG, aromatics, benzene and certain trade goods, in particular benzene and hexane. Additional factors that contributed to the increase in export sales during this period included higher oil prices and the depreciation of the Turkish Lira against the U.S. dollar.

Sales discounts Discounts increased by TL 68 million, or 122 per cent., to TL 124 million for the nine months ended 30 September 2017 from TL 56 million for the nine months ended 30 September 2016.

Cost of sales Cost of sales includes direct raw materials and supplies, cost of sold trade goods, energy, labour costs, depreciation and amortisation and other. Cost of sales increased by TL 1,438 million, or 56 per cent., to TL 4,023 million for the nine months ended 30 September 2017, from TL 2,585 million for the nine months ended 30 September 2016. The increase was primarily due to an increase in direct raw materials and supplies, cost of trade goods sold, energy, labour costs and depreciation. The following table presents an overview of our cost of sales for the nine months ended 30 September 2017 and 2016:

Nine months ended 30 September 2016 2017 (TL millions) Direct raw materials and supplies ...... (1,811) (2,822) Cost of sold trade goods ...... (280) (542) Energy ...... (247) (284) Labour costs ...... (150) (191) Depreciation and amortisation ...... (78) (117) Other ...... (19) (68) Total cost of sales ...... (2,585) (4,023)

Direct raw materials and supplies Direct raw materials and supplies increased by TL 1,011 million, or 56 per cent., to TL 2,822 million for the nine months ended 30 September 2017 from TL 1,811 million for the nine months ended 30 September 2016. The increase was primarily due to an increase in feedstock costs due to higher oil and naphtha prices, an increase in capacity utilisation at our facilities and the depreciation of the Turkish Lira against the U.S. dollar.

Cost of sold trade goods Cost of sold trade goods increased by TL 262 million, or 94 per cent., to TL 542 million for the nine months ended 30 September 2017 from TL 280 million for the nine months ended 30 September 2016. The increase was primarily due to an increase in the quantity of certain products we sell through our trading operations, including thermoplastics, benzene, styrene and hexane, which was partially offset by a decrease in the quantity of MEG sold. The depreciation of the Turkish Lira against the U.S. dollar also contributed to the increase in cost of trade goods sold.

56 Energy Energy costs increased by TL 37 million, or 15 per cent., to TL 284 million for the nine months ended 30 September 2017 from TL 247 million for the nine months ended 30 September 2016. The increase was primarily due to the increase in capacity utilisation at our facilities.

Labour costs Labour costs increased by TL 40 million, or 27 per cent., to TL 191 million for the nine months ended 30 September 2017 from TL 150 million for the nine months ended 30 September 2016. The increase was in line with inflation.

Depreciation and amortisation Depreciation and amortisation increased by TL 39 million, or 50 per cent., to TL 117 million for the nine months ended 30 September 2017 from TL 78 million for the nine months ended 30 September 2016. The increase was primarily due to the capitalisation of our wind farm in April 2017 and the Petlim Container Port in December 2016.

General and administrative expenses General and administrative expenses increased by TL 45 million, or 43 per cent., to TL 148 million for the nine months ended 30 September 2017 from TL 103 million for the nine months ended 30 September 2016. The increase was primarily due to higher personnel expenses and higher costs associated with consultancy services in connection with the implementation of the operational excellence program as well as other outsourced services.

Marketing, selling and distribution expenses Marketing, selling and distribution expenses increased by TL 12 million, or 39 per cent., to TL 43 million for the nine months ended 30 September 2017 from TL 31 million for the nine months ended 30 September 2016. The increase was primarily due to an increase in rent expenses and outsourced services related to transportation incurred in connection with the increased quantities of trade goods sold during the period.

Research and development expenses Research and development expenses increased by TL 2 million, or 20 per cent., to TL 12 million for the nine months ended 30 September 2017 from TL 10 million for the nine months ended 30 September 2016.

Net other operating income Net other operating income increased by TL 16 million, or 34 per cent., to TL 63 million for the nine months ended 30 September 2017 from TL 47 million for the nine months ended 30 September 2016. The increase was primarily due to an increase in net foreign exchange gains as a result of fluctuations in the Turkish lira/U.S. dollar exchange rate, partially offset by lower rental income.

Net income from investing activities Net income from investing activities increased by TL 37 million to TL 38 million for the nine months ended 30 September 2017 from TL 1 million for the nine months ended 30 September 2016. The increase was primarily due to the sale of land to SCR Gayrimenkul A.¸S., a member of the SOCAR Group.

Net finance (expense)/income We recorded net finance expense of TL 49 million for the nine months ended 30 September 2017, compared to net finance income of TL 21 million for the nine months ended 30 September 2016. This was due to higher foreign exchange losses as a result of fluctuations in the Turkish lira/U.S. dollar exchange rate.

57 Total tax expense Total tax expense increased by TL 123 million, or 160 per cent., to TL 200 million for the nine months ended 30 September 2017 from TL 78 million for the nine months ended 30 September 2016. This reflected an effective tax rate of 16 per cent. and 13 per cent. for the nine months ended 30 September 2017 and 2016, respectively.

Years Ended 31 December 2016 and 2015 The following table sets forth our results of operations for the years ended 31 December 2016 and 2015 (for purposes of this discussion, the reclassified comparative financial information for the year ended 31 December 2015 included in the 2016 Audited Financial Statements is presented. See ‘‘Presentation of Financial and Other Information’’):

Year ended 31 December 2015 2016 (TL millions) Sales ...... 4,533 4,533 Cost of sales ...... (3,814) (3,575) Gross profit ...... 718 958 General and administrative expenses ...... (118) (138) Marketing, selling and distribution expenses ...... (32) (42) Research and development expenses ...... (12) (13) Other operating income ...... 128 204 Other operating expense ...... (180) (240) Operating profit/(loss) ...... 505 729 Income from investment activities ...... 11 17 Expense from investment activities ...... — (4) Operating profit before financial income and expense ...... 516 742 Finance income ...... 422 379 Finance expense ...... (364) (339) Profit/(loss) before tax ...... 574 782 Current tax expense ...... (19) (163) Deferred tax income/(expense) ...... 85 113 Net profit for the period ...... 639 732

Sales Our sales remained stable at TL 4,533 million for the year ended 31 December 2016 and 2015. The following table presents a breakdown of our sales for the years ended 31 December 2016 and 2015:

Year ended 31 December 2015 2016 (TL millions) Domestic sales ...... 3,180 3,207 Export sales ...... 1,387 1,367 Other sales ...... 52 31 Gross sales ...... 4,619 4,605 Less: other discounts ...... (71) (58) Less: sales discounts ...... (11) (10) Less: sales returns ...... (4) (4) Total sales ...... 4,533 4,533

58 Domestic sales Domestic sales increased by TL 27 million, or 0.9 per cent., to TL 3,207 million for the year ended 31 December 2016 from TL 3,180 million for the year ended 31 December 2015. The increase was primarily due to an increase in the Turkish lira/U.S. dollar exchange rate, which was partially offset by a decrease in overall product pricing in U.S. dollar terms due to the decline in oil prices.

Export sales Export sales decreased by TL 20 million, or 1.4 per cent., to TL 1,367 million for the year ended 31 December 2016 from TL 1,387 million for the year ended 31 December 2015. The decrease was primarily due to an increase in the Turkish lira/U.S. dollar exchange rate, which was partially offset by a decrease in overall product pricing in U.S. dollar terms due to the decline in oil prices. Changes in the product mix sold in the export market (including an increase in quantities sold for ethylene, C4, ACN, PTA and MEG and a decrease in sales of thermoplastics, Py-gas and aromatic oil) also contributed to the decrease.

Other sales Other sales decreased by TL 21 million, or 40.8 per cent., to TL 31 million for the year ended 31 December 2016 from TL 52 million for the year ended 31 December 2015. The decrease was primarily due to foreign exchange income (which increased) being classified under domestic and export sales in 2016, as well as a decrease in service income from tugboat and pilotage services, and scrap sales.

Discounts Discounts decreased by TL 14 million, or 16.0 per cent., to TL 73 million for the year ended 31 December 2016 from TL 86 million for the year ended 31 December 2015.

Cost of sales Cost of sales decreased by TL 240 million, or 6.3 per cent., to TL 3,575 million for the year ended 31 December 2016 from TL 3,814 million for the year ended 31 December 2015. The decrease was primarily due to a decrease in raw materials usage and energy costs and decreases in change in work in process and change in finished goods. The following table presents an overview of our cost of sales for the year ended 31 December 2016 and 2015:

Year ended 31 December 2015 2016 (TL millions) Raw material usage ...... 2,576 2,552 Cost of sold trade goods ...... 312 383 Energy ...... 373 321 Labour ...... 187 199 Depreciation ...... 100 105 Idle capacity expense ...... 30 24 Packaging costs ...... 24 17 Change in work in process ...... 96 (57) Change in finished goods ...... 42 (65) Provision for impairment of inventories ...... (15) (11) Other ...... 89 106 Total cost of sales ...... 3,814 3,575

Raw material usage Raw material usage costs decreased by TL 24 million, or 0.9 per cent., to TL 2,552 million for the year ended 31 December 2016 from TL 2,576 million for the year ended 31 December 2015. The decrease was primarily due to a decrease in feedstock costs due to lower oil and naphtha prices, which was in turn due to lower pricing. This was partially offset by higher capacity utilisation in 2015.

59 Cost of sold trade goods Cost of sold trade goods increased by TL 71 million, or 22.8 per cent., to TL 383 million for the year ended 31 December 2016 from TL 312 million for the year ended 31 December 2015. The increase was primarily due to an increase in the quantity of certain products we sell through our trading operations, including styrene and MEG. In the case of MEG, this was in turn due to a planned shutdown related to catalyst change, which led to us having to import MEG for on-sale to customers.

Energy Energy costs decreased by TL 52 million, or 13.9 per cent., to TL 321 million for the year ended 31 December 2016 from TL 373 million for the year ended 31 December 2015. The decrease was primarily due to lower natural gas prices.

Labour Labour costs increased by TL 12 million, or 6.4 per cent., to TL 199 million for the year ended 31 December 2016 from TL 187 million for the year ended 31 December 2015. The increase was in line with inflation.

Depreciation Depreciation increased by TL 5 million, or 5 per cent., to TL 105 million for the year ended 31 December 2016 from TL 100 million for the year ended 31 December 2015.

Change in work in process Change in work in process decreased by TL 153 million, or 158.9 per cent., to negative TL 57 million for the year ended 31 December 2016 from positive TL 96 million for the year ended 31 December 2015. The increase was primarily due to the positive effect of increasing naphtha prices on inventories in the first quarter of 2016.

Change in finished goods Change in finished goods decreased by TL 107 million, or 254.8 per cent., to negative TL 65 million for the year ended 31 December 2016 from positive TL 42 million for the year ended 31 December 2015. The decrease was primarily due to the impact of increasing naphtha prices on inventories in the first quarter of 2016.

General and administrative expenses General and administrative expenses increased by TL 20 million, or 17.0 per cent., to TL 138 million for the year ended 31 December 2016 from TL 118 million for the year ended 31 December 2015. The increase was primarily due to an increase in fees for consultancy services in connection with our operational excellence program.

Marketing, selling and distribution expenses Marketing, selling and distribution expenses increased by TL 10 million, or 31.3 per cent., to TL 42 million for the year ended 31 December 2016 from TL 32 million for the year ended 31 December 2015. The increase was primarily due to higher outsourcing costs, which was in turn related to an increase in storage rent which was in line with the increase in the quantity of products sold.

Research and development expenses Research and development expenses increased by TL 1 million, or 8.3 per cent., to TL 13 million for the year ended 31 December 2016 from TL 12 million for the year ended 31 December 2015.

Net other operating expense Net other operating expense decreased by TL 16 million, or 30.4 per cent., to TL 36 million for the year ended 31 December 2016 from TL 52 million for the year ended 31 December 2015. The decrease was primarily due to higher foreign exchange losses on trade payables in 2016, which was in turn due to the 11 per cent. depreciation of the Turkish lira against the U.S. dollar.

60 Net finance income Net finance income decreased by TL 18 million, or 30.8 per cent., to TL 40 million for the year ended 31 December 2016 from TL 58 million for the year ended 31 December 2015. The decrease was primarily due to lower foreign exchange gains in 2016, which was in turn due to the 11 per cent. depreciation of the Turkish lira against the U.S. dollar.

Total tax expense We had a total tax expense of TL 50 million for the year ended 31 December 2016, compared to a total tax credit of TL 66 million for the year ended 31 December 2015. This was primarily due to strategic investment incentives for corporate tax used in 2015, which mostly related to capacity expansion projects.

Years Ended 31 December 2015 and 2014 The following table sets forth our results of operations for the years ended 31 December 2015 and 2014 (for purposes of this discussion, the un-reclassified financial information for the year ended 31 December 2015 included in the 2015 Audited Financial Statements is presented. See ‘‘Presentation of Financial and Other Information’’):

Year ended 31 December 2014 2015 (TL millions) Sales ...... 4,133 4,533 Cost of sales ...... (4,047) (3,816) Gross profit ...... 85 716 General and administrative expenses ...... (100) (118) Marketing, selling and distribution expenses ...... (27) (32) Research and development expenses ...... (12) (12) Other operating income ...... 119 131 Other operating expense ...... (127) (170) Operating profit/(loss) ...... (61) (516) Income from investment activities ...... 3 — Operating profit/(loss) before financial income and expense ...... (58) 516 Finance income ...... 141 422 Finance expense ...... (145) (364) Profit/(loss) before taxation ...... (62) 574 Current year tax expense ...... — (19) Deferred tax income/(expense) ...... 70 85 Net profit for the period ...... 9 639

Sales Our sales increased by TL 400 million, or 9.7 per cent. to TL 4,533 million for the year ended 31 December 2015 compared to TL 4,133 million for the year ended 31 December 2014. The increase was due to capacity expansions at our ethylene cracker and PTA production plant which were completed during 2014. In addition to those expansions, we undertook planned maintenance works in 2014 at other production units. Following the completion of these capacity expansions and maintenance works, our production increased, which resulted in an increase in sales volumes, particularly for thermoplastics, ACN, MEG, PTA, PP, C4, Py-gas, benzene, PA and C5.

61 The following table presents a breakdown of our sales for the years ended 31 December 2015 and 2014:

Year ended 31 December 2014 2015 (TL millions) Domestic sales ...... 2,958 3,180 Export sales ...... 1,240 1,387 Other sales ...... 16 52 Gross sales ...... 4,214 4,619 Less: other discounts ...... (68) (71) Less: sales discounts ...... (9) (11) Less: sales returns ...... (4) (4) Total sales ...... 4,133 4,533

Domestic sales Domestic sales increased by TL 222 million, or 7.5 per cent., to TL 3,180 million for the year ended 31 December 2015 from TL 2,958 million for the year ended 31 December 2014. The increase was primarily due to the capacity expansions at our ethylene cracker and PTA production plant which were completed during 2014. This resulted in higher sales volumes for thermoplastics, ACN, PTA and MEG. This was partially offset by lower pricing due to a decrease in oil prices.

Export sales Export sales increased by TL 147 million, or 11.8 per cent., to TL 1,387 million for the year ended 31 December 2015 from TL 1,240 million for the year ended 31 December 2014. The increase was primarily due to low sales volumes in 2014, which was in turn due to reduced production resulting from the shutdowns occasioned by our capacity expansions and maintenance work performed during that year. Given the lower volumes of production, we elected to sell our limited production in the domestic market rather than the export market, where margins are lower. In 2015, once the capacity expansions and maintenance work was completed, our production levels normalised, causing export sales to increase.

Other sales Other sales increased by TL 36 million, or 225 per cent., to TL 52 million for the year ended 31 December 2015 from TL 16 million for the year ended 31 December 2014. The increase was primarily due to an increase in foreign exchange income due to movements in exchange rates.

Discounts Discounts increased by TL 5 million, or 6.2 per cent., to TL 86 million for the year ended 31 December 2015 from TL 81 million for the year ended 31 December 2014.

Cost of sales Cost of sales decreased by TL 231 million, or 5.7 per cent., to TL 3,816 million for the year ended 31 December 2015 from TL 4,047 million for the year ended 31 December 2014. The decrease was primarily due to a sharp decrease in feedstock prices, which was offset by an increase in raw material usage due to higher capacity utilisation rate and capacity expansions at our ethylene cracker and PTA production plant.

62 The following table presents an overview of our cost of sales for the year ended 31 December 2015 and 2014:

Year ended 31 December 2014 2015 (TL millions) Raw material usage ...... 2,973 2,576 Cost of sold trade goods ...... 472 312 Energy ...... 350 373 Labour ...... 131 187 Depreciation ...... 75 100 Change in work in process ...... (58) 96 Change in finished goods ...... 18 42 Idle capacity expense ...... 29 30 Packaging costs ...... 13 24 Rediscount income/(expense) on trade payables ...... 4 2 Provision for impairment of inventories ...... 27 12 Other ...... 16 62 Total cost of sales ...... 4,047 3,816

Raw material usage Raw material usage costs decreased by TL 397 million, or 13.3 per cent., to TL 2,576 million for the year ended 31 December 2015 from TL 2,973 million for the year ended 31 December 2014. The decrease was primarily due to a decrease in feedstock costs, which was in turn due to lower pricing. The decrease was primarily due to a sharp decrease in feedstock prices, which was offset by an increase in raw material usage due to higher capacity utilisation rate and capacity expansions at our ethylene cracker and PTA production plant.

Cost of sold trade goods Cost of sold trade goods decreased by TL 160 million, or 33.8 per cent., to TL 312 million for the year ended 31 December 2015 from TL 472 million for the year ended 31 December 2014. The decrease was primarily due to a supply deficit in the domestic market in 2014 resulting from the capacity expansions and maintenance work undertaken that year. This led us to purchase a higher volume of trade goods in 2014 than would otherwise have been the case. Following the completion of the capacity expansions and maintenance work, the quantity of trade goods sold increased.

Energy Energy costs increased by TL 23 million, or 6.8 per cent., to TL 373 million for the year ended 31 December 2015 from TL 350 million for the year ended 31 December 2014. The increase was primarily due to higher capacity utilisation in 2015.

Labour Labour costs increased by TL 56 million, or 42.7 per cent., to TL 187 million for the year ended 31 December 2015 from TL 131 million for the year ended 31 December 2014. The increase was primarily due to the usage of labour in connection with the expansions of our ethylene cracker and PTA production plant.

Depreciation Depreciation increased by TL 25 million, or 33.3 per cent., to TL 100 million for the year ended 31 December 2015 from TL 75 million for the year ended 31 December 2014. The increase was primarily due to the capacity expansions we undertook in 2014.

Change in work in process Change in work in process increased by TL 154 million, or 265.5 per cent., to TL 96 million for the year ended 31 December 2015 from negative TL 58 million for the year ended 31 December 2014. The increase was primarily due to the negative effect of decreasing naphtha prices on inventories.

63 Change in finished goods Change in finished goods increased by TL 24 million, or 133.3 per cent., to negative TL 18 million for the year ended 31 December 2015 from negative TL 42 million for the year ended 31 December 2014. The increase was primarily due to the negative effect of decreasing naphtha prices on inventories.

General and administrative expenses General and administrative expenses increased by TL 18 million, or 18.0 per cent., to TL 118 million for the year ended 31 December 2015 from TL 100 million for the year ended 31 December 2014. The increase was primarily due to higher personnel expenses, which was in turn due to a provision for bonuses and an increase in salaries.

Marketing, selling and distribution expenses Marketing, selling and distribution expenses increased by TL 5 million, or 18.5 per cent., to TL 32 million for the year ended 31 December 2015 from TL 27 million for the year ended 31 December 2014. The increase was primarily due to higher personnel expenses, which was in turn due to a provision for bonuses and an increase in salaries.

Research and development expenses Research and development expenses remained stable at TL 12 million for each of the years ended 31 December 2015 and 2014.

Net other operating expense Net other operating expense increased by TL 31 million, or 389.1 per cent., to TL 38 million for the year ended 31 December 2015 from TL 8 million for the year ended 31 December 2014. The increase was primarily due to foreign exchange losses on trade payables, which was in turn due to the depreciation of the Turkish lira against the U.S. dollar.

Net finance income/(expense) We recorded net finance income of TL 58 million for the year ended 31 December 2015, compared to a net finance expense of TL 4 million for the year ended 31 December 2014. This was primarily due to higher net foreign exchange gains in 2015 as compared to 2014.

Total tax expense We had a total tax credit of TL 65 million for the year ended 31 December 2015, compared to TL 70 million for the year ended 31 December 2014. This was primarily due to strategic investment incentives for corporate tax used in 2015, which mostly related to capacity expansion projects.

Liquidity and Capital Resources Our business has required, and will continue to require, liquidity primarily to meet our debt service requirements, to fund capital expenditures (including for scheduled maintenance of our production facilities and expanding capacity at our production plants) and to fund our working capital. Historically, our principal sources of liquidity have been cash generated from our operating activities, short-term bank borrowings, including overnight loans, and long-term bank borrowings denominated in U.S. dollars and euro with Turkish and international banks. Our ability to generate cash from our operating activities depends on future operating performance, which in turn depends to a certain extent on general economic, financial, competitive market, legislative, regulatory and other factors, many of which are beyond our control, as well as other factors discussed in the section entitled ‘‘Risk Factors.’’

64 Facilities The table below sets out the outstanding facilities into which we have entered for the financing of capital expenditure and raw materials as at 30 September 2017:

Amount drawn Amount drawn as at as at 30 September 2017 Lender Amount 30 September 2017 (U.S.$ millions)(1) Date Tenor European Investment Bank (‘‘EIB’’)..... e40 million Fully drawn U.S.$45.2 million April 2014 9 years Turkiye¨ ˙Ihracat Kredi Bankası A.¸S...... TL 100 million Fully drawn U.S.$28 million November 2016 1 year U.S.$240 million U.S.$80 million U.S.$80 million November 2016 1 year Turkiye¨ ˙I¸s Bankası A.¸S. U.S.$101.5 million U.S.$76.6 million U.S.$76.6 million March 2013 4 years/9 years(2) AKBANK T.A.¸S. (‘‘Akbank’’)...... e29 million Fully drawn U.S.$20.5 million April 2013 9 years Yapi ve Kredi Bankasi A.¸S...... TL 50 million Fully drawn U.S.$14.0 million March 2017 1 year

Notes: (1) The amounts outstanding are converted from Turkish lira using the spot exchange rate of TL 3.5641 = U.S.$1.00 as at 30 September 2017. See ‘‘Exchange Rate Information’’. (2) The facility includes two tranches, comprising a Nippon Export and Investment Insurance tranche with a four-year tenor and a Japan Bank for International Cooperation tranche with a nine year tenor. The table below sets out the outstanding facilities into which we have entered for the financing of the construction of the Petlim Container Port as at 30 September 2017:

Amount drawn Amount drawn as at 30 September 2017 Lender Amount as at 30 September 2017 (U.S.$ millions) Date Tenor Akbank . . U.S.$212 million(1) Fully drawn U.S.$ 212 million May 2015 13 years EIB..... U.S.$ 80 million e35 million U.S.$41.2 million May 2016 9 years

Note: (1) Petlim, in which we own a 70 per cent. shareholding interest, is the borrower under this project finance credit agreement and we are the guarantor, having also pledged our entire shareholding interest in Petlim as collateral until the payment of all outstanding amounts under the loan pursuant to a separate share pledge agreement. The agreement does not require payment for the first three years of the loan, and contains certain covenants, including a requirement for Petlim to maintain a debt to equity ratio (defined as total debt divided by total shareholders’ equity and subordinated debt) of no more than 75:25 during the construction period and a debt service cover ratio (defined as available cashflow divided by the aggregate of the principal amount and any interest payments, fees and costs payable under any outstanding indebtedness of Petlim during any relevant period) of no less than 1.10:1. On 20 November 2015, Petlim granted a first ranking mortgage in the amount of U.S.$350 million in favour of Akbank over the Petlim Container Port’s land as collateral for the loan. The amounts guaranteed by us under the agreement decrease from 100 per cent. of the amounts owed by Petlim (being the case as at the date of this Offering Memorandum) to U.S.$75 million per year from the project completion date specified in the agreement, which is currently expected to fall on or before 31 March 2018 (the ‘‘Project Completion Date’’) to the third anniversary of the Project Completion Date; to U.S.$50 million per year from the third anniversary to the sixth anniversary of the Project Completion Date; and to U.S.$25 million from the sixth anniversary of the Project Completion Date to the date on which 70 per cent. of all amounts owed by Petlim have been repaid. The amount outstanding under the loan, previously classified as a long-term liability, was classified as a short-term liability in our financial statements for the nine months ended 30 September 2017 due to a provision allowing Akbank to require prepayment of amounts outstanding under the loan in the event that the first phase of the construction of the Petlim Container Port was not completed by 1 February 2016 and/or the second phase of the port did not become operational by 24 February 2017. Following unforeseen delays in construction outside of our control, Petlim obtained an unofficial waiver of the prepayment provision from Akbank, and subsequently obtained a formal waiver of the prepayment provision and an extension of the second phase completion date to the Project Completion Date, effective 28 September 2017. We expect the amount outstanding under the loan to be classified as a long-term liability in our next financial statements.

65 Cash Flows Nine Months Ended 30 September 2017 and 2016 The following table presents our consolidated cash flows for the nine months ended 30 September 2017 and 2016:

Nine months ended 30 September 2016(1) 2017 (TL millions) Net cash generated by/(used in) operating activities ...... 154 978 Net cash generated by/(used in) investing activities ...... (256) (332) Net cash generated by/(used in) financing activities ...... (449) (706) Net increase/(decrease) in cash and cash equivalents ...... (551) (60) Foreign exchange differences on cash and cash equivalents ...... 17 1 Cash and cash equivalents at the beginning of the period ...... 1,342 1,267 Cash and cash equivalents at the end of the period ...... 807 1,208

Note: (1) The consolidated statement of cash flows for the nine months ended 30 September 2016 has not been reclassified to reflect the reclassification in the 2017 Unaudited Interim Financial Statements of (1) certain payables with letters of credit to financial institutions from trade payables to third parties to other financial liabilities and (2) certain investments from investment properties to property, plant and equipment. See ‘‘Presentation of Financial and Other Information’’. The reclassified consolidated statement of cash flows for the nine months ended 30 September 2016 is presented on pages F-43 to F-79.

Net cash generated by operating activities Net cash generated by operating activities increased by TL 824 million to TL 978 million for the nine months ended 30 September 2017 from TL 154 million for the nine months ended 30 September 2016. The increase was primarily due to the reclassification of naphtha-related letters of credit from trade payables to short term financial liabilities in 2017 and the increase in net profit during the nine months ended 30 September 2017.

Net cash used in investing activities Net cash used in investing activities increased by TL 76 million to TL 332 million for the nine months ended 30 September 2017 from TL 256 million for the nine months ended 30 September 2016. The decrease was mainly due to other cash inflows of TL 160 million in the nine months ended 30 September 2016, which related to interest gains on time deposits over three months.

Net cash used in financing activities We used TL 706 million in financing activities in the nine months ended 30 September 2017, compared to TL 449 million in the nine months ended 30 September 2016. The increase was primarily due to the reclassification of naphtha-related letters of credit from trade payables to short term financial liabilities in 2017.

66 Years Ended 31 December 2016 and 2015 The following table presents our consolidated cash flows for the years ended 31 December 2016 and 2015:

Year ended 31 December 2015 2016 (TL millions) Net cash generated by/(used in) operating activities ...... 860 461 Net cash generated by/(used in) investing activities ...... (735) (405) Net cash generated by/(used in) financing activities ...... 319 (310) Net increase/(decrease) in cash and cash equivalents ...... 445 (253) Foreign exchange differences on cash and cash equivalents ...... 194 179 Cash and cash equivalents at the beginning of the period ...... 702 1,342 Cash and cash equivalents at the end of the period ...... 1,342 1,267

Net cash generated by operating activities Net cash generated by operating activities decreased by TL 399 million to TL 461 million for the year ended 31 December 2016 from TL 860 million for the year ended 31 December 2015. The decrease was mainly due to certain adverse working capital movements, including an increase in inventories.

Net cash used in investing activities Net cash used in investing activities decreased by TL 330 million to TL 405 million for the year ended 31 December 2016 from TL 735 million for the year ended 31 December 2015. The decrease was mainly due to higher tax payments, which was in turn due to lower short-term financial investments.

Net cash used in financing activities We used TL 310 million in financing activities in the year ended 31 December 2016 compared to generating TL 319 million in the year ended 31 December 2015. This was mainly due to a dividend payment in 2016 in the amount of TL 473 million, compared to nil for the year ended 31 December 2015.

Years Ended 31 December 2015 and 2014 The following table presents our consolidated cash flows for the years ended 31 December 2015 and 2014:

Year ended 31 December 2014 2015 (TL millions) Net cash generated by/(used in) operating activities ...... (31) 999 Net cash generated by/(used in) investing activities ...... 159 (735) Net cash generated by/(used in) financing activities ...... 295 375 Net increase/(decrease) in cash and cash equivalents ...... 423 639 Cash and cash equivalents at the beginning of the period ...... 279 702 Cash and cash equivalents at the end of the period ...... 702 1,342

Net cash generated by operating activities We had a net cash inflow from operating activities of TL 999 million for the year ended 31 December 2015, compared to an outflow of TL 31 million for the year ended 31 December 2014. This was mainly due to the improved cash generation of our business as a result of higher profitability.

Net cash used in investing activities We had a net cash outflow from investing activities of TL 735 million for the year ended 31 December 2015, compared to an inflow of TL 159 million for the year ended 31 December 2014. In 2014, we had proceeds from the sale of property, plant and equipment in the amount of TL 581 million, which related to the sale of 30 per cent. of Petlim to Goldman Sachs.

67 Net cash generated by financing activities Net cash generated by financing activities increased by TL 80 million to TL 375 million for the year ended 31 December 2015 compared to TL 295 million for the year ended 31 December 2014. The increase was mainly due to higher net proceeds from borrowings.

Contractual Obligations Collateral, Pledges and Mortgages We have provided collateral, pledges and mortgages (‘‘CPMs’’) in connection with the financing of certain projects. The following table presents CPMs provided by us as at 30 September 2017:

As at 30 September 2017 (TL millions) Mortgages given to banks ...... 776 Guarantees given to banks ...... 996 Customs offices and Republic of Turkey Prime Ministry Under secretariat of Customs . 61 Other ...... 127 Total CPMs ...... 1,960

On 25 May 2015, Petlim, in which we own a 70 per cent. shareholding interest, signed a project finance credit agreement with Akbank in the amount of U.S.$212 million which has a maturity of 13 years with no repayments in the first three years for the external funding of the Petlim Container Port project. Petkim has guaranteed the loan repayment and has also pledged all of its shares in Petlim until the payment of all outstanding amounts under the loan. The agreement contains certain covenants including a requirement to maintain a credit/Total Shareholders’ Equity ratio not exceeding 75:25 during the construction period. On 20 November 2015, Petlim entered into a first ranking mortgage in the amount of U.S.$350 million in favor of Akbank in relation to its land.

Operational leases The following table presents operating lease income and expense which are not recognised in our financial statements for the nine months ended 30 September 2017 and 2016 and the years ended 31 December 2016, 2015 and 2014:

Nine months Year ended ended 31 December 30 September 2014 2015 2016 2016 2017 (TL millions) Operating lease income 0–1 year ...... 11 33 41 241 258 1–5 years ...... 46 221 273 651 866 5 years and more ...... 359 2,292 2,832 1,751 1,766 Total operating lease income ...... 416 2,546 3,146 2,643 2,890 Operating lease expense 0–1 year ...... 13 13 13 13 7 1–5 years ...... 30 17 4 7 0 Total operating lease expense ...... 43 30 17 20 7

We have signed an operational leasing contract for naphtha tanks effective between 1 December 2014 and 30 April 2018. STAR Rafineri A.¸S. has rented out tanks it owns to us and discounted TL 44 million plus VAT over the duration of the contract. STAR Rafineri A.¸S. has obtained an independent valuation report regarding the value of the usage right of the tanks for the duration of the lease so as to determine the fair value of the leasing contract. The net book value of the net rental income from tanks between 1 December 2014 and 20 April 2018, is in the range of TL 40 million to TL 45 million.

68 Commitments STAR Refinery Offtake Agreement On 26 May 2014, we signed a 20-year offtake agreement with STAR Rafineri A.¸S., whose main shareholder is STEA¸S, for the purchase of a minimum of 1,300,000 tons and a maximum of 1,600,000 tons of naphtha per year (which can be increased upon bilateral agreement) and 270,000 tons of mixed xylene per year. In addition, we signed a cooperation contract with STAR Rafineri A.¸S. on the same date and pursuant to that contract, we will sell steam for 20 years and provide solid and hazardous waste disposal services, a supply of workers on a temporary basis and security services to STAR Rafineri A.¸S.

STAR Refinery Share Sale Agreement On 9 January 2018, we signed a share sale and transfer agreement with STEA¸S (the ‘‘STAR Refinery Share Sale Agreement’’) for the purchase of 30 per cent. of the share capital of Rafineri Holding A.¸S. Rafineri Holding A.¸S. is a holding company which owns 60 per cent. of STAR Rafineri A.¸S., and is currently a wholly-owned subsidiary of STEA¸S. Upon payment in full of the purchase price as provided below, we will become a minority shareholder in Rafineri Holding A.¸S. and will thereby acquire an 18 per cent. effective stake in STAR Rafineri A.¸S. The purchase price of U.S.$720 million is to be paid in three equal instalments. The first instalment was paid by us on 9 January 2018, the second instalment is due on the date on which testing at the STAR Refinery commences and the final instalment is due on the closing date, being the date on which the shares in Rafineri Holding A.¸S. are to be transferred by STEA¸S to us. We have agreed in the STAR Refinery Share Sale Agreement that the closing date must occur by no later than 31 March 2019, and is subject to customary conditions precedent, including the obtaining of all regulatory approvals necessary for the transaction. The conditions precedent also include the finalisation between us and STEA¸S of a shareholders’ agreement. We have agreed in principle with STEA¸S that such shareholders’ agreement will allow us to appoint one member of the board of directors of Rafineri Holding A.¸S. (with STEA¸S to appoint the remaining three members), that it will entitle us to certain tag-along rights and drag-along rights, that it will require STEA¸S to first offer any shares in Rafineri Holding A.¸S. to us before selling such shares to a third party, and that it will also address customary other matters, such as reserved matters. However, even if we do conclude the shareholders’ agreement with respect to our ownership of Rafineri Holding A.¸S, our interest in the STAR Refinery itself will be limited to an indirect economic interest only, as the power to decide all shareholder, board and other management-related matters at the STAR Refinery-level will continue to be controlled by the SOCAR Group and the Republic of Azerbaijan Ministry of Economic and Industry. If closing does not take place prior to the long stop date for any reason attributable to STEA¸S, STEA¸S is required, after written notice from us, to refund the purchase price in cash together with interest. If closing does not take place for any reason attributable to us and we do not reach an agreement to extend the long stop date, the STAR Refinery Share Sale Agreement will be deemed to have been terminated on the long stop date, and STEA¸S shall refund the purchase price to us without interest. We have also agreed in the STAR Refinery Share Sale Agreement that STEA¸S must deliver additional shares in Rafineri Holding A.¸S. to us (without any requirement for further payment from us) in the event of a capital increase affecting its effective stake in STAR Rafineri A.¸S., so as to maintain our 18 per cent. effective stake in STAR Rafineri A.¸S. following closing.

Financial Instruments and Financial Risk Management Credit Risk The holding of financial assets involves the risk that counterparties may be unable to meet the terms of the agreements. These risks are managed by collecting collateral and by restricting the average risk range for counterparties (other than intercompany exposures) in every agreement. As part of our sales policy, we obtain collateral in the amount of 100 per cent. of total outstanding Turkish lira trade receivables from our customers. The use of credit limits is regularly monitored and financial position of the customers, past experiences, reputation in the market and other factors are considered by management in order to evaluate credit quality.

69 The credit risk exposure in terms of financial instruments as at 31 December 2016 is set forth below:

As at 31 December 2016 Trade receivables Other receivables Related Third Related Third Bank parties parties parties parties deposits Total (TL millions) Maximum amount of credit risk as of reporting date ...... — 674,471 14,321 16,471 1,267,188 1,972,452 Covered by guarantees ...... — 543,664 — — — 543,664 Net book value of financial assets neither past due nor impaired .... — 658,268 14,321 16,471 1,267,188 1,956,249 Net book value of financial assets whose conditions are renegotiated, otherwise to be classified as past due or impaired ...... — — — — — — Net book value of assets past due but not impaired ...... — 16,203 — — — 16,203 Covered by guarantees ...... — (6,789) — — — (6,789) Net book value of assets impaired . . — — — — — — Past due (gross book value) ..... — 15,820 — 2,067 — 17,887 Impairment amount ...... — (15,820) — (2,067) — (17,887) Net value covered by guarantees — — — — — — Not due (gross book value) ...... — — — — — — Impairment amount ...... — — — — — — Net value covered by guarantees — — — — — — Off balance sheet items exposed to credit risk ...... — — — — — — The following table presents due receivables as at 30 September 2017:

As at 30 September 2017 (TL millions) Overdue receivables ...... 20 1–30 days due ...... 394 31–60 days due ...... 103 61–90 days due ...... 177 Over 90 days due ...... 130 Total due receivables ...... 824 Covered by guarantees ...... 708

Liquidity risk Prudent liquidity risk management comprises maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The ability to fund existing and prospective debt requirements is managed by maintaining the availability of fund providers’ lines from high quality lenders. In order to maintain liquidity, we closely monitor the collection of trade receivables in order to and to prevent any financial burden that may result from late collections and arrange cash and non-cash credit lines with banks.

Market risk Foreign exchange risk We are exposed to currency risk on assets or liabilities denominated in foreign currencies. We have set up a policy to balance and manage foreign exchange risk. Existing risks are monitored in meetings held by our Audit Committee and Board of Directors. Although raw materials, which comprise a significant portion of production and import volumes, are foreign exchange-denominated cost items, the determination of sales prices by us in foreign exchange terms serves as a natural hedge, decreasing foreign exchange risk.

70 The following table sets forth our foreign currency position as at 30 September 2017:

As at 30 September 2017 TL equivalent USD EUR Other (TL millions) Trade receivables ...... 455 93 30 — Monetary financial assets ...... 1,171 326 3 0.3 Non-monetary financial assets ...... — — — — Current assets ...... 1,627 419 33 0.3 Trade receivables ...... — — — — Monetary financial assets ...... 650 183 — — Non-monetary financial assets ...... — — — — Other ...... — — — — Non-current assets ...... 650 183 — — Total assets ...... 2,277 602 33 0.3 Trade payables ...... 381 97 8 6 Financial liabilities ...... 821 216 12 — Monetary other liabilities ...... — — — — Non-monetary other liabilities ...... — — — — Short-term liabilities ...... 1,202 313 20 6 Trade payables ...... — — — — Financial liabilities ...... 463 38 78 — Monetary other liabilities ...... — — — — Non-monetary other liabilities ...... — — — — Long-term liabilities ...... 463 38 78 — Total liabilities ...... 1,665 351 98 6 Amount of asset in the nature of off balance sheet derivative instruments ...... 106 25 4 — Amount of liability in the nature of off balance sheet derivative instruments ...... — — — — Net foreign (liability)/asset position ...... 717 276 (61) (5) Net foreign currency (liability)/asset position of monetary items . . 612 251 (65) (5) Total fair value of financial instruments used for foreign currency hedging ...... 1 0.4 — — Hedged amount for current assets ...... 106 25 4 — Hedged amount for current liabilities ...... — — — — Export ...... 1,971 303 221 — Import ...... 3,190 821 55 344

71 The following tables set forth a sensitivity analysis of foreign currency risk as at 30 September 2017 and as at 31 December 2016:

As at 30 September 2017 Profit and loss Equity Appreciation of Depreciation of Appreciation of Depreciation of foreign foreign foreign foreign currency currency currency currency (TL millions) Change of USD by 10 per cent. against TL Asset/liability denominated in USD—net ...... 89 (89) — — Portion hedged for USD risk ...... 9 (9) — — USD effect—net ...... 98 (98) — — Change of EUR by 10 per cent. against TL Asset/liability denominated in USD—net ...... (26) 26 — — Portion hedged for USD risk ...... 2 (2) — — USD effect—net ...... (24) 24 — — Change of other currencies by 10 per cent. against TL Asset/liability denominated in USD—net ...... (0.5) 0.5 — — Portion hedged for USD risk ...... — — — — USD effect—net ...... (0.5) 0.5 — — Total ...... 73 (73) — —

As at 31 December 2016 Profit and loss Equity Appreciation of Depreciation of Appreciation of Depreciation of foreign foreign foreign foreign currency currency currency currency (TL millions) Change of USD by 10 per cent. against TL Asset/liability denominated in USD— net...... (58) 58 — — Portion hedged for USD risk ...... 31 (31) — — USD effect—net ...... (28) 28 — — Change of EUR by 10 per cent. against TL Asset/liability denominated in USD— net...... (24) 24 — — Portion hedged for USD risk ...... 2 (2) — — USD effect—net ...... (22) 22 — — Change of other currencies by 10 per cent. against TL Asset/liability denominated in USD— net...... — 1 — — Portion hedged for USD risk ...... — — — — USD effect—net ...... — 1 — — Total ...... (50) 50 — —

72 The total export and import amount from Turkey for the years ended 31 December 2016, 2015 and 2014 are set forth in the tables below:

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 Original Original Original amount TL amount TL amount TL (TL millions) Exports USD...... 408 884 277 761 240 737 EUR...... 116 337 200 613 183 614 Total exports ...... 1,221 1,374 1,350 Imports USD...... 1,473 3,210 773 2,090 935 2,818 EUR...... 50 144 27 80 42 141 British sterling ...... — 2 1 3 1 4 Japanese yen ...... 79 2 156 4 351 10 Swiss franc ...... — 1 — — 1 3 Total imports ...... 3,358 2,177 2,977

Interest rate risk We are exposed to interest rate risk through the impact of rate changes on interest-bearing assets and liabilities. These exposures are managed by balancing interest rate sensitive assets and liabilities. Our interest rate position as at 31 December 2016 is set forth below:

As at 31 December 2016 (TL millions) Financial liabilities USD financial liabilities ...... 150,804 EUR financial liabilities ...... 74,195 TL financial liabilities ...... 90,591 Financial instruments with variable interest rates USD financial liabilities ...... 1,089,659 EUR financial liabilities ...... 282,942

Price risk Our operational profitability and cash inflows from operations are exposed to the risk arising from fluctuations in naphtha prices which are affected by competition in the petrochemicals sector and raw material prices. We manage this risk by regularly reviewing the amount of inventory held on hand and taking action to reduce costs to decrease the pressure of costs on prices. These risks are managed through regular meetings of the Board of Directors. We set our sales prices considering certain indicators of petrochemicals products in domestic and foreign markets. The changes in foreign markets are monitored through the worldwide publications comparing most attainable competitive market prices of Western Europe, Asia and the US contract, spot and factory prices and computing actual import costs to Turkey. While we determine domestic market prices, we consider indicators such as price information obtained from other producers and sector publications and our production levels, stock levels and order amounts received. We also use some derivative financial instruments, mainly in relation to naphtha, to hedge cash flow risk arising from raw material price risk.

Capital risk management Our objectives when managing capital are to safeguard our ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

73 In order to maintain or adjust the capital structure, we may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. We monitor capital on the basis of our debt/equity ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total debt (including short-term liabilities and long-term liabilities) less cash and cash equivalents. Our debt to equity ratio as at 30 September 2017 is set forth below:

As at 30 September 2017 (TL millions, unless otherwise indicated) Total debt ...... 3,309 Less: cash and cash equivalents ...... 1,208 Net debt ...... 2,101 Total equity ...... 3,493 Debt/equity ratio ...... 60.2 per cent.

Critical Accounting Policies Basis of consolidation The consolidated financial statements comprise the financial statements of Petkim, Petlim in which Petkim has a shareholding interest of 70 per cent. and Petkim Specialities Muhendislik¨ Plastikleri Sanayi ve Ticaret A.¸S. in which we have a shareholding interest of 100 per cent. Subsidiaries are consolidated from the date on which control is transferred us until the date on which the control is transferred out of Petkim. As stated above, the consolidated financial statements consist of our financial statements and those of our subsidiaries which we control. This control is normally evidenced when we own, either directly or indirectly, more than 50 per cent. of the voting rights of a company’s share capital and are able to govern the financial and operating policies of an enterprise so as to benefit from its activities. Subsidiaries are consolidated by using the full consolidation method, accordingly the registered subsidiary values are netted off with the related equity items. Balances and transactions between us and our subsidiaries, including intercompany profits and unrealised profits and losses (if any) are eliminated. Consolidated financial statements are prepared using uniform accounting policies for transactions and other events in similar circumstances.

Inventories Inventories are valued at the lower of cost and net realizable value. The cost of inventory consists of purchase materials, cost of conversion and other costs that are necessary to bring the inventories to their present location and condition. The costs of inventories are determined on a weighted average basis. Net realizable value is the estimated selling price in the ordinary course of business, less cost of completion and selling expenses. Spare parts and material stocks are valued at the lower of cost and net recoverable value. The cost of spare parts and material stocks consist of purchase materials and other costs that are necessary to bring them to their present location and condition. The costs of spare parts and material stocks are determined on a weighted average basis.

Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and impairment losses if any. Historical costs include the costs directly related to the acquisition of property plant and equipment. Costs incurred after the acquisition can be capitalised to the net book value of the assets or can be booked as another asset if and only if it is probable that the future economic benefits will flow to us and the cost of the asset can be measured reliably. Repair and maintenance expenses are charged to the consolidated statement of comprehensive income as they incurred. Repair and maintenance

74 expenditures are capitalised if they result in an enlargement or substantial improvement of the respective asset. Depreciation is provided using the straight-line method based on the estimated useful lives of the net assets. Spare parts and material stocks qualify as property, plant and equipment when they are expected to be used more than one period and only in connection with an item of property, plant and equipment. Spare parts and material stocks are carried at cost less the accumulated depreciation which is calculated over the remaining useful life of the related item of property, plant and equipment. Buildings, machinery and equipment are capitalised and depreciated when they are in the condition necessary for operations in the manner intended by management. Residual values of property, plant and equipment are deemed as insignificant. The useful lives of property, plant and equipment are as follows:

Useful life Land improvements ...... 4–50 years Buildings ...... 18–50 years Machinery and equipment ...... 4–68 years Motor vehicles ...... 5 years Furniture and fixtures ...... 3–20 years Other fixed assets ...... 5 years Leasehold improvements ...... 3 years The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted on a prospective basis. Land is not depreciated as it is deemed to have an indefinite useful life. Gains or losses on disposals of property, plant and equipment are included in the other operating income and expense accounts, in the consolidated statement of comprehensive income as appropriate.

Intangible assets Intangible assets comprise acquired rights, information systems and software and capitalised development costs. Intangible assets are amortised on a straight-line basis over their estimated useful lives from the date of acquisition. In case of impairment, the carrying values of the intangible assets are written-down to their recoverable amounts. The estimated useful lives of rights and software is 3-15 years.

Impairment of assets At each reporting date, we assess whether there is an impairment indication for the assets, except for the deferred income tax asset and financial assets stated at fair values. We assess whether there is any indication that the book value of tangible and intangible assets, calculated by the acquisition cost less accumulated amortisation, may be impaired. When an indication of impairment exists, we estimate the recoverable values of such assets. When the individual recoverable value of assets cannot be measured, the recoverable value of the cash-generating unit of that asset is measured. Provision for doubtful receivables is booked in the consolidated financial statements when there is an indication that the related receivable cannot be collected. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originated receivables at inception. If the impairment amount decreases due to an event occurring after the write-down, the release of the provision is credited to other income in the current period. Impairment exists if the carrying value of an asset or a cash-generating unit is greater than its recoverable amount, which is the higher of value in use or fair value less costs to sell. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit.

75 When the recoverable amount of an asset (or a cash-generating unit) is lower than its carrying value, the asset’s (or cash-generating unit’s) carrying value is reduced to its recoverable amount. An impairment loss is recognised immediately in the consolidated statement of comprehensive income. An impairment loss recognised in prior periods for an asset is reversed if the subsequent increase in the asset’s recoverable amount is caused by a specific event since the last impairment loss was recognised. Such a reversal amount cannot be higher than the previously recognised impairment and is recognised in the consolidated statement of comprehensive income. The criteria that we use to determine that there is objective evidence of an impairment loss include: • Significant financial difficulty of the issuer or obligor; • A breach of contract, such as a default or delinquency in interest or principal payments; • For economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; • It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; and • Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets.

Current and deferred income tax Taxes include current period income taxes and deferred taxes. Current year tax liability consists of tax liability on the taxable income calculated according to currently enacted tax rates and to the effective tax legislation as of balance sheet date. Deferred income tax is provided, using the liability method, for temporary differences arising between the tax bases of assets and liabilities and their carrying values. Deferred income tax is determined using tax rates that have been enacted by the balance sheet date. Tax is recognised in the consolidated statement of comprehensive income, except to the extent that it relates to items recognised in equity. Taxes arisen on items recognised in equity are recognised directly in equity. Deferred income tax liabilities are recognised for all taxable temporary differences; whereas deferred income tax assets resulting from deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised. Deferred income tax asset is recognised to the extent that it is probable that the entity will have sufficient taxable profit in the same period as the reversal of the deductible temporary difference arising from tax losses carried forward. Deferred income tax assets and deferred income tax liabilities related to income taxes levied by the same taxation authority are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities. Deferred income tax assets and deferred income tax liabilities are classified as long-term in the consolidated financial statements.

Revenue recognition Revenue is based on the invoiced amount of products sold and services given. Revenues are recognised on an accrual basis at the time deliveries or acceptances are made, when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to us, at the fair value of consideration received or receivable. Risks and rewards are transferred to customers, when the transfer of ownership has realised. Net sales represent the invoiced value of goods sold less sales returns and commission and exclude related taxes. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to us. When the arrangement effectively constitutes a financing transaction, 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 as interest income on a time proportion basis that takes into account the effective yield on the asset.

76 Transactions in foreign currency Transactions in foreign currencies during the year have been translated at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated into Turkish lira at the exchange rates prevailing at the balance sheet date. Foreign exchange gains or losses arising from the settlement of such transactions and from the translation of monetary assets and liabilities are recognised in the consolidated statement of comprehensive income.

77 BUSINESS OF THE GROUP Overview Petkim was established on 3 April 1965 by the Turkish government and is currently the sole petrochemicals producer of size in Turkey. We produce basic and intermediate petrochemical raw materials with an annual average gross production capacity of 3.6 million tons. In 2016, we operated at 88 per cent. capacity, producing 1.7 million tons of saleable products from a total gross output of 3.1 million tons, and in the twelve months ended 30 September 2017, we operated at 94 per cent. capacity, producing 1.8 million tons of saleable products from a total gross output of 3.3 million tons. The Petkim complex has 14 production plants and one masterbatch unit, as well as seven auxiliary processing units, and covers 19 million square metres. We produce petrochemicals across the integrated value chain based on naphtha and related feedstock, including an ethylene cracker with capacity of 588,000 tons per year, downstream integration into polyolefins and vinyl chain products and direct sales of selected cracking co-products (e.g. aromatics). Our products are used by customers in a wide range of industries, including the plastics, chemistry, packaging, pipe, paint, construction, agriculture, automotive, textiles, pharmaceuticals and detergents industries, among others. Approximately 64 per cent. of our products by value were sold in the domestic market in the nine months ended 30 September 2017, with the remaining 36 per cent. being sold in export markets, where the main destination is Europe. Based on management estimates, as at 31 December 2016, we had a direct domestic market share (based on production capacity) in Turkey of approximately 18 per cent. from our own production, with additional involvement in the domestic market through third party trading. Our facilities are located on the Petkim Peninsula in Aliaga,˘ Turkey on the coast of the Aegean Sea, approximately 50 kilometers from Izmir, which is one of the few coastal areas in Turkey dedicated to industrial activity. As an integrated company, Petkim is located in a strategic area logistically in terms of both sales and procurement of raw materials. Our logistics capabilities are one of our greatest strengths given the strategic location of our assets. Aliaga’s˘ proximity to Izmir, its connection to a large number of Organised Industrial Zones and its access to motorways and railways make it an advantageous location. In addition, sea shipping connections and proximity to ports in the Eastern Mediterranean make it an attractive platform to serve regional and global trade. Additionally, our facilities are very close to the main naphtha exporting regions, including the Black Sea region and Russia, and our operations are located near the Tupra¸¨ s refinery, which is also located at Aliaga.˘ Since the acquisition of Petkim by the SOCAR Group through a privatisation process (as further described under ‘‘—History and Development’’ below), we have undertaken several operational efficiency programmes and investments with the aim of enhancing our competitiveness in the petrochemicals sector. In 2014, for example, we increased the capacity of our main facility ethylene cracker by 13 per cent., bringing its capacity to 588,000 tons per year, and we also increased our PTA production capacity by 50 per cent., bringing the capacity to 105,000 tons per year. This involved investments of approximately U.S.$118 million in our ethylene cracker and U.S.$20 million for the expansion of our PTA production capacity. Following the acquisition of Petkim, the SOCAR Group has been focused on creating an industrial hub on the Petkim Peninsula in Aliaga˘ via various projects. This has included the construction of the STAR Refinery, Turkey’s first privately established refinery, which is intended to provide us with raw material security. It is the first part of the integration chain, with an investment value of U.S.$6.3 billion and a refining capacity of 10 million tons per year. As at 30 November 2017, approximately U.S.$4.9 billion had been invested, of which approximately 46 per cent. was financed by equity and the remainder by debt. As of November 2017, overall construction on the STAR Refinery was approximately 97 per cent. complete and it is expected to come onstream in the third quarter of 2018. On 9 January 2018, we signed a share sale and transfer agreement with STEA¸S for the purchase of an 18 per cent. effective stake in STAR Rafineri A.¸S., and we intend to use the net proceeds from the offering of the Notes to fund a portion of the purchase price. See ‘‘Integration—STAR Refinery’’, ‘‘Strategy—Capitalise on potential for synergies and additional, diversified cash flows through the STAR Refinery, Petlim and other projects’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’. Another major project was the construction of the Petlim Container Port, which was commissioned in 2016 with an initial capacity of 0.8 million TEU. The terminal’s capacity was expanded to 1.5 million TEU

78 in September 2017, making it Turkey’s third largest port, and is expected to be fully operational in 2018. This investment was undertaken by Petlim, 70 per cent. of which is owned by Petkim, with the remaining 30 per cent. being owned by Goldman Sachs, which acquired this stake in 2014 for U.S.$250 million. The total cost of the development and its financing was approximately U.S.$400 million. In February 2013, Petlim signed a 28-year concession agreement with an optional extension period of 4 years with APM Terminals, which allows APM Terminals to operate the port in exchange for an annual payment, comprising a fixed and a variable component. Under this agreement, APM Terminals is responsible for all operational aspects of the port and associated deliverables, including obtaining permits, while Petlim is responsible for all construction-related aspects of the port, including dredging. The expansion of the port to its current capacity was completed in September 2017, and APM Terminals is expected to obtain all necessary permits for use of the port’s full capacity in the first quarter of 2018. In order to diversify our sources of revenue, we have also invested in a wind farm with a total capacity of 51 MW. The wind farm has 17 new turbines, each able to generate 3 MW of electricity. The construction of all turbines was completed in September 2017, and while the wind farm is currently licensed to generate 25 MW of electricity, we have applied for an amendment to the license which would allow it to generate 51 MW. We plan to sell electricity produced by the wind farm to Turkey’s national grid with a guaranteed tariff. The wind farm is expected to reduce carbon emissions by 120,000 tons per year. The investment in the wind farm amounts to e55 million. Petkim holds a Regional Incentive Certificate for modernisation and replacement investments, as well as a Strategic Incentive Certificate for capacity increases and new investments. These certificates were granted within the scope of the Decree published by the Turkish government in 2012 pursuant to a decision by the Council of Ministers regarding ‘‘State Assistance for Investment’’. These certificates entitle us to certain tax benefits, including VAT exemptions, customs duty exemptions and tax reduction, among other benefits. The incentive certificate regime is intended to support economic development and address Turkey’s current account deficit. Our shares have been listed on Borsa Istanbul since 1990. We had a market capitalisation of approximately U.S.$3.1 billion, or approximately TL 11.7 billion, as at 31 December 2017.

History and Development The Turkish government first began considering the establishment of a petrochemicals production facility in the context of the First Five-Year Development Plan. Following research and evaluation conducted under the leadership of Turkiye¨ Petrolleri Anonim Ortaklıgı˘ (‘‘TPAO’’), the Turkish national petroleum company, Petkim Petrokimya Holding A.¸S., or Petkim, was established on 3 April 1965 with TL 250 million in capital. We undertook our initial infrastructure investment with five plants constructed at the Yarımca Complex in 1970. Following investments in the Yarımca Complex, we commenced work to establish a second complex in the Aliaga˘ region within the framework of the Turkish government’s Third Five-Year Development Plan. The Aliaga˘ Complex became operational in 1985. We have continuously invested in the Aliaga˘ Complex since its inception, raising capacity, renovating, modernising and improving energy efficiency, while also maintaining its international competitive edge by efficiently meeting the needs and expectations of our broad customer base. In 2001, in anticipation of the separate privatisation of Petkim and Tupra¸¨ s, Petkim transferred the Yarımca Complex to Tupra¸¨ s pursuant to the Privatisation High Council’s decree. In 2005, we completed expansions of our ethylene, low density polyethylene (‘‘LDPE’’) and polypropylene plants, which was the largest investment we had undertaken in the previous 18 years. We also increased capacity at the aromatics plant. Following a U.S.$90 million investment, our 57 MW gas turbine commenced operation at the steam production and electric power generation units in 2007. In 2007, a privatisation tender for 51 per cent. of Petkim using the block sale method was announced. In November 2007, the sale of these shares to a consortium consisting of the SOCAR Group and Turcas was approved by Decision No. 2007/63 of the Privatisation High Council. On 30 May 2008, the SOCAR & Turcas Consortium acquired 51 per cent. of Petkim for a consideration of U.S.$2.04 billion. In 2011, following the withdrawal of Turcas from the shareholding structure, 51 per cent. of Petkim’s shares were transferred to STEA¸S.

79 In 2010, the STAR Refinery received a licence for a 10 million ton per year capacity refinery at the Petkim Complex. Petlim was also established in 2010. In December 2010, we received approval from EMRA for the construction of a wind power plant. In 2013, an agreement for the operation of Petlim was signed between Petlim and APM Terminals, a Dutch based company active in the operation and management of container terminals. In 2014, following the purchase of 30 per cent. of Petlim for U.S.$250 million, Goldman Sachs became a shareholder in Petlim. In 2014, we increased the capacity of our ethylene cracker by 13 per cent., bringing its capacity from 520,000 tons per year to 588,000, and also increased the capacity of our PTA production plant by 50 per cent., from 70,000 tons per year to 105,000. This involved investments of approximately U.S.$118 million in our ethylene cracker and U.S.$20 million for the expansion of our PTA production capacity. In 2015, we established Petkim Specialities, a wholly owned subsidiary, in order to diversify our product range and to specialise in high value added advanced engineering plastics and high-tech chemicals (masterbatch, compound). In 2016, the construction of the Petlim Container Terminal was commissioned with an initial capacity of 0.8 million TEU, which was subsequently increased to 1.5 million TEU. The construction of the terminal was completed in September 2017. In 2017, we also completed the construction of all turbines of our 51 MW wind farm.

Strengths We believe that we have the following key strengths:

Superior market and customer access as sole incumbent producer with granular marketing network We believe that we are well positioned to address foreign competitive threats as a result of our large and diversified customer base, strong barriers to entry and ability to protect ourselves from import threats. We have over 6,000 customers across a wide range of industries, including the plastics, chemistry, packaging, pipe, paint, construction, agriculture, automotive, textiles, pharmaceuticals and detergents industries, among others. We have long-standing supply arrangements with our customers and as a local producer in Turkey, are able to offer customers just-in-time inventory management. We are also able to make sales in much smaller volumes than importers, which represents a key competitive advantage. We have sought to strengthen our customer relationships through sectoral meetings, trade shows and customer visits, where we share domestic production capacity and technical know-how with customers. We believe that we benefit from barriers to entry as a result of the burdensome process to obtain licences, permits and approvals from the government for the production of petrochemicals. There are limited suitable locations for a petrochemicals complex and the requirements for country-wide distribution channels and extensive human know-how also represent barriers to entry. As a result of the foregoing factors, no domestic competition is expected to come onstream in Turkey in the near future.

80 While Turkey is an open market, with no customs duties applicable to imports from the European Union, EFTA and/or FTA countries, we are able to protect ourselves against import threats in extraordinary circumstances. We currently benefit from anti-dumping restrictions, including a rate of 16 per cent. to 18 per cent. for PVC for Germany and the United States and a rate of 8.44 per cent. for PA for South Korea. In the event of unfair competition, under World Trade Organisation rules, we can demand the imposition of anti-dumping duties on countries and/or companies engaging in dumping. In addition, the Turkish market is currently protected against imports as a result of import duties. A customs duty of 3 per cent. is applicable to imports from GSP countries and a customs duty of 6.5 per cent. is applicable to imports from all other countries. We also benefit from tariff restrictions for all LDPE imports. In relation to PTA, we have also initiated anti-dumping proceedings and expect a decision later in 2018.

81 in Turkey. This project includes the construction of the STAR Refinery, which is expected to be our main supplier of naphtha and mixed xylene once it comes onstream in 2018. Additionally, our facilities are located very close to the main naphtha exporting regions, including the Black Sea region and Russia, and our operations are located near the Tupra¸¨ s refinery, which is also located at Aliaga.˘ The following map shows the location of our assets:

8JAN201819110297

Attractive financial profile with efficient working capital and risk management, improving cash conversion and natural currency hedge investments We have demonstrated strong potential for cash generation as a result of our track record of profitability and strong receivables risk management capabilities and strong cash conversion. Our cash conversion (defined as EBITDA less maintenance capital expenditure, divided by EBITDA) improved to 88 per cent. in the nine months ended 30 September 2017 from (22) per cent. in the nine months ended 30 September 2014. We expect our capital expenditure requirements to decrease in future periods following completion of the investments we have made in Petlim, our wind farm, pipelines to the STAR Refinery for feedstock requirements and Petkim Specialities. We also have a conservative funding structure, primarily comprising U.S. dollar, euro and Turkish lira denominated borrowings. We are focused on maintaining a healthy balance sheet and generally target a net debt/EBITDA ratio of no more than 2.0x to 2.5x. As adjusted to give effect to the offering of the Notes and our acquisition of an 18 per cent. stake in STAR Rafineri A.¸S. from STEA¸S, our net debt/EBITDA ratio was 2.3x as at and for the twelve months ended 30 September 2017. Excluding indebtedness outstanding under Petlim’s project finance credit agreement with Akbank in relation to the Petlim Container Port, our net debt/EBITDA ratio was 1.8x as at and for the twelve months ended 30 September 2017.* We benefit from favourable foreign exchange dynamics as a result of our U.S. dollar denominated revenues. Approximately 45 per cent., 40 per cent. and 15 per cent. of our sales are invoiced in Turkish lira, U.S. dollars and euro, respectively, although most of our sales in Turkish lira are indexed to the U.S. dollar exchange rate on the relevant day announced by Turkish Central Bank. Approximately 90 per cent. of our variable costs are denominated in U.S. dollars, with the remainder being denominated in Turkish lira, and our fixed costs are mainly denominated in Turkish lira. As a result, most of our foreign currency exposure is naturally hedged. We also have efficient working capital management, with inventory and payables controls that allow us to maintain favourable working capital metrics in terms of inventory days, receivables days and payables days. On average, our inventory days and receivables days are each 45 days and our payables days are 90 days, although we expect our payables days to decrease once the STAR Refinery comes onstream due to the contractual terms of the offtake agreement.

82 We manage our receivables through a guarantee system via a direct debit system (‘‘DDS’’), guarantee letters and receivable insurance tools. These strong receivables risk management capabilities enable us to sell our products to small- and medium-sized customers, which typically provide us with higher margins in comparison with larger customers. As at 30 September 2017, substantially all of our receivables from local customers were backed by bank guarantees, a system which is accepted by local customers and which enables us to minimise our collection risk, with approximately 86 per cent. of our total receivables being backed by bank guarantees as at the same date. The remaining receivables are with reputable firms which management believes represent relatively low credit risk. This approach represents an important competitive advantage in the local market particularly during periods of economic instability. Our close relationships with local banks as well as our strong receivables risk management capabilities contribute to our ability to achieve stable cash conversion.

Further operational improvement from synergies and integration of the STAR Refinery into our supply chain In 2008, STEA¸S and Turcas, a Turkish oil and energy investment company, established a project company, STAR Rafineri A.¸S., to develop, construct, own and operate the STAR Refinery, a complex crude oil refinery with a processing capacity of 10 million tons of crude oil per annum on the Aegean coast of Turkey. The refinery is located adjacent to Petkim on the Aliaga˘ industrial peninsula north of Izmir and is expected to employ 750 staff. On 9 January 2018, we signed a share sale and transfer agreement with STEA¸S for the purchase of an 18 per cent. effective stake in STAR Rafineri A.¸S. (by purchasing 30 per cent. of STEA¸S’s stake in a holding company which owns 60 per cent. of STAR Rafineri A.¸S.), and we intend to use the net proceeds from the offering of the Notes to fund a portion of the purchase price. The state of Azerbaijan and STEA¸S currently hold 40 per cent. and 60 per cent. stakes, respectively, in STAR Rafineri A.¸S. (though STEA¸S’s stake is expected to decrease to 42 per cent. following our acquisition). See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’. Since 2014, we have paid an average premium of approximately U.S.$30/ton over the market price for our imported naphtha. When the STAR Refinery comes onstream, we expect to pay a premium of approximately U.S.$6/ton due to logistical synergies, resulting in cost savings of approximately U.S.$24/ton. Based on a weighted average premium cost, we expect to benefit from annual cost savings of approximately U.S.$38 million per year in naphtha premiums. Additionally, we expect cost savings of approximately U.S.$30 million per year in relation to reformate supplied by the STAR Refinery. We also expect the STAR Refinery to provide us with a steady dividend stream over the medium-term. The refinery is a strategic project for Turkey, as it is expected to reduce Turkey’s dependence on imports and decrease the current account deficit. The strategic importance of the STAR Refinery has been confirmed by the fact that it was the first project to receive the ‘‘Strategic Investment Incentive Certificate’’ from the Turkish Ministry of Economy in December 2012. The refinery is located in close proximity to crude oil production sites in the Middle East and the CIS and also benefits from access to key product demand centres in the west of Turkey. It has access to existing port facilities, as well as utilities supply, via our existing infrastructure, which also provides substantial capital cost savings. In addition, the refinery will benefit from on-site offtake by us for naphtha and mixed xylenes. Naphtha is a key feedstock for us and the offtake arrangements with the refinery will provide logistics cost savings for us (compared to imports) and ensure long term reliable supply. Naphtha production and sales to us also mean that the STAR Refinery is not required to produce any gasoline. As of November 2017, overall construction on the STAR Refinery was approximately 97 per cent. complete, and it is expected to come onstream in the third quarter of 2018 with a total investment value of approximately U.S.$6.3 billion. As at 30 November 2017, approximately U.S.$4.9 billion had been invested, of which approximately 47 per cent. was financed by equity (approximately U.S.$2.4 billion invested out of U.S.$2.7 billion committed) and the remainder by debt (approximately U.S.$2.5 billion invested out of U.S.$3.3 billion committed). Approximately U.S.$2.6 billion of the debt financing has a maturity of 18 years with a four year grace period, while the remaining U.S.$600 million has a maturity of 15 years with a four year grace period.

83 developing land already owned by us, thereby diversifying our sources of revenue. It is now the largest container terminal in the Aegean region and the third largest port in Turkey. In addition, Petlim offers deep water capacity and addresses commercial demand from shipping lines for more efficient access to Turkey’s high growth market. In addition, we have invested in a wind farm, which is expected to result in a 22 per cent. increase in Petkim’s electricity generating capacity and a 120,000 ton reduction in annual carbon emissions. In addition to meeting a portion of our electricity requirements, we plan to sell electricity produced by the wind farm to Turkey’s national grid with a guaranteed tariff. As a result, we expect the port and the wind farm to provide additional stability to our cash flows.

Experienced senior management team and strong support from controlling shareholder Our senior management team has extensive experience in the energy and petrochemicals industry as well as other sectors in Turkey, Azerbaijan and the broader region. Our general manager, Anar Mammadov, has worked at the SOCAR Group since 2009, including as the CEO of SOCAR Georgia and SOCAR Greece. Riza Bozoklar, our Deputy General Manager and CFO, has experience as a CFO at various companies in Turkey, including Fiat-GM Powertrain, TOFAS, Atas Holding, Delphi Automotive and Cimko Cement and Concrete. See ‘‘Directors, Senior Management and Corporate Governance’’. In addition, we enjoy strong support from our controlling shareholder, the SOCAR Group, which is the leading oil and gas company in Azerbaijan with vertically integrated upstream, midstream and downstream operations. The SOCAR Group has made a commitment to Turkey, with the aim of becoming one of the three largest companies in the country. The SOCAR Group has already invested approximately U.S.$18 billion in pursuit of this goal (having invested approximately U.S.$3.4 billion in equity financing into its Turkish operations from 2008 to 2016 through STEA¸S), and expects this investment to increase to U.S.$19.5 billion by 2020. These aims are underpinned by the strategic relationship between Azerbaijan and Turkey, which share historical, linguistic, cultural and political similarities, as well as the geo-strategically important location of Turkey as a transit country in key energy corridors. The National Assembly of Azerbaijan has ratified an agreement for cooperation and mutual assistance, including economic cooperation, military-political and security issues, military and military- technical cooperation and humanitarian issues. In the energy sector, a key agreement was reached on a package of issues relating to the Shah Deniz gas field in 2013 and successful joint projects have included the Trans-Anatolian Natural Gas Pipeline (‘‘TANAP’’) and the Trans-Adriatic Pipeline (‘‘TAP’’). The initial capacity of TANAP is expected to be 16.5 billion cubic metres of gas annually. SOCAR Group is expected to inject further capital in TANAP in the medium term to fund its construction capital expenditure. The graph below sets forth the SOCAR Group’s contribution to Turkey’s gross total and industrial foreign direct investment (‘‘FDI’’) from 2010 to 2016.

Turkey gross FDI inflow (billion US$) Total FDI Industrial FDI SOCAR’s Share in Industrial FDI (%) SOCAR’s Share in Total FDI (%)

84 The graph below sets forth the SOCAR Group’s historical equity contributions in Turkey from 2008 to 2016 (in U.S.$ millions).

1,938

1,361

928

680 689 513 189 420 341 324 680 577 90 500 420 415 107 341 80 234 80 107 2008 2009 2010 2011 2012 2013 2014 2015 2016 STEAS1 TANAP 10JAN201815424920

Note: (1) STEAS historical equity contributions include contributions in connection with the Petkim acquisition (including debt service). The SOCAR Group is focused on achieving the integration of refineries, petrochemicals production, energy, logistics, distribution and transmission by 2023. The project is aimed at transforming the Petkim Peninsula into Turkey’s first Chemical Industry Park and enhancing the competitiveness of the petrochemicals industry in Turkey. We also benefit from the expertise of our shareholder in the development and implementation of our strategy. Hayati Ozturk, who worked at Petkim in various roles from 1977 to 2015 and now acts as CEO Adviser at STEA¸S, and Teymur Abasguliyev, the CFO of STEA¸S, provide valuable operational support. Our key financial policies and governance are closely coordinated with STEA¸S, including in relation to our dividend policy, leverage target, liquidity management and foreign exchange management. Finally, the SOCAR Group has demonstrated its commitment to Petkim through a cross-default clause in relation to its outstanding bonds.

Strategy Continue to pursue operational efficiency programmes We are focused on achieving operating efficiencies across our organisation, including through the integration of our sales, trading, manufacturing, procurement and maintenance functions. We have also improved productivity at our plants, including through energy efficiency projects, an initiative we intend to continue to pursue. We have developed an integrated optimisation model, which will monitor a wide range of factors across our production facilities to optimise maintenance schedules. Digitisation is also an area of focus for us. For example, the digitisation of our production facilities has enabled us to monitor and control the temperature of our furnaces more efficiently, which has resulted in significant cost savings. In January 2017, we also introduced an operational excellence programme (called ‘Petkim Benim’, translated as ‘My Petkim’) which is aimed at creating a working environment in which employees and other stakeholders throughout our entire business are involved in the decision-making process around improving operational efficiency across four main areas of focus. The first area of focus is improving production and energy efficiency and reducing maintenance costs; the second is digitisation with a view to improving the integration of our business functions through advanced analytics; the third is promoting commercial excellence to increase sales force effectiveness and revenues; and the fourth is

85 implementing a dynamic procurement strategy which results in optimal solutions with vendors and better inventory management. As a result of current and planned investments in the operational excellence program, we aim to realise financial savings of approximately U.S.$50 million by the end of 2018. Finally, we have implemented certain efficiency measures aimed at enhancing profitability. These have included, for example, working capital measures designed to improve inventory days and payables days, as well as measures intended to facilitate efficient and secure receivables collection. We will continue to implement these types of programmes in future periods in order to improve our working capital position.

Capitalise on potential for synergies and additional, diversified cash flows through the STAR Refinery, Petlim and other projects We intend to capitalise on the potential for synergies expected from projects that are being undertaken by us and by our controlling shareholder, STEA¸S. In particular, the STAR Refinery project undertaken by STEA¸S will produce naphtha for use by us as feedstock in our operations, which will provide us with increased raw material security. See ‘‘Integration—STAR Refinery’’. On 26 May 2014, we signed a 20-year offtake agreement with STAR Rafineri A.¸S. for the purchase of a minimum of 1,300,000 tons and a maximum of 1,600,000 tons of naphtha per year (which can be increased upon bilateral agreement) and 270,000 tons of mixed xylene per year, which is expected to be sufficient to sustain our current production levels. The refinery will also produce other refined products which are in deficit in Turkey, including diesel and jet fuel. In addition to providing us with raw material security, we expect significant cost savings from the STAR Refinery resulting from lower raw material transport and storage costs, the higher quality of the feedstock produced by the refinery, the replacement of a portion of the heavy naphtha feedstock used at our facilities with reformate produced by the refinery, a reduction in inventory costs and shared maintenance and security costs. Since 2014, we have paid an average premium of approximately U.S.$30/ton over the market price for our imported naphtha. When the STAR Refinery comes onstream, we expect to pay a premium of approximately U.S.$6/ton due to logistical synergies, resulting in cost savings of approximately U.S.$24/ton. Based on a weighted average premium cost, we expect to benefit from annual cost savings of approximately U.S.$38 million per year in naphtha premiums. Additionally, we expect cost savings of approximately U.S.$30 million per year in relation to reformate supplied by the STAR Refinery (though we have not yet signed an offtake agreement with respect to reformate produced by the STAR Refinery). In terms of strategic rationale, our acquisition of a stake in the STAR Refinery also ensures long-term alignment of interests with the STAR Refinery, as we will enjoy board-level participation and an ability to influence decision-making at the refinery. Furthermore, under the governance framework in the shareholders’ agreement set out in the STAR Refinery Share Sale Agreement, we expect long-term security of feedstock supply even if STEA¸S ceases to be a controlling shareholder. We also expect the STAR Refinery to provide us with a steady dividend stream over the medium-term. We also plan to pursue additional cash flow streams in order to diversify our sources of revenue, including through Petlim, in which we own a 70 per cent. stake. Petlim was established in 2010 with the aim of developing land already owned by us, thereby diversifying our sources of revenue. It is now the largest container terminal in the Aegean region and the third largest port in Turkey. In addition, Petlim offers deep water capacity and addresses commercial demand from shipping lines for more efficient access to Turkey’s high growth market. In February 2013, Petlim signed a 28-year concession agreement with an optional extension period of 4 years with APM Terminals, which allows APM Terminals to operate the port in exchange for an annual payment, comprising a fixed and a variable component. The operations agreement between parties has been drafted in a way which seeks to apportion the primary risks to those parties in the best position to manage those risks. In this respect, the operational criteria, operational performance and associated deliverables, such as requisite permits, rest entirely with APM Terminals while all construction responsibilities, including dredging, lie with Petlim. Construction of the port has been completed. While the completion of Petlim has not resulted in an operational benefit to our core petrochemicals business since it is a container port that does not ship chemicals or feedstock, we believe that it represents a significant potential cash flow stream due to the positive outlook for container traffic in the Aegean region. We also expect cost savings on shipments for any expansion projects which we may undertake in the future. Petlim shareholders will be the sole beneficiary of cash flows from Petlim once the Petlim project finance loan is fully amortised.

86 Finally, we plan to develop an additional cash flow stream through the wind farm in which we have invested. The wind farm is expected to result in a 22 per cent. increase in Petkim’s electricity generating capacity and a 120,000 ton reduction in annual carbon emissions. In addition to meeting a portion of our electricity requirements, we plan to sell electricity produced by the wind farm to Turkey’s national grid with a guaranteed tariff. As a result, we expect the port and the wind farm to provide additional stability to our cash flows.

Integration The SOCAR Group is focused on achieving the integration of refineries, petrochemicals production, energy, logistics, distribution and transmission in the Petkim Peninsula. This is expected to further enhance the benefits we enjoy as a result of our strategic location. The project is aimed at transforming the Petkim Peninsula into Turkey’s first Chemical Industry Park and enhancing the competitiveness of the petrochemicals industry in Turkey, including through the construction of the STAR Refinery. We have also undertaken projects, including the Petlim Container Terminal, that are aimed at developing additional cash flow streams.

STAR Refinery In 2008, STEA¸S and Turcas, a Turkish oil and energy investment company, established a project company, STAR Rafineri A.¸S., to develop, construct, own and operate the STAR Refinery, a complex crude oil refinery with a processing capacity of 10 million tons of crude oil per annum, or 214,000 barrels per day, on the Aegean coast of Turkey. The refinery is located adjacent to Petkim on the Aliaga˘ industrial peninsula north of Izmir and is expected to employ 750 staff. On 9 January 2018, we signed a share sale and transfer agreement with STEA¸S for the purchase of an 18 per cent. effective stake in STAR Rafineri A.¸S. (by purchasing 30 per cent. of STEA¸S’s stake in a holding company which owns 60 per cent. of STAR Rafineri A.¸S.), and we intend to use the net proceeds from the offering of the Notes to fund a portion of the purchase price. The state of Azerbaijan and STEA¸S currently hold 40 per cent. and 60 per cent. stakes, respectively, in STAR Rafineri A.¸S. (though STEA¸S’s stake is expected to decrease to 42 per cent. following our acquisition). See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’.

87 As of November 2017, overall construction on the STAR Refinery was approximately 97 per cent. complete, and it is expected to come onstream in the third quarter of 2018 with a total investment value of approximately U.S.$6.3 billion. Approximately U.S.$3.3 billion of the project finance portion of the STAR Refinery was signed with 23 local and international financial institutions, including export credit agencies, commercial banks and development banks in May 2014. As at 30 November 2017, approximately U.S.$4.9 billion had been invested, of which approximately 46 per cent. was financed by equity (approximately U.S.$2.2 billion invested out of U.S.$2.7 billion committed) and the remainder by debt (approximately U.S.$2.7 billion invested out of U.S.$3.3 billion committed). Approximately U.S.$2.6 billion of the debt financing has a maturity of 18 years with a four-year grace period, while the remaining U.S.$600 million has a maturity of 15 years with a four-year grace period. The STAR Refinery will implement a high conversion design which includes deep conversion capabilities associated with a vacuum residue coking unit and a vacuum gasoil hydrocracking unit. The configuration has been designed to be flexible enough to process different sources of crude with medium to light gravity (around 30 to 35 API) and medium to low sulphur content (2.16 wt per cent. to 0.14 wt per cent.). Crude oil meeting such specifications is widely available from the Middle East and the CIS. The STAR Refinery’s Nelson complexity factor is expected to be 9.0. The table below sets forth the breakdown by product, volume and customer of the STAR Refinery’s expected production capacity.

To Market To Petkim via offtake To Market or Petkim2 Tons/ Tons/ Tons/ Product year Product year Product year Diesel 4,900,000 Naphtha LPG 320,000 offtake up 1,600,000 Reformate Jet fuel 1,600,000 to 900,000 Sulphur 159,000 M.Xylene1 270,000 Petcoke 692,000 Petkim 20.0% offtake % Market % 80.0% 8JAN201823100906

Notes: (1) Approximately 300 kilotons initially. (2) We have not yet entered into offtake agreements with the STAR Refinery with regard to LPG and reformate. If the LPG-Naphtha price spread is in favour of LPG, Petkim will be able to purchase LPG from the STAR Refinery at market price. With respect to reformate, after investments in aromatics, Petkim will likewise be able to purchase from the STAR Refinery at market price. The refinery represents the key pillar of SOCAR’s long-term strategic objective to establish itself as the only fully integrated player in the Turkish energy sector. The refinery will benefit from SOCAR’s existing global trading platform for crude oil supply and products marketing, at a time when SOCAR is also enhancing its marketing and distribution presence and activities within Turkey. SOCAR is also developing other strategic projects in Turkey (including the TANAP and the SOCAR Fibre Optic Network). Turkey currently has a significant deficit of certain refined products. Demand for refined products in Turkey is expected to increase due to Turkey’s strong economic development, driven by a growth in the industry and service sectors, as well as a growing population. The refinery will focus on those products (i.e. diesel, jet fuel, naphtha) that are in deficit in Turkey with a tailored product slate maximising the middle distillate output and allowing the refinery to benefit from the existing and projected widening diesel deficit in Turkey. The refinery is a strategic project for Turkey, as it is expected to reduce Turkey’s dependence on imports and decrease the current account deficit. The strategic importance of the STAR Refinery has been confirmed by the fact that it was the first project to receive the ‘‘Strategic Investment Incentive Certificate’’ from the Turkish Ministry of Economy in December 2012. The STAR Refinery is located in close proximity to crude oil production sites in the Middle East and the CIS and also benefits from access to key product demand centres in the west of Turkey. It has access to existing port facilities, as well as utilities supply, via our existing infrastructure, which also provides

88 substantial capital cost savings. In addition, the refinery will benefit from on-site offtake by us for naphtha and mixed xylenes. Naphtha is a key feedstock for us and the offtake arrangements with the refinery will provide logistics cost savings for us (compared to imports) and ensure long term reliable supply. Naphtha production and sales to us also mean that the STAR Refinery is not required to produce any gasoline.

Petlim Petlim was established on 22 November 2010 to oversee the development of a port, which was intended to be ‘‘The Largest Integrated Port of the Aegean Region’’. In 2014, Goldman Sachs acquired 30 per cent. of Petlim’s shares, while we retained the remaining 70 per cent. In connection with the acquisition of this stake, Goldman Sachs and STEA¸S entered into a put option contract pursuant to which Goldman Sachs has the right to sell its stake to STEA¸S in certain circumstances. The put option contract further provides that Goldman Sachs shall be compensated in the event of any loss following an initial public offering of Petlim, which is contemplated to be undertaken within seven years of the date of the sale of the 30 per cent. stake to Goldman Sachs. The cost of the port investment was approximately U.S.$400 million, including financing costs. The project has been financed via a U.S.$212 million project finance facility with Akbank and a U.S.$80 million facility, under which e35 million has been drawn, with the EIB. The costs of the investment have been borne by Petkim, and Goldman Sachs has no obligation to provide further financing for the port investment under the terms of the agreement through which it acquired a 30 per cent. stake. The first phase of Petlim was completed in December 2016. The expansion of the port to its current capacity as well as the construction of a 48-hectare back service area was completed in September 2017 as part of the second phase of the investment. As Turkey’s first port to accept vessels with capacities of over 11,000 TEU, as well as deep water capacity up to a depth of 16 metres, Petlim will be an important logistics centre in the region, which will rival the Piraeus and Alexandria ports. The operation and management of the port is carried out by the Dutch firm APM Terminals, one of the world’s largest port operators in its field, pursuant to a revenue sharing agreement with Petlim for a 28-year period with a four-year extension option. Pursuant to the agreement, APM Terminals is entitled to operate the port in exchange for an annual payment, comprising a fixed and a variable component. APM Terminals also agreed to pay an up-front fee amounting to U.S.$65 million. The port is for dry bulk and will not be used to ship chemicals or feedstock for our operations. However, it has been used as the main port for the shipment of materials required for the construction of the STAR Refinery.

Products All of our products are naphtha based and therefore our production starts at the cracker level. We source the naphtha for our ethylene cracker and aromatics plant from a range of suppliers, including refineries located in the Black Sea region, pursuant to supply agreements or on the spot market. Going forward, we will rely on the STAR Refinery for our naphtha requirements, which will provide us with a degree of security with respect to the supply of raw materials and will also provide us with cost savings. For further details of our raw material supply arrangements and the cost savings we expect to benefit from, see ‘‘—Raw Materials—Feedstock’’ below. We have invested in certain downstream integrated production chains, in particular related to the olefins (ethylene and propylene), which we produce through our ethylene cracker, and specialised production plants using ethylene as an input. We have also invested in chlorine chain products, which we produce from our CA plant, which in turn uses ethylene produced by our ethylene cracker. Finally, we have also invested in an aromatics plant to produce aromatics and their derivatives. To the extent they are required for the production of downstream chemicals we source certain (chemical) raw materials externally.

89 These production chains and products are set forth in the table below.

Petrochemical Simplified Flow Chart Years of capacity expansions

LDPE Petkim has fully integrated operations Bag, greenhouse covers, film, cable, toys, pipes, bottles, hose, 1992 and 2001 (350,000 ton/year) packaging

HDPE Construction and water pipes, packaging film, toys, bottles, soft 1998 and 2001 (96,000 ton/year) drink crates, barrels Ethylene Plant MEG Polyster fiber, polyester film, antifreeze (89,000 ton/year) Ethylene C4 2000 (140,000 ton/year)

PVC Pipe, window shades, cable, bottles, building materials, 2001 (150,000 ton/year) packaging film, floor tiles, serum bags 2005 and 2014

Chlor-alkali (100,000 ton/year)

PP Knitting yarn, ropes, tablecloths, napkins, doormats, hoses, 1993 and 2005 (144,000 ton/year) radiator pipes, fishing nets, brushes

Naphtha Propylene ACN Textile fibers, artificial wool, ABS resins (acrylonitrile butadiene) 1994 (90,000 ton/year)

Benzene (144,000 ton/year) Detergent, solvents, explosives, pharmaceuticals, cosmetics, Aromatics Plant PA parts of white goods (49,000 ton/year) 2001 and 2012

C5 Mixtures Aromatics Polyester industry 1998 and 2001 (80,000 ton/year)

2005 P-X (136,000 ton/year) Polyester fiber, polyester resin, films, plasticizers, synthetic chemicals PTA 2014 (105,000 ton/year) 8JAN201822282225 Our products are used by customers in a wide range of industries, including the plastics, chemistry, packaging, pipe, paint, construction, agriculture, automotive, textiles, pharmaceuticals and detergents industries, among others. The graph below sets out a breakdown of our sales by product in the year ended 31 December 2016.

2016 Volume Sold by Product (kt)

Others LDPE Thermoplastics 49% 11% 38% PVC 7% Others1 Paraxylene 18% 4% LDPE-T 9%

PY-Gas 9% PP 7%

C4 9% HDPE 5% Benzene 9% ACN MEG PTA 6% Fibers 3% 4% 13% Total: 1,705kt 11JAN201807555480

Note: (1) Others include remaining aromatics and aromatics derivatives. Most of our products are sold domestically, with the exception of our aromatics products, which we sell outside of Turkey, primarily in Europe. The tables below set forth a breakdown of our domestic sales revenue, sales volume and customers by region for the year ended 31 December 2016 and the nine months ended 30 September 2017.

90 Nine months ended 30 September 2017

Customer Number of percentage Regions Sales Sales customers Volume of total (kilotons) (TL millions) (%) (%) Marmara...... 405 1,734 519 49 46 Aegean ...... 145 584 246 18 22 Mediterranean ...... 100 410 76 12 7 Central Anatolia ...... 98 375 173 12 15 Southeastern Anatolia ...... 65 251 80 8 7 Black Sea ...... 7 29 22 1 2 East Anatolia ...... 5 21 14 1 1 Total ...... 826 3,405 1,130 100 100

2016

Customer Number of percentage Regions Sales Sales customers Volume of total (kilotons) (TL millions) (%) (%) Marmara...... 419 1,366 539 41 46 Aegean ...... 186 580 272 18 23 Mediterranean ...... 152 479 68 15 6 Central Anatolia ...... 134 415 181 13 15 Southeastern Anatolia ...... 115 337 86 11 7 Black Sea ...... 8 24 19 1 2 East Anatolia ...... 5 17 14 0 1 Total ...... 1,018 3,217 1,179 100 100

Our key products are summarised below.

Olefins Olefins are the basic building blocks used to create a variety of petrochemical products. Olefins include ethylene, propylene and butadiene. Olefin based polymers and their derivatives (e.g., LDPE, HDPE, polypropylene, MEG and ACN) accounted for over half of our revenues and over 80 per cent. of our gross profit in the year ended 31 December 2016. These products are primarily sold in the domestic market.

Ethylene We have an average annual capacity of 588,000 tons of ethylene per year. Ethylene is used to produce ethylene oxide, which is one of the most important raw materials used in large-scale chemical production, including for the production of ethylene glycol. We mainly use ethylene internally in the production of LDPE, HDPE, MEG, DEG, TEG and PVC. We expect that demand for HDPE and polypropylene will remain strong in the future. In particular, polypropylene is already starting to replace other thermoplastics especially in food packaging. Our strategic positioning in LDPE is also expected to improve in the future since new investment is centred around LLDPE, leaving us as one of the few LDPE producers left in the region. Ethylene glycol. Ethylene glycol is manufactured by the oxidation of ethylene with oxygen in the presence of catalysts. We sell ethylene glycol directly to our customers and also use it internally to produce MEG and DEG (diethylene glycol). Ethylene glycol and its derivatives play a significant role in the petrochemical industry due to the fact that they can serve as versatile intermediates in a wide range of applications. Ethylene glycol is used in the production of a range of products including polyester fibre, polyethylene terephthalate resins, automotive liquids and other chemical products. We have an average annual capacity of 89,000 tons of MEG per year. MEG is used in the manufacturing of antifreeze, polyester fibre, textile products and plastic bottles.

91 We have an average annual capacity of 8,000 tons of DEG per year. DEG is used in the manufacturing of antifreeze, polyester fibre, textile products and bottles. Polyethylene. Polyethylene, which includes LDPE, HDPE and linear low density polyethylene polyolefins, is the single largest category of thermoplastics in the world. It is relatively low cost, and is capable of being moulded, extruded and cast into many various shapes. It is a versatile polymer used in a wide range of moulding and extruding applications such as retail and consumer goods, household and food containers, industrial and chemical containers, toys, food and non-food packaging film and sheet, as well as industrial and agricultural applications. We sell polyethylene directly to our customers and also use it to produce LDPE and HDPE. We have an average annual capacity of 350,000 tons of LDPE (including LDPE-T (LDPE-tubular)) per year. LDPE is used in the manufacturing of heavy duty bags, greenhouse film, packaging film, cable coating, household goods, toys, pipes, hoses, tubes, bottles, fabric and metal coatings, rotations and moulding materials, among other products. We have an average annual capacity of 96,000 tons of HDPE per year. HDPE is used in the manufacturing of household items, toys, packaging film, pressurised water and gas pipes, detergent and cosmetics bottles (non-transparent), bins, fabric and metal coating and rotational moulding material, among other products.

Polypropylene Polypropylene is produced through the polymerisation of propylene. We sell polypropylene directly to our customers. We have an average annual capacity of 144,000 tons per year of polypropylene. Polypropylene is used in the manufacturing of knitting materials, sacks, carpet yearn, ropes, tablecloths, mats, filter cloths, felt, cord fabric, pipe, cable sheaths, fishing nets, brushes, basins, tables, chairs, toys and picnic items, among other products. ACN. Acrylonitrile is a polypropylene derivative produced by the catalytic ammoxidation of propylene. We are the only ACN producer in the Middle East and have an average annual capacity of 90,000 tons per year. ACN is used in the production of acrylic fibres, knitting wool (orlon), fabrics, carpets, blankets, ABS resins, acrylic resins and nitrile rubber, among other products. Substantially all of our ACN output is sold domestically. We expect continued strong demand for ACN since demand for this product is significantly in excess of supply, and is expected to remain so in the near future.

Aromatics We have an average annual capacity of 150,000 tons of aromatics per year. Aromatics includes benzene, toluene, and xylenes. Benzene is a raw material for dyes and synthetic detergents, and benzene and toluene for isocyanates MDI and TDI used in making polyurethanes. Manufacturers use xylenes to produce plastics and synthetic fibres. We make direct sales of aromatics to third parties. Aromatics and their derivatives (e.g., benzene, toluene, paraxylene, C5 hydrocarbons, PTA and PA) accounted for approximately one-quarter of our revenues and slightly less than 15 per cent. of our gross profit in the year ended 31 December 2016. Substantially all of our aromatics products are sold in the export market because of a lack of domestic consumption of these products.

Benzene Benzene is the primary building block for many chemicals used in the pharmaceutical and chemicals industries. Styrene and phenol are used as building blocks in the manufacturing of plastics as well as in the manufacturing of synthetic detergents. Aniline is used as a building block in the manufacturing of gasoline and paint. We sell benzene directly to our customers.

Toluene Toluene is used as a solvent to thin paints and lacquers. It is also used in plastic manufacturing and the construction of explosive TNT (trinitrotoluene), as an octane increaser in fuel and in manufacturing disinfectant adhesives and inks. We sell toluene directly to our customers.

92 Paraxylene Paraxylene is used in the production of PTA, PET resin and DMT (dimetiltereftalat) as a raw material in the textile industry. We use a portion of our paraxylene production for PTA production and sell the remaining portion directly to customers.

Orthoxylene Orthoxylene is used in the production of phtallicanhydride, pharmaceutical and diethylphthalate. We primarily use orthoxylene for PA production internally.

C5 hydrocarbons C5 hydrocarbons are used in gasoline production. We sell C5 hydrocarbons directly to customers. PTA. We have an average annual capacity of 105,000 tons of PTA per year. PTA, a C5 hydrocarbon derivative, is used in the manufacturing of polyester fibres (including Dacron, teril and perylene) and the manufacturing of yarns such as Trevira, as well as in polyester resin and polyester film production. It is also used in the manufacturing of polyethylene terephthalate. PA. Phthalic anhydride is a principal commercial form of phthalic acid. We have an average annual capacity of 49,000 tons of PA per year. PA is used in the paint industry, in the manufacturing of alkyd resins and in polyester production. We expect the plastics industry to shift from PA-based products to PTA-based products as a result of emerging evidence that foetal development is interrupted by the sublimation of PA. PTA, on the other hand, offers a substitute that does not give rise to these concerns.

Chlorine Chain We use CA (chlorine alkali) in the production of VCM (vinylchloride monomer) and PVC. We have an average annual capacity of 100,000 tons of CA per year. We use all of the CA we produce in the production of VCM and PVC and do not sell it directly to customers. We also produce caustic soda in our PA plant, which we sell directly to customers. Chlorine sold in the market is used to disinfect water as well as in the production of organic dyes and decolorising chlorides. It is also used in the preparation of a medicine used against insects. Chlorine alkali is also used to produce caustic soda, which is used in the paper, pulp, aluminium, soap and detergent, textile, oil petrochemicals, food, rayon and film and vegetable oil industries.

VCM Ethylene and chlorine are used in the production of VCM. We have an average annual capacity of 152,000 tons of VCM per year. We use VCM to produce PVC, as described in further detail below. VCM is not sold directly to customers.

PVC PVC is produced by polymerisation of VCM. We have an average annual capacity of 150,000 tons of PVC per year. PVC is used in the agriculture and construction industries, including in irrigation pipes, sewage pipes and fittings, as well as for the manufacturing of packaging films, wire coatings, transparent cosmetic and oil bottles, various tubes and other bottles, shoe soles, floor tiles and various building materials (including doors, window frames, shutters, flooring and artificial leather). PVC is sold directly to customers. PVC accounted for approximately 10 per cent. of our revenues and gross profit for the year ended 31 December 2016. We expect PVC usage to decrease at least in the European Union since future EU regulations will likely limit the usage of PVC products due to the poisonous nature of PVC when exposed to flame. On the other hand, ongoing warfare in Turkey’s neighbouring countries is expected to contribute to higher demand for PVC from the construction and infrastructure industries.

93 Production plants and auxiliary processing units The Petkim complex has 14 production plants and one masterbatch unit, as well as seven auxiliary processing units. Our production plants produce the products described above under ‘‘—Products’’. Our auxiliary processing units include the Guzel¨ Hisar Water Dam, which has a total storage volume of 150 million cubic metres, a water purification unit, a demineralised water unit, a wastewater treatment plant, a solid-liquid waste incinerator, a port and energy production facilities.

Production plants The following table sets forth certain information regarding our production plants:

Year Production Commenced/Expansions and Plant Refurbishments Capacity Tubular Low Density Plant ...... 2005, 2011 160,000 tons per year Masterbatch Unit ...... 1993 10,000 tons per year PTA Plant ...... 1987, 2014 105,000 tons per year Plastics Processing Plant ...... 1986 4,000 tons per year FFS roll film PVC Plant ...... 1986, 2001 150,000 tons per year VCM Plant ...... 1986, 1995, 2001 152,000 tons per year PA Plant ...... 1985, 2001, 2012 49,000 tons per year Ethylene Glycol Plant ...... 1985, 1995 89,000 tons year MEG ACN Plant ...... 1985, 1994 90,000 tons per year Polypropylene Plant ...... 1985, 1993, 2005 144,000 tons per year HDPE Plant ...... 1985, 1998, 2001 96,000 tons per year LDPE Plant ...... 1985, 1992, 2001 190,000 tons per year CA Plant ...... 1985, 2000 100,000 tons per year chlorine Aromatics Plant ...... 1985, 2005 150,000 tons per year benzene Ethylene Plant ...... 1985, 2005, 2014 588,000 tons per year

Auxiliary Processing Units The following table sets forth certain information regarding our auxiliary processing units:

Unit Capacity and Other Data Guzel¨ Hisar Water Dam ...... Rainfall area: 450 km2 Annual average rainfall: 500-600 kg/m2 Water level: 63 m (minimum), 104 m (normal), 107 m (maximum) Active volume: 137 million m3 Total storage volume: 150 million m3 Water Purification Unit ...... Capacity: 7,800 m3/h Start up date: 1983 Expansion date: 2005 Total storage capacity of raw water basins: 80,000 m3 Demineralised Water Unit .... Capacity: 1,700 m3/h Start up date: 1984 Expansion Date: 1998, 2006 Wastewater Treatment Plant . . . Capacity: 1,670 m3/h (550 m3/h oily wastewater, 120 m3/h domestic wastewater, 1,000 m3/h chemical wastewater) Solid-Liquid Waste Incinerator . Installed capacity: 2.26 tons/h (0.85 tons/h solid waste, 1.07 tons/h treatment sludge, 0.34 tons/h waste oil) Port...... Handling amount: 2.7 million tons (3 jetties for tankers, 1 jetty for salt) Energy production ...... Electricity production-distribution—total power generated: 226 MW Steam production unit—installed capacity: 1,200 tons/h XHS Capacity extensions: 2001, 2007

94 Raw Materials and Energy Feedstock The most significant direct cost associated with the production of our products is feedstock. Feedstock accounted for approximately 82 per cent. of our cost of sales for both the nine months ended 30 September 2017 and the year ended 31 December 2016, respectively.

The feedstock we use in the production of our products is naphtha, which is a mixture of C5 to C10 hydrocarbons, from the distillation of crude oil. Many of our competitors use ethane-rich gas as feedstock. In line with the high correlation between naphtha prices and oil prices, prior to June 2014, the costs of naphtha based producers such as ourselves were significantly higher than those of their ethane based peers. Subsequently, however, as oil prices declined, the cost of ethylene production for both naphtha based and ethane based producers correspondingly declined, making naphtha based production more competitive in relative terms. Our facilities are located very close to the main naphtha exporting regions, including the Black Sea region and Russia, and our operations are located near the Tupra¸¨ s refinery, which is also located at Aliaga.˘ We purchase naphtha from a range of suppliers in these regions, primarily including refineries located in the Black Sea region, pursuant to supply agreements or on the spot market. The naphtha supplied pursuant to these arrangements currently covers the substantial majority of our feedstock requirements, with the remainder supplied by a local naphtha supplier, the adjacent Tupra¸¨ s refinery. The remaining portion of our feedstock requirements is sourced from spot purchases and can also be supplied from the refineries with which we have entered into supply agreements. We also source certain raw materials externally to the extent they are required for the production of downstream chemicals in our production chain. Going forward, we will rely on the STAR Refinery for our feedstock requirements, which will provide us with a degree of security with respect to the supply of raw materials. On 26 May 2014, we signed a contract with STAR Rafineri A.¸S. for the purchase of a minimum of 1,300,000 tons and a maximum of 1,600,000 tons of naphtha per year (which can be increased upon bilateral agreement) and 270,000 tons of mixed xylene per year, which is expected to be sufficient to sustain our current production levels. In addition to producing naphtha for use by us as feedstock in our operations, the STAR Refinery will produce other refined products which are in deficit in Turkey, including diesel and jet fuel. The STAR Refinery is expected to be completed in 2018. It is expected to cover almost all of our feedstock requirements upon completion. To the extent there are any shortfalls in our feedstock requirements following the completion of the STAR Refinery, we will continue to rely on our existing infrastructure and would continue to source naphtha pursuant to the supply agreements and on the spot market as we do currently. We expect significant cost savings from the STAR Refinery resulting from lower raw material transport and storage costs, the higher quality of the feedstock produced by the refinery, the replacement of a portion of the heavy naphtha feedstock used at our facilities with reformate produced by the refinery, a reduction in inventory costs and shared maintenance and security costs. Since 2014, we have paid an average premium of approximately U.S.$30/ton over the market price for our imported naphtha. When the STAR Refinery comes onstream, we expect to pay a premium of approximately U.S.$6/ton due to logistical synergies, resulting in cost savings of approximately U.S.$24/ton. Based on a weighted average premium cost, we expect to benefit from annual cost savings of approximately U.S.$38 million per year in naphtha premiums. On average, our payables days are 90 days, although we expect our payables days to decrease once the STAR Refinery comes onstream due to the contractual terms of the offtake agreement.

Energy We rely on our own facilities for our energy supply, as described above under ‘‘—Production Plants and Auxiliary Processing Units—Auxiliary Processing Units’’. We have the capacity to generate 226 MW of electricity and 1,200 tons/h XHS steam. In order to diversify our sources of revenue, we have also invested in a wind farm with a total capacity of 51 MW. The wind farm has 17 new turbines each able to generate 3 MW of electricity. The construction of all turbines was completed in September 2017, and while the wind farm is currently licensed to generate 25 MW of electricity, we have applied for an amendment to the license which would allow it to generate

95 51 MW. We plan to sell electricity produced by the wind farm to Turkey’s national grid with a guaranteed tariff. The wind farm is expected to reduce carbon emissions by 120,000 tons per year. The investment in the wind farm amounts to e55 million. While our own facilities are sufficient to meet our electricity needs, we have in the past experienced electricity outages at our operations. We have, however, taken steps to mitigate the impact of these outages. In particular, the Turkish Government has guaranteed that the operations of companies holding a Strategic Incentive Certificate, including ourselves, will not be interrupted in the event of planned power cuts. Furthermore, we have access to Turkey’s national grid in the event of outages. We have also developed a comprehensive power cut emergency plan pursuant to which we are able to isolate certain facilities in order to continue production.

Sales and Marketing We have over 6,000 customers, which are primarily located in Turkey and operate in industries including the plastics, chemistry, packaging, pipe, paint, construction, agriculture, automotive, electricity, electronics, textiles, pharmaceuticals, detergents and cosmetics industries, among others. For the year ended 31 December 2016, our five largest customers accounted for 21 per cent. of our revenues. However, customer concentration varies based on product and geography. Approximately 64 per cent. of our products by value were sold in the domestic market in the nine months ended 30 September 2017, with the remaining 36 per cent. being sold in export markets, where the main destination is Europe. We primarily sell our aromatics products in the export market due to a lack of domestic consumption of these products. The strategic location of our assets provides us with a competitive advantage in relation to the shipping of our products to customers. Our facilities are located on the Petkim Peninsula in Aliaga,˘ Turkey on the coast of the Aegean Sea, approximately 50 kilometres from Izmir. Its connection to a large number of Organised Industrial Zones and its access to motorways and railways make Aliaga˘ an advantageous location. The Gebze-Izmir Motorway Project, which is currently under construction and is expected to be completed in 2020, is expected to enhance the competitiveness of our location by connecting the area around Istanbul with Izmir. In addition, sea shipping connections and proximity to ports in the Eastern Mediterranean make the Petkim Peninsula an attractive platform to serve regional and global trade. On average, our inventory days and receivables days are each 45 days and our payables days are 90 days, although we expect our payables days to decrease once the STAR Refinery comes onstream due to the contractual terms of the offtake agreement. During recent years, we have been focused on marketing and selling our products to small- and medium-sized customers, which typically provide us with higher margins in comparison with larger customers. As a result of our strong receivables risk management capabilities, including our DDS system, guarantee letters and receivable insurance tools, we have positioned ourselves as the only petrochemical producer that is able to sell to small- and medium-sized customers as well as larger clients in Turkey. Small- and medium-sized customers are also able to obtain financing from local banks, which they are typically not able to do with respect to purchases from importers. In the domestic market, sales are mostly made on a contractual basis with guaranteed quantities and periodic price adjustments. In export markets, most of our sales are made pursuant to one-year contracts with price formulae relying on global publications such as Nexant, ICIS and PLATTS. In order to protect our profitability, most of our contracts contain features that permit regular price resetting, which in principle enables the pass-through of increasing raw material costs to customers, albeit this is subject to a time lag. In 2016, we reached 140,000 tons of trading goods volume, mainly consisting of LDPE, MEG and styrene monomer sales. In future years, we expect to further increase our trading activities in order to maintain our market share. The fact that we are the only petrochemicals producer in the Turkish market, which is the seventh largest market globally, provides us with a strong brand advantage and a strong influence on pricing. Many pricing data providers such as ICIS and Chermorbis report pricing in the Turkish market based on our price lists.

96 In order to further strengthen our customer relationships, we organise sectoral meetings, trade shows and customer visits. Customer visits are intended to enable closer monitoring of technical as well as business issues and to take suggestions from relevant personnel at all levels. As part of these visits, we share domestic production and technical know-how with customers, which we believe represents an important advantage over our competitors. In 2014, we also commissioned a ‘‘Customer Communication Line (Call Centre),’’ which was positioned as a new communication channel that enables customers to reach us more easily.

Employees As at 30 September 2017, we had 2,441 employees across our operations on a full-time equivalent basis.

Collective Bargaining Agreement Approximately 1,900 of our employees are members of a trade union. Our management and human resources department negotiate a collective bargaining agreement with the relevant trade union every two years. Financial rights and fringe benefits made available to blue-collar workers who are members of the trade union are determined by the collective bargaining agreement. Pursuant to ‘‘Article 27— Appointment of a Workplace Trade Union Representative and His/Her Duties’’ of Law No. 6356 on Trade Unions and Collective Bargaining Agreement (the ‘‘Collective Bargaining Agreement’’), we have a Chief Workplace Representative and other representatives at the workplace. Within the scope of the Collective Bargaining Agreement in force for the period between 1 January 2017 and 31 December 2019, we and Petrol-i¸s Union reached an agreement with respect to pay increases based on inflation.

Employee Benefits In accordance with existing social legislation in Turkey, we are required to make lump-sum termination indemnities to each employee who has completed over one year of service with us and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. We also have an employee benefit plan, the ‘‘Seniority Incentive Bonus’’, which is paid to employees with a certain level of seniority. See Note 17 to the 2016 Audited Financial Statements for further details on the Seniority Incentive Bonus.

Competition The markets for most of our products are competitive and we are exposed to competition arising from imports from large global petrochemicals companies, including producers based in hydrocarbon-rich regions such as the Middle East and the United States. Competition in the markets for a majority of our products is based primarily on price but also on product performance, product quality, product deliverability and customer service. The Turkish petrochemicals sector is highly import reliant due to limited capacity. We operate as the sole producer within the market and due to increasing market demand over the years, we have increased sales as a result of capacity expansions, debottlenecking and a focus on operational excellence resulting in optimisation of our capacity utilisation rates. However, market demand is outpacing our expansion of capacity, resulting in our market share (based on production capacity) decreasing from 26 per cent. in 2006 (when we had a production capacity of 1,902 kilotons) to 18 per cent. in 2016 (when we had a production capacity of 2,067 kilotons). As the sole petrochemicals producer of size in Turkey, we are able to provide a high level of service to our customers and are therefore able to command premiums over the import parity price. For example, whereas an importer may require a month to deliver products to its customers, we are able to deliver most of our products to our customers within a week, which provides our customers with more effective working capital management. While Turkey is an open market, with no customs duties applicable to imports from the European Union, EFTA and/or FTA countries, in extraordinary cases, we are able to avail ourselves of anti-dumping restrictions imposed by the government. We currently benefit from such restrictions, including a rate of 16 per cent. to 18 per cent. for PVC for Germany and the United States and a rate of 8.44 per cent. for PA for South Korea. In the event of unfair competition, under World Trade Organisation rules, we can demand the imposition of anti-dumping duties on countries and/or companies engaging in dumping. In addition, the Turkish market is currently protected against imports as a result of import duties. A customs

97 duty of 0 per cent. is applicable to imports from the European Union, EFTA and FTA countries, while a customs duty of 3 per cent. is applicable to imports from GSP countries and a customs duty of 6.5 per cent. is applicable to imports from all other countries. We also benefit from tariff restrictions for all LDPE imports. In relation to PTA, we have also initiated anti-dumping proceedings and expect a decision later in 2018. In the future, we expect that the synergies arising from our arrangements with the STAR Refinery in terms of the cost of procuring feedstock, logistics and market premiums, will strengthen our competitive position. See also ‘‘Industry Overview’’ below for further details on the petrochemicals industry more generally.

Insurance We have obtained insurance for our plants, equipment and other assets, as well as business interruption and product liability insurance, which we believe is in line with customary industry practices for similarly situated companies. Through a number of international and local insurers, we have insurance policies relating to employees, contamination and other environmental risks, losses relating to our assets, transportation of our products, certain aspects of business interruption and product and operational accountability, and director and officer liability insurance. Our insurers regularly visit our facilities to review the facilities and our procedures.

Health, Safety and Environment We have systematic and consistent HSE policies which are based on industry best practices and aim to promote safety, environmental and occupational health excellence. In 2016, we adopted an HSE management system, SAFE, which is focused on four pillars: continuous improvement, leadership, risk management and implementation. The schematic below sets forth the underlying principles of our SAFE management system:

8JAN201819110571 Each of these principles (Regulatory Compliance; Management, Leadership and Accountability; Risk Assessment and Management; Operational Accountability; Contractor and Supplier Management; Competence, Training and Behaviours; Management of Change; Facilities, Design and Construction; Environmental Assessment and Management; Safeguarding of Health; Information and Documentation; Societal Commitment; Customer and Products; Performance Monitoring and Improvement; Incident Analysis and Prevention; Emergency Preparedness and Crisis Management) is underpinned by a number of specific expectations, which constitute the standards by which all new HSE policies, systems and procedures are measured. As a result of this risk-based approach, we have also been able to implement a number of measures, including improved and systematic reporting and analysis systems,

98 more comprehensive clearly-delineated HSE-related responsibilities across our business and enhanced on-the-job HSE trainings. Our HSE management is focused on four sub-disciplines: occupational health and safety, environment, process safety and plant protection. We employ over 75 full-time HSE professionals across our operations. In addition, our leadership issued a revised HSE policy in 2017 which re-emphasised our commitment to health and safety best practices. As set out in the chart below, our focus on HSE has enabled us to decrease our TRIR (based on a 12-month rolling average per 200,000 man hours) from 3.22 in June 2016 to 1.11 in November 2017, and we seek to further decrease our TRIR to 0.3 in the short- to mid-term, in line with global petrochemicals industry best practice levels. The average TRIR for all industries in Turkey is 1.78.

Petkim + Contractor Staff Total Recordable Injury Rate (TRIR) / 12 Month-rolling per 200,000 Manhours

3.5 3.22 3.04 3.0 2.56 2.50 2.5 2.13 2.0 1.82

Turkey Average: 1.78 1.30 1.5 1.59 1.26 1.0 1.11

0.5 Global Petrochemical Best Practice: 0.30

0.0 Jul-2017 Jul-2016 Oct-2017 Apr-2017 Oct-2016 Jun-2017 Jan-2017 Jun-2016 Feb-2017 Mar-2017 Aug-2017 Aug-2016 Nov-2017 Nov-2016 Dec-2016 Sep-2017 Sep-2016 May-2017 9JAN201811405600

Litigation As is the case with many companies in the petrochemicals industry, we are and may from time to time become a party to claims and lawsuits incidental to the ordinary course of our business. However, we are not involved in any material governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which we are aware). In 2014, we received three separate fines and VAT accrual charges from the Turkish Customs Administration (‘‘TCA’’) in relation to the alleged accrual of supplementary charge tax (‘‘SCT’’) on our import of certain feedstock. The total amount of these fines is approximately TL 4 million. We objected to the fines and VAT accrual charges and commenced legal proceedings. In September 2017, we received favourable judgments from the Regional Administrative Court in all three of the relevant pending cases, which ruled that SCT did not apply to our import of the feedstock, and the judgment is now on appeal with the Council of State. While the exact timing is uncertain, a decision can be expected in the next one to two years. We believe that this dispute will be concluded either through a favourable judgment on appeal or through settlement, and that it does not pose any material risk to us. While these proceedings were pending, the Turkish Ministry of Finance conducted a limited tax inspection in relation to the same alleged accrual of SCT in 2014. Subsequently, in August 2017, we received a tax loss penalty of approximately TL 99 million and a SCT penalty of TL 66 million. Tax inspections for the years 2013, 2015 and 2016 are still ongoing as of the date of this Offering Memorandum.

Compliance STEA¸S maintains a centralised compliance function for the entire SOCAR Group, to which Petkim belongs. This centralised compliance function is administered by the Compliance Department of STEA¸S with the collaboration of the necessary task forces embedded in relevant departments/units (e.g. legal, supply chain, sales and/or customer relationship management, accounting) of each member of the SOCAR Group, including but not limited to Petkim. The compliance function aims to ensure that the SOCAR Group’s operations are conducted in compliance with the STEA¸S Code of Ethics and its supporting policies and procedures.

99 The STEA¸S Code of Ethics, together with its supporting policies and procedures, such as the Anti-Corruption Policy, is a set of rules and principles dealing with various matters including but not limited to the prevention of corrupt practices (such as bribery, money-laundering, and financing of terrorism). It is created in line with the best practices in the oil and gas industry and in observance of all applicable laws to the SOCAR Group either by territorial jurisdiction or contractually, to the extent relevant or necessary considering the SOCAR Group’s structure and the nature of its business. In this respect, third party controls and integrity due diligence exercises are significant aspects of the SOCAR Group’s compliance function. For example, designated task forces in relevant operational units run screenings on third parties, with the help of licensed software systems, on an ongoing basis and the STEA¸S Compliance Department monitors these screenings.

100 INDUSTRY OVERVIEW Certain parts of the projections and other information set forth in this section have been derived from external sources, including reports of Nexant, an independent consultant to the chemical industry, among others. Industry surveys and publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We believe that these industry publications, surveys and forecasts are reliable but we have not independently verified them and cannot guarantee their accuracy or completeness. See ‘‘Historical and Current Market and Industry Data.’’

Overview The petrochemicals industry encompasses all chemical products derived from crude oil and natural gas, and includes olefins, aromatics, polyolefins and various chemical intermediate products directly or indirectly derived from olefins or aromatics. We participate in a considerable number of these markets, with a significant proportion of our profitability stemming from the polyolefins and chemical intermediates segments.

Natural Gas Other Inputs

Polyolefins & Crude Olefins & Downstream & Oil Refining Chemical Oil Aromatics End Products Intermediates

Refining Cracking Polymerisation and Other Processes

Petrochemicals 8JAN201819110165 The refining industry processes crude oil into a number of different outputs, including naphtha, liquid petroleum gas (‘‘LPG’’) and gas oil, of which a significant portion is used as feedstock for the production of olefins, such as ethylene and propylene, and aromatics, such as benzene and xylenes. In turn, these olefins and aromatics are the basic building blocks for the manufacture of polyolefins and a vast variety of chemical intermediates. Petrochemicals are consumed in a number of industrial and consumer applications, such as plastics, packaging, construction, textiles and cosmetics. As a result of their physical properties, affordability and availability, petrochemicals continue to be used in favour of more traditional materials, such as glass, ceramics, metal and wood, and penetrate an expanding list of end-use applications. Rising demand from key end-use applications is one of the major growth drivers for the petrochemicals industry. From a supply perspective, the petrochemicals industry remains relatively fragmented, with a significant tail of smaller regional producers. Major global players include LyondellBasell, Chevron Phillips Chemical, Dow Chemical, INEOS, ExxonMobil Chemical, Westlake, SABIC, Formosa Plastics and Braskem, amongst others. The industry overview detailed on the following pages summarises the market environment and outlook for our main products in the key geographies that we serve, namely Turkey and Europe, in which approximately 64 per cent. and 36 per cent. of our products were sold in the nine months ended 30 September, respectively. The location of our manufacturing base, our access to the sea, integration within a Turkey-wide distribution channel, and sourcing of naphtha from the adjacent STAR refinery commencing in the third quarter of 2018 enable us to both serve the growing domestic petrochemicals market in Turkey and export our products to Western Europe. Petkim is Turkey’s first and sole domestic petrochemicals producer, and as such is the captive supplier in a net import market with highly attractive growth prospects. Turkish petrochemicals consumption has outpaced Turkish real GDP growth historically and is forecasted to continue growing at a multiple of 1.4 times the rate of growth of GDP. Despite Turkey being one of the most significant consumers of petrochemicals in the Middle East, limited domestic production capacity means that the country relies on imports to meet the majority of domestic demand, namely ~80 per cent. of Turkish petrochemicals consumption, according to Management. This

101 combination of strong demand growth and limited domestic capacity characterises Turkey as an attractive market to serve in the petrochemicals industry.

Turkish GDP vs Petrochemicals Consumption Development

100 = Indexed to its year 2010 value 180 170 Petrochemicals Consumption 160 GDP (Real)

150 140 130 120

110 100 90 10 11 12 13 14 15 16 17 18 19 20

Turkey, x GDP 1.4x 1.4x Global Top 25 Countries, 1.4x 1.2x x GDP 9JAN201800243334

Source: ICIS Supply and Demand Database—2017, Turkstat, World Bank, OECD Our main products which will be covered in this section include: • Olefins: ethylene, propylene • Ethylene derivatives: polyethylene, polyvinyl chloride, mono ethylene glycol • Propylene derivatives: polypropylene, acrylonitrile • Aromatics derivatives: purified terephthalic acid.

Olefins Olefins, together with aromatics, are the basic building blocks for the petrochemicals industry. The most commercially significant olefins are ethylene, propylene and butadiene. Olefins are mainly produced by steam cracking of hydrocarbon feedstocks, with additional production from oil refinery upgrading processes and by catalytic dehydrogenation of alkanes. Periodically, higher prices for conventional petrochemical feedstocks have also driven technological development to exploit alternative feedstocks such as coal and methanol. The proportion of ethylene, propylene and butadiene produced by a steam cracker depends on the feedstock used and the operating conditions. All feedstocks for steam cracking produce ethylene. Heavier feedstocks (such as naphtha and gas oil) produce a greater proportion of propylene and butadiene, the heavier olefins, per unit of ethylene output, while steam crackers using lighter feedstock (such as ethane and LPG) produce a significantly higher proportion of ethylene. Recent feedstock price volatility has led to increased flexibility in feedstock selection by steam cracker operators. In Europe and Asia, for example, numerous steam cracker operators have invested in modifications to permit increased cracking of LPG as its pricing had become increasingly attractive relative to that of naphtha. The increased exploitation of shale gas in the United States resulted in supply growth of natural gas liquids (‘‘NGLs’’) outpacing the growth in capacity to consume NGLs in the United States, which led to very low prices and the emergence of exports of ethane and downstream derivatives. The price differential between United States ethane costs and those of relevant competitive products in regions such as Western Europe, South America and Asia proved sufficient to cover the relatively high cost of shipping. In addition, shale gas exploitation in the United States has greatly increased the volume of propane and butane on offer both locally and internationally. Increased gas cracking has left the propylene market

102 short, and created the opportunity for numerous propane dehydrogenation (‘‘PDH’’) developments to convert the attractively priced propane into propylene. The United States and China are currently the main centres for PDH capacity development, while the increase of capacity in the Middle East has slowed. The fall in oil prices since late 2014 has been accompanied by a fall in the prices of LPG, naphtha and also coal. This has led to a reduction in margins made by those olefin producers with access to low-priced ethane, such as those in the United States and parts of the Middle East. Nevertheless, ethane-based producers remain the most competitive, in particular in light of stabilising and gradually increasing oil prices. As such, there are currently two major poles of global olefins capacity development—around coal and methanol feedstock in China, and around low cost gas in the United States. Capacity development in the Middle East has slowed relative to the capacity additions of prior periods as a result of limited availability of additional ethane for new projects. We at Petkim produce olefins through the steam cracking of naphtha. Our ethylene and propylene volumes are almost exclusively consumed in the manufacture of downstream products (i.e. ethylene and propylene derivatives). Crude C4 olefins (from which butadiene is extracted) and other by-products of the steam cracking process are sold on to external parties (with few exceptions such as purified terephthalic acid).

Ethylene Consumption Ethylene is a flammable gas and the largest segment of the olefins markets. The majority is consumed in the production of plastics, either directly as polyethylene or via intermediates to polymers such as polyvinyl chloride, polyester and polystyrene. Polyethylene is the dominant consumer of ethylene, accounting for over 60 per cent. of global ethylene demand. There are three major types of polyethylene—high-density polyethylene (‘‘HDPE’’), low-density polyethylene (‘‘LDPE’’) and linear-low-density polyethylene (‘‘LLDPE’’). Almost all new steam crackers have polyethylene units as the main on-site ethylene consumer. Polyethylene consumption has a variety of drivers, including some stable, and some more cyclical, sectors. Packaging tends to be the dominant application area in developed economies and tends to provide robust demand at most points in the economic cycle. Polyethylene is also widely used in the production of pipe and conduits, and flexible coatings for wires, and therefore has exposure to the more cyclical construction and automotive sectors. Ethylene oxide is the second largest derivative of ethylene, accounting for 15 per cent. of global ethylene demand in 2016. Three quarters of the world’s ethylene oxide is consumed directly as the intermediate for the production of ethylene glycol, with the remainder being further purified for use in numerous families of products such as ethoxylates, ethanolamines and glycol ethers, which have applications across the surfactant and solvent industries. Most ethylene glycol is consumed in the production of polyester. The third largest derivative of ethylene is ethylene dichloride (‘‘EDC’’), accounting for 9 per cent. of global ethylene demand in 2016. EDC is used almost exclusively to produce vinyl chloride monomer which in turn is an intermediate to polyvinyl chloride, a versatile polymer used in both rigid and flexible forms. Styrene accounted for 6 per cent. of global ethylene consumption in 2016 and is produced from ethylene and benzene via the intermediate ethylbenzene. Styrene is used in a broad range of polymer derivatives, ranging from commodity polymers to engineering plastics and synthetic rubber. The main uses of styrene are in the production of polystyrene, expandable polystyrene, acrylonitrile butadiene styrene, styrene butadiene rubbers and styrene butadiene latex. Ethylene is also consumed in the production of propylene via metathesis. Smaller amounts of ethylene are further used for alpha olefins, vinyl acetate monomer and as a co-monomer in the production of polypropylene and ethylene propylene diamine monomer.

103 Global Ethylene Demand by Derivative (2016)

Polypropylene 1% Others Propylene 5% 2% Styrene 6%

HDPE EDC 30% 9% Polyethylene Ethylene Oxide 62% 15% LLDPE LDPE 18% 14%

8JAN201823220046

Source: Nexant—2017 Ethylene derivatives are consumed in a variety of industrial and consumer sectors, and global demand closely follows economic activity. As ethylene itself is more expensive to ship, trade is mainly in ethylene derivatives such as polyethylene and ethylene glycol. Aside from areas such as the United States Gulf Coast and North-West Europe, which have ethylene pipeline networks, most ethylene is consumed at plants adjacent to the steam crackers. A notable exception is coastal China, where numerous consumers import ethylene from nearby countries such as South Korea and Japan. Ethylene production competitiveness depends almost entirely on access to feedstock and energy costs. Consumption has declined in those areas where ethylene is not sufficiently competitive to provide a viable platform for derivative production. According to Nexant, worldwide demand for ethylene has grown at a rate greater than the growth rate of GDP from 2000–2016, reflecting in part the ongoing substitution of thermoplastics for other industrial materials, and the change in consumption patterns of developing nations. Growing derivative consumption in developing regions is expected to remain the fundamental long-term demand growth driver for ethylene. Over the period 2016–2020, Nexant forecasts average annual global ethylene consumption growth of 3.7 per cent., compared to (0.3) per cent. for Turkey and (1.2) per cent. for Western Europe. Over 2020–2025, annual consumption for Turkey is forecasted to increase at a rate of 6.0 per cent., positioning the country as one of the highest growth regions in the long-term, compared to growth of 3.2 per cent. and 0.2 per cent. globally and in Western Europe, respectively. Nexant’s view on demand growth rates for ethylene consumption by region is detailed in the following table:

Ethylene Consumption by Region

Average Annual Growth Actual Estimate Forecast Rate 2016 2017 2018 2019 2020 2025 2000–16 2016–20 2020–25 (in ktons) (%) Western Europe . . . 20,073 19,889 19,611 19,669 19,192 19,379 (0.0) (1.1) 0.2 Middle East ...... 27,154 28,126 28,175 28,810 30,511 36,424 9.4 3.0 3.6 o/w Turkey ...... 525 515 517 519 519 694 1.2 (0.3) 6.0 Global ...... 145,089 150,383 156,157 161,689 167,689 195,945 3.1 3.7 3.2

Source: Nexant—2017

Supply, Operating Rates and Trade North America has emerged as a major focus for global ethylene capacity development, with several new gas-based crackers set to enter the market over the coming years, providing a surge in derivative exports which has reduced the incentive to invest in other regions. The extent to which shale exploitation

104 can continue to grow in the U.S. in the lower oil price environment, and develop in other regions, will be among the key influences on the global ethylene market. Several world-scale steam cracker projects continue to be developed in the United States. Those projects that already entered the construction phase, or in respect of which the final investment decision had been taken, in 2014–2015 continued to be developed in 2016 despite the low oil price environment. However, several projects under construction encountered relatively significant delays and cost overruns. Other projects that were announced, but in respect of which a final investment decision has not yet been taken, continue to be evaluated. Several other plans have been announced but remain at a preliminary stage of development. Nexant’s forecast assumes a net capacity addition of 15 million tons per year between 2016 and 2025 in the United States. The capacity base in Western Europe is expected to remain stable in the medium term and some plants should see improved operating rates as a result of United States ethane imports. The slowdown in capacity developments in Eastern Europe removes some of the near-term competition in derivative markets for both Western and Central Europe. The rate of capacity addition in the Middle East increased in 2016 with the commissioning of new plants in Iran and Saudi Arabia. The capacity outlook for the next five years, however, is flat in Saudi Arabia, and regional growth to 2021 will stem primarily from Iran. Iran is set to be the main source of supply growth in the Middle East, through the completion of new projects which are currently under construction, and by higher operability of existing units as a result of the improved access to operation and trading resources permitted by the easing of trade sanctions. Outside Iran, the only other active cracker project in the Middle East is in Oman. Longer-term developments in the Middle East could focus more on crude oil cracking, and the remaining untapped supply of ethane in countries such as Iraq. In 2016, operating rates started what is expected to be a gradual but consistent decline, as capacity addition exceeds the expected consumption growth towards 2020, which is forecast to be limited. Capacity growth is focused in the United States and China. Trade in ethylene remains very small relative to trade in its derivatives, and the high cost of shipping ethylene favours integrated investments with balanced ethylene and derivatives capacity. There is however considerable ethylene imbalance built into legacy assets around the world, supporting ongoing trade in ethylene. China overtook Belgium to become the largest ethylene net importer in 2013, importing a total of 1.7 million tons. Belgium imports around 1.5 million tons per year, mainly by pipeline from the Netherlands and Germany, but also by sea from the United Kingdom. The Western European ethylene market has ceased to be net short on ethylene however, mainly as a result of derivative plant closures, and has in fact been exporting ethylene almost continually since 2014. Exports of ethylene from the Middle East have been declining due to feedstock restrictions, downstream expansions and improved margins on derivatives. While trade sanctions on Iran have now been lifted, there is now less surplus ethylene available. Exports from Saudi Arabia have declined significantly in recent years, leaving the United Arab Emirates (‘‘UAE’’) as the key olefins exporter in the Middle East. Future expansion and improvement of the gas supply in Iran is expected to enable greater exports of ethylene in the future, mainly to Asia. According to Nexant, global capacity in ethylene is expected to grow at an average annual rate of 4.9 per cent. over 2015–2020 and 2.4 per cent. over 2020–2025. This compares to production growth of 3.6 per cent. across both periods, resulting in slightly decreasing operating rates up to 2020 (to 84 per cent.) which are set to recover post 2020 (to 89 per cent. by 2025). Operating rates are forecasted to be at similar levels in the Middle East, where capacity growth of 3.9 per cent. over 2015–2020 and 3.3 per cent. over 2020–2025 are being absorbed by growing regional consumption and exports. In Turkey, Petkim operates the country’s sole ethylene production facility, and there have been no announcements of further capacity additions in the country to date. In Western Europe, operating rates are forecasted to be lower than global levels, as a result of limited consumption outlook, while capacity is expected to stay constant.

Propylene Consumption Propylene is a flammable gas and the second largest segment of the olefins markets after ethylene. The majority is consumed in the production of plastics and fibres, either directly as polypropylene or as a precursor to chemical intermediates such as polyether polyols, acrylonitrile and cumene. Polypropylene is the dominant consumer of propylene, accounting for ~54 per cent. of global propylene demand in 2016. Polypropylene is a versatile and fast growing polymer, whose main application is in the

105 production of injection-moulded components ranging from disposable food containers to car bumpers. Other major uses are in the production of biaxially oriented polypropylene (‘‘BOPP’’) films, mainly for packaging applications, and in fibre and raffia applications. These range from carpets to woven ‘‘big-bags’’ of one ton capacity or more which are widely used for the transport of bulk materials and building products. Advances in product features, such as clarity, have allowed a rapid penetration of polypropylene in food packaging applications, at the cost of other polymers such as polystyrene. Propylene oxide is the second largest consumer of propylene, accounting for 12 per cent. of global propylene demand in 2016. Its main application is for the production of polyether polyols, which are reacted with isocyanates to form polyurethanes. End-uses for polyurethanes include flexible foams for the furniture and automotive industries, rigid foams for appliance and building insulation, and various non-foam applications including coatings, adhesives, sealants and elastomers. The other principal application of propylene oxide is propylene glycol, which is used for the manufacture of unsaturated polyester resins, pharmaceuticals and personal care products. The third largest derivative of propylene is cumene. Propylene is combined with benzene to produce cumene, which accounted for 7 per cent. of global propylene consumption in 2016. Cumene is almost exclusively used for conversion into phenol. Applications for phenol include mainly synthetic resins, both directly in phenol/formaldehyde resins for timber products, and through the intermediate Bisphenol A, in polycarbonate and epoxy resins. Phenol is also used to produce caprolactam and adipic acid, which are both nylon precursors. Propylene is also used as a feedstock for the production of acrylonitrile, accounting for 5 per cent. of global propylene demand in 2016. Acrylonitrile is used for the production of acrylic fibre and polymers such as acrylonitrile butadiene styrene. It is also used to produce adiponitrile, a precursor in the manufacture of nylon. Smaller amounts of propylene are also consumed in the manufacture of acrylic acid, butanols, 2-ethylhexanol and isopropanol.

Global Propylene Demand by Derivative (2016)

Others Isopropanol 11% 2% 2-Ethylhexanol 2% Butanols 3% Acrylic Acid 4% Polypropylene Acrylonitrile 54% 5%

Cumene 7%

Propylene Oxide 12% 8JAN201819110878

Source: Nexant—2017 According to Nexant, worldwide demand for propylene increased at a rate greater than the growth rate of both ethylene and GDP from 2000–2016. Polypropylene remains the main growth product, driven by relatively strong underlying demand. Aside from competing with polyethylene in some film and packaging applications, polypropylene is also taking market share from other polymers, such as polystyrene, and development of new applications is expected to support the long-term growth rates for both polypropylene and propylene. Over the period 2016–2020, Nexant forecasts average annual global propylene consumption growth of 3.7 per cent., compared to 0.6 per cent. for Turkey and contraction of

106 0.9 per cent. for Western Europe. Nexant’s view on demand growth rates for propylene consumption by region is detailed in the following table:

Propylene Consumption by Region

Average Annual Growth Actual Estimate Forecast Rate 2016 2017 2018 2019 2020 2025 2000–16 2016–20 2020–25 (in ktons) (%) Western Europe . . . 15,513 15,246 15,133 15,232 14,941 15,111 0.4 (0.9) 0.2 Middle East ...... 8,289 8,853 9,175 9,628 9,808 12,620 12.4 4.3 5.2 o/w Turkey ...... 244 249 248 248 250 253 2.0 0.6 0.2 Global ...... 100,508 103,671 107,086 111,090 116,172 135,360 3.9 3.7 3.1

Source: Nexant—2017

Supply, Operating Rates and Trade The surge in production of NGLs in the United States triggered a switch to NGL feeds at United States crackers, dropping steam cracker propylene production, and causing a period of tightness in the propylene market, and high prices relative to ethylene. Massive investments in NGL export capacity from the United States have contributed to falling propane prices in other regions, and regions such as Asia and Western Europe are now replicating the United States switch to lighter feeds, although in a more measured way. Any loss of steam cracker propylene has however been outweighed by methanol-based production and PDH projects in Asia, thus changing the supply picture dramatically since 2015. Supply growth in the United States is falling below previous estimates with several PDH projects on hold or delayed and a Methanol to Propylene (MTP) project also on hold. Propylene capacity is largely shared between the three major regions North America, Western Europe and Asia Pacific. The share held by Middle Eastern producers is comparatively small relative to their presence in the ethylene market, due to the prevalence of gas-based steam crackers. Major investment in PDH, the move towards mixed-feed steam crackers and finally metathesis have increased propylene capacity in the Middle East, but the region’s share of global supply base is only 10 per cent. compared with 19 per cent. for ethylene. Western Europe and Asia Pacific derive most propylene from steam cracking naphtha and other heavy feeds, while supply in the United States is based to a greater extent on refinery production. Propylene capacity is nevertheless declining in Western Europe as a result of the closure of some small steam crackers, and an increasing shift towards lighter cracker feedstocks. PDH developments in Europe appear attractive in the longer-term, but the current market is not favourable for investment, and the fall in propylene production from steam cracking is expected to be balanced by falling demand. The on-purpose propylene developments underway in China are significant on a global scale. Global propylene operating rates increased very slightly in 2016 and are expected to remain fairly constant over the coming years. The market remains dynamic regarding both supply and consumption growth, but the broad base of propylene derivatives and the application areas they serve provides reliable demand growth for propylene, and therefore is expected to match supply developments over the coming years. Propane looks likely to remain well supplied globally in the medium term, providing strong financial returns for PDH operators even with propylene prices at a significant discount to ethylene. Competitive propylene pricing will in turn drive strong consumption growth. PDH margins remained strong in 2016, mainly due to weak propane prices. Methanol-based economics also remain robust in most cases partly driven by the significant drop which has occurred in Chinese coal prices. Propylene capacity in the Middle East grew rapidly as a result of several PDH/polypropylene developments in Saudi Arabia and Oman, but the development of PDH capacity is now much lower. The massive metathesis unit developed by Borouge in Abu Dhabi does not look likely to be repeated. Recent developments were of PDH and FCC propylene in Abu Dhabi, and steam cracker propylene in Saudi Arabia. The near term focus is on PDH capacity in Iran, and a small quantity of steam cracker propylene in Oman. Historically the Middle East has been a significant net exporter of propylene. Middle Eastern propylene exports are mainly to Indonesia, Malaysia, China, Taiwan and Western Europe.

107 According to Nexant, global capacity in propylene is expected to grow at an average annual rate of 4.3 per cent. over 2015–2020 and 2.5 per cent. over 2020–2025. This compares to production growth of 3.9 per cent. and 3.9 per cent. over the same periods, resulting in slightly decreasing operating rates up to 2020 (to 85 per cent.) which are set to recover post 2020 (to 91 per cent. by 2025). Operating rates are forecasted to be at similar levels in the Middle East, where capacity growth of 3.1 per cent. over 2015–2020 and 4.5 per cent. over 2020–2025 are being absorbed by growing regional consumption and exports. In Turkey, Petkim operates the country’s sole propylene production capacity, with no announcements of further capacity additions to date. In Western Europe, operating rates are forecasted to be higher than global levels. In addition, Western Europe is expected to shift from being a net importer of propylene to become a net exporter by 2020.

Ethylene Derivatives As mentioned above, ethylene is consumed in a vast variety of higher value added chemicals. Set out on the following pages is a description of three key ethylene derivative products, the markets for which we are active in and from which we derive a significant proportion of our revenues and profitability: polyethylene, polyvinyl chloride and mono ethylene glycol.

Polyethylene Consumption Polyethylene is the world’s most widely used thermoplastic and is consumed globally in a wide range of segments including consumer, automotive, construction, industrial and agricultural markets. It is manufactured by the process of polymerisation whereby individual molecules of ethylene are aggregated in polymer chains. Polyethylene grades are typically classified by their density, as higher density corresponds with greater material rigidity. As such, the polyethylene market can be further categorised into high-density polyethylene (‘‘HDPE’’), low-density polyethylene (‘‘LDPE’’) and linear-low-density polyethylene (‘‘LLDPE’’). We at Petkim are active in both the HDPE and LDPE markets. The world’s largest share of polyethylene is HDPE, accounting for 45 per cent. of global polyethylene demand in 2016. HDPE has a relatively high degree of tensile strength. Plastic containers represent the most common household use of HDPE. At the opposite end of the spectrum is LDPE, accounting for 23 per cent. of global polyethylene demand in 2016, which was the first type of polyethylene to be developed. Plastic bags represent the most common household use of LDPE. Both HDPE and LDPE are also commonly used for moulding applications. LLDPE, accounting for 32 per cent. of global polyethylene demand in 2016, was developed in the 1970s and can usually be manufactured at a slightly lower cost than LDPE with similar basic properties. While LDPE and LLDPE are to a certain extent substitutable for each other, one may be more suitable than the other for a specific application, and penetration of LLDPE into LDPE applications is said to be largely completed in mature markets. In general, demand growth for polyethylene is a function of economic growth. The effect of economic issues varies for different industries. Sectors such as food and beverage, home / personal care and healthcare (all non-discretionary areas of spending) are less impacted by changes in economic growth. The automotive and housing sectors, however, are more affected by the economy and consumer spending. Other factors that impact demand growth in polyethylene are environmental actions (e.g. recycling, plastic bag bans), energy and feedstock costs, inter-polymer and inter-material competition, and new product development. According to Nexant, global demand growth for LLDPE was on average 2.8 percentage points higher than GDP growth over the period 2000–2016, and HDPE averaged 1.1 percentage points higher, while LDPE averaged 1.2 percentage points lower than GDP growth. As the polyethylene markets mature, performance versus GDP may not be as strong in the future, at least from a global perspective, however LLDPE and HDPE are still expected to continue outgrowing GDP performance. For the 2016–2020 period, average annual demand growth for LLDPE, HDPE and LDPE is forecasted at 5.0 per cent., 4.2 per cent. and 3.4 per cent., respectively.

108 Polyethylene Consumption by Type and Region

Average Annual Growth Actual Estimate Forecast Rate 2016 2017 2018 2019 2020 2025 2000–16 2016–20 2020–25 (in ktons) (%) LLDPE—Global ...... 29,335 30,483 32,388 34,049 35,719 44,562 5.6 5.0 4.5 LDPE—Global ...... 20,835 21,693 22,251 22,998 23,829 26,979 1.6 3.4 2.5 Western Europe ...... 3,755 3,833 3,912 3,944 3,979 4,095 (1.5) 1.5 0.6 Middle East ...... 1,394 1,445 1,498 1,600 1,715 2,107 3.3 5.3 4.2 o/w Turkey ...... 421 436 468 499 533 657 1.1 6.1 4.3 HDPE—Global ...... 40,994 42,602 44,409 46,333 48,344 57,291 3.9 4.2 3.5 Western Europe ...... 5,157 5,272 5,373 5,451 5,542 5,884 0.6 1.8 1.2 Middle East ...... 3,317 3,515 3,763 3,967 4,200 5,124 8.9 6.1 4.1 o/w Turkey ...... 1,089 1,159 1,234 1,294 1,363 1,673 12.0 5.8 4.2

Source: Nexant—2017 In HDPE, blow moulding and film applications accounted for 27 per cent. and 25 per cent. of global demand in 2016, respectively. Injection moulding (19 per cent.), pipe and conduit (16 per cent.), fibre (5 per cent.) and other extrusion (4 per cent.) are other significant applications. Pipe and conduit, other extrusion, rotomoulding and film applications are expected to have the highest growth rates. In the Middle East, Iran and Turkey, the region’s two largest HDPE consumers, were responsible for much of the region’s demand growth in recent years. The region has also managed to penetrate European export markets, efficiently competing with exports from Asia. Turkey is the largest consumer of HDPE in the Middle East, accounting for 33 per cent. of regional consumption in 2016. Turkish HDPE demand has grown on average 12.0 per cent. per annum over 2000–2016, and is forecasted to grow at an average annual rate of 5.8 per cent. and 4.2 per cent. over 2016–2020 and 2020–2025, respectively, positioning the country as one of the high growth regions in the long-term. Western European HDPE markets have been volatile over the last few years, with several factors influencing the region, including weak regional economics, a slow return to growth after the downturn, changing consumer trends, capacity closures, the introduction of new import tariffs and regulation. Overall, Western European HDPE demand has grown on average 0.6 per cent. per annum over 2000–2016, with consumption forecasted to recover to 1.8 per cent. annual growth over 2016–2020. In LDPE, film applications accounted for almost 63 per cent. of global demand in 2016. Extrusion coating applications and other extrusion are the next largest consumers, accounting for 11 per cent. and 10 per cent. of global demand in 2016, respectively. Film and other extrusion applications are expected to be the main growth drivers. In 2016, LLDPE accounted for 58 per cent. of the total global LLDPE/LDPE market. Since LLDPE demand is expected to grow at higher rates than LDPE, LLDPE is likely to continue increasing its share of the combined market, reaching 62 per cent. on a global basis by 2025. In the Middle East, regional LLDPE consumption growth is projected to be higher than that of LDPE, reflecting gradual substitution. Turkey is the leading consumer of LDPE in the Middle East, accounting for 30 per cent. of regional consumption in 2016. Turkey’s LDPE demand is expected to grow by 6.1 per cent. and 4.3 per cent. annually over 2016–2020 and 2020–2025, respectively, according to Nexant. Film production makes up around 87 per cent. of Turkish LDPE demand with the remainder used for blow moulding, injection moulding, other extrusion and other applications. In Western Europe, the weakness in LDPE demand over the last few years has been in part due to weak regional economics leading to poor domestic consumption levels, waste reduction regulations, downgauging and consumer trends moving away from LDPE in film applications. The substitution of LLDPE for LDPE is still apparent but appears to be reducing, stabilising future demand levels. European Union regulations regarding waste reduction have contributed to a fall in demand for polyolefin films for carrier bag use, although this has not been as significant for LDPE as it has been for HDPE. Some of the more environmentally friendly, reusable ‘bags for life’ are being made from LDPE or LDPE blends, and this has supported some growth in sack and bag applications. Overall, with more optimistic prospects for the film segment, Western European LDPE consumption is forecasted at 1.5 per cent. and 0.6 per cent. annual growth over 2016–2020 and 2020–2025, respectively.

109 Supply, Operating Rates and Trade Historically, LDPE has on average been able to command higher margins relative to both HDPE and LLDPE. Global capacity additions in polyethylene have been affected by the drop in oil prices and the slowdown in China’s economic growth. Although much of the planned capacity additions in North America, the Middle East and China are going through as planned, some have been delayed or cancelled. These additions would have a negative effect on global operating rates. However, demand growth is also expected to increase, thus reducing some of the excess capacity. It is also possible that some projects will be further delayed. Lower operating rates are also expected to result in further closures of uncompetitive assets in developed regions. The Middle East is presumed to maintain its position as the major net exporter based on advantaged feedstock. Western Europe was previously regarded as a region in decline with weak market growth, declining competitiveness, capacity rationalisation and rising imports. The outlook for Western Europe is now considerably more optimistic with stronger demand growth, no further plant closures and there are plans for regional investment in polyolefins and olefin feedstocks. In HDPE, existing capacity base in the Middle East includes some of the largest and most modern facilities globally, supported by ethylene production which has had an unrivalled competitive advantage. Middle East producers achieved a massive capacity build between 2009 and 2015, thereby more than doubling capacity since 2008, with the majority as HDPE/LLDPE swing plants. Turkey, despite being one of the region’s largest HDPE consumers, has scarce HDPE production. No firm capacity additions are expected in Turkey in the medium-term. The Middle East is the dominant global net exporter of HDPE, while Turkey and Israel were the region’s main net importers. In Western Europe, there have been significant HDPE closures since 2005. In many cases, these have been the smallest and oldest HDPE plants in the region which have experienced some unprofitability in recent years. According to Nexant, no further closures are expected in the near-term supported by improved domestic demand growth. The upturn in regional production economics following the drop in crude oil price and supported by strong underlying demand and advantageous exchange rates have improved the investment scenario. The increasing trend for importing ethane from the United States is set to boost ethylene output from crackers in the region, which may in turn lead to investment in downstream polyethylene facilities. In LDPE, Saudi Arabia and Iran represent the largest producers in the Middle East after a series of mostly export-oriented capacity additions, thereby further reinforcing the Middle East’s net export position. Turkey has a deficit of LDPE, with supplies from local production at Petkim being supplemented by imports. According to Nexant, net imports of LDPE in Turkey are expected to increase by over 12 per cent. per annum in the medium-term. Given its proximity to the region, Turkey is a major market for other Middle Eastern suppliers, especially during weak demand cycles in Asia and Europe. Continued growth of Middle Eastern net exports is expected to be supported by a wave of new capacity developments in Iran, the UAE and Saudi Arabia. In Western Europe, there have been substantial closures of LDPE capacity since 2005. No further activity has been announced regarding LDPE capacity, so levels are anticipated to remain steady in the near-term. The improved demand growth prospects in the region have withdrawn the threat of more regional capacity closures, according to Nexant.

Polyvinyl Chloride Consumption Polyvinyl chloride (‘‘PVC’’) is a versatile polymer which is commonly derived from ethylene dichloride (‘‘EDC’’) via vinyl chloride monomer (‘‘VCM’’). EDC is produced from ethylene and chlorine, and through the process of pyrolysis yields VCM and hydrogen chloride. PVC is derived from the polymerisation of VCM, for which the two main processes include suspension and emulsion polymerisation. As such, PVC can be classified into two major categories, suspension PVC and emulsion PVC. The basis of PVC is the chlor-alkali industry, which provides the chlorine for EDC production, and the by-product caustic soda. Chlorine is considered very hazardous to transport, and therefore EDC production is mainly co-located with chlorine. Chlor-alkali processes are large consumers of electrical power and the availability of competitive power pricing, along with availability of ethylene, are the principal factors influencing where EDC plants are located. Integrated EDC-VCM-PVC plants have optimal economics, although large quantities of both EDC and VCM are traded, mainly for reasons relating to legacy assets. EDC and VCM are almost exclusively used in the manufacture of PVC. Small

110 amounts of VCM are consumed in chlorinated solvents and polyvinylidene chloride, while small amounts of EDC are used in chlorinated solvents, lead alkyls and adhesives. The global PVC market is dominated by suspension PVC, which accounted for 90 per cent. of total PVC demand in 2016. Suspension PVC is primarily used in the construction industry with applications such as pipe and conduit, window profiles, siding, cladding, wire and cable. Smaller portions are also consumed in film and sheet applications. Emulsion PVC, which accounted for the remaining 10 per cent. of total PVC demand in 2016, comprises certain flexible PVC applications, such as artificial leather cloth (e.g. used in luggage and in car upholstery), tarpaulins, floor and wall coverings, and rotomoulding (e.g. used in manufacture of toys). Given major uses of PVC are in the construction industry, demand tends to track regional GDP growth. According to Nexant, global PVC demand has grown with an average annual growth rate of 3.1 per cent. over 2000–2016, and is forecasted to grow by 3.4 per cent. and 3.6 per cent. per annum over 2016–2020 and 2020–2025, respectively. High volume growth in populous nations such as China and India should maintain Asia as the major driver of global PVC consumption growth. Complementing this is the ongoing recovery of the housing and construction markets in Western Europe and North America, while demand in developing regions should benefit from infrastructure investments. The cost competitiveness of PVC in the construction sector is expected to support consumption growth.

PVC Consumption by Region

Average Annual Growth Actual Estimate Forecast Rate 2016 2017 2018 2019 2020 2025 2000–16 2016–20 2020–25 (in ktons) (%) Western Europe ...... 4,401 4,455 4,515 4,574 4,635 4,860 (1.4) 1.3 1.0 Middle East ...... 2,336 2,407 2,494 2,594 2,710 3,141 5.7 3.8 3.0 o/w Turkey ...... 900 934 970 1,012 1,060 1,252 5.4 4.2 3.4 Global ...... 42,352 43,668 45,198 46,897 48,455 57,775 3.1 3.4 3.6

Source: Nexant—2017 In the Middle East, PVC consumption has grown at 5.7 per cent. per annum over 2000–2016, as the region saw many infrastructure projects, both building construction and water distribution systems, as well as the development of a very strong Turkish manufacturing industry. Turkey is the largest PVC consumer in the Middle East, accounting for 37 per cent. of regional demand in 2016. Despite having just one single PVC production facility in the country (Petkim), demand far exceeds domestic supply due to a well-developed manufacturing industry of pipes and window profiles which target the export market. In fact, Turkish output for PVC windows is currently greater than that of Germany. Relatively strong economic growth forecasted for Turkey, together with a young population and significant foreign direct investment, should ensure continued demand growth for PVC. Turkey exhibits a different end-use breakdown compared to the rest of the Middle East, due to the high proportion of export-oriented manufacturing facilities. In Turkey, profiles account for 36 per cent., pipes for 27 per cent., and wire and cable for 10 per cent. of PVC consumption. Emulsion PVC accounts for 12 per cent. of total PVC demand in Turkey. The main use of emulsion PVC is for flexible flooring, with smaller quantities used in synthetic leathers. Many Middle Eastern countries in fact import finished emulsion PVC goods from Turkey. In Western Europe, PVC consumption is expected to recover with average annual growth rates of 1.3 per cent. over 2016–2020. Growth is lower compared to developing regions, given the already high consumption per capita as well as existing well-established infrastructure. In addition, the region is likely to continue to rely on imports of finished products from its neighbouring countries following the relocation of manufacturing activities to Central and Eastern Europe, as well as Turkey.

Supply, Operating Rates and Trade Regional capacity development shows considerable variation due to differing demand outlooks and cost of production. Low demand and high energy prices make investments in Western and Central Europe unattractive. The same was true for North America until the development of shale gas, which has provided substantial cost-advantage over traditional oil-based production, and a number of major capacity developments are already underway in the region. Capacity development in China has proceeded rapidly due to substantial demand growth and the relative attractiveness of coal-based

111 production. On a global level, in the near term, operating rates are expected to remain at high levels as demand in most of the regions is expected to recover, while capacity addition is limited. In the longer term, average operating rates are expected to gradually decline, following a new wave of capacity addition. In the Middle East, PVC capacity is shared between Iran (accounting for more than half of regional capacity), Saudi Arabia and Turkey. There is no emulsion PVC capacity in Turkey, as Petkim operates a suspension polymerisation plant, and therefore all emulsion PVC requirements must be imported. The Middle East is a net importer of PVC and there are currently no announced firm capacity additions in the region. In fact, Turkey is the second largest importing country of PVC globally, after India. The large net deficits displayed by Turkey, Saudi Arabia and the UAE, as well as the availability of ethylene and low utility cost, suggest that these countries might be potential locations for additional PVC capacity in the long-term. Western European PVC capacity expanded in 2017 as a result of two small capacity expansions at existing sites. Expansions such as these are the only changes to capacity expected in the long term, which will otherwise remain constant. This follows a ten year period of capacity closures and mergers and acquisitions. Western Europe is a key producing region of emulsion PVC, almost half of Western Europe’s net surplus is emulsion PVC. European producers make specialist emulsion PVCs that are valued for specific applications. The region is a significant net exporter of PVC. Key export destinations include the Middle East, Central and Eastern Europe. Turkey is the most significant export market, as Turkey has an established downstream PVC processing market but limited PVC capacity itself. Trade is aided by the Turkey-EU customs union.

Mono Ethylene Glycol Consumption Mono ethylene glycol (‘‘MEG’’) is a clear, odourless, slightly viscous, combustible liquid which is produced by the reaction of ethylene oxide with water. Ethylene oxide is a chemical intermediate derived from ethylene, and, as such, MEG economics are driven principally by the cost of ethylene. Around three quarters of the world’s ethylene oxide is consumed for the production of MEG, with the remainder being further purified for use in ethoxylates, ethanolamines and glycol ethers, which have applications across the surfactant and solvent industries. MEG is widely transported by road or by ship and is stored in tanks. The primary consumer of MEG is polyethylene terephthalate (‘‘PET’’), which accounted for 88 per cent. of global MEG demand in 2016. PET is a thermoplastic of the polyester family and is produced by polymerisation of MEG with purified terephthalic acid or dimethyl terephthalate in a melt reaction. PET exists both in transparent and semi-crystalline opaque forms, and can be made into fibres (e.g. polyester fabrics), resins (e.g. PET bottles) and film (e.g. biaxially oriented PET (‘‘BoPET’’) film). MEG is also consumed in anti-freeze and industrial applications, each accounting for 6 per cent. of global MEG demand in 2016. MEG consumption for the production of PET dominates the MEG market due to lower growth rates in other sectors. Growth outlook for anti-freeze usage is limited given modern vehicles have little to no ongoing requirement for anti-freeze as a result of improvements in engine design and the increasing service life of anti-freeze formulations. Industrial uses are diverse, ranging from solvent applications to heat exchange fluids. The concentration of the PET industry in Asia has generated very high growth rates for regional MEG demand, such that the region accounts for over three quarters of global MEG consumption. The Asian market has grown due to its importance for the PET fibre industry which supplies both the global textile industry and Asia’s own large populations. Over the period 2000–2016, global MEG consumption has grown by 4.9 per cent. per annum on average. According to Nexant, global MEG consumption is expected to continue outpacing GDP and grow at an annual average rate of 4.8 per cent. over 2016–2020.

112 MEG Consumption by Region

Average Annual Growth Actual Estimate Forecast Rate 2016 2017 2018 2019 2020 2025 2000–16 2016–20 2020–25 (in ktons) (%) Western Europe ...... 1,453 1,404 1,401 1,488 1,481 1,665 0.3 0.5 2.4 Middle East ...... 972 1,141 1,164 1,229 1,223 1,429 7.2 5.9 3.2 o/w Turkey ...... 336 377 385 395 396 513 2.9 4.2 5.3 Global ...... 26,658 27,928 29,640 30,826 32,152 37,308 4.9 4.8 3.0

Source: Nexant—2017 In the Middle East, consumption is focused around the major PET resin and fibre producing regions Turkey, Iran and Oman. Turkey is the region’s largest consumer of MEG and has the greatest potential for MEG consumption growth in the near-term given the considerable increase in domestic PET capacity in recent years. According to Nexant, Turkish annual consumption growth is forecasted at 4.2 per cent. over 2016–2020. In Western Europe, the closure of several PET plants, and intermittent operations at several others, caused a considerable drop in MEG consumption over 2005–2014. The trend reversed in 2015 as a result of improved trading conditions due to the weakness of the Euro against the US Dollar, which makes US Dollar-denominated Asian derivatives less competitive. The scope for further MEG demand growth in the PET industry in Western Europe is however relatively low, as any future investment in PET is likely to be offset at least partially with more closures of older plants. Overall, Western European MEG demand is forecasted to grow at 0.5 per cent. and 2.4 per cent. per annum over 2016–2020 and 2020–2025, respectively.

Supply, Operating Rates and Trade On a global level, the Middle East represents the major net exporter, while Asia is the major net importer of MEG. Capacity in the Middle East approximately doubled between 2007 and 2010, but has subsequently been stable as the minimal quantities of additional ethylene have generally been earmarked for higher-value derivatives. The focus for capacity development has now moved to Asia, most notably China, where a wave of coal-based capacity is under development. The rapid acceleration of Chinese capacity additions means that Asia should remain the largest producer of MEG globally, and its domestic production development remains the key variable affecting the long-term global supply picture and operating rates. Nevertheless, Asia is forecasted to remain a net importer of MEG in the future in light of the region’s significant domestic consumption needs. Despite the Middle East’s major net export position, Turkey runs a large deficit of MEG and is reliant on imports alongside its sole MEG production capacity at Petkim. Western Europe is also expected to remain a net importer of MEG, as the region is presumed to experience capacity decline due to increased pressure from imports and demand growth for ethylene oxide into higher value applications, while consumption will grow as a result of increased downstream investments. Imports are therefore set to grow significantly.

Propylene Derivatives As mentioned above, propylene is consumed in a vast variety of higher value added chemicals. Set out on the following pages is a description of two key propylene derivative products, the markets for which we are active in and from which we derive a large proportion of our revenues and profitability: polypropylene and acrylonitrile.

Polypropylene Consumption Polypropylene is the world’s second most widely used thermoplastic after polyethylene and is among the fastest growing categories of thermoplastics. It is manufactured by the process of polymerisation whereby individual molecules of propylene are aggregated in polymer chains. The sustained growth of polypropylene-based products reflects the attractive cost and performance profile of this versatile polymer, which continues to displace other polymers, such as polyethylene and polystyrene.

113 Polypropylene is characterised by its rigidity and resistance to high temperatures, which makes it particularly suitable for ‘‘hot fill’’ applications. Polypropylene is the most significant thermoplastic used in moulded containers and automotive applications, while polypropylene fibres are also used in textile and carpets. Similar to polyethylene, demand growth for polypropylene is a function of economic growth. According to Nexant, global demand growth for polypropylene was on average 2.0 percentage points higher than GDP growth over the period 2000–2016. As the polypropylene market matures, performance versus GDP may not be as strong in the future, at least on a global level. Nevertheless, global polypropylene consumption is still expected to exceed GDP performance and is forecasted to grow on average 4.5 per cent. per annum over 2016–2020. Injection moulding applications accounted for 39 per cent. of global demand in 2016, while fibre (29 per cent.), film (19 per cent.) and other extrusion (8 per cent.) represent other significant applications. Extrusion coating, fibre and film applications are expected to have the highest growth rates.

Polypropylene Consumption by Region

Average Annual Growth Actual Estimate Forecast Rate 2016 2017 2018 2019 2020 2025 2000–16 2016–20 2020–25 (in ktons) (%) Western Europe ...... 7,700 7,844 7,908 8,021 8,147 8,800 1.0 1.4 1.6 Middle East ...... 4,554 4,783 5,059 5,378 5,737 6,903 7.7 5.9 3.8 o/w Turkey ...... 2,101 2,194 2,294 2,429 2,580 3,107 8.5 5.3 3.8 Global ...... 65,201 68,502 71,386 74,403 77,740 94,139 4.8 4.5 3.9

Source: Nexant—2017 In the Middle East, polypropylene consumption is expected to grow at 5.9 per cent. annually over 2016–2020. Fibre, mostly used in the production of woven bags and carpets, is the main consumer of polypropylene in the region, accounting for 56 per cent. of regional demand in 2016. Polypropylene has also made in-roads into injection moulding applications for household goods, accounting for 16 per cent. of consumption in 2016, a sector dominated by HDPE. Part of the reason for this substitution is the deterioration of the price differentials between HDPE and polypropylene. Film (18 per cent. of demand) represents another key application for polypropylene, in particular given the region’s strong production base in BOPP films. Turkey is by far the largest consumer of polypropylene in the Middle East, accounting for 46 per cent. of regional demand in 2016. According to Nexant, Turkey’s polypropylene consumption is expected to grow by 5.9 per cent. and 3.8 per cent. per annum over 2016–2020 and 2020–2025, respectively. Fibre production accounts for 70 per cent. of Turkish polypropylene demand, while film and injection moulding together account for around a fifth of consumption. Polypropylene co-polymers are also used where clarity features are required but usually in non-frozen applications due to the poor low temperature performance of the material. Growth in the Turkish automotive sector is further increasing polypropylene consumption due to an increasing volume of car exports. The Western European polypropylene market has improved as regional economies strengthened, consumer spending rose and as propylene supply lengthened. In 2016, injection moulding was the largest end-user segment in the region, accounting for 52 per cent. of demand. Of this segment, the most significant sectors were automotive, rigid packaging and housewares. The fibre and film segments accounted for 21 per cent. and 14 per cent. of consumption, respectively. Fibre showed healthy demand despite competition from other polymers such as nylon into carpet manufacture. Film usage fell with consumer usage and regulatory trends drove a reduction in waste. Other extrusion accounted for 10 per cent. of demand in 2016 and evidenced a recovery as growth in the construction sector supported demand in pipe applications. Overall, Western European polypropylene demand is forecasted to grow at 1.4 per cent. per annum over 2016–2020, according to Nexant.

Supply, Operating Rates and Trade Global capacity in polypropylene has increased rapidly, at an average annual rate of 4.7 per cent. between 2000 and 2016. Demand has grown at a slightly higher rate, resulting in higher global operating rates. Capacity additions over 2016–2025 are expected to increase by 4.0 per cent. per year, a slightly

114 lower rate than global demand growth. The drive for development in polypropylene will support demand growth and operating rates will remain at high levels during the forecast period. In the Middle East, the rate of capacity development in recent years has been high, with notable additions in Saudi Arabia and the UAE. This latest wave of capacity addition has now almost come to a close, with the exception of Iran and Oman. The region has a dominant position in the global market as a net exporter. Saudi Arabia was by far the largest exporter in the region in 2015, while Turkey was the main net importer. Middle Eastern producers have primarily focused on supplying China, but have also established a significant presence in Europe and Turkey. However, as domestic demand is expected to grow strongly, the additional volumes for export may only serve to maintain the trade balance. A wave of new polypropylene capacity projects in China, the major destination for Middle Eastern exports, is likely to deter investment in new polypropylene capacity. In Western Europe, there have been substantial reductions of polypropylene capacity since 2005, with some of the region’s more uncompetitive plants being closed. Western Europe has remained a net exporter of polypropylene over the last years despite capacity closures. Turkey represents the single largest destination for Western European polypropylene exports while significant volumes also flow into Central Europe. The regional polypropylene market will remain steady supported by robust end–use demand. Limited investment in new capacity and feedstock challenges will suppress the export markets, although further capacity closures are unlikely. According to Nexant, Western Europe is forecast to switch to a net import position by 2025 despite the prospect of some investment in new capacity.

Acrylonitrile Consumption Acrylonitrile (‘‘ACN’’) is a propylene derivative and is manufactured from propylene, ammonia and air with the use of a purpose-made special catalyst. ACN is toxic, flammable and, unless chemical stabilisers are added for storage and shipment, explosive. ACN is used for the production of acrylic fibre and polymers such as acrylonitrile butadiene styrene (‘‘ABS’’). It is also used to produce adiponitrile, a precursor in the manufacture of nylon. Further applications of ACN comprise acrylamide, nitrile butadiene rubber and nitrile butadiene latex. Other relatively small applications of ACN include adhesives, corrosion inhibitors, and as a co-monomer with vinyl chloride, vinylidene chloride, vinyl acetate and acrylates in resins for paints and coatings. Acrylic fibre, the second largest acrylonitrile end-use, accounted for approximately 30 per cent. of global acrylonitrile demand in 2016. The acrylic fibre market has suffered severe substitution pressure, principally from lower-priced polyester fibre. Due to its fundamentally higher cost, acrylic fibre was forced out of lower value applications and consumption is now largely restricted to high-end textile uses and technical applications, which require its unique characteristics. Acrylic fibre has unique performance attributes in outdoor applications such as tarpaulins and awnings for caravans and buildings due to its UV and water resistance. In the apparel sector, acrylic fibres are preferred where colourability and breathability are important. In addition, carbon fibre represents a form of acrylic fibre with strong potential for long-term growth. Carbon fibre is produced mainly by processing pure polyacrylonitrile fibre in an oxygen-free atmosphere. While demand has historically been dominated by the aerospace and sporting goods industries, the industrials sector is now also taking advantage of this material in new applications aimed at reducing weight and energy consumption. Carbon fibre is roughly 10 times stronger than steel and is a quarter of the weight, and as such is targeted to replace frame rails and other steel parts. Compared to historically negative growth, the outlook for acrylic fibre will improve modestly during the forecast period, driven by reduced substitution pressure by lower-cost fibres. It is understood that that the acrylic fibre market has bottomed out, following continuous capacity reductions in recent years. The ABS sector is seen as one of the major growth drivers for ACN going forward. ABS is a high-volume engineering polymer which is favoured for its strength, wear resistance and attractive finish. The material has favourable mechanical properties, high gloss, reasonable processability, and unlike polyolefins it has good adhesive properties for printing and decoration. ABS components are widely used in automotive applications, housings for electrical appliances, office equipment, telephones, luggage and various household products. It is also widely used as a co-polymer with polycarbonate for higher-end applications. ABS continues to dominate sectors such as portable electronics and electrical

115 applications. These product groups see the highest growth in populous developing countries and ABS production is accordingly highly concentrated in East Asia. Adiponitrile is the precursor to hexamethylenediamine, the basic raw material for the manufacture of nylon 6.6 (also known as polyamide 6.6). Adiponitrile is commonly produced from ACN, while some manufacturers employ an alternative production route using butadiene as the main feedstock. Production technology for adiponitrile is tightly controlled by a handful of major players. Applications for nylon 6.6 include engineering plastics (e.g. for automotive or electrical equipment), performance fibres (e.g. for functional clothing or automotive), industrial and technical yarns (e.g. for aerospace and marine), as well as textile yarns (e.g. for apparel, carpet and home textile). Acrylamide is seen as the second major growth driver for ACN alongside ABS and has extensive use in enhanced oil recovery, water treatment, textile, papermaking and ore dressing. Nitrile butadiene rubber is a high wear resistance and high resilience rubber primarily used in mechanical goods for the automotive industry, while nitrile butadiene latex is consumed mainly in the manufacture of rubber gloves.

ACN Consumption by Region

Average Annual Growth Actual Estimate Forecast Rate 2016 2017 2018 2019 2020 2025 2000–16 2016–20 2020–25 (in ktons) (%) Western Europe ...... 699 712 726 743 760 857 (2.9) 2.1 2.4 Middle East ...... 360 390 399 413 419 506 3.1 3.9 3.8 o/w Turkey ...... 319 320 322 325 329 345 2.6 0.8 1.0 Global ...... 5,990 6,177 6,367 6,566 6,799 7,654 1.3 3.2 2.4

Source: Nexant—2017 In the Middle East, demand for ACN continues to grow driven by demand from both acrylic fibre and ABS. Turkey’s AKSA is the world’s leading acrylic fibre producer. The large textile and carpet industry in Turkey supports AKSA, making Turkey one of the largest ACN consumers in the world. Along with the acrylic fibre business, AKSA has a joint venture with Dow Chemical, DowAKSA, which was formed in 2012 to manufacture and commercialise carbon fibre and derivatives. The ABS sector in the Middle East has relatively good feedstock integration, while acrylamide for water treatment and enhanced oil recovery chemicals represents another potential growth sector for the region, supported by the large oil and gas industry. The Western European ACN market is expected to grow around two per cent. per year. Western European acrylonitrile consumption is increasingly driven by novel applications such as oilfield, water treatment chemicals (polyacrylamide), and, to a lesser extent, carbon fibre. Acrylamide is likely to continue gaining higher market share of acrylonitrile in the forecast period due to the strong growth potential of water treatment and EOR. Acrylonitrile consumption into acrylic fibre is expected to remain relatively flat, with no further decline.

Supply, Operating Rates and Trade As Asia has developed large-scale fibre and ABS production, it is the largest net importer of ACN in the world, with a significant proportion of Asian imports coming from North America. Aggressive plans for capacity additions have partially reduced import requirements in Asia in recent years. Western European exporters have benefited from the proximity to the Middle East market, which is also a major net importer of ACN given the dominant acrylic fibre capabilities primarily in Turkey. The high capital cost of new acrylonitrile plants supports ongoing operation of export-oriented production in the United States. With more than one ton of propylene consumed per ton of acrylonitrile produced, acrylonitrile competitiveness is sensitive to propylene price differentials between regions. Over the next few years, capacity development is expected to be concentrated entirely in China, with a number of projects under construction, planning or feasibility studies. Turkey’s Petkim is the only ACN producer in the Middle East. Petkim’s ACN production unit is fully integrated upstream with propylene and the outputs are largely supplied to the very large domestic consumer AKSA. Several projects have been proposed in the Middle East over the last few years, in

116 particular Saudi Arabia and Iran, although no projects have progressed. Within the Middle East, Turkey is the largest consumer and importer. Western Europe is the biggest exporter to Turkey, followed by Russia and the United States. Western Europe’s ACN capacity has been stable over the last years and no closures are currently anticipated in the region, according to Nexant. Increased demand and a stable capacity outlook will result in Western Europe becoming balanced before shifting into deficit in the longer term.

Aromatics derivatives Aromatics, together with olefins, are the basic building blocks for the petrochemicals industry. The commercially most important aromatics are benzene, toluene and xylenes. Aromatics are predominantly derived in the petrochemicals industry by extraction from pyrolysis gasoline (a by-product of steam cracker production of ethylene), or in the refining industry by extraction from reformate in the catalytic reforming of naphtha. Other routes to aromatics include extraction from coke oven gas condensates or catalytic cyclisation and dehydrogenation of LPG. The yield of pyrolysis gasoline is determined by feedstock composition and operating conditions. All feedstocks for steam cracking produce benzene. Heavier feedstocks (such as naphtha and gas oil) produce a greater proportion of toluene and xylenes, the heavier aromatics, per unit of benzene output while steam crackers using lighter feedstock (such as ethane and LPG) produce a significantly higher proportion of benzene. Benzene is the most common and diverse of the aromatics, finding use in materials such as styrene, cumene, cyclohexane, nitrobenzene, linear alkyl benzene, amongst others. Toluene is mostly used in the production of toluene di-isocyanate, an intermediate in the manufacture of flexible polyurethane. Xylenes are existent as three isomers, para-xylene, ortho-xylene and meta-xylene, which reflect the different position of the alkyl groups around the ring structure. Almost all para-xylene is consumed in the production of purified terephthalic acid, the key precursor to PET alongside MEG. Ortho-xylene is mainly consumed in the production of phthalic anhydride, the main raw material for plasticisers and unsaturated polyester resins. Meta-xylene is oxidised to produce isophthalic acid, which is used in small quantities as a co-monomer with purified terephthalic acid to enhance clarity of PET packaging resins, and is also used as a substitute for phthalic anhydride in specialty unsaturated polyester resins. Para-xylene is the most commercially important xylene isomer, given the strong global growth in PET. We at Petkim derive aromatics by extraction from pyrolysis gasoline which is produced during the steam cracking of naphtha. This allows us to extract optimal economics on top of our olefins-based production. Our benzene, toluene, para-xylene and ortho-xylene are sold on directly to external parties (mostly as exports), while we retain some para-xylene and ortho-xylene for the production of purified terephthalic acid and phthalic anhydride, our aromatics derivatives. Set forth on the following pages is a description of our main aromatics derivative—purified terephthalic acid.

Purified Terephthalic Acid Consumption Purified terephthalic acid (‘‘PTA’’) is a white powder or crystal produced by catalytic liquid phase oxidation of para-xylene in acetic acid in the presence of air, whereby cobalt or cobalt acetate serve as catalysts. Alongside MEG, PTA is the key building block in the production of PET. By polymerising PTA and MEG in a melt phase reaction, raw PET polymer is created which is the basis of all PET derivatives. Transporting PTA is more expensive than its precursor para-xylene, which favours the production of PTA close to its customers. Global consumption of PTA is almost entirely driven by the production of PET resins, fibres and film, representing 98 per cent. of global PTA demand in 2016. The remainder is utilised in the production of polybutylene terephthalate, co-polyester-ether elastomers, plasticisers and liquid crystal polymers. The PTA market has grown both through expansion of the PET industry and through substitution of dimethyl terephthalate (‘‘DMT’’), its predecessor in the production of PET, as PTA avoids the cost of methanol and has a lower energy requirement for polymerisation. To date, DMT has largely been replaced by PTA so that substitution no longer presents a significant growth driver going forward. Asia represents the vast majority of global PTA consumption, which is mainly driven by the fibre industry serving the populous local regions as well as global export markets. Over the period 2000–2016, global PTA consumption has grown by 6.6 per cent. per annum on average mainly driven by growth in Asia, the

117 Middle East and Central Europe. According to Nexant, global PTA consumption is expected to have an annual average growth rate of 5.3 per cent. over 2016–2020. Due to the increasing use of recycled PET (‘‘RPET’’) demand growth for PTA is expected to be slightly lower than growth in underlying PET consumption.

PTA Consumption by Region

Average Annual Growth Actual Estimate Forecast Rate 2016 2017 2018 2019 2020 2025 2000–16 2016–20 2020–25 (in ktons) (%) Western Europe ...... 2,330 2,212 2,207 2,423 2,406 2,880 1.3 0.8 3.7 Middle East ...... 1,894 2,316 2,367 2,519 2,498 2,993 10.2 7.2 3.7 o/w Turkey ...... 476 588 604 624 622 909 3.8 6.9 7.9 Global ...... 58,435 61,605 65,791 68,645 71,836 84,425 6.6 5.3 3.3

Source: Nexant—2017 In the Middle East, PTA demand is concentrated among the large PET resin producers in Turkey, Iran and Oman. Although there is significant fibre production in Turkey, much of this is integrated with DMT-based polymer due to legacy assets. According to Nexant, Turkish PTA consumption growth is forecasted at 6.9 per cent. and 7.9 per cent. per annum over 2016–2020 and 2020–2025, respectively. Western Europe has seen an increase in PTA demand in both PET bottles and fibres as a result of declining oil prices making virgin PET products more cost competitive than RPET, for which the cost structure is more fixed cost dependent. Going forward, PTA demand is expected to be stable but could be undermined by price competitive PET imports, such as those from Turkey, as the country has access to cheaper PTA from Asia which Western European producers do not as a result of anti-dumping duties imposed by the European Commission. According to Nexant, regional PTA consumption has grown by 1.3 per cent. annually over 2000–2016 and is expected to grow by 0.8 per cent. per annum over 2016–2020.

Supply, Operating Rates and Trade The global PTA supply base has expanded significantly in recent years, causing major distortions in patterns of business. China has been the focus of recent developments, tripling capacity over the last five years, and making capacity additions between 2010 and 2015 of 60 per cent. of the global capacity base in 2010. The development proved unsustainable in China however, and two of the major new producers went bankrupt and ceased production in 2015. Apart from China, PTA capacity closures have occurred across the world in North America, Western Europe, Japan, South Korea, Taiwan and Indonesia. Global supply growth was constrained for many years by the availability of competitive technology. The arrival of ‘‘mega-PTA technology’’ has however contributed to significant capacity expansions, mainly driven by consumers which have built PTA capacity to support the competitiveness of their downstream PET activities. Overall, Asia is expected to remain the major net exporter of PTA alongside North America. The Middle East region is a net importer of PTA with most of its imports coming from China and South Korea. Oman, Turkey and the UAE represent the main importers, and imports into Turkey have increased sharply given the considerable increase in domestic PET capacity in recent years. Middle Eastern PTA supply is dominated by state-owned petrochemical companies in Iran, Saudi Arabia and Turkey with plants that to a large extent are integrated with para-xylene feedstock. In Turkey, PTA is sold in the merchant market, while in Iran and Saudi Arabia PTA producers consume a large portion of their output captively. According to Nexant, capacity in the Middle East is expected to increase in the long-term given the region’s forecasted growth in para-xylene exports and increasing import requirements for PTA. The global market is so seriously oversupplied however that PTA imports are available at levels which make new PTA investments difficult to justify in the near term. Western Europe has established a major import position for PTA, with South Korea as the major supplier having forced older plants in the region to close. Depending on anti-dumping regulations the relatively cheap South Korean imports might drop sharply and support operating rates for local PTA producers.

118 DIRECTORS, SENIOR MANAGEMENT AND CORPORATE GOVERNANCE Board of Directors Under the Turkish Commercial Code and the Articles of Association, the Board is responsible for representing and administering the Issuer. The Articles of Association require that the Board consist of nine members. There are three independent members on the Board. All of the Issuer’s Board Members are non-executive members. Legislation, articles of association, and the CMB’s Corporate Governance Principles set out in the Corporate Governance Communique´ (II-17.1) of the CMB enforced upon its publication in the Official Gazette numbered 28871 dated 3 January 2014 apply to the determination, nomination, election, dismissal and/or resignation of members, as well as the qualifications and the required number of independent members. Each director is elected for a maximum term of three years. The quorum of the Board is five members. Resolutions of the Board may be adopted by the affirmative vote of five members, with certain resolutions also requiring the affirmative vote of the independent director appointed by the Turkish Privatisation Administration. The Board convened 52 times in 2016. The agenda of the Board of Directors’ meeting is determined by the Chairman. The table below sets forth the current members of the Board:

Name Position Age Nominated by Vagif Aliyev ...... Chairman of the Board 58 SOCAR Turkey Petrokimya David Mammadov ...... Vice Chairman of the Board 62 SOCAR Turkey Petrokimya Mehmet Bostan ...... Board Member 46 Turkish Privatisation Administration Farrukh Gasimov ...... Board Member 58 SOCAR Turkey Petrokimya Ertugrul˘ Altın ...... Board Member 50 SOCAR Turkey Petrokimya Ilhami Oz¸¨ sahin ...... Board Member 67 SOCAR Turkey Petrokimya Suleyman¨ Gasimov ..... Board Member 56 SOCAR Turkey Petrokimya Mehmet Ceylan ...... Board Member 59 SOCAR Turkey Petrokimya(1) Tevfik Bilgin ...... Board Member 50 SOCAR Turkey Petrokimya

Note: (1) Mehmet Ceylan was nominated to the Board through a resolution of the Board due to the resignation of Emin Birpınar, who was nominated by SOCAR Turkey Petrokimya. Mr. Ceylan’s election was subsequently approved during the meeting of the general assembly on 6 September 2016. The business address of each member of the Board is Siteler Mh. Necmettin Giritlioglu˘ Cd. No:6 Aliaga˘ 35800 Izmir, Turkey. Vagif Aliyev graduated from Azerbaijan Civil Engineering Institute’s Hydraulic Engineering program in 1981. He began his career at the Caspian Sea Oil & Gas Production Union’s Azer Sea Oil Construction Trust and was promoted from engineer to senior engineer and subsequently to section manager. Since 2005, he has been the Head of Investments at the SOCAR Group. Mr. Aliyev has served as a member of the Board since 2008 and in October 2009, he was named Chairman. David Mammadov graduated from the M. Azizbeyov Petroleum and Chemicals Institute, Azerbaijan, in 1980 with a Chemical Engineering degree. He began his career in 1976 as an Operator at the Baku Oil Refinery. Since 2005, he has served as Vice President in charge of refineries at the SOCAR Group. Mr. Mammadov has been a member of the Board since 2008. Mehmet Bostan graduated from Istanbul University, Faculty of Economics with a degree in international relations, and received his MBA from Istanbul Bilgi University. He began his career in 1995 and worked as a Corporate Banking Officer at Denizbank, Marketing Manager at BNP Ak Dresdner Bank, Manager at Turkiye¨ Sınai Kalkınma Bankası, and lastly, as Chief Representative of Turkey Operations at Dresdner Bank AG. Mr. Bostan became Assistant General Manager of Finance at Gune¸¨ s Sigorta in 2009. He then served as General Manager of Vakıf Emeklilik for six years. He was appointed by the CMB as an independent board member of Turkcell on 15 August 2013. He was was General Manager and Chairman of the Board of Turkiye¨ Wealth Fund Management Co. between November 2016 and September 2017. Mr. Bostan has been a member of the Board since 2016. Farrukh Gasimov graduated with a law degree from Baku State University in 1981 and earned his Ph.D. from Moscow Public Studies and Law Institute in 1985. From 1985 to 1991, he served as a Lecturer and Associate Professor at the Baku Public Administration and Politics University. Since 2006, he has been

119 Deputy Head of the Legal Department at the SOCAR Group. He has been a member of the Board since 2008. Ertugrul˘ Altın graduated from Yıldız University with a degree in mechanical engineering. He successfully completed the Management Certification Program at Marmara Contemporary Management Techniques Foundation and the University of Maine, and also attended a graduate programme at the European Community Institute at Marmara University. He started his career in 1990 in his family business. He worked as an engineer, specialist, supervisor, manager and lastly, as district manager at ˙IGDA¸S (˙Istanbul Gas Distribution Co.) between 1996 and 2004, and as General Manager of Bursagaz, a company in the Calık¸ Group, from 2004 to 2008. He worked as a freelance consultant from 2008 to 2009 and published a book titled Dort¨ Yılda Kalite Od¨ ul¨ une—Bir¨ Ornek¨ Olay (A Case Study: A Quality Award in Just Four Years). He served as General Manager of Trakya Gaz and Gazda¸s, companies in the Zorlu Group, from 2009 to 2011 and General Manager of TANAP from 2011 to 2013. As General Manager, he was involved in the negotiation process on behalf of STEA¸S. He was a member of the Technical Contract Committee at TANAP on behalf of the SOCAR Group from 2014 to 2015. He has been serving as an adviser to the Minister at the Ministry of Energy and Natural Resources since November 2015. Mr. Altın has been a member of the Board since 2016. Ilhami Oz¸¨ sahin graduated with a degree in Electric Engineering from Istanbul State Architecture Engineering Faculty. In 1976, Mr. Oz¸¨ sahin started his professional career at TEK as a System Operating Engineer, and in 1995 he was appointed as the TEA¸S Load Dispatching Department Chair. In 2000, he was appointed as Counselor in the General Management of TEA¸S. From 1995 to 2000, he also served as Chair of the TEA¸S Environmental Department and Scientific Inspection and Efficiency Department. From 2002 to 2003, he served as Energy Specialist at EMRA, and in March 2003 he was appointed as General Manager and Board Chair of Turkiye¨ Elektrik ˙Iletim A.¸S., retiring in 2009. Over the course of his career, he attended various domestic and overseas short-term education programmes and received long-term educational training related to energy planning and coordination in Japan, and completed Energy Management studies in England. Mr. Oz¸¨ sahin still works as an independent consultant. Mr. Oz¸¨ sahin has been a member of the Board since 2012. Suleyman¨ Gasimov graduated from the Azerbaijan National Economic Institute (now Azerbaijan State Economic University) in 1982 and from the Academy of Public Administration under the President of the Republic of Azerbaijan in 2003. He worked in various positions, including accountant, economist, deputy chief accountant and chief accountant, in the oil and gas industry from 1982 to 1991. Between 1991 and 2003, he was a chief accountant at the Khazardenizneftgas (Caspian Sea Oil and Gas) Production Unit of Azerineft (Azeri Oil) Oil and Gas Production Department, Offshore Oil and Gas Production Unit. From 2004 to 2006, he was Chief of the Division of Economics and Accounting Department of the SOCAR Group, Deputy Chief of the Department and Chief of the Department. In 2006, Mr. Gasimov became Vice President responsible for economic issues. In 2006, he was presented with the Taraggi (Progress) Medal and in 2011, the Shohrat (Glory) Order. He has a Ph.D. in Economics and is the author of one scientific work and more than 15 scientific articles and is a member of the New Azerbaijan Party. Mr. Gasimov has been a member of the Board since 2012. Tevfik Bilgin graduated from the Middle East Technical University, Faculty of Economics and Administrative Sciences with a degree in public administration. He received his MBA from the University of Iowa, United States. He worked as a Sworn Bank Auditor at the Prime Ministry Undersecretariat of Treasury from 1992 to 2001, and as Assistant Financial Coordinator responsible for Financial Institutions at Anadolu Endustri¨ Holding from 2001 to 2003. He became General Manager of Halkbank in 2003, and served as the Chairman of the Savings Deposit Insurance Fund (SDIF) in 2003 and 2004. He held the position of the Chairman of the Banking Regulation and Supervision Agency (BRSA) from 2003 to 2012. Mr. Bilgin has served as the Chairman of the Board of Nuh Cimento¸ San. A.¸S. since 2013. Mr. Bilgin has been a member of the Board since 2016. Mehmet Ceylan graduated with a degree in mechanical engineering from Konya State Engineering Architectural Academy (now Sel¸cuk University) at the top of his class in 1979 and received a master’s degree in the same field from Istanbul State Engineering and Architectural Academy (now Yıldız Technical University). He worked as an assistant and member of faculty of Zonguldak Karaelmas University from 1981 to 1985, and then graduated from the Middle East Technical University, School of Foreign Languages where he pursued his academic studies as a research associate. He transferred to the State Planning Organisation as an assistant specialist in 1986, where he was appointed planning specialist in 1991. After successfully completing his second master’s degree in economics at Western

120 Illinois University, United States in 1991, he returned to his position at the State Planning Organisation. He embarked upon a political career with the local elections held on 18 April 1999. He served as Mayor of Safranbolu for one term. He was elected as a Member of Parliament for the constituency of Karabuk¨ twice in the general elections held on 3 November 2002 and 22 July 2007. As an Member of Parliament, he served as a Member of the Planning and Budgeting Commission and the EU Harmonisation Commission and as Vice President of the Turkey-EU Joint Parliamentary Commission during the 22nd term. During the 23rd term of the Parliament, he acted as Deputy President of the Foreign Affairs Commission and as a member of the NATO Parliamentary Assembly as a member of the parliament. For eight years, he presided over the Turkey-Saudi Arabia Friendship Group, which he founded. After his term as a Member of Parliament ended, he served as Deputy Minister of Development from September 2011 until September 2015. On 2 January 2016, he was appointed Deputy Minister of Environment and Urbanisation, in which post he still serves. Mr. Ceylan has been a member of the Board since 2016.

Committees Under the Articles of Association, the Board is responsible for the establishment of committees required by the Turkish Commercial Code and the CMB regulations. The Audit Committee, Corporate Governance Committee and Early Detection of Risk Committee were established in order to enable the Board to carry out its duties and responsibilities in an appropriate manner. The chairman of each committee is an independent member of the Board.

Audit Committee The Audit Committee consists of two independent Board members. The Audit Committee is responsible for ensuring the overall soundness of financial and operational activities, specifically transparency of internal and independent auditing activities, efficiency of internal control systems, analysis and election of the independent auditing firm and compliance of financial statements with international accounting standards and prevailing legislation. The members of the Audit Committee are Mehmet Ceylan (Chairman) and Tevfik Bilgin.

Corporate Governance Committee The Corporate Governance Committee’s main responsibilities include the supervision of compliance with the CMB’s Corporate Governance Principles and the activities of its investor relations and capital markets departments, making recommendations to the Board regarding sound corporate governance, the periodical review of the committee’s charter and the preparation of the annual corporate governance principles compliance report. The Corporate Governance Committee also carries out the duties of the Nomination Committee and the Remuneration Committee. The members of the Corporate Governance Committee include Tevfik Bilgin (Chairman), Vagif Aliyev (Member), Farrukh Gasimov (Member) and Mustafa Ca¸ gatay˘ (Member).

Early Detection of Risk Committee The Early Detection of Risk Committee makes proposals and suggestions to the Board regarding early detection and assessment of strategic, financial, operational and similar risks that might affect the Issuer, including calculation of their impact and probability, management and reporting of these risks, implementation of necessary measures in relation to identified risks, their consideration in decision- making mechanisms and creation and integration of efficient internal control systems. The members of the Early Detection of Risk Committee are Mehmet Bostan (Chairman), Vagif Aliyev (Member) and Suleyman¨ Gasimov (Member).

Remuneration Committee In lieu of a Remuneration Committee, the Corporate Governance Committee is responsible for the evaluation of the performance of the members of the Board, determination of the remuneration policy of the Issuer and its periodic review, submission of proposals to the Board in relation to the remuneration of the members of the Board and executive management.

121 Nomination Committee In lieu of a Nomination Committee, the Corporate Governance Committee is responsible for the establishment of a transparent system to designate and evaluate appropriate nominees to the Board, evaluating the structure of the Board and its efficiency on a periodic basis, obtaining views of shareholders on the nominees, reviewing the principles regarding appointment and promotion of senior management on a periodic basis, and evaluating the independence of the nominated independent Board members.

Conflict of Interests There is no actual or potential conflict of interests between the duties of any of the members of the Board of Directors or the executive management and their respective private interests or other duties.

Management The members of executive management are responsible for the day-to-day management of the Issuer in accordance with the instructions, policies and guidelines set by the applicable Board of Directors. Pursuant to the Articles of Association, the Board may delegate some of its powers to such persons. The table below sets forth the key members of the executive management team.

Name Position Age Anar Mammadov ...... General Manager 46 Riza Bozoklar ...... Assistant General Manager (Finance) 48 Nihat Gurb¨ uz...... ¨ Assistant General Manager (Operations) 65 Bilal Guliyev ...... Assistant General Manager (Projects and Maintenance) 40 Kanan Mirzayev ...... Assistant General Manager (Strategy and Business Development) 30 Khalig Mustafayev ...... Assistant General Manager (Business Support) 46 Oguzhan Ipek ...... Assistant General Manager (Supply Chain) 48 Levent Kocagul...... ¨ Assistant General Manager (Human Resources) 39 Agshin Salimov ...... Assistant General Manager (Sales and Marketing) 28 Anar Mammadov is the General Manager of the Issuer. Mr. Mammadov graduated from Azerbaijan Medical University and the Faculty of Law of Baku State University. He received his Ph.D. from the College of Petroleum Studies in the United Kingdom, where he focused on oil supply, logistics, and trading. He received his MBA from TRIUM Global Executive. From 1995 to 1998, Mr. Mammadov managed Avista Company, a company which he founded. From 1998 to 2007, he worked at Milio International as Regional Director and from 2007 to 2009, he worked as CEO of Arxiel Carbonexis. From 2009 to 2014, Mr. Mammadov served as the CEO of SOCAR Georgia. He became CEO of SOCAR Greece from 2014 to 2016. In July 2016, Mr. Mammadov was appointed General Manager of Petkim. Riza Bozoklar is an Assistant General Manager of Finance of the Issuer. Mr. Bozoklar earned a degree from Bosphorus University Industrial Engineering Department and an MBA at Bilgi University. He has completed the Paris Essec University Delphi Management Programme and is currently pursuing his PhD in Financial Economics at Dogu¸˘ s University. He has 21 years of experience in the industrial field and has spent over 5 years working in Italy and France. He has served in the past as CFO for the Group Companies of Fiat and Ata Holding, Delphi Automotive and Cimko¸ A.¸S. Nihat Gurb¨ uz¨ is the Assistant General Manager of Operations of the Issuer. Mr. Gurb¨ uz¨ graduated from Ankara University Faculty of Chemical Engineering in 1975. He first began working as Project, Planning, and Operations Engineer at Sumerbank’s¨ chemical and textile plants and in 1983, he began working at Petkim Aliaga˘ Petrochemical Complex as a Production Engineer. Since beginning at Petkim, he has served as Engineer, Chief Engineer, Assistant Manager, and Manager of Production at the VCM, PP and Ethylene plants. From 2004 onwards, Mr. Gurb¨ uz¨ has acted as Department Head and later, Production Group Manager, before being appointed as Assistant General Manager for Operations in 2011. Bilal Guliyev is an Assistant General Manager of Projects and Maintenance of the Issuer. Mr. Guliyev graduated from Nakhchivan State University with a degree in chemistry in 1998 and received his master’s degree from Ankara University Institute of Sciences in 2002. He then received his Ph.D. in 2007 from the Institute of Petrochemical Processes at Azerbaijan Academy of Sciences. He completed a Project Management Certification Program at George Washington University in 2013. Mr. Guliyev has a 15 years’ experience in the areas of petro-chemistry, downstream projects development and

122 management. He worked as an engineer and then as chief engineer in the Refinery-Petrochemicals Strategic Development Department at SOCAR Azerbaijan between 2007 and 2011, as process manager and project coordinator at the STAR Refinery between 2011 and 2014, and as Investment Manager of Petrochemicals Projects at STEA¸S between 2014 and 2016. He served as Project Execution Coordinator at SOCAR Turkiye¨ A.¸S. from May 2016 to August 2016. Appointed as Assistant General Manager of Projects and Maintenance on 4 August 2016, Mr. Guliyev has more than 10 published academic articles and owns patents in Europe and the United States. Kanan Mirzayev is an Assistant General Manager of Strategy and Business Development of the Issuer. Born in 1987 in Azerbaijan, Kanan Mirzayev graduated from the Department of Finance at Azerbaijan State University of Economics and then received his master’s degree in industrial enterprise management from the Aston University in the United Kingdom. He also holds an Executive Diploma in Management from the Chartered Management Institute in the United Kingdom. He was an Operator and HSE Consultant at Azfen-Tekfen Consortium from August 2004 to August 2007 and HSE Engineer at SOCAR Rodan LLC from August 2008 to March 2009. He worked in the Finance Department at Interenergy LLC from May 2009 to November 2009, and then as a Quality Control Supervisor at Azeri Fugro JV from October 2009 to March 2010. He was an HSE Supervisor for the Baku Wind Energy Project at Gamesa between March 2010 and October 2011, Business Analyst in the Investment Department of the SOCAR Group between October 2011 and June 2012, and Senior Business Analyst and Deputy CEO at SOCAR Energy Greece between June 2014 and October 2016. He was appointed as Assistant General Manager of Strategy and Business Development at Petkim in October 2016. Khalig Mustafayev is an Assistant General Manager of Business Support of the Issuer. Mr. Mustafayev graduated from Baku State University, earning a degree in history in 1993 and in law in 2001. He earned a degree in economics and management from Azerbaijan State Oil Academy in 2007. From 1993 to 2005, he was responsible for protecting the public order in various units of the T.R. Ministry of the Interior. He then worked as Ata Holding Security and Surveillance Department Manager, SOCAR Security Department Internal Affairs Branch Manager from 2006 to 2010 and as Assistant General Manager of Personnel, Regime, and Information Technology at SOCAR Azerikimya from 2010 to 2016. He was appointed as Assistant General Manager of Business Support at Petkim in November 2016. Oguzhan˘ Ipek is an Assistant General Manager of Supply Chain of the Issuer. Mr. Ipek has completed a degree from the Middle East Technical University Engineering Faculty. He has 22 years of experience and has worked in Denmark, Switzerland and Hong Kong. He has experience working in the procurement and supply chain departments of such multinational companies as Danone, Perfetti and Carlsberg, in positions including global and regional vice president. Mr Ipek joined Petkim in March 2017. Levent Kocagul¨ is an Assistant General Manager of Human Resources of the Issuer. Mr. Kocagul¨ graduated from Dokuz Eylul¨ University with a degree in business administration in 2000. He worked as Human Resources Services Manager at Japan Tobacco International (JTI) from November 2001 to September 2007, and Human Resources Shared Services Manager at Coca-Cola ˙I¸cecek (CC˙I) from October 2007 to March 2016. He joined Petkim in May 2016 as Organisational Development Manager and became Assistant General Manager of Human Resources in November 2016. Agshin Salimov is an Assistant General Manager of Sales and Marketing of the Issuer. Mr. Salimov graduated from the Department of Political Science and Public Administration at the Middle East Technical University. He worked in international trade and energy companies in Azerbaijan, Switzerland and the United Kingdom as an Operations Specialist, Commerce Officer, Senior Commerce Officer and Head of Commerce. He was appointed Assistant General Manager of Sales and Marketing at Petkim in November 2016.

Corporate Governance The Issuer complies with all of the mandatory provisions, and makes the utmost effort to comply with the voluntary provisions, of the CMB’s Corporate Governance Principles. The Issuer updates its annual report and web site in compliance with the Principles and for the use of its stakeholders. Stakeholders can access detailed information via the corporate web site or direct their inquiries to the Investor Relations Coordinator.

123 CERTAIN REGULATORY MATTERS Regulatory Institutions Our petrochemicals production and refinery activities are primarily governed by the Ministry of Environment, which is responsible for the regulation of petrochemicals, and EMRA, which is responsible for the regulation and supervision of the energy markets, including the electricity, petroleum, natural gas and liquefied petroleum gas markets. The Ministry of Energy and Natural Resources is ultimately responsible for the preparation and implementation of energy policies, plans and programmes. Publicly listed companies in Turkey are subject to regulatory obligations promulgated by the CMB regarding major corporate governance and operational issues, including the structure of the board of directors, handling of material transactions such as major asset purchases or divestitures, related party transactions, dividend distributions, reorganisations such as mergers and acquisitions, and disclosure obligations. Therefore, we are also supervised by the CMB as a listed company. Petkim’s port operations are primarily governed by the General Directorate of Sea and Inland Waters.

Specific Regulations on Petrochemicals The use, manufacture and importation of chemicals are highly regulated in Turkey by the Regulation on Registration, Evaluation, Authorisation and Restriction of Chemicals (‘‘Turkish REACH’’) which was recently introduced as part of the ongoing harmonisation process of Turkish legislation with that of the European Union, and was intended to implement a substantial portion of Regulation (EC) No 1907/2006 of the European Parliament and of the Council concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (‘‘REACH’’). Turkish REACH entered into force on 23 December 2017. However, certain of its provisions enter into force at different times, allowing a transition period for the manufacturers and importers. The use, manufacture and importation of chemicals were previously regulated by the Regulation on Inventory and Control of Chemicals, Regulation on Safety Data Sheets regarding the Hazardous Substances and Mixtures, and Regulation on Restriction and Prohibition of Hazardous Substances and Mixtures (the ‘‘Chemicals Regulations’’). Turkish REACH replaced the Chemicals Regulation except for the Regulation on Inventory and Control of Chemicals which will be replaced by the Turkish REACH on 31 December 2023. Under Turkish REACH, any person who manufactures or imports a substance either on its own or in mixtures (including substances in articles) in quantities exceeding or equal to one ton per year is required to apply to the Ministry of Environment for registration via the chemicals registry system. The chemicals registry system is an online registration system which can be accessed through the official website of the Ministry of Environment. Furthermore, in line with REACH, Turkish REACH introduced a ‘‘no data no market’’ rule which will enter into force on 31 December 2023 and will require that no substances on their own, in mixtures or in articles be manufactured or placed on the market unless they have been registered with the Ministry of Environment. Registration provisions require manufacturers and importers to generate data on the substances they manufacture or import, to use these data to assess the risks related to these substances and to develop and recommend appropriate risk management measures. Accordingly, registration application shall be comprised of (i) a technical dossier which must include work summaries providing detailed information as per tonnage thresholds; and (ii) a chemical safety report which must document the chemical safety assessment prepared for all substances subject to registration in quantities of 10 tonnes or more per year per registrant, and which shall include exposure assessment and risk characterisation for substances and mixtures categorised as hazardous. Additionally, for chemical substances which are classified as hazardous, a detailed chemical safety data sheet is required. Suppliers of such chemicals substances or mixtures are required to deliver a safety data sheet prepared by the chemical evaluation expert to the buyer. The provisions of Turkish REACH regarding safety data sheets are intended to replace the Regulation on Safety Data Sheets regarding the Hazardous Substances and Mixtures, which shall be abolished on 31 December 2023. In order to allow a transition period for the importers and manufacturers, until 31 December 2023, such data sheets may be prepared either in accordance with the Turkish REACH or in accordance with the Regulation on Safety Data Sheets regarding the Hazardous Substances and Mixtures and as from 31 December 2023 solely in accordance with Turkish REACH. The Ministry of Environment shall undertake a completeness check of each registration within three weeks of the application date. Accordingly, a registrant may commence or continue the manufacture or

124 import of a substance or production or import of an article if there is no indication to the contrary from the Ministry of Environment within the three weeks after the application date. As from 31 December 2023, manufacturers and importers of particularly hazardous substances to be listed will require specific authorisation in addition to the registration requirement. The list of substances on this ‘‘authorisation list’’ will be regularly reviewed and new substances can be added to the list. See ‘‘Risk Factors—Risks Related to Our Industry and Business—Our operations are subject to environmental and other laws and regulations, including those related to greenhouse gases’’. The manufacture, use and placing on the market of certain hazardous substances listed in Annex 17 of Turkish REACH are restricted. Turkish REACH expanded the scope of the hazardous substances restricted under Annex 17. Furthermore, the Ministry of Environment and the Ministry of Health may adopt new restrictions or amend current restrictions in Annex 17. The carriage of dangerous substances is regulated under a special regime which differs according to the means of transportation (i.e. road, railway, sea). The suitability of the vehicles for carriage of dangerous substances, transportation conditions, and loading and unloading specifications are regulated by the following: (i) Regulation on the Carriage of Dangerous Goods by Road, (ii) Regulation on the Carriage of Dangerous Goods by Rail and (iii) Regulation on the Carriage of Dangerous Goods by Sea.

Classification, Labelling and Packaging of Substances and Mixtures The Regulation on Classification, Labelling and Packaging of Substances and Mixtures (‘‘CLP Regulation’’) entered into force on 11 December 2013, replacing the preceding regulation. The Regulation has been put in place as part of the ongoing harmonisation process of Turkish legislation with the European Union with the intention of implementing Regulation (EC) No 1272/2008 of the European Parliament and of the Council on the Classification, Labelling and Packaging of Substances and Mixtures. Manufacturers and importers are obliged to ensure that their substances are classified in accordance with the CLP Regulation and suppliers are obliged to ensure that such classified substances are labelled and packaged in accordance with the CLP Regulation before they are placed on the market. Manufacturers and importers are also required to take all reasonable steps to keep themselves up to date with any new scientific or technical information that may affect the classification of the substance and, when aware of such new information, make a new evaluation of the classification and labelling of the substance.

Food Contact Controls Our facilities in Turkey produce substances which may come into contact with food. The materials and articles that come into contact with food are mainly regulated by the Law No. 5996 and the Regulation on Materials and Articles That Come into Contact with Food (‘‘Food Contact Regulation’’). The Food Contact Regulation seeks to ensure the protection of human health and the interest of consumers regarding materials and articles intended to come into contact with food, either directly or indirectly. The Food Contact Regulation requires materials and articles to be manufactured in accordance with good manufacturing practice. The materials and articles must not transfer substances to the food with which they are in contact, in quantities likely to endanger human health or which could produce an unacceptable change in the composition of the food or deterioration in certain characteristics of the food. If active or intelligent materials and articles intentionally change the composition or certain characteristics of food, they must comply with provisions in the Regulation on Food Additive and other related food legislation. For certain materials and articles listed in the Food Contact Regulation, the Ministry of Food, Agriculture and Livestock may also adopt specific measures. Annexes to the Food Contact Regulation list specific measures. There are also specific regulations which set forth specific measures for certain groups of materials and articles, such as the Regulation No. 2013/34 on plastic materials and articles that come into contact with food. Materials and articles must be labelled appropriately as per Article 5 of the Food Contact Regulation and the traceability of a material or article (and, where appropriate, the substances used in their manufacture) must be in accordance with Article 8 of the Food Contact Regulation at all times.

125 Petroleum Market Regulations The Petroleum Market Law regulates our petroleum processing activities. We hold (i) a petroleum processing license (valid until 6 October 2035) granting us the right to produce new products from petroleum and other chemicals and alteration of the quality or quantity of products except for the production of lube oil, and (ii) an eligible consumer license (valid until 28 August 2018 and renewable every year thereafter) entitling us to procure petroleum products from licensed distribution companies and licensed dealers. Pursuant to the Petroleum Market Law, companies are required to obtain licenses from EMRA to perform petroleum market activities. There are several types of licenses which should be obtained by companies in accordance with their intended market activities (e.g. refining license, distribution license and transmission license). Licenses are granted for a maximum period of 49 years depending on the license type, for example, our license for petroleum processing has a term of 30 years. Petroleum market licenses can be renewed upon their expiry, provided that the licensing requirements are met, such as maintaining the minimum capital set out in the regulation and technical ability to conduct the relevant business.

Electricity Market Regulations We use our own facilities for the energy supply of our core business, and utilise electricity produced in our own electricity generation facilities. As per the Electricity Market Law and the applicable secondary legislation, a generation license is required for the operation of electricity generation facilities. We hold two electricity generation licenses for: (i) our co-generation thermal power plant with capacity of 222.04 MW, valid until 24 April 2052 and (ii) our wind energy power plant with capacity of 25 MW, valid until 1 February 2060. Non-compliance by a license holder with the applicable energy market regulations would result in administrative fines and/or suspension or cancellation of the license. If the licenses for petroleum processing granted by the EMRA are suspended or cancelled, it would cause the discontinuation of our operations. On the other hand, the suspension or cancellation of electricity generation licenses would only harm us financially depending on the market prices for the purchase of electricity from third party suppliers in the alternative. If electricity generation from our own generation facilities is disrupted, we would utilise electricity from the electricity market as per the market participation agreements executed with the market operator, EP˙IA¸S, where the electricity prices are freely determined in the market. Therefore, procuring energy from the market may cost higher than using our own electricity generation facilities. Furthermore, there can be no assurance that we will be able to access the Turkish national electricity grid or any other back-up electricity sources in a timely or cost-effective manner in either of these scenarios. See ‘‘Risk Factors—Risks Related to Our Industry and Business—Any disruption in our supply of raw materials or access to electricity may have negative consequences for our supply and production chain’’.

Regulations Concerning the Port Business We hold 70 per cent. of Petlim’s shares, a subsidiary of Petkim involved in holding a port in Aliaga,˘ ˙Izmir, Turkey, that is operated by APM Terminals for a 28-year period with a four-year option under a Port Operation Agreement. The operation of ports is a highly-regulated sector in Turkey and therefore subject to various laws and regulations including, but not limited to, Ports Law, Coastal Law, and specific regulations on operation licenses, operation and security of ports. Pursuant to the Regulation on Principles and Procedures of Granting Operation Permit to Shore Facilities, every port must obtain an operation permit to operate the facilities on ports. The Undersecretariat of Maritime Affairs issues such operation permit for a maximum of five years and conducts an audit at the end of the permit term upon the renewal application of the port operator. If it is determined that the operator is in compliance with the obligations set out by the relevant legislation, the permit will be renewed. Within the scope of our port operation business, we are also obliged to comply with the Ports Regulation which regulates the charging and discharging requirements, security measures, pilotage and towage services.

Environment, Health and Safety Regulations Our manufacturing sites in Turkey are subject to significant regulations regarding the operation of chemical plants. They range from waste prevention and control, fire safety, protection against explosive

126 hazards, storage, transport and use of hazardous substances, air emissions, wastewater management, environmental liability, and integrated environmental permitting to noise and groundwater protection. The Environmental Law and applicable secondary legislation set out the general framework of obligations, impose requirements on operators to obtain permits and licenses for certain activities, and prescribe the sanctions for failure to comply with applicable environmental requirements. The following legislation and regimes are applicable to environment, health and safety aspects of our businesses and facilities in Turkey.

Environmental Permit and License Regulation The Environmental Permit and License Regulation (‘‘EPLR’’) came into force on 1 November 2014, and creates a mechanism allowing for one global environmental permit and/or license and unifies separate permits and/or licenses being granted under the Environmental Law. The EPLR covers a wide range of industrial facilities in a variety of industry sectors, including the petrochemicals industry. The EPLR requires, among other things, facilities which fall within its scope to operate under an environmental permit and/or license, which replaced the licenses and permits granted under the Environmental Law for these facilities. An environmental permit may cover activities involving emissions, wastewater discharge, noise control and/or deep sea discharge. An environmental license indicates the technical sufficiency of the license- holder for collection, recovery, recycling, processing and destruction of waste. We currently have a permit and license covering emissions, wastewater discharge, waste incineration and waste reception, which is valid until 9 October 2019. As per the EPLR, we are considered among facilities with high environmental contamination and, therefore, we are required to comply with the environmental obligations and procedures entailed such as reduction of emission, waste disposal and carriage of waste. Failure to comply with these requirements would result in possible sanctions set forth under the Environmental Law, including but not limited to, monetary fines and cancellation of environmental permit and/or license. See ‘‘Risk Factors—Risks Related to Our Industry and Business—Our operations are subject to various environmental and other laws and regulations, including those related to greenhouse gases’’.

Industrial Air Pollution Control Regulation The Industrial Air Pollution Control Regulation (‘‘IAP’’) sets out the obligation of companies for controlling industrial emissions. The IAP came into force on 3 July 2009, and covers a wide range of industry sectors, including the chemicals industry. The IAP aims to prevent or reduce emissions from industrial facilities to air, soil and water. The IAP requires facilities falling within its scope to operate under an environmental permit covering emissions. Companies are required to prepare and submit an emission monitoring report to the Provincial Directorate of Environment and Urbanisation at the time of application. While granting the emission permit, the Ministry of Environment may require such facility to regularly monitor its gas emission and install an online gas emissions surveillance system.

Waste Management Rules The Waste Management Regulation amends, consolidates and replaces three pieces of Turkish legislation on waste management of facilities. This regulation sets forth the principles and procedures for the production, collection, temporary storage, transportation, exportation, importation, recycling and disposal of hazardous and non-hazardous waste. Annex 4 of the regulation lists the hazardous wastes and facilities considered to be producing more than one ton of hazardous waste per month. Such facilities, including those of Petkim, are required obtain a temporary storage permit from the Provincial Directorate of Environment and Urbanisation. Each facility must obtain an environmental permit covering wastewater discharge subject to the limits set for industrial waste water and the principles for discharging wastewater into the surroundings, sea or the sewage system set forth by the Water Pollution Control Regulation.

Labour Health and Safety Regulations Occupational Health and Safety Law regulates the obligations of employers regarding (i) health and safety and other precautions to prevent occupational risks, (ii) monitoring and ensuring their proper implementation, (iii) training employees on potential occupational risks, health and safety rules, and

127 (iv) risk assessment. Turkish legislation on occupational health and safety is principally based on European Union Directive No. 89/391, adopting the main principles set forth therein such as evaluating the risks, combating the risks at source and adapting to technical progress. As per the secondary legislation concerning occupational health and safety, our facilities fall into the category of ‘‘very dangerous operations’’. Therefore, we are subject to various regulations regarding the health and safety requirements in facilities with dangerous operations, failure to comply with which may result in monetary fines. In addition to monetary fines, any continued non-compliance with the Occupational Health and Safety Law (No. 6331) and its secondary legislation which causes any danger detected by the Ministry of Labour and Social Security officials may result in the suspension of the operations of the facility and revocation of the licenses.

Control of Major Industrial Accidents Involving Dangerous Substances Our facilities are subject to the Regulation on Prevention of Major Industrial Accidents and Reduction of Their Effects, (‘‘Accident Prevention Regulation’’) which implements the Council Directive 96/82/EC of 9 December 1996 on the control of major-accident hazards involving dangerous substances. The Accident Prevention Regulation aims to prevent major accidents in facilities containing dangerous substances as well as to minimise the dangers of potential damage to human life and the environment. The Accident Prevention Regulation applies to facilities in which certain quantities of dangerous substances, such as naphtha, and which are set out in the Accident Prevention Regulation, are present. Operators of such facilities are required to take all necessary measures to prevent major accidents and limit their consequences on human health and the environment. Accordingly, operators must submit an online notification to the Ministry of Environment (also known as a ‘‘Seveso notification’’) with regard to the hazardous substances in their possession. Upon notification, the Ministry of Environment determines whether the relevant operator is out of scope, an ‘‘upper-tier establishment’’ or a ‘‘lower-tier establishment’’. The Accident Prevention Regulation defines two categories of sites in accordance with the level of risk they pose and depending on the quantity of the dangerous substances they deal with listed in Annex 1 of the Accident Prevention Regulation: ‘‘upper-tier establishments’’ and ‘‘lower-tier establishments’’. Petkim as an ‘‘upper-tier establishment’’ is subject to more stringent requirements, including submitting a notification to the Ministry of Environment, preparing a safety report, preparing an internal emergency plan and assisting the Provincial Directorate of Disaster and Emergency with the preparation of external emergency plans which are reviewed and updated within time intervals not exceeding three years. Upper-tier establishments are also required to test regularly their internal and external emergency plans.

Fire Security and Explosion Hazard Rules We are required to follow the Regulation on Equipment and Protective Systems Used in Potentially Explosive Atmospheres which took effect on 30 June 2016 (‘‘Regulation 2016’’). Regulation 2016 relates to the equipment and protective systems intended for use in potentially explosive atmospheres. All safety devices and equipment at Petkim’s facilities must conform to its requirements. The Regulation on the Protection of Employees from Exposure to Explosive Atmospheres which took effect on 30 April 2013 (‘‘Regulation 2013’’) relates to the requirements for improving the safety and health protection of workers who are potentially at risk due to working in explosive atmospheres, and to protecting such employees from an explosion risk when working in areas with an explosive atmosphere. Regulation 2013 requires employers to ensure the health and safety of workers by implementing organisational and/or technical measures to prevent the formation of an explosive environment or, where the nature of the activity precludes this, to remove any sources of ignition and mitigate the detrimental effects of a potential explosion. These measures shall be combined and supplemented with technical measures to prevent the propagation of explosions, where necessary. Essentially, employers are required to classify the areas where hazardous explosive atmospheres may occur at the installation of the facility into various zones. The classification of a particular area is determined according to the probability of an explosive atmosphere occurring and its maintenance needs. The employer is also required to produce an ‘‘Explosion Protection Document’’ to demonstrate that explosion risks have been determined and assessed, hazardous areas have been classified into zones with the appropriate signs displayed, workplace and work equipment designed, operated and maintained in compliance with safety rules, and that equipment is used in compliance with safety procedures.

128 Greenhouse Gas Emissions In Turkey, greenhouse gas (‘‘GHG’’) emissions are regulated by the Regulation Concerning Monitoring of Greenhouse Gas Emissions (‘‘GHG Regulation’’) and the Communique´ on Monitoring and Reporting of Greenhouse Emissions (‘‘GHG Communique´’’). As per the GHG Regulation, operators of facilities are required to monitor the GHG arising from their facilities according to the principles set forth in the GHG Regulation, and prepare a GHG monitoring plan for this purpose. Operators of the facilities shall submit their plan for monitoring to the Ministry of Environment for approval and registration. Furthermore, as per the GHG Regulation, operators of such facilities shall submit an annual GHG report prepared in accordance with the plan for monitoring to the Ministry of Environment each year by the end of April for the GHG emissions observed in the previous calendar year.

Capital Markets Regulations We are subject to the supervision of the CMB as a public company since 2001. Certain capital market regulations, with which we must comply, are as follows:

Corporate Governance Communique´ The Corporate Governance Communique´ entered into force on 3 January 2014 regulating specifically the principles introduced into the Capital Markets Law. The Corporate Governance Communique´ is designed to implement certain EU legislation harmonised enhancements to Turkish corporate governance standards and provides certain compulsory and non-mandatory principles (the ‘‘Corporate Governance Principles’’) applicable to listed companies. The Corporate Governance Regulation divides listed companies into three categories depending on market capitalisation, assigning different levels of standards to each. We fall within the first-tier listed companies that have an average market capitalisation of over TL 3 billion and which have a free float of over TL 750 million, as per the CMB decision dated 6 January 2017 and numbered 1/23. The CMB is authorised to amend the thresholds for the categories. The Corporate Governance Principles address four major topics: (i) shareholders’ rights and equal treatment of shareholders; (ii) public disclosures and transparency; (iii) company stakeholder policies and their rights; and (iv) management powers and composition. Material provisions include the following: • The Board of Directors must be composed of at least five directors. At least one-third of (and, in any case, a minimum of two) directors must be independent board members within the meaning of the Corporate Governance Regulation. A person who has been a member of the company’s board of directors for more than six years cannot be appointed as an independent member. • Prior to entering into a related party transaction, the board of directors of the company and the board of directors of its affiliate are each required to approve the essential terms of the transaction. Depending on the nature and substantiality of the transaction, the company or its affiliate may be subject to further requirements such as public disclosure, obtaining an appraisal report, and/or a board of directors’ resolution, including the affirmative votes of the majority of the independent directors. If such affirmative votes are not obtained, they shall be brought to the general assembly meeting where related parties to those transactions are not permitted to vote. • In their annual reports, companies must either confirm compliance with the Corporate Governance Principles or explain the reasons for their non-compliance with its non-mandatory provisions. • Listed companies and their affiliates may not grant any security, pledge or surety other than (i) for their own benefit, (ii) to their consolidated affiliates, and/or (iii) for the benefit of third parties to carry out its ordinary commercial activities. The CMB is entitled to require listed companies to comply with the Corporate Governance Principles in whole or in part and to take certain measures such as requesting injunctions from the court, or filing lawsuits to determine or to revoke any unlawful transactions and/or actions that contradict these principles.

129 Dividend Distribution Pursuant to Article 19 of the Capital Market Law, public companies are required to have a dividend distribution policy which must be determined by the general assembly of shareholders of the relevant company. Pursuant to the mandatory provisions of the Communique´ on Dividend Distribution (II-19.1), the dividend distribution policy is required to consist of information as to whether the public company will distribute dividends and, if so, the relevant dividend distribution ratio, form of payment, timing of dividend distribution and whether interim dividends will be paid by the public company. Based on the non-mandatory provisions of the Corporate Governance Principles, the dividend distribution policy should include the minimum information allowing the investors to foresee the procedures and the principles that will apply to the distribution of profits in the upcoming periods. The CMB may set different principles on companies with similar qualifications with respect to profit distribution policies of listed companies. In accordance with the Turkish Commercial Code, unless the required reserves and the dividend for shareholders (as determined in the articles of association or in the dividend distribution policy of the company) are set aside, no decision may be taken to set up other reserves, to transfer profits to the subsequent year, or to distribute dividends to the holders of usufruct shares, to the members of the board of directors or to any employees. In addition, no dividend can be distributed to the holders unless the determined dividend for shareholders is paid in cash. For the listed companies, dividend distribution is made evenly to all existing shares as of the date of dividend distribution without considering the dates of issuance and acquisition of the shares.

Material Transactions The Communique´ on Material Transactions Regulation of the CMB (No. II-23.1) (the ‘‘Material Transaction Communique´’’) requires the approval of shareholders through a shareholder meeting for any material transactions including, but not limited to, major asset purchases or divestitures, de-listing related party transactions and reorganisations, such as mergers and acquisitions which meet the thresholds set out under the Material Transaction Communique.´ Such transactions shall be approved by the affirmative vote of at least two-thirds of the voting shares represented at the general assembly meeting. However, if at least half of voting shares representing the capital are present at the meeting, the decision shall be adopted with the affirmative vote of the majority of voting shares that are present in the shareholders meeting. Articles of association may provide higher decision quorums regarding approval of material transactions. Shareholders who vote against approval of a material transaction during the shareholders meeting and record their dissenting votes to the minutes are eligible to sell their shares to the company (right to exit) under the Material Transaction Regulation. The exercise price of the right to exit is the arithmetic average of the corrected weighted average prices quoted on Borsa Istanbul within 30 days prior to the date of first disclosure of transaction to the public, excluding the date of disclosure.

Data Protection Regulations The Law on the Protection of Personal Data (the ‘‘Data Protection Law’’) entered into force, for most of its provisions, on 7 April 2017 as part of the harmonisation process with the European Union legislation and is based largely on the European Union Directive No. 95/46/EC. The Data Protection Law regulates the principles and procedures for the processing of personal data and the obligations of real and legal persons processing personal data. Data controllers which determine the purposes and means of processing personal data, are required, among others, to (i) inform the data subject on aspects of the data processing activity, (ii) obtain the consent of the data subject if the processing of personal data does not fall within one of the seven grounds for processing personal data which do not require the consent of the data subject, (iii) take all necessary technical and administrative measures, including putting in place policies regarding data processing activities and data retention and destruction policy, to provide a sufficient level security in order to prevent unlawful processing of or access to personal data and ensure the lawful retention of personal data, (iv) delete, erase or anonymize personal data when the processing purpose of such data no longer exists, (v) respond to data subject requests in relation to their rights specified in the Data Protection Law, (vi) register with the data controllers’ registry and (vii) obtain consent of the data subject if personal data is transferred outside of Turkey, including any transfer of personal of data on servers of cloud service providers located abroad, in compliance with the Data Protection Law. The Data Protection Authority will act as an independent supervisory authority to ensure

130 compliance with the data protection rules specified in the Data Protection Law and secondary legislation. The Regulation on Deletion, Destruction and Anonymisation of Personal Data published on 28 October 2017 (the ‘‘DDA Regulation’’) by the Data Protection Authority regulates the data controller’s obligations with respect to the deletion, destruction and anonymisation of personal data. The DDA Regulation entered into force on 1 January 2018. Companies which are deemed as data controllers and registered with the data controllers’ register are required, among others, to (i) have in place a personal data retention and destruction policy, (ii) delete, destroy or anonymise personal data when the processing purpose of such data no longer exists, (iii) record for at least three years an inventory of deletion, destruction and anonymisation entries, (iv) delete, destroy or anonymise periodically data within 6 months when the processing purpose of such data no longer exists and (v) delete, destroy or anonymise, ex officio or upon the data subject’s request, personal data when the processing purpose of such data no longer exists. Data controllers which are not required to put in place a data retention and destruction policy are still required to comply with deletion, destruction and anonymisation requirements under the Data Protection Law and the DDA Regulation and to proceed with periodical deletion, destruction and anonymisation of personal data within 3 months if they become subject to such liabilities. The Regulation on Data Controllers’ Register (the ‘‘Register Regulation’’) which entered into force on 1 January 2018 regulates the establishment of the data controllers’ register (the ‘‘Register’’) and registration rules. Companies which are data controllers are under the obligation to register before processing personal data through an information system called VERBIS to the public Register (subject to some exemptions which will be determined by the Board based on objective criteria) pursuant to the Draft Register Regulation. Data controllers subject to the registration obligation are required to prepare an inventory detailing the personal data processing activities, the processing purposes, processed data categories, information relating to recipient groups and data subject groups. The Working Procedures and Principles of the Personal Data Protection Board Regulation which entered into force on 16 November 2017 regulates the duties, powers, responsibilities, working procedures and principles of the Personal Data Protection Board. The Data Protection Board, the executive board of the Data Protection Authority, is composed of 9 members elected for 4 years and has the authority, among others, to (i) decide on data protection rights violation claims, (ii) following a complaint or when the Board comes to know an alleged violation, (iii) to determine whether personal data is processed in compliance with the laws and take temporary measures, (iv) determine the countries providing sufficient protection for data transfers outside of Turkey, (v) determine the rules and procedures for the deletion, destruction and anonymisation of personal data, (vi) decide on the administrative sanctions specified in the Data Protection Law and (vii) deliver an opinion on draft regulations prepared by other institutions and organisations pertaining to personal data. The Data Protection Board has not yet issued a list of countries providing sufficient protection for data transfers. The Personal Health Data Processing and Privacy Protection Regulation entered into force on 20 October and was amended on 24 November 2017 (the ‘‘Personal Health Data Regulation’’). Personal Health Data Regulation sets forth the procedures and principles regulating, among others, the processing of personal health data, systems to be established enabling access to these data, security and supervision of systems recording personal health data and notifications to the Ministry of Health of the employee movements during the provision of health services. The scope of application of the Personal Health Data Regulation covers health care providers, real persons whose personal health data is processed, persons providing software and hardware related services to healthcare providers and any other person processing personal health data within the scope of a legislation. The Personal Health Data Regulation was recently amended to be aligned with the provisions of the Data Protection Law. Aside from the various provisions regulating the centralised health data system to be used by health care providers, data controllers who process personal health data are required to process personal health data in compliance with the Data Protection Law and the Personal Health Data Regulation. As under the Data Protection Law, data controllers who process personal health data are required to provide information regarding the processing health data, obtain consent from the data subject if the processing purpose does not fall within the scope of one of the exceptions under the Data Protection Law which do not require the consent of the data subject.

131 Regulations regarding Government Incentives We are also dependent on regulations governing investment incentives in Turkey. The Council of Ministers Decree No. 2012/3305 Concerning State Aids in Investments (‘‘Decree’’), which entered into force on 19 June 2012, regulates the government incentives and provides support for investments. The Decree divides the incentive scheme into four groups: (i) general investment incentive scheme; (ii) regional investment incentive scheme; (iii) large-scale investment incentive scheme; and (iv) strategic investment incentive scheme. Our activities are eligible to benefit from such incentives and, within this scope, we have obtained two strategic investment certificates from the Ministry of Economy, as follows: (i) pure terephthalic acid capacity increase project on 4 January 2013; and (ii) wind energy power plant on 20 April 2015. Strategic investment certificates enable us to benefit from the following advantages: VAT exemption, customs duty exemption, corporate tax discount, employer’s social security contribution support, land allocation, VAT refund and interest support. Furthermore, we obtained (i) a regional investment certificate from the Ministry of Economy on 15 June 2012 with respect to factory modernisation, and (ii) a large-scale investment certificate from the Ministry of Economy on 20 November 2014 with respect to our Petlim port. Such regional and large-scale investment certificates enable us to benefit from the incentives set out above, except for the VAT refund and interest support.

132 SHAREHOLDERS AND RELATED PARTY TRANSACTIONS As at the date of this Offering Memorandum, our share capital is TL 1,500,000,000 with each share having a nominal value of TL 0.01. Our shares have been divided into two groups: Group A and Group C. The Group C share belongs to the Turkish Privatisation Administration. The privileges granted to the holder of the Group C share shall continue to exist as long as the Turkish Privatisation Administration owns the Group C share. Upon conversion of the Group C share into a Group A share, the right to nominate a member of the Board granted to the holder of the Group C share pursuant to Article 11 of the Articles of Association shall cease to exist. The holders of our shares are as set forth below:

Paid-in Capital Class of Percentage (TL) Shares of Shares SOCAR Turkey Petrokimya ...... 765,000,000.00 A 51.00 Free Float ...... 734,999,999.99 A 49.00 Turkish Privatisation Administration ...... 0.01 C — Total ...... 1,500,000,000 N/A 100.00

Holders of Group C shares have certain privileges with respect to voting. The validity of decisions taken by the Board of Directors on the following matters depends on the affirmative vote of the member of the Board of Directors elected from the holders of the Group C shares: (i) modifications of the Articles of Association that will affect the privileges assigned to the Group C share; (ii) registration of the transfer of registered shares on the share ledger; (iii) determination of the form of power of attorney indicated in the Article 31 of the present Articles of Association; (iv) decisions stipulating a decrease of at least 10 per cent. in the capacity of any plant owned by us; (v) our establishment of a new company or partnership, acquisition of a company being partner to and/or merging with an existing company, separation, dematerialisation, annulment and liquidation of the Issuer.

Shareholders SOCAR Turkey Petrokimya, a wholly-owned subsidiary of STEA¸S, owns 51 per cent. of our shares. STEA¸S is in turn owned by SOCAR and Goldman Sachs, who hold 87 per cent. and 13 per cent. of STEA¸S’s shares, respectively. Goldman Sachs holds a put option in respect of the shares it holds in STEA¸S, as described below under ‘‘—STEA¸S’’. The remaining 49 per cent. of our shares (other than the Group share owned by the Turkish Privatisation Administration) are owned by third party shareholders (free float) pursuant to our listing on Borsa Istanbul, which occurred in 1990.

133 The following diagram depicts our corporate structure as at the date of this Offering Memorandum:

State Oil Company of Goldman Sachs Azerbaijan Republic International (“SOCAR”) 13% 87%

70% The Republic of SOCAR Turkey Rafineri Holding A.S¸ . Azerbaijan Ministry of Enerji A.S¸ .(“STEAS¸ ”) Petkim will acquire 30% of Economy and Industry STEA S’ stake in Refinery Holding which owns 60% of 60% STAR. Effectively Petkim will end up owning 18% of STAR 40% SOCAR Turkey 100% 30% Yatirim A.S¸ .

100%

The Turkish Government holds SOCAR Turkey a golden share in Petkim STAR Rafineri A.S¸ . Petrokimya A.S¸ . (“SOCAR (“STAR Refinery”) Turkey Petrokimya”) Issuer 51% SOCAR and related parties 49% The Notes Free Float ISE Ticker: PETKM Petrokimya Holding A.S¸ . External Shareholders (“Petkim”) Bank Loans and Trade Finance STAR Refinery 70% Akbank Project Bank Facilities Goldman Sachs 30% Petlim Limancilik Ticaret Finance Credit International A.S¸ . (“Petlim”) Agreement The Notes8JAN201823195160 The Turkish Privatisation Administration holds a Group C preferential, or ‘‘golden’’, share in the Issuer that carries special rights. In particular, the validity of decisions taken by the Board on the following matters depends on the affirmative vote of the member of Board elected from holders of the Group C shares: (i) modifications of the Articles of Association that will affect the privileges assigned to Group C share; (ii) registration of the transfer of registered shares on the share ledger; (iii) determination of the form of power of attorney indicated in the Article 31 of the present Articles of Association; (iv) decisions stipulating a decrease of at least 10 per cent. in the capacity of any plant owned by the Issuer; (v) the Issuer’s establishment of a new company or partnership, acquisition of a company being partner to and/or merging with an existing company, separation, dematerialisation, annulment and liquidation of the Issuer. The project finance credit agreement with Akbank in relation to the Petlim Container Port, which is guaranteed by us, is an obligation of Petlim and all other loans and trade financing commitments are obligations of Petkim. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Facilities’’.

SOCAR SOCAR, which is 100 per cent. owned by the state of Azerbaijan, comprises vertically-integrated upstream, midstream and downstream operations, located primarily in Azerbaijan, as well as Turkey, Greece, Georgia, Romania, Switzerland and Ukraine. SOCAR controls nearly 20 per cent. of Azerbaijan’s total crude oil production and has production sharing agreements with 32 major international oil companies. SOCAR is the largest employer and tax contributor in Azerbaijan, with 51,500 employees and revenues of approximately U.S.$52 billion in 2016. SOCAR was established to consolidate Azerbaijan’s state-owned oil companies, following the merger of two companies, Azerneft and Azerneftkimya, each of which were also 100 per cent. state-owned, and to manage Azerbaijan’s oil and gas exploration activities, as well as its transportation and refining activities following the fall of the Soviet Union. SOCAR is comprised of 25 wholly-owned special purpose companies and a large number of jointly-controlled entities and associates.

STEA¸S SOCAR commenced its operations in Turkey through its acquisition of Petkim, as part of a consortium with Turcas, for U.S.$2.04 billion from the Turkish Privatisation Administration in 2008. In 2011, following the withdrawal of Turcas from Petkim’s shareholding structure, 51 per cent. of Petkim’s shares were transferred to STEA¸S through SOCAR Turkey Petrokimya, a wholly-owned subsidiary of STEA¸S. STEA¸S was founded to implement SOCAR’s strategy of investing in the Turkish market and steadily growing its

134 operations there to become one of its largest holdings as well as one of its largest integrated energy companies. Goldman Sachs acquired its 13 per cent. stake in STEA¸S for U.S.$1.3 billion on 14 August 2015 in a transaction arranged by Goldman Sachs and JPMorgan. At the same time, Goldman Sachs entered into a six-year put option transaction arrangement with each of STEA¸S and Sermaye Investments Limited (‘‘SIL’’), a subsidiary of SOCAR, to protect Goldman Sachs against a decline in the value of the shares below U.S.$1.3 billion. If the put option with STEA¸S is exercised, STEA¸S will purchase approximately 685.1 million shares, corresponding to 10 per cent. of the total issued share capital of STEA¸S, at an independently determined fair value at the time of the purchase. If the put option with SIL is exercised, SIL will purchase approximately 205.5 million shares, corresponding to 3 per cent. of the total issued share capital of STEA¸S, for U.S.$300 million, in addition to an amount in U.S. dollars equal to any shortfall resulting if the purchase price of the shares under the STEA¸S put option is less than U.S.$1 billion. Prior to the exercise of the option, SIL will pay a running minimum return amount. SIL will also guarantee the obligations of STEA¸S under the STEA¸S put option. To ensure SIL honours its obligations under the SIL put option and its guarantee of the STEA¸S put option, SOCAR has undertaken to contribute capital to SIL up to a maximum amount of U.S.$1.3 billion. Goldman Sachs will therefore eliminate the risk of its credit exposure to STEA¸S and SIL under the put options, and to SOCAR in respect of its undertaking. In connection with that elimination of risk, Goldman Sachs and JPMorgan have arranged a credit-linked loan through which Goldman Sachs will secure its rights in respect of the shares, the put options and the SOCAR undertaking in favour of end investors in that loan. Goldman Sachs and JPMorgan will initially hold part of the loan and may, over the course of the transaction, increase or decrease that holding. The upside proceeds from any sales of the shares will be shared pro rata between SIL and the holders of the loan. Goldman Sachs also holds a 30 per cent. interest in Petlim, which it acquired in 2014. The remaining 70 per cent. of Petlim is held by Petkim. In connection with the acquisition of its stake, Goldman Sachs and STEA¸S entered into a put option contract pursuant to which Goldman Sachs has the right to sell its stake in Petlim to STEA¸S in certain circumstances. The put option contract further provides that Goldman Sachs shall be compensated in the event of any loss following an initial public offering of Petlim, which is contemplated to be undertaken within seven years of the date of the sale of the 30 per cent. stake to Goldman Sachs.

Related Parties STAR Rafineri A.¸S. STAR Rafineri A.¸S., which owns the STAR Refinery project, is owned by the state of Azerbaijan and STEA¸S, who hold 40 per cent. and 60 per cent. stakes, respectively. STAR Rafineri A.¸S. was established in 2008 to develop, construct, own and operate a complex crude oil refinery with a processing capacity of 10 million tons of crude oil per annum on the Aegean coast of Turkey. The refinery is located adjacent to Petkim on the Aliaga˘ industrial peninsula north of Izmir. It is expected to come onstream in the third quarter of 2018 with a total investment value of U.S.$6.3 billion. On 26 May 2014, we signed a contract with STAR Rafineri A.¸S. for the purchase of a minimum of 1,300,000 tons and a maximum of 1,600,000 tons of naphtha per year (which can be increased upon bilateral agreement) and 270,000 tons of mixed xylene per year. For further detail on the STAR Refinery project, see ‘‘Business—Integration—STAR Refinery’’. On 9 January 2018, we signed the STAR Refinery Share Sale Agreement with STEA¸S for the purchase of an 18 per cent. effective stake in STAR Rafineri A.¸S., and we intend to use the net proceeds from the offering of the Notes to fund a portion of the purchase price. The conditions precedent in the STAR Refinery Share Sale Agreement also include the finalisation between us and STEA¸S of a shareholders’ agreement, further details of which are set out in ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations—Commitments—STAR Refinery Share Sale Agreement’’.

TANAP SOCAR holds a 49 per cent. interest in Southern Gas Corridor (‘‘SGC’’), which in turn holds a 58 per cent. stake in the Trans-Anatolian Natural Gas Pipeline (‘‘TANAP’’), which is the Turkish part of the SGC gas value chain between Azerbaijan and Europe. The state of Azerbaijan holds the remaining 51 per cent. stake in SGC, and BOTA¸S Petroleum Pipeline Corporation and BP hold the remaining 30 per cent.

135 and 12 per cent. stakes, respectively, in TANAP. TANAP aims to transport natural gas originating from the Shah Deniz-2 field and other production fields in Azerbaijan to the European and Turkish markets. The U.S.$8 billion project has been financed through a combination of cash equity and shareholder loans to TANAP. The construction of the project started in 2014. TANAP is a partnership among Turkey, Azerbaijan and BP. STEA¸S intends to use a portion of the proceeds from the sale of its 13 per cent. stake to Goldman Sachs to purchase a 7 per cent. stake in TANAP from SGC.

SOCAR Gas STEA¸S owns a 51 per cent. stake in SOCAR Gas, with the remaining 49 per cent. being held by unaffiliated shareholders. SOCAR Gas was established to engage in retail and wholesale trading of Azerbaijani natural gas in Turkey. On 1 January 2013, STEA¸S commenced annual sales of 1.2 billion cubic metres of natural gas in accordance with an international agreement signed between Azerbaijan and Turkey in June 2010.

136 TERMS AND CONDITIONS OF THE NOTES The following is the text of the terms and conditions of the Notes which, subject to amendment and completion and except for the text in italics, will be endorsed on each Definitive Certificate (if issued) and incorporated by reference into the Global Certificate: The U.S.$500,000,000 5.875 per cent. Notes due 2023 (the ‘‘Notes’’, which expression includes any further notes issued pursuant to Condition 15 (Further Issues) and forming a single series therewith) of Petkim Petrokimya Holding A.¸S. (the ‘‘Issuer’’) (a) are constituted by and subject to, and have the benefit of, a trust deed dated 26 January 2018 (as amended or supplemented from time to time, the ‘‘Trust Deed’’) between the Issuer and BNY Mellon Corporate Trustee Services Limited as trustee (the ‘‘Trustee’’, which expression includes all persons for the time being appointed as trustee for the holders of the Notes under the Trust Deed) and (b) are the subject of an agency agreement dated 26 January 2018 (as amended or supplemented from time to time, the ‘‘Agency Agreement’’) between, inter alios, the Issuer, the Trustee and The Bank of New York Mellon, London Branch as principal paying agent (the ‘‘Principal Paying Agent’’, which expression includes any successor principal paying agent appointed from time to time in connection with the Notes), the other paying agents named therein (together with the Principal Paying Agent, the ‘‘Paying Agents’’, which expression includes any successor or additional paying agents appointed from time to time in connection with the Notes), the transfer agents named therein (the ‘‘Transfer Agents’’, which expression includes any successor or additional transfer agents appointed from time to time in connection with the Notes), and The Bank of New York Mellon SA/NV, Luxembourg Branch, in its capacity as Registrar (the ‘‘Registrar’’, which expression shall include any successor registrar appointed from time to time in connection with the Notes). The Principal Paying Agent, the Paying Agents, the Transfer Agents and the Registrar are together referred to herein as the ‘‘Agents’’ and any reference to an ‘‘Agent’’ is to any one of them. Certain provisions of these Conditions are summaries of the Trust Deed and the Agency Agreement and are subject to their detailed provisions. The Noteholders (as defined below) are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of the provisions of the Agency Agreement applicable to them. Copies of the Trust Deed and the Agency Agreement are available for inspection during normal business hours at the Specified Offices (as defined in the Agency Agreement) of the Principal Paying Agent and the other Paying Agents.

1 Form, Denomination and Title (a) Form and Denomination The Notes are in registered form, serially numbered, and in minimum denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. Definitive note certificates (the ‘‘Definitive Certificates’’ and each a ‘‘Definitive Certificate’’) will be issued to each Noteholder in respect of its registered holding. The Notes are issued pursuant to the Capital Markets Law No. 6362, the Communique´ on Debt Instruments No. VII-128.8, the Turkish Commercial Code No. 6102 and Decree No. 32 regarding the Protection of the Value of Turkish Currency. (b) Title Title to the Notes will pass by transfer and registration as described in Condition 2 (Transfers of Notes and Issue of Definitive Certificates). The holder of any Note will (except as otherwise required by law or as ordered by a court of competent jurisdiction) be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or any other interest in it, any writing thereon by any Person (as defined below) (other than a duly executed transfer thereof in the form endorsed thereon) or any notice of any previous theft or loss thereof, and no Person will be liable for so treating the Noteholder (as defined below). In these Conditions, ‘‘Noteholder’’ and ‘‘holder’’ means the Person in whose name a Note is for the time being registered in the register of Noteholders (or, in the case of a joint holding, the first named thereof) kept by the Registrar at its Specified Office in which will be entered the names and addresses of the Noteholders and the particulars of the Notes held by them and all transfers and redemptions of the Notes (the ‘‘Register’’).

137 2 Transfers of Notes and Issue of Definitive Certificates (a) Transfers A Note may be transferred by depositing the Definitive Certificate issued in respect of that Note, with the form of transfer on the back duly completed and signed, at the specified office of the Registrar or any of the Agents. (b) Delivery of new Definitive Certificates Each new Definitive Certificate to be issued upon a transfer of Notes will, within five Business Days of receipt by the Registrar or the relevant Agent of the duly completed form of transfer endorsed on the relevant Definitive Certificate, be mailed by uninsured mail at the risk of the Noteholder entitled to the Note to the address specified in the form of transfer. Issues of Definitive Certificates upon transfers of any Notes are subject to compliance by the transferor and the transferee with the certification procedures described above and in the Agency Agreement. Where some but not all of the Notes in respect of which a Definitive Certificate is issued are to be transferred, redeemed in accordance with Condition 7(b) (Optional Redemption by the Issuer) or repurchased in accordance with Condition 7(d) (Redemption at the Option of the Noteholders upon a Change of Control), a new Definitive Certificate in respect of the Notes not so transferred will, within five Business Days of receipt by the Registrar or the relevant Agent of the original Definitive Certificate, be mailed by uninsured mail at the risk of the Noteholder of the Notes not so transferred to the address of such Noteholder appearing on the register of Noteholders or as specified in the form of transfer. Neither the part transferred nor the balance not transferred may be less than U.S.$200,000. (c) Formalities Free of Charge Registration of a transfer of Notes will be effected without charge by or on behalf of the Issuer or any Agent subject to (i) the Person making such application for transfer paying or procuring the payment of any taxes, duties and other governmental charges in connection therewith, (ii) the Registrar being satisfied with the documents of title and/or identity of the Person making the application and (iii) such reasonable regulations as the Issuer may from time to time agree with the Registrar. (d) Closed Periods Neither the Issuer nor the Registrar will be required to register the transfer of any Note (or part thereof) during the period of (i) 15 days immediately prior to the due date for any payment of principal or interest in respect of the Notes; (ii) during the period of 15 days immediately prior to (and including) any date which has been fixed for redemption of the Notes by the Issuer at its option pursuant to Condition 7(b); or (iii) after all such Notes have been called for redemption. (e) Regulations All transfers of Notes and entries on the Register will be made subject to the detailed regulations concerning transfer of Notes scheduled to the Trust Deed. The regulations may be changed by the Issuer to (i) reflect changes in legal requirements or (ii) in any other manner which is not prejudicial to the interests of Noteholders with the prior approval of the Registrar and the Trustee (such approval not to be unreasonably withheld or delayed). A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requests in writing a copy of regulations.

3 Status of the Notes The Notes constitute direct, unconditional, unsubordinated and (subject to Condition 4(b) (Limitation on Liens)) unsecured obligations of the Issuer. The Notes will at all times rank pari passu among themselves and at least pari passu in right of payment with all other present and future unsecured and unsubordinated obligations of the Issuer, save for such obligations as may be preferred by mandatory provisions of applicable law.

138 4 Covenants (a) Incurrence of Indebtedness and Issuance of Preferred Stock (i) The Issuer shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, ‘‘incur’’) any Indebtedness (including Acquired Debt), and the Issuer will not issue any Disqualified Stock and will not permit any of its Subsidiaries to issue any shares of preferred stock; provided, however, that the Issuer may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and the Issuer’s Subsidiaries may incur Indebtedness (including Acquired Debt) or issue preferred stock, if the Group Leverage Ratio for the Group’s most recently ended four full fiscal quarters for which internal financial statements on a consolidated basis are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or such preferred stock is issued, as the case may be, does not exceed 4.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock or the preferred stock had been issued, as the case may be, at the beginning of such four-quarter period. (ii) The foregoing paragraph (i) of this Condition 4(a) will not prohibit the incurrence of any of the following items of Indebtedness (collectively, ‘‘Permitted Indebtedness’’): (A) the incurrence by the Issuer and any of its Subsidiaries of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (A) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Issuer and its Subsidiaries thereunder) not to exceed 3 per cent. of the Issuer’s Consolidated Tangible Assets plus, in the case of any refinancing of any Indebtedness permitted under this clause (A) or any portion thereof, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing; (B) the incurrence by the Issuer and its Subsidiaries of the Existing Indebtedness; (C) the incurrence by the Issuer of Indebtedness represented by the Notes; (D) the incurrence by the Issuer or any of its Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings, revolving financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment used in the business of the Issuer or any of its Subsidiaries, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (D), not to exceed 3 per cent. of the Issuer’s Consolidated Tangible Assets at any time outstanding; (E) the incurrence by the Issuer or any of its Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted to be incurred under Condition 4(a)(i) above or pursuant to Condition 4(a)(ii)(B), (C), (K), (L), (P) and this clause (E); (F) the incurrence by the Issuer or any of its Subsidiaries of intercompany Indebtedness between or among the Issuer and any of its Subsidiaries, provided, however, that (I) if the Issuer is the obligor on such Indebtedness and the payee is not the Issuer, such Indebtedness must be unsecured and expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the Notes (except in those jurisdictions or territories where such internal subordination is contrary to law, rule or regulation), in the case of the Issuer; and (II) (a) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Issuer or a Subsidiary of the Issuer and (b) any sale or other transfer of any such Indebtedness to a Person that is not the Issuer or a Subsidiary of the Issuer, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Issuer or such Subsidiary, as the case may be, that was not permitted by this clause (F);

139 (G) the issuance by any of the Issuer’s Subsidiaries to the Issuer or to any of its Subsidiaries of shares of preferred stock; provided, however, that: (a) any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than the Issuer or a Subsidiary of the Issuer; and (b) any sale or other transfer of any such preferred stock to a Person that is not either the Issuer or a Subsidiary of the Issuer, will be deemed, in each case, to constitute an issuance of such preferred stock by such Subsidiary that was not permitted by this clause (G); (H) the incurrence by the Issuer or any of its Subsidiaries of Hedging Obligations in the ordinary course of business and not for speculative purposes; (I) the incurrence by the Issuer or any of its Subsidiaries of Indebtedness in respect of workers’ compensation claims, self-insurance obligations, letters of credit, bankers’ acceptances, performance, appeal, bid and surety bonds in the ordinary course of business or in respect of any completion, performance, supply or other similar guarantee, bond, surety, letter of credit or other similar agreement, or any representations, warranties, covenants or indemnities (which shall be customary for the relevant transaction and are on market terms at the time such transaction is entered into), in each case entered into in connection with a financing of specified goods, equipment, plant or property; (J) the incurrence by the Issuer or any of its Subsidiaries of Indebtedness arising from the honouring by a bank or other financial institution of a cheque, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five Business Days; (K) Indebtedness of any Person outstanding on the date on which such Person becomes a Subsidiary of the Issuer or is merged, consolidated, or amalgamated or otherwise combined with (including pursuant to any acquisition of assets and assumption of related liabilities) the Issuer or any Subsidiary of the Issuer (other than Indebtedness incurred to provide all or any portion of the funds used to consummate the transaction or series of related transactions pursuant to which such Person became a Subsidiary or was otherwise acquired by the Issuer or a Subsidiary of the Issuer) or Indebtedness of the Issuer incurred in relation to any such acquisition, merger, consolidation, amalgamation or combination; provided, however, with respect to this clause (K), that at the time of the acquisition or other transaction pursuant to which such Indebtedness was incurred or deemed to be incurred (x) the Issuer would have been able to incur at least U.S.$1.00 of additional Indebtedness pursuant to Condition 4(a)(i) above after giving effect to the incurrence of such Indebtedness pursuant to this clause (K) calculated on a pro forma basis; (L) the incurrence by the Issuer of Indebtedness in an aggregate outstanding principal amount which, when taken together with the principal amount of all other Indebtedness incurred pursuant to this clause (L) and then outstanding, will not exceed 100 per cent. of the net cash proceeds received by the Issuer from the issuance or sale (other than to a Subsidiary) of its Capital Stock (other than Disqualified Stock) or otherwise contributed to the equity (other than through the issuance of Disqualified Stock) of the Issuer, in each case, subsequent to the Issue Date; provided, however, that (i) any such net cash proceeds that are so received or contributed shall be excluded for purposes of making Restricted Payments under the first paragraph and sub-clauses (ii)(B) and (E) of Condition 4(c) (Limitation on Restricted Payments) to the extent the Issuer and its Subsidiaries incur Indebtedness in reliance thereon and (ii) any net cash proceeds that are so received or contributed shall be excluded for purposes of incurring Indebtedness pursuant to this clause (L) to the extent the Issuer or any of its Subsidiaries makes a Restricted Payment under the first paragraph and sub-clauses (ii)(B) and (E) and of Condition 4(c) (Limitation on Restricted Payments) in reliance thereon; (M) the incurrence by the Issuer or any of its Subsidiaries of Indebtedness arising under agreements providing for indemnification, adjustment of purchase price or similar obligations in connection with disposition of any assets or Equity Interests, other than any credit support given by the Issuer or any of its Subsidiaries with respect to Indebtedness incurred by any Person (other than the Issuer or any of its Subsidiaries) which is acquiring all or any portion of such assets for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness permitted

140 pursuant to this clause (M) will at no time exceed the net proceeds, including the Fair Market Value of non-cash proceeds (the Fair Market Value of such non-cash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received from such disposition; (N) the incurrence by the Issuer or any Subsidiary of the Issuer of Indebtedness (other than and in addition to Indebtedness permitted under clauses (A) through (L) above) in an aggregate principal amount at any time outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund, replace, refinance, defease or discharge any Indebtedness incurred pursuant to this clause (N), not to exceed 5 per cent. of the Issuer’s Consolidated Tangible Assets; (O) Indebtedness incurred to finance goods in transit or exports of specified goods and secured thereon, and Indebtedness owing to export credit agencies, development banks or other similar lenders which are owned or operated by governmental entities or bodies, together in an aggregate principal amount at any time outstanding, including all Indebtedness incurred to renew, refund, replace, refinance, defease or discharge any Indebtedness incurred pursuant to this Clause (O), not to exceed 3 per cent. of the Issuer’s Consolidated Tangible Assets; and (P) Indebtedness owing to, or preferred stock held by, a Principal or a Related Party of a Principal, so long as (x) the Group Leverage Ratio for the Group’s most recently ended four full fiscal quarters for which internal financial statements on a consolidated basis are available immediately preceding the date on which such additional Indebtedness is incurred or such preferred stock is issued, as the case may be, does not exceed 5.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the preferred stock had been issued, as the case may be, at the beginning of such four-quarter period and (y) such Indebtedness or preferred stock, as the case may be, is (i) subordinated and junior in right of payment to the Notes, (ii) if such Indebtedness or preferred stock matures, matures on a date that is at least one year after the Maturity Date and (iii) shall not be secured by, or give rise to, any Lien, and that any subsequent issuance, sale or transfer of any preferred stock or Indebtedness incurred pursuant to this Clause (P) that results in such preferred stock or Indebtedness, as the case may be, being held by a Person other than a Principal or a Related Party, will be deemed, in each case, to constitute an incurrence of such Indebtedness or issuance of such preferred stock that was not permitted by this Clause (P). (iii) The Issuer will not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Issuer unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Issuer solely by virtue of being unsecured or by virtue of being secured on junior priority basis. (iv) For purposes of determining compliance with any U.S. dollar denominated restriction on the incurrence of Indebtedness where the Indebtedness incurred is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent determined on the date of the incurrence of such Indebtedness; provided, however, that if any such Indebtedness denominated in a different currency is subject to a currency hedging agreement with respect to U.S. dollars covering all principal, premium, if any, and interest payable on such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be as provided in such currency hedging agreement. The principal amount of any Refinancing Indebtedness incurred in the same currency as the Indebtedness being Refinanced will be the U.S. Dollar Equivalent, as appropriate, of the Indebtedness Refinanced, except to the extent that (A) such U.S. Dollar Equivalent was determined based on a Currency Agreement, in which case the principal amount of such Refinancing Indebtedness will be determined in accordance with the preceding sentence, and (B) the principal amount of the Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such excess, as appropriate, will be determined on the date such Refinancing Indebtedness is incurred. Notwithstanding any other provision of this covenant, the maximum

141 amount that the Issuer or a Subsidiary of the Issuer may incur pursuant to this covenant shall not be deemed to be exceeded, with respect to outstanding Indebtedness, due solely as a result of fluctuations in the exchange rates of currencies. (v) For purposes of determining compliance with this Condition 4(a), in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in Conditions 4(a)(ii)(A) through (ii)(M) above, or is entitled to be incurred pursuant to Condition 4(a)(i), the Issuer will be permitted to classify such item of Indebtedness on the date of its incurrence in any manner that complies with this covenant and may later reclassify any item of Indebtedness described in Condition 4(a)(i) as well as Conditions 4(a)(ii)(A) through (ii)(M) above (provided that at the time of reclassification it meets the criteria in such category or categories) (other than such Indebtedness pursuant to Condition 4(a)(ii)(A) and Indebtedness outstanding under any credit facilities on the Issue Date under 4(a)(ii)(B) above, which may not be reclassified). The accrual of interest or preferred stock dividends, the accretion or amortisation of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of preferred stock as Indebtedness due to a change in accounting principles, and the payment of dividends on preferred stock or Disqualified Stock in the form of additional shares of the same class of preferred stock or Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of preferred stock or Disqualified Stock for purposes of this Condition 4(a); provided, in each such case, that the amount thereof is included in Consolidated Net Indebtedness as accrued. (vi) The amount of any Indebtedness outstanding as of any date will be (without double counting): (A) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; (B) the principal amount of the Indebtedness, in the case of any other Indebtedness; and (C) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of: (I) the Fair Market Value of such assets at the date of determination; and (II) the amount of the Indebtedness of the other Person. (b) Limitation on Liens So long as any Note remains outstanding (as defined in the Trust Deed), the Issuer will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien, other than Permitted Liens, upon any of their property or assets, now owned or hereafter acquired, or on any income, revenue or profits therefrom securing Indebtedness unless, at the same time or prior thereto, all payments due under the Trust Deed and the Notes are secured on an equal and ratable basis with the obligations so secured or as otherwise approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders until such time as such obligations are no longer secured by a Lien. (c) Limitation on Restricted Payments (i) The Issuer shall not, and shall not cause or permit any of its Subsidiaries to, directly or indirectly: (A) declare or pay any dividend or make any other payment or distribution on account of the Issuer’s or any of its Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Issuer or any of its Subsidiaries) or to the direct or indirect holders of the Issuer’s or any of its Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Issuer and other than dividends or distributions payable to the Issuer or a Subsidiary of the Issuer); (B) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Issuer) any Equity Interests of the Issuer; (C) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Issuer or any of the Issuer’s Subsidiaries that is contractually subordinated in right of payment to the Notes (excluding any

142 intercompany Indebtedness between or among the Issuer and any of its Subsidiaries), except a payment of interest or principal at the Stated Maturity thereof; or (D) make any Restricted Investment, (all such payments and other actions set forth in these clauses (A) through (D) above being collectively referred to as ‘‘Restricted Payments’’), unless, at the time of and after giving effect to such Restricted Payment: (I) no Potential Event of Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; (II) the Issuer would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least U.S.$1.00 of additional Indebtedness pursuant to the Group Leverage Ratio test set forth in Condition 4(a)(i) (Incurrence of Indebtedness and Issuance of Preferred Stock); and (III) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Subsidiaries since the Issue Date (excluding payments permitted by Condition 4(c)(ii)(B), (C), (D), (E), (F) and (G) below), is less than the sum, without duplication, of: (1) 50 per cent. of the Consolidated Net Income of the Issuer for the period (taken as one accounting period) from the beginning of the first annual fiscal quarter commencing immediately prior to the Issue Date to the end of the Issuer’s most recently ended fiscal period for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100 per cent. of such deficit); plus (2) 100 per cent. of the aggregate net cash proceeds and the Fair Market Value of marketable securities received by the Issuer since the Issue Date as a contribution to its common equity capital or from the issue or sale of Qualifying Equity Interests of the Issuer or from the issue or sale of convertible or exchangeable Disqualified Stock of the Issuer or convertible or exchangeable debt securities of the Issuer, in each case, that have been converted into or exchanged for Qualifying Equity Interests of the Issuer (other than Qualifying Equity Interests and convertible or exchangeable Disqualified Stock or debt securities sold to a Subsidiary); plus (3) to the extent that any Restricted Investment that was made after the date of the Trust Deed is (a) sold for cash or otherwise cancelled, liquidated or repaid for cash, or (b) made in an entity that subsequently becomes a Wholly-Owned Subsidiary of the Issuer, the initial amount of such Restricted Investment. (ii) The preceding provisions will not prohibit: (A) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of the Trust Deed; (B) the making of any Restricted Payment in exchange for, or out of or with the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Issuer) of, Equity Interests of the Issuer (other than Disqualified Stock), or from the substantially concurrent contribution of common equity capital to the Issuer; provided that the amount of any such net cash proceeds that are utilised for any such Restricted Payment will be excluded from the calculation of amounts under sub-clause (III)(2) above; (C) the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Subsidiary of the Issuer to the holders of its Equity Interests on a pro rata basis;

143 (D) the repurchase, redemption or other acquisition or retirement for value of Indebtedness of the Issuer that is contractually subordinated to the Notes with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness; (E) the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options; (F) so long as no Potential Event of Default or Event of Default has occurred and is continuing, the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of the Issuer or any preferred stock of any Subsidiary of the Issuer issued on or after the Issue Date in accordance with the Group Leverage Ratio test set forth in Condition 4(a)(i); (G) payments of cash, dividends, distributions, advances or other Restricted Payments by the Issuer or any of its Subsidiaries to allow the payment of cash in lieu of the issuance of fractional shares upon (i) the exercise of options or warrants or (ii) the conversion or exchange of Capital Stock of any such Person; (H) so long as no Potential Event of Default or Event of Default has occurred and is continuing, the repurchase, redemption or retirement for value of any Equity Interests of the Issuer or any Subsidiary of the Issuer held by any current or former officer, director or employee of the Issuer or any of its Subsidiaries pursuant to any equity subscription agreement, stock option agreement, shareholders’ agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed U.S.$5 million (or the U.S. Dollar Equivalent in any other currency or currencies) in any twelve-month period; (I) so long as no Potential Event of Default or Event of Default has occurred and is continuing, other Restricted Payments in an aggregate amount not to exceed 10 per cent. of the Group’s Consolidated EBITDA for the most recently ended four full fiscal quarters for which internal financial statements on a consolidated basis are available immediately preceding the date on which such Restricted Payment is made, since the Issue Date; and (J) any Restricted Payment, provided, that (i) no Potential Event of Default or Event of Default has occurred and is continuing (or would result therefrom) and (ii) the Group Leverage Ratio for the Group’s most recently ended four full fiscal quarters for which internal financial statements on a consolidated basis are available immediately preceding the date on which such Restricted Payment is made does not exceed 2.0 to 1.0 on a pro forma basis for such Restricted Payment. (iii) The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Issuer or such Subsidiary, as the case may be, pursuant to the Restricted Payment. (d) Transactions with Affiliates The Issuer shall not, and shall ensure that none of its Subsidiaries, directly or indirectly, will, conduct any business, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, transfer, assignment, lease, conveyance or exchange of any property or the rendering of any service) with, or for the benefit of, any Affiliate (an ‘‘Affiliate Transaction’’) including, without limitation, intercompany loans, unless the terms of such Affiliate Transaction are no less favourable to such entity, than those that could be obtained (at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefore) in a comparable arm’s-length transaction with a Person that is not an Affiliate of such entity. For the avoidance of doubt, this Condition 4(d) does not apply to: (i) any Affiliate Transaction between the Issuer and its Subsidiaries and between or among Subsidiaries of the Issuer; (ii) compensation or employee benefit arrangements with any employee, officer or director of the Issuer or any Subsidiary of the Issuer arising as a result of their employment contract; (iii) transactions pursuant to written agreements existing on the Issue Date; or (iv) any other payments of fees made pursuant to services contracts existing on the Issue Date for the provision of

144 services to a member of the Group that have been entered into in the ordinary course of business between that member of the Group and any Affiliate that are on arm’s-length terms. (e) Asset Sales The Issuer shall not, and shall not permit any of its Subsidiaries to consummate an Asset Sale unless: (i) The Issuer or any of its Subsidiaries receives consideration at the time of the Asset Sale at least equal to the Fair Market Value (measured as of the date of the definitive agreement with respect to such Asset Sale) of the assets or Equity Interests issued or sold or otherwise disposed of; and (ii) at least 75 per cent. of the consideration received in the Asset Sale by the Issuer or the relevant Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash: (A) any liabilities, as shown on the Issuer’s most recent consolidated balance sheet, of the Issuer or any of its Subsidiaries (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets pursuant to a customary novation or indemnity agreement that releases the Issuer or such Subsidiary from or indemnifies against further liability; (B) any securities, notes or other obligations received by the Issuer or any such Subsidiary from such transferee that are contemporaneously, subject to ordinary settlement periods, converted by the Issuer or such Subsidiary into cash, to the extent of the cash received in that conversion; and (C) any stock or assets of the kind referred to in clauses (I), (II) or (IV) of the next paragraph of this Condition 4(e). Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Issuer or one or more of its Subsidiaries may apply an amount equal to the amount of such Net Proceeds: (I) to repay Indebtedness and other Obligations under a Credit Facility that are secured by a Lien and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; (II) to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business, if, after giving effect to any such acquisition of Capital Stock, the Permitted Business is or becomes a Subsidiary of the Issuer; (III) to make a capital expenditure; or (IV) to acquire other assets that are not classified as current assets under IFRS and that are used or useful in a Permitted Business. Pending the final application of any Net Proceeds, the Issuer or any of its Subsidiaries may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by these Conditions. If the Net Proceeds exceed the aggregate amount within the applicable time period, such excess amount applied or invested as provided in the second paragraph of this covenant will constitute ‘‘Excess Proceeds’’. When the aggregate amount of Excess Proceeds exceeds U.S.$25 million (or the U.S. Dollar Equivalent in any other currency or currencies), within five days thereof, the Issuer will make an offer (an ‘‘Asset Sale Offer’’) to all Noteholders with respect to offers to purchase, prepay or redeem with the proceeds of sales of assets to purchase, prepay or redeem the maximum principal amount of Notes (plus all accrued and unpaid interest and the amount of all fees and expenses, including premiums (if any), incurred in connection therewith) that may be purchased or redeemed out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100 per cent. of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the date of purchase or redemption. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Issuer may use those Excess Proceeds for any purpose not otherwise prohibited by these Conditions. If the aggregate principal amount of Notes tendered in (or required to be redeemed in connection with) such Asset Sale Offer exceeds the amount of Excess Proceeds, the Issuer will accept Notes for purchase on a pro rata basis, based on the amounts tendered or

145 required to be prepaid or redeemed (with such adjustments as may be deemed appropriate by the Issuer so that only Notes in denominations of U.S.$200,000, or an integral multiple of U.S.$1,000 in excess thereof, will be purchased). Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. The Issuer will comply with the requirements of all securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Condition 4(e), the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Condition 4(e) by virtue of such compliance. (f) Merger, Consolidation or Sale of Assets The Issuer may not, directly or indirectly, (i) merge, consolidate, amalgamate or otherwise combine with or into another Person (whether or not the Issuer is the surviving corporation); or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Issuer and its Subsidiaries, taken as a whole, in one or more related transactions, to another Person; unless: (i) either (a) the Issuer is the surviving corporation, (b) the Person formed by or surviving any such merger, consolidation, amalgamation or other combination (if other than the Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organised or existing under the laws of any member state of the European Union (including the United Kingdom), the Republic of Turkey, the United States or any state of the United States or the District of Columbia or (c) the Person formed by or surviving any such merger, consolidation, amalgamation or other combination (if other than the Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organised or existing under the laws of the Republic of Azerbaijan, so long as such merger, consolidation, amalgamation or other combination or such sale, assignment, transfer, conveyance or other disposition does not result in any Ratings Agency downgrading the then applicable credit rating of the Notes; (ii) the Person formed by or surviving any such merger, consolidation, amalgamation or other combination (if other than the Issuer) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Issuer under the Notes and the Trust Deed; (iii) immediately after such transaction, the Issuer or such surviving Person certifies to the Trustee in writing that no Potential Event of Default or Event of Default exists or will exist as a result thereof; (iv) the Issuer or the Person (as applicable) formed by or surviving any such merger, consolidation, amalgamation or other combination (if other than the Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made: (A) will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least U.S.$1.00 of additional Indebtedness pursuant to the Group Leverage Ratio test set forth in Condition 4(a)(i) above; (B) will (either directly or through its Subsidiaries), on the date of such transaction after giving effect thereto, retain, renew or procure all material licenses and other authorisations reasonably required to operate its business as it was conducted prior to such transaction; (v) furnishes to the Trustee an Officers’ Certificate confirming that the transaction complies with these Conditions; and (vi) if the Person formed by or surviving any such merger, consolidation, amalgamation or other combination is STAR Rafineri A.¸S., such merger, consolidation, amalgamation or other combination shall not result in any Ratings Agency downgrading the then-applicable credit rating of the Notes; If any Ratings Agency downgrades the then-applicable credit rating of the Notes as a result of the transaction described in this Condition 4(f)(vii), the Notes shall become immediately become due and repayable at their principal amount together with accrued interest.

146 In addition, the Issuer may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This Condition 4(f) will not apply to (i) a merger between or among the Issuer and any of its Subsidiaries (so long as no Capital Stock of the Issuer is distributed to any Person) or (ii) a merger of the Issuer with an Affiliate solely for the purpose and with the sole effect of reincorporating the Issuer in another jurisdiction for tax reasons. (g) Business Activity The Issuer will not, and will not permit any of its Subsidiaries to, engage in any business other than a Permitted Business. (h) Dividend and other Payment Restrictions Affecting Subsidiaries (i) The Issuer will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary to (1) pay dividends or make any other distributions on its Capital Stock to the Issuer or any of its Subsidiaries or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Issuer or any of its Subsidiaries, (2) make any loans or advances to the Issuer or any of its Subsidiaries or (3) sell, lease or transfer any of its property or assets to the Issuer or any its Subsidiaries. (ii) The foregoing sub-paragraph (i) will not apply to encumbrances or restrictions existing under or by reason of: (A) agreements governing Existing Indebtedness and Credit Facilities as in effect on the Issue Date and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are no less favourable in any material respect to the Noteholders, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the Issue Date; (B) the Notes or the Trust Deed; (C) agreements governing other Indebtedness permitted to be incurred under Condition 4(a) (Incurrence of Indebtedness and Issuance of Preferred Stock) and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the restrictions therein are not materially less favourable to the Noteholders, taken as a whole, than those contained in the Trust Deed and the Notes; (D) applicable law, rule, regulation or order; (E) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Issuer or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred; (F) customary non-assignment provisions in contracts and licenses entered into in the ordinary course of business; (G) purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (i)(3) of this Condition 4(h); (H) any agreement for the sale or other disposition of a Subsidiary that restricts distributions by that Subsidiary pending its sale or other disposition; (I) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

147 (J) Liens permitted to be incurred under the provisions of Condition 4(b) (Limitation on Liens) that limit the right of the debtor to dispose of the assets subject to such Liens; (K) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements (including agreements entered into in connection with a Restricted Investment) entered into with the approval of the Issuer’s Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements; (L) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and (M) agreements entered into in connection with any Project Financing. (i) Reports (i) So long as any Notes are outstanding, the Issuer shall (i) make available on the Issuer’s website or (ii) so long as the Notes are listed on the Stock Exchange, make available on the official website of the Stock Exchange, to the extent and in the manner permitted by the rules of the Stock Exchange: (A) as soon as they become available but in any event within 120 days after the end of the Issuer’s fiscal year beginning with the fiscal year ending 31 December 2017, copies of the Accounts as at and for such fiscal year, in each case audited by the Auditors; and (B) within 60 days following the end of the first and third fiscal quarters of the Issuer in each fiscal year, beginning with the first quarter ended 31 March 2018, and within 60 days following the end of the first six months in each fiscal year of the Issuer, beginning with the first six months ended 30 June 2018, Accounts as at, and for such periods, in each case reviewed by the Auditors; (ii) provided, however, that each set of Accounts delivered by it pursuant to Condition 4(i) is accompanied by an audit report, in the case of paragraph (A) above and a review report, in the case of paragraph (B) above, of the Auditors and accompanying notes and annexes. The Issuer undertakes to furnish to the Trustee such information as the Stock Exchange may require in connection with the listing or admission to trading on the Stock Exchange of the Notes at the same time as such information is provided to the Stock Exchange. (iii) So long as the Notes remain outstanding and during any period during which the Issuer is not subject to Section 13 or 15(d) of the U.S. Exchange Act nor exempt therefrom pursuant to Rule 12g3-2(b) of such Act, the Issuer shall furnish to the Noteholders (with a copy to the Trustee) and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act. (iv) Contemporaneously with the provision of the information discussed above, the Issuer will also either provide the information to a regulatory news service or file a press release with the appropriate internationally recognised wire services with respect to such information and post such press release on the Issuer’s website. (j) Maintenance of Listing The Issuer shall use all reasonable endeavours to maintain the listing of the Notes on the Official List of the Stock Exchange for so long as any Note is outstanding; provided that if at any time the listing becomes impractical or unduly onerous, the Issuer shall use all reasonable endeavours to obtain, and thereafter to maintain a quotation for, or listing of, the Notes on such other stock exchange as is commonly used for the quotation or listing of debt securities as the Issuer may decide. (k) Payment of Taxes and Other Claims The Issuer shall pay or discharge, or cause to be paid or discharged, before the same shall become overdue, all taxes, assessments and government charges levied or imposed upon, or upon their income, profits or property provided that this covenant will not require the payment or discharge of any tax, assessment or charge the amount, or the applicability of which is being contested in good faith and by appropriate proceedings (or has been the subject of such proceedings within the then preceding 30 days, resulted in a final, non-appealable determination of liability in a definitively

148 ascertained amount) and for which adequate reserves or other appropriate provision has been made. (l) Suspension of Covenants when Notes rated Investment Grade If on any date following the Issue Date (i) the Notes have achieved an Investment Grade Rating; and (ii) no Potential Event of Default or Event of Default shall have occurred and be continuing on such date, then, the Issuer will notify the Trustee in writing, including a copy of the letter evidencing such Investment Grade Rating, and beginning on the date of such notice and continuing until such time, if any, at which the Notes cease to have an Investment Grade Rating (such period, the ‘‘Suspension Period’’), the following covenants will no longer be applicable: Condition 4(a) (Incurrence of Indebtedness and Issuance of Preferred Stock); Condition 4(c) (Limitation on Restricted Payments); Condition 4(d) (Transactions with Affiliates); Condition 4(e) (Asset Sales), and Condition 4(h) (Dividend and other Payment Restrictions Affecting Subsidiaries), provided that such covenants (and any related default provisions) will again apply in accordance with their terms from the first day on which a Suspension Period ceases to be in effect with regard to actions of the Issuer or any Subsidiary properly taken during the continuance of the Suspension Period, and the covenant under Condition 4(c) (Limitation on Restricted Payments) will be interpreted as if it had been in effect since the Issue Date except that no default will be deemed to have occurred solely by reason of a Restricted Payment made while such covenant was suspended. (m) Payments for Consent The Issuer will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Noteholders for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of these Conditions or the Trust Deed unless such consideration is offered to be paid to all Noteholders (save for any Noteholders for which such offer or payment of consideration would breach any applicable law or regulation applicable to the Issuer and its Subsidiaries) that consent, waive or agree to amend in the time frame and on the terms set forth in the solicitation documents relating to such consent, waiver or agreement.

5 Interest (a) Interest Accrual Each Note bears interest from and including 26 January 2018 (the ‘‘Issue Date’’) at the rate of 5.875 per cent. per annum (the ‘‘Rate of Interest’’) payable semi-annually in arrear on 26 January and 26 July in each year, commencing on 26 July 2018 (each, an ‘‘Interest Payment Date’’). Each period beginning on (and including) the Issue Date or any Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date is herein called an ‘‘Interest Period’’. The amount of interest payable in respect of each Note for any Interest Period shall be calculated by applying the Rate of Interest to the principal amount of such Note, dividing the product by two and rounding the resulting figure to the nearest cent (half a cent being rounded upwards). (b) Cessation of Interest Each Note will cease to bear interest from the due date for final redemption unless, upon due surrender of the relevant Note, payment of principal is improperly withheld or refused. In such case it will continue to bear interest at such rate (after as well as before judgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day after the Principal Paying Agent or the Trustee has notified the Noteholders that it has received all sums due in respect of the Notes up to that day (except to the extent that there is any subsequent default in payment) in accordance with Condition 13 (Notices). (c) Day Count Fraction If interest is required to be calculated for any period other than an Interest Period, it will be calculated on the basis of a year of 360 days consisting of twelve 30 day months each and, in the case of an incomplete month, the actual number of days elapsed. The determination of the amount of interest payable under this Condition 5(c) by the Principal Paying Agent shall, in the absence of fraud or manifest or proven error, be binding on all parties.

149 6 Payments (a) Principal Payment of principal and premium in respect of each Note and payment of interest due other than on an Interest Payment Date will be made to the Person shown in the Register at the close of business on the Record Date and subject to the surrender (or, in the case of part payment only, endorsement) of the relevant Definitive Certificate at the Specified Office of any Paying Agent. (b) Interest Payments of interest due on an Interest Payment Date will be made to the Person shown in the Register at close of business on the Record Date. (c) Payments Each payment in respect of the Notes pursuant to Conditions 6(a) (Principal) and 6(b) (Interest) will be made by transfer to the registered account of the Noteholder. Payment instructions (for value the due date, or, if the due date is not a Business Day, for value the next succeeding Business Day) will be initiated by the Paying Agents, in the case of principal, on the later of the due date for payment and the day on which the relevant Definitive Certificate is surrendered (or, in the case of part payment only, endorsed) at the specified office of any of the Paying Agents and, in the case of interest and other amounts on the due date for payment. (d) Delay in Payment Noteholders will not be entitled to any interest or other payment in respect of any delay in payment resulting from (i) the due date for payment not being a Business Day or (ii) if the Noteholder is late in surrendering its Definitive Certificate (if required pursuant to these Conditions). (e) Payments Subject to Fiscal Laws All payments in respect of the Notes are subject in all cases to (i) any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 8 (Taxation) and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the ‘‘Code’’) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or any law implementing an intergovernmental approach thereto (any such withholding or deduction, a ‘‘FATCA Withholding’’). No commissions or expenses shall be charged to the Noteholders in respect of such payments save as provided in Condition 6(c) (Payments). (f) Partial Payments If the amount of principal or interest which is due on the Notes on any date is not paid in full, the Registrar will annotate the Register and any Definitive Certificates surrendered for payment with a record of the amount of principal or interest in fact paid and the date of such payment. (g) Appointment of Agents The names of the Agents initially appointed by the Issuer and their Specified Offices are set out below. The Issuer reserves the right under and in accordance with the terms of the Agency Agreement at any time with the prior written approval of the Trustee to vary or terminate the appointment of any Agent and to appoint successor or additional Agents, provided that it will at all times maintain: (i) a Principal Paying Agent; (ii) an Agent (which may be the Principal Paying Agent) having a specified office in London; and (iii) a Registrar. Notice of any such removal or appointment and of any change in the Specified Office of any Agent shall promptly be given to Noteholders in accordance with Condition 13 (Notices).

150 7 Redemption and Purchase (a) Scheduled redemption Unless previously redeemed or purchased and cancelled as provided below, the Notes will be redeemed at their principal amount on the Maturity Date. (b) Optional Redemption by the Issuer (i) At any time prior to 26 January 2021, the Issuer may at its option on one or more occasions redeem the Notes in whole or in part, on giving not less than 30 nor more than 60 days’ irrevocable notice to the Noteholders in accordance with Condition 13 (Notices), at a redemption price equal to 100 per cent. of the principal amount of the Notes redeemed, plus the Applicable Premium as of, and accrued and unpaid interest, and Additional Amounts (as defined in Condition 8 (Taxation)) (if any), to, but excluding, the applicable redemption date (subject to the right of Noteholders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date). (ii) At any time on or after 26 January 2021, the Issuer may at its option redeem the Notes, in whole or in part, on giving not less than 30 nor more than 60 days’ irrevocable notice to the Noteholders in accordance with Condition 13 (Notices), at the following redemption prices (expressed as a percentage of the principal amount of the Notes) plus accrued and unpaid interest, and Additional Amounts (as defined in Condition 8 (Taxation)) (if any), to, but excluding, the applicable redemption date (subject to the right of Noteholders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date), if redeemed during the periods indicated below:

Period Percentage From and including 26 January 2021 to but excluding 26 January 2022 ..... 102.9375% From and including 26 January 2022 to but excluding the Maturity Date ..... 101.46875% (iii) Notices of redemption delivered in accordance with this Condition 7(b) will specify (i) the date fixed for redemption, (ii) the amount to be redeemed (which shall be limited by the provisions of Condition 7(b)(ii)) and (iii) the applicable redemption price (determined in accordance with Condition 7(b)(i) or Condition 7(b)(ii), as the case may be). Upon the expiry of any notice of redemption delivered in accordance with this Condition 7(b), the Issuer shall be bound to redeem the Notes in accordance with this Condition 7(b). None of the Trustee or the Agents shall be responsible for calculating or verifying the redemption price payable pursuant to this Condition 7(b) or for determining or verifying whether a Note is to be accepted for redemption under this Condition 7(b) and will not be responsible to Noteholders or any other person for any loss arising from any failure by it to do so. The Issuer is not required to make mandatory redemption payments or sinking fund payments with respect to the Notes. (c) Redemption for Taxation Reasons The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ irrevocable notice to the Noteholders in accordance with Condition 13 (Notices) at their principal amount, plus accrued and unpaid interest to, but excluding, the date fixed for redemption, if, before giving such notice, the Issuer delivers an Officers’ Certificate to the Trustee stating that it has or will become obliged to pay any Additional Amounts as a result of: (i) any change in, or an amendment to, or change in the official interpretation of the laws (including any regulations or rulings promulgated thereunder) of, any Relevant Taxing Jurisdiction (as defined in Condition 8 (Taxation)); or (ii) any change in or amendment to or change in the official interpretation of any official position regarding the application or interpretation of such laws or regulations or rulings (including a judgment by a court of competent jurisdiction), in each case which change or amendment is announced or becomes effective on or after the Issue Date, and the Issuer cannot avoid such obligation by taking reasonable measures available to it,

151 provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such Additional Amounts if a payment in respect of the Notes were then due. The Trustee shall be entitled to accept such Officers’ Certificate as sufficient evidence of the satisfaction of the condition precedent described above in which event it shall be conclusive and binding on the Noteholders. Upon the expiry of any such notice referred to above, the Issuer shall be bound to redeem the Notes in accordance with this Condition 7(c). (d) Redemption at the Option of the Noteholders upon a Change of Control Upon the occurrence of a Change of Control Event, unless the Issuer has exercised its right to redeem all of the Notes as described under Condition 7(b) (Optional Redemption by the Issuer), each Noteholder shall have the right to require that the Issuer repurchase all or any part of that Noteholder’s Notes (in integral multiples of U.S.$1,000; provided that Notes of U.S.$200,000 or less may only be redeemed in whole and not in part) at a purchase price in cash equal to 101 per cent. of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to, but excluding, the date of purchase (subject to the right of Noteholders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date). Within 30 days following any Change of Control Event, unless the Issuer has exercised its right to redeem all of the Notes as described under Condition 7(b) (Optional Redemption by the Issuer) the Issuer will notify the Noteholders (with a copy to the Trustee) in accordance with Condition 13 (Notices) and the Trust Deed (the ‘‘Change of Control Offer’’) stating: (i) that a Change of Control Event has occurred and that such Noteholder has the right to require the Issuer to purchase such Noteholder’s Notes (in integral multiples of U.S.$1,000; provided that Notes of U.S.$200,000 or less may only be redeemed in whole and not in part) at a purchase price in cash equal to 101 per cent. of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to, but excluding, the date of purchase (subject to the right of Noteholders of record on the relevant Record Date to receive interest on the relevant Interest Payment Date); (ii) the circumstances and relevant facts regarding such Change of Control and Change of Control Event; (iii) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is made); and (iv) the procedures determined by the Issuer, consistent with the Agency Agreement that a Noteholder must follow in order to have its Notes purchased. The Issuer will not be required to make a Change of Control Offer following a Change of Control Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements of these Conditions and the Trust Deed applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding anything to the contrary contained herein, a Change of Control Offer may be made notwithstanding the fact that a Change of Control Event shall not have occurred, conditioned upon the consummation of the relevant Change of Control, if a definitive agreement is in place for the relevant Change of Control at the time the Change of Control Offer is made. (e) Partial Redemption If the Notes are to be redeemed in part only on any date in accordance with Conditions 7(b) (Optional Redemption by the Issuer), each Note shall be redeemed in part in the proportion which the aggregate principal amount of the outstanding Notes to be redeemed on the relevant redemption date bears to the aggregate principal amount of outstanding Notes on such date. (f) Purchases The Issuer and any of its Subsidiaries may at any time purchase or procure others to purchase for their account Notes in the open market or otherwise and at any price. The Notes so purchased may be held or resold (provided that such resale is in compliance with all applicable laws) or surrendered

152 to the Registrar for cancellation at the option of the Issuer or otherwise, as the case may be in compliance with Condition 7(g) (Cancellation of Notes) below. The Notes so purchased, while held by or on behalf of the Issuer or by any Subsidiary of the Issuer, shall not entitle the Issuer or any such Subsidiary to vote at any meeting of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Condition 12(a) (Meetings of Noteholders). (g) Cancellation of Notes All Notes which are redeemed pursuant to this Condition 7 or repurchased and submitted to the Registrar for cancellation pursuant to Condition 7(f) (Purchases) will be cancelled and may not be reissued or resold. For so long as the Notes are admitted to trading on a stock exchange and the rules of such exchange so require, the Issuer shall promptly inform the stock exchange of the cancellation of any Notes under this Condition 7(g). (h) Tender Offer and Exchange Offer Redemption Notwithstanding any other Condition, in connection with any tender offer or exchange offer for the Notes at a price equivalent to at least 100.0 per cent. of the principal amount of the Notes tendered, plus accrued and unpaid interest thereon to, but excluding, the applicable tender settlement date or exchange settlement date, as the case may be, if Noteholders of not less than 90 per cent. in aggregate principal amount of the applicable outstanding Notes validly tender or exchange and do not withdraw such Notes in such tender offer or exchange offer and the Issuer, or any third party making such a tender offer in lieu of the Issuer, purchases or exchanges for new notes, all of the Notes validly tendered or exchanged, as the case may be, and not withdrawn by such Noteholders, the Issuer or such third party will have the right upon not less than ten nor more than 60 days’ prior notice, given not more than 30 days following such tender offer expiration date or exchange offer expiration date, as the case may be, to redeem the Notes that remain outstanding in whole, but not in part, following such purchase or exchange for new notes at a price equal to the price or consideration offered to each other Noteholder in such tender offer or exchange offer, plus, to the extent not included in the tender offer payment or exchange offer payment, accrued and unpaid interest, if any, thereon, to, but excluding, such redemption date.

8 Taxation (a) Additional Amounts All payments of principal, premium and interest payable by or on behalf of the Issuer under or with respect to the Notes will be made free and clear of, and without withholding or deduction for or on account of Taxes imposed or levied by or on behalf of the jurisdiction of organisation of the Issuer and (if different) any jurisdiction in which the Issuer is resident for tax purposes at the time of payment and any political subdivision or taxing authority thereof or therein (each a ‘‘Relevant Taxing Jurisdiction’’), unless such withholding or deduction is required by law. If any amounts are required to be withheld or deducted for or on account of Taxes imposed by a Relevant Taxing Jurisdiction from any payment of principal, premium or interest made under or with respect to the Notes, the Issuer, to the fullest extent then permitted by law, will be required to pay such additional amounts (‘‘Additional Amounts’’) as may be necessary so that the net amount received by a Noteholder (including Additional Amounts) after such withholding or deduction will not be less than the amount such Noteholder would have received if such Taxes had not been withheld or deducted; provided, however, that the foregoing obligation to pay Additional Amounts does not apply to: (i) any Taxes that would not have been so imposed but for the existence of any present or former connection between the relevant Noteholder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of power over, the relevant Noteholder, if the relevant Noteholder is an estate, trust, partnership or corporation) and the Relevant Taxing Jurisdiction (other than the mere receipt of such payment or the ownership or holding of such Note); or (ii) any payment of or on account of estate, inheritance, gift, sales, excise, transfer, personal property tax or similar tax, assessment or governmental charge; or (iii) any tax, duty, assessment, fee or other governmental charge that would not have been imposed but for the presentation of the Note by the Noteholder for payment more than 30 days after the date on which such payment on such Note became due and payable or the date on

153 which payment thereof is duly provided for, whichever is later (except to the extent that the Noteholder would have been entitled to Additional Amounts had the Note been presented on the last day of such 30-day period); or (iv) with respect to any payment of principal of or interest on such Notes to any Noteholder who is a fiduciary or partnership or any Person other than the sole beneficial owner of such payment, to the extent that (A) such withholding or deduction is required for the sole reason that the Noteholder is a fiduciary, a partnership or a Person other than the beneficial owner of such payment or (B) a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial owner of such payment would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the actual Noteholder of such Note; or (v) any tax, duty, assessment, fee or other governmental charge that would have been avoided if the Noteholder had made a declaration of non-residence or similar claim for exemption or reduction of the applicable deduction or withholding but fails to do so; or (vi) any withholding or deduction imposed as a result of the failure of the holder of the Note or beneficial owner of the Notes to comply with certification, information, documentation, reporting or other similar requirements concerning the nationality, residence or identity of such holder or beneficial owner or to make any valid and timely declaration or similar claim or satisfy any certification information or other reporting requirement, which is required or imposed by a statute, treaty, regulation or administrative practice of the Relevant Taxing Jurisdiction as a precondition to exemption from or reduction in all or part of such withholding or deduction; or (vii) where (in the case of a payment of principal or interest on redemption) the relevant Definitive Certificate is surrendered for payment in a Relevant Taxing Jurisdiction; or (viii) any combination of the above. Notwithstanding any other provision of these Conditions or the Trust Deed, any amounts to be paid on the Notes by or on behalf of the Issuer, will be paid net of FATCA Withholding. Neither the Issuer nor any person will be required to pay any additional amounts in respect of FATCA Withholding. Whenever in the Trust Deed or the Conditions there is mentioned, in any context (i) the payment of principal; (ii) interest; or (iii) any other amount (including premium) payable on or with respect to any of the Notes, such reference shall be deemed to include payment of Additional Amounts as described under this heading to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

9 Prescription Claims against the Issuer for payment in respect of principal, premium and interest will become void unless the relevant Definitive Certificate is surrendered for payment as required by Condition 6 (Payments) within a period of ten years in the case of principal and premium and five years in the case of interest from the relevant date for payment thereof.

10 Events of Default The Trustee at its discretion may, and if so requested in writing by the holders of not less than one quarter in aggregate principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution (subject in each case to being indemnified and/or prefunded and/or secured to its satisfaction against all liabilities, costs and expenses) shall give written notice to the Issuer that the Notes are and they shall immediately become due and repayable in each case at their principal amount together with accrued interest, if any of the following events (each, an ‘‘Event of Default’’) occurs and is continuing: (a) Non-Payment (i) failure by the Issuer to pay any principal or premium in respect of any of the Notes when it becomes due and payable (whether at stated maturity, upon redemption, upon acceleration or otherwise); or

154 (ii) failure by the Issuer to pay interest in respect of any of the Notes when it becomes due and payable and such failure continues for a period of fourteen days; or (b) Breach of Other Obligations (i) failure by the Issuer to comply with any of the agreements or covenants described above under Condition 4(f) (Merger, Consolidation or Sale of Assets); or (ii) failure by the Issuer to comply with any other agreement or covenant in these Conditions or the Trust Deed and such failure continues for 30 days after written notice of such failure has been given to the Issuer by the Trustee; or (c) Cross-Acceleration (i) any Indebtedness of the Issuer or any of its Subsidiaries is not paid on the due date for payment or (as the case may be) within any originally applicable grace period; or (ii) any such Indebtedness becomes due and payable prior to its stated maturity by reason of any default, event of default or the like (howsoever described) (which, for the avoidance of doubt, excludes any Indebtedness becoming due and payable pursuant to any scheduled early repayment, exercise of any option to require early repayment or the like), provided that the aggregate principal amount of such Indebtedness falling within (i) and/or (ii) above individually or in the aggregate equals or exceeds U.S.$50 million (or the U.S. Dollar Equivalent in any other currency or currencies); or (d) Judgment Default one or more judgments or orders or arbitration awards against the Issuer or a Material Subsidiary of the Issuer from which no further appeal or judicial review is permissible under applicable law for the payment of an amount in excess of U.S.$50 million (or the U.S. Dollar Equivalent in any other currency or currencies) (net of any amounts that are covered by insurance policies issued by solvent carriers), whether individually or in aggregate, is rendered or granted against the Issuer or any of its Material Subsidiaries and continue(s) unsatisfied and unstayed for a period of 60 days after the date thereof or, if later, the date therein specified for payment; or (e) Bankruptcy (i) the Issuer, or any of the Issuer’s Material Subsidiaries, (A) is declared by a court of competent jurisdiction to be insolvent, bankrupt or unable to pay its debts; or (B) stops, suspends, threatens to stop or suspend payment of, all or substantially all of its debts as they mature; or (C) applies for or consents to or suffers the appointment of an administrator, liquidator or receiver or other similar person in respect of the Issuer or any of the Issuer’s Material Subsidiaries over the whole or substantially the whole of their respective undertakings, property, assets or revenues pursuant to any insolvency law (other than for a solvent liquidation of a Material Subsidiary or otherwise pursuant to a Permitted Reorganisation); or (D) takes any proceedings under any law for a readjustment or deferment of its obligations or substantially all of them or makes or enters into a general assignment or an arrangement or composition with or for the benefit of its creditors except pursuant to a Permitted Reorganisation; or (ii) an order of a court of competent jurisdiction is made or an effective resolution is passed for the winding-up or dissolution of the Issuer or any Material Subsidiary of the Issuer, or the Issuer or any Material Subsidiary of the Issuer ceases to carry on all or substantially all of their respective businesses or operations except, in any such case, (A) for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation on terms approved by an Extraordinary Resolution or Written Resolution (as defined in the Trust Deed) of the Noteholders or (B) for a solvent liquidation of a Material Subsidiary or (C) pursuant to a Permitted Disposal or Permitted Reorganisation; or

155 (f) Government intervention (i) all or substantially all of the undertaking, assets and revenues of the Issuer or any of the Issuer’s Material Subsidiaries is condemned, seized or otherwise appropriated by any Person acting under the authority of any national, regional or local government; or (ii) the Issuer or any of the Issuer’s Material Subsidiaries is prevented by any such Person from exercising normal control over all or substantially all of its undertaking, assets and revenues and as a consequence of any such government intervention, the Issuer is unable to perform or comply with any one or more of its obligations under the Notes; or (g) Unlawfulness it is or will become unlawful for the Issuer to perform or comply with any one or more of its obligations under any of the Notes or the Trust Deed; or (h) Analogous effect any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of the foregoing paragraphs of this Condition 10, provided that in the case of Conditions 10(f), 10(g) and 10(h) such event is materially prejudicial to the interests of the Noteholders.

11 Replacement of Notes If any Definitive Certificate is lost, stolen, mutilated, defaced or destroyed it may be replaced at the Specified Office of the Registrar or any Transfer Agent subject to all applicable laws and stock exchange or other relevant authority requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Definitive Certificates must be surrendered before replacements will be issued.

12 Meetings of Noteholders; Modification, and Waivers (a) Meetings of Noteholders The Trust Deed contains provisions for convening meetings of Noteholders to consider any matters relating to the Notes, including the modification of any provision of these Conditions or the Trust Deed. Any such modification may be made if sanctioned by an Extraordinary Resolution. Such a meeting may be convened by the Trustee, or the Issuer, or by the Trustee upon the request in writing of Noteholders holding not less than one-tenth of the aggregate principal amount of the outstanding Notes. The quorum at any meeting convened to vote on an Extraordinary Resolution will be two or more Eligible Persons (as defined in the Trust Deed) holding or representing a majority in aggregate principal amount of the Notes for the time being outstanding, or, at any adjourned meeting, two or more Eligible Persons being or representing Noteholders whatever the principal amount of the Notes for the time being outstanding so held or represented; provided, however, that at any meeting the business of which includes a Reserved Matter, the quorum shall be two or more Eligible Persons holding or representing not less than three-quarters or, at any adjourned meeting, not less than one-quarter of the aggregate principal amount of the outstanding Notes. Any Extraordinary Resolution duly passed at any such meeting shall be binding on all the Noteholders, whether present at the meeting(s) or not. (b) Written Resolution A Written Resolution will take effect as if it were an Extraordinary Resolution if it is signed by or on behalf of the holders of not less than three fourths in principal amount of the Notes for the time being outstanding. Such a resolution in writing may be contained in one document or several documents in like form, each signed by or on behalf of one or more Noteholders. (c) Modification without Noteholders’ consent The Trustee may agree with the Issuer, without the consent or sanction of the Noteholders, (i) to any modification of these Conditions, the Trust Deed or the Agency Agreement if, in the opinion of the

156 Trustee it may be proper to make, provided that the Trustee is of the opinion that such modification will not be materially prejudicial to the interests of Noteholders or (ii) to any modification of the Notes or the Trust Deed if in the opinion of the Trustee such modification is of a formal, minor or technical nature or to correct a manifest error or an error which is, in the opinion of the Trustee, proven. In addition, the Trustee may, without the consent of the Noteholders, authorise or waive any breach or proposed breach of the Notes or the Trust Deed if, in the opinion of the Trustee, the interests of the Noteholders will not be materially prejudiced thereby, provided that the Trustee shall not exercise any such powers in contravention of any express direction given by an Extraordinary Resolution or by a request under Condition 14(c) (Enforcement; Reliance). Any such authorisation, waiver, modification or substitution shall be binding on the Noteholders and, if the Trustee so requires, shall be notified to the Noteholders in accordance with Condition 13 (Notices) as soon as practicable thereafter.

13 Notices All notices to the Noteholders regarding the Notes will be valid if mailed to them at their respective addresses in the Register and will be deemed to have been given on the fourth Business Day after the date of mailing. The Issuer shall also ensure that notices are duly given or published in a manner which complies with the rules and regulations of the Stock Exchange or any other stock exchange on which the Notes are for the time being listed. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the first date on which such publication is made.

14 Trustee (a) Indemnification Under the Trust Deed, the Trustee is entitled to be indemnified and relieved from responsibility in certain circumstances and to be paid its costs and expenses in priority to the claims of the Noteholders. In addition, the Trustee is entitled to enter into business transactions with the Issuer and/or any of its Subsidiaries and any entity relating to the Issuer and/or any of its Subsidiaries without accounting for any profit and to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the Issuer and/or any of its Subsidiaries. (b) Exercise of power and discretion In the exercise of its powers and discretion under these Conditions and the Trust Deed, the Trustee will have regard to the interests of the Noteholders as a class and will not be responsible for any consequence for individual Noteholders as a result of such Noteholders being connected in any way with a particular territory or taxing jurisdiction, and the Trustee shall not be entitled to require, nor shall any Noteholder be entitled to claim, from the Issuer, any indemnification in respect of any tax consequences of any such exercise upon individual Noteholders. (c) Enforcement; Reliance The Trustee may at any time after the Notes become due and payable, at its discretion and without notice, institute such proceedings or take any other legal action as it thinks fit to enforce its rights under the Trust Deed and these Conditions in respect of the Notes, but it shall not be bound to do so unless: (i) it has been so requested in writing by the holders of not less than one-quarter in principal amount of the outstanding Notes or has been so directed by an Extraordinary Resolution; and (ii) it has been indemnified and/or prefunded and/or secured to its satisfaction. No Noteholder shall be entitled to proceed directly against the Issuer to enforce the provisions of the Notes under the Trust Deed or these Conditions, unless the Trustee, having become bound so to proceed on behalf of the Noteholders, fails to do so within a reasonable time and such failure is continuing. The Trustee may, in making any determination under these Conditions, act and/or rely on the opinion or advice of, or information obtained from, any expert and will not be responsible for any loss, liability, cost, claim, action, demand, expense or inconvenience which may result from it so

157 acting and/or relying or not so acting and/or relying or for any failure to call for any such expert advice at any time. The Trustee may rely without liability to Noteholders on any certificate or report prepared by any of the above mentioned experts, including specifically the Auditors, or any auditor, pursuant to the Conditions or the Trust Deed, whether or not the expert or auditor’s liability in respect thereof is limited by a monetary cap or otherwise. Until the Trustee has actual or express knowledge to the contrary, the Trustee may assume that no Change of Control Event, Potential Event of Default or Event of Default has occurred. The Trustee is not liable for any failure to monitor compliance by the Issuer with the Conditions (including, without limitation, Condition 4 (Covenants) and Condition 10 (Events of Default)).

15 Further Issues The Issuer may from time to time, without notice to or the consent of the Noteholders and in accordance with the Trust Deed, create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the date for and amount of the first payment of interest) so as to be consolidated and form a single series with the Notes (‘‘Further Notes’’). The Further Notes and the Notes shall be treated as a single class for all purposes of the Trust Deed, including waivers, amendments, redemptions and offers to purchase. Any further Notes shall be constituted by a deed supplemental to the Trust Deed. The Issuer may from time to time, with the consent of the Trustee, create and issue other series of notes having the benefit of the Trust Deed.

16 Contracts (Rights of Third Parties) Act 1999 No Person shall have any right to enforce any term or condition of the Notes or the Trust Deed under the Contracts (Rights of Third Parties) Act 1999.

17 Governing Law and Submission to Jurisdiction (a) Governing law The Trust Deed and the Notes, and any non-contractual obligations arising out of or in connection with the Trust Deed and/or the Notes, shall be governed by, and construed in accordance with, English law. (b) Jurisdiction of English courts The Issuer has, in the Trust Deed, irrevocably agreed for the benefit of the Trustee and the Noteholders that the High Court of Justice of England and Wales in London (and any competent United Kingdom appellate court in respect of any appeal relating to any judgment or order originally of the High Court of Justice of England and Wales) is to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Notes, the Trust Deed, and any non-contractual obligations arising out of or in connection with them, and accordingly has submitted to the exclusive jurisdiction of such courts. The Issuer has in the Trust Deed, waived, to the extent permitted by law, any objection to the High Court of Justice of England and Wales in London (and any competent United Kingdom appellate court in respect of any appeal relating to any judgment or order originally of the High Court of Justice of England and Wales) on the grounds that they are an inconvenient or inappropriate forum. To the extent permitted by law, the Trustee and the Noteholders may take any suit, action or proceeding arising out of or in connection with the Notes (including any proceeding relating to any non-contractual obligations arising out of or in connection with the Notes) (together referred to as ‘‘Proceedings’’) against the Issuer in any other court of competent jurisdiction and concurrent Proceedings in any number of jurisdictions. (c) Consent to Enforcement The Issuer agrees, without prejudice to the enforcement of a judgment obtained in the English courts according to the provisions of Article 54 of the International Private and Procedural Law of Turkey (Law No. 5718), that in the event that any action is brought in relation to the Issuer in a court in the Republic of Turkey in connection with the Notes, any judgment obtained in the courts of England in connection with such action shall constitute conclusive evidence of the existence and amount of the claim against the Issuer, pursuant to the provisions of the first sentence of Article 193 of the Civil Procedure Code of Turkey (Law No. 6100) and Articles 58 and 59 of the International Private and Procedural Law of Turkey (Law No. 5718).

158 (d) Appointment of Process Agent The Issuer has in the Trust Deed, irrevocably and unconditionally appointed UK PSG Limited at its registered office for the time being as its agent for service of process in England in respect of any Proceedings and has undertaken that in the event of such agent ceasing so to act it will appoint another person as its agent in England for that purpose. (e) Immunity To the extent that the Issuer may in any jurisdiction claim for itself or its assets or revenues immunity from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process and to the extent that such immunity, if any, (whether or not claimed) may be attributed in any such jurisdiction to the Issuer or any of its assets or revenues, the Issuer agrees (in connection with any Proceedings): (i) not to claim; and (ii) irrevocably waives, such immunity, in each case only to the fullest extent permitted by the laws of such jurisdiction.

18 Definitions For the purposes of these Conditions: ‘‘Accounts’’ means the consolidated financial statements of the Issuer, prepared in accordance with Turkish Accounting Standards. ‘‘Acquired Debt’’ means, with respect to any specified Person: (a) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (b) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. ‘‘Additional Amounts’’ shall have the meaning given to such term in Condition 8 (Taxation). ‘‘Affiliate’’ of any specified Person means any other Person, directly or indirectly controlling, controlled by, or under direct or indirect common control with, such specified Person. For purposes of this definition, ‘‘control’’ (including, with correlative meanings, the terms ‘‘controlling’’, ‘‘controlled by’’ and ‘‘under common control with’’), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. ‘‘Affiliate Transaction’’ shall have the meaning given to such term in Condition 4(d) (Transactions with Affiliates). ‘‘Agency’’ means any agency, authority, central bank, department, committee, government, legislature, minister, ministry, official or public or statutory person (whether autonomous or not). ‘‘Applicable Premium’’ means, with respect to any Note redeemed pursuant to Condition 7(b)(i) on any redemption date, the greater of: (a) 1.0 per cent. of the principal amount of the Note; or (b) the excess of: (i) the present value at such redemption date of (x) the redemption price of the Note at 26 January 2021, plus (y) all required interest payments due on the Note through 26 January 2021 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points, over (ii) the principal amount of the Note, as calculated by the Issuer or on behalf of the Issuer by such Person as the Issuer may engage. For the avoidance of doubt, calculation of the Applicable Premium shall not be a duty or obligation of the Trustee, the Registrar or any Paying Agent. ‘‘Aromatics Project Financing Subsidiary’’ means any Subsidiary of the Issuer which has been established by the Issuer for, or designated by the Issuer to have, the primary purpose of building, developing, enhancing, modifying or improving, by the use of Project Financing, any property, plant, equipment, factory, facility or asset the intended primary use of which is the extraction, manufacture, development, marketing, purchase or sale of benzene, toluene, xylenes or any other substance derived

159 by extraction from pyrolysis gasoline, extraction from reformate in the catalytic reforming of naptha, extraction from coke oven gas condensates, catalytic cyclisation and dehydrogenation of liquified petroleum gas or other similar refining or extracting activities, together with any other business activity which is ancillary or reasonably related to any of the foregoing. ‘‘Asset Sale’’ means: (a) the sale, lease, conveyance or other disposition of any assets or rights by the Issuer or any of the Issuer’s Subsidiaries; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer and its Subsidiaries taken as a whole will be governed by the provisions in Condition 7(d) (Redemption at the Option of the Noteholders upon a Change of Control) and Condition 4(f) (Merger, Consolidation or Sale of Assets) and not by the provisions of Condition 4(e) (Asset Sales); and (b) the issuance of Equity Interests by any of the Issuer’s Subsidiaries or the sale by the Issuer or any of the Issuer’s Subsidiaries of Equity Interests in any of the Issuer’s Subsidiaries. For purposes of this definition, the term ‘‘Asset Sale’’ shall not include: (a) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than U.S.$10 million (or the U.S. Dollar Equivalent in any other currency or currencies); (b) a transfer of assets or Equity Interests between or among the Issuer and its Subsidiaries; (c) an issuance of Equity Interests by a Subsidiary of the Issuer to the Issuer or to a Subsidiary of the Issuer; (d) the sale, lease or other transfer of products, inventory, trading stock, services, accounts receivable or other assets in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete assets in the ordinary course of business (including the abandonment or other disposition of intellectual property that is, in the reasonable judgment of the Issuer, no longer economically practicable to maintain or useful in the conduct of the business of the Issuer and its Subsidiaries taken as whole); (e) licenses and sublicenses by the Issuer or any of its Subsidiaries of software or intellectual property in the ordinary course of business; (f) any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business; (g) the granting of Liens not prohibited by the covenant described above under Condition 4(b) (Limitation on Liens); (h) the sale or other disposition of cash or Cash Equivalents; (i) a Restricted Payment that does not violate Condition 4(c) (Limitation on Restricted Payments), a Permitted Investment or any transaction specifically excluded from the definition of Restricted Payment; and (j) any sale, lease, conveyance or other disposition of any shares, assets or rights in or of Petlim Limancılık ve Ticaret A.¸S. ‘‘Auditors’’ means the auditors of the consolidated financial statements of the Group from time to time. ‘‘Beneficial Owner’’ has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the U.S. Exchange Act, except that in calculating the beneficial ownership of any particular ‘‘person’’ (as that term is used in Section 13(d)(3) of the U.S. Exchange Act), such ‘‘person’’ will be deemed to have beneficial ownership of all securities that such ‘‘person’’ has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms ‘‘Beneficially Owns’’ and ‘‘Beneficially Owned’’ have a corresponding meaning. ‘‘Board of Directors’’ means, as to any Person, the board of directors or other equivalent executive body of such Person or any duly authorised committee thereof. ‘‘Business Day’’ means a day which is a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in London, Istanbul and New York City and (where surrender is required by these

160 Conditions) in the place of the specified office of the Registrar or the relevant Paying Agent to whom the relevant Definitive Certificate is surrendered. ‘‘Capital Lease Obligation’’ means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalised on a balance sheet prepared in accordance with IFRS, and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. ‘‘Capital Stock’’ means: (a) in the case of a corporation, corporate stock; (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (c) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock. ‘‘Cash Equivalents’’ means: (a) direct obligations (or certificates representing an interest in such obligations) issued by, or unconditionally guaranteed by, the government of a member state of the Pre-Expansion European Union, the United States of America, Switzerland or Canada (including, in each case, any agency or instrumentality thereof), as the case may be, the payment of which is backed by the full faith and credit of the relevant member state of the European Union or the United States of America, as the case may be, and which are not callable or redeemable at the Issuer’s option; (b) overnight bank deposits, time deposit accounts, certificates of deposit, banker’s acceptances and money market deposits with maturities (and similar instruments) of twelve months or less from the date of acquisition issued by a bank or trust company which is organised under, or authorised to operate as a bank or trust company under, the laws of a member state of the Pre-Expansion European Union or of the United States of America or any state thereof; provided that the long-term debt of such bank or trust company is rated ‘‘A-3’’ or higher by Moody’s or A or higher by S&P or the equivalent rating category of another internationally recognised rating agency; (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above entered into with any financial institution meeting the qualifications specified in clause (b) above; (d) commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case, maturing within one year after the date of acquisition; and (e) interests in any investment company or money market funds at least 95 per cent. of the assets of which consist of Cash Equivalents of the type referred to in paragraphs (a) to (d) above. ‘‘Change of Control’’ means the occurrence of any of the following: (a) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer and its Subsidiaries taken as a whole to any Person (including any ‘‘person’’ (as that term is used in Section 13(d)(3) of the U.S. Exchange Act)) (other than a Principal or a Related Party of a Principal) acting as a group for the purpose of acquiring, holding or disposing of securities of the Issuer and/or its Subsidiaries, other than a sale, lease, transfer, conveyance or other disposition of all or substantially all of the properties or assets of the Issuer and its Subsidiaries taken as a whole in which the transferee Person of such assets becomes (i) the obligor in respect of the Notes and (ii) a subsidiary of the transferor or such assets; (b) the adoption of a plan or legal procedure relating to the liquidation or dissolution of the Issuer; or (c) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any Person (including any ‘‘person’’ (as defined above), other than a

161 Principal and/or any Related Party, becomes the Beneficial Owner, directly or indirectly, of more of the Voting Stock of the Issuer (measured by voting power rather than number of shares) than is (after giving effect to the relevant transaction) at the time Beneficially Owned by the Principal and its Related Parties in the aggregate. ‘‘Change of Control Offer’’ shall have the meaning given to such term in Condition 7(d) (Redemption at the Option of Noteholders upon a Change of Control). ‘‘Change of Control Period’’ means the period commencing on the Relevant Announcement Date and ending 90 days after the Change of Control (or such longer period for which Notes are under consideration (such consideration having been announced publicly within the period ending 90 days after the Change of Control) for rating review or, as the case may be, rating by a Rating Agency, such period not to exceed 60 days after the public announcement of such consideration). ‘‘Change of Control Event’’ will be deemed to occur if a Change of Control occurs and on the Relevant Announcement Date the Notes have: (a) been assigned at the request of the Issuer: (i) an investment grade rating by any Rating Agency and, within the Change of Control Period, that credit rating is either downgraded to a non-investment grade rating or such Rating Agency ceases to assign a credit rating to the Notes and, in each case, does not subsequently upgrade its credit rating assigned to the Notes to an investment grade rating or re-assign an investment grade rating to the Notes by the end of the Change of Control Period; or (ii) a non-investment grade rating by any Rating Agency and, within the Change of Control Period, that credit rating is either downgraded by one or more categories (by way of example, BB+ to BB being one rating category) or such Rating Agency ceases to assign a credit rating to the Notes and, in each case, does not subsequently upgrade its credit rating assigned to the Notes to, or re-assign a credit-rating to the Notes of, the category assigned to the Notes on the Relevant Announcement Date or better by the end of the Change of Control Period, provided that if on the Relevant Announcement Date the Notes have been assigned at the request of the Issuer a credit rating from more than one Rating Agency, at least one of which is an investment grade rating, then paragraph (i) only will apply; or (b) not been assigned a credit rating by any Rating Agency, regardless whether the Issuer has requested such credit rating. ‘‘Commission’’ means the U.S. Securities and Exchange Commission. ‘‘Consolidated EBITDA’’ means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus, without duplication: (a) an amount equal to any extraordinary loss plus any net loss realised by such Person or any of its Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (b) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (c) the Fixed Charges of such Person and its Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income; plus (d) any foreign currency translation losses (including losses related to currency remeasurements of Indebtedness) of such Person and its Subsidiaries for such period, to the extent that such losses were taken into account in computing such Consolidated Net Income; plus (e) depreciation, amortisation (including amortisation of intangibles but excluding amortisation of prepaid cash expenses that were paid in a prior period) and other non-cash charges and expenses (excluding any such non-cash charge or expense to the extent that it represents an accrual of or reserve for cash charges or expenses in any future period or amortisation of a prepaid cash charge or expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, amortisation and other non-cash charges or expenses were deducted in computing such Consolidated Net Income; minus

162 (f) any foreign currency translation gains (including gains related to currency remeasurements of Indebtedness) of such Person and its Subsidiaries for such period, to the extent that such gains were taken into account in computing such Consolidated Net Income; minus (g) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with IFRS. ‘‘Consolidated Net Income’’ means, with respect to any specified Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with IFRS and without any reduction in respect of preferred stock dividends. ‘‘Consolidated Net Indebtedness’’ means at any Determination Date an amount equal to (a) (and without duplication) the aggregate outstanding principal, capital or nominal amount of Indebtedness of the Group on a consolidated basis as calculated in accordance with the then most recently published consolidated financial statements of the Group prepared in accordance with IFRS, less (b) the aggregate cash and Cash Equivalents of the Group on a consolidated basis as calculated in accordance with the then most recently published consolidated financial statements of the Group prepared in accordance with IFRS. ‘‘Consolidated Tangible Assets’’ of any Person as of any date means the total assets of such Person and its Subsidiaries as of the most recent fiscal period end for which a consolidated balance sheet of such Person and its Subsidiaries is available, minus total goodwill and other intangible assets of such Person and its Subsidiaries reflected on such balance sheet, all calculated on a consolidated basis in accordance with IFRS. ‘‘continuing’’ means, with respect to any Potential Event of Default or Event of Default, that such Potential Event of Default or Event of Default has not been cured or waived. ‘‘Credit Facilities’’ means one or more debt facilities, indentures, bonds, instruments, arrangements or commercial paper facilities, in each case, with banks or other institutional lenders or investors, together with all related documents and security in relation thereto, providing for revolving credit loans, term loans, factoring and receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, restructured, repaid, refunded, replaced or refinanced in whole or in part from time to time. ‘‘Currency Agreement’’ means any foreign exchange contract, currency swap agreement or other similar agreement with respect to currency values. ‘‘Disqualified Stock’’ means, Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is six months after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Issuer to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provided that the Issuer may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Condition 4(c) (Limitation on Restricted Payments). The amount of Disqualified Stock deemed to be outstanding at any time for purposes of the Trust Deed will be the maximum amount that the Issuer and its Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends. ‘‘Equity Interests’’ means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). ‘‘Event of Default’’ shall have the meaning given to such term in Condition 10 (Events of Default). ‘‘Existing Indebtedness’’ means all Indebtedness of the Issuer and its Subsidiaries in existence as at the Issue Date assuming such facilities are fully drawn.

163 ‘‘Fair Market Value’’ means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress of either party, determined in good faith by the Board of Directors of the Issuer. ‘‘Fitch’’ means Fitch Ratings Limited, its affiliates and any successor to its ratings business. ‘‘Fixed Charges’’ means, with respect to any specified Person for any period, the sum, without duplication, of: (a) the consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued, including, without limitation, amortisation of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates; plus (b) the consolidated interest expense of such Person and its Subsidiaries that was capitalised during such period; plus (c) any interest on Indebtedness of another Person that is guaranteed by such Person or one of its Subsidiaries or secured by a Lien on assets of such Person or one of its Subsidiaries, whether or not such guarantee or Lien is called upon; plus (d) the product of (i) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Issuer (other than Disqualified Stock) or to the Issuer or a Subsidiary of the Issuer, times (ii) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined national, state and local statutory tax rate of such Person, expressed as a decimal, in each case, determined on a consolidated basis in accordance with IFRS. ‘‘Further Notes’’ shall have the meaning given to such term in Condition 15 (Further Issues). ‘‘Group’’ means the Issuer and its Subsidiaries, taken as a whole. ‘‘Group Leverage Ratio’’ as of any date of determination (a ‘‘Determination Date’’), means the ratio of (x) the aggregate amount of Consolidated Net Indebtedness to (y) the aggregate amount of Consolidated EBITDA for the period (the ‘‘EBITDA Calculation Period’’) of the two most recent consecutive semi-annual periods or, if applicable, four most recent consecutive quarterly periods (provided that published, reviewed or audited financial statements are available for such quarterly periods), ending prior to such Determination Date for which financial statements of the Group on a consolidated basis and prepared in accordance with IFRS are available; provided, however, that: (a) if (i) any member of the Group has incurred any Indebtedness since the balance sheet date (the ‘‘Relevant Date’’) of the most recently published consolidated financial statements of the Group which remains outstanding on the Determination Date or (ii) the transaction giving rise to the need to calculate the Group Leverage Ratio is an incurrence of Indebtedness, or both, the Group Leverage Ratio shall be calculated by adjusting the Consolidated Net Indebtedness for such period to give effect to the incurrence of any Indebtedness mentioned in (i) or (ii) above, or both, as if such Indebtedness had been incurred on the Relevant Date; provided that no effect shall be given to any cash or Cash Equivalents received by any member of the Group as proceeds of such Indebtedness that gave rise to the need to calculate the Group Leverage Ratio; (b) if (i) any member of the Group has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the Relevant Date or (ii) if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Group Leverage Ratio, or both, the Group Leverage Ratio shall be calculated by adjusting the Consolidated Net Indebtedness for such period to give effect to such repayment, repurchase, defeasement or discharge mentioned in (i) or (ii) above, as if such repayment, repurchase, defeasement or discharge had occurred on the Relevant Date;

164 (c) if since the Relevant Date any member of the Group has made an Asset Sale as a result of which a Person ceased to be a member of the Group, the Group Leverage Ratio shall be calculated by adjusting the Consolidated Net Indebtedness for such period to give effect to any reduction of Indebtedness (to the extent originally included) equal to the Indebtedness of such Person as if such disposal had occurred on the Relevant Date; (d) if since the beginning of the EBITDA Calculation Period any member of the Group (by merger or otherwise) shall have made an investment in any Person which as a result of such investment becomes a member of the Group or an acquisition of assets which constitutes all or substantially all of an operating unit of a business (including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder), the Group Leverage Ratio shall be calculated by adjusting the Consolidated EBITDA for such EBITDA Calculation Period as if such investment or acquisition had occurred on the first day of such EBITDA Calculation Period; and (e) if since the beginning of the EBITDA Calculation Period any member of the Group shall have made an Asset Sale, the Group Leverage Ratio shall be calculated by reducing the Consolidated EBITDA for such EBITDA Calculation Period by an amount equal to the Consolidated EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Sale, or increased by an amount equal to the Consolidated EBITDA (if negative), directly attributable thereto for such period as if such Asset Sale had occurred on the first day of such EBITDA Calculation Period. The Group Leverage Ratio shall be determined in good faith by an authorised officer of the Issuer, whose determination will be conclusive (in the absence of manifest error). ‘‘guarantee’’ means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise). ‘‘Hedging Obligations’’ means, with respect to any specified Person, the obligations of such Person under: (a) currency exchange, interest rate or commodity swap agreements, currency swap, interest rate or commodity cap agreements, currency exchange, interest rate or commodity collar agreements and foreign exchange contracts or futures contracts; (b) other agreements or arrangements designed to manage interest rates or interest rate risk; and (c) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange, interest rates commodity prices or equity risks. ‘‘IFRS’’ means International Financial Reporting Standards promulgated by the International Accounting Standards Board or any successor board or agency as endorsed by the European Union as in effect on the Issue Date. ‘‘Indebtedness’’ means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables): (a) in respect of borrowed money; (b) evidenced by or issued in exchange for bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (c) in respect of banker’s acceptances; (d) representing Capital Lease Obligations; (e) representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed; or (f) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with Turkish Accounting Standards. In addition, the term ‘‘Indebtedness’’ includes, without duplication, all

165 Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person. Indebtedness shall be calculated without giving effect to the effects of International Accounting Standard No. 39 and related interpretations to the extent such effects would otherwise increase or decrease an amount of Indebtedness for any purpose under the Trust Deed as a result of accounting for any embedded derivatives created by the terms of such Indebtedness. Notwithstanding anything herein to the contrary, however, no guarantee, bond, surety, letter of credit or other similar agreement, or any representations, warranties, covenants or indemnities, in each case entered into by the Issuer or a Subsidiary in connection with a Naptha Purchase, shall be deemed to be Indebtedness for the purpose of this definition. ‘‘Interest Payment Date’’ shall have the meaning given to such term in Condition 5(a) (Interest Accrual). ‘‘Interest Period’’ shall have the meaning given to such term in Condition 5(a) (Interest Accrual). ‘‘Investment Grade Rating’’ means a long term credit rating of ‘‘AAA,’’ ‘‘AA,’’ ‘‘A’’ or ‘‘BBB,’’ as modified by a ‘‘+’’ or ‘‘’’ indication, or an equivalent rating representing one of the four highest rating categories, by S&P or any of its successors or assigns or a long term credit rating of ‘‘Aaa,’’ or ‘‘Aa,’’ ‘‘A’’ or ‘‘Baa,’’ as modified by a ‘‘1,’’ ‘‘2’’ or ‘‘3’’ indication, or an equivalent rating representing one of the four highest rating categories, by Moody’s or any of its successors or assigns or assigns or a long term credit rating of ‘‘AAA,’’ or ‘‘AA,’’ ‘‘A’’ or ‘‘BBB,’’ as modified by a ‘‘+,’’ or ‘‘’’ indication, or an equivalent rating representing one of the four highest rating categories, by Fitch or any of its successors or assigns or the equivalent long term credit ratings of any internationally recognised rating agency or agencies, as the case may be, which shall have been designated by the Issuer as having been substituted for S&P, Moody’s or Fitch or all of them, as the case may be. ‘‘Investments’’ means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including by way of guarantee or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with IFRS. If the Issuer or any Subsidiary of the Issuer sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Issuer such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Issuer, the Issuer will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Issuer’s Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in clause (iii) of Condition 4(c) (Limitation on Restricted Payments). The acquisition by the Issuer or any Subsidiary of the Issuer of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Issuer or such Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined as provided in clause (iii) of Condition (c) (Limitation on Restricted Payments). The amount of an Investment will be determined at the time the Investment is made and without giving effect to subsequent changes in value. ‘‘Stock Exchange’’ means the Irish Stock Exchange plc or any alternative stock exchange or stock exchanges or any relevant authority or authorities on which the Notes are, from time to time, listed or admitted to trading. ‘‘Issue Date’’ shall have the meaning given to such term in Condition 5(a) (Interest Accrual). ‘‘Issuer’’ means the party named as such above until a successor replaces it in accordance with Condition 4(f) (Merger, Consolidation or Sale of Assets) and thereafter means such successor. ‘‘Lien’’ means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the laws of any jurisdiction.

166 ‘‘Material Subsidiary’’ means any Subsidiary which meets any of the following conditions: (a) the Issuer and the other Subsidiaries’ investments in and advances to such Subsidiary exceed five per cent. of the Consolidated Tangible Assets of the Issuer and the Subsidiaries as of the end of the most recently completed financial year; or (b) the Issuer and the other Subsidiaries’ proportionate share of the total assets (after intercompany eliminations) of such Subsidiary exceeds ten per cent. of the total consolidated assets of the Issuer and the Subsidiaries as of the end of the most recently completed financial year; or (c) the Issuer and the other Subsidiaries’ equity in the consolidated income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principle of such Subsidiary exceeds ten per cent. of such consolidated income of the Issuer and the Subsidiaries for the most recently completed financial year. ‘‘Maturity Date’’ means 26 January 2023. ‘‘Moody’s’’ means Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation, and its successors or assigns. a ‘‘Naptha Purchase’’ means any acquisition of naptha by the Issuer or a Subsidiary where payment therefor is deferred, provided, that the period after such acquisition during which payment permissibly may be deferred shall not exceed 365 days and the aggregate amount of any and all such deferred payments shall at no one time exceed U.S.$300,000,000. ‘‘Noteholder’’ shall have the meaning given to such term in Condition 1(b) (Title). ‘‘Obligations’’ means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. ‘‘Officers’ Certificate’’ means a certificate signed by any duly authorised signatory of the Issuer. ‘‘Permitted Business’’ means any business, services or activities engaged in by the Issuer or any of its Subsidiaries on the Issue Date, all activities reasonably necessary to, or undertaken in connection with, the foregoing, or any business activity that is a reasonable extension, development or expansion thereof or ancillary thereto, or any business reasonably related thereto. ‘‘Permitted Disposal’’ means a disposal on arm’s length terms of the whole or any part of the business or operations of a Material Subsidiary (including the disposal of all or some only of the shares in a Material Subsidiary). ‘‘Permitted Indebtedness’’ shall have the meaning given to such term in Condition 4(a)(ii) (Incurrence of Indebtedness and Issuance of Preferred Stock). ‘‘Permitted Investment’’ means: (a) any Investment in the Issuer or any Subsidiary of the Issuer, except that the aggregate amount of all Investments in Aromatics Project Financing Subsidiaries shall be limited to a combined maximum of U.S.$250 million, of which up to U.S.$150 million may be an Investment in Equity Interests of Aromatics Project Financing Subsidiaries; (b) any Investment in Cash Equivalents; (c) any Investment by the Issuer or any Subsidiary of the Issuer in a Person, if as a result of such Investment: (i) such Person becomes a Subsidiary of the Issuer; or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Subsidiary of the Issuer; provided that, in the case of both (i) and (ii) of this clause (c) if such Person becomes or merges, consolidates, amalgamates or transfers or conveys substantially all of its assets to, or is liquidated into, an Aromatics Project Financing Subsidiary, then the aggregate amount of all Investments into such Person shall be limited to a combined maximum of U.S.$250 million for all Aromatics Project Financing Subsidiaries, of which up to U.S.$150 million may be an Investment in Equity Interests of Aromatics Project Financing Subsidiaries;

167 (d) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Condition 4(e) (Asset Sales); (e) any acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Issuer; (f) any Investments received in compromise or resolution of (I) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Issuer or any of its Subsidiaries, including pursuant to any plan of reorganisation or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (II) litigation, arbitration or other disputes with Persons who are not Affiliates; (g) Investments represented by Hedging Obligations; (h) repurchases of the Notes; (i) any guarantee of Indebtedness permitted to be incurred by Condition 4(a) (Incurrence of Indebtedness and Issuance of Preferred Stock) other than a guarantee of Indebtedness of an Affiliate of the Issuer that is not a Subsidiary of the Issuer; (j) any Investment existing on, or made pursuant to binding commitments existing on, the date of the Trust Deed and any Investment consisting of an extension, modification or renewal of any Investment existing on, or made pursuant to a binding commitment existing on, the date of the Trust Deed; provided that the amount of any such Investment may be increased (x) as required by the terms of such Investment as in existence on the Issue Date or (y) as otherwise permitted under the Trust Deed; (k) Investments acquired after the Issue Date as a result of the acquisition by the Issuer or any Subsidiary of the Issuer of another Person, including by way of a merger, amalgamation or consolidation with or into the Issuer or any of its Subsidiaries, or all or substantially all of the assets of another Person, in each case, in a transaction that is not prohibited by Condition 4(f) (Merger, Consolidation or Sale of Assets) after the Issue Date to the extent that such Investments were not made in contemplation of such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger, amalgamation or consolidation; and (l) any Investment in STAR Rafineri A.¸S. or in any Subsidiary of STAR Rafineri A.¸S or in any direct or indirect Subsidiary of the Issuer which owns or holds, or will own or hold an, Investment in STAR Rafineri A.¸S. ‘‘Permitted Liens’’ means: (a) Liens securing Indebtedness under Credit Facilities that are incurred under Condition 4(a)(ii)(A) (Incurrence of Indebtedness and Issuance of Preferred Stock); (b) Liens to secure Hedging Obligations incurred in the ordinary course of business; (c) Liens on property (including Capital Stock) of a Person existing at the time such Person becomes a Subsidiary of the Issuer or is merged with or into or consolidated with the Issuer or any Subsidiary of the Issuer; provided that such Liens were in existence prior to the contemplation of such Person becoming a Subsidiary of the Issuer or such merger or consolidation and do not extend to any assets other than those of the Person that becomes a Subsidiary of the Issuer or is merged with or into or consolidated with the Issuer or any Subsidiary of the Issuer; (d) Liens on property (including Capital Stock) existing at the time of acquisition of the property by the Issuer or any Subsidiary of the Issuer; provided that such Liens were in existence prior to such acquisition and not incurred in contemplation of, such acquisition; (e) Liens to secure the performance of statutory obligations, letters of credit, insurance, performance bonds, surety bonds, bid bonds, appeal bonds, workers compensation obligations, or other obligations of a like nature incurred in the ordinary course of business; (f) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by Condition 4(a)(ii)(D) (Incurrence of Indebtedness and Issuance of Preferred Stock) covering only the assets acquired with or financed by such Indebtedness; (g) Liens existing on the Issue Date;

168 (h) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with IFRS has been made therefor; (i) Liens imposed by law, such as carriers’, warehousemen’s, landlord’s and mechanics’ Liens, in each case, incurred in the ordinary course of business; (j) survey exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (k) Liens created for the benefit of (or to secure) the Notes; (l) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under the Trust Deed; provided, however, that: (i) the new Lien is limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to, such property or proceeds or distributions thereof); and (ii) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged with such Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge; (m) Liens on insurance policies and proceeds thereof, or other deposits, to secure insurance premium financings; (n) filing of financing statements as a precautionary measure in connection with operating leases; (o) bankers’ Liens, rights of setoff, Liens arising out of judgments or awards not constituting an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings and for which adequate reserves have been made; (p) Liens on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness; (q) Liens on specific items of inventory or other goods (and the proceeds thereof) of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created in the ordinary course of business for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (r) grants of software and other technology licences in the ordinary course of business; (s) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into in the ordinary course of business; (t) Liens in favour of the Issuer or any of its Subsidiaries; (u) Liens to secure Indebtedness permitted by Condition 4(a)(ii)(D) (Incurrence of Indebtedness and Issuance of Preferred Stock); provided that (i) the related Indebtedness shall not be secured by any property or assets of the Issuer or any Material Subsidiary other than the property and assets so acquired and (ii) the Lien securing such Indebtedness shall be created within 90 days of such acquisition; (v) Liens; provided that the maximum amount of Indebtedness secured in the aggregate at any one time pursuant to this clause (v) does not exceed 5 per cent. of the Issuer’s Consolidated Tangible Assets; (w) Liens to secure Indebtedness permitted by Condition 4(a)(ii)(O) (Incurrence of Indebtedness and Issuance of Preferred Stock); and

169 (x) Liens securing Project Financing. ‘‘Permitted Refinancing Indebtedness’’ means any Indebtedness of the Issuer or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness of the Issuer or any of its Subsidiaries (other than intercompany Indebtedness); provided that: (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith); (b) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity that is (a) equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged or (b) more than 90 days after the final maturity date of the Notes; (c) if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Notes on terms at least as favourable to the holders of Notes as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; and (d) such Indebtedness is incurred either by the Issuer or by the Subsidiary of the Issuer that was the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged and is guaranteed only by Persons who were obligors on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged. ‘‘Permitted Reorganisation’’ means any reconstruction, amalgamation, reorganisation, merger or consolidation (i) (in the case of the Issuer) whereby the business, undertaking or assets of the Issuer are transferred to or are otherwise vested in one of its Subsidiaries and at the same time or prior thereto all amounts payable by the Issuer under the Notes have been assumed by such other Subsidiary; (ii) (in the case of a Material Subsidiary) whereby the business, undertaking or assets of that Material Subsidiary are transferred to or are otherwise vested in the Issuer and/or any of the Issuer’s other Subsidiaries; (iii) in connection with the substitution of the Issuer in compliance with the requirements of Condition 4(f); or (iv) on terms approved by an Extraordinary Resolution or Written Resolution of the Noteholders, provided that the Issuer will provide to the Trustee an Officers’ Certificate confirming that no Potential Event of Default or Event of Default has occurred and is continuing or would occur as a consequence of such reorganisation. ‘‘Person’’ means any individual, corporation, firm, partnership, joint venture, association, trust, unincorporated organisation or government or judicial entity or any Agency or political subdivision thereof, in each case, whether or not having a separate legal personality. ‘‘Potential Event of Default’’ means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. ‘‘Pre-Expansion European Union’’ means the European Union as of 1 January 2004, including the countries of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Ireland, the Netherlands, Portugal, Spain, Sweden and the United Kingdom, but not including any country which became or becomes a member of the European Union after 1 January 2004. ‘‘Principal’’ means any of the State Oil Company of the Azerbaijan Republic or SOCAR Turkey Enerji A.S. ‘‘Project Financing’’ means any Indebtedness incurred in connection with all or part of the costs of the acquisition, construction or development of any asset or project by an Aromatics Project Financing Subsidiary, provided that (i) creditors for such financing shall have no recourse to any assets of the Issuer or any of its Subsidiaries (other than those assets specific to such financing) and such asset or project is either (x) wholly-owned by the Aromatics Project Financing Subsidiary or (y) owned by the Aromatics Project Financing Subsidiary and another Person which is neither the Issuer or a Subsidiary of the Issuer or otherwise a member of the Group; (ii) the Person or Persons providing such financing have been provided with a feasibility study prepared by competent independent experts on the basis of which

170 it is reasonable to conclude that such project would generate sufficient operating income to service the Indebtedness incurred in connection with such acquisition, construction or development of such asset or project and (iii) the Person or Persons providing such financing shall not be the Issuer or any of its Subsidiaries. ‘‘Qualifying Equity Interests’’ means Equity Interests of the Issuer other than Disqualified Stock. ‘‘Rating Agencies’’ means Fitch, Moody’s and S&P and ‘‘Rating Agency’’ means any one of them. ‘‘Record Date’’ means the fifteenth day before the due date for the relevant payment. ‘‘Refinance’’ means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. ‘‘Refinanced’’ and ‘‘Refinancing’’ shall have correlative meanings. ‘‘Register’’ shall have the meaning given to such term in Condition 1(b) (Title). ‘‘Related Party’’ with respect to any Principal means: (a) any controlling stockholder, Subsidiary, or immediate family member (in the case of an individual) of any Principal; or (b) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding a majority (and controlling) interest of which consist of any one or more of the Principal and/or such other Persons referred to in the immediately preceding clause (a). ‘‘Relevant Announcement Date’’ means the date that is the earlier of (a) the date of the first public announcement of the relevant Change of Control and (b) the date of the earliest Relevant Potential Change of Control Announcement (if any). ‘‘Relevant Potential Change of Control Announcement’’ means any public announcement or statement by the Issuer, any actual or potential bidder or any adviser acting on behalf of any actual or potential bidder relating to any potential Change of Control where within 180 days following the date of such announcement or statement, a Change of Control occurs. ‘‘Relevant Taxing Jurisdiction’’ shall have the meaning given to such term in Condition 8 (Taxation). ‘‘Reserved Matter’’ means any of the following: (a) reducing, or changing the maturity of the principal of any Note; (b) reducing the rate of or extending the time for payment of interest on any Note; (c) reducing any premium payable upon redemption of the Notes or changing the date on, or the circumstances under, which any Notes are subject to redemption (other than provisions relating to the purchase of Notes described in Condition 7(d) (Redemption at the Option of the Noteholders upon a Change of Control) and Condition 4(e) (Asset Sales) except that if a Change of Control has occurred, no amendment or other modification of the obligation of the Issuer to make a Change of Control Offer relating to such Change of Control shall be made without the consent of Noteholders by way of Extraordinary Resolution); (d) making any Note payable in money or currency other than that stated in the Notes; (e) modifying or changing any provision of the Trust Deed or the related definitions to affect the ranking of the Notes in a manner that adversely affects the holders; (f) reducing the percentage of holders necessary to consent to an amendment or waiver to the Trust Deed or the Notes; (g) waiving a default in the payment of principal of or premium or interest on any Notes (except a rescission of acceleration of the Notes by the holders thereof as provided in the Trust Deed and a waiver of the payment default that resulted from such acceleration); (h) impairing the rights of holders to receive payments of principal of or interest on the Notes on or after the due date therefor or to institute suit for the enforcement of any payment on the Notes; or

171 (i) making any change in this definition of ‘‘Reserved Matters’’ or changing the quorum requirements relating to meetings or the majority required to pass an Extraordinary Resolution. ‘‘Restricted Investment’’ means an Investment other than a Permitted Investment. ‘‘Restricted Payment’’ shall have the meaning given to such term in Condition 4(c)(i) (Limitation on Restricted Payments). ‘‘S&P’’ means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors or assigns. ‘‘Stated Maturity’’ means, with respect to any instalment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the first date it was incurred in compliance with the terms of the Trust Deed, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. ‘‘Subsidiary’’ means, with respect to any specified Person: (a) any corporation, association or other business entity of which more than 50 per cent. of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (b) any partnership or limited liability company of which (i) more than 50 per cent. of the capital accounts, distribution rights, total equity and voting interests or general and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, whether in the form of membership, general, special or limited partnership interests or otherwise, and (ii) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity. ‘‘Suspension Period’’ has the meaning given to it in Condition 4(l) (Suspension of Covenants when Notes Rated Investment Grade). ‘‘Taxes’’ means any taxes, duties, assessments or governmental charges of whatsoever nature. ‘‘Treasury Rate’’ means, as of any redemption date, the yield to maturity as of such redemption date of the most recently issued United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two business days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to the Maturity Date; provided, however, that if the period from the redemption date to the Maturity Date, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used. ‘‘Turkish Accounting Standards’’ means the set of accounting standards issued by the Public Oversight Accounting and Auditing Standards Authority in Turkey. Turkish Accounting Standards contains Turkish Financial Reporting Standards (TFRS) and its addendum and interpretations. ‘‘U.S. Dollar Equivalent’’ means with respect to any amount denominated in a currency other than U.S. Dollars, at any time for the determination thereof, the amount of U.S. Dollars obtained by converting such other currency involved into U.S. Dollars at the spot rate for the purchase of U.S. Dollars with such other currency as most recently published under ‘‘Currency Rates’’ in the section of the Financial Times entitled ‘‘Currencies, Bonds & Interest Rates’’ or any replacement thereof. ‘‘U.S. Exchange Act’’ means the U.S. Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations of the Commission promulgated thereunder. ‘‘U.S. Securities Act’’ means the U.S. Securities Act of 1933, as amended, or any successor statute, and the rules and regulations of the Commission promulgated thereunder. ‘‘Voting Stock’’ of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

172 ‘‘Weighted Average Life to Maturity’’ means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (x) the amount of each then remaining instalment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness.

173 SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM The Global Certificates contain the following provisions which apply to the Notes in respect of which they are issued whilst they are represented by the Global Certificates, some of which modify the effect of the Conditions. Terms defined in the Conditions have the same meaning in paragraphs 1 to 6 below.

1 Accountholders For so long as any of the Notes are represented by a Global Certificate, each person (other than another clearing system) who is for the time being shown in the records of DTC, Euroclear or Clearstream, Luxembourg (as the case may be) as the holder of a particular aggregate principal amount of such Notes (each an ‘‘Accountholder’’) (in which regard any certificate or other document issued by DTC, Euroclear or Clearstream, Luxembourg (as the case may be) as to the aggregate principal amount of such Notes standing to the account of any person shall, in the absence of manifest error, be conclusive and binding for all purposes) shall be treated as the holder of such aggregate principal amount of such Notes and, in the case of DTC or its nominee, voting, giving consents and making requests pursuant to the Trust Deed, (and the expression ‘‘Noteholders’’ and references to ‘‘holding of Notes’’ and to ‘‘holder of Notes’’ shall be construed accordingly) for all purposes other than with respect to payments on such Notes, the right to which shall be vested, as against us and the Trustee, solely in the nominee for the relevant clearing system (the ‘‘Relevant Nominee’’) in accordance with and subject to the terms of the relevant Global Certificate. Each Accountholder must look solely to DTC, Euroclear or Clearstream, Luxembourg, as the case may be, for its share of each payment made to the Relevant Nominee.

2 Cancellation Cancellation of any Note following its redemption or purchase by us or any of our Subsidiaries (as defined in the Conditions) will be effected by reduction in the aggregate principal amount of the Notes in the relevant register of Noteholders and by the annotation of the appropriate schedule to the relevant Global Certificate. Any Notes purchased on a pro rata basis, in accordance with the Conditions, will in all cases be subject to the rules and procedures of the relevant clearing system in effect from time to time.

3 Payments Payments of principal and interest in respect of Notes represented by a Global Certificate will be made upon presentation or, if no further payment falls to be made in respect of the relevant Notes, against presentation and surrender of such Global Certificate to or to the order of the relevant Registrar or any other Agent (as defined in the Conditions) as shall have been notified to the holders of the relevant Global Certificate for such purpose. Distributions of amounts with respect to book-entry interests in the Regulation S Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the relevant Registrar, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant clearing system’s rules and procedures. Holders of book-entry interests in the Rule 144A Notes held through DTC will receive, to the extent received by the relevant Registrar, all distributions of amounts with respect to book-entry interests in such Notes from the relevant Registrar through DTC. Distributions in the United States will be subject to United States tax laws and regulations. All payments in respect of Notes represented by a Global Certificate will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the record date, which shall be on the Clearing System Business Day immediately prior to the date for payment, where ‘‘Clearing System Business Day’’ means Monday to Friday inclusive except 25 December and 1 January. A record of each payment made will be endorsed on the appropriate schedule to the relevant Global Certificate by or on behalf of the relevant Registrar and shall be prima facie evidence that payment has been made.

174 4 Notices So long as the Notes are represented by a Global Certificate or Global Certificates and such Global Certificate(s) is/are held on behalf of a clearing system or clearing systems, notices to Noteholders may be given by delivery of the relevant notice to the relevant clearing system(s) for communication by it/ them to entitled Accountholders in substitution for notification as required by Condition 13 (Notices) provided that, so long as the Notes are listed and admitted to trading on the Irish Stock Exchange, notices will also be filed at the Companies Announcements Office of the Irish Stock Exchange. Any such notice shall be deemed to have been given to the Noteholders on the second day after the day on which such notice is delivered to the relevant clearing system(s) as aforesaid. Whilst any of the Notes held by a Noteholder are represented by a Global Certificate, notices to be given by such Noteholder may be given by such Noteholder (where applicable) through Euroclear or Clearstream, Luxembourg or DTC (as applicable) and otherwise in such manner as the Trustee and Euroclear or Clearstream, Luxembourg or DTC (as applicable) may approve for this purpose.

5 Registration of Title Registration of title to Notes in a name other than that of the Relevant Nominee will not be permitted unless Euroclear or Clearstream, Luxembourg or DTC, as applicable, notifies us that it is unwilling or unable to continue as a clearing system in connection with a Global Certificate or, in the case of DTC only, DTC ceases to be a clearing agency registered under the United States Securities Exchange Act of 1934, and in each case a successor clearing system approved by the Trustee is not appointed by us within 90 days after receiving such notice from Euroclear, Clearstream, Luxembourg or DTC or becoming aware that DTC is no longer so registered (as applicable). In these circumstances, title to a Note may be transferred into the names of holders notified by the Relevant Nominee in accordance with the Conditions, except that Certificates in respect of Notes so transferred may not be available until 21 days after the request for transfer is duly made. The Registrars will not register title to the Notes in a name other than that of the Relevant Nominee for a period of 15 calendar days preceding the due date for any payment of principal, premium (if any) or interest in respect of the Notes. If only one of the Global Certificates (the ‘‘Exchanged Global Certificate’’) becomes exchangeable for Certificates in accordance with the above paragraphs, transfers of Notes may not take place between, on the one hand, persons holding Certificates issued in exchange for beneficial interests in the Exchanged Global Certificate and, on the other hand, persons wishing to purchase beneficial interests in the other Global Certificate.

6 Transfers Transfers of book-entry interests in the Notes will be effected through the records of Euroclear, Clearstream, Luxembourg and DTC and their respective participants in accordance with the rules and procedures of Euroclear, Clearstream, Luxembourg and DTC and their respective direct and indirect participants, as more fully described under ‘‘Book-entry, Delivery and Form’’. For additional transfer restrictions, see ‘‘Selling and Transfer Restrictions’’.

175 TAXATION The following summary of certain Turkey and United States tax consequences of ownership of the Notes is based upon laws, regulations, decrees, rulings, income tax conventions (treaties), administrative practice and judicial decisions in effect at the date of this Offering Memorandum. Legislative, judicial or administrative changes or interpretations may, however, be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may be retroactive and could affect the tax consequences to Noteholders. This summary does not purport to be a legal opinion or to address all tax aspects that may be relevant to Noteholders. Each prospective Noteholder is urged to consult its own tax advisers as to the particular tax consequences to such holder of the ownership and disposition of Notes, including the applicability and effect of any other tax laws or tax treaties, and of pending or proposed changes in applicable tax laws as at the date of this Offering Memorandum, and of any actual changes in applicable tax laws after such date.

Certain Turkish Tax Considerations The following discussion is a summary of certain Turkish tax considerations relating to an investment by a person who is a non-resident of Turkey in Notes of a Turkish company issued abroad. The discussion is based upon current law and is for general information only. The discussion below is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership, or disposition of the Notes that may be relevant to a decision to make an investment in the Notes. Furthermore, the discussion only relates to the investment by a person where the Notes will not be held in connection with the conduct of a trade or business through a permanent establishment in Turkey. Each investor should consult its own tax advisers concerning the tax considerations applicable to its particular situation. This discussion is based upon laws and relevant interpretations thereof in effect as of the date of this Prospectus, all of which are subject to change, possibly with a retroactive effect. In addition, it does not describe any tax consequences: (a) arising under the laws of any tax jurisdiction other than turkey or (b) applicable to a resident of Turkey or a permanent establishment in Turkey that is constituted either by the existence of a fixed place of business or appointment of a permanent representative. For Turkish tax purposes, a legal entity is resident of Turkey if its corporate domicile is in Turkey or its effective place of management is in Turkey. A resident legal entity is subject to Turkish taxes on its worldwide income, whereas a non-resident legal entity is only liable to the Turkish taxes for the trading income made through a permanent establishment or a permanent representative, or for the income sourced in Turkey otherwise. A natural person or individual is a resident of Turkey if such person has established domicile in Turkey, or stays in Turkey more than six months in a calendar year. On the other hand, foreigners who stay in Turkey for six months or more for a specific job or business or particular purposes that are specified in the Income Tax Law numbered 193 may not be treated as a resident of Turkey depending upon characteristics of the stay. A resident individual is liable for Turkish taxes on his worldwide income, whereas a non-resident individual is liable for Turkish tax for the income sourced in Turkey. Income from capital investment is sourced in Turkey when the principal is invested in Turkey. Capital gain is considered sourced in Turkey when the activity or transaction generating such income is performed or accounted for in Turkey. The term ‘‘accounted for’’ means that a payment is made in Turkey, or if the payment is made abroad, it is recorded in the books in Turkey or apportioned from the profits of the payer or the person on whose behalf the payment is made in Turkey. Income from capital investment is sourced in Turkey when the principal is invested in Turkey. Capital gain is considered sourced in Turkey when the activity or transaction generating such income is performed or accounted for in Turkey. The term ‘‘accounted for’’ means that a payment is made in Turkey, or if the payment is made abroad, it is recorded in the books in Turkey or apportioned from the profits of the payer or the person on whose behalf the payment is made in Turkey. Interest paid on notes (such as the Notes) issued abroad by Turkish corporates is subject to withholding tax. Through the Decree No. 2009/14592 dated 12 January 2009, which was amended by Decree No. 2010/1182 dated 20 December 2010 and Decree No. 2011/1854 dated 26 April 2011 (together, the ‘‘Tax Decrees’’), the withholding tax rates are set according to the original maturity of notes (including the Notes) issued abroad as follows: • 10 per cent. withholding tax for notes with maturity of less than one year;

176 • 7 per cent. withholding tax for notes with maturity of at least one year and less than three years; • 3 per cent. withholding tax for notes with maturity of at least three years and less than five years; and • 0 per cent. withholding tax for notes with maturity of at least five years. Such withholding tax is the final tax for a non-resident person and no further declaration is required. Interest income derived by a resident corporation or individual is subject to further declaration and the withholding tax paid can be offset from the tax calculated on the return. For resident individuals, the interest income is not required to be declared if the interest income derived does not exceed (or is equal to) TL 34,000 for declarations in the year 2018 together with the gains from other marketable securities outside the scope of Provisional Article 67 of the Turkish Income Tax Law, rental income from immovable property and salaries (except for salaries referred to under Article 86/1 of the Turkish Income Tax Law), provided that they were all subjected to Turkish withholding tax at source. For resident corporations, the total interest income is subject to declaration. In general, capital gains are not taxed through withholding tax and therefore any capital gain sourced in Turkey with respect to the Notes may be subject to declaration; however, pursuant to Provisional Article 67 of the Turkish Income Tax Law, as amended by the Law No. 6111, special or separate tax returns will not be submitted for capital gains from the notes of a Turkish corporation issued abroad when the income is derived by a non-resident. Therefore, no tax is levied on non-resident persons in respect of capital gains from the Notes and no declaration is required. A non-resident holder will not be liable for Turkish estate, inheritance or similar tax with respect to its investment in the Notes, nor will it be liable for any Turkish stamp issue, registration or similar tax or duty relating thereto.

Reduced Withholding Tax Rates Under current Turkish laws and regulations, interest payments on notes issued abroad by a Turkish corporate to a non-resident holder will be subject to a withholding tax at a rate between 10 per cent. and 0 per cent. in Turkey, as detailed above. If a double taxation treaty is in effect between Turkey and the country of the holder of the notes (including the Notes) (in some cases, for example, pursuant to the treaties with the United Kingdom and the United States, the term ‘‘beneficial owner’’ is used), that provides for the application of a lower withholding tax rate than the local rate to be applied by the corporation, then the lower rate may be applicable. For the application of withholding tax at a reduced rate that benefits from the provisions of a double tax treaty concluded between Turkey and the country where the investor is a resident, an original copy of the certificate of residence signed by the competent authority referred to in Article 3 of the Treaty is required, together with a translated copy translated by a translation office, to verify that the investor is subject to taxation over its worldwide income in the relevant country on the basis of resident taxpayer status, as a resident of the relevant jurisdiction to the related tax office directly or through the banks and intermediary institutions prior to the application of withholding tax. In the event the certificate of residence is not delivered prior to the application of withholding tax, then upon the subsequent delivery of the certificate of residence, refunding of the excess tax shall be granted pursuant to the provisions of the relevant double taxation treaty and the Turkish tax legislation.

Value Added Tax Note issuances and interest payments on notes are exempt from the Value Added Tax (‘‘VAT’’) pursuant to the Article 17/4(g) of the Value Added Tax Law (Law No. 3065), as amended by the Turkish Tax Bill Regarding Improvement of the Investment Environment (Law No. 6728), published in the Official Gazette dated 9 August 2016 and numbered 29796.

United States Certain U.S. Federal Income Tax Considerations The following is a summary of certain U.S. federal income tax consequences of the acquisition, ownership and disposition of the Notes by a U.S. Holder (as defined below). This summary deals only with initial purchasers of Notes who purchase the Notes at the ‘‘issue price’’ (the first price at which a substantial amount of Notes are sold for money, excluding sales to underwriters, placement agents or

177 wholesalers) that are U.S. Holders and that will hold the Notes as capital assets. The discussion does not cover all aspects of U.S. federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of Notes by particular investors (including consequences under the alternative minimum tax, special rules for the taxable year of inclusion for accrual basis taxpayers under section 451(b) of the Code, or net investment income tax), and does not address federal non-income (such as estate or gift), state, local or non-U.S. tax laws. This summary also does not discuss all of the tax considerations that may be relevant to certain types of investors subject to special treatment under the U.S. federal income tax laws (such as financial institutions, insurance companies, individual retirement accounts and other tax-deferred accounts, tax-exempt organisations, dealers in securities or currencies, investors that will hold the Notes as part of straddles, hedging transactions or conversion transactions for U.S. federal income tax purposes, persons that have ceased to be U.S. citizens or lawful permanent residents of the United States, investors holding the Notes in connection with a trade or business conducted outside of the United States, U.S. citizens or lawful permanent residents living abroad or investors whose functional currency is not the U.S. dollar). As used herein, the term ‘‘U.S. Holder’’ means a beneficial owner of Notes that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation created or organised under the laws of the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax without regard to its source or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or the trust has validly elected to be treated as a domestic trust for U.S. federal income tax purposes. The U.S. federal income tax treatment of a partner in an entity or arrangement treated as a partnership for U.S. federal income tax purposes that holds Notes will depend on the status of the partner and the activities of the partnership. Prospective purchasers that are entities or arrangements treated as partnerships for U.S. federal income tax purposes should consult their tax advisers concerning the U.S. federal income tax consequences to them and their partners of the acquisition, ownership and disposition of Notes by the partnership. This summary is based on the tax laws of the United States, including the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, all as of the date hereof and all subject to change at any time, possibly with retroactive effect. THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS FOR GENERAL INFORMATION ONLY. ALL PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING, AND DISPOSING OF THE NOTES, THE APPLICABILITY AND EFFECT OF STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS AND POSSIBLE CHANGES IN TAX LAW.

Payments of Interest Interest on a Note (including any amounts paid in respect of withholding taxes and withour reduction for any amounts withheld for or on account of any tax) generally will be taxable to a U.S. Holder as ordinary income at the time it is received or accrued, depending on such holder’s method of accounting for U.S. federal income tax purposes. If, however, the Notes are not issued with less than a statutorily defined de minimis amount of original issue discount (‘‘OID’’) (generally, 0.0025 multiplied by the stated principal amount of the Notes and the number of complete years to maturity from the issue date), a U.S. Holder will be required to include a portion of the OID in gross income as interest in each taxable year or portion thereof in which the U.S. Holder holds the Notes, even if the U.S. Holder has not received a cash payment in respect of the OID. The amount of a Note’s OID is the excess of the Note’s principal amount over its issue price. Interest generally will be income from sources outside the United States and, for purposes of the U.S. foreign tax credit, generally will be considered passive category income or, in certain cases, general category income. Any non-U.S. withholding tax paid on behalf of a U.S. Holder at the rate applicable to such holder may be eligible for foreign tax credits (or deduction in lieu of such credits) for U.S. federal income tax purposes, subject to applicable limitations (including holding period and at-risk rules). The calculation of foreign tax credits involves the application of complex rules that depend on a U.S. Holder’s particular circumstances. U.S. Holders should consult their tax advisors regarding the availability of foreign tax credits.

178 Sale and Retirement of the Notes A U.S. Holder generally will recognise gain or loss on the sale or retirement of a Note equal to the difference between the amount realised on the sale or retirement and the U.S. Holder’s adjusted tax basis of the Note. A U.S. Holder’s tax basis in a Note generally will be its U.S. dollar cost. The amount realised does not include the amount attributable to accrued but unpaid interest, which will be taxable as interest income to the extent not previously included in income. Gain or loss recognised by a U.S. Holder on the sale or retirement of a Note will be U.S. course capital gain or loss and will be long-term capital gain or loss if the Note was held by the U.S. Holder for more than one year.

Further Notes The Issuer may issue additional notes (‘‘Further Notes’’) as described under ‘‘Terms and Conditions— Further Notes.’’ These Further Notes, even if they are treated for non-tax purposes as part of the same series as the original Notes in some cases may be treated as a separate series for U.S. federal income tax purposes. In such case, the Further Notes In such case, the Additional Notes may be considered to have OID (or a greater amount of OID), which may adversely affect the market value of the original Notes if the Further Notes are not otherwise distinguishable from the original Notes.

Backup Withholding and Information Reporting Payments of principal and interest on, and the proceeds of sale or other disposition of, the Notes by a U.S. paying agent or other U.S. intermediary will be reported to the IRS and to the U.S. Holder as may be required under applicable regulations. Backup withholding may apply to these payments if the U.S. Holder fails to provide an accurate taxpayer identification number or certification of exempt status or fails to comply with applicable certification requirements. Certain U.S. Holders are not subject to backup withholding. U.S. Holders should consult their tax advisers about these rules and any other reporting obligations that may apply to the ownership or disposition of Notes, including requirements related to the holding of certain ‘‘specified foreign financial assets.’’

179 BOOK-ENTRY, DELIVERY AND FORM The information set out below is subject to any change in or reinterpretation of the rules, regulations and procedures of DTC, Euroclear or Clearstream, Luxembourg (together, the ‘‘Clearing Systems’’) currently in effect. Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System. Neither we nor any other party to the Agency Agreement will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Notes held through the facilities of any Clearing System or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Pursuant to the Communique,´ we are required to notify the CRA Turkey within three business days from the issue date of the Notes of the principal amount, the issue date, the ISIN (if any), the interest commencement date, the maturity date, the interest rate, the name of the custodian and the currency of the Notes and the country of issuance.

Clearing Systems Euroclear and Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate the clearance and settlement of securities transactions by electronic book-entry transfer between their respective accountholders. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several countries through established depositary and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective participants may settle trades with each other. Euroclear and Clearstream, Luxembourg customers are worldwide financial institutions, including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an accountholder of either system.

DTC DTC has advised the us that it is a limited purpose trust company organised under the New York Banking Law, a ‘‘banking organisation’’ within the meaning of the New York Banking Law, a ‘‘clearing corporation’’ within the meaning of the New York Uniform Commercial Code and a ‘‘clearing agency’’ registered pursuant to Section 17A of the Exchange Act. DTC holds securities that its participants deposit with DTC. DTC also facilitates the settlement among its participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerised book-entry changes in participants’ accounts. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly.

Registration and Form Book-entry interests in the Regulation S Notes held through Euroclear and Clearstream, Luxembourg will be represented by the Unrestricted Global Certificate registered in the name of a nominee of, and held by, a common depositary for Euroclear and Clearstream, Luxembourg. Book-entry interests in the Rule 144A Notes held through DTC will be represented by the Restricted Global Certificate registered in the name of Cede & Co., as nominee for DTC, and held by a custodian for DTC. As necessary, the Registrars will adjust the amounts of Notes on each Register for the accounts of Euroclear, Clearstream, Luxembourg and DTC to reflect the amounts of Notes held through Euroclear, Clearstream, Luxembourg and DTC, respectively. Beneficial ownership of book-entry interests in Notes will be held through financial institutions as direct and indirect participants in Euroclear, Clearstream, Luxembourg and DTC. The aggregate holdings of book-entry interests in the Notes in Euroclear, Clearstream, Luxembourg and DTC will be reflected in the book-entry accounts of each such institution. Euroclear, Clearstream, Luxembourg or DTC, as the case may be, and every other intermediate holder in the chain to the beneficial owner of book-entry interests in the Notes, will be responsible for establishing and maintaining

180 accounts for their participants and customers having interests in the book-entry interests in the Notes. The Registrar which maintains the register of Notes held through DTC will be responsible for maintaining a record of the aggregate holdings of Notes registered in the name of a nominee for DTC, and the Registrar which maintains the register of Notes held through Euroclear and Clearstream, Luxembourg will be responsible for maintaining a record of the aggregate holdings of Notes registered in the name of a common nominee for Euroclear and Clearstream, Luxembourg, and/or, in each case if individual Certificates are issued in the limited circumstances described under ‘‘Summary of Provisions Relating to the Notes While in Global Form—Registration of Title’’, holders of Notes represented by those individual Certificates. The Principal Paying Agent will be responsible for ensuring that payments received by it from us for holders of book-entry interests in the Notes holding through Euroclear and Clearstream, Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case may be, and the Principal Paying Agent will also be responsible for ensuring that payments received by the Principal Paying Agent from us for holders of book-entry interests in the Notes holding through DTC are credited to DTC. We will not impose any fees in respect of holding the Notes; however, holders of book-entry interests in the Notes may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear, Clearstream, Luxembourg or DTC.

Clearing and Settlement Procedures Initial Settlement Upon their original issue, the Notes will be in global form represented by the two Global Certificates. Interests in the Notes will be in uncertified book-entry form. Purchasers electing to hold book-entry interests in the Notes through Euroclear and Clearstream, Luxembourg accounts will follow the settlement procedures applicable to conventional Eurobonds. Book-entry interests in the Notes will be credited to Euroclear and Clearstream, Luxembourg participants’ securities clearance accounts on the business day following the Issue Date against payment (value the Issue Date). DTC participants acting on behalf of purchasers electing to hold book-entry interests in the Notes through DTC will follow the delivery practices applicable to securities eligible for DTC’s Same Day Funds Settlement system. DTC participants’ securities accounts will be credited with book-entry interests in the Notes following confirmation of receipt of payment to us on the Issue Date.

Secondary Market Trading Secondary market trades in the Notes will be settled by transfer of title to book-entry interests in the Clearing Systems. Title to such book-entry interests will pass by registration of the transfer within the records of Euroclear or Clearstream, Luxembourg or DTC, as the case may be, in accordance with their respective procedures. Book-entry interests in the Notes may be transferred within Euroclear and within Clearstream, Luxembourg and between Euroclear and Clearstream, Luxembourg in accordance with procedures established for these purposes by Euroclear and Clearstream, Luxembourg. Book-entry interests in the Notes may be transferred within DTC in accordance with procedures established for this purpose by DTC. Transfer of book-entry interests in the Notes between Euroclear or Clearstream, Luxembourg and DTC may be effected in accordance with procedures established for this purpose by Euroclear, Clearstream, Luxembourg and DTC.

General Neither Euroclear, Clearstream, Luxembourg nor DTC is under any obligation to perform or continue to perform the procedures referred to above, and such procedures may be discontinued at any time. We, the Trustee and our respective agents will not have any responsibility for the performance by Euroclear, Clearstream, Luxembourg or DTC or their respective participants of their respective obligations under the rules and procedures governing their operations or the arrangements referred to above.

181 SUBSCRIPTION AND SALE Each of Goldman Sachs International and J.P. Morgan Securities plc (each a ‘‘Joint Global Coordinator’’ and together, the ‘‘Joint Global Coordinators’’), Citigroup Global Markets Limited (together with the Joint Global Coordinators, the ‘‘Joint Bookrunners’’) and Societ´ e´ Gen´ erale´ and VTB Capital plc (together with the Joint Bookrunners, the ‘‘Joint Lead Managers’’) has, pursuant to a subscription agreement entered into with us dated 22 January 2018 (the ‘‘Subscription Agreement’’), severally agreed to subscribe or procure subscribers for the respective principal amount of Notes set out opposite its name below, subject to the provisions of the Subscription Agreement:

Amount of Notes Name of Joint Lead Manager Citigroup Global Markets Limited ...... U.S.$55,600,000 Goldman Sachs International ...... U.S.$222,000,000 J.P. Morgan Securities plc ...... U.S.$222,000,000 Societ´ e´ Gen´ erale´ ...... U.S.$200,000 VTB Capital plc ...... U.S.$200,000 Total ...... U.S.$500,000,000

The Subscription Agreement may be terminated in certain circumstances prior to payment to us of the issue price. Certain of the Joint Lead Managers and their affiliates have performed certain investment and commercial banking or financial advisory services for us and our affiliates from time to time, for which they have received customary fees and commissions, and they expect to provide these services to us and our affiliates in the future, for which they expect to receive customary fees and commissions. In addition, in the ordinary course of their business activities, the Joint Lead Managers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve our, or our affiliates’, securities and/or instruments. If the Joint Lead Managers or their affiliates have a lending relationship with us, they routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, the Joint Lead Managers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the Notes. Any such short positions could adversely affect future trading prices of the Notes. The Joint Lead Managers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

United States The Notes have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Notes are being offered and sold only (a) outside the United States in offshore transactions in reliance on, and in compliance with, Regulation S and (b) in the United States to a limited number of QIBs as defined in the Securities Act in connection with resales by the Joint Lead Managers, in reliance on, and in compliance with, Rule 144A. In addition, until 40 days after the commencement of the offering, an offer or sale of Notes within the United States by any dealer (whether or not participating in the offering of the Notes) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A.

Prohibition of Sales to EEA Retail Investors Each Joint Lead Manager has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes to any retail investor in the

182 European Economic Area. For the purposes of this provision the expression ‘‘retail investor’’ means a person who is one (or more) of the following: (a) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (b) a customer within the meaning of the Insurance Mediation Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

United Kingdom Each Joint Lead Manager has represented, warranted and agreed that: (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to us; and (b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

Turkey The offering of the Notes has been authorised by the CMB only for the purpose of the issuance and sale of the Notes outside Turkey in accordance with Article 15(b) of Decree 32 and the Communique.´ The Notes (and any beneficial interests therein) must be offered or sold only outside Turkey, and the CMB has authorised the offering of the Notes on the basis that, following the primary sale of the Notes, no transaction that may be deemed as a sale of the Notes (or any beneficial interests therein) in Turkey by way of private placement or public offering may be engaged in. Pursuant to Article 15(d)(ii) of Decree 32, there is no restriction on the purchase or sale of the Notes (or beneficial interests therein) by residents of Turkey, provided that they purchase or sell such Notes (or such beneficial interests) in the financial markets outside Turkey and such sale or purchase is made through banks and/or licensed brokerage institutions authorised pursuant to CMB regulations. The issue of the Notes and the issuance certificate relating to the Notes were approved by the CMB on 22 December 2017 and the written approval of the CMB relating to the issue of the Notes (which may be in the form of a tranche issuance certificate (in Turkish: tertip ihra¸c belgesi) is expected to be obtained from the CMB on or before the Issue Date. Each of the Joint Lead Managers has agreed that neither it, nor any of its affiliates, nor any person acting on behalf of such Joint Lead Manager or any of its affiliates, has engaged or will engage in any directed selling efforts within Turkey in connection with the Notes. Each of the Joint Lead Managers has further agreed that neither it nor any of its affiliates, nor any person acting on behalf of such Joint Lead Manager or any of its affiliates (i) has engaged or will engage in any form of general solicitation or general advertising in connection with any offer and sale of the Notes in Turkey, or (ii) will make any disclosure in Turkey in relation to us, the Notes or this Offering Memorandum without our prior consent, save as may be required by applicable law, court order or regulation.

Canada The Notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal, that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), or section 1.1 of National Instrument 45-106 Prospectus Exemptions and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this Offering Memorandum (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal adviser.

183 Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the initial purchasers are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

General No action has been taken or will be taken in any jurisdiction by us or any of the Joint Lead Managers that would, or is intended to, permit a public offer of the Notes or possession or distribution of this Offering Memorandum or any other offering material in any country or jurisdiction where any such action for that purpose is required. Persons into whose hands this Offering Memorandum comes are required by us and the Joint Lead Managers to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or have in their possession, distribute or publish this Offering Memorandum or any other offering material relating to the Notes, in all cases at their own expense.

184 SELLING AND TRANSFER RESTRICTIONS Because the following restrictions will apply with respect to the Notes, purchasers of the Notes are advised to consult legal counsel prior to making an offer, resale, pledge or transfer of any of the Notes. The offering of the Notes has been authorised by the CMB only for the purpose of the issuance and sale of the Notes outside Turkey in accordance with Article 15(b) of Decree 32 and the Communique.´ The Notes (and any beneficial interests therein) must be offered or sold only outside Turkey, and the CMB has authorised the offering of the Notes on the basis that, following the primary sale of the Notes, no transaction that may be deemed as a sale of the Notes (or any beneficial interests therein) in Turkey by way of private placement or public offering may be engaged in. Pursuant to Article 15(d)(ii) of Decree 32, there is no restriction on the purchase or sale of the Notes (or beneficial interests therein) by residents of Turkey, provided that they purchase or sell such Notes (or such beneficial interests) in the financial markets outside Turkey and such sale or purchase is made through banks and/or licensed brokerage institutions authorised pursuant to CMB regulations. The issue of the Notes and the issuance certificate relating to the Notes were approved by the CMB on 22 December 2017 and the written approval of the CMB relating to the issue of the Notes (which may be in the form of a tranche issuance certificate (in Turkish: tertip ihra¸c belgesi) is expected to be obtained from the CMB on or before the Issue Date. We have not registered the Notes under the Securities Act or the laws of any state securities commission and, therefore, the Notes may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Notes are being offered and sold only (1) to QIBs, in compliance with Rule 144A and (2) outside the United States in compliance with Regulation S. By its purchase of Notes, each purchaser of Notes will be deemed to have acknowledged, represented and agreed with each of the Joint Lead Managers and us as follows: 1. that the Notes have not been registered under the Securities Act or any other applicable securities law and that the Notes are being offered for resale in transactions not requiring registration under the Securities Act or any other securities law, including sales pursuant to Rule 144A, and, unless so registered, may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act or any other applicable securities law, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with the conditions for transfer set forth in paragraph (4) below; 2. that it is not an ‘‘affiliate’’ (as defined in Rule 144A) of ours and it is not acting on our or their behalf and it is either (i) a QIB and is aware that any sale of Notes to it will be made in reliance on Rule 144A and such acquisition will be for its own account or for the account of another QIB or (ii) it is purchasing Notes in an offshore transaction in accordance with Regulation S; 3. that neither we nor the Joint Lead Managers, nor any person representing us or the Joint Lead Managers, has made any representation to it with respect to us or the offer or sale of any of the Notes, other than the information contained in this Offering Memorandum, which has been delivered to it and upon which it is relying in making its investment decision with respect to the Notes. It acknowledges that the Joint Lead Managers make no representation or warranty as to the accuracy or completeness of this Offering Memorandum. It has had access to such financial and other information concerning us and the Notes as it has deemed necessary in connection with its decision to purchase the Notes, including an opportunity to ask questions of and request information from us and the Joint Lead Managers; 4. that it is purchasing the Notes for its own account, or for one or more investor accounts for which it is acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act. It agrees on its own behalf and on behalf of any investor account for which it is purchasing Notes, and each subsequent holder of the Notes by its acceptance thereof will agree, to offer, sell or otherwise transfer such Notes prior to (x) the date which is one year (or such shorter period of time as permitted by Rule 144A or any successor provision thereunder) after the later of the date of the original issue of the Notes and the last date on which we or any affiliate of ours was the owner of such Notes (or any predecessor thereto), or (y) such later date, if any, as may be required by applicable law (the ‘‘Resale Restriction Termination Date’’), only (a) to us, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Notes are eligible for resale pursuant to Rule 144A, to a person it reasonably believes is a QIB that purchases for its

185 own account or for the account of another QIB to whom it gives notice that the transfer is being made in reliance on Rule 144A, (d) in an offshore transaction complying with Rule 903 or 904 of Regulation S, or (e) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. It acknowledges that we reserve the right prior to any offer, sale or other transfer of the Notes pursuant to clause (d) or (e) above, to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to us; 5. that each Rule 144A Note will contain a legend substantially in the following form: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), OR OTHER SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A ‘‘QUALIFIED INSTITUTIONAL BUYER’’ (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’)), (2) AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS ONE YEAR (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144A OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE THEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH WE OR ANY AFFILIATE (AS DEFINED IN RULE 144A) OF OURS WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE), OR (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE ‘‘RESALE RESTRICTION TERMINATION DATE’’), OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE EXCEPT (A) TO US, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A ‘‘QUALIFIED INSTITUTIONAL BUYER’’ AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT (‘‘REGULATION S’’) OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN COMPLIANCE WITH THE RELEVANT SECURITIES LAWS OF ANY OTHER JURISDICTION, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTICE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT WE AND THE ISSUING AND PAYING AGENT SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) OR (E) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION REASONABLY SATISFACTORY TO US AND THE ISSUING AND PAYING AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS ‘‘OFFSHORE TRANSACTION’’ AND ‘‘UNITED STATES’’ HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S.; 6. that if it purchases the Notes, it will also be deemed to acknowledge that the foregoing restrictions apply to holders of beneficial interests in the Notes as well as to holders of the Notes; 7. that the Registrars will not be required to accept for registration of transfer any Notes acquired by it, except upon presentation of evidence satisfactory to us and the Registrars that the restrictions set forth herein have been complied with; 8. that: (a) we, the Trustee, the Joint Lead Managers and others will rely upon the truth and accuracy of its acknowledgements, representations and agreements set forth herein and it agrees that if any of

186 its acknowledgements, representations or agreements herein cease to be accurate and complete, it will notify us and the Joint Lead Managers promptly in writing; and (b) if it acquires any Notes as fiduciary or agent for one or more investor accounts, it represents with respect to each such account that: (i) it has sole investment discretion; and (ii) it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account and that each such investment account is eligible to purchase the Notes; 9. that it will give to each person to whom it transfers the Notes notice of any restrictions on the transfer of the Notes; and 10. that no action has been taken in any jurisdiction (including the United States) by us or the Joint Lead Managers that would permit a public offering of the Notes or the possession, circulation or distribution of this Offering Memorandum or any other material relating to us or the Notes in any jurisdiction where action for that purpose is required. Consequently, any transfer of the Notes will be subject to the selling restrictions set forth under ‘‘Selling and Transfer Restrictions’’ and ‘‘Subscription and Sale’’.

187 GENERAL INFORMATION Authorisation The issue of the Notes was duly authorised by a resolution of our Board of Directors dated 15 December 2017.

Approval, admission to trading and listing Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on the Global Exchange Market. The Global Exchange Market is not a regulated market for the purposes of the Markets in Financial Instruments Directive. We estimate the total expenses related to the admission of the Notes to the Official List and trading on the Global Exchange Market to be approximately e6,540.

Listing Agent Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in relation to the Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock Exchange or to trading on the Global Exchange Market of the Irish Stock Exchange.

Clearing Systems The Regulation S Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. Application has been made for acceptance of the Rule 144A Notes into DTC’s book-entry settlement system. The ISIN for the Regulation S Notes is XS1747548532 and for the Rule 144A Notes is US71638YAA47. The Common Code for the Regulation S Notes is 174754853 and for the Rule 144A Notes is 175955658 and the CUSIP number for the Rule 144A Notes is 71638Y AA4.

No significant change There has been no material adverse change in the prospects of the Issuer or the Issuer and its subsidiaries since 31 December 2016. There has been no significant change in the financial or trading position of the Issuer or the Issuer and its subsidiaries since 30 September 2017.

Litigation Neither the Issuer nor any of its subsidiaries is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) in the 12 months preceding the date of this Offering Memorandum which may have or have in such period had a significant effect on the financial position or profitability of the Issuer or the Issuer and its subsidiaries. In 2014, we received three separate fines and VAT accrual charges from the TCA in relation to the alleged accrual of SCT on our import of certain feedstock. The total amount of these fines is approximately TL 4 million. We objected to the fines and VAT accrual charges and commenced legal proceedings. While these proceedings were pending, the Turkish Ministry of Finance conducted a limited tax inspection in relation to the same alleged accrual of SCT in 2014. Subsequently, in August 2017, we received a tax loss penalty of approximately TL 99 million and a SCT penalty of TL 66 million. In September 2017, we received favourable judgments from the Regional Administrative Court in all three of the relevant pending cases, which ruled that SCT did not apply to our import of the feedstock, and the judgment is now on appeal with the Council of State. While the exact timing is uncertain, a decision can be expected in the next one to two years. We believe that this dispute will be concluded either through a favourable judgment on appeal or through settlement, and that it does not pose any material risk to us.

Independent Auditors E&Y Turkey, a member firm of Ernst & Young Global Limited, independent auditors, have audited the 2015 Audited Financial Statements and the 2016 Audited Financial Statements, as stated in their reports thereon appearing elsewhere herein, without qualification, in accordance with the Standards on Auditing as issued by the CMB and the Auditing Standards, which are part of the Turkish Auditing Standards as

188 issued by the POA. E&Y Turkey was not reappointed as our independent auditor and effective 1 January 2017, PwC Turkey, a member firm of PricewaterhouseCoopers, was appointed as our independent auditor. PwC Turkey have reviewed the 2017 Unaudited Interim Financial Statements in accordance with the Standard on Review Engagements 2410, ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ as issued by the POA. E&Y Turkey and PwC Turkey are authorised by the CMB, the Banking Regulation and Supervision Agency, the Turkish Treasury, the Energy Market Regulatory Authority and the POA to conduct independent audits in Turkey. We maintain our financial books and records and prepare our financial statements in Turkish Lira in accordance with the Turkish Accounting Standards. E&Y Turkey and PwC Turkey have no interest in us.

Certain information about the Issuer Petkim Petrokimya Holding A.¸S. was incorporated in Turkey on 3 April 1965 with registration number 314 in the Aliaga˘ Trade Register. The Issuer operates under the Turkish Commercial Code. The address of the Issuer’s registered office is Siteler Mh. Necmettin Giritlioglu Cd. No:6, Aliaga˘ 35800 ˙Izmir, Turkey and its telephone number is +90 232 616 12 40.

Documents For so long as the Notes are listed on the Official List and admitted to trading on the Global Exchange Market, physical copies of the following documents will be available for inspection from our registered office and from the specified offices of the Trustee and the Paying Agents for the time being in One Canada Square, London E14 5AL, United Kingdom: (a) our constitutional documents (with an English translation thereof); (b) the annual financial statements of the Issuer for the three years ended 31 December 2016, 2015 and 2014, together with the audit reports in connection therewith. The Issuer currently prepares audited consolidated accounts on an annual basis; (c) the unaudited consolidated financial statements of the Issuer for the nine months ended 30 September 2017 and 2016; (d) the Trust Deed; (e) the Agency Agreement; and (f) this Offering Memorandum.

Post-issuance information We do not intend to provide any post-issuance information in relation to this issue of Notes.

Yield On the basis of the issue price of the Notes of 99.467 per cent. of their principal amount, the yield on the Notes is 6.000 per cent. on an annual basis. Such yield is not an indication of future yield.

Interest of natural and legal persons involved with the issue of the Notes Save for any fees payable to the Joint Lead Managers, so far as we are aware, no person involved in the issue of the Notes has a material interest in the offer of the Notes.

189 INDEX TO FINANCIAL STATEMENTS

Condensed consolidated interim financial statements for the nine months ended 30 September 2017 ...... F-2 Condensed consolidated interim balance sheets ...... F-4–F-6 Condensed consolidated interim statement of profit or loss and other comprehensive income ...... F-7 Condensed consolidated interim statement of changes in equity ...... F-8 Condensed consolidated interim statement of cash flows ...... F-9 Notes to the condensed consolidated interim financial statements ...... F-10–F-42 Condensed consolidated interim financial statements for the nine months ended 30 September 2016 ...... F-43 Interim consolidated statement of financial position ...... F-45–F-46 Interim consolidated statement of profit or loss and other comprehensive income . . F-47 Interim consolidated statement of changes in equity ...... F-48 Interim consolidated statement of cash flows ...... F-49 Notes to the interim condensed consolidated financial statements ...... F-50–F-79 Report and consolidated financial statements for the year ended 31 December 2016 ...... F-80 Independent auditors’ report ...... F-82–F-83 Consolidated statement of financial position ...... F-84–F-85 Consolidated statement of profit or loss and other comprehensive income ...... F-86 Consolidated statement of changes in equity ...... F-87 Consolidated statement of cash flows ...... F-88 Notes to the consolidated financial statements ...... F-89–F-156 Report and consolidated financial statements for the year ended 31 December 2015 ...... F-157 Independent auditors’ report ...... F-159–F-160 Consolidated statement of financial position ...... F-161–F-162 Consolidated statement of profit or loss and other comprehensive income ...... F-163 Consolidated statement of changes in equity ...... F-164 Consolidated statement of cash flows ...... F-165 Notes to the consolidated financial statements ...... F-166–F-233

F-1 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PETK˙IM PETROK˙IMYA HOLD˙ING ANON˙IM S¸˙IRKET˙I AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2017

F-2 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PETK˙IM PETROK˙IMYA HOLD˙ING ANON˙IM S¸˙IRKET˙I AND ITS SUBSIDIARIES INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIOD 1 JANUARY–30 SEPTEMBER 2017

CONTENTS PAGE CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS ...... F-4–F-6 CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ...... F-7 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY ... F-8 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS ...... F-9 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIOD 1 JANUARY–30 SEPTEMBER 2017 ...... F-10–F-42

F-3 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PETK˙IM PETROK˙IMYA HOLD˙ING ANON˙IM S¸˙IRKET˙I AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED INTERIM BALANCE SHEET AS AT 30 SEPTEMBER 2017 (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.)

(*) Unaudited Audited Notes 30 September 2017 31 December 2016 ASSETS CURRENT ASSETS Cash and cash equivalents ...... 4 1.208.239.114 1.267.188.405 Trade receivables ...... 823.899.836 674.471.489 —Trade receivables from third parties ...... 6 823.899.836 674.471.489 Other receivables ...... 89.509.116 30.792.406 —Other receivables from related parties ...... 19 47.505.920 14.321.046 —Other receivables from third parties ...... 42.003.196 16.471.360 Derivative financial instruments ...... 317.520 7.466.471 Inventories ...... 5 749.890.053 604.333.833 Prepaid expenses ...... 65.676.154 31.915.791 —Prepaid expenses to third parties ...... 10 58.155.464 19.037.704 —Prepaid expenses to related parties ...... 19 7.520.690 12.878.087 Other current assets ...... 46.126.401 43.777.394 —Other current assets related to third parties ...... 46.126.401 43.777.394 TOTAL CURRENT ASSETS ...... 2.983.658.194 2.659.945.789 NON-CURRENT ASSETS Financial investments ...... 8.910.000 8.910.000 —Available for sale financial assets ...... 8.910.000 8.910.000 Other receivables ...... 429.963.173 423.305.661 —Other receivables from related parties ...... 19 429.963.173 423.305.661 Investment properties ...... 1.469.935 1.469.935 Property, plant and equipment ...... 8 3.036.386.025 2.831.261.149 Intangible assets ...... 23.698.586 22.398.670 Prepaid expenses ...... 78.630.345 64.040.243 —Prepaid expenses to third parties ...... 10 78.630.345 59.747.547 —Prepaid expenses to related parties ...... 19 — 4.292.696 Deferred income tax assets ...... 13 225.447.938 244.963.987 Other non-current assets ...... 13.716.784 12.232.354 —Other non-current assets related to third parties . . 13.716.784 12.232.354 TOTAL NON-CURRENT ASSETS ...... 3.818.222.786 3.608.581.999 TOTAL ASSETS ...... 6.801.880.980 6.268.527.788

(*) See Note 2.5 for prior year reclassifications.

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

F-4 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PETK˙IM PETROK˙IMYA HOLD˙ING ANON˙IM S¸˙IRKET˙I AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (Continued) AS AT 30 SEPTEMBER 2017 (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.)

(*) Unaudited Audited Notes 30 September 2017 31 December 2016 LIABILITIES CURRENT LIABILITIES Short-term borrowings ...... 1.039.966.808 1.164.193.179 —Short-term borrowings from third parties ...... 1.039.966.808 1.164.193.179 —Bank borrowings ...... 7 587.223.446 461.698.893 —Other financial liabilities ...... 7 452.743.362 702.494.286 Short-term portion of long-term borrowings ...... 829.584.834 55.495.727 —Short-term portion of long-term borrowings from third parties ...... 829.584.834 55.495.727 —Bank borrowings ...... 7 829.584.834 55.495.727 Derivative financial instruments ...... 1.717.791 432.006 Trade payables ...... 562.361.620 412.369.070 —Trade payables to related parties ...... 19 59.546.132 29.584.837 —Trade payables to third parties ...... 502.815.488 382.784.233 Payables related to employee benefits ...... 19.887.993 25.429.492 Other payables ...... 14.396.996 38.733.947 —Other payables to related parties ...... 19 87.116 26.450.401 —Other payables to third parties ...... 14.309.880 12.283.546 Deferred revenue ...... 69.836.941 39.144.851 —Deferred revenue from related parties ...... 19 8.738.161 4.198.100 —Deferred revenue from third parties ...... 9 61.098.780 34.946.751 Short term provisions ...... 15.271.440 4.000.981 —Provision for employee benefits ...... 11 11.737.997 2.617.402 —Other short term provisions ...... 20 3.533.443 1.383.579 Current tax liabilities ...... 13 47.883.711 48.864.818 Other current liabilities ...... 10.148.122 7.976.519 —Other current liabilities related to third parties ...... 10.148.122 7.976.519 TOTAL CURRENT LIABILITIES ...... 2.611.056.256 1.796.640.590 NON-CURRENT LIABITIES Long term financial liabilities ...... 463.452.791 1.172.474.368 —Long term financial liabilities from third parties ..... 463.452.791 1.172.474.368 —Bank borrowings ...... 7 463.452.791 1.172.474.368 Derivative financial instruments ...... 10.863.934 9.027.379 Deferred revenue ...... 128.773.662 129.637.103 —Deferred revenue from related parties ...... 19 6.011.641 8.829.511 —Deferred revenue from third parties ...... 9 122.762.021 120.807.592 Long term provisions ...... 95.015.088 91.308.322 —Provision for employee termination benefits ..... 11 95.015.088 91.308.322 TOTAL NON-CURRENT LIABILITIES ...... 698.105.475 1.402.447.172 TOTAL LIABILITIES ...... 3.309.161.731 3.199.087.762

(*) See Note 2.5 for prior year reclassification

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

F-5 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

Unaudited Audited 30 September 31 December Notes 2017 2016 EQUITY Equity attributable to owners of the parent company .. 3.433.799.692 3.001.710.146 Share capital ...... 12 1.500.000.000 1.500.000.000 Adjustment to share capital ...... 12 238.988.496 238.988.496 Share premium ...... 214.187.872 214.187.872 Other comprehensive expense not to be reclassified to profit or loss —Actuarial loss arising from defined benefit plan ...... (23.868.468) (24.694.546) Other comprehensive (expense) / income to be reclassified to profit or loss ...... (4.982.888) 572.240 —Currency translation differences ...... 2.221.132 — —(Loss) / Gain on cash flow hedges ...... (7.204.020) 572.240 Restricted reserves ...... 192.598.686 104.957.638 Retained earnings ...... 280.057.398 241.912.168 Net profit for the period / year ...... 1.036.818.596 725.786.278 Non-controlling interest ...... 58.919.557 67.729.880 TOTAL EQUITY ...... 3.492.719.249 3.069.440.026 TOTAL LIABILITIES AND EQUITY ...... 6.801.880.980 6.268.527.788

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

F-6 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PETK˙IM PETROK˙IMYA HOLD˙ING ANON˙IM S¸˙IRKET˙I AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE NINE-MONTH INTERIM PERIOD ENDED 30 SEPTEMBER 2017 (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.)

Unaudited Unaudited Unaudited Unaudited 1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September Notes 2017 2017 2016 2016 PROFIT OR LOSS Revenue ...... 14 5.401.902.586 1.775.482.731 3.253.455.041 968.829.547 Cost of sales ...... 14 (4.022.896.072) (1.335.174.474) (2.585.062.405) (776.198.587) GROSS PROFIT ...... 1.379.006.514 440.308.257 668.392.636 192.630.960 General administrative expenses ...... 15 (147.809.950) (45.819.673) (103.091.540) (30.448.719) Selling, marketing and distribution expenses . . . (43.359.149) (14.712.445) (31.246.051) (10.285.396) Research and development expenses ...... (12.228.255) (4.585.402) (9.744.393) (3.364.661) Other operating income ...... 16 162.594.543 68.109.120 113.392.268 33.674.246 Other operating expense ...... 16 (99.873.631) (13.695.437) (66.431.775) (29.352.887) OPERATING PROFIT ...... 1.238.330.072 429.604.420 571.271.145 152.853.543 Income from investing activities ...... 37.768.958 26.827.019 565.634 (30.220) Expense from investing activities ...... (144.232) (1.218) (12.812) (566) OPERATING PROFIT BEFORE FINANCIAL INCOME/ (EXPENSE) ...... 1.275.954.798 456.430.221 571.823.967 152.822.757 Financial income ...... 17 383.519.541 99.583.207 194.963.181 55.576.435 Financial expenses ...... 17 (432.098.880) (119.629.785) (174.328.865) (52.321.453) PROFIT BEFORE TAX FROM CONTINUED OPERATIONS ...... 1.227.375.459 436.383.643 592.458.283 156.077.739 Tax expense from continuing operations ...... (200.271.595) (64.343.201) (77.053.227) (17.952.877) —Current tax expense ...... 13 (176.953.541) (49.762.195) (112.512.643) (32.037.498) —Deferred tax income ...... 13 (23.318.054) (14.581.006) 35.459.416 14.084.621 PROFIT FOR THE PERIOD CONTINUED OPERATIONS ...... 1.027.103.864 372.040.442 515.405.056 138.124.862 PROFIT FOR THE PERIOD ...... 1.027.103.864 372.040.442 515.405.056 138.124.862 DISTRIBUTION OF INCOME/ (EXPENSE) FOR THE PERIOD —Non-controlling interest ...... (9.714.732) (2.075.250) 5.300.075 1.401.012 —Owners of the parent company ...... 1.036.818.596 374.115.692 510.104.981 136.723.850 Basic and diluted Earnings Per Share ...... 18 0,6912 0,2494 0,3401 0,0911 —Earnings per Kr 1 number of 1 shares from continued operations ...... 0,6912 0,2494 0,3401 0,0911 OTHER COMPREHENSIVE (LOSS) / INCOME Items to be reclassified to Profit or Loss .... (4.650.719) 7.325.029 (7.976.804) 1.242.973 Currency translation differences ...... 3.566.315 3.146.492 — — Other comprehensive (loss) / income related with cash flow hedges ...... (10.271.293) 5.223.171 (9.971.005) 1.553.716 Tax relating to (loss) / gain on cash flow hedge . 2.054.259 (1.044.634) 1.994.201 (310.743) Items not to be reclassified to Profit or Loss .. 826.078 — 786.508 3.669.443 Defined benefit plans remeasurement Earnings (losses) ...... 1.032.598 — 983.135 4.586.804 Taxes relating to remeasurements of defined benefit plans ...... (206.520) — (196.627) (917.361) OTHER COMPREHENSIVE INCOME ...... (3.824.641) 7.325.029 (7.190.296) 4.912.416 TOTAL COMPREHENSIVE INCOME ...... 1.023.279.223 379.365.471 508.214.760 143.037.278 Attributable to: Non-controlling interests ...... (8.810.323) (679.867) (1.385.983) 1.867.332 Owners of parent company ...... 1.032.089.546 380.045.338 509.600.743 141.169.946

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

F-7 7 492.719.249 Equity attributable to 510.104.981 — 510.104.981 5.300.075 515.405.056 1.036.818.596 — 1.036.818.596 (9.714.732) 1.027.103.864 39.750.000 — (512.250.000) (472.500.000) — (472.500.000) 28.658.861 (626.378.793) 597.719.932 —35.141.048 (725.786.278) 690.645.230 —52.500.000 — — — (652.500.000) (600.000.000) — — (600.000.000) — I AND ITS SUBSIDIARIES ˙ IRKET ˙ S IM ¸ ˙ ING ANON ˙ profit or loss IMYA HOLD IMYA ˙ not to be (expense) / profit or loss reclassified to Actuarial loss reclassified to income to be (expense) / income comprehensive Other comprehensive Other IM PETROK ˙ (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.) (Amounts expressed in Turkish FOR THE NINE-MONTH INTERIM PERIOD ENDED 30 SEPTEMBER 2017 FOR THE NINE-MONTH PETK Adjustment arising from (Loss) / gain Currency Net profit owners of Non- The accompanying notes are an integral part of these consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY STATEMENTS CONDENSED CONSOLIDATED Share to share defined benefit on cash translation Share Restricted for the Retained the parent controlling Total capital capital plan flow hedges differences premium reserves period earnings company interests equity 1.500.000.000 238.988.496 (22.881.529) (8.780.769) — 214.187.872 104.957.638 510.104.981 241.912.168 2.778.488.857 62.609.400 2.841.098.25 1.500.000.000 238.988.496 (23.668.037) (7.490.023) — 214.187.872 36.548.777 626.378.793 156.442.236 2.741.388.1141.500.000.000 63.995.383 238.988.496 2.805.383.497 (23.868.468) (7.204.020) 2.221.132 214.187.872 192.598.686 1.036.818.596 280.057.398 3.433.799.692 58.919.557 3. 1.500.000.000 238.988.496 (24.694.546) 572.240 — 214.187.872 104.957.638 725.786.278 241.912.168 3.001.710.146 67.729.880 3.069.440.026 .... —.... — — — — — — — — — — — — — ...... — — — — — — ...... — — — — — — ...... — — — — — — ...... — — — — — — CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ORIGINALLY FINANCIAL STATEMENTS INTO ENGLISH OF CONSOLIDATED CONVENIENCE TRANSLATION 30 September 2016 1 January 2016 Transfers Total comprehensive incomeTotal . .—Other comprehensive income—Net profit for the period Dividend paid — — comprehensive incom)Total .—Other comprehensive income . ——Net profit for the period —30 September 2017 786.508 — 786.508 — (1.290.746) (1.290.746) — — — — 826.078 826.078 (7.776.260) — (7.776.260) — 2.221.132 2.221.132 — — 510.104.981 — — — — — — 1.036.818.596 509.600.743 (1.385.983) 508.214.760 — — — 1.032.089.546 (504.238) (8.810.323) (6.686.058) 1.023.279.223 (7.190.296) — (4.729.050) 904.409 (3.824.641) Transfers 1 January 2017 Dividend paid

F-8 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PETK˙IM PETROK˙IMYA HOLD˙ING ANON˙IM S¸˙IRKET˙I AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH INTERIM PERIOD ENDED 30 SEPTEMBER 2017 (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.)

Unaudited Unaudited 1 January 1 January Notes 30 September 2017 30 September 2016 A. Cash flows from operating activities: ...... 978.109.809 445.409.256 Net profit for the year (I) ...... 1.027.103.864 515.405.056 Adjustments related to reconciliation of (II) net profit (loss) for the year: ...... 351.920.361 153.469.956 Adjustments for depreciation and amortization ...... 124.199.363 81.745.600 Adjustments for impairments/ reversals —Adjustments for impairment of inventories ...... 5 (316.365) (10.656.453) —Adjustments for other impairment ...... (31.807.000) — Adjustments for provisions —Adjustments for provision employment termination benefits ...... 11 29.653.112 21.715.459 —Adjustments for provision legal cases ...... 20 2.149.864 145.394 —Adjustments for provision / other cases ...... 8.960.334 10.280.524 Adjustments for interest income/ (expense) —Adjustments for interest income ...... 17 (64.168.642) (40.379.184) —Adjustments for interest expense ...... 17 70.452.342 14.637.288 —Deferred interest expense due to credit purchase ...... (4.047.146) (1.030.139) —Unearned interest income due to credit sales ...... 9.041.825 8.621.620 Adjustments for unrealized foreign currency translation differences . . . 29.767.177 (7.960.022) Adjustments for tax income/ losses ...... 13 200.271.595 77.053.227 Adjustments for gain/ losses on sale of property, plant and equipment . (23.959.777) (565.634) Adjustments for income from government incentives ...... 1.723.679 (137.724) Changes in working capital (III) Adjustments related to (increase)/decrease in trade receivables ..... (172.404.542) 9.638.090 Adjustments related to (increase)/decrease in other receivables ..... (51.554.900) (16.333.558) Adjustments related to (increase)/decrease in inventory ...... (136.220.194) (121.045.440) (Increase)/decrease in prepaid expenses ...... (3.353.942) 15.914.624 Adjustments for increase/(decrease) in trade payables ...... 156.903.530 (37.394.382) Adjustments for increase/(decrease) in other payable ...... (22.165.349) 9.389.269 Change in derivative financial instruments ...... (2.678.367) — Increase/(decrease) in payables related to employee benefits ...... 11 (5.541.499) 12.587.674 Adjustments for increase/(decrease) in deferred revenue ...... 9 29.828.649 24.441.186 Cash flows from operating activities (I+II+III) ...... 1.171.837.611 566.072.475 Employee termination benefits paid ...... 11 (15.793.154) (29.335.745) Income taxes (paid) ...... 13 (177.934.648) (91.327.474) B. Cash flows from investing activıties ...... (332.067.319) (255.776.658) Cash outflows from purchases of property, plant and equipment ..... (339.334.018) (352.997.377) Proceeds from sale of property, plant and equipment ...... 24.050.203 1.087.064 Other cash advances and payables given ...... (16.783.504) (64.318.604) Other cash inflows ...... — 160.452.259 C. Cash flows from financing activities ...... (706.335.285) (740.832.182) Proceeds from borrowings ...... 7 1.077.454.358 369.561.024 Repayments of borrowings ...... 7 (924.925.027) (334.943.708) Proceeds from other financial liabilities ...... 7 505.322.874 540.709.871 Repayments of other financial liabilities ...... 7 (753.465.911) (832.101.285) Interest received ...... 63.929.185 38.042.046 Interest paid ...... (74.650.764) (49.600.130) Dividends paid ...... (600.000.000) (472.500.000) D. Net increase / (decrease) in cash and cash equivalents before foreign currency translation differences (A+B+C) ...... (60.292.795) (551.199.584) E. Effect of currency translation differences on cash and cash equivalents ...... 1.343.504 17.100.259 Net increase / (decrease) in cash and cash equivalents (D+E) .... (58.949.291) (534.099.325) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD ...... 4 1.267.188.405 1.341.536.749 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD .. 1.208.239.114 807.437.424

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

F-9 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PETK˙IM PETROK˙IMYA HOLD˙ING ANON˙IM S¸˙IRKET˙I AND ITS SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH INTERIM PERIOD ENDED 30 SEPTEMBER 2017 (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.)

NOTE 1—GROUP’S ORGANISATION AND NATURE OF OPERATIONS Petkim Petrokimya Holding A.¸S. (‘‘Petkim’’ or ‘‘the Company’’) was established on 3 April 1965. The Company started its investment activities in ˙Izmit-Yarımca and initially established the Ethylene, Polyethylene, Chlorine Alkali, VCM and PVC plants in 1970 in the Yarımca Complex and in the following years, construction of other plants continued. In 1985, Aliaga˘ Petrochemical Complex was established with advance technology and optimum capacity. The Company has 14 main plants, 1 bag production unit and 1 solid waste incineration facility. The Company operates its facilities in the petrochemical sector in Turkey. The major operations of the Company and its subsidiaries are as follows: • To establish and to operate factories, plants in Turkey home or abroad in relation to the petrochemistry, chemistry and such other industrial sectors, • To process and to treat the raw materials and supplementary/auxiliary substances, materials and chemicals necessary for the production of petrochemicals, chemicals and such other materials/ substances by procuring such materials/substances either from Turkey or abroad, to produce such materials/substances, and to carry out and to perform the domestic and international trading thereof, • In accordance with the Law 4628 on the Electricity Market, and the related legislation thereto, to establish power plants as per the auto-producer’s license in order to meet its own need for electricity and heat/thermal energy at first, to generate electricity and heat/thermal energy, to sell the generated electricity and heat/thermal energy and/or the capacity to other legal persons holding the requisite licenses or to the eligible consumers as per the mentioned legislation in case of any surplus production, and to carry out and to perform the activities in relation to the obtainment of any and all kinds of equipment and fuel in relation to the electricity power/generating plant provided that such activities are not of commercial nature, • To carry out and to perform the activities in relation to the importation or purchase from domestic resources, of natural gas on wholesale and retail basis, utilization, storage of natural gas imported and purchased, in accordance with the legislation thereto, • To carry out and to perform pilotage, trailer and mooring activities, to operate ports, cruise ports, passenger terminals, seaports, docks, harbors, berths, liquid fuel/liquefied petroleum pipeline and buoy systems, and such other similar onshore facilities/plants, and to be involved in port management activities, to offer port, agency, provision, bunkering services, and to provide that such services are offered by third parties either by way of leasing or such other methods when required, and to purchase, to have built and to lease, to sell the necessary vessels/naval platforms, and to establish either domestic or international partnerships in relation thereto, to operate warehouses, and to offer warehousing services, The ‘‘Share Sales Agreement’’, with respect to the sale of 51% of shares of Petkim Petrokimya Holding A.¸S. (which has been in the privatization process for several years) to SOCAR & Turcas Petrokimya A.¸S. (‘‘STPA¸S’’), 44% of which previously owned by the Republic of Turkey Ministry Privatization Administration (‘‘Administration’’) and 7% State Pension Fund (‘‘Emekli Sandıgı˘ Genel Mud¨ url¨ u¨g˘u’’)¨ transferred to Republic of Turkey Social Security Institution, was signed on 30 May 2008. On 22 June 2012, the public shares amounting to 10,32% of the Company capital which belonged to Prime Ministry Privatization Administration was sold to SOCAR ˙Izmir Petrokimya A.¸S (‘‘S˙IPA¸S’’) which is the subsidiary of the Company’s main shareholder, SOCAR Turkey Enerji A.¸S. (‘‘STEA¸S’’) On 22 September 2012, the listed shares of 10,32% in the Company, which belonged to Prime Ministry Privatisation Administration, was sold to SOCAR ˙Izmir Petrokimya A.¸S (‘‘S˙IPA¸S’’), the subsidiary of the Company’s main shareholder, SOCAR Turkey Enerji A.¸S. (‘‘STEA¸S’’).

F-10 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

PETK˙IM PETROK˙IMYA HOLD˙ING ANON˙IM S¸˙IRKET˙I AND ITS SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) FOR THE NINE-MONTH INTERIM PERIOD ENDED 30 SEPTEMBER 2017 (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.)

NOTE 1—GROUP’S ORGANISATION AND NATURE OF OPERATIONS (Continued) STEA¸S and S˙IPA¸S merged on 22 September 2014 under STEA¸S. As of 30 September 2017 and 31 December 2016 the ultimate shareholder of the Company is State Oil Company of Azerbaijan Republic (‘‘SOCAR’’). The Group is registered at the Capital Markets Board (‘‘CMB’’) and 49% (31 December 2016: %49) of its shares have been quoted in Borsa ˙Istanbul (‘‘BIST’’) since 9 July 1990 (Note 12). These condensed consolidated interim financial statements were approved to be issued by the Board of Directors on 9 November 2017 and signed by Mr. Anar Mammadov, General Manager and Mr. Rıza Bozoklar, Vice President of Finance, on behalf of the Board of Directors. The registered address of the Company as of the date of preparation of the condensed consolidated interim financial statements is as follows: Siteler Mh. Necmettin Giritlioglu˘ Cd. No: 6 35800 Aliaga/˘ ˙IZM˙IR As of 30 September 2017, the Company’s subsidiaries (‘‘subsidiaries’’) the Company and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) and their respective operating segments are as follows:

Nature of operations Business segment 1. Petlim Limancılık Ticaret A.¸S. (‘‘Petlim’’) ...... Port operations Port 2. Petkim Specialities Muhendislik¨ Plastikleri Sanayi ve Ticaret A.¸S...... Plastic Processing Petrochemistry As of 30 September 2017, the average number of employees working for the Group is 2.418 (31 December 2016: 2.434). The details of the employees as of 30 September 2017 and 31 December 2016 are as follows:

30 September 2017 31 December 2016 Union(*) ...... 1.860 1.857 Non-union(**) ...... 581 538 2.441 2.395

(*) Indicates the personnel who are members of Petrol ˙I¸s Union. (**) Indicates the personnel who are not members of Petrol ˙I¸s Union.

NOTE 2—BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT 2.1 Basis of Presentation The accompanying condensed consolidated interim financial statements are prepared in accordance with the Communique´ Serial II, No: 14.1, ‘‘Principals of Financial Reporting in Capital Markets’’ published in the Official Gazette numbered 28676 on 13 June 2013. According to the article 5 of the Communique,´ condensed consolidated interim financial statements are prepared in accordance with Turkish Accounting Standards / Turkish Financial Reporting Standards (‘‘TAS’’ / ‘‘TFRS’’) and its addendum and interpretations (‘‘IFRIC’’) issued by the Public Oversight Accounting and Auditing Standards Authority (‘‘POAASA’’) Turkish Accounting Standards Board. The Group prepared its condensed consolidated interim financial statements for the period ended 30 September 2017 in accordance with (‘‘TAS’’) 34 ‘‘Interim Financial Reporting’’ in the framework of the Communique Serial II, No: 14.1, and it’s the necessary related announcement. The condensed

F-11 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 2—BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT (Continued) consolidated interim financial statements and its accompanying notes are presented in compliance with the format recommended by the CMB including its mandatory information. The Group and its subsidiaries maintain their books of accounts and prepare their statutory financial statements in accordance with the principles issued by CMB, the Turkish Commercial Code (‘‘TCC’’), tax legislation, the Uniform Chart of Acc ounts issued by the Ministry of Finance. The condensed consolidated interim financial statements are based on the statutory records, which are maintained under historical cost conventions, with the required adjustments and reclassifications recognised for the purpose of fair presentation in accordance with TAS. The condensed consolidated interim financial statements are presented in accordance with ‘‘Announcement regarding with TAS Taxonomy’’ which was published on 2 June 2016 by POAASA and the format and mandatory information recommended. In compliance with TAS 34, entities are allowed to make preference in presenting their interim financial statements in full set or condensed set of financial statements. In this framework, the Group elected to present its interim financial statements as condensed set. The Group’s condensed consolidated interim financial statements do not include all disclosure and notes that should be included at year-end financial statements. Therefore the condensed consolidation interim financial statements should be read in conjunction with the Group’s annual consolidated financial statements dated 31 December 2016. The condensed consolidated interim financial statements, except for the financial assets and liabilities measured at their fair values, are maintained under historical cost conversion, with the required adjustment and reclassification reflected for the purpose of fair presentation in accordance with the TAS/ TFRS. According to CMB Communique´ No: 14 and announcements made by the CMB, it is obligatory for the companies preparing condensed financial statements in interim periods to present the foreign exchange position table, the hedging ratio of the total foreign exchange liability and the total export and total import amounts in the footnotes of the financial statements (Note 21). The Group’s condensed consolidated interim financial statements are not subject to seasonality. On the other hand, as a result of gradually increasing spread between the prices of naphtha (main raw material) and ethylene (base output for the products), and the depreciation of TL against USD in which the commodity prices are denominated in; the gross profit of the Group increased considerably for the nine month period ended 30 September 2017.

2.2 Summary of significant accounting policies Significant accounting policies applied in these condensed consolidated interim financial statements are consistent with the accounting policy applied in the consolidated financial statements for the period 1 January–31 December 2016 except for the followings: The port operations of the Group have started on 1 January 2017. The fixed revenue to be generated by the Group based on the contract is updated annually by considering the related inflation coefficient stated in the contract and recognized as revenue within the contractual period on a straight line basis. The variable revenue to be generated over the port operator’s revenue, at amount exceeding the minimum revenue limits stated in the contract, will be recognized when incurred. Income tax expense is recognised in each interim period based on the best estimate of the weighted average annual income tax rate expected for the full financial year. Amounts accrued for income tax expense in one interim period may have to be adjusted in a subsequent interim period of that financial year if the estimate of the annual income tax rate changes.

F-12 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 2—BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT (Continued) Expenses which are not evenly distributed through the year are recognized in the condensed consolidated interim financial statements only when they can be estimated or deferred appropriately.

2.3 Basis of consolidation The condensed consolidated interim financial statements include the accounts of the parent company, Petkim and its subsidiaries on the basis set out in sections below. The financial statements of the companies included in the scope of consolidation have been prepared as of the date of the consolidated financial statements and have been prepared in accordance with TAS / TFRS applying uniform accounting policies and presentation. a) Subsidiaries The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability 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 the control ceases. Intercompany transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from intercompany transactions that are recognized in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The non-controlling share in the net assets and results of subsidiaries for the period are separately classified as ‘‘non-controlling interest’’ in the consolidated balance sheet and statement of income. The accounting policies of the subsidiaries have been changed where necessary to be consistent with the accounting policies accepted by the Group. The table below sets out all subsidiaries included in the scope of consolidation together with the related voting rights and effective ownership rates at 30 September 2017;

Direct or Indirect Control Shareholding rates of the Group (%) Subsidiaries 30 September 2017 31 December 2016 Petlim ...... 73,00 73,00 Petkim Specialities Muhendislik¨ Plastikleri Sanayi ve Ticaret A.¸S...... 100,00 100,00 b) Foreign currency translation i) Functional and presentation currency The financial statements of each company within the Group are measured in the currency in which the entity is located and in which the operations are maintained (‘‘functional currency’’). As a result of the Group management’s assessment, the functional currency of Petlim has been designated as US Dollars as of 1 January 2017 due to Petlim’s commencement of its operations and generating all its revenues in US Dollars. The condensed consolidated interim financial statements have been prepared and presented in Turkish lira (‘‘TL’’), which is the parent Company’s functional and presentation currency.

F-13 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 2—BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT (Continued) ii) Transactions and balances Transactions in foreign currencies have been translated into functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from the settlement and translation of monetary assets and liabilities denominated in foreign currency at the exchange rates prevailing at the balance sheet dates are included in consolidated comprehensive income, except for the effective portion of foreign currency hedge of cash flow which are included under shareholders equity. iii) Translation of financial statements of subsidiaries, whose functional currency is not Turkish liras Upon the change in functional currency of Petlim as US Dollars as of 1 January 2017, in accordance with the transition provisions of TMS 21, ‘‘Effects of Changes in Foreign Exchange’’, the financial statements of Petlim have been converted to US Dollars with the exchange rate as of 1 January 2017. As of 30 September 2017, Petlim’s assets and liabilities are translated into TL from the foreign exchange rate at the date of that balance sheet date. The income and expenses of Petlim are translated into TL at the average exchange rate. The effects of conversion of opening net assets of Petlim and the differences arising from the exchange rates at the average exchange rates and balance sheet dates are recognized in ‘‘currency translation differences’’ in other comprehensive income. The balance sheet date rates and average rates used for translation for the related periods are as follows: The end of the period: 30 September 2017 31 December 2016 Turkish Liras / US Dollars ...... 3,5521 3,5192

Average: 30 September 2017 Turkish Liras / US Dollars ...... 3,5936

2.4 Amendments in Turkish Financial Reporting Standards a) Standards, amendments and interpretations applicable as at 30 September 2017: • Annual improvements 2014-2016, effective from annual periods beginning on or after 1 January 2017. These amendments impact three standards: • IFRS 1,’ First-time adoption of IFRS’, regarding the deletion of short-term exemptions for first-time adopters regarding IFRS 7, IAS 19, and IFRS 10 effective 1 January 2018. • IFRS 12,’Disclosure of interests in other entities’ regarding clarification of the scope of the standard. These amendments should be applied retrospectively for annual periods beginning on or after 1 January 2017. • IAS 28,’Investments in associates and joint ventures’ regarding measuring an associate or joint venture at fair value effective 1 January 2018. • Amendments to IAS 7 ‘Statement of cash flows’ on disclosure initiative, effective from annual periods beginning on or after 1 January 2017. These amendments introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities, The amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved.

F-14 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 2—BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT (Continued) • Amendments IAS 12 ‘Income Taxes’, effective from annual periods beginning on or after 1 January 2017. The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base, It also clarify certain other aspects of accounting for deferred tax assets. b) New standards, amendments and interpretations issued and effective as of 1 January 2017 have not been presented since they are not relevant to the operations of the Company or have insignificant impact on the financial statements. c) Standards, amendments and interpretations effective after 30 September 2017: • TFRS 9 ‘Financial instruments’, effective from annual periods beginning on or after 1 January 2018. This standard replaces the guidance in TAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. • TFRS 15 ‘Revenue arising from contracts with customers’: effective from annual periods beginning on or after 1 January 2018. The goal of the compliance study with Accepted Accounting Standards in the United States was to provide financial reporting of the resulting new standard revenue and to ensure that the total income of the financial statements is comparable globally. • Amendments to TFRS 15 ‘Revenue arising from contracts with customers; These amendments include guidance on implementation guidance that sets performance (performance) obligations, accounting for intellectual property licenses, and disclosures about whether the entity is a noble or an intermediary (gross revenue presentation vs. net revenue presentation). New and modified explanatory examples have been added for each of these areas in the implementation guidance. The IASB also included additional practical measures related to the transition to the new revenue standard. • TFRS 16 ‘Leases’, effective from annual periods beginning on or after 1 January 2019, This standard replaces the current guidance in TAS 17 and is a farreaching change in accounting by lessees in particular. Under TAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). TFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under TFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. • Annual improvements from 2014 to 2016 • TFRS 1, ‘First-time adoption of TFRS’, regarding the deletion of short-term exemptions for first-time adopters regarding TFRS 7, TAS 19, and TFRS 10 effective 1 January 2018. • TAS 28,‘Investments in associates and joint ventures’ regarding measuring an associate or joint venture at fair value effective 1 January 2018. • TFRS 22,’ Foreign currency transactions and advance consideration’, effective from annual periods beginning on or after 1 January 2018. This IFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The

F-15 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 2—BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT (Continued) interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidance aims to reduce diversity in practice. • IFRIC 23, ‘Uncertainty over income tax treatments’, effective from annual periods beginning on or after 1 January 2019. This IFRIC clarifies how the recognition and measurement requirements of IAS 12 ‘Income taxes’, are applied where there is uncertainty over income tax treatments. The IFRS IC had clarified previously that IAS 12, not IAS 37 ‘Provisions, contingent liabilities and contingent assets’, applies to accounting for uncertain income tax treatments. IFRIC 23 explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the tax authority. For example, a decision to claim a deduction for a specific expense or not to include a specific item of income in a tax return is an uncertain tax treatment if its acceptability is uncertain under tax law. IFRIC 23 applies to all aspects of income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss, the tax bases of assets and liabilities, tax losses and credits and tax rates. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group. However, no material effect is expected as a result of adoption of these standarts and interpretations.

2.5 Comparative information and correction of prior period financial statements The Group prepared its condensed consolıdated interim financial statements on a comparative basis with the preceding financial period, which enables determination of trends in financial position and performance. The Group prepared its balance sheet at 30 September 2017 on a comparative basis with balance sheet at 31 December 2016; and statements of profit or loss comprehensive income, cash flows and changes in equity for the period of 1 January–30 September 2017 on a comparative basis with financial statements for the period of 1 January–30 September 2016. For the purpose of convenience with the presentation of current period consolidated financial statements, comparative information is restated when necessary and major changes are disclosed. In line with the guidance (‘‘Taxonomy’’) provided by the CMB, Group management detected the following faults concerning balance sheet items. Reclassifications were made for the balance sheet prepared on 31 December 2016 and the consolidated cash flow prepared on 30 September 2016. These reclassifications were made as per the classifications in place on 30 September 2017 and are as follows: • Payables with letters of credit to financial institutions amounting TL 702.494.286 which were recognised in trade payables to unrelated parties, were reclassified under other financial payables as per TMS 39 (Note 7). • Net cash outflow amounting TL 291.391.414 previously recognised under cash flows from operating activities, were recognised under cash flow from financing activities due to the reclassification of payables with letters of credit. • Group investments amounting to TL 927.411.743 previously recognised under investment properties, were reclassified under property, plant and equipment since they do not meet the investment property criteria as per TMS 40 (Note 8).

F-16 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 2—BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT (Continued) 2.6 Critical accounting estimates and judgments Preparation of condensed consolidated interim financial statements requires the use of estimates and assumptions that may affect the amount of assets and liabilities recognized as of the balance sheet date, disclosures of contingent assets and liabilities and the amount of revenue and expenses reported. Although these estimates and assumptions rely on the Group management’s best knowledge about current events and transactions, actual outcomes may differ from those estimates and assumptions. Significant estimates of the Group management are as follows: a) Useful life of tangible and intangible assets and investment property The Group determines useful lives of tangible and intangible assets and investment properties in line with opinions of technical experts and recognizes depreciation and amortization expenses during aforementioned useful lives. Useful lives of land improvements related to port project are estimated by considering leasing period granted by Petlim in via operator agreement dated 22 February 2013. The Group reviews useful lives of assets subject to aforementioned depreciation in each reporting period and it is estimated that there exist no situation requiring any adjustment in useful lives as of 30 September 2017. b) Deferred income tax assets There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business and significant judgment is required in determining the provision for income taxes. The Group recognizes tax liabilities for anticipated tax issues based on estimates of whether additional taxes will be due and recognizes tax assets for the tax losses carried forward and investment incentives to the extent that the realization of the related tax benefit through the future taxable profits is probable (Note 13). Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. c) Provision for employee benefits Actuarial assumptions about discount rates, inflation rates, future salary increases and employee turnover rates are used to calculate Group’s provision for employee benefits. Such assumptions used in determination of the provision for defined benefit plans are disclosed in Note 11. d) Recoverability of available-for-sale investments on related parties and receivables from related parties At each reporting period, the assessment of the recoverability of available-for-sale investments and receivables from related parties are performed by the Group management including a determination of the counterparty’s ability and intention to repay its obligation to the Group. This assessment includes the Group management’s judgment about the ability of the debtor to generate additional sources of financing, revenue, and ultimately adequate cash flows to service those receivables. The Group management does not anticipate any risk in relation to the recoverability of those assets at 30 September 2017.

NOTE 3—SEGMENT REPORTING Operating segments are identified on the same basis as financial information is reported internally to the Group’s chief operating decision maker. The Company Board of Directors has been identified as the Group’s chief operating decision maker who is responsible for allocating resources between segments

F-17 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 3—SEGMENT REPORTING (Continued) and assessing their performances. The Group management determines operating segments by reference to the reports reviewed by the Board of Directors to make strategic decisions. The operating segment of the Group are as follows; • Petrochemical • Port The Board of Directors assesses the performance of operating segments with specific criteria and measurement units. This measurement criterion consists of net sales and operating profit. Assets and liabilities of the segment include all assets and liabilities of the Group. a) Revenue

30 September 2017 30 September 2016 Petrochemical ...... 5.345.623.674 3.253.540.034 Port...... 56.292.968 — Total before eliminations and adjustments ...... 5.401.916.642 3.253.540.034 Consolidation eliminations and adjustments ...... (14.056) (84.993) 5.401.902.586 3.253.455.041 b) Operating profit/(loss)

30 September 2017 30 September 2016 Petrochemical ...... 1.215.433.345 583.167.020 Port...... 2.325.645 (6.968.568) Total before eliminations and adjustments ...... 1.217.758.990 576.198.452 Consolidation eliminations and adjustments ...... 20.571.082 (4.927.307) Operating profit ...... 1.238.330.072 571.271.145 Financial (expenses)/income, net ...... (48.579.339) 20.634.316 Income from investing activities, net ...... 37.624.726 552.822 Profit before tax from continued operations ...... 1.227.375.459 592.458.283 Tax expense ...... (200.271.595) (77.053.227) Profit for the period ...... 1.027.103.864 515.405.056 c) Total assets

30 September 2017 31 December 2016 Petrochemical ...... 5.968.465.914 5.474.315.400 Port...... 1.404.113.535 1.449.507.641 Total before eliminations and adjustments ...... 7.372.579.449 6.923.823.041 Consolidation eliminations and adjustments ...... (570.698.469) (655.295.253) 6.801.880.980 6.268.527.788

F-18 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 3—SEGMENT REPORTING (Continued) d) Total liabilities

30 September 2017 31 December 2016 Petrochemical ...... 2.390.847.829 2.334.125.024 Port...... 1.217.091.009 1.233.117.523 Total before eliminations and adjustments ...... 3.607.938.838 3.567.242.547 Consolidation eliminations and adjustments ...... (298.777.107) (368.154.785) 3.309.161.731 3.199.087.762

NOTE 4—CASH AND CASH EQUIVALENTS

30 September 2017 31 December 2016 Cash ...... — — Banks ...... 1.208.239.114 1.267.188.405 —Demand deposits ...... 8.518.472 13.644.245 —TL...... 1.083.716 3.620.195 —Foreign currency ...... 7.434.756 10.024.050 —Time deposits ...... 1.199.720.642 1.253.544.160 —TL...... 36.107.076 264.674.114 —Foreign currency ...... 1.163.613.566 988.870.046 1.208.239.114 1.267.188.405

As of 30 September 2017, foreign currency time deposits consist of overnight or monthly deposits. The weighted average effective interest rates of USD and Euro overnight deposits are 3,84% and 1,68% per annum, respectively. (31 December 2016: USD—2,45% , Euro—1,17%). The weighted average effective interest rate of the USD denominated time deposits was respectively 4,23% (31 December 2016: 3,62%). As of 30 September 2017, the TL dominated time deposits consist of overnight deposits and the weighted average effective interest rate is 13,77% per annum. (31 December 2016: overnight 10,45%, monthly 11,60%). The Group has no blocked deposits as of 30 September 2017 (31 December 2016: None).

NOTE 5—INVENTORIES

30 September 2017 31 December 2016 Raw materials ...... 178.176.081 131.205.558 Work-in-progress ...... 142.728.554 151.387.512 Finished goods ...... 186.047.479 155.419.561 Trade goods ...... 50.872.924 16.287.036 Goods in transit ...... 142.476.813 107.705.559 Other inventories ...... 50.903.381 43.327.421 751.205.232 605.332.647 Less: Provision for impairment on inventories ...... (1.315.179) (998.814) 749.890.053 604.333.833

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NOTE 5—INVENTORIES (Continued) Movements of provision for impairment on inventory for the periods ended 30 September 2017 and 2016 were as follows:

2017 2016 1 January ...... (998.814) 12.046.150 Current year additions ...... (316.365) (10.656.453) 30 September ...... (1.315.179) 1.389.697

Allocation of the provision for impairment on inventories in terms of inventory category is as follows:

30 September 2017 31 December 2016 Raw materials ...... (681.533) (555.245) Finished goods ...... (87.699) — Trade goods ...... (272.777) (173.195) Other inventories ...... (273.170) (270.374) (1.315.179) (998.814)

NOTE 6—TRADE RECEIVABLES a) Short-term trade receivables from third parties

30 September 2017 31 December 2016 Trade receivables ...... 848.679.777 690.291.096 Provision for doubtful trade receivables () ...... (24.779.941) (15.819.607) 823.899.836 674.471.489

The maturity of trade receivables as of 30 September 2017 and 31 December 2016 are as follows:

Overdue receivables ...... 19.672.957 16.203.086 0 to 30 days due ...... 393.816.985 326.609.470 31 to 60 days due ...... 103.188.851 137.770.278 61 to 90 days due ...... 177.474.259 97.536.981 91 days and over ...... 129.746.784 96.351.674 823.899.836 674.471.489

F-20 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 7—BORROWINGS AND BORROWING COSTS

30 September 2017 31 December 2016 Short-term borrowings ...... 587.223.446 461.698.893 Short-term portions of long-term borrowings(*) ...... 829.584.834 55.495.727 Other financial liabilities(**) ...... 452.743.362 702.494.286 Short-term financial liabilities ...... 1.869.551.642 1.219.688.906 Long-term borrowings(*) ...... 463.452.791 1.172.474.368 Long-term financial liabilities ...... 463.452.791 1.172.474.368 2.333.004.433 2.392.163.274

(*) Since some provisions concerning the long-term loan agreement for the container terminal investment of Petlim may possibly be deemed to have been breached because the second phase of the harbour was not commissioned in the current period, the loan which was previously classified as long-term was reclassified as short-term. Currently, there is no dispute with the relevant finance institution concerning the loan in question. With the commissioning of the second phase of the terminal in short term , and by obtaining the official consent of the financial institution on the relevant provisions of the agreement, the low risk would be eliminated. However, the Group classified the loan amounting to TRY 684,239,674, equivalent to USD 192,629,620, as short-term, considering the relevant provisions of TMS 1, since there is no explicit written legal document that prevents the withdrawal of the loan. It is expected that the said loan will again be classified as long-term as the above-mentioned issue becomes very clear in the upcoming periods. (**) Other financial liabilities consist of letters of credits arising from naphtha purchases. The average maturity of letter of credits is 161 days including commission expenses accrued in accordance with the effective interest method as of 30 September 2017 (31 Aralık 2016: average maturity 108 days).

F-21 463.452.791 1.172.474.368 1.880.261.071 1.689.668.988 1.416.808.280 517.194.620 I AND ITS SUBSIDIARIES ˙ IRKET ˙ S IM ¸ ˙ ING ANON ˙ Interest rate p.a. (%) Original currency TL equivalent Effective weighted average IMYA HOLD IMYA ˙ Libor + 2,26 Libor + 4,67 – 4,26 38.173.506 239.001.672 135.596.111 841.094.684 Libor + 0,75 Libor + 0,75 – 1,25 80.000.000 105.411.332 284.168.000 370.963.560 2017 2016 2017 2016 2017 2016 12,20 – 13,25 10,20 303.055.446 90.735.333 303.055.446 90.735.333 30 September 31 December 30 September 31 December 30 September 31 December Libor + 1,70 – 4,68 Libor + 1,70 – 4,26 218.865.090 8.071.505 777.430.686 29.071.835 Euribor + 0,72 – 3,00 Euribor + 0,73 – 3,00 78.202.624 89.323.076 327.856.680 331.379.684 Euribor + 0,09 – 3,00 Euribor + 0,87 – 3,00 12.440.165 6.942.856 52.154.148 26.423.892 IM PETROK ˙ (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.) (Amounts expressed in Turkish FOR THE NINE-MONTH INTERIM PERIOD ENDED 30 SEPTEMBER 2017 FOR THE NINE-MONTH PETK NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) FINANCIAL STATEMENTS NOTES TO THE CONDENSED CONSOLIDATED ...... borrowings: Total long-term borrowings Total Long-term borrowings: USD borrowings Euro borrowings borrowings Total Euro borrowings short-term borrowings Total NOTE 7—BORROWINGS AND BORROWING COSTS (Continued) USD borrowings Short-term portions of long-term USD borrowings CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ORIGINALLY INTO ENGLISH OF FINANCIAL STATEMENTS CONVENIENCE TRANSLATION Short-term borrowings: TL borrowings

F-22 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 7—BORROWINGS AND BORROWING COSTS (Continued) The redemption schedule of long-term bank borrowings as of 30 September 2017 and 31 December 2016 is as follows:

30 September 2017 1 October 2018–30 September 2019 ...... 85.721.602 1 October 2019–30 September 2020 ...... 73.855.710 1 October 2020–30 September 2021 ...... 87.874.052 1 October 2021–30 September 2022 ...... 77.531.447 1 October 2022–30 September 2023 ...... 58.199.566 2023 and over ...... 80.270.413 463.452.791

31 December 2016 2018 ...... 148.913.757 2019 ...... 90.177.581 2020 ...... 93.636.722 2021 ...... 110.240.586 2022 and over ...... 729.505.722 1.172.474.368

Fair values of the short-term bank borrowings and other financial liabilities due to their short-term nature and long-term borrowings due to having floating interest rate updated with market conditions approximates their carrying values. Movements of financial liabilities are as of 30 September 2017 ve 30 September 2016 as follows:

2017 2016 1 Jaunuary ...... 2.392.163.274 2.113.608.700 Proceeds from financial liabilities ...... 1.582.777.232 910.270.895 Repayments of financial liabilities ...... (1.678.390.938) (1.167.044.993) Changes in foreign exchange ...... 43.977.332 37.725.775 Changes in interest accrual ...... (7.482.467) (15.371.058) Less: Cash and cash equivalents ...... (1.208.239.114) (807.437.424) 30 September ...... 1.124.805.319 1.071.751.895

F-23 Foreign currency translation I AND ITS SUBSIDIARIES ˙ IRKET ˙ S IM ¸ ˙ 996.152671.403 — — — — — — — — 996.152 671.403 (996.152)(589.295) (977.997) — — — — — — — (1.567.292) (996.152) (9.648.130) (708.889)(1.532.648) (14.747.068) — 1.372.105 — — — 193.829 (8.984.914) (16.085.887) 91.565.404 — 3.798.851 (29.900) 3.878 95.338.233 12.513.099 — 467.684 (1.401.132) — 11.579.651 13.522.050 — — (37.976) 55.826 13.539.900 ING ANON ˙ (62.187.737) (4.643.736) — 24.736 (1.226) (66.807.963) (87.814.829) (2.175.949) — — 2.090 (89.988.688) 966.567.852 326.139.308 (348.485.011) (108.378) 3.709.892 947.823.663 536.666.080 — 87.829.869 — 6.463.482 630.959.431 171.618.044 — 86.060 — 4.292 171.708.396 115.726.542 — 47.122 (3.354) 16.692 115.787.002 (102.921.776) (2.838.066) — — (699) (105.760.541) 6.560.805.487 — 255.119.038 (9.846.808) — 6.806.077.717 2.831.261.149 3.036.386.025 8.470.652.113 326.139.308 (1.136.387) (11.427.548) 10.254.062 8.794.481.548 1 January 2017 Additions Transfers Disposals differences 30 September 2017 (5.373.700.397) (104.029.233) — 9.825.544 — (5.467.904.086) (5.639.390.964) (130.120.938) — 11.222.385 193.994 (5.758.095.523) IMYA HOLD IMYA ˙ IM PETROK ˙ (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.) (Amounts expressed in Turkish FOR THE NINE-MONTH INTERIM PERIOD ENDED 30 SEPTEMBER 2017 FOR THE NINE-MONTH PETK ...... NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) FINANCIAL STATEMENTS NOTES TO THE CONDENSED CONSOLIDATED ...... Other fixed assets Leasehold improvements Assets subject to operating lease Furniture and fixtures Furniture Net book value Motor vehicles Construction in progress(*) Accumulated depreciation: Land improvements Buildings Machinery and equipment Machinery and equipment Other fixed assets Leasehold improvements Assets subject to operating lease(**) Motor vehicles and fixtures Furniture NOTE 8—PROPERTY, PLANT AND EQUIPMENT NOTE 8—PROPERTY, Land improvements Buildings CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ORIGINALLY INTO ENGLISH OF FINANCIAL STATEMENTS CONVENIENCE TRANSLATION Cost: Land (*) Construction in progress mainly consist of port investments. (**) port leased to a third party. Consist of Petlim

F-24 I AND ITS SUBSIDIARIES ˙ IRKET ˙ 996.152 — — — 996.152 581.831 — — — 581.831 S (404.795) (145.458) — — (550.253) (996.152) — — — (996.152) (9.909.746) (617.431) — 1.115.531 (9.411.646) 13.200.58612.319.269 —74.702.806 — — — 1.418.840 15.197.839 (1.225.011) (177.358) — 12.513.098 89.723.287 13.200.586 IM ¸ ˙ (57.753.151) (3.498.981) — 210.283 (61.041.849) (98.986.892) (2.805.683) — — (101.792.575) (85.089.479) (2.033.236) — — (87.122.715) 113.957.571171.235.674 — —987.795.284 376.402.137 (126.385.172) — — — — 1.237.812.249 — 113.957.571 171.235.674 6.436.255.729 — 105.822.673 (17.683.298) 6.524.395.104 1 January 2016 Additions Transfers Disposals 30 September 2016 2.276.634.074 2.560.275.862 7.811.044.902 376.402.137 (3.945.820) (19.085.667) 8.164.415.552 (5.281.270.613) (79.192.310) — 17.238.423 (5.343.224.500) (5.534.410.828) (88.293.099) — 18.564.237 (5.604.139.690) ING ANON ˙ IMYA HOLD IMYA ˙ IM PETROK ˙ (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.) (Amounts expressed in Turkish FOR THE NINE-MONTH INTERIM PERIOD ENDED 30 SEPTEMBER 2017 FOR THE NINE-MONTH PETK NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) FINANCIAL STATEMENTS NOTES TO THE CONDENSED CONSOLIDATED ...... Net book value Other fixed assets Leasehold improvements Motor vehicles and fixtures Furniture Machinery and equipment NOTE 8—PROPERTY, PLANT AND EQUIPMENT (Continued) NOTE 8—PROPERTY, Land improvements Buildings Machinery and equipment and fixtures Furniture Other fixed assets Leasehold improvements Accumulated depreciation: Land improvements Buildings CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ORIGINALLY INTO ENGLISH OF FINANCIAL STATEMENTS CONVENIENCE TRANSLATION Cost: Land (*) The ongoing investments mainly consist of port and wind turbine investments. Motor vehicles Construction in progress(*)

F-25 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 9—DEFERRED REVENUE a) Short term deferred revenue

30 September 31 December 2017 2016 Advances received ...... 57.331.712 28.820.322 Deferred revenue(*) ...... 3.767.068 6.126.429 61.098.780 34.946.751 b) Long term deferred revenue

Deferred revenue(*) ...... 122.762.021 120.807.592 122.762.021 120.807.592

(*) Based on the operating agreement between the Company and APM Terminalleri Liman ˙I¸sletmeciligi˘ A.¸S. (‘‘APM Terminalleri’’) dated 22 February 2013, upfront payments of USD 48 million were received as part of the total operating fee throughout the lease term of the port. The Group defers the upfront payments and realized respective revenue on a straight line basis.

NOTE 10—PREPAID EXPENSES a) Short-term prepaid expenses

30 September 31 December 2017 2016 Advances given for inventory ...... 28.263.595 587.442 Prepaid rent, insurance and other expenses ...... 16.395.133 14.850.908 Advances given for customs procedures ...... 13.496.736 3.599.354 58.155.464 19.037.704 b) Long-term prepaid expenses

Advances given for property, plant and equipment ...... 61.627.284 76.651.061 Advances given for customs procedures ...... 12.772.125 12.772.125 Prepaid rent, insurance and other expenses ...... 4.230.936 2.131.361 78.630.345 91.554.547 Impairment on advances given(*) ...... — (31.807.000) 78.630.345 59.747.547

(*) Based on the minute of board of directors dated 18 September 2017, it was decided that the advance given for the construction of administration building to be transferred without recourse at its carrying amount of USD11 million, and the respective lands, where this building is based on, to be sold at TL 22.431.000 to SCR Gayrimenkul A.¸S. (‘‘SCR’’). As of the approval date of this condensed consolidated financial statements, the sale of land was completed whereas the transfer of order advances was completed in October 2017. In this respect, the Group management recognized the reversal of the impairment provision and the gain from the sale of the land by TL 31.807.000 and TL 22.392.024, respectively (Note 19).

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NOTE 11—EMPLOYEE BENEFITS a) Short-term employee benefits:

30 September 31 December 2017 2016 Provision for bonus premium ...... 7.143.288 — Provision for seniority incentive bonus ...... 4.594.709 2.617.402 11.737.997 2.617.402 b) Long-term employee benefits:

Provision for employment termination benefits ...... 77.530.885 79.216.848 Provision for unused vacation rights ...... 12.961.879 8.867.379 Provision for seniority incentive bonus ...... 4.522.324 3.224.095 95.015.088 91.308.322

Provision for unused vacation: Movements of the provision for unused vacation rights are as follows:

2017 2016 1 January ...... 8.867.379 7.686.675 Changes in the period, net ...... 4.094.500 2.700.575 30 September ...... 12.961.879 10.387.250

Provision for employment termination benefits: Under Turkish Labour Law, the Group is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, or who is called up for military service, dies or retires after completing 25 years of service (20 years for women). The amount payable consists of one month’s salary limited to a maximum of TL4.732,48 for each year of service as of 30 September 2017 (31 December 2016—TL4.297,21). The liability is not funded, as there is no funding requirement. The provision is calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. TAS 19 requires actuarial valuation methods to be developed to estimate the enterprises’ obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:

30 September 31 December 2017 2016 Net discount rate (%) ...... 3,61 3,61 Probability of retirement (%) ...... 100,00 100,00 The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. As the maximum liability is revised semi-annually, the maximum

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NOTE 11—EMPLOYEE BENEFITS (Continued) amount of TL4.732,48 which is effective from 1 July 2017, has been taken into consideration in the calculation of employment termination benefits of the Group (1 January 2017—TL4.426,16). The movements of the provision for employment termination benefits are as follows:

2017 2016 1 January ...... 79.216.848 78.796.553 Interest cost ...... 6.642.050 5.318.767 Payments during the period ...... (12.210.024) (13.358.309) Service cost ...... 4.914.609 4.470.326 Actuarial loss ...... (1.032.598) (983.135) 30 September ...... 77.530.885 74.244.202

Provision for seniority incentive bonus: Seniority incentive bonus is a benefit provided to the personnel to promote their loyalty to the job and workplace. The bonus amounting to 40 days of gross salary for 5 years seniority, 50 days of gross salary for 10 years seniority, 65 days of gross salary for 15 years seniority, 80 days of gross salary for 20 years seniority, 90 days of gross salary for 25 and 100 days of gross salary for 30, 35 and 40 years seniority is paid to the union personnel with the gross salary of the month when they are reached to the seniority level. In case of termination of employment for any reason that does not prevent gaining severance pay, 20% of seniority incentive which the employee will gain, for each year last first seniority incentive level. In this calculation the periods which are shorter than six months are not considered. Periods which are more than six months are considered as one year. For the non-union personnel working at the Group, the bonus amounting to 40 days of gross salary for 5 years seniority, 50 days of gross salary for 10 years seniority, 65 days of gross salary for 15 years seniority, 80 days of gross salary for 20 years seniority, 90 days of gross salary for 25 years and 100 days for 30, 35 and 40 years seniority for the seniority levels in which they are entitled as of the aforementioned date and 30 days of gross salary for the following seniority levels that they are going to be entitled is paid with the gross salary of the month when they are reached to the seniority level. In case of termination of employment for any reason that does not prevent gaining severance pay, 20% of seniority incentive which the employee will gain, for each year last first seniority incentive level. In this calculation the periods which are shorter than six months are not considered. Periods which are more than six months are considered as one year. The seniority incentive bonus provision is calculated by estimating the present value of the future probable obligation arising from the qualification of the employees for the bonus. TAS 19 requires that actuarial valuation methods to be developed to estimate the employee benefit provisions. The following actuarial assumptions have been used in the calculation of the total provision:

30 September 31 December 2017 2016 Net discount rate (%) ...... 3,61 3,61 Used rate related to retirement probability (%) ...... 100,00 100,00

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NOTE 11—EMPLOYEE BENEFITS (Continued) The movements of the provision for seniority incentive bonus are as follows:

2017 2016 1 January ...... 5.841.497 5.671.563 Interest cost ...... 489.810 382.831 Payments during the period ...... (3.583.130) (3.732.720) Service cost ...... 6.368.856 3.592.960 30 September ...... 9.117.033 5.914.634

NOTE 12—EQUITY The shareholders of the Company and their shareholdings as of 30 September 2017 and 31 December 2016 were as follows:

30 September 2017 31 December 2016 Group: Shareholder: Amount Share (%) Amount Share (%) A Socar Turkey Petrokimya A.¸S...... 765.000.000 51,00 765.000.000 51,00 A Publicly traded and other ...... 735.000.000 49,00 735.000.000 49,00 C Privatization Administration ...... 0,01 — 0,01 — Total paid share capital ...... 1.500.000.000 100 1.500.000.000 100 Adjustment to share capital ...... 238.988.496 238.988.496 Total share capital ...... 1.738.988.496 1.738.988.496

Adjustment to share capital represents the difference between the inflation adjusted amounts of the cash and cash equivalents of the paid-in capital and the amounts before the inflation adjustment.

NOTE 13—TAX ASSETS AND LIABILITIES a) Corporate tax: Current tax liabilities at 30 September 2017 and 31 December 2016 are summarized below:

30 September 31 December 2017 2016 Calculated corporation tax ...... 176.953.541 163.030.686 Less: Prepaid taxes ()...... (129.069.830) (114.165.868) Total corporation tax liability ...... 47.883.711 48.864.818

Tax expenses included in the income statement for the condensed consolidated interim periods ended 30 September 2017 and 2016 are summarized below:

1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 Deferred tax (expense) / income ..... (23.318.054) (14.581.006) 35.459.416 14.084.621 Current period tax expense ...... (176.953.541) (49.762.195) (112.512.643) (32.037.498) Total tax (expense) / gains ...... (200.271.595) (64.343.201) (77.053.227) (17.952.877)

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NOTE 13—TAX ASSETS AND LIABILITIES (Continued) Turkish tax legislation does not permit a parent company, its subsidiaries and its subsidiaries to file a tax return on its consolidated financial statements. For this reason, the tax provisions reflected in the financial statements in this consolidated are separately calculated for the subsidiaries In Turkey, the corporate tax rate is 20% for 2017 (2016: 20%). Institutions tax rate is applied to the tax base that will result in deducting expenses not included in the deduction according to the tax legislation of the corporation’s commercial income, deduction in the tax laws (exemption of participation profits, exception of investment discount etc.) and discounts (such as R&D discount). No further tax is payable unless the profit is distributed (except for the withholding tax at the rate of 19.8% calculated and paid on the exemption amount utilized in case of investment reduction exemption utilized under Article 61 of the Income Tax Law). b) Deferred taxes The Group recognizes deferred income tax assets and liabilities based upon temporary differences arising between their financial statements as reported under the TMS and the statutory tax financial statements prepared in accordance with Corporate Tax Law. For the companies operating in Turkey, deferred income taxes are calculated on temporary differences that are expected to be realized or settled based on the taxable income in future periods under the liability method using a principal tax rate of 20% (31 December 2016—20%). Details of cumulative temporary differences and the resulting deferred income tax assets and liabilities provided as of 30 September 2017 and 31 December 2016 were as follows:

Taxable Temporary Deferred Income Tax Differences Assets/(Liabilities) 30 September 31 December 30 September 31 December 2017 2016 2017 2016 Difference between the carrying values and tax bases of property, plant, equipment and intangible assets ...... (222.879.464) (234.712.829) (44.575.893) (46.942.565) Other ...... (7.327.559) (11.499.654) (1.465.511) (2.299.931) Deferred income tax liabilities ... (230.207.023) (246.212.483) (46.041.404) (49.242.496) Unused investment incentives .... 855.066.345 947.460.922 234.363.027 250.612.314 Provision for employee benefits . . . 106.747.959 103.444.982 21.349.591 20.688.997 Deferred revenue related to the transfer of operating rights ..... 41.913.214 74.386.834 8.382.643 14.877.367 Adjustment to rediscount of receivables ...... 8.976.331 9.094.536 1.795.266 1.818.907 Rent allowance fee ...... 4.517.856 4.643.350 903.571 928.670 Provision for legal cases ...... 3.533.443 1.383.579 706.689 276.716 Other ...... 19.943.522 25.017.557 3.988.555 5.003.512 Deferred income tax assets ..... 1.040.698.670 1.165.431.760 271.489.342 294.206.483 Deferred tax assets / (liabilities)— net ...... 225.447.938 244.963.987

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NOTE 13—TAX ASSETS AND LIABILITIES (Continued) The movement of deferred income tax is as follows:

2017 2016 1 January ...... 244.963.987 133.346.497 Recognized in the profit or loss statement ...... (23.318.054) 35.459.416 Recognized in other comprehensive income ...... 1.847.739 1.797.572 Foreign currency translation differences ...... 1.954.266 — 30 September ...... 225.447.938 170.603.485

NOTE 14—REVENUE AND COST OF SALES 1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 Domestic sales ...... 3.432.308.575 1.150.813.059 2.309.180.176 725.800.646 Export sales ...... 2.064.856.632 659.927.339 982.334.229 256.226.093 Other sales ...... 29.075.669 11.556.666 17.952.102 4.711.753 Sales discounts ()...... (124.338.290) (46.814.333) (56.011.466) (17.908.945) Net sales ...... 5.401.902.586 1.775.482.731 3.253.455.041 968.829.547 Direct raw materials and supplies ...... (2.821.546.412) (940.852.168) (1.810.726.360) (577.397.102) Cost of trade goods sold .... (541.997.240) (186.097.238) (280.172.272) (89.625.111) Energy ...... (283.633.214) (89.754.190) (246.882.487) (79.828.412) Labour costs ...... (190.581.417) (67.863.092) (150.205.219) (45.128.587) Depreciation and amortization . (116.858.585) (42.172.090) (77.983.411) (29.714.931) Other ...... (68.279.204) (8.435.696) (19.092.656) 45.495.556 Cost of sales ...... (4.022.896.072) (1.335.174.474) (2.585.062.405) (776.198.587)

NOTE 15—GENERAL ADMINISTRATIVE EXPENSES 1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 Personnel expense ...... 61.402.148 16.764.515 42.988.199 10.798.780 Consultancy and outsourced services . . . 50.558.502 18.912.715 27.642.284 8.269.072 Energy expenses ...... 7.754.058 1.337.085 7.482.893 1.334.242 Depreciation and amortization ...... 6.312.617 2.279.158 5.575.061 1.893.011 Taxes, funds and fees ...... 4.545.893 1.504.474 5.043.562 1.036.164 Other ...... 17.236.732 5.021.726 14.359.541 7.117.450 147.809.950 45.819.673 103.091.540 30.448.719

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NOTE 16—OTHER INCOME/ EXPENSES FROM OPERATING ACTIVITIES a) Other operating income: 1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 Foreign exchange gains ...... 72.771.783 17.142.181 30.782.668 10.805.852 Interest income on term sales ...... 35.162.708 8.750.563 49.023.712 13.138.058 Rent income ...... 7.822.563 2.761.378 22.418.676 7.422.871 Unearned financial income from trade payables ...... 4.047.146 1.921.001 (32.583) (289.710) Other ...... 42.790.343 37.533.997 11.199.795 2.597.175 162.594.543 68.109.120 113.392.268 33.674.246 b) Other operating expenses 1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 Foreign exchange losses ...... (61.079.158) (5.552.154) (30.445.294) (16.763.316) Unearned financial expense from trade receivables ...... (10.925.284) (218.458) (8.621.620) 739.603 Provision for doubtful receivables ...... (9.288.711) — (9.702.295) (9.702.295) Unearned financial expense from trade payables ...... (3.598.097) (415.356) (9.814.993) (2.902.262) Other ...... (14.982.381) (7.509.469) (7.847.573) (724.617) (99.873.631) (13.695.437) (66.431.775) (29.352.887)

NOTE 17—FINANCIAL INCOME / EXPENSES a) Finance income 1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 Foreign exchange gains ...... 314.710.679 73.579.948 154.584.001 49.797.747 Interest income ...... 64.168.642 24.425.963 40.379.180 5.778.688 Other ...... 4.640.220 1.577.296 — — 383.519.541 99.583.207 194.963.181 55.576.435 b) Finance expense 1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 Foreign exchange loss ...... (344.502.627) (84.780.349) (152.419.422) (44.414.279) Interest expense ...... (70.452.342) (27.744.454) (15.268.853) (3.597.008) Interest expense on employee benefits ...... (7.131.860) (2.376.922) (5.701.599) (4.096.703) Commission expense ...... (5.305.586) (3.034.074) (938.991) (213.463) Other ...... (4.706.465) (1.693.986) — — (432.098.880) (119.629.785) (174.328.865) (52.321.453)

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NOTE 18—EARNINGS PER SHARE 1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 Net profit for the period of the equity holders of the parent ...... 1.036.818.596 374.115.692 510.104.981 136.723.850 Weighted average number of shares with nominal value of Krl each (thousand) ...... 150.000.000 150.000.000 150.000.000 150.000.000 Earnings per share (Kr) ...... 0,6912 0,2494 0,3401 0,0911

NOTE 19—TRANSACTIONS AND BALANCES WITH RELATED PARTIES Summary of the intercompany balances as of 30 September 2017 and 31 December 2016 and significant intercompany transactions during the period were as follows: i) Balances with related parties a) Short-term other receivables from related parties: 30 September 2017 31 December 2016 STEA¸S(1) ...... 24.507.191 13.169.638 SCR GAYR˙IMENKUL A.¸S.(2) ...... 22.878.600 — STAR(2) ...... 113.527 1.149.900 SOCAR Turkey Akaryakıt Depolama A.¸S.(2) ...... 5.214 — TANAP Dogalgaz˘ ˙Ileti¸sim A.¸S.(2) ...... 1.388 1.508 47.505.920 14.321.046 b) Long-term other receivables from related parties:

30 September 2017 31 December 2016 STEA¸S(1) ...... 359.738.113 356.875.812 SOCAR Power Enerji Yatırımları A.¸S.(2) ...... 70.225.060 66.429.849 429.963.173 423.305.661

The effective weighted average interest rate applied to TL and USD denominated other trade receivables from related parties as of 30 September 2017 is 15,31% p.a. and 4,85%, respectively. c) Short-term trade payables to related parties: SOCAR Turkey Petrokimya A.¸S.(1) ...... 30.160.811 — STEA¸S(1) ...... 27.502.360 404.943 Petrokim Trading Ltd. (‘‘Petrokim’’)(2) ...... 1.431.745 3.675.964 Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... 451.216 284.141 SOCAR Gaz Ticareti A.¸S.(2) ...... — 25.217.360 SOCAR Power Enerji Yatırımları A.¸S.(2) ...... — 1.474 STAR(2) ...... — 955 59.546.132 29.584.837

(1) Shareholders of the Company (2) Shareholders of the Company or SOCAR’s subsidiaries

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NOTE 19—TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) Short term trade payables to related parties are mainly consist of natural gas, fuel, and trade goods purchases. Average maturity of short term trade payables is 23 days. (31 December 2016—15 days). d) Other payables to related parties:

30 September 2017 31 December 2016 Due to shareholder ...... 87.116 87.116 STAR(2) ...... — 26.363.285 87.116 26.450.401 e) Short-term deferred revenue from related parties

30 September 2017 31 December 2016 STAR(2) ...... 8.592.392 4.188.726 SOCAR Turkey Akaryakıt Depolama A.¸S.(2) ...... 145.769 — SOCAR Power Enerji Yatırımları A.¸S.(2) ...... — 9.374 8.738.161 4.198.100 f) Long-term deferred revenue from related parties

30 September 2017 31 December 2016 STAR(2) ...... 6.011.641 8.829.511 6.011.641 8.829.511 g) Short-term prepaid expense to related parties

30 September 2017 31 December 2016 STAR(2) ...... 7.520.690 12.878.087 7.520.690 12.878.087 h) Long-term prepaid expense to related parties

30 September 2017 31 December 2016 STAR(2) ...... — 4.292.696 — 4.292.696

(1) Shareholders of the Company (2) Shareholders of the Company or SOCAR’s subsidiaries

F-34 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 19—TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) ii) Transactions with related parties a) Other income / (expenses), Income from investing activities and finance income / (expenses) from related party transactions—net:

1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 SCR Gayrimenkul A.¸S.(2) ...... 22.392.024 — — — STEA¸S(1) ...... 21.855.976 10.650.549 21.742.177 13.625.717 SOCAR Power Enerji Yatırımları A.¸S.(2) . . . 3.367.976 1.770.292 3.437.151 2.391.307 STAR(2) ...... 3.645.788 3.137.424 (5.374) 11.624 SOCAR Turkey Petrokimya A.¸S.(1) ...... 220.722 (27.116) — — Petrokim(2) ...... 131.227 87.400 203.776 (3.515) Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... 3.365 1.722 (796) (1.389) SOCAR Turkey Akaryakıt Depolama A.¸S.(2) ...... 4.833 — — — SOCAR Azerikimya Production Union(2) . . (14) (19) — — Socar Gaz Ticareti A.¸S.(2) ...... (162.184) — (49.383) (1.039) Socar Turkey Petrol Ener. Dag.˘ A.¸S.(2) . . . — — — (339) 51.459.713 15.620.252 25.327.551 16.022.366 b) Service and rent purchases from related parties:

1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 STAR(2) ...... 34.070.634 11.194.795 18.789.930 7.698.189 STEA¸S(1) ...... 32.888.763 25.998.395 10.951.123 3.822.149 SOCAR Power Enerji Yatırımları A.¸S.(2) . . . 66.792 — 677.652 156.185 67.026.189 37.193.190 30.418.705 11.676.523

The rent and service purchases from STAR consist of rent for naphtha tank amounting to TL9.658.565, labor cost charges amounting to TL3.287.745 and engineering and other services purchases amounting to TL21.124.324. The service purchases from STEA¸S consist of labor cost charges of STEA¸S personnel amounting to TL8.231.605 and other services purchases amounting to TL24.657.158.

(1) Shareholders of the Company (2) Shareholders of the Company or SOCAR’s subsidiaries

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NOTE 19—TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) c) Product purchase from related parties:

1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 Petrokim(2) ...... 294.821.552 60.453.210 95.810.733 42.915.396 SOCAR Turkey Petrokimya A.¸S.(1) .... 247.794.548 79.501.751 — — SOCAR Logistics DMCC(2) ...... 52.972.645 — — — Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... 1.472.246 451.825 956.531 289.944 SOCAR Gaz Ticareti A.¸S.(2) ...... — — 203.034.012 63.397.769 SOCAR Turkey Petrol Enerji Dagıtım˘ A.¸S.(2) ...... — — 6.888.558 2.106.097 597.060.991 140.406.786 306.689.834 108.709.206

Purchases made by related parties during the interim period ended 30 September 2017 consist of commercial products, natural gas and fuel purchases. d) Product and service sales to related parties:

1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 STAR(2) ...... 5.061.365 348.715 2.717.454 1.755.479 STEA¸S(1) ...... 158.749 36.742 298.754 162.326 SOCAR Power Enerji Yatırımları A.¸S.(2) . . . — 966 2.730 1.622 Petrokim(2) ...... — — 2.490.452 1.073.734 5.220.114 386.423 5.509.390 2.993.161 e) Rent income from related parties:

1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 STAR(2) ...... 17.314.499 5.794.169 14.453.238 4.773.952 SOCAR Turkey Akaryakıt Depolama A.¸S.(2) ...... 145.769 — — — Socar Power Enerji Yatırımları A.¸S.(2) .... 8.520 — 16.184 5.113 Socar Teknolojik C¸oz¨ umler¨ A.¸S.(2) ...... — — 763 254 17.468.788 5.794.169 14.470.185 4.779.319

(1) Shareholders of the Company (2) Shareholders of the Company or SOCAR’s subsidiaries.

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NOTE 19—TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) f) Key management compensation:

1 January– 1 July– 1 January– 1 July– 30 September 30 September 30 September 30 September 2017 2017 2016 2016 i. Key management compensation—short term: Payments for salary and seniority incentives ...... 10.636.266 3.146.334 7.565.990 2.566.748 ii. Key management compensation—long term: Provision for unused vacation ...... 653.404 76.036 387.595 (425.012) Provision for seniority incentives ...... 90.876 836 — (71.158) Provision for employment termination benefits ...... 77.752 5.648 63.751 (47.356) 822.032 82.520 451.346 (543.526) 11.458.298 3.228.854 8.017.336 2.023.222

The Group classifies the general manager, assistant general managers, and board of directors and audit committee members as executive management. Key management compensation consist of salary and travel payments; employment termination benefits, seniority incentive bonus and vacation pays made to the key management and their provisions for the period in which they incurred.

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NOTE 20—PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

30 September 2017 31 December 2016 a) Short—term provisions: Provision for legal cases ...... 3.533.443 1.383.579 3.533.443 1.383.579 b) Guaranties received: Bank guarantees within the context of DOCS ...... 578.798.139 491.942.679 Letters of guarantee received from customers ...... 389.446.589 288.961.642 Letters of guarantee received from suppliers ...... 187.284.624 183.424.856 Letters of credit ...... 170.635.361 84.503.722 Receivable insurance ...... 143.974.789 96.013.037 Received insurance policies ...... 13.373.216 1.502.374 Mortgages ...... 2.000.000 2.000.000 1.485.512.718 1.148.348.310 c) Guaranties given: Mortgages given to banks ...... 996.490.665 585.141.407 Mortgage given to banks(*) ...... 775.958.157 867.787.728 Custom offices ...... 61.023.202 50.099.000 Other ...... 126.671.504 123.458.142 1.960.143.528 1.626.486.277

(*) Mortgage amounting to USD350 million is related with the borrowing for port investment amounting to USD209 million as of 30 September 2017. d) Ongoing cases and investigations The Customs Administration levied an additional VAT accrual and fine on the Group in 2014, as the customs tariff statistical position of Pygas, which was imported by the group in 2014, requires SCT. The Group objected to the VAT accrual and fine, then started legal proceedings when its objection was rejected. While these lawsuits were in process, the Turkish Ministry of Finance started a limited tax inspection for the 2014 SCT on the grounds the customs tariff statistical position of Pygas requires SCT. As a result of this inspection, the Group was informed of the imposition of a tax loss penalty and late payment interest of TRY 99 million and an SCT penalty of TRY 66 million on 25 August 2017. At the same time during 2017, two of the three ongoing lawsuits at local tax courts related to the imported Pygas were concluded in favour of the Group, with the statement that the product customs tariff statistical position does not require SCT. In the third lawsuit it was ruled that the product does require SCT but that the penalty was unfair. Subsequently on 28 September 2017 all the lawsuits which were heard at the Regional Administrative Court (the ‘‘Court of Appeals’’) were concluded in favour of the Group with rulings that the product’s customs tariff statistical position does not require SCT, and a lawsuit was filed with the Council of State. The Group expects the litigation process will decide that the customs tariff statistical position of Pygas does not require SCT as the Customs Administration claimed. Group management and Group legal consultants predict that since the Court of Appeals has ruled that the customs tariff statistical position of Pygas does not require SCT, the tax principal and penalty

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NOTE 20—PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (Continued) communicated by the Turkish Ministry of Finance will then be concluded via a settlement and/or litigation in a way that does not constitute any material financial risk.

Collaterals, Pledges and Mortgages (‘‘CPM’’) provided by the Group:

30 September 2017 31 December 2016 A. Total amount of CPMs given for the Company’s own legal personality ...... 1.184.185.371 758.698.549 B. Total amount of CPMs given on behalf of fully consolidated companies ...... 745.765.307 691.827.728 C. Total amount of CPMs given for continuation of its economic activities on behalf of third parties ...... 30.192.850 175.960.000 D. Total amount of other CPMs i. Total amount of CPMs given on behalf of the majority shareholder ...... — — ii. Total amount of CPMs given to on behalf of other group companies which are not in scope of B and C ...... — — iii. Total amount of CPMs given to on behalf of third parties which are not in scope of C ...... — — 1.960.143.528 1.626.486.277 e) Operational leases Annual income plans and amounts (not discounted) regarding to the operational lease income, which are not recognized in the consolidated financial statements of the Group as of 30 September 2017 and 31 December 2016 are as follows:

30 September 2017 31 December 2016 0–5 year ...... 257.889.500 241.217.690 5–10 year(s) ...... 866.067.907 650.779.200 10 years and more ...... 1.766.126.540 1.750.698.696 Total ...... 2.890.083.947 2.642.695.586

NOTE 21—NATURE AND LEVEL OF RISK DERIVING FROM FINANCIAL INSTRUMENTS Foreign exchange risk The Group is exposed to currency risk on assets or liabilities denominated in foreign currencies. Management has set up a policy to balance and manage their foreign exchange risk. Existing risks are followed in meetings held by the Group’s Audit Committee and Board of Directors and foreign currencies, closely in terms of the Group’s foreign exchange position. Although the raw materials, which comprise the significant portion of production and import volume, are foreign exchange denominated cost items, such exposure is limited with the sales prices impacted by foreign currencies.

F-39 I AND ITS SUBSIDIARIES ˙ 30 September 2017 31 December 2016 IRKET ˙ S ———— — ——— ———— — ——— ———— — ——— ———— — ——— ———— — ——— ———— — ——— ———— — ——— ———— — ——— ———— — ——— ———— ————— ——— — ——— IM ¸ ˙ TL US TL US 1.390.466 391.449 — — 1.556.304 163.660 264.252 — 463.452.793 38.173.523 78.202.610 — 1.172.474.367 239.001.672 89.323.077 — 820.737.421 216.374.339 12.440.161 — 1.129.097.581 313.193.198 7.253.047 — 381.266.580 96.717.482 7.672.679 5.549.473 289.340.519 74.598.272 7.139.375 327.913 455.145.737 92.821.297 29.919.666650.471.976 183.123.216 — 390.148.989 93.945.230 — 16.048.124 — — 365.195.175 103.772.214 — — 105.572.100 25.000.000 4.000.000 — 325.687.680 87.275.000 5.000.000 — 717.139.177 275.640.201 (61.233.637) (5.246.482) (496.278.015) (78.799.363) (58.934.171) (327.416) 611.567.077 250.640.201 (65.233.637) (5.246.482) (821.965.695) (166.074.363) (63.934.171) (327.416) 105.572.100 25.000.000 4.000.000 — 325.687.680 87.275.000 5.000.000 — 463.452.793 38.173.523105.572.100 78.202.610 25.000.000 4.000.000 — 1.172.474.367 239.001.672 — 89.323.077 325.687.680 87.275.000 5.000.000 — — 650.471.976 183.123.216 — — 365.195.175 103.772.214 — — Equivalent Dollar Euro Other Equivalent Dollar Euro Other 1.171.406.158 325.961.032 3.162.147 302.991 1.013.602.609 263.001.335 23.733.204 497 3.190.220.680 820.697.021 55.034.832 343.651.160 2.976.902.046 934.910.668 42.161.459 352.637.656 1.970.653.980 302.732.096 220.569.545 — 1.350.245.112 239.964.703 182.543.988 — 1.665.456.794 351.265.344 98.315.450 5.549.473 2.590.912.468 626.793.142 103.715.499 327.913 1.202.004.001 313.091.821 20.112.840 5.549.473 1.418.438.101 387.791.470 14.392.422 327.913 2.277.023.871 601.905.545 33.081.813 302.991 1.768.946.773 460.718.779 39.781.328 497 1.626.551.895 418.782.329 33.081.813 302.991 1.403.751.597 356.946.565 39.781.328 497 ING ANON ˙ ...... IMYA HOLD IMYA ˙ ...... IM PETROK ˙ (Amounts expressed in Turkish Lira (‘‘TL’’) unless otherwise indicated.) (Amounts expressed in Turkish FOR THE NINE-MONTH INTERIM PERIOD ENDED 30 SEPTEMBER 2017 FOR THE NINE-MONTH ...... PETK ...... 17+19) ...... NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) FINANCIAL STATEMENTS NOTES TO THE CONDENSED CONSOLIDATED ...... 15a) ...... ...... 14 ...... 13 ...... 11a ...... 10 ...... ...... 9 ...... ...... (=1+2a+4+5a 25. Import 23. Hedged amount for current liabilities 24. Export 20. Net foreign currency (liability) / asset position of monetary items (IFRS 7.B23) 21. Total fair value of financial instruments used for foreign currency hedging 21. Total 22. Hedged amount for current assets 15a. Monetary other liabilities 15b. Non-monetary other liabilities 18b. Amount of liability contract value derivative instruments 19. Net foreign (liability) / asset position (8 16. Long-term liabilities (13+14+15a+15b) liabilities (12+16) 17. Total 18. Net (liability)/asset contract value of derivative instruments (18a – 18b) 18a. Amount of asset contract value derivative instruments 11a. Monetary other liabilities 11b. Non-monetary other liabilities payables 13. Trade 14. Financial liabilities 12. Short-term liabilities (9+10+11) 10. Financial liabilities 9. Trade payables 9. Trade 8. Total assets (3+7) 8. Total 2b. Non-monetary financial assets 2a. Monetary financial assets (Cash, bank accounts included) 3. Current assets (1+2) receivables 4. Trade 5a. Monetary financial assets 5b. Non-monetary financial assets Foreign currency position Foreign receivables 1. Trade 6. Other 7. Non-current assets (4+5+6) NOTE 21—NATURE AND LEVEL OF RISK DERIVING FROM FINANCIAL INSTRUMENTS (Continued) NOTE 21—NATURE CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH ORIGINALLY FINANCIAL STATEMENTS INTO ENGLISH OF CONSOLIDATED CONVENIENCE TRANSLATION

F-40 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 21—NATURE AND LEVEL OF RISK DERIVING FROM FINANCIAL INSTRUMENTS (Continued) Table of sensitivity analysis for foreign currency risk 30 September 2017

Profit/(Loss) Equity Appreciation of Depreciation of Appreciation of Depreciation of foreign foreign foreign foreign currency currency currency currency Change of USD by 10% against TL: 1—Asset/Liability denominated in USD—net ...... 89.029.906 (89.029.906) — — 2—The part hedged for USD risk () 8.880.250 (8.880.250) — — 3—USD effect—net (1+2) ...... 97.910.156 (97.910.156) — — Change of EUR by 10% against TL: 4—Asset/Liability denominated in EUR—net ...... (25.671.590) 25.671.590 — — 5—The part hedged for EUR risk () 1.676.960 (1.676.960) — — 6—EUR effect—net (4+5) ...... (23.994.630) 23.994.630 — — Change of other currencies by 10% against TL: 7—Assets/Liabilities denominated in other foreign currencies—net ..... (526.094) 526.094 — — 8—The part hedged for other foreign currency risk () ...... — — — — 9—Other foreign currency effect— net (7+8) ...... (526.094) 526.094 — — Total (3+6+9) ...... 73.389.432 (73.389.432) — —

F-41 CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

NOTE 21—NATURE AND LEVEL OF RISK DERIVING FROM FINANCIAL INSTRUMENTS (Continued) 31 December 2016

Profit/(Loss) Equity Appreciation of Depreciation of Appreciation of Depreciation of foreign foreign foreign foreign currency currency currency currency Change of USD by 10% against TL: 1—Asset/Liability denominated in USD—net ...... (58.444.890) 58.444.890 — — 2—The part hedged for USD risk () 30.713.818 (30.713.818) — — 3—USD effect—net (1+2) ...... (27.731.072) 27.731.072 — — Change of EUR by 10% against TL: 4—Asset/Liability denominated in EUR—net ...... (23.718.938) 23.718.938 — — 5—The part hedged for EUR risk () 1.854.950 (1.854.950) — — 6—EUR effect—net (4+5) ...... (21.863.988) 21.863.988 — — Change of other currencies by 10% against TL: 7—Assets/Liabilities denominated in other foreign currencies—net ..... (137.457) 137.457 — — 8—The part hedged for other foreign currency risk () ...... — — — — 9—Other foreign currency effect— net (7+8) ...... (137.457) 137.457 — — Total (3+6+9) ...... (49.732.517) 49.732.517 — —

F-42 (Convenience translation of the independent auditors’ review report into English together with interim condensed consolidated financial statements originally issued in Turkish—See Note 2.1)

Petkim Petrokimya Holding Anonim Sirketi¸ and Its Subsidiaries Interim condensed consolidated financial statements for the interim period January 1—September 30, 2016

F-43 Petkim Petrokimya Holding Anonim Sirketi¸ and Its Subsidiaries

Table of contents Pages Interim consolidated statement of financial position ...... F-45–F-46 Interim consolidated statement of profit or loss and other comprehensive income ..... F-47 Interim consolidated statement of changes in equity ...... F-48 Interim consolidated statement of cash flows ...... F-49 Notes to the interim condensed consolidated financial statements ...... F-50–F-79

F-44 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

Petkim Petrokimya Holding Anonim Sirketi¸ and its subsidiaries Interim consolidated statement of financial position as at September 30, 2016 (Currency—Turkish Lira (TL) unless otherwise indicated)

Current period Prior period Not reviewed Audited Note September 30, 2016 December 31, 2015 Assets Current assets: Cash and cash equivalents ...... 3 807.437.424 1.341.536.749 Financial investments ...... — 160.452.259 Trade receivables —Trade receivables from third parties ...... 532.647.862 551.425.057 Other receivables —Other receivables from related parties ...... 13 9.509.944 255.049.233 —Other receivables from third parties ...... 12.536.869 6.510.328 Derivative Instruments ...... 16 8.549.840 1.646.432 Inventories ...... 4 503.741.032 363.508.864 Prepaid expenses —Prepaid expenses to related parties ...... 13 12.878.087 12.878.087 —Prepaid expenses to third parties ...... 6 22.528.126 39.469.618 Other current assets ...... 62.639.764 35.096.475 Total current assets ...... 1.972.468.948 2.767.573.102 Non-current assets: Financial investments ...... 8.910.000 8.910.000 Other receivables —Other receivables from related parties ...... 13 368.872.154 105.206.024 Investment property ...... 1.469.935 1.469.935 Property, plant and equipment ...... 5 2.560.275.862 2.276.634.074 Intangible assets ...... 20.290.713 18.327.669 Prepaid expenses —Prepaid expenses to related parties ...... 13 7.512.217 17.170.782 —Prepaid expenses to third parties ...... 6 156.957.911 92.704.917 Deferred tax assets ...... 9 170.603.485 133.346.497 Other non-current assets ...... 24.867.219 39.322.328 Total non-current assets ...... 3.319.759.496 2.693.092.226 Total assets ...... 5.292.228.444 5.460.665.328

The accompanying policies and explanatory notes on pages 7 through 41 form an integral part of the interim condensed consolidated financial statements.

F-45 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

Petkim Petrokimya Holding Anonim Sirketi¸ and its subsidiaries Interim consolidated statement of financial position (Continued) as at September 30, 2016 (Currency—Turkish Lira (TL) unless otherwise indicated)

Current period Prior period Not reviewed Audited Note September 30, 2016 December 30, 2015 Liabilities Current liabilities: Short term financial liabilities ...... 377.237.153 319.638.074 Current portion of long term financial liabilities ...... 44.770.606 41.912.519 Trade payables —Trade payables to related parties ...... 13 37.113.079 31.306.140 —Trade payables to third parties ...... 761.611.011 1.110.250.720 Short term liabilities for employee benefits ...... 18.604.011 8.261.053 Other payables —Other payables to related parties ...... 13 2.836.085 1.750.437 —Other payables to third parties ...... 11.079.936 4.017.208 Derivative instruments ...... 16 24.798 11.008.960 Deferred income —Deferred income from related parties ...... 13 8.033.727 4.168.083 —Deferred income from third parties ...... 6 47.136.186 21.925.077 Tax liability of profit ...... 9 30.869.224 9.684.055 Short term provisions —Provision for employee benefits ...... 7 7.829.101 13.027.856 —Other short-term provisions ...... 14 1.088.140 942.746 Other current liabilities ...... 7.736.304 6.495.411 Total current liabilities ...... 1.355.969.361 1.584.388.339 Non-current liabilities: Long term financial liabilities ...... 916.471.691 914.267.416 Derivative Instruments ...... 16 27.858.576 — Deferred income —Deferred income from related parties ...... 13 9.799.042 12.705.027 —Deferred income from third parties ...... 6 53.064.532 54.794.114 Long term provisions —Provision for employee benefits ...... 7 87.966.985 89.126.935 Total non- current liabilities ...... 1.095.160.826 1.070.893.492 Total liabilities ...... 2.451.130.187 2.655.281.831 Equity Share capital ...... 8 1.500.000.000 1.500.000.000 Adjustment to share capital ...... 8 238.988.496 238.988.496 Share premium ...... 214.187.872 214.187.872 Other comprehensive income or expense not to be reclassified to profit or loss —Remeasurement income/(loss) arising from defined benefit plans ...... (22.881.529) (23.668.037) Other comprehensive income / (expense) to be reclassified to profit or loss —Cash flow hedge gain / (loss) ...... (8.780.769) (7.490.023) Restricted reserves ...... 104.957.638 36.548.777 Retained earnings ...... 241.912.168 156.442.236 Net profit for the period / year ...... 510.104.981 626.378.793 Equity holders of the parent ...... 2.778.488.857 2.741.388.114 Non-controlling interest ...... 62.609.400 63.995.383 Total equity ...... 2.841.098.257 2.805.383.497 Total equity ...... 5.292.228.444 5.460.665.328

The accompanying policies and explanatory notes on pages 7 through 41 form an integral part of the interim condensed consolidated financial statements.

F-46 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

Petkim Petrokimya Holding Anonim Sirketi¸ and Its Subsidiaries Interim consolidated statement of profit or loss and other comprehensive income for the nine-month period ended September 30, 2016 (Currency—Turkish Lira (TL) unless otherwise indicated)

Current period Prior period Not Not Not Not reviewed reviewed reviewed Reviewed January 1– July 1– January 1– July 1– September 30, September 30, September 30, September 30, Note 2016 2016 2015 2015 Revenue ...... 3.253.455.041 968.829.547 3.375.129.510 1.291.569.444 Cost of sales ...... (2.585.062.405) (776.198.587) (2.813.980.783) (1.020.404.667) Gross profit ...... 668.392.636 192.630.960 561.148.727 271.164.777 General administrative expenses ...... 10 (103.091.540) (30.448.719) (85.973.121) (22.236.937) Marketing expenses ...... (31.246.051) (10.285.396) (22.030.592) (7.538.735) Research and development expenses ...... (9.744.393) (3.364.661) (8.357.816) (3.326.924) Other operating income ...... 11 113.392.268 33.674.246 139.937.259 66.835.585 Other operating expense ...... 11 (66.431.775) (29.352.887) (178.164.001) (83.108.475) Operating profit ...... 571.271.145 152.853.543 406.560.456 221.789.291 Income from investment activities ...... 565.634 (30.220) 13.119 — Expense from investment activities ...... (12.812) (566) —— Operating profit before financial income / (expense) ...... 571.823.967 152.822.757 406.573.575 221.789.291 Financial income ...... 194.963.181 55.576.435 351.475.208 163.601.375 Financial expenses ...... (174.328.865) (52.321.453) (311.979.708) (146.692.049) Profit before taxation ...... 592.458.283 156.077.739 446.069.075 238.698.617 Tax income / (expenses) Current year tax expense ...... 9 (112.512.643) (32.037.498) (7.980.538) (5.733.307) Deferred tax income / (expense) ...... 9 35.459.416 14.084.621 65.127.638 37.931.886 Net profit for the period ...... 515.405.056 138.124.862 503.216.175 270.897.196 Distribution of net profit for the period: Non-controlling interest ...... 5.300.075 1.401.012 (552.926) (4.645.116) Equity holders of the parent ...... 510.104.981 136.723.850 503.769.101 275.542.312 Earnings per share ...... 12 0,3401 0,0911 0,5038 0,2755 Other comprehensive income Not to be reclassified to profit or loss —Remeasurement gain / (loss) arising from defined benefit plan ...... 7 983.135 4.586.804 (5.364.889) (2.199.064) Deferred tax effect of remeasurement gain / (loss) arising from defined benefit plan .... (196.627) (917.361) 1.072.978 439.813 To be reclassified to profit or loss —Cash flow hedging gain / (loss) ...... (9.971.005) 1.553.716 (15.179.015) (15.054.989) —Deferred tax effect of cash flow hedging gains / (losses) ...... 1.994.201 (310.743) 3.035.803 3.010.998 Other comprehensive income/(expense) (after tax) ...... (7.190.296) 4.912.416 (16.435.123) (13.803.242) Total comprehensive income ...... 508.214.760 143.037.278 486.781.052 257.093.954 Distribution of total comprehensive income: Non-controlling interest ...... (1.385.983) 1.867.332 (554.102) (4.645.116) Equity holders of the parent ...... 509.600.743 141.169.946 487.335.154 261.739.070

The accompanying policies and explanatory notes on pages 7 through 41 form an integral part of the interim condensed consolidated financial statements.

F-47 ed financial statements. (472.500.000) (472.500.000) — (472.500.000) 503.769.101 — 503.769.101 (552.926) 503.216.175 510.104.981 — 510.104.981 5.300.075 515.405.056 28.192.077 (6.452.915) (21.739.162) — — — 68.408.861 (626.378.793) 557.969.932 — — — Sirketi and Its Subsidiaries profit or loss 786.508786.508 (1.290.746) (1.290.746) — — — 510.104.981 — — 509.600.743 — (1.385.983) 508.214.760 — (504.238) (6.686.058) (7.190.296) (4.291.911) (12.143.212) — — 503.769.101 — 487.333.978 (552.926) 486.781.052 (4.291.911) (12.143.212) — — — — (16.435.123) — (16.435.123) profit or loss be reclassified to Actuarial gain / Interim consolidated statement of changes in equity for the nine-month period ended September 30, 2016 to be reclassified income / (expense) to Other comprehensive (Currency—Turkish Lira (TL) unless otherwise indicated) (Currency—Turkish income / (expense) not Other comprehensive Petkim Petrokimya Holding Anonim Petrokimya Petkim ¸ Adjustment (loss) arising Cash flow Net profit / Equity Non- Share to share from defined hedging Share Restricted (loss) for the Retained holders of controlling Total capital capital benefit plan gains / (losses) premium reserves period / year earnings the parent interest equity 1.000.000.000 486.852.283 (15.228.165) 1.156.133 466.324.085 8.356.700 6.452.915 178.181.398 2.132.095.349 51.165.518 2.183.260.867 1.000.000.000 486.852.283 (19.520.076) (10.987.079) 466.324.085 36.548.777 503.769.101 156.442.236 2.619.429.327 50.612.592 2.670.041.919 1.500.000.000 238.988.496 (23.668.037) (7.490.023) 214.187.872 36.548.777 626.378.793 156.442.236 2.741.388.114 63.995.383 2.805.383.497 1.500.000.000 238.988.496 (22.881.529) (8.780.769) 214.187.872 104.957.638 510.104.981 241.912.168 2.778.488.857 62.609.400 2.841.098.257 .... — — .... — — ...... — — — — — — ...... — — — — — — — — — — — — — ...... — — — — — ...... — — — — — ...... — — ...... — — (loss) (loss) The accompanying policies and explanatory notes on pages 7 through 41 form an integral part of the interim condensed consolidat (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish) Transfers January 1, 2015 Total comprehensive income Total Net profit for the period Other comprehensive income / September 30, 2015 January 1, 2016 Transfers Total comprehensive income Total Net profit for the period Other comprehensive income / Dividends paid (Note 8) September 30, 2016

F-48 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

Petkim Petrokimya Holding Anonim Sirketi¸ and Its Subsidiaries Interim consolidated statement of cash flow for the nine-month period ended September 30, 2016 (Currency—Turkish Lira (TL) unless otherwise indicated)

Current period Prior period Not reviewed Not reviewed January 1– 1 January– Note September 30, 2016 30 September 2015 A. Cash flows from operating activities: ...... 154.017.842 303.676.162 Net profit for the period ...... 515.405.056 503.216.175 Adjustments to reconcile net profit Adjustments related with depreciation and amortization expenses ...... 81.745.600 78.248.482 Provision for impairment of inventories ...... 4 (10.656.453) (21.675.286) Adjustments related with provisions —Adjustments related with employee benefits ...... 7 21.715.459 10.782.020 —Provision / (reversal) for legal cases ...... 145.394 (1.043.480) —Adjustments related with other provisions ...... 10.280.524 1.556.337 Adjustments related with interest (income) and expenses —Interest income ...... (40.379.184) (21.570.371) —Interest expense ...... 14.637.288 26.124.809 —Deferred interest expense due to on credit purchases ...... (1.030.139) (16.418.716) —Unearned interest income due to on credit sales ...... 8.621.620 2.641.658 Adjustments related with unrealized currency translation differences .... (7.960.022) (168.966.491) Adjustments related with tax (income) / expense ...... 9 77.053.227 (57.147.100) Adjustments related with (gain) / loss on sale of property, plant and equipment ...... (565.634) (13.119) Adjustments related with incentive income related to government grants . (137.724) (163.155) Changes in working capital Adjustments related with (increase) / decrease in trade receivables ..... 9.638.090 (154.169.070) Adjustments related with (increase) / decrease in other receivables ..... (16.333.558) (303.810.981) Inventories ...... (121.045.440) 67.065.717 (Increase) / decrease in prepaid expenses ...... 15.914.624 5.067.062 Adjustments related with increase / (decrease) in trade payables ...... (328.785.796) 333.884.661 Adjustments related with increase / (decrease) in other payables ...... 9.389.269 (3.738.231) Liabilities for employee benefits ...... 12.587.674 (2.415.316) Increase / (decrease) in deferred income ...... 24.441.186 45.039.445 Employee termination benefits paid ...... (29.335.745) (17.097.288) Taxes refunded (paid) ...... (91.327.474) — Other cash inflows / (outflows) ...... — (1.721.600) B. Cash flows from investing activities ...... (255.776.658) (636.814.564) Purchase of property, plant and equipment and intangible assets ...... (352.997.377) (409.267.774) Proceeds from sales of property, plant and equipment and intangible assets ...... 1.087.064 13.119 Other cash advances given and liabilities ...... (64.318.604) (172.011.187) Other cash inflows / (outflows) ...... 160.452.259 (55.548.722) C. Cash flow from financing activities ...... (449.440.768) 614.420.037 Proceeds from borrowings ...... 369.561.024 978.384.980 Repayment of borrowings ...... (334.943.708) (363.906.172) Interest received ...... 38.042.046 20.681.385 Interest payments ...... (49.600.130) (20.740.156) Dividend payments ...... 8 (472.500.000) — D. Net increase/ (decrease) in cash and cash equivalents before currency translation differences (A+B+C) ...... (551.199.584) 281.281.635 E. Currency translation differences effect in cash and cash equivalents ...... 17.100.259 258.593.944 Net increase in cash and cash equivalents (D+E) ...... (534.099.325) 539.875.579 Cash and cash equivalents at the beginning of the period ...... 3 1.341.536.749 702.158.128 Cash and cash equivalents at the end of the period ...... 3 807.437.424 1.242.033.707

The accompanying policies and explanatory notes on pages 7 through 41 form an integral part of the interim condensed consolidated financial statements.

F-49 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

Petkim Petrokimya Holding Anonim Sirketi¸ and Its Subsidiaries Notes to the interim consolidated financial statements for the nine month period ended September 30, 2016 (Currency—Turkish Lira (TL) unless otherwise indicated)

1. Organization and nature of operations Petkim Petrokimya Holding A.¸S. (‘‘Petkim’’ or ‘‘the Company’’) was established on April 3, 1965. The Company started its investment activities in lzmit-Yarimca and initially established the Ethylene, Polyethylene, Chlorine Alkali, VCM and PVC plants in 1970 in the Yarimca Complex. During the course of the Company, construction of other plants continued. In 1985, Aliaga˘ Petrochemical Complex was established. The Company has 14 main plants, 1 bag production unit and 1 solid waste incineration facility. The Company operates its facilities in the petrochemical sector in Turkey. The Company is mainly engaged in the following fields • To establish and to operate factories, plants either at home or abroad in relation to the petrochemistry, chemistry and such other industrial sectors, • To process and to treat the raw materials and supplementary/auxiliary substances, materials and chemicals necessary for the production of petrochemicals, chemicals and such other materials/ substances by procuring such materials/substances either from home or abroad, to produce such materials/substances, and to carry out and to perform the domestic and international trading thereof, • In accordance with the Law 4628 on the Electricity Market, and the related legislation thereto, to establish power plants as per the auto-producer’s license in order to meet its own need for electricity and heat/thermal energy at first, to generate electricity and heat/thermal energy, to sell the generated electricity and heat/thermal energy and/or the capacity to other legal persons holding the requisite licenses or to the eligible consumers as per the mentioned legislation in case of any surplus production, and to carry out and to perform the activities in relation to the obtainment of any and all kinds of equipment and fuel in relation to the electricity power/generating plant provided that such activities are not of commercial nature • To carry out and to perform the activities in relation to the importation or purchase from domestic resources, of natural gas on wholesale and retail basis, utilization, storage of natural gas imported and purchased, in accordance with the legislation thereto, • To carry out and to perform pilotage, trailer and mooring activities, to operate ports, cruise ports, passenger terminals, seaports, docks, harbors, berths, liquid fuel/liquefied petroleum pipeline and buoy systems, and such other similar onshore facilities/plants, and to be involved in port management activities, to offer port, agency, provision, bunkering services, and to provide that such services are offered by 3rd parties either by way of leasing or such other methods when required, and to purchase, to have built and to lease, to sell the necessary vessels/naval platforms, and to establish either domestic or international partnerships in relation thereto, to operate warehouses, and to offer warehousing services, • To support and to donate to the foundations, associations, educational institutions, which have been established for social purposes, and to such other persons, institutions and organizations in accordance with the principles prescribed by the Capital Market Board The ‘‘Share Sales Agreement’’, with respect to the sales of 51% of shares of Petkim Petrokimya Holding A.¸S. (which has been in the privatization process for several years) to SOCAR & Turcas Petrokimya A.¸S. (‘‘STPA¸S’’), 44% of which previously owned by the Republic of Turkey Ministry Privatization Administration (‘‘Administration’’) and 7% State Pension Fund (‘‘Emekli Sandigi˘ Genel Mud¨ url¨ u¨g˘u’’)¨ transferred to Republic of Turkey Social Security Institution, was signed on May 30, 2008 On June 22, 2012, the public shares amounting to 10,32% of the Company capital which belonged to Prime Ministry Privatization Administration was sold to SOCAR Izmir Petrokimya A.¸S (‘‘SIPA¸S’’) which is the subsidiary of the Company’s main shareholder, SOCAR Turkey Enerji A.¸S. (‘‘STEA¸S’’)

F-50 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

Petkim Petrokimya Holding Anonim Sirketi¸ and Its Subsidiaries Notes to the interim consolidated financial statements (Continued) for the nine month period ended September 30, 2016 (Currency—Turkish Lira (TL) unless otherwise indicated)

1. Organization and nature of operations (Continued) SOCAR Turkey Enerji A.¸S. and SOCAR lzmir Petrokimya A.¸S., which is the %100 subsidiary of SOCAR Turkey Enerji A.¸S and owns 10,32% shares of the Group, have merged as of September 22, 2016. As of September 30, 2016 and December 31, 2015 the ultimate shareholder of the Company is State Oil Company of Azerbaijan Republic (‘‘SOCAR’’). The Group is registered at the Capital Markets Board (‘‘CMB’’) and its shares have been quoted in Istanbul Stock Exchange (‘‘ISE’’) since July 9, 1990.

Subsidiaries The Company has participated to Petlim Limancilik Ticaret A.¸S. (‘‘Petlim’’) with the capital of TL 100.000 and the share of 99,99%, according to the decision of Board of Director dated April 28, 2010 and numbered 64/132, to implement port activities. With the general assembly resolution dated, November 13, 2012, the share capital of Petlim has been increased to TL 8.000.000. With the general assembly resolution dated, September 30, 2013, the share capital of Petkim has been increased from TL 8.000.000 to TL 83.000.000 and the share of 100% transferred to Petkim. With the general assembly resolution dated, November 17, 2015, the share capital of Petlim has been increased from TL 83.000.000 to TL 150.000.000. The company has founded a company with the name of the Petkim Specialities Muhendislik¨ Plastikleri Sanayi ve Ticaret A.¸S. with the capital of TL 100.000 and the share of 100%, to carry out its production activities in high value-added advanced engineering plastics (masterbach, compound) and high-tech chemicals on October 28, 2015. Petkim and its subsidiaries are referred together as ‘‘the Group’’. 45 million shares, representing 30% of share capital of Petlim Limancilik Ticaret A.¸S., which is subsidiary of the Company, has been purchased by Goldman Sachs International (‘‘GSI’’, together with its subsidiaries ‘‘GS’’) as of December 18, 2014 in exchange for 250 million USD Dollars. At the same date, in the consequence of put option contract signed by STEA¸S with GSI, it has undertaken guarantor liability regarding of liabilities of Petkim due to share transfer agreement, if required and in the event of contract conditions the right of selling shares of Petlim by GSI to STEA¸S has been originated (‘‘Put option Contract’’). Within the mentioned put option contract, no later than 7 years following the signed share transfer agreement, it has been agreed on public offering of shares of Petlim (public offering), in accordance with those regulations agreed by the parties and in consequence of option relation, loss of GSI shall be compensated by STEA¸S. The number of personnel in the Group is 2.412 as of September 30, 2016 and the number of average personnel in the Group is 2.446 (December 31, 2015—2.471 and on average 2.430).

September 30 December 31 2016 2015 Union(*) ...... 1.865 1.918 Non-union(**) ...... 547 553 2.412 2.471

(*) Indicates the personnel who are members of Petrol I¸s Union (**) Indicates the white collar personnel who are not members of Petrol I¸s Union The registered address of the Group as of the date of these consolidated financial statements is as follows:

P.K. 12, 35800 Aliaga,˘ Izmir

F-51 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

2. Basis of presentation of interim condensed consolidated financial statements 2.1 Basis of presentation The Group keeps its statutory books and prepares their statutory financial statements in TL in accordance with Turkish Commercial Code (‘‘TCC’’), tax legislation and the Uniform Chart of Accounts issued by the Ministry of Finance. The interim condensed consolidated financial statements are based on the statutory records, with adjustments and reclassifications for the purpose of fair presentation in accordance with the Turkish Accounting Standards published by POA. The Group has prepared its condensed consolidated financial statements for the interim period ended September 30, 2016 in accordance with Turkish Accounting Standards, No 34 Interim Financial Reporting. The accompanying interim condensed consolidated financial statements have been prepared under the historical cost convention except the derivative financial assets and liabilities carried at fair value. Significant amounts and natures of all items even with similar characteristics, are presented separately in the financial statements. Insignificant amounts if similar in terms of function is shown aggregated. As a result of the transaction and to make the event the necessary offsetting these transactions and the net amount of the event or the presence of the monitoring over the amount after impairment losses is not considered a violation of the rule of offsetting. As a result of the company’s transactions in the normal course of business and income earned in that the nature of the transaction or event is presented as net value provided The interim condensed consolidated financial statements as of and for the period ended September 30, 2016 do not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group’s annual consolidated financial statements as at December 31, 2015 The condensed interim consolidated financial statements are presented in TL, which is the functional currency and presentation currency of the Group. The Group has prepared interim condensed consolidated financial statements in accordance with the going concern assumption

Approval of financial statements The interim condensed consolidated financial statements were approved to be issued by the Board of Directors November 4, 2016 and signed by Mr. Anar Mammadov, General Manager and Mr. Riza Bozoklar, Vice President of Finance, on behalf of the Board of Directors.

2.2 Summary of significant accounting policies The accounting policies adopted in the preparation of the interim condensed consolidated financial statements as at September 30, 2016 are consistent with those followed in the preparation of the consolidated financial statements of December 31, 2015. As of September 30, 2016, there is no change in ownership and voting right of Group’s subsidiaries, which included in the consolidated financial statement.

2.3 Changes in accounting and reporting standards The new standards, amendments and interpretations The accounting policies adopted in preparation of the interim condensed consolidated financial statements as at September 30, 2016 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS and TFRIC interpretations effective as of January 1, 2016. The

F-52 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

2. Basis of presentation of interim condensed consolidated financial statements (Continued) effects of these standards and interpretations on the Group’s financial position and performance have been disclosed in the related paragraphs. i) The new standards, amendments and interpretations which are effective as at January 1, 2016 are as follows: TFRS 11 Acquisition of an Interest in a Joint Operation (Amendment) TFRS 11 is amended to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. This amendment requires the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in TFRS 3 Business Combinations, to apply all of the principles on business combinations accounting in TFRS 3 and other TFRSs except for those principles that conflict with the guidance in this TFRS. In addition, the acquirer shall disclose the information required by TFRS 3 and other TFRSs for business combinations. The amendments did not have an impact on the financial position or performance of the Group.

TAS 16 and TAS 38—Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to TAS 16 and TAS 38) The amendments to TAS 16 and TAS 38, have prohibited the use of revenue-based depreciation for property, plant and equipment and significantly limiting the use of revenue-based amortisation for intangible assets. The amendments did not have an impact on the financial position or performance of the Group.

TAS 16 Property, Plant and Equipment and TAS 41 Agriculture (Amendment)—Bearer Plants) TAS 16 is amended to provide guidance that bearer plants, such as grape vines, rubber trees and oil palms should be accounted for in the same way as property, plant and equipment in TAS 16. Once a bearer plant is mature, apart from bearing produce, its biological transformation is no longer significant in generating future economic benefits. The only significant future economic benefits it generates come from the agricultural produce that it creates. Because their operation is similar to that of manufacturing, either the cost model or revaluation model should be applied. The produce growing on bearer plants will remain within the scope of TAS 41, measured at fair value less costs to sell. The amendment is not applicable for the Group and did not have an impact on the financial position or performance of the Group.

TAS 27 Equity Method in Separate Financial Statements (Amendments to TAS 27) Public Oversight Accounting and Auditing Standards Authority (POA) of Turkey issued an amendment to TAS 27 to restore the option to use the equity method to account for investments in subsidiaries and associates in an entity’s separate financial statements. Therefore, an entity must account for these investments either: • At cost • In accordance with IFRS 9 Or • Using the equity method defined in TAS 28 The entity must apply the same accounting for each category of investments. The amendment is not applicable for the Group and did not have an impact on the financial position or performance of the Group.

F-53 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

2. Basis of presentation of interim condensed consolidated financial statements (Continued) TFRS 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments) Amendments issued to TFRS 10 and TAS 28, to address the acknowledged inconsistency between the requirements in TFRS 10 and TAS 28 in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture, to clarify that an investor recognises a full gain or loss on the sale or contribution of assets that constitute a business, as defined in TFRS 3, between an investor and its associate or joint venture. The gain or loss resulting from the re-measurement at fair value of an investment retained in a former subsidiary should be recognised only to the extent of unrelated investors’ interests in that former subsidiary. The amendment is not applicable for the Group and did not have an impact on the financial position or performance of the Group.

TFRS 10, TFRS 12 and TAS 28: Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10 and IAS 28) Amendments issued to TFRS 10, TFRS 12 and TAS 28, to address the issues that have arisen in applying the investment entities exception under TFRS 10 Consolidated Financial Statements. The amendment is not applicable for the Group and did not have an impact on the financial position or performance of the Group.

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

Annual Improvements to TFRSs—2012–2014 Cycle POA issued, Annual Improvements to TFRSs 2012–2014 Cycle. The document sets out five amendments to four standards, excluding those standards that are consequentially amended, and the related Basis for Conclusions. The standards affected and the subjects of the amendments are: • IFRS 5 Non-current Assets Held for Sale and Discontinued Operations—clarifies that changes in methods of disposal (through sale or distribution to owners) would not be considered a new plan of disposal, rather it is a continuation of the original plan • IFRS 7 Financial Instruments: Disclosures—clarifies that i) the assessment of servicing contracts that includes a fee for the continuing involvement of financial assets in accordance with IFRS 7; ii) the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report • IAS 19 Employee Benefits—clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located • IAS 34 Interim Financial Reporting—clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report The amendment did not have significant impact on the financial position or performance of the Group.

F-54 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

2. Basis of presentation of interim condensed consolidated financial statements (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 interim condensed 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 9 Financial Instruments—Classification and measurement As amended in is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. Phase 1 of this new TFRS introduces new requirements for classifying and measuring financial instruments. The amendments made to TFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair value option (FVO) liabilities and requires that the change in fair value of a FVO financial liability attributable to credit risk is presented under other comprehensive income. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is adopted by POA.

IFRS 15 Revenue from Contracts with Customers The IASB issued IFRS 15 Revenue from Contracts with Customers. The new five-step model in the standard provides the recognition and measurement requirements of revenue. The standard applies to revenue from contracts with customers and provides a model for the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., the sale of property, plant and equipment or intangibles). IFRS 15 effective date is January 1, 2018, with early adoption permitted. Entities will transition to the new standard following either a full retrospective approach or a modified retrospective approach. The modified retrospective approach would allow the standard to be applied beginning with the current period, with no restatement of the comparative periods, but additional disclosures are required. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group. iii) The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA) The following standards, interpretations and amendments to existing IFRS standards are issued by the IASB but not yet effective up to the date of issuance of the financial statements. However, these standards, interpretations and amendments to existing IFRS standards are not yet adapted/issued by the POA, thus they do not constitute part of TFRS. The Group will make the necessary changes to its consolidated financial statements after the new standards and interpretations are issued and become effective under TFRS.

IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments) In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. Early application of the amendments is still permitted

F-55 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

2. Basis of presentation of interim condensed consolidated financial statements (Continued) Annual Improvements—2010–2012 Cycle IFRS 13 Fair Value Measurement As clarified in the Basis for Conclusions short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial. The amendment is effective immediately.

Annual Improvements—2011–2013 Cycle IFRS 9 Financial Instruments—Final standard (2014) The IASB published the final version of IFRS 9 Financial Instruments. The final version of IFRS 9 brings together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting. In addition, IFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value. The Standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. However, the Standard is available for early application. In addition, the own credit changes can be early applied in isolation without otherwise changing the accounting for financial instruments. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.

IFRS 16 Leases The IASB has published a new standard, IFRS 16 ‘Leases’. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 ‘Leases’ and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has also been applied. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.

IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses (Amendments) The IASB issued amendments to IAS 12 Income Taxes. The amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. The amendments clarify the requirements on recognition of deferred tax assets for unrealised losses, to address diversity in practice. These amendments are to be retrospectively applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. However, on initial application of the amendment, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. If the Company/Group applies this relief, it shall disclose that fact. The amendment are not applicable for the Group and will not have an impact on the financial position or performance of the Group.

F-56 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

2. Basis of presentation of interim condensed consolidated financial statements (Continued) IAS 7 Statement of Cash Flows (Amendments) The IASB issued amendments to IAS 7 ‘Statement of Cash Flows’. The amendments are intended to clarify IAS 7 to improve information provided to users of financial statements about an entity’s financing activities. The improvements to disclosures require companies to provide information about changes in their financing liabilities. These amendments are to be applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. When the Company/Group first applies those amendments, it is not required to provide comparative information for preceding periods. The amendment are not applicable for the Group and will not have an impact on the financial position or performance of the Group.

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

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

2.4 Comparative information and restatement of prior period dated financial In order to allow for the determination of financial position and performance trends, the Group’s interim condensed consolidated financial statements have been presented comparatively with the prior periods.

F-57 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

2. Basis of presentation of interim condensed consolidated financial statements (Continued) The reclassifications in the interim period of cash flow statements made considering the Turkish Accounting Standards taxonomy published on June 6, 2016 and considering taxonomy, reclassifications made in the cash flow statement of period ended on September 30, 2015 are as follows: • There is a classification at an amount of TL 258.593.944 sourcing from ‘‘adjustments related to unrealized foreign exchange translation differences’’ between cash flow generated from operating activities and impact of foreign currency translation differences on cash and cash equivalents, and at an amount of TL 55.548.722 sourcing from advances given for fixed assets between cash flow sourcing from operating activities and cash flow sourcing from investing activities is made on statement of cash flows. • There is a reclassification due to the capitalized borrowing costs of amounting to 25.205.531 TL between cash flows from investing activities and cash flows from financing activities.

2.5 Seasonality of operations There are no significant impacts on the interim condensed consolidated financial statements of the Group due to the seasonality of operations.

3. Cash and cash equivalents

September 30, December 31, 2016 2015 Cash ...... — — Banks ...... 807.437.424 1.341.536.749 —Foreign currency demand deposits ...... 15.029.000 6.477.785 —Foreign currency time deposits ...... 651.928.371 1.106.344.117 —TL demand deposits ...... 7.708.765 11.158.398 —TL time deposits ...... 132.771.288 217.556.449 807.437.424 1.341.536.749

As of September 30, 2016, foreign currency time deposits consist of overnight and monthly deposits. The effective weighted average interest rates for USD and EUR %2,57 and %1,24 respectively (December 31, 2015: USD—%2,75, EUR—%1,24). The monthly effective weighted average interest for the USD time deposit is %3,60. (December 31, 2015: USD %2,52). As of September 30, 2016, TL time deposits consist of overnight and monthly deposits and bear the effective interest rate of %11,15 (December 31, 2015—overnight %12,55). As of September 30, 2016, the Group has no blockage on its bank deposits (December 31, 2015—None). Based on the independent data with respect to the credit risk assessment of the banks at which the Group has deposits, are sufficient in terms of credit quality of the banks. The carrying values, including accrued interest income in the fair value of the reporting date to the actual cash and cash equivalents are assumed to approximate.

F-58 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

4. Inventories

September 30, December 31, 2016 2015 Raw materials ...... 124.727.623 112.685.870 Work-in-progress ...... 139.883.506 94.789.137 Finished goods ...... 126.213.122 90.622.291 Trade goods ...... 13.099.365 19.207.550 Goods in transit ...... 66.936.337 33.907.481 Other inventories ...... 34.270.776 24.342.685 505.130.729 375.555.014 Less: Provision for impairment on inventories ...... (1.389.697) (12.046.150) 503.741.032 363.508.864

Movements of provision for impairment on inventory for the periods ended September 30, 2016 and 2015 were as follows:

2016 2015 January 1 ...... 12.046.150 27.379.753 Charge/(reversal) for the period, net ...... (10.656.453) (21.675.286) September 30 ...... 1.389.697 5.704.467

Allocation of the provision for impairment on inventories in terms of inventory type is as follows:

September 30, December 31, 2016 2015 Work-in-progress ...... 970.109 10.041.552 Finished goods ...... 149.178 1.150.298 Trade goods ...... — 583.877 Other inventories ...... 270.410 270.423 1.389.697 12.046.150

F-59 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

5. Property, plant and equipment

January 1, September 30, 2016 Additions Transfers Disposals 2016 Cost: Land ...... 13.200.586 — — — 13.200.586 Land improvements .... 113.957.571 — — — 113.957.571 Buildings ...... 171.235.674 — — — 171.235.674 Machinery and equipment ...... 6.436.255.729 — 105.822.673 (17.683.298) 6.524.395.104 Motor vehicles ...... 12.319.269 — 1.418.840 (1.225.011) 12.513.098 Furniture and fixtures .. 74.702.806 — 15.197.839 (177.358) 89.723.287 Other fixed assets ..... 996.152 — — — 996.152 Leasehold improvements ...... 581.831 — — — 581.831 Construction in progress 987.795.284 376.402.137 (126.385.172) 1.237.812.249 7.811.044.902 376.402.137 (3.945.820) (19.085.667) 8.164.415.552 Accumulated depreciation: Land improvements .... (85.089.479) (2.033.236) — — (87.122.715) Buildings ...... (98.986.892) (2.805.683) — — (101.792.575) Machinery and equipment (5.281.270.613) (79.192.310) — 17.238.423 (5.343.224.500) Motor vehicles ...... (9.909.746) (617.431) — 1.115.531 (9.411.646) Furniture and fixtures .... (57.753.151) (3.498.981) — 210.283 (61.041.849) Other fixed assets ...... (996.152) — — — (996.152) Leasehold improvements . (404.795) (145.458) — — (550.253) (5.534.410.828) (88.293.099) — 18.564.237 (5.604.139.690) Net book value ...... 2.276.634.074 2.560.275.862

(*) Transfers of construction in progress amounting to TL 3.945.820 were made to the intangible assets as of September 30, 2016.

F-60 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

5. Property, plant and equipment (Continued)

January 1 September 30 2015 Additions Transfers Disposals 2015 Cost: Land ...... 13.208.763 — — — 13.208.763 Land improvements .... 108.396.415 — 5.205.038 — 113.601.453 Buildings ...... 169.032.795 — 718.314 — 169.751.109 Machinery and equipment ...... 6.381.145.390 — 3.084.323 — 6.384.229.713 Motor vehicles ...... 10.576.693 — 1.209.990 (29.115) 11.757.568 Furniture and fixtures . . . 67.789.913 — 3.033.074 — 70.822.987 Other fixed assets ...... 996.152 — — — 996.152 Leasehold Improvements 581.831 — — — 581.831 Construction in progress . 488.649.086 434.472.305 (14.806.946) — 908.314.445 7.240.377.038 434.472.305 (1.556.207) (29.115) 7.673.264.021 Accumulated depreciation: Land improvements .... (82.575.675) (1.833.499) — — (84.409.174) Buildings ...... (95.524.377) (2.735.309) — — (98.259.686) Machinery and equipment ...... (5.179.977.175) (75.678.120) — — (5.255.655.295) Motor vehicles ...... (9.276.064) (464.012) — 29.115 (9.710.961) Furniture and fixtures . . . (54.532.020) (2.349.415) — — (56.881.435) Other fixed assets ...... (996.152) — — — (996.152) Leasehold Improvements (210.852) (145.458) — — (356.310) (5.423.092.315) (83.205.813) — 29.115 (5.506.269.013) Net book value ...... 1.817.284.723 2.166.995.008

(*) Transfers of construction in progress amounting to TL 1.556.207 were made to the intangible assets as of September 30, 2015.

6. Deferred income and prepaid expenses from third parties Deferred Income a) Short term deferred income

September 30, December 31, 2016 2015 Advances taken ...... 43.029.342 18.740.926 Deferred income(*) ...... 4.106.844 3.184.151 47.136.186 21.925.077 b) Long term deferred income

September 30, December 31, 2016 2015 Long-term deferred income(*) ...... 53.064.532 54.794.114 53.064.532 54.794.114

(*) For a container port to be established inside Petkim facilities to be operated by APM Terminalleri Liman I¸sletmeciligi˘ A.¸S. (APM Terminalleri), an operation agreement was signed between the Group and APMT BV. and APM Terminalleri on February 22, 2013. The amount of TL 2.234.292 is presented under short-term deferred income and TL 53.064.381 is presented under long-term deferred income for the prepayment made by APM Terminals to the Group under the operation agreement.

F-61 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

6. Deferred income and prepaid expenses from third parties (Continued) Prepaid expenses a) Short-term prepaid expenses

September 30, December 31, 2016 2015 Advances given for customs affairs ...... 3.318.720 10.201.986 Prepaid rent, insurance and other expenses ...... 15.725.809 8.956.615 Advances given for inventories ...... 3.483.597 20.311.017 22.528.126 39.469.618 b) Long term prepaid expenses

September 30, December 31, 2016 2015 Advances given for PP&E purchases(*) ...... 142.032.556 77.713.952 Advances given for customs affairs ...... 12.772.125 12.772.125 Prepaid rent, insurance and other expenses ...... 2.153.230 2.218.840 156.957.911 92.704.917

(*) A large part of the amount constituting the advance has been given tangible assets under the Wind Power Plant Project. Also The Group has given advance of TL 31.807.000 in accordance with head office construction which is presented in detail in Note 14.

7. Provision for employee benefits

September 30, December 31, 2016 2015 i) Short-term provision for employee benefits: Provision for seniority incentive bonus ...... 2.579.101 3.027.856 Provision for bonus premium ...... 5.250.000 10.000.000 7.829.101 13.027.856 ii) Long-term provision for employee benefits: Provision for employment termination benefits ...... 74.244.202 78.796.553 Provision for unused vacation liabilities ...... 10.387.250 7.686.675 Provision for seniority incentive bonus ...... 3.335.533 2.643.707 87.966.985 89.126.935

Unused vacation liabilities Movements of the provision for unused vacation liabilities are as follows:

2016 2015 January 1 ...... 7.686.675 6.547.365 Changes in the period, net ...... 2.700.575 2.680.362 September 30 ...... 10.387.250 9.227.727

F-62 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

7. Provision for employee benefits (Continued) a) Provision for employment termination benefits The amount payable consists of one month’s salary limited to a maximum of TL 4.297,21 for each year of service as of September 30, 2016 (December 31, 2015—TL 3.828, 37). The liability is not funded, as there is no funding requirement. The provision for employee termination benefit is calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. TAS 19 requires actuarial valuation methods to be developed to estimate the enterprises’ obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:

September 30, December 31 2016 2015 Net discount rate (%) ...... 3,80 3,80 Probability of retirement (%) ...... 100,00 100,00 The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. As the maximum liability is revised semi-annually, the maximum amount of TL 4.297,21 which is effective as of September 1, 2016, has been taken into consideration in the calculation of employment termination benefits of the Group (January 1, 2016—TL 4.092,53). The movements of the provision for employee termination benefit are as follows:

2016 2015 January 1 ...... 78.796.553 69.911.457 Interest cost ...... 5.318.767 1.992.477 Actuarial loss/(gain) ...... (983.135) 5.364.889 Service cost ...... 4.470.326 1.905.977 Payments during the year ...... (13.358.309) (7.153.319) September 30 ...... 74.244.202 72.021.481 b) Provision for seniority incentive bonus: The Group has an employee benefit plan, namely ‘‘Seniority Incentive Bonus’’, which is paid to employees with a certain level of seniority. Seniority incentive bonus is a benefit provided to the personnel to promote their loyalty to the job and workplace. The bonus amounting to 40 days of gross salary for 5 years seniority, 50 days of gross salary for 10 years seniority, 65 days of gross salary for 15 years seniority, 80 days of gross salary for 20 years seniority, 90 days of gross salary for 25 and 100 dats of gross salary for 30 years seniority is paid to the union personnel with the gross salary of the month when they are reached to the seniority level. In case of termination of employment for any reason that does not prevent gaining severance pay, 20% of seniority incentive which the employee will gain, for each year last first seniority incentive level. In this calculation the periods which are shorter than six months are not considered. Periods which are more than six months are considered as one year. For the non-union personnel working at the Company, the bonus amounting to 40 days of gross salary for 5 years seniority, 50 days of gross salary for 10 years seniority, 65 days of gross salary for 15 years seniority, 80 days of gross salary for 20 years seniority, 90 days of gross salary for 25 years and 100 days

F-63 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

7. Provision for employee benefits (Continued) for 30 years seniority for the seniority levels in which they are entitled as of the aformentioned date and 30 days of gross salary for the following seniority levels that they are going to be entitled is paid with the gross salary of the month when they are reached to the seniority level. In case of termination of employment for any reason that does not prevent gaining severance pay, 20% of seniority incentive which the employee will gain, for each year last first seniority incentive level. In this calculation the periods which are shorter than six months are not considered. Periods which are more than six months are considered as one year. The seniority incentive bonus provision is calculated by estimating the present value of the future probable obligation arising from the qualification of the employees for the bonus. TAS 19 requires that actuarial valuation methods to be developed to estimate the employee benefit provisions. The following actuarial assumptions have been used in the calculation of the total provision:

September 30, December 31, 2016 2015 Net discount rate (%) ...... 3,80 3,80 Probability of retirement (%) ...... 100,00 100,00 The movements of the provision for seniority incentive bonus are as follows:

2016 2015 January 1 ...... 5.671.563 5.648.537 Interest cost ...... 382.831 160.983 Service cost ...... 3.592.960 4.042.221 Payments during the year ...... (3.732.720) (3.357.043) September 30 ...... 5.914.634 6.494.698

8. Equity The shareholders of the Company and their shareholdings as of September 30, 2016 and December 31, 2015 were as follows:

September 30, 2016 December 31, 2015 Group: Shareholder name Amount—TL Share (%) Amount—TL Share (%) A Socar Turkey Petrokimya A.¸S...... 765.000.000 51,00 765.000.000 51,00 A Public owned(*) ...... 735.000.000 49,00 655.176.478 43,68 C Ozelle¸¨ stirme Idaresi Ba¸skanligi˘ .... 0,01 — 0,01 — A SOCAR Turkey Enerji A.¸S.(**) ..... ——79.823.522 5,32 Total paid share capital 1.500.000.000 100 1.500.000.000 100 Adjustment to share capital 238.988.496 238.988.496 Total share capital 1.738.988.496 1.738.988.496

(*) SOCAR Turkey Enerji A.¸S. traded on a public BIST part; it has a rate of 5.32% per share 79.823.521,64 (December 31, 2015: a rate of 2.75% per share 41.278.401,47). Adjustment to share capital represents the difference between the amounts of cash and cash equivalents contributions, restated for inflation, to share capital and the amounts before the restatement. As the board of directories meeting decision taken at the December 8, 2015 in the registered capital ceiling of TL 4.000.000.000, increased 50% of the issued share capital and reached from

F-64 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

8. Equity (Continued) TL 1.000.000.000 to TL 1.500.000.000. Capital increase consists from adjustments to share capital amounting to TL 247.863.787 and special fund amounting to TL 252.136.213. Group A registered shares, issued per procuration of the capital increased at an amount of TL 500.000.000, are distributed to shareholders in due form. Approved and issued capital of the Company consist of 149.999.999.999 Group A shares, each of them having a registered nominal price of 1Kr, and 1 Group C preferred stock belonging to Management (December 31, 2015—149.999.999.999 Group A shares each of them having a registered nominal price of 1Kr, and 1 Group C preferred stock belonging to Management). Capital of the Company is composed of all registered shares (December 31, 2015—All registered). The following matters are subject to the approval of the member of the Board of Directors representing the C type share: • The amendments on the articles of association affecting the privileges of type C, • The recording of the transfer of the registered shares in the stock ledger, • The determination of the form of the certificate of authority stated in the 31st clause of the Articles of Association, • The decision related with the reduction of the capacity of any plant by 10% owned by the Company • The foundation of new company or partnership, acquisition of a company being a partner of existing companies and/or merging with them, spin-off, changes of the titles, annulment and winding-up. In the Ordinary General Meeting dated on March 28, 2016, it is decided that profit of the year 2015 amounting to TL 472.500.000 (2015: dividend is not paid) to be distributed by cash dividends (each with a nominal value of 1 kuru¸s 100 (the kr¸s 1 amount) gross per share dividend: 0,315 TL) After withholding of dividend payment has been completed as of September 30, 2016.

9. Tax assets and liabilities i) Current income tax:

September 30, December 31, 2016 2015 Corporate and income tax payable ...... 112.512.643 19.213.253 Prepaid corporate tax ...... (81.643.419) (9.529.198) 30.869.224 9.684.055

As of September 30 Tax expense for the year ended are detailed below:

January 1– July 1– 1 January– 1 July– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 Deferred tax income / (expense) ..... 35.459.416 14.084.621 65.127.638 37.931.886 Current year tax expense ...... (112.512.643) (32.037.498) (7.980.538) (5.733.307) Total tax expense ...... (77.053.227) (17.952.877) 57.147.100 32.198.579

The corporate tax rate of the fiscal year 2016 is 20% (December 31, 2015—20%). Corporate tax is payable at a rate of 20% on the total income of the companies after adjusting for certain disallowable expenses, exempt income (exemption for participation in subsidiaries, exemption for investment incentive allowance etc.) and allowances (such as research and development expenditure allowances). With the above mentioned amendments,

F-65 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

9. Tax assets and liabilities (Continued) Tax returns are open for five years from the beginning of the year that follows the date of filling during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Under the Turkish taxation system, tax losses can be carried forward to offset against future taxable income for up to five years. Tax losses cannot be carried back to offset profits from previous periods. ii) Deferred tax The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between their financial statements as reported under the Turkish Accounting Standards and the statutory tax financial statements. For the companies operating in Turkey, deferred income taxes are calculated on temporary differences that are expected to be realized or settled based on the taxable income in future periods under the liability method using a principal tax rate of 20% (December 31, 2015: 20%). Details of cumulative temporary differences and the resulting deferred income tax assets and liabilities provided as of September 30, 2016 and December 31, 2015 were as follows:

Taxable temporary Deferred income tax differences assets/(liabilities) September 30, December 31, September 30, December 31, 2016 2015 2016 2015 Difference between the carrying values and tax bases of property, plant, equipment ...... (307.607.739) (314.955.950) (61.521.548) (62.991.190) Income accrual of hedging reserve . . (8.549.840) (1.646.432) (1.709.968) (329.286) Adjustment for financial borrowings internal rate of return ...... (645.129) (1.202.203) (129.026) (240.441) Rediscount income from trade payables ...... (601.537) (633.967) (120.307) (126.794) Other ...... — (1.474.473) — (294.895) Deferred income tax liabilities .... (317.404.245) (319.913.025) (63.480.849) (63.982.606) Unused investment incentives ..... 879.185.628 691.151.826 202.346.324 166.103.900 Employment termination benefits and seniority incentive bonus provision ...... 80.158.836 84.468.116 16.031.768 16.893.623 Inventory impairment ...... 1.389.697 12.158.681 277.939 2.431.736 Accrued expenses of hedging ..... 27.883.373 11.008.960 5.576.675 2.201.792 Accrual expense of personnel bonus 5.250.000 10.000.000 1.050.000 2.000.000 Rent allowance fee ...... 9.010.030 9.266.208 1.802.006 1.853.242 Rediscount expense on trade receivables ...... 8.621.774 8.388.021 1.724.355 1.677.604 Provision for unused vacation rights . 10.387.250 7.686.675 2.077.450 1.537.335 Letter of credit interest accrual and amortised cost adjustment ...... 2.269.914 5.689.407 453.983 1.137.883 Provision for doubtful receivables . . . 10.076.691 5.141.764 2.015.338 1.028.353 Provision for legal cases ...... 1.088.140 891.260 217.628 178.252 Other ...... 2.554.338 1.426.916 510.868 285.383 Deferred income tax assets ...... 1.037.875.671 847.277.834 234.084.334 197.329.103 Deferred income tax asset—net ... 170.603.485 133.346.497

F-66 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

9. Tax assets and liabilities (Continued) The movement of deferred tax is as follows:

Deferred tax asset / (liabilities)—net

2016 2015 January 1 ...... 133.346.497 44.480.315 Tax expense recognized in statement of profit or loss ...... 35.459.416 65.127.638 Tax expenses recognized in other comprehensive income ...... 1.797.572 4.108.781 September 30 ...... 170.603.485 113.716.734

As of September 30, 2016, the Group has TL 879.185.628 unused investment incentive for which the realization of the related tax benefit through the future taxable profit has deemed probable (December 31, 2015—TL 691.151.826). The Group obtained a strategic investment incentive certificate from TC Ministry of Economy for PTA capacity increase project on January 4, 2013. The Group will be able to deduct 50% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 90% as subject of deduction from corporate tax. The group has TL 100.836.293 unused investment incentive within the scope of strategic investment incentive certificate as of September 30, 2016. In this context, as of September 30, 2016, the Group has recognized deferred tax asset that can be used in following periods amounting to TL 50.418.147. The Group has obtained regional investment incentive certificates from T.C. Ministry of Economy for factory modernization investment at the date of June 15, 2012. The Group will be able to deduct 50% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 15% as subject of deduction from corporate tax. The Group has TL 74.833.802 investment incentives within the scope of the regional investment certificate. In this context, as of September 30, 2016, the Group has recognized deferred tax asset, which can be used in following periods, amounting to TL 11.225.070. The Group has obtained large scale of investment incentive certificate from T.C. Ministry of Economy for port project investments at the date of November 20, 2014. The Group will be able to deduct 20% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 30% as subject of deduction from corporate tax. The Group has TL 703.515.533 unused investment incentives within the scope of the port project investment certificate. In this context, as of September 30, 2016, the Group has recognized deferred tax asset that can be used in following periods amounting to TL 140.703.107

10. General administrative expenses

January 1– July 1– 1 January– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 Personnel expenses ...... 42.223.622 11.926.984 39.374.803 8.488.032 Outsourced services ...... 27.642.284 8.269.072 19.793.418 7.082.285 Energy expenses ...... 7.482.893 1.334.242 8.659.523 1.698.811 Depreciation and amortization ...... 5.575.061 1.893.011 5.276.959 1.672.428 Taxes, funds and fees ...... 5.043.562 1.036.164 3.425.392 990.153 Employment termination benefits ..... 764.578 (1.132.873) 1.905.977 364.534 EMRA contribution share ...... 1.311.492 376.578 1.339.541 514.790 Other ...... 13.048.048 6.745.541 6.197.508 1.425.904 103.091.540 30.448.719 85.973.121 22.236.937

F-67 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

11. Other operating income/ (expense) Other operating income:

January 1– 1 July 1– January 1– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 Interest income from credit sales ..... 49.023.712 13.138.058 30.310.877 12.473.734 Rent income ...... 22.418.676 7.422.871 15.368.431 5.204.966 Foreign exchange gain on trade payables ...... 21.112.425 6.387.440 28.812.948 16.804.148 Foreign exchange gain on trade receivable ...... 9.670.242 4.418.412 46.760.819 23.140.215 Energy maintenance income ...... 2.648.076 334.363 1.079.702 446.094 Infrastructure income ...... 947.411 317.845 811.433 277.138 Rediscount income on trade payable . . (32.583) (289.710) 12.621.436 7.729.144 Other ...... 7.604.309 1.944.967 4.171.613 760.146 113.392.268 33.674.246 139.937.259 66.835.585

Other operating expenses:

January 1– 1 July 1– January 1– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 Foreign exchange losses on trade payables ...... (28.162.076) (19.849.506) (149.593.353) (75.626.049) Interest cost from credit purchases . . . (9.814.993) (2.902.262) (14.117.293) (3.004.685) Provision for doubtful receivables ..... (9.702.295) (9.702.295) (115.547) (115.547) Rediscount expense on trade receivable ...... (8.621.620) 739.603 (2.641.658) (1.461.878) Foreign exchange losses on trade receivables ...... (2.283.218) 3.086.190 (4.375.389) (210.812) Compensation and penalty charges . . . (1.237.583) (38.146) (2.589.494) (1.113.269) Others ...... (6.609.990) (686.471) (4.731.267) (1.576.235) (66.431.775) (29.352.887) (178.164.001) (83.108.475)

12. Earnings per share Companies can increase their share capital by making a pro-rata distribution of shares (‘‘bonus shares’’) to existing shareholders from retained earnings. For the purpose of (loss)/earnings per share computations, the weighted average number of shares outstanding during the year has been adjusted in respect to bonus shares issues without a corresponding change in resources, by giving them retroactive effect for the year in which they were issued and for each earlier year. (Loss)/earnings per share are

F-68 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

12. Earnings per share (Continued) calculated by dividing net income for the period to weighted average number of shares in issue during that period.

January 1– 1 July 1– January 1– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 Net profit for the year belongs to equity holders of the parent ...... 510.104.981 136.723.850 503.769.101 275.542.312 Weighted average number of shares with nominal value of Kr 1 each (thousand) ...... 150.000.000 150.000.000 100.000.000 100.000.000 Earnings per share (per TL 1 equivalent to 100 units of share) .. 0,3401 0,0911 0,5038 0,2755

13. Transactions and balances with related parties Summary of the intercompany balances as of September 30, 2016 and December 31, 2015 and significant intercompany transactions during the period were as follows: i) Balances with related parties

September 30, December 31, 2016 2015 a) Short term other receivables from related parties SOCAR Turkey Enerji A.¸S.(‘‘STEA¸S’’)(1)(*) ...... 9.508.434 255.041.322 TANAP Dogalgaz˘ ileti¸sim A.¸S.(2) ...... 1.510 7.911 9.509.944 255.049.233 b) Long term other receivables from related parties SOCAR Power Enerji Yatirimlari A.¸S.(2)(**) ...... 57.523.441 54.500.611 SOCAR Turkey Enerji A.¸S.(‘‘STEA¸S’’)(1)(*) ...... 311.348.713 50.705.413 368.872.154 105.206.024

(*) Related with the advances given to STEA¸S. Amounting to TL 9.508.434 consist of interest and other receivables and interest charge is applied by annual rates 13.34% and 4.37% respectively TL and USD denominated receivables (**) Revenue from Socar Power Enerji Yatirimlari A.¸S. consist from land sale and rent receivable amounting to TL 50.372.505, interest and other receivables amounting to TL 7.150.936 (December 31, 2015: TL 50.118.688 land sale and rent receivables, TL 4.381.923 interest and other receivables). (1) Shareholders of the Company (2) Entities controlled by the shareholders’ of the Company or Socar (the ultimate parent)

F-69 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

13. Transactions and balances with related parties (Continued) c) Short term trade payable to related parties

September 30, December 31, 2016 2015 SOCAR Gaz Ticareti A.¸S(2) ...... 25.774.200 30.958.921 Petrokim Trading Ltd. (‘‘Petrokim’’)(2) ...... 11.105.803 — Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... 233.076 347.219 37.113.079 31.306.140

Short term trade payables to related parties mainly arise from natural gas, fuel, LPG and merchandise purchases. Average maturity for short term trade payables to related parties is 7 days. (December 31, 2015—17 days.) d) Other payables to related parties:

September 30, December 31, 2016 2015 STAR(2) ...... 2.748.780 1.257.480 STEA¸S(1) ...... — 405.652 Payables to shareholders(1) ...... 87.305 87.305 2.836.085 1.750.437

September 30, December 31, 2016 2015 e) Short term deferred income from related parties STAR(2)(*) ...... 8.018.642 4.156.932 SOCAR Power Enerji Yatirimlari A.¸S.(2) ...... 15.000 10.305 SOCAR Teknolojik C¸oz¨ umler¨ A.¸S.(2) ...... 85 846 8.033.727 4.168.083 f) Long term deferred income from related parties STAR(2)(*) ...... 9.799.042 12.705.027 9.799.042 12.705.027

(*) Short term and long term deferred income from STAR, consists of rent income that arise from one shot cash collections of the Group at the beginning of rent agreement (1) Shareholders of the Company (2) Entities controlled by the shareholders’ of the Company or Socar (the ultimate parent)

September 30, December 31, 2016 2015 g) Short term prepaid expense to related party STAR(2)(**) ...... 12.878.087 12.878.087 12.878.087 12.878.087

F-70 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

13. Transactions and balances with related parties (Continued) h) Long term prepaid expense to related party

September 30, December 31, 2016 2015 STAR(2)(**) ...... 7.512.217 17.170.782 7.512.217 17.170.782

(**) Long and short term prepaid expense to STAR, consists of rent expense of naphtha tank. The group has signed an operational leasing contract for 3 naphtha tanks to be effective between December 1, 2014 and April 30, 2018 at the date of December 30, 2014. STAR has rented out tanks, owned by it, and discounted amounting TL 44.00.129 + VAT for over entire duration within the context of that contract. STAR has invoiced to the Group about the rents in 2015 and the Group has paid the entire amount. STAR has worked with an independent firm to valuation that fair value of tank using and they’ve sent report to the Group. In this valuation report, the present value of net rental income has identified the range of TL 40.000.000 and TL 45.000.000 between the dates of December 1, 2014 and April 30, 2018. (1) Shareholders of the Company (2) Entities controlled by the shareholders’ of the Company or Socar (the ultimate parent) ii) Transactions with related parties

January 1– 1 July 1– January 1– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 a) Other operating income/(expense) from related party transactions—net STEA¸S(1) ...... 21.742.177 13.625.717 28.615.003 25.669.132 SOCAR Power Enerji Yatirimlari A.¸S.(2) . 3.437.151 2.391.307 13.722.775 6.574.250 Petrokim(2) ...... 203.776 (3.515) (9.886) (538) STAR(2) ...... (5.374) 11.624 238.512 9.252 Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... (796) (1.389) (935) (935) Socar Gaz Ticareti A.¸S.(2) ...... (49.383) (1.039) 6.448 6.448 Socar Turkey Petrol Ener. Dag.˘ A.¸S.(2) . . — (339) —— SOCAR Azerikimya Production Union(2) . ——455 25.327.551 16.022.366 42.572.372 32.257.609

The Group generates interest income at a rate of 13,34% and 3,53% for its TL and USD receivables from SOCAR Power Enerji A.¸S. respectively and 13,34% and 4,37% for its TL and USD receivables from SOCAR Turkey Enerji A.¸S. respectively. TL 5.097 and TL 277 of expenses sourcing from STAR constitutes of exchange differences expenses and other expenses respectively, TL 14.060.077 and TL 7.682.100 of income generated from STEA¸S constitutes of interest income from receivables and exchange differences expenses respectively. TL 1.480.986 and TL 1.956.165 of income obtained from SOCAR Power Enerji Yatirimlari A.¸S. constitutes of exchange differences expenses and interest income respectively.

F-71 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

13. Transactions and balances with related parties (Continued)

January 1– 1 July 1– January 1– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 b) Service and rent purchases from related parties: STAR(2) ...... 18.789.930 7.698.189 15.098.193 4.808.934 STEA¸S(1) ...... 10.951.123 3.822.149 8.878.397 2.825.723 SOCAR Power Enerji Yatirimlari A.¸S.(2) . 677.652 156.185 565.981 113.164 30.418.705 11.676.523 24.542.571 7.747.821

Service and rent purchases from STAR consist from naphtha rent expense amounting to TL 9.658.566, labour purchase amounting to TL 7.014.699 and other service purchases amounting to 2.116.665. All of service purchases from STEA¸S consist of invoices and expenses of STEA¸S staff, works on behalf of the Group. (1) Shareholders of the Company (2) Entities controlled by the shareholders’ of the Company or Socar (the ultimate parent)

January 1– 1 July 1– January 1– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 c) Rent income from related parties STAR(2) ...... 14.453.238 4.773.952 11.785.770 3.961.942 SOCAR Power Enerji Yatirimlari A.¸S.(2) . 16.184 5.113 16.273 5.621 SOCAR Teknolojik C¸oz¨ umler¨ A.¸S.(2) . . . 763 254 —— 14.470.185 4.779.319 11.802.043 3.967.563

January 1– 1 July 1– January 1– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 d) Material purchase from related parties: Socar Gaz Ticareti A.¸S.(2) ...... 203.034.012 63.397.769 258.302.777 85.431.853 Petrokim(2) ...... 95.810.733 42.915.396 39.191.526 24.786.540 Socar Turkey Petrol Enerji Dag.˘ A.¸S.(2) . 6.888.558 2.106.097 793.187 389.008 Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... 956.531 289.944 992.880 352.144 306.689.834 108.709.206 299.280.370 110.959.545

F-72 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

13. Transactions and balances with related parties (Continued) Material purchases from SOCAR Gaz Ticareti A.¸S. and Petrokim in the period ended September 30, 2016 consist of trade goods, fuel, natural gas and LPG.

January 1– 1 July 1– January 1– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 e) Product and service sales to related parties: STAR(2) ...... 2.717.454 1.755.479 664.837 238.326 Petrokim(2) ...... 2.490.452 1.073.734 —— STEA¸S(1) ...... 298.754 162.326 101.335 38.616 SOCAR Power Enerji Yatirimlari A.¸S.(2) . 2.730 1.622 1.629 563 SOCAR Azeri Kimya Production Union(2) ...... ——1.013.489 391.321 5.509.390 2.993.161 1.781.290 668.826

(1) Shareholders of the Company (2) Entities controlled by the shareholders’ of the Company or Socar (the ultimate parent) f) Key management emoluments:

January 1– 1 July 1– January 1– July 1– September 30, September 30, September 30, September 30, 2016 2016 2015 2015 i. Key management emoluments— short term: Payments for salary and seniority incentives ...... 7.565.990 2.566.748 5.848.582 1.698.720 7.565.990 2.566.748 5.848.582 1.698.720 ii. Key management emoluments— long term: Provision for employment termination benefits ...... 63.751 (47.356) 89.145 6.411 Provision for seniority incentives ...... — (71.158) 49.522 14.593 Provision for unused vacation ...... 387.595 (425.012) 556.812 23.306 451.346 (543.526) 695.479 44.310 8.017.336 2.023.222 6.544.061 1.743.030

The Group classifies the general manager, assistant general managers, and board of directors and audit committee members as executive management. Key management emoluments consist of salary and travel payments; employment termination benefits, seniority incentive bonus and vacation pays made to the key management and their provisions for the period in which they incurred

F-73 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

14. Provisions, contingent assets and liabilities

September 30, December 31, 2016 2015 a) Short-term provisions: Provision for legal cases ...... 1.088.140 942.746 1.088.140 942.746

The details of guarantees received as of September 30, 2016 and December 31, 2015 are as follows:

September 30, December 31, 2016 2015 a) Guarantees received: Bank guarantees within the context of DOCS ...... 526.099.864 599.275.848 Bank letter of guarantees obtained from customers ...... 258.676.919 310.208.811 Guarantee letters obtained from suppliers ...... 168.528.345 167.392.899 Import letter of credit ...... 75.308.048 37.277.336 Receivable insurance ...... 71.297.217 76.290.860 Mortgages ...... 2.000.000 2.000.000 Bill of exchange received ...... — 1.000.000 Cheque received ...... — 801.072 1.101.910.393 1.194.246.826

September 30, December 31, 2016 2015 b) Guarantees given: Letters of guarantees given ...... 678.075.217 438.767.502 678.075.217 438.767.502

F-74 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

14. Provisions, contingent assets and liabilities (Continued) Collaterals, Pledges and Mortgages (‘‘CPM’’) provided by the Group:

September 30, December 31, 2016 2015 A. Total amount of CPMs given for the Company’s own legal personality ...... 678.075.217 438.767.502 B. Total amount of CPMs given on behalf of fully consolidated companies ...... 588.953.936 571.595.334 C. Total amount of CPMs given for continuation of its economic activities on behalf of third parties ...... 149.795.000 120.665.400 C. Total amount of CPMs given for continuation of D. Total amount of other CPMs i. Total amount of CPMs given on behalf of the majority shareholder ...... — — ii. Total amount of CPMs given to on behalf of other group companies which are not in scope of B and C...... — — iii. Total amount of CPMs given on behalf of third parties which are not in scope of C...... — — 1.416.824.153 1.131.028.236 Total equity ratio of the group of other CPMs given by the Group . %0 %0

(*) Petlim Limancilik Ticaret A.¸S., which the group owns its %70 shares, has signed a project finance credit agreement with AKBANK T.A.¸S. on May 25, 2015 at an amount of USD 212 million which has 13 years maturity with the first 3 years no repayment period, for the external funding of the container port project. Petkim has guaranteed the loan repayment and also amounting to 105 M TL which is its shares in Petlim Limancilik Ticaret A.¸S has been pledged. There are three covenant conditions of the loan agreements, the one on the construction period (credit / Total Shareholders’ Equity Ratio does not exceed the 75:25 ratio), and two covering after the period of project activities. On November 20, 2015, Petlim Limancilik Ticaret A.¸S. has given 1st degree mortgage amounting to USD 350 million in favor of Akbank T.A.¸S. on its land, which has been sold to Petlim by Petkim amounting to TL 5.650.000. It would be appropriate to take into account the amount of the land value instead of mortgage amount The details of guarantees given as of September 30, 2016 and December 31, 2015 are as follows.

September 30, December 31, 2016 2015 Mortgages given to banks ...... 738.748.936 692.260.734 Securities given to banks ...... 510.207.737 277.805.781 Customs offices ...... 47.007.203 46.664.800 Turkiye¨ Elektrik Ticaret ve Taahhut¨ A.¸S...... 9.744.571 8.478.465 EMRA...... 5.600.000 5.600.000 Other ...... 105.515.706 100.218.456 1.416.824.153 1.131.028.236

Allocation of the letters of guarantee given in terms of currency type as of September 30, 2016 and December 31, 2015 are as follows:

September 30, 2016 December 31, 2015 Original Original amount TL amount TL USD...... 400.331.647 1.199.353.581 318.093.104 924.887.510 EUR ...... 50.000.000 168.040.000 50.627.045 160.872.500 TL...... — 49.430.572 — 45.268.226 1.416.824.153 1.131.028.236

F-75 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

14. Provisions, contingent assets and liabilities (Continued) Annual income plans and amounts (not discounted) regarding to the operational lease income, which are not recognized in the consolidated interim financial statements of the Group as of September 30, 2016 as follows:

September 30, December 31, Operational leases income 2016 2015 0–1 year ...... 10.822.591 14.261.363 1–5 years ...... 60.685.027 60.206.567 5 years and more ...... 475.192.434 493.081.329 Total ...... 546.700.052 567.549.259

Annual income plans and amounts (not discounted) regarding to the operational lease expense, which are not recognized in the consolidated interim financial statements of the Group as of September 30, 2016 as follows:

Operational leases expense 2016 2015 0–1 year ...... 12.878.087 12.878.087 1–5 years ...... 7.512.217 17.170.782 Total ...... 20.390.304 30.048.869

The group has signed an operational leasing contract for naphtha tank to be effective between December 1, 2014 and April 30, 2018 at the date of December 30, 2014. STAR has rented out tanks, owned by it, and discounted amounting TL 44.000.129 + VAT for over entire duration within the context of that contract. STAR has obtained a valuation report regarding usage right value of tank within period of rent from an independent firm so as to determine fair value of related rent process. Net book value of the net rent income from tanks between December 1, 2014 and April 30, 2018, is in the range of TL 40.0000.000 TL 45.000.000. The Group has signed a construction contract with a real estate company for the construction of new head office building which is planned to be built on Petkim’s land and the construction of the head office building has begun accordingly. An advance payment approximately at an amount of USD 11 million was made related to cost of additional areas occurring as a result of expansion as m2 because of amendments made in line with requests of Petkim in construction plan in scope of this contract in 2016. The advances given to the real estate company above mentioned are included in Note 6 Non-current prepaid expenses amounting to TL 31.807.000.

15. Financial instruments and financial risk management a) Market risk: i) Foreign exchange risk: The Group is exposed to currency risk on assets or liabilities denominated in foreign currencies. Management has set up a policy to balance and manage their foreign exchange risk. Existing risks are followed in meetings held by the Group’s Audit Committee and Board of Directors and foreign currencies, closely in terms of the Group’s foreign exchange position. Although the raw materials, which comprise the significant portion of production and import volume, are foreign exchange-denominated cost items, the determination of sales prices by the Group in foreign exchange terms is a factor that decreases the foreign exchange risk in the cash flows

F-76 ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— 372.767 128.204 — — 986.794 — 310.547 — 48.766.889 16.772.21448.766.889 16.772.214 — — — — (25.490.797) (128.116.650) 109.207.602 1.023 192.210.599 61.512.953 4.203.026 — 276.604.032 59.998.638 32.147.530 — 914.267.416 247.484.680 61.266.667 — 914.267.416 247.484.680 61.266.667 — 257.067.840 — 80.900.000 — 257.067.840 — 80.900.000 — 257.067.840 — 80.900.000 — (282.558.637) (128.116.650) 28.307.602 1.023 1.857.117.653 534.676.2831.032.825.508 353.667.096 95.194.421 1.023 1.417.126 — 1.808.350.764 517.904.069 95.194.421 1.023 1.531.746.732 457.905.431 63.046.891 1.023 1.225.408.874 415.308.253 5.620.152 — 2.139.676.290 662.792.933 66.886.819 — September 30 2016 December 31 2015 ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— 123.019 — 36.604 — TL TL Sirketi and Its Subsidiaries 23.525.600 — 7.000.000 — 23.525.600 — 7.000.000 — 23.525.600 — 7.000.000 — 704.218.073410.270.406 231.501.568 130.865.730 3.079.266 5.418.284 9.851.838 — 960.712.860 299.304.668310.891.176 19.050.754 103.772.214310.891.176 77 103.772.214 — — — — 674.779.404 221.679.419 3.168.829 77 285.933.456 77.625.249 15.881.925 — 916.471.691 243.243.176 55.861.538 — 916.471.691 243.243.176 55.861.538 — Equivalent USD EUR Other equivalent USD EUR Other (735.830.534) (202.533.592) (38.308.334) (9.851.761) (759.356.134) (202.533.592) (45.308.334) (9.851.761) 1.271.604.036 403.076.882 19.050.754 77 1.114.488.479 362.367.298 8.497.550 9.851.838 2.030.960.170 605.610.474 64.359.088 9.851.838 ...... for the nine month period ended September 30, 2016 (Currency—Turkish Lira (TL) unless otherwise indicated) (Currency—Turkish Petkim Petrokimya Holding Anonim Petrokimya Petkim ¸ ...... Notes to the interim consolidated financial statements (Continued) ...... (=1+2a+4+5a-9-10-11a-13-14-15a) 5b. Non-monetary financial assets 6. Other assets (3+7 8. Total payables 9. Trade 10. Financial liabilities 4. Trade receivables 4. Trade 5a. Monetary financial assets 7. Non-current assets (4+5+6)) 11a. Monetary other liabilities 11b. Non-monetary other liabilities 12. Short-term liabilities (9+10+11) 2b. Non-monetary financial assets 3. Current assets (1+2) payables 13. Trade Foreign currency position Foreign receivables 1. Trade 14. Financial liabilities (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish) 15. Financial instruments and financial risk management (Continued) 2a. Monetary financial assets (Cash, bank accounts included) 15a. Monetary other liabilities 15b. Non-monetary other liabilities 16. Long-term liabilities (13+14+15a+15b) 17. Total liabilities (12+16) 17. Total 18. Net (liability)/asset position of off-balance sheet Derivative instruments (18a-18b) 18. Net (liability)/asset position of off-balance 18a. Amount of asset nature off-balance sheet derivative Instruments 18a. Amount of asset nature off-balance 18b. Amount of liability nature off-balance sheet derivative Instruments 18b. Amount of liability nature off-balance 19. Net foreign (liability) / asset position (8-17+18) 20. Net foreign currency (liability) / asset position of monetary items (IFRS 7.B23) fair value of financial instruments used for foreign currency hedging 21. Total 22. Hedged amount for current assets 23. Hedged amount for current liabilities

F-77 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

15. Financial instruments and financial risk management (Continued) Table of sensitivity analysis for foreign currency risk

Profit/(Loss) Equity Appreciation of Depreciation of Appreciation of Depreciation of foreign foreign foreign foreign September 30, 2016 currency currency currency currency Change of USD by 10% against TL: 1—Asset/Liability denominated in USD—net ..... (60.677.039) 60.677.039 — — 2—The part hedged for USD risk () ...... ———— 3—USD effect—net (1+2) ...... (60.677.039) 60.677.039 — — Change of EUR by 10% against TL: 4—Asset/Liability denominated in EUR—net ..... (15.227.225) 15.227.225 — — 5—The part hedged for EUR risk () ...... 2.352.560 (2.352.560) — — 6—EUR effect—net (4+5) ...... (12.874.665) 12.874.665 — — Change of other currencies by 10% against TL: 7—Assets/Liabilities denominated in other foreign currencies—net ...... (31.349) 31.349 — — 8—The part hedged for other foreign currency risk ()...... ———— 9—Other foreign currency effect—net (7+8) .... (31.349) 31.349 — — Total (3+6+9) ...... (73.583.053) 73.583.053 — —

Profit/(Loss) Equity Appreciation of Depreciation of Appreciation of Depreciation of foreign foreign foreign foreign December 31, 2015 currency currency currency currency Change of USD by 10% against TL: 1—Asset/Liability denominated in USD—net ...... (37.251.197) 37.251.197 — — 2—The part hedged for USD risk ()...... — — — — 3—USD effect—net (1+2) ...... (37.251.197) 37.251.197 — — Change of EUR by 10% against TL: 4—Asset/Liability denominated in EUR—net ...... 8.995.024 (8.995.024) — — 5—The part hedged for EUR risk ()...... 25.706.784 (25.706.784) — — 6—EUR effect—net (4+5) ...... 34.701.808 (34.701.808) — — Change of other currencies by 10% against TL 7—Assets/Liabilities denominated in other foreign currencies—net ...... 309 (309) — — 8—The part hedged for other foreign currency risk () ...... — — — — 9—Other foreign currency effect—net (7+8) ..... 309 (309) — — Total (3+6+9) ...... (2.549.080) 2.549.080 — —

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

F-78 (Convenience translation of interim condensed consolidated financial statements into English originally issued in Turkish)

16. Financial instruments (fair value and financial risk management disclosures) (Continued) The methods and assumptions stated below are used in the estimation of the fair values of the financial instruments of which fair values are measurable:

Financial assets The fair values of balances denominated in foreign currencies, which are translated at year-end exchange rates, are considered to approximate to their carrying values. Cash and cash equivalents are carried at their fair values. The fair values of trade receivables and due from related parties are considered to approximate their respective carrying values due to their short-term nature. The cost of financial assets available for sale investments less, if any, impairments are considered to approximate their fair values.

Financial liabilities Trade payables, payables to related parties and other monetary liabilities are estimated to be presented with their discounted carrying amounts and they are considered to approximate to their fair values and the fair values of balances denominated in foreign currencies, which are translated at year-end exchange rates, are considered to approximate carrying values. Fair values of short-term bank borrowings and other financial liabilities are assumed to approximate their carrying values due to their short term. Long-term floating rate bank loans’ interest rates are updated according to the changing market conditions, it is assumed to represent the value of the fair value is the carrying value of these loans. Long-term fixed-rate loan, when evaluated with a fixed interest rate as of the balance sheet date, it is observed its fair value is close to the carrying value.

Fair value estimation The Group’s financials classification of fair value of asset and liabilities were as follows: Level 1: Depend on registered price (unadjusted) in the active market; Level 2: Depend on data that are explicitly (via price in active market) or implicitly (derivate from price in active market) observable. Level 3: Not depend on observable market data September 30, 2016 and December 31, 2015, fair value and book value of financial statement were as follows

September 30, 2016 Level 1 Level 2 Level 3 Total Derivative instruments ...... — 8.549.840 — 8.549.840 Total asset ...... — 8.549.840 — 8.549.840 Derivative instruments ...... — 27.883.374 — 27.883.374 Total liabilities ...... — 27.883.374 — 27.883.374

December 31, 2015 Level 1 Level 2 Level 3 Total Derivative instruments ...... — 1.646.432 — 1.646.432 Total asset ...... — 1.646.432 — 1.646.432 Derivative instruments ...... — 11.008.960 — 11.008.960 Total liabilities ...... — 11.008.960 — 11.008.960

17. Subsequent events None.

F-79 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

Petkim Petrokimya Holding Anonim Sirketi¸ and its Subsidiaries Consolidated financial statements for the period between January 1–December 31, 2016 and independent auditors’ report

F-80 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

Petkim Petrokimya Holding Anonim Sirketi¸ and Its Subsidiaries

Table of contents Page Independent auditors’ report ...... F-82–F-83 Consolidated statement of financial position ...... F-84–F-85 Consolidated statement of profit or loss and other comprehensive income ...... F-86 Consolidated statement of changes in equity ...... F-87 Consolidated statement of cash flows ...... F-88 Notes to the consolidated financial statements ...... F-89–F-156

F-81 (Convenience translation of the independent auditors’ report into English originally issued in Turkish)

INDEPENDENT AUDITORS’ REPORT To the Board of Directories of Petkim Petrokimya Holding Anonim Sirketi;¸

The report on financial statements We have audited the accompanying consolidated financial statements of financial position of Petkim Petrokimya Holding Anonim Sirketi¸ (‘‘Petkim’’ or ‘‘the Company’’) and its subsidiaries (together referred as ‘‘the Group’’) which comprise the consolidated statement of financial position as at December 31, 2016 and the consolidated statement of profit or loss and comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and explanatory notes.

Management’s responsibility for the consolidated financial statements The Group management is responsible for the preparation and fair presentation of consolidated financial statements in accordance with the Turkish Accounting Standards (‘‘TAS’’) and for such internal controls as management determines is necessary to enable the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to error or fraud.

Independent auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Our audit was conducted in accordance with Standards on Auditing as issued by the Capital Markets Board of Turkey and Auditing Standards which are part of the Turkish Auditing Standards as standards on auditing issued by Public Oversight Accounting and Auditing Standards Authority (‘‘POA’’). Those standards require that ethical requirements are complied with and that the independent audit is planned and performed to obtain reasonable assurance whether the financial statements are free from material misstatement. Independent audit involves performing independent audit procedures to obtain independent audit evidence about the amounts and disclosures in the financial statements. The independent audit procedures selected depend on our professional judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to error and/or fraud. In making those risk assessments; the Company’s internal control system is taken into consideration. Our purpose, however, is not to express an opinion on the effectiveness of internal control system, but to design independent audit procedures that are appropriate for the circumstances in order to identify the relation between the financial statements prepared by the Group and its internal control system. Our independent audit includes also evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Company’s management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained during our audit is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Petkim Petrokimya Holding A.¸S. and its subsidiaries as at December 31, 2016 and their financial performance and cash flows for the year then ended in accordance with the Turkish Accounting Standards.

F-82 2) In accordance with paragraph 4 of Article 402 of the TCC, no significant matter has come to our attention that causes us to believe that the Company’s bookkeeping activities for the period 1 January—31 December 2016 and financial statements are not in compliance with the code and provisions of the Company’s articles of association in relation to financial reporting.. 3) In accordance with paragraph 4 of Article 402 of the TCC, the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit Guney¨ Bagımsız˘ Denetim ve Serbest Muhasebeci Mali Mu¸¨savirlik Anonim Sirketi¸ A member firm of Ernst & Young Global Limited

Cem U¸carlar, SMMM Partner March 2, 2017 ˙Istanbul, Turkey

F-83 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

Petkim Petrokimya Holding A.¸S. and its subsidiaries Consolidated statement of financial position as at December 31, 2016 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

Current period Previous period Audited Audited December 31, December 31, Note 2016 2015 Assets Current assets Cash and cash equivalents ...... 4 1.267.188.405 1.341.536.749 Financial investments ...... 5 — 160.452.259 Trade receivables —Trade receivables from third parties ...... 7 674.471.489 551.425.057 Other receivables —Other receivables from related parties ...... 32 14.321.046 255.049.233 —Other receivables from third parties ...... 8 16.471.360 6.510.328 Derivative financial assets ...... 9 7.466.471 1.646.432 Inventories ...... 10 604.333.833 363.508.864 Prepaid expenses —Prepaid expenses to third parties ...... 19 19.037.704 39.469.618 Prepaid expenses to related parties ...... 32 12.878.087 12.878.087 Other current asset ...... 21 43.777.394 35.096.475 Total current assets ...... 2.659.945.789 2.767.573.102 Non-current assets: Financial investments ...... 5 8.910.000 8.910.000 Other receivables —Other receivables from related parties ...... 32 423.305.661 105.206.024 Investment property ...... 11 928.881.678 1.469.935 Property, plant and equipment ...... 12 1.903.849.406 2.276.634.074 Intangible assets ...... 13 22.398.670 18.327.669 Prepaid expenses —Prepaid expenses to third parties ...... 19 59.747.547 92.704.917 —Prepaid expenses to related parties ...... 32 4.292.696 17.170.782 Deferred tax assets ...... 30 244.963.987 133.346.497 Other non-current assets ...... 21 12.232.354 39.322.328 Total non-current assets ...... 3.608.581.999 2.693.092.226 Total assets ...... 6.268.527.788 5.460.665.328

F-84 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

Petkim Petrokimya Holding A.¸S. and its subsidiaries Consolidated statement of financial position (Continued) as at December 31, 2016 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

Current period Previous period Audited Audited December 31, December 31, Note 2016 2015 Liabilities Current liabilities Short-term financial liabilities ...... 6 461.698.893 319.638.074 Current portion of long-term financial liabilities ...... 6 55.495.727 41.912.519 Derivative financial liabilities ...... 9 432.006 11.008.960 Trade payables —Trade payables to related parties ...... 32 29.584.837 31.306.140 —Trade payables to third parties ...... 7 1.085.278.519 1.105.668.986 Short-term liabilities for employee benefits ...... 20 25.429.492 12.842.787 Other payables —Other payables to related parties ...... 32 26.450.401 1.750.437 —Other payables to third parties ...... 8 12.283.546 4.017.208 Deferred income —Deferred income from related parties ...... 32 4.198.100 4.168.083 —Deferred income from third parties ...... 18 34.946.751 21.925.077 Short term provisions —Provision for employee benefits ...... 17 2.617.402 13.027.856 —Other short-term provisions ...... 15 1.383.579 942.746 Current tax liabilities ...... 30 48.864.818 9.684.055 Other current liabilities ...... 21 7.976.519 6.495.411 Total current liabilities ...... 1.796.640.590 1.584.388.339 Non-current liabilities Long-term financial liabilities ...... 6 1.172.474.368 914.267.416 Derivative financial liabilities ...... 9 9.027.379 — Deferred income —Deferred income from related parties ...... 32 8.829.511 12.705.027 —Deferred income from third parties ...... 18 120.807.592 54.794.114 Long term provisions —Provision for employee benefits ...... 17 91.308.322 89.126.935 Total non-current liabilities ...... 1.402.447.172 1.070.893.492 Total liabilities ...... 3.199.087.762 2.655.281.831 Equity Share capital ...... 22 1.500.000.000 1.500.000.000 Adjustment to share capital ...... 22 238.988.496 238.988.496 Share premium ...... 22 214.187.872 214.187.872 Other comprehensive income / (expense) not to be reclassified to profit or loss —Remeasurement gain/(loss) arising from defined benefit plan ...... (24.694.546) (23.668.037) Other comprehensive income / (expense) to be reclassified to profit or loss —Cash flow hedge gain/(loss) reserve ...... 572.240 (7.490.023) Restricted reserves ...... 104.957.638 36.548.777 Retained earnings ...... 241.912.168 156.442.236 Net profit for the year ...... 725.786.278 626.378.793 Equity holders of the parent ...... 3.001.710.146 2.741.388.114 Non-controlling interest ...... 67.729.880 63.995.383 Total equity ...... 3.069.440.026 2.805.383.497 Total liabilities and equity ...... 6.268.527.788 5.460.665.328

F-85 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

Petkim Petrokimya Holding Anonim Sirketi¸ and its subsidiaries Consolidated statement of profit or loss and comprehensive income for the year ended December 31, 2016 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

Current period Previous period Audited Audited January 1– January 1– December 31, December 31, Profit or loss section Note 2016 2015 Revenue ...... 23 4.532.590.622 4.532.635.969 Cost of sales ...... 23 (3.574.771.797) (3.814.365.797) Gross profit ...... 957.818.825 718.270.172 General administrative expenses ...... 24 (138.143.303) (117.751.852) Selling, marketing and distribution expenses ...... 24 (42.276.221) (32.297.691) Research and development expenses ...... 24 (12.782.619) (11.742.738) Other operating income ...... 26 204.162.679 128.100.309 Other operating expense ...... 26 (240.044.758) (179.627.572) Operating profit ...... 728.734.603 504.950.628 Income from investment activities ...... 27 17.322.323 10.981.956 Expense from investment activities ...... 27 (4.212.586) — Operating profit before financial income / (expense) ... 741.844.340 515.932.584 Financial income ...... 28 379.028.470 421.668.110 Financial expenses ...... 29 (338.989.566) (363.773.458) Profit before taxation ...... 781.883.244 573.827.236 Tax income / (expenses) Current year tax expense ...... 30 (163.030.686) (19.213.253) Deferred tax income / (expense) ...... 30 112.834.788 84.594.675 Net profit for the period ...... 731.687.346 639.208.658 Distribution of net profit for the period: Non-controlling interest ...... 5.901.068 12.829.865 Equity holders of the parent ...... 725.786.278 626.378.793 Earnings per share ...... 31 0,484 0,418 Other comprehensive income / (loss) section Not to be reclassified to profit or loss —Remeasurement gain/(loss) arising from defined benefit plan ...... 17 (1.283.136) (10.549.840) —Deferred tax effect of remeasurement gain/(loss) arising from defined benefit plan ...... 30 256.627 2.109.968 To be reclassified to profit or loss —Cash flow hedging gain / (loss) ...... 7.369.615 (10.807.695) —Deferred tax effect of cash flow hedging gains / (losses) 30 (1.473.923) 2.161.539 Other comprehensive income/(expense) (after tax) .... 4.869.183 (17.086.028) Total comprehensive income ...... 736.556.529 622.122.630 Distribution of total comprehensive income: Non-controlling interest ...... 3.734.497 12.829.865 Equity holders of the parent ...... 732.822.032 609.292.765

F-86 626.378.793 626.378.793 12.829.865 639.208.658 Retained earnings 28.192.077 (21.739.162) (6.452.915) — — — S. and its subsidiaries Other Other (8.439.872) (8.646.156) — — 626.378.793 609.292.765 12.829.865 622.122.630 income / income / not to be to be (expense) (expense) profit or loss profit or loss reclassified to reclassified to comprehensive comprehensive Remeasurement Cash flow for the year ended December 31, 2016 Consolidated statement of changes in equity Petkim Petrokimya Holding A.¸ Petrokimya Petkim (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish Adjustment gain/(loss) arising hedge Equity Non- —— — — — — (1.026.509) — 8.062.263 — — 68.408.861 557.969.932 (626.378.793) — 725.786.278 732.822.032 — 3.734.497 736.556.529 — — —— — — — — (1.026.509) — 8.062.263 — — — — — — 725.786.278 7.035.754 725.786.278 (2.166.571) 5.901.068 4.869.183 731.687.346 — — — — — — (472.500.000) — (472.500.000) — (472.500.000) Share to share Share from defined gain/(loss) Restricted Retained Net profit holders controlling Total capital capital premium benefit plan reserve reserves Earnings for the year of the parent Interest equity 500.000.000 (247.863.787) (252.136.213) — — — — — — — — 1.000.000.000 486.852.283 466.324.085 (15.228.165) 1.156.133 8.356.700 178.181.398 6.452.915 2.132.095.349 51.165.518 2.183.260.867 1.500.000.000 238.988.496 214.187.872 (23.668.037) (7.490.023) 36.548.777 156.442.236 626.378.793 2.741.388.114 63.995.383 2.805.383.497 1.500.000.000 238.988.496 214.187.872 (23.668.037) (7.490.023) 36.548.777 156.442.236 626.378.793 2.741.388.114 63.995.383 2.805.383.497 1.500.000.000 238.988.496 214.187.872 (24.694.546) 572.240 104.957.638 241.912.168 725.786.278 3.001.710.146 67.729.880 3.069.440.026 ..... — — — ...... — — — — — — — ...... — — — — — ...... Net profit for the period (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36) (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See January 1, 2015 Transfers comprehensive income Total Other comprehensive income / (loss)Capital increase December 31, 2015 January 1, 2016 — — — (8.439.872) (8.646.156) — — — (17.086.028) — (17.086.028) Transfers Total comprehensive income Total Net profit for the period Other comprehensive income / (loss) Dividends paid (Note 22) December 31, 2016

F-87 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

Petkim Petrokimya Holding A.¸S. and Its Subsidiaries Consolidated statement of cash flows for the year ended December 31, 2016 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

Previous Current period period Audited Audited January 1– January 1– December 31, December 31, Note 2016 2015 A. Cash flows from operating activities: ...... 461.405.154 860.308.289 Net profit for the period (I) ...... 731.687.346 639.208.658

Adjustments to reconcile net profit (II) ...... 167.637.955 50.219.874 Adjustments related with depreciation and amortization expenses ...... 25,27 116.598.304 108.579.612 Provision for impairments —Provision for impairment of inventories ...... 23 (11.047.336) (15.333.603) —Provision for impairment of property, plant and equipment ...... 27 2.667.127 — Adjustments related with provisions —Adjustments related with employee benefits ...... 17 16.255.132 21.649.459 —Provision / (reversal) for legal cases ...... 15 492.319 10.537 —Other provision / (reversal) ...... 26 34.216.040 1.341.985 Adjustments related with interest (income) and expenses —Interest income ...... 28 (54.088.875) (33.403.052) —Interest expense ...... 29 19.120.786 21.268.003 —Deferred interest expense due to on credit purchases ...... (370.037) 2.060.731 —Unearned interest income due to on credit sales ...... 26 9.094.381 8.388.176 Adjustments related with unrealized currency translation differences ...... (14.709.088) 1.213.098 Adjustments related with tax (income) / expense ...... 30 50.195.898 (65.381.422) Adjustments related with (gain) / loss on sale of property, plant and equipment .... 27 (566.058) (13.030) Adjustments related with incentive income related to government grants ...... 8 (220.638) (160.620)

Changes in working capital ...... (288.251.403) 197.036.440 Adjustments related with (increase) / decrease in trade receivables ...... (118.577.973) (30.491.395) Adjustments related with (increase) / decrease in other receivables ...... (17.849.840) (301.896.906) Inventories ...... (219.828.939) 88.951.019 (Increase) / decrease in prepaid expenses ...... 52.707.537 (8.487.649) Adjustments related with increase / (decrease) in trade payables ...... (106.925.957) 461.536.866 Adjustments related with increase / (decrease) in other payables ...... 34.447.411 (8.059.906) Liabilities for employee benefits ...... 12.586.705 (14.660.988) Increase / (decrease) in deferred income ...... 75.189.653 10.145.399

Cash flows provided by operating activities (I+II+III) ...... 611.073.898 886.464.972 Employee termination benefits paid ...... 17 (25.767.335) (12.151.867) Taxes refunded (paid) ...... 30 (123.849.923) (9.529.198) Other cash inflows / (outflows) ...... (51.486) (4.475.618) B. Cash flows from investing activities ...... (404.617.342) (734.791.412) Purchase of property, plant and equipment and intangible assets ...... 12 (567.261.634) (519.232.239) Proceeds from sales of property, plant and equipment and intangible assets ..... 1.129.142 201.299 Other cash advances given and liabilities ...... 1.062.891 (55.308.213) Other cash inflows / (outflows) ...... 5 160.452.259 (160.452.259) C. Cash flow from financing activities ...... (310.285.064) 319.453.365 Proceeds from borrowings ...... 617.137.859 1.244.687.445 Repayment of borrowings ...... (443.003.374) (940.756.896) Interest received ...... 53.187.872 29.877.952 Interest payments ...... (65.107.421) (14.355.136) Dividend payments ...... 22 (472.500.000) — D. Net increase/ (decrease) in cash and cash equivalents before currency translation differences (A+B+C) ...... (253.497.252) 444.970.242 E. Currency translation differences effect related to cash and cash equivalents . 179.148.908 194.408.379 Net (decrease) / increase in cash and cash equivalents (D+E) ...... (74.348.344) 639.378.621 Cash and cash equivalents at the beginning of the period ...... 4 1.341.536.749 702.158.128 Cash and cash equivalents at the end of the period ...... 4 1.267.188.405 1.341.536.749

F-88 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

Petkim Petrokimya Holding Anonim Sirketi¸ and its Subsidiaries Notes to the consolidated financial statements for the year ended December 31, 2016 (Currency—Turkish Lira (TL) unless otherwise indicated)

1. Organization and nature of operations Petkim Petrokimya Holding A.¸S. (‘‘Petkim’’ or ‘‘the Company’’) was established on April 3, 1965. The Company started its investment activities in ˙Izmit-Yarımca and initially established the Ethylene, Polyethylene, Chlorine Alkali, VCM and PVC plants in 1970 in the Yarımca Complex. During the course of the Company, construction of other plants continued. In 1985, Aliaga˘ Petrochemical Complex was established. The Company has 14 main plants, 1 bag production unit and 1 solid waste incineration facility. The Company operates its facilities in the petrochemical sector in Turkey. The Company is mainly engaged in the following fields: • To establish and to operate factories, plants either at home or abroad in relation to the petrochemistry, chemistry and such other industrial sectors, • To process and to treat the raw materials and supplementary/auxiliary substances, materials and chemicals necessary for the production of petrochemicals, chemicals and such other materials/ substances by procuring such materials/substances either from home or abroad, to produce such materials/substances, and to carry out and to perform the domestic and international trading thereof, • In accordance with the Law 4628 on the Electricity Market, and the related legislation thereto, to establish power plants as per the auto-producer’s license in order to meet its own need for electricity and heat/thermal energy at first, to generate electricity and heat/thermal energy, to sell the generated electricity and heat/thermal energy and/or the capacity to other legal persons holding the requisite licenses or to the eligible consumers as per the mentioned legislation in case of any surplus production, and to carry out and to perform the activities in relation to the obtainment of any and all kinds of equipment and fuel in relation to the electricity power/generating plant provided that such activities are not of commercial nature • To carry out and to perform the activities in relation to the importation or purchase from domestic resources, of natural gas on wholesale and retail basis, utilization, storage of natural gas imported and purchased, in accordance with the legislation thereto, • To carry out and to perform pilotage, trailer and mooring activities, to operate ports, cruise ports, passenger terminals, seaports, docks, harbors, berths, liquid fuel/liquefied petroleum pipeline and buoy systems, and such other similar onshore facilities/plants, and to be involved in port management activities, to offer port, agency, provision, bunkering services, and to provide that such services are offered by 3rd parties either by way of leasing or such other methods when required, and to purchase, to have built and to lease, to sell the necessary vessels/naval platforms, and to establish either domestic or international partnerships in relation thereto, to operate warehouses, and to offer warehousing services, • To support and to donate to the foundations, associations, educational institutions, which have been established for social purposes, and to such other persons, institutions and organizations in accordance with the principles prescribed by the Capital Market Board. The ‘‘Share Sales Agreement’’, with respect to the sales of 51% of shares of Petkim Petrokimya Holding A.¸S. (which has been in the privatization process for several years) to SOCAR & Turcas Petrokimya A.¸S. (‘‘STPA¸S’’), 44% of which previously owned by the Republic of Turkey Ministry Privatization Administration (‘‘Administration’’) and 7% State Pension Fund (‘‘Emekli Sandıgı˘ Genel Mud¨ url¨ u¨g˘u’’)¨ transferred to Republic of Turkey Social Security Institution, was signed on May 30, 2008. On June 22, 2012, the public shares amounting to 10,32% of the Company capital which belonged to Prime Ministry Privatization Administration was sold to SOCAR ˙Izmir Petrokimya A.¸S (‘‘S˙IPA¸S’’) which is the subsidiary of the Company’s main shareholder, SOCAR Turkey Enerji A.¸S. (‘‘STEA¸S’’) SOCAR Turkey Enerji A.¸S. and SOCAR ˙Izmir Petrokimya A.¸S., which is the %100 subsidiary of SOCAR Turkey Enerji A.¸S and owns 10,32% shares of the Group, have merged as of September 22, 2014.

F-89 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

Petkim Petrokimya Holding A.¸S. and its subsidiaries Notes to the consolidated financial statements (Continued) for the year ended December 31, 2016 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

1. Organization and nature of operations (Continued) As of December 31, 2016 and December 31, 2015 the ultimate shareholder of the Company is State Oil Company of Azerbaijan Republic (‘‘SOCAR’’) main shareholder is STPA¸S. The Group is registered at the Capital Markets Board (‘‘CMB’’) and its shares have been quoted in Istanbul Stock Exchange (‘‘ISE’’) since July 9, 1990.

Subsidiaries The Company has participated to Petlim Limancılık Ticaret A.¸S. (‘‘Petlim’’) with the capital of TL 100.000 and the share of 99,99%, according to the decision of Board of Director dated April 28, 2010 and numbered 64/132, to implement port activities. With the general assembly resolution dated, November 13, 2012, the share capital of Petlim has been increased to TL 8.000.000. With the general assembly resolution dated, September 30, 2013, the share capital of Petkim has been increased from TL 8.000.000 to TL 83.000.000 and the share of 100% transferred to Petkim. With the general assembly resolution dated, November 17, 2014, the share capital of Petlim has been increased from TL 83.000.000 to TL 150.000.000. The company has founded a company with the name of the Petkim Specialities Muhendislik¨ Plastikleri Sanayi ve Ticaret A.¸S. with the capital of TL 100.000 and the share of 100%, to carry out its production activities in high value-added advanced engineering plastics (masterbach, compound) and high-tech chemicals on October 28, 2015. Petkim and its subsidiaries are referred together as ‘‘the Group’’. 45 million shares, representing 30% of share capital of Petlim Limancılık Ticaret A.¸S., which is subsidiary of the Company, has been purchased by Goldman Sachs International (‘‘GSI’’, together with its subsidiaries ‘‘GS’’) as of December 18, 2014 in exchange for 250 million USD Dollars. At the same date, in the consequence of put option contract signed by STEA¸S with GSI, it has undertaken guarantor liability regarding of liabilities of Petkim due to share transfer agreement, if required and in the event of contract conditions the right of selling shares of Petlim by GS˙I to STEA¸S has been originated (‘‘Put option Contract’’). Within the mentioned put option contract, no later than 7 years following the signed share transfer agreement, it has been agreed on public offering of shares of Petlim (public offering), in accordance with those regulations agreed by the parties and in consequence of option relation, loss of GSI shall be compensated by STEA¸S. The number of personnel in the Group is 2.395 as of December 31, 2016 and the number of average personnel in the Group is 2.434 (December 31, 2015—2.471 and on average 2.430).

December 31, December 31, 2016 2015 Union(*) ...... 1.857 1.918 Non-union(**) ...... 538 553 2.395 2.471

PK. 12, 35800 Aliaga,˘ ˙Izmir

F-90 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements 2.1 Basis of presentation The consolidated financial statements and disclosures have been prepared in accordance with the communique´ numbered II-14.1 ‘‘Communique´ on the Principles of Financial Reporting in Capital Markets’’ (‘‘the Communique’’)´ announced by the Capital Markets Board (‘‘CMB’’) (hereinafter will be referred to as ‘‘the CMB Reporting Standards’’) on June 13, 2013 which is published on Official Gazette numbered 28676. Companies should apply Turkish Accounting Standards / Turkish Financial Reporting Standards and interpretations regarding these standards as adopted by Public Oversight Accounting and Auditing Standards Authority of Turkey (‘‘POA’’). In accordance with article 5th of the CMB Reporting Standards, companies should apply Turkish Accounting Standards/Turkish Financial Reporting Standards and its interpretations issued by the Public Oversight Accounting and Auditing Standards Authority of Turkey (‘‘POA’’). The financial statements are prepared on cost basis, except the derivative financial instruments and tangible assets used for silicon steel and iron ore carried on fair value.

Functional and reporting currency The functional currency of the Company and its subsidiaries’ Petlim and Petkim Specialities Muhendislik¨ Plastikleri Sanayi ve Ticaret A.¸S. are TRY

Going concern The Group prepared its consolidated financial statements under going concern assumption.

Approval of the consolidated financial statements Consolidated financial statements were approved to be issued by the Board of Directors March 2, 2017 and signed by Mr. Anar Mammadov, General Manager and Mr. Rıza Bozoklar, Vice President of Finance, on behalf of the Board of Directors. General Assembly and relevant regulators has the right to modify legal financial statements and the consolidated financial statements.

2.2 New and amendments in Financial Reporting Standards The new standards, amendments and interpretations The accounting policies adopted in preparation of the consolidated financial statements as at 31 December 2016 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS and TFRIC interpretations effective as of 1 January 2016. The effects of these standards and interpretations on the Group’s financial position and performance have been disclosed in the related paragraphs. The new standards, amendments and interpretations which are effective as at 1 January 2016 are as follows: • TFRS 11 Acquisition of an Interest in a Joint Operation (Amendment) TFRS 11 is amended to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. This amendment requires the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in TFRS 3 Business Combinations, to apply all of the principles on business combinations accounting in TFRS 3 and other TFRSs except for those principles that conflict with the guidance in this TFRS. In addition, the acquirer shall disclose the information required by TFRS 3 and other TFRSs for business combinations. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.

F-91 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) • TAS 16 and TAS 38—Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to TAS 16 and TAS 38) The amendments to TAS 16 and TAS 38, have prohibited the use of revenue-based depreciation for property, plant and equipment and significantly limiting the use of revenue-based amortisation for intangible assets. The amendments did not have an impact on the financial position or performance of the Group. • TAS 16 Property, Plant and Equipment and TAS 41 Agriculture—Bearer Plants (Amendment) TAS 16 is amended to provide guidance that bearer plants, such as grape vines, rubber trees and oil palms should be accounted for in the same way as property, plant and equipment in TAS 16. Once a bearer plant is mature, apart from bearing produce, its biological transformation is no longer significant in generating future economic benefits. The only significant future economic benefits it generates come from the agricultural produce that it creates. Because their operation is similar to that of manufacturing, either the cost model or revaluation model should be applied. The produce growing on bearer plants will remain within the scope of TAS 41, measured at fair value less costs to sell. The amendment did not have an impact on the financial position or performance of the Group. • TAS 27 Equity Method in Separate Financial Statements (Amendments to TAS 27) Public Oversight Accounting and Auditing Standards Authority (POA) of Turkey issued an amendment to TAS 27 to restore the option to use the equity method to account for investments in subsidiaries and associates in an entity’s separate financial statements. Therefore, an entity must account for these investments either: • At cost • In accordance with IFRS 9, Or • Using the equity method defined in TAS 28 The entity must apply the same accounting for each category of investments. The amendment is not applicable for the Group and did not have an impact on the financial position or performance of the Group. • TFRS 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments) Amendments issued to TFRS 10 and TAS 28, to address the acknowledged inconsistency between the requirements in TFRS 10 and TAS 28 in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture, to clarify that an investor recognises a full gain or loss on the sale or contribution of assets that constitute a business, as defined in TFRS 3, between an investor and its associate or joint venture. The gain or loss resulting from the re-measurement at fair value of an investment retained in a former subsidiary should be recognised only to the extent of unrelated investors’ interests in that former subsidiary. The amendment did not have an impact on the financial position or performance of the Group. • TFRS 10, TFRS 12 and TAS 28: Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10 and IAS 28) In February 2015, Amendments issued to TFRS 10, TFRS 12 and TAS 28, to address the following issues that have arisen in applying the investment entities exception under TFRS 10 Consolidated Financial Statements; i) the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value, ii) only a subsidiary that is not an investment entity itself and provides support services to the investment entity is consolidated. All other subsidiaries of an investment

F-92 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) entity are measured at fair value, iii) the amendments to TAS 28 Investments in Associates and Joint Ventures allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries. The amendment did not have an impact on the financial position or performance of the Group. • TAS 1: Disclosure Initiative (Amendments to TAS 1) The amendments issued to TAS 1. Those amendments include narrow-focus improvements in the following five areas: Materiality, Disaggregation and subtotals, Notes structure, Disclosure of accounting policies, Presentation of items of other comprehensive income (OCI) arising from equity accounted investments. The amendment did not have an impact on the financial position or performance of the Group.

Annual Improvements to TFRSs—2012–2014 Cycle • POA issued, Annual Improvements to TFRSs 2012-2014 Cycle. The document sets out five amendments to four standards, excluding those standards that are consequentially amended, and the related Basis for Conclusions. The standards affected and the subjects of the amendments are: • IFRS 5 Non-current Assets Held for Sale and Discontinued Operations—clarifies that changes in methods of disposal (through sale or distribution to owners) would not be considered a new plan of disposal, rather it is a continuation of the original plan • IFRS 7 Financial Instruments: Disclosures—clarifies that the assessment of servicing contracts that includes a fee for the continuing involvement of financial assets in accordance with IFRS 7; the offsetting disclosure requirements do not apply to condensed interim financial statements, • IAS 19 Employee Benefits—clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. • IAS 34 Interim Financial Reporting—clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report. Standards issued but not yet effective and not early adopted: Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the consolidated financial statements are as follows. The Group will make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial statements and disclosures, when the new standards and interpretations become effective. • TFRS 15 Revenue from Contracts with Customers In September 2016, POA issued TFRS 15 Revenue from Contracts with Customers. The new standard issued includes the clarifying amendments to IFRS 15 made by IASB in April 2016. The new five-step model in the standard provides the recognition and measurement requirements of revenue. The standard applies to revenue from contracts with customers and provides a model for the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., the sale of property, plant and equipment or intangibles). TFRS 15 effective date is January 1, 2018, with early adoption permitted. Entities will transition to the new standard following either a full retrospective approach or a modified retrospective approach. The modified retrospective approach would allow the standard to be applied beginning with the current period, with no restatement of the comparative periods, but additional disclosures are required. Soz¨ konusu degi¸˘ sikligin˘ Grup’un finansal durumu ve performansı uzerindeki¨ etkileri degerlendirilmektedir.˘ The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.

F-93 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) • TFRS 9 Financial Instruments In January 2017, POA issued the final version of TFRS 9 Financial Instruments. The final version of TFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. TFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward- looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting. In addition, TFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value. The Standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment. TFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted by applying all requirements of the standard. Alternatively, entities may elect to early apply only the requirements for the presentation of gains and losses on financial liabilities designated as FVTPL without applying the other requirements in the standard. The Group has performed a high-level impact assessment of TFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional supportable information being made available to the Group in the future. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group. The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA): The following standards, interpretations and amendments to existing IFRS standards are issued by the IASB but not yet effective up to the date of issuance of the financial statements. However, these standards, interpretations and amendments to existing IFRS standards are not yet adapted/issued by the POA, thus they do not constitute part of TFRS. The Group will make the necessary changes to its consolidated financial statements after the new standards and interpretations are issued and become effective under TFRS. • IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments) In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. Early application of the amendments is still permitted.

Annual Improvements—2010–2012 Cycle • IFRS 13 Fair Value Measurement As clarified in the Basis for Conclusions short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial. The amendment is effective immediately.

Annual Improvements—2011–2013 Cycle • IFRS 16 Leases The IASB has published a new standard, IFRS 16 ‘Leases’. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating

F-94 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 ‘Leases’ and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has also been applied. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group. • IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses (Amendments) The IASB issued amendments to IAS 12 Income Taxes. The amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. The amendments clarify the requirements on recognition of deferred tax assets for unrealised losses, to address diversity in practice. These amendments are to be retrospectively applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. However, on initial application of the amendment, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. If the Group applies this relief, it shall disclose that fact. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group. • IAS 7 Statement of Cash Flows (Amendments) The IASB issued amendments to IAS 7 ‘Statement of Cash Flows’. The amendments are intended to clarify IAS 7 to improve information provided to users of financial statements about an entity’s financing activities. The improvements to disclosures require companies to provide information about changes in their financing liabilities. These amendments are to be applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. When the Group first applies those amendments, it is not required to provide comparative information for preceding periods. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group. • IFRS 2 Classification and Measurement of Share-based Payment Transactions (Amendments) The IASB issued amendments to IFRS 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments, provide requirements on the accounting for: a) The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments, b) Share-based payment transactions with a net settlement feature for withholding tax obligations, and c) A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted. • IFRS 4 Insurance Contracts (Amendments)

F-95 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) In September 2016, the IASB issued amendments to IFRS 4 Insurance Contracts. The amendments introduce two approaches: an overlay approach and a deferral approach. The amended Standard will: a) Give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 Financial instruments is applied before the new insurance contracts Standard is issued; and b) Give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 Financial instruments until 2021. The entities that defer the application of IFRS 9 Financial instruments will continue to apply the existing financial instruments Standard—IAS 39. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted. • IAS 40 Investment Property: Transfers of Investment Property (Amendments) The IASB issued amendments to IAS 40 ‘Investment Property’. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted. • IFRIC 22 Foreign Currency Transactions and Advance Consideration The interpretation clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation states that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. An entity is not required to apply this Interpretation to income taxes; or insurance contracts (including reinsurance contracts) it issues or reinsurance contracts that it holds. The interpretation is effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted.

Annual Improvements to IFRSs—2014–2016 Cycle The IASB issued Annual Improvements to IFRS Standards 2014–2016 Cycle, amending the following standards: • IFRS 1 First-time Adoption of International Financial Reporting Standards: This amendment deletes the short-term exemptions about some IFRS 7 disclosures, IAS 19 transition provisions and IFRS 10 Investment Entities. These amendments are to be applied for annual periods beginning on or after 1 January 2018. • IFRS 12 Disclosure of Interests in Other Entities: This amendment clarifies that an entity is not required to disclose summarised financial information for interests in subsidiaries, associates or joint ventures that is classified, or included in a disposal group that is classified, as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. These amendments are to be applied for annual periods beginning on or after 1 January 2017. • IAS 28 Investments in Associates and Joint Ventures: This amendment clarifies that the election to measure an investment in an associate or a joint venture held by, or indirectly through, a venture

F-96 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) capital organisation or other qualifying entity at fair value through profit or loss applying IFRS 9 Financial Instruments is available for each associate or joint venture, at the initial recognition of the associate or joint venture. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.

2.3 Comparative information and restatement of previous year financial statements In order to allow for the determination of financial situation and performance trends, the Group’s consolidated financial statements have been presented comparatively with the previous year. In order to comply with the presentation of the financial statements in the current period, comparative information is reclassified when necessary and significant differences are disclosed. The reclassification adjustments made to the consolidated statement of profit or loss and other comprehensive income statement of the Group for the year ended December 31, 2015 are as follows: • Trade receivable rediscount income amounting to TL 8.033.938 netted off under other operating expense were classified to other operating income (Note 26). • Deferred finance cost related to trade payables amounting to TL 2.060.731 netted off under cost of sales were classified to other operating loss (Note 26). • Rent income amounting to TL 10.968.926 shown in other operating income were classified to Income from investment activities. The reclassification adjustments made to the consolidated statement of financial position of the Group dated December 31, 2015 are as follows: • Social Security Institution (‘‘SSI’’) premium payables to employees amounting to TL 4.581.734 shown in trade payables to third parties were classified to short-term liabilities for employee benefits (Note 20). • Payable to EMRA amounting to TL 1.763.480 shown in short term provisions were classified to other payables to third parties (Note 8). The reclassification adjustment made to the consolidated statement of cash flows of the Group for the year ended December 31, 2015 are as follows: • There is a reclassification due to the capitalized borrowing costs of amounting to 55.676.557 TL between cash flows from investing activities and cash flows from financing activities. The reclassification adjustments made to the consolidated statement of cash flows for the year ended on December 31, 2015 in accordance with the Turkish Accounting Standards taxonomy published on June 6, 2016 are as follows: • There is a classification at an amount of TL 194.408.379 sourcing from ‘‘adjustments related to unrealized foreign exchange translation differences’’ between cash flow generated from operating activities and impact of foreign currency translation differences on cash and cash equivalents, and at an amount of TL 55.308.213 sourcing from advances given for fixed assets between cash flow sourcing from operating activities and cash flow sourcing from investing activities is made on statement of cash flows.

F-97 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) 2.4 Summary of significant accounting policies The significant accounting policies applied in the preparation of the consolidated financial statements are summarized below:

Basis of consolidation The consolidated financial statements include the accounts of the parent company, Petkim, and its Subsidiaries on the basis set out in sections below. The financial statements of the companies included in the consolidation have been prepared as of the date of the consolidated financial statements and are based on the statutory records with adjustments and reclassifications for the purpose of presentation in conformity TAS/TFRS promulgated by the POA as set out in the communique´ numbered II-14.1, and Group accounting and disclosure policies. Subsidiaries are the Companies controlled by Petkim when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The table below sets out all Subsidiaries included in the scope of consolidation and discloses their ownership, and voting power as of 31 December 2016 and 31 December 2015.

Voting power Ownership interest Consolidation December 31, December 31, December 31, December 31, Entity name method 2016 2015 2016 2015 Petlim ...... Full consolidation 73% 73% 70% 70% Petkim Specialities Muhendislik¨ Plastikleri Sanayi ve Ticaret A.¸S...... Full consolidation 100% 100% 100% 100% The statement of financial position and statements profit or loss of the Subsidiaries are consolidated on a line-by-line basis and the carrying value of the investment held by Petkim and its Subsidiaries is eliminated against the related shareholders’ equity. Intercompany transactions and balances between Petkim and its Subsidiaries are eliminated on consolidation. The cost of, and the dividends arising from, shares held by Petkim in its Subsidiaries are eliminated from shareholders’ equity and income for the year, respectively.

Inventories Inventories are valued at the lower of cost and net realizable value. The cost of inventory consists of purchase materials, cost of conversion and other costs that are necessary to bring the inventories to their present location and condition. The costs of inventories are determined on a weighted average basis by the Group. Net realizable value is the estimated selling price in the ordinary course of business, less cost of completion and selling expenses (Note 10). Spare parts in the forms of operating supplies are presented in the other stocks. These stocks are valued at the lower of cost and net realizable value Spare parts and material stocks are valued at the lower of cost and net recoverable value. The cost of spare parts and material stocks consist of purchase materials and other costs that are necessary to bring them to their present location and condition. The costs of spare parts and material stocks are determined on a weighted average basis by the Group (Notes 10).

F-98 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) Property, plant and equipment Property, plant and equipment are carried at cost less accumulated depreciation and impairment losses if any. Historical costs include the costs directly related to the acquisition of property plant and equipment. Land is not depreciated as it is deemed to have an indefinite useful life. Buildings, machinery and equipment are capitalized and depreciated when they are in the condition necessary for operations in the manner intended by the management. Residual values of property, plant and equipment are deemed as insignificant. The useful lives of property, plant and equipment are as follows:

Useful life Land improvements ...... 4–50 years Buildings ...... 18–50 years Machinery and equipment ...... 4–50 years Motor vehicles ...... 5 years Furniture and fixtures ...... 3–20 years Other fixed assets ...... 5 years Leasehold Improvements ...... at the lower cost of 3 years and lease term Expenses after the capitalization are added to the cost of related asset and reflected in financial statements as a separate asset if they shall mostly provide an economic benefit and their cost is measured in a trustable manner. Tangible assets are reviewed for impairment if there are conditions showing that the securities are more than amount recoverable. Assets are grouped at the lowest level which is cash-generating unit in order to determine impairment. Carrying amount of a tangible asset and recoverable value is the one which is higher than the net sales price following the deduction of commensurable value for the sale of the asset. Useful life of assets are reviewed as of date of balance sheet and adjusted, if required. Maintenance and repair expenses are recorded as expense to the income statement of the related period. The Company omits the carrying values of the changed pieces occurred with respect to renovations from the balance sheet without considering whether they are subject to depreciation in an independent manner from other sections. Main renovations are subject to deprecation based on the shortest of residual life of the related tangible asset or useful life of the renovation itself. Advances paid related to purchasing of tangible assets are monitored in prepaid expenses under fixed assets until the related asset is capitalized or recognized under on-going investments. Advances paid in foreign currency are evaluated based on being monetary or non-monetary items and measured accordingly. It is evaluated that a significant part of advances paid in foreign currency are in nature of non-monetary item and tracked over exchange rate on the date of advance payment. Impairment regarding advances given is evaluated in accordance with the impairment of non-financial assets policy and recognized on profit and loss statement of the related period. Spare parts and material stocks qualify as property, plant and equipment when they are expected to be used more than one period and only in connection with an item of property, plant and equipment. Spare parts and material stocks are carried at cost less the accumulated depreciation which is calculated over the remaining useful life of the related item of property, plant and equipment. Gains or losses on disposals of property, plant and equipment are included in the other operating income and expense accounts, in the consolidated statement of comprehensive income as appropriate.

F-99 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) Intangible assets Rights and software Intangible assets comprise acquired rights, information systems and software and capitalized development costs. Intangible assets are amortized on a straight-line basis over their estimated useful lives from the date of acquisition. In case of impairment, the carrying values of the intangible assets are written-down to their recoverable amounts (Note 13). The estimated useful lives of intangible assets are as follows:

Useful life Rights and software ...... 3–15 years

Research and development expenses Research expenditures are recognized in the consolidated statement of comprehensive income when they are incurred. Intangible assets arising from in-house development activities (or the improvement phase of an intergroup project) are recognized when all of the following conditions are met: • existence of the technical feasibility of completing the intangible asset so that it will be available for use or sale, • existence of the intention to complete the intangible asset and use or sell it, • existence of the ability to use or sell the intangible asset, • reliability of how the intangible asset will generate probable future economic benefits, • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, • existence of the ability to measure reliably the expenditure attributable to the intangible asset during its development. Capitalized development expenses are amortized in 5 years by straight-line method effective from the start of the production. Annual impairment test is made in each reporting period during the period in which the on-going capitalized development costs are realized.

Investment properties Land and buildings held for rental yields or for capital appreciation or both, rather than for use in the production or supply of goods or services or for administrative purposes or sale in the ordinary course of business are classified as ‘‘investment property and accounted for at their acquisition cost in the consolidated statement of financial position. Depreciation is provided using the straight-line method based on the estimated useful lives of the net assets and the useful lives of investment properties are as follows

Useful life Land improvements ...... 20–32 years Buildings ...... 32 years Machinery and equipment ...... 20–25 years Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its

F-100 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) disposal. Gains or losses on disposals of investment properties are included in the other operating income and expense accounts, as appropriate (Note 11). Any gains or losses on the retirement or disposal, any maintenance and repair expenses of an investment property are recognized in the consolidated statement of income under income and expense from investment activities

Impairment of assets At each reporting date, the Group assesses whether there is an impairment indication for the assets, except for the deferred income tax asset and financial assets stated at fair values. The Group assesses whether there is any indication that the book value of tangible and intangible assets, calculated by the acquisition cost less accumulated amortization, may be impaired. When an indication of impairment exists, the Group estimates the recoverable values of such assets. When the individual recoverable value of assets cannot be measured, the recoverable value of the cash-generating unit of that asset is measured. Provision for doubtful receivables is booked in the consolidated financial statements when there is an indication that the related receivable cannot be collected. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originated receivables at inception. If the impairment amount decreases due to an event occurring after the write-down, the release of the provision is credited to other income in the current period. Impairment exists if the carrying value of an asset or a cash-generating unit is greater than its recoverable amount, which is the higher of value in use or fair value less costs to sell. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. When the recoverable amount of an asset (or a cash-generating unit) is lower than its carrying value, the asset’s (or cash-generating unit’s) carrying value is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statement of comprehensive income. An impairment loss recognized in prior periods for an asset is reversed if the subsequent increase in the asset’s recoverable amount is caused by a specific event since the last impairment loss was recognized. Such a reversal amount cannot be higher than the previously recognized impairment and is recognized in the consolidated statement of comprehensive income.

Financial instruments Financial assets and financial liabilities are recognized in the Group’s consolidated balance sheet when the Group becomes a legal party for the contractual provisions of the financial instrument.

Financial assets Financial assets, are initially measured at fair value, less transaction costs except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. All financial assets are recognized and derecognized on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market. Financial assets are classified into the following specified categories: financial assets as ‘at fair value through profit or loss’, ‘held-to-maturity investments’, ‘available-for-sale financial assets’ and ‘loans and

F-101 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method The effective interest rate method is a method of calculating the amortized cost of a financial asset and of allocating the interest income over the relevant period. The effective interest rate is the ratio exactly discounts the estimated future cash receipts through the expected life of the financial asset to the net present value of the financial asset or in a shorter period where appropriate. Incomes related to the debt instruments that are held to maturity and are available for sale, and financial assets that are classified as loans and receivables are calculated according to the effective interest rate method.

Available for sale financial assets Some of the shares and long term marketable securities held by the Group are classified as available for sale and recognized at their fair values. The financial assets, which are not priced in an active market and the fair value cannot be recognized accurately, are recognized at cost less accumulated impairments. Gains and losses arising from changes in fair value are recognized directly in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognized directly in the consolidated income statement. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognized in the investments revaluation reserve is included in the consolidated income statement for the period. Some of the shares and long term marketable securities held by the Group are classified as available for sale and recognized at their fair values.

Receivables Trade receivables and other receivables are initially recognized at their fair value. Subsequently, receivables are measured at amortized cost using the effective interest method.

Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For receivables, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in the consolidated income statement under general administrative expenses. With the exception of available for sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the

F-102 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In respect of available for sale equity securities, any increase in fair value subsequent to an impairment loss is recognized directly in the consolidated statement of comprehensive income. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: • Significant financial difficulty of the issuer or obligor, • A breach of contract, such as a default or delinquency in interest or principal payments • For economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider, • It becomes probable that the borrower will enter bankruptcy or other financial reorganization, • Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets.

Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments which their maturities are three-months or less from date of acquisition and that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. The carrying amount of these assets approximates their fair value.

Financial liabilities Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. Financial liabilities are classified as either financial liabilities’ at fair value through profit or loss’ or other financial liabilities.

Financial payables Bank borrowings are recognized initially at the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortized cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of comprehensive income over the period of the borrowings. If the maturity of the bank borrowings is less than 12 months at the balance sheet date, these are classified in current liabilities; and if more than 12 months, they are classified under non-current liabilities (Note 6).

Trade payables Trade payables are recognized initially at fair value of and subsequently measured at amortized cost using the effective interest method (Note 7).

F-103 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) Other financial liabilities Other financial liabilities are initially accounted at fair value, net of transaction costs. Subsequently other financial liabilities are accounted at amortized cost using the effective interest method, with interest expense recognized on an effective interest rate basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating the interest expense to the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount.

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the consolidated statement of comprehensive income in the period they incurred.

Government grants All government grants, including non-monetary government grants followed up at fair values, are taken into account in the financial statements when there is reasonable assurance that the Group will comply with the conditions attaching to it and that the grant will be received or when the grant is actually received by the Group. Government grants shall be recognized in profit or loss on a systematic and pro rata basis over periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate (Note 14).

Derivative financial instruments and hedge accounting Derivatives are initially recognized at cost of acquisition and are subsequently accounted to their fair value at the end of each reporting period. The method of recognizing the result of gain or loss is dependent on the nature of the item being hedged. On the date a derivative contract is entered into, the Group designates certain derivatives as either a hedge of the fair value of a recognized asset or liability (fair value hedge) or a hedge from changes that could affect the statement of income due to a specific risk in cash flow of a forecasted transaction (cash flow hedge). Fair value of the Group’s interest swap contracts is determined by valuation methods depending on analyzable market data. Changes in the fair value of the derivatives that are designated and qualified as cash flow hedges and that are highly effective, are recognized in equity as hedging reserve. Where the forecasted transaction or firm commitment results in the recognition of an asset or a liability, the gains and losses previously booked under equity are transferred from equity and included in the initial measurement of the cost of acquisition of the asset or liability. Otherwise, amounts booked under equity are transferred to the consolidated statement of income and classified as revenue or expense in the period in which the hedged item affects the statement of income. When the hedging instrument expires, is sold, or when a hedge no longer meets the criteria for hedge than hedge accounting is terminated. Any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the committed or forecasted transaction ultimately is recognized in the statement of income. However, if the hedged transaction is not realized, the cumulative gain or loss that was reported in equity is immediately transferred to the profit or loss of the current period.

F-104 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) The Group measures the derivative financial instruments held for fair value hedge purpose with their fair values and recognizes them in the consolidated income statement under financial income/(expense).

Statement of cash flow Cash flows during the period are classified and reported as operating, investing and financing activities in the consolidated statement of cash flows. Cash flows arising from investment activities represent the cash flows that are used in or provided by the investing activities (direct investments and financial investments) of the Group. Cash flows arising from financing activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds.

Related parties Parties are considered related to the Group if (a) A person or a close member of that person’s family is related to a reporting entity if that person: (i) has control or joint control over the reporting entity, (ii) has significant influence over the reporting entity, or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. (b) An entity is related to a reporting entity if any of the following conditions applies: (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), (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member), (iii) Both entities are joint ventures of the same third party, (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity, (v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity, (vi) The entity is controlled or jointly controlled by a person identified in (a), (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). A related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged. Key management personnel are identified as Board of Directors, general manager and vice general managers (Note 32).

Taxation and deferred income taxes Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the consolidated financial statements, have been calculated on a separate-entity basis. Income tax expense represents the sum of the current tax and deferred tax.

F-105 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in future and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax Deferred tax is determined by calculating the temporary differences between the carrying amounts of assets/liabilities in the financial statements and the corresponding tax bases, used in the computation of the taxable profit, using currently enacted tax rates. Deferred tax liabilities are generally recognized for all taxable temporary differences where deferred tax assets resulting from deductible temporary differences are recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilized. Such 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. 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 if it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Deferred income tax is determined using tax rates that have been enacted by the balance sheet date. Tax is recognized in the consolidated statement of comprehensive income, except to the extent that it relates to items recognized in equity. Taxes arisen on items recognized in equity are recognized directly in equity. Deferred income tax liabilities are recognized for all taxable temporary differences; whereas deferred income tax assets resulting from deductible temporary differences are recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilized. Deferred income tax asset is recognized to the extent that it is probable that the entity will have sufficient taxable profit in the same period as the reversal of the deductible temporary difference arising from tax losses carried forward.

F-106 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) Deferred income tax assets and deferred income tax liabilities related to income taxes levied by the same taxation authority are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities. Deferred income tax assets and deferred income tax liabilities are classified as long-term in the consolidated financial statements (Note 30).

Employee benefits a) Defined benefit plans: In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination indemnities to each employee who has completed over one year of service with the Group and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. Furthermore, the Group has an employee benefit plan, namely ‘‘Seniority Incentive Bonus’’, which is paid to employees with a certain level of seniority (Note 17). In the consolidated financial statements, the Group has recognized a liability using the ‘‘Projected Unit Credit Method’’ based upon factors derived using the Group’s experience of personnel terminating and being eligible to receive benefits, discounted by using the current market yield at the balance sheet date on government bonds. All actuarial gains and losses are recognized in the consolidated statement of comprehensive income.

(b) Defined contribution plans: The Group pays contributions to the Social Security Institution on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as an employee benefit expense when they are due. c) Unused vacation Liabilities due to unused vacations classified as provisions due to employee benefits are accrued and discounted if the discount effect is material.

Provisions Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. Provisions, as of the balance sheet date, are recorded with the best estimate of management in order to provide for the estimated obligation and are discounted, if they are material for the consolidated financial statement.

Contingent assets and liabilities Contingent assets or obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Group, are not included in the consolidated financial statements and are treated as contingent assets or liabilities (Note 15). Contingent liabilities are not recognized in the consolidated financial statements, and disclosed only, unless the possibility of an outflow of resources embodying economic benefits is probable. A contingent asset is not recognized in the consolidated financial statements but disclosed when an inflow of economic benefits is mostly probable.

F-107 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) Revenue recognition Revenue is measured at the fair value of the received or receivable amount. The estimated customer returns, rebates, and other similar allowances are deducted from this amount.

Sale of goods Revenue from the sale of goods is recognized when all the following conditions are satisfied: • The Group transfers the significant risks and benefits of the ownership of the goods to the buyer; • The Group retains neither a continuing managerial involvement usually associated with ownership nor effective control over the goods sold; • The amount of revenue is measured reliably; • It is probable that the economic benefits associated with the transaction will flow to the Group; and • The costs incurred or to be incurred due to the transaction are measured reliably.

Rental income Rental income from investment properties is recognized on a straight-line basis over the term of the relevant lease and recognised under other operating income.

Interest income Interest revenue 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 the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. Group’s interest income from time deposits is recognized in financial income. Group’s interest income from sales with maturities is recognized in other operating income. When the arrangement effectively constitutes a financing transaction, 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 recognized as interest income on a time proportion basis that takes into account the effective yield on the asset.

The effects of foreign exchange rate changes Foreign currency transactions are recorded at the rates of exchange prevailing on the dates of the transactions. Assets and liabilities denominated in foreign currencies are converted at the exchange rates prevailing on the balance sheet date. Transactions realized in foreign currency (currencies other than TL) are recorded through based on the exchange rate on date of the transaction during the preparation of financial statements of each entity. Foreign exchange indexed monetary assets and liabilities included in the balance sheet are converted into New Turkish Liras by using the exchange rates effective on balance sheet date. Those recorded in foreign currency from the non-monetary items followed-up with fair value are converted into TRY through based on the exchange rates on date when the fair value is determined. Nonmonetary items in foreign currency measured in type of historical cost may not be subjected to conversion again.

F-108 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) Exchange differences are recognized in the profit or loss of the period when they occur except for below stated circumstances: • Exchange differences considered as the correction item in the interest costs on the debts associated with the assets built for the purpose of future use and indicated in foreign currency and included in the cost of such assets, • Exchange differences resulted from the transactions realized for the purpose of financial protection against the risks rising from foreign currency (accounting policies related with provision of financial protection against risks are explained below).

Operating lease The Group as the lessee Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.

The Group as the lessor Assets leased out under operating leases are classified under property, plant and equipment in the consolidated balance sheet and rental income is recognized on a straight-line basis over the lease term.

Share capital and dividends Ordinary shares are classified as equity. Dividends payable on ordinary shares are recognized as an appropriation of the profit in the period they are declared.

Share premiums Share premium represents differences resulting from the sale of the Company’s subsidiaries and associates’ shares at a price exceeding the face values of those shares or differences between the face values and the fair value of shares issued for acquired companies.

Subsequent events Subsequent events and announcements related to net profit or even declared after other selective financial information has been publicly announced; include all events that take place between the balance sheet date and the date when the balance sheet is authorized for issue. In the case that events requiring an adjustment to the financial statements occur subsequent to the balance sheet date, the Group makes the necessary corrections on the consolidated financial statements (Note 35). Post period end events that are not adjusting events are disclosed in the notes when material.

Earnings per share Basic earnings per share are calculated by dividing the net profit by the weighted average number of ordinary shares outstanding during the year. The companies can increase their share capital by making a pro-rata distribution of shares (‘‘Bonus Shares’’) to existing shareholders without consideration for amounts resolved to be transferred to share capital from retained earnings. For the purpose of the earnings per share calculation such Bonus Share

F-109 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) issues are regarded as stock dividends. Accordingly, the weighted average number of shares used in earnings per share calculation is derived by giving retroactive effect to the issue of such shares.

Segment reporting Reporting of operating segments is arranged in a manner consistent with reporting to the competent boards of the operating decision-makers. It is the responsibility of the business operator to make decisions on the decision-making mechanisms related to the activities or on the resources to be allocated to the competent division in this regard and to evaluate the performance of the division. The Board of Directors of the Company has been designated as the competent authority to decide on the activities of the company.

Offsetting Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liabilities simultaneously.

2.5 Changes in accounting policies, accounting estimates and errors Material changes in accounting policies or material errors are corrected, retrospectively; by restating the prior period financial statements. The effect of changes in accounting estimates affecting the current period is recognized in the current period; the effect of changes in accounting estimates affecting current and future periods is recognized in the current and future periods. There exist no change in significant accounting policies or accounting estimates during the preparation of consolidated financial statements of the period ending as of December 31, 2016 compared to previous period. There is no accounting or management error which is determined in current period.

2.6 Significant accounting estimates, judgments and assumptions Preparation of consolidated financial statements requires the use of estimates and assumptions that may affect the amount of assets and liabilities recognized as of the balance sheet date, disclosures of contingent assets and liabilities and the amount of revenue and expenses reported. Although, these estimates and assumptions rely on the management’s best knowledge about current events and transactions, actual outcomes may vary from those estimates and assumptions. Significant estimates of the Group management are as follows:

Useful lives of tangible and intangible assets and investment properties The Group determines useful economic lives of tangible and intangible assets and investment properties in capitalization periods in line with opinions of technical experts and recognizes depreciation and redemption during aforementioned economic lives. Economic lives anticipated by Group Management are disclosed in notes (Notes 11, 12 and 13). Useful lives of land improvements related to port project included in investment properties are anticipated through considering leasing period obtained by Petkim in scope of use of right contract. The Group reviews economic lives of assets subject to aforementioned depreciation in each reporting period and it is anticipated that there exist no situation requiring any adjustment in economic lives as of December 31, 2016. Phase 1 part, which is related to port investments of Petkim tracked under construction in progress in tangible fixed assets accounts in 2016, is transferred to investment properties as a result of put into use in December 2016.

F-110 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) Deferred tax assets The Group recognizes deferred tax on the temporary timing differences between the carrying amounts of assets and liabilities in the financial statements prepared in accordance with TFRS and statutory financial statements which is used in the computation of taxable profit. The related differences are generally due to the timing difference of the tax base of some income and expense items between statutory and TFRS financial statements. The Group has deferred tax assets resulting from tax loss carry-forwards and deductible temporary differences, which could reduce taxable income in the future periods. All or partial amounts of the realizable deferred tax assets are estimated in current circumstances. As a result of the projections made by the Group management by using its best estimates deferred income tax asset regarding to the unused investment incentives was recognized in the consolidated financial statements (Note 30).

Provisions for employee benefits Actuarial Assumptions about discount rates, inflation rates, future salary increases and employee turnover rates are used to calculate Group’s provision for employee benefits. The details related with the defined benefit plans are stated in Note 17.

Fair values of derivative financial instruments The Group values its derivative financial instruments by using the foreign exchange and interest rate estimations and based on the valuation estimates of the market values as of the balance sheet date (Note 9).

Impairments on Assets The Group, performs impairment tests for assets that are subject to depreciation and amortization in case of being not possible to prevent recovery of the assets at each reporting period. As of December 31, 2016, the Group has booked a provision for impairment in the current period amounting to TL 31.807.000 and TL 1.133.514 for advances given and other receivables (Note 8 and 19). In addition, the Group has accounted for impairment loss amounting to TL 2.667.127 as of 31 December 2016 in the scope of the impairment analysis for the ongoing investment projects and no additional impairment is provided for in the consolidated financial statements except for the related reserves (Note 12).

Provision for inventories As a result of this, the provision for inventories with the net realizable values below the costs and the slow moving inventories are presented in Note 10.

Provision for doubtful receivables Allowance for doubtful receivables reflect the future loss that the Group anticipates to incur from the trade receivables as of the balance sheet date which is subject to collection risk considering the current economic conditions. During the impairment test for the receivables, the debtors are assessed with their prior year performances, their credit risk in the current market, their performance after the reporting date up to the issuing date of the financial statements; and also the renegotiation conditions with these debtors are considered. As of reporting date the provision for doubtful receivables is presented in Note 7 and Note 8.

F-111 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

2. Basis of presentation of consolidated financial statements (Continued) Trade payables with letter of credits Discounted letter of credits for the raw material purchases has been assessed as trade payable by the group management (Note 7)

Provision for lawsuits Provision for lawsuits is evaluated by the Group based on opinions of Group Legal Counsel and legal consultants. The Group determines the amount of provisions based on best estimates. As of Reporting date, provision for lawsuits is stated in Note 15.

3. Segment reporting Including petrochemical and port services, the Group has two main fields of activity: a) Net sales

January 1– January 1– December 31, 2016 December 31, 2015 Petrochemical ...... 4.532.691.950 4.533.431.442 Port services ...... — — Total before elimination ...... 4.532.691.950 4.533.431.442 Eliminations and adjustments of consolidation ...... (101.328) (795.473) 4.532.590.622 4.532.635.969 b) Operating Profit

January 1– January 1– December 31, 2016 December 31, 2015 Petrochemical ...... 790.332.324 534.604.407 Port services ...... (17.620.311) (36.242.038) Total before elimination ...... 772.712.013 498.362.369 Eliminations and adjustments of consolidation ...... (43.977.410) 6.588.259 728.734.603 504.950.628 c) Depreciation and amortization

January 1– January 1– December 31, 2016 December 31, 2015 Petrochemical ...... (114.922.435) (113.598.533) Port services ...... (65.451.264) (25.886.955) Total before elimination ...... (180.373.699) (139.485.488) Eliminations and adjustments of consolidation ...... 63.775.395 25.752.786 (116.598.304) (113.732.702)

F-112 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

3. Segment reporting (Continued) d) Profit before taxation

January 1– January 1– December 31, 2016 December 31, 2015 Petrochemical ...... 894.667.144 625.075.416 Port services ...... (69.596.287) (30.759.953) Total before elimination ...... 825.070.857 594.315.463 Eliminations and adjustments of consolidation ...... (43.187.613) (20.488.227) 781.883.244 573.827.236 e) Net profit for the year

January 1– January 1– December 31, 2016 December 31, 2015 Petrochemical ...... 755.204.731 616.871.622 Port services ...... 19.670.227 42.825.263 Total before elimination ...... 774.874.958 659.696.885 Eliminations and adjustments of consolidation ...... (43.187.612) (20.488.227) 731.687.346 639.208.658 f) Investment expense

January 1– January 1– December 31, 2016 December 31, 2015 Petrochemical ...... 436.861.489 158.240.038 Port services ...... 358.576.053 462.906.710 Total before elimination ...... 795.437.542 621.146.748 Eliminations and adjustments of consolidation ...... (106.962.258) (46.237.952) 688.475.284 574.908.796 g) Total asset

January 1– January 1– December 31, 2016 December 31, 2015 Petrochemical ...... 5.474.315.400 4.845.019.577 Port services ...... 1.449.507.641 977.224.062 Total before elimination ...... 6.923.823.041 5.822.243.639 Eliminations and adjustments of consolidation ...... (655.295.253) (361.578.311) 6.268.527.788 5.460.665.328

F-113 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

3. Segment reporting (Continued) h) Total liabilities

January 1– January 1– December 31, 2016 December 31, 2015 Petrochemical ...... 2.334.125.024 1.989.391.513 Port services ...... 1.233.117.523 783.591.534 Total before elimination ...... 3.567.242.547 2.772.983.047 Eliminations and adjustments of consolidation ...... (368.154.785) (117.701.216) 3.199.087.762 2.655.281.831

4. Cash and cash equivalents

December 31, 2016 December 31, 2015 Banks ...... 1.267.188.405 1.341.536.749 —Foreign currency demand deposits ...... 10.024.050 6.477.785 —Foreign currency time deposits ...... 988.870.046 1.106.344.117 —TL demand deposits ...... 3.620.195 11.158.398 —TL time deposits ...... 264.674.114 217.556.449 1.267.188.405 1.341.536.749

As of December 31, 2016, foreign currency time deposits consist of overnight and monthly deposits. The effective weighted average interest rates for USD and EUR 2,45% and 1,17%, respectively (December 31, 2015—USD 2,75%, EUR 1,24%.). The monthly effective weighted average interest for the USD time deposit is 3,62% (December 31, 2015: USD 2,52%.) As of December 31, 2016, TL time deposits consist of overnight and monthly deposits and bear the effective interest rate of 10,45% and 11,6% (December 31, 2015—overnight 12,55%). As of December 31, 2016, the Group has no blockage on its bank deposits (December 31, 2015—None). Based on the independent data with respect to the credit risk assessment of the banks at which the Group has deposits, are sufficient in terms of credit quality of the banks. Cash and cash equivalents are estimated to approximate carrying values including the accrued interest income at the reporting date.

5. Financial investments a) Short-term financial investments

December 31 2016 December 31, 2015 Time deposits longer than 3 months(*) ...... — 160.452.259 — 160.452.259

(*) As of December 31, 2015, the Group has EUR 50.000.000 time deposit, 158.880.000TL due in June 3, 2016, bear the effective interest of 1,72%. The related amount has been classified under the financial investments.

F-114 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

5. Financial investments (Continued) b) Long-term financial investments The details of financial assets available for sale and percentage of shares are below.

December 31, 2016 December 31, 2015 Shareholding Shareholding rate (%) Amount—TL rate (%) Amount—TL SOCAR Power Enerji Yatırımları A.¸S...... 9,90 8.910.000 9,90 8.910.000 8.910.000 8.910.000

TL 8.910.000 shares having a nominal price of TL 1 per share corresponding to 9,9% of capital of SOCAR Power Enerji Yatırımları A.¸S. (SOCAR Power) (TL 8.910.000) owned by SOCAR Turkey Elektrik Yatırımları Holding A.¸S (Power Holding), which is a subsidiary of controlling shareholder of the Group, SOCAR Turkey Enerji A.¸S., in Socar Power are purchased by the Group on January 26, 2015.

6. Financial liabilities a) Short term liabilities

December 31, 2016 December 31, 2015 Short-term bank borrowings(*) ...... 461.554.886 308.155.137 Short-term installment of long term borrowings ...... 54.162.544 40.001.436 Interest accrual ...... 1.477.190 13.394.020 517.194.620 361.550.593

(*) Bank borrowings amounting to TL 591.326 as of December 31, 2016 (December 31, 2015—TL 9.744.159) are overnight loans without bearing any interest and used for the month-end Social Security Institution (‘‘SSI’’) payments and Custom transactions. As of December 31, 2016 and 2015, the amounts of short term bank borrowings and interest rates are as follows:

December 31, 2016 Interest Effective Original type interest rate (%) currency Amount Short-term bank borrowings USD borrowings ...... Floating LIBOR + 0,75 1,25 105.411.332 370.963.560 TL borrowings ...... Fixed 10,20 90.000.000 90.000.000 TL borrowings ...... Floating — 591.326 591.326 Interest accruals ...... 144.007 461.698.893

F-115 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

6. Financial liabilities (Continued)

December 31, 2015 Interest Effective Original type interest rate (%) currency Amount Short-term bank borrowings USD borrowings ...... Floating Libor + 1,10 51.042.433 148.410.978 TL borrowings ...... Fixed 11,00 10,90 150.000.000 150.000.000 TL borrowings ...... No interest — 9.744.159 9.744.159 Interest accruals ...... 11.482.937 319.638.074

December 31, 2016 Interest Effective Original type interest rate (%) currency Amount Short-term instalment of long-term bank borrowings USD borrowings ...... Fixed 4,26 436.803 1.537.197 USD borrowings ...... Floating Libor + 1,70 7.634.702 26.868.046 EUR borrowings ...... Fixed 1,64 1.537.728 5.704.817 EUR borrowings ...... Floating Libor + 0,87 3,00 5.405.128 20.052.484 Interest accruals ...... 1.333.183 55.495.727

December 31, 2015 Interest Effective Original type interest rate (%) currency Amount Short-term instalment of long-term bank borrowings USD borrowings ...... Floating Libor + 1,70 3,75 9.533.457 27.719.479 EUR borrowings ...... Floating Libor + 3,00 3.865.168 12.281.957 Interest accruals ...... 1.911.083 41.912.519

As of 31 December 2016, the collaterals given by the Group against US Dollar and Euro loans held are explained in Note 15. The fair values of bank borrowings are disclosed in Note 32. b) Long-term bank borrowings

December 31, 2016 Interest Effective Original type interest rate (%) currency Amount Long-term bank borrowings USD borrowings ...... Fixed 4,26 42.415.025 149.266.956 USD borrowings ...... Floating LIBOR + 4,67 196.586.647 691.827.728 EUR borrowings ...... Fixed 1,64 18.461.538 68.490.462 EUR borrowings ...... Floating LIBOR + 0,73 3,00 70.861.538 262.889.222 1.172.474.368

F-116 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

6. Financial liabilities (Continued)

December 31, 2015 Interest Effective Original type interest rate (%) currency Amount Long-term bank borrowings USD borrowings ...... Floating Libor + 1,70 4,67 204.221.348 593.793.993 USD borrowings ...... Fixed 4,26 43.263.332 125.792.463 EUR borrowings ...... Floating Libor + 0,87 3,00 41.266.667 131.128.960 EUR borrowings ...... Fixed 1,64 20.000.000 63.552.000 914.267.416

As of December 31, 2016 and 2015 the principal repayment schedule of the borrowing is as follows:

December 31 2016 December 31 2015 Original currency Equivalent in Original currency Equivalent in (USD) TL (USD) TL 1–2 years ...... 27.139.078 95.507.843 8.483.008 24.665.194 2–3 years ...... 10.448.871 36.771.667 27.139.078 78.909.583 3–4 years ...... 11.431.805 40.230.808 10.448.871 30.381.137 4–5 years ...... 16.149.884 56.834.672 11.431.805 33.239.116 5 years and over ...... 173.832.034 611.749.694 189.981.918 552.391.426 Total ...... 239.001.672 841.094.684 247.484.680 719.586.456

December 31 2016 December 31 2015 Original currency Equivalent in Original currency Equivalent in (Euro) TL (Euro) TL 1–2 years ...... 14.395.513 53.405.914 6.943.590 22.063.952 2–3 years ...... 14.395.513 53.405.914 10.020.513 31.841.182 3–4 years ...... 14.395.513 53.405.914 10.020.513 31.841.182 4–5 years ...... 14.395.513 53.405.914 10.020.513 31.841.182 5 years and over ...... 31.741.024 117.756.028 24.261.538 77.093.462 Total ...... 89.323.076 331.379.684 61.266.667 194.680.960

As of December 31, 2016 and 2015, the Group is not subject to any financial covenant related to financial borrowings.

7. Trade receivables and payables a) Short-term trade receivables

December 31, December 31, 2016 2015 Trade receivables ...... 690.291.096 565.969.138 Allowance for doubtful receivables () ...... (15.819.607) (14.544.081) 674.471.489 551.425.057

As of December 31, 2016, weighted average yearly effective interest rates for the calculated not accrued income arising from short term trade receivables in TL, USD and EUR are 16,17%, 5,39% and 4,88%, respectively (December 31, 2015—TL, USD and EUR—11,91%, 5,21% and 5,04%)

F-117 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

7. Trade receivables and payables (Continued) The aging analysis of trade receivables including doubtful receivables as of December 31, 2016 and 2015 is as follows:

December 31, December 31, 2016 2015 Overdue receivables ...... 16.203.086 9.198.511 0–30 days ...... 326.609.470 236.226.997 31–60 days ...... 137.770.278 115.299.387 61–90 days ...... 97.536.981 98.795.660 91 days and over ...... 96.351.674 91.904.502 674.471.489 551.425.057

Other information related with the Group’s credit risk is explained in Note 33. Concentrations of credit risk with respect to trade receivables are limited due to the Group’s widely diversified customer base, covering the spectrum of manufacturing and distribution and the variety of available end markets in which they sell. As part of its sales policy, the Group obtains 100% of total outstanding TL trade receivables from its customers. An appropriate provision is provided by the Group according to the past experiences of the collections of trade receivables. Therefore, management believes that no additional credit risk exists beyond the Group’s trade receivables, which have been identified as doubtful receivable and have been fully provided for. The average maturity dates of trade receivables are 47 days (December 31, 2015—44)

Letters of guarantee received for trade receivables The Group’s receivables mainly arise from sales of thermoplastics and fiber materials. As of December 31, 2016, total amount of letters of guarantee received and bank guarantees within the context of direct order collection system (‘‘DOCS’’) from domestic and foreign customers are amounting to TL 964.923.454 TL (December 31, 2015—1.024.533.662 TL) (Note 15) The movement of the allowance for doubtful receivables during the year is as follows:

2016 2015 January 1 ...... (14.544.081) (13.532.966) Additions during the year (Note 26) ...... (1.275.526) (1.341.985) Provisions no longer required ...... — 330.870 December 31 ...... (15.819.607) (14.544.081) b) Other short-term trade payables

December 31 December 31, 2016 2015 Trade payables, net ...... 1.080.083.029 1.099.415.327 Expense accruals(*) ...... 5.195.490 6.253.659 1.085.278.519 1.105.668.986

(*) Letter of credits amounting to TL 702.494.286 of total short-term trade payable were due to the banks to finance the purchases of Naphtha. The average maturity for the letter of credit transactions is 108 days and consists of the commission expenses accrued in accordance with the effective interest method for the mentioned letter of credits as of the reporting (December 31, 2016—837.790.691 TL and the average maturity is 296 days).

F-118 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

7. Trade receivables and payables (Continued) Average maturity for short-term trade payables other than letter of credits is 17 days as of December 31, 2016 (December 31, 2015—29 days). The effective weighted average interest rates used in the calculation of finance costs of short-term trade payables are 13,68%, 5,25% and 4,13% for TL, USD and EUR denominated trade payables, respectively (December 31, 2015—The effective weighted average interest rates of short-term trade payables for TL, USD and EUR denominated trade payables are 13,93% and 3,38% respectively)

8. Other receivables and payables

December 31, December 31, 2016 2015 a) Other short-term receivables Receivables from contract of port services ...... 7.270.342 3.764.943 Loan interest incentive accrual ...... 1.868.259 1.647.621 Other ...... 9.399.881 2.031.372 18.538.482 7.443.936 Provision for other doubtful receivables ...... (2.067.122) (933.608) 16.471.360 6.510.328

The movement of the provision for other doubtful receivables during the year is as follows:

2016 2015 January 1 ...... (933.608) (933.608) Additions in the year (Note 26) ...... (1.133.514) — December 31 ...... (2.067.122) (933.608) b) Other short-term payables

December 31 December 31 2016 2015 Deposits and guarantees received ...... 10.447.190 2.193.874 Other ...... 1.836.356 1.823.334 12.283.546 4.017.208

9. Derivative financial instruments The amounts of derivative financial instruments as of December 31, 2016 and 2015 are as follows:

December 31 2016 December 31 2015 Asset Liability Asset Liability Cash flow hedge ...... 7.466.471 (9.459.385) 1.646.432 (11.008.960) 7.466.471 (9.459.385) 1.646.432 (11.008.960)

F-119 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

9. Derivative financial instruments (Continued)

December 31, 2016 December 31, 2015 NominalFair value (TL) Nominal Fair value (TL) value (TL) Asset (Liability) value (TL) Asset (Liability) Foreign currency forward transactions ...... 18.549.500 928.319 — 257.067.840 1.646.432 (659.638) Foreign currency option transactions ...... 285.055.203 28.505 (432.006) — — — Futures commodity trading operations ...... 23.376.286 3.364.044 — 149.529.817 — (10.349.322) Commodity swap contracts . 17.332.907 3.145.603 — — — — Interest rate swap contracts 12.672.105 — (9.027.379) — — — 356.986.001 7.466.471 (9.459.385) 406.597.657 1.646.432 (11.008.960)

The Group’s hedging transactions that fulfil the conditions of hedge accounting from financial risk are classified as derivatives for hedging purposes. As of December 31, 2016, the future commodity trading operations are related to Naphtha commodity that is subject to price risk of the Company and traded for the purchase of 9,500 tons of Naphtha. The fair value of these operations with maturities due to March 2017 with a nominal contract amount of TL 23.376.286 is TL 3.145.603 excluding deferred tax effect and is recognized in the cash flow hedge reserve in the other comprehensive income (31 December 2015: TL 10.349.322). Group has fixing contracts for future interest and principle payments of floating interest rate borrowings. The fair values of these contracts match the floating rate borrowings and was included in other comprehensive income Depending on the Group’s sales prices per customer contracts are set in TL, in US Dollar or in Euro, which is based on prices for raw material purchases in US Dollars, it is reflected in the sales price in US Dollar exchange rate. The Group has signed a contract that related to the amount of EUR 5.000.000 to foreign currency forward transactions to hedge against currency exchange risks in 2016. The fair value as of December 31, 2016 amounting to TL 928.319 is shown in the balance sheet as derivative instruments; the gain is recognized in the statement of comprehensive income under hedge funds. (December 31, 2015—TL 986.794) The terms and conditions of those contracts match the terms and conditions of the floating rate borrowings. As a result, no hedge ineffectiveness arises requiring recognition through profit or loss.

10. Inventories

December 31, 2016 December 31, 2015 Raw materials ...... 131.205.558 112.685.870 Work-in-progress ...... 151.387.512 94.789.137 Finished goods ...... 155.419.561 90.622.291 Trade goods ...... 16.287.036 19.207.550 Goods-in-transit ...... 107.705.559 33.907.481 Other inventories ...... 43.327.421 24.342.685 605.332.647 375.555.014 Less: Allowance for impairment on inventories ...... (998.814) (12.046.150) 604.333.833 363.508.864

F-120 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

10. Inventories (Continued) Movements of allowance for impairment on inventories for the years ended December 31, 2016 and 2015 are as follows:

2016 2015 January 1 ...... (12.046.150) (27.379.753) Charge for the year ...... (998.814) (12.046.150) Allowance no longer required ...... 12.046.150 27.379.753 December 31 ...... (998.814) (12.046.150)

Allocation of the provision for allowance on inventories in terms of inventory type is as follows:

December 31, 2016 December 31, 2015 Work-in-progress ...... (555.245) (10.041.552) Finished goods ...... — (1.150.298) Trade goods ...... (173.195) (583.877) Other inventories ...... (270.374) (270.423) (998.814) (12.046.150)

Allowance for impairment mainly consists of the net realizable value measurements of inventories. The reason of the impairment of inventories is the difference between sales and cost price, as product sales price decreased due to the decrease in naphtha price.

11. Investment properties

December 31, 2016 December 31, 2015 Investment properties ...... 928.881.678 1.469.935 928.881.678 1.469.935

The movement of investment properties for the year ended December 31, 2016 are as follows:

December 31, December 31, 2015 Additions Transfers(*) 2016 Cost: Land(**) ...... 1.469.935 — — 1.469.935 Land improvements ...... — — 468.609.013 468.609.013 Buildings ...... — — 41.129.754 41.129.754 Machinery and equipment ...... — — 26.927.312 26.927.312 Construction in progress ...... — — 392.278.311 392.278.311 1.469.935 — 928.944.390 930.414.325 Accumulated depreciation: Land improvements ...... — (1.334.308) — (1.334.308) Buildings ...... — (107.109) — (107.109) Machinery and equipment ...... — (91.230) — (91.230) — (1.532.647) — (1.532.647) Net book value ...... 1.469.935 928.881.678

(*) In 2016, investment property amounting to TL 928.944.390 has been transferred from property, plant and equipment (Note 12) (31 December 2015—8.177). For a container port to be established inside Petkim facilities to be operated by APM

F-121 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

11. Investment properties (Continued) Terminalleri Liman ˙I¸sletmeciligi˘ A.¸S. (APM Terminalleri), an operation agreement was signed between the Group and APMT BV. and APM Terminalleri on February 22, 2013. Phase 1, which is related to port investments of Petkim accounted under construction in progress in tangible assets accounts in the current period is transferred to investment properties as a result of put into operation in December 2016. (**) 30 years right of construction of the land, that is 1.969.478,40 m2, is given to the Star Rafineri A.¸S. (‘‘STAR’’) by Group. The annual cost of the land, that is located in Aliaga˘ district Arap¸ciftligi,˘ is USD 4.630.057,88 and the cost will be increased at the rate of Libor + 1% each year. 30 years right of construction of the land, that is 11.017.36 m2, is given to the Air Liquide Gaz Sanayi ve Ticaret A.¸S. by the Group. According to the a real estate appraisal company authorized by the CMB to—major valuation report which was prepared by shareholder of the Group, for the mentioned land in January 2013, the market value of the land has been determined as TL 378.125.000. The increase of the market value of the mentioned land resulted from the approval of the change of construction plan and the investments made by Star Rafineri A.¸S. to the land for making the land possible to invest.

12. Property, plant and equipment The movements of tangible assets and related accumulated depreciation for the years ended December 31, 2016 and 2015 are as follows:

December 31, December 31 2015 Additions Transfers Disposals 2016 Cost: Land ...... 13.522.050 — — — 13.522.050 Land improvements . . 113.957.571 — 1.768.971 — 115.726.542 Buildings ...... 171.618.043 — — — 171.618.043 Machinery and equipment ...... 6.436.255.729 — 142.233.057 (17.683.298) 6.560.805.488 Motor vehicles ...... 12.319.269 — 1.418.840 (1.225.011) 12.513.098 Furniture and fixtures . 74.702.806 — 17.417.764 (555.166) 91.565.404 Other fixed assets . . . 996.152 — — — 996.152 Leasehold improvements ..... 581.831 — 89.572 — 671.403 Construction in progress ...... 987.285.985 688.475.284 (1.098.804.600) (2.667.127) 574.289.542 7.811.239.436 688.475.284 (935.876.396) (22.130.602) 7.541.707.722 Accumulated depreciation: Land improvements . . (85.089.479) (2.725.350) — — (87.814.829) Buildings ...... (99.181.426) (3.740.351) — — (102.921.777) Machinery and equipment ...... (5.281.270.613) (109.668.482) — 17.238.423 (5.373.700.672) Motor vehicles ...... (9.909.746) (853.914) — 1.115.531 (9.648.129) Furniture and fixtures . (57.753.151) (4.980.749) — 546.437 (62.187.463) Other fixed assets . . . (996.152) — — — (996.152) Leasehold improvements ..... (404.795) (184.499) — — (589.294) (5.534.605.362) (122.153.345) — 18.900.391 (5.637.858.316) Net book value ..... 2.276.634.074 1.903.849.406

F-122 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

12. Property, plant and equipment (Continued)

December 31, December 31 2014 Additions Transfers Disposals 2015 Cost: Land ...... 13.208.763 321.464 (8.177) — 13.522.050 Land improvements ...... 108.396.415 — 5.561.156 — 113.957.571 Buildings ...... 169.032.795 — 2.585.248 — 171.618.043 Machinery and equipment . . . 6.381.145.390 — 55.110.339 — 6.436.255.729 Motor vehicles ...... 10.576.693 — 1.771.691 (29.115) 12.319.269 Furniture and fixtures ...... 67.789.913 — 6.939.741 (26.848) 74.702.806 Other fixed assets ...... 996.152 — — — 996.152 Leasehold improvements . . . 581.831 — — — 581.831 Construction in progress .... 488.649.086 574.587.332 (75.762.598) (187.835) 987.285.985 7.240.377.038 574.908.796 (3.802.600) 243.798 7.811.239.436 Accumulated depreciation: Land improvements ...... (82.575.675) (2.513.804) — — (85.089.479) Buildings ...... (95.524.377) (3.656.754) — (295) (99.181.426) Machinery and equipment . . . (5.179.977.175) (101.293.438) — — (5.281.270.613) Motor vehicles ...... (9.276.064) (662.797) — 29.115 (9.909.746) Furniture and fixtures ...... (54.532.020) (3.247.840) — 26.709 (57.753.151) Other fixed assets ...... (996.152) — — — (996.152) Leasehold improvements . . . (210.852) (193.943) — — (404.795) (5.423.092.315) (111.568.576) — 55.529 (5.534.605.362) Net book value ...... 1.817.284.723 2.276.634.074

As of December 31, 2016, transfers amounting to TL 935.876.396 is transferred to intangible asset (December 31, 2015 TL 3.802.600), TL 928.944.390 is transferred to investment properties (December 31, 2015 TL 8.177) (Note 11 and 13). The Group compared the investment loans in foreign currency to the TL market loan interest and capitalized the borrowing cost amounting to TL 121.213.650 (December 31 2015—TL 55.676.557). The rate that group has used to determine the capitalized finance cost is 16,579% (December 31, 2015— 15,41%) which is weighted average effective interest rate of the investment loans. Depreciation charges amounting to TL 122.153.345 for the year ended December 31, 2016 (December 31, 2015—TL—111.568.576) were allocated to cost of sales by TL 97.320.770 (December 31, 2015—TL—90.846.512), to idle capacity expenses by TL 6.992.975 (December 31, 2015—TL—8.554.895), to inventories by TL 9.948.694 (December 31, 2015—TL 5.153.090), to general administrative expenses by TL 6.371.129 (December 31, 2015—TL 6.276.974), to marketing, selling and distribution expenses by TL 772.786 (December 31, 2015—TL 492.489), and to research and development expenses by TL 746.992 (December 31, 2015—TL 244.616). The major part of the additions to machinery and equipment as of December 31, 2016 related to the modernization of production facilities and machineries which are classified under construction in progress as of December 31, 2015 and completed in year 2016. The Group’s management plans to increase the efficiency and environmental compliance with these investments. Construction in progress as of December 31, 2016 has similar characteristics with previous year’s construction in progress. As of December 31, 2016, Petlim Limancılık Ticaret A.¸S. has given 1st degree mortgage in favor of Akbank T.A.¸S. on its land amounting to USD 350 million on the date of November 20, 2015 (December 31, 2015—USD 350 million). A mortgage on the land of Petkim was established for Socar Turkey Enerji A.¸S. amounting to USD 50 million (31 December 2015: USD 50 million).

F-123 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

13. Intangible assets The movements of intangible assets and related accumulated amortization for the years ended December 31, 2016 and 2015 are as follows:

December 31, December 31 2015 Additions Transfers Disposals 2016 Cost: Rights and software ...... 28.703.310 — 932.139 — 29.635.449 Capitalized development costs . . 1.567.320 5.999.867 7.567.187 30.270.630 — 6.932.006 — 37.202.636 Accumulated amortization: Rights and software ...... (11.825.758) (2.064.634) — — (13.890.392) Capitalized development costs . . (117.203) (796.371) (913.574) (11.942.961) (2.861.005) — — (14.803.966) Net book value ...... 18.327.669 22.398.670

December 31, December 31 2014 Additions Transfers Disposals 2015 Cost: Rights and software ...... 26.476.207 — 2.227.103 — 28.703.310 Capitalized development costs . . . — — 1.567.320 — 1.567.320 26.476.207 — 3.794.423 — 30.270.630 Accumulated amortization: Rights and software ...... (9.778.835) (2.046.923) — — (11.825.758) Capitalized development costs . . . — (117.203) — — (117.203) (9.778.835) (2.164.126) — — (11.942.961) Net book value ...... 16.697.372 18.327.669

There is no mortgage on intangible assets as of December 31, 2016 (31 December, 2015—None). Amortization charges amounting to TL 2.861.005 (31 December 2015—2.164.126 TL) for the year ended December 31, 2016 were allocated to cost of sales by TL 1.149.033 (31 December 2015—568.567 TL), to research and development expenses by TL 139.854 (31 December 2015—59.177 TL), and to general administrative expenses by TL 1.572.118 (31 December 2015—1.536.382TL).

14. Government grants As of December 31, 2016, government grants consist of research and development incentives granted from TUB¨ ˙ITAK amounting to TL 1.732.189 (31 December 2015: 1.539.637TL) and TL 192.552 (31 December 2015: 132.275 TL) of that incentives grant has been presented in income statement.

15. Provisions, contingent assets and liabilities a) Short-term provisions:

December 31, December 31, 2016 2015 Provision for litigation ...... 1.383.579 942.746 1.383.579 942.746

F-124 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

15. Provisions, contingent assets and liabilities (Continued) The movement of the provision for litigation is as follows:

2016 2015 January 1 ...... 942.746 1.986.226 Change in the period ...... 492.319 10.537 Paid in the period ...... (51.486) (1.054.017) December 31 ...... 1.383.579 942.746

The details of guarantees received as of December 31, 2016 and December 31, 2015 are as follows Allocation of the letters of guarantee received in terms of currency type is as follows: b) Guarantees received:

December 31, December 31, 2016 2015 Bank guarantees within the context of DOCS ...... 491.942.679 599.275.848 Letters of guarantee received from customers ...... 288.961.642 310.208.811 Letters of guarantee received from suppliers ...... 183.424.856 167.392.899 Letters of credit received ...... 96.013.037 34.957.071 Receivable insurance ...... 84.503.722 76.290.860 Mortgages ...... 2.000.000 2.000.000 Policies received ...... 1.502.374 1.000.000 Cheques received ...... — 801.072 1.148.348.310 1.191.926.561

Allocation of the letters of guarantee received in terms of currency type is as follows:

December 31, 2016 December 31, 2015 Original Original currency TL Amount currency TL Amount Turkish Lira ...... — 632.430.106 — 739.630.915 US Dollar ...... 90.936.709 320.024.466 97.758.658 284.243.074 Euro ...... 52.802.970 195.893.738 52.860.611 167.969.878 Japanese Yen ...... ——1.737.553 41.837 British Pound ...... ——9.500 40.857 1.148.348.310 1.191.926.561 c) Guarantees given:

December 31, December 31, 2016 2015 Letters of guarantee given ...... 758.698.549 438.767.502 758.698.549 438.767.502

F-125 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

15. Provisions, contingent assets and liabilities (Continued) Collaterals, Pledges and Mortgages (‘‘CPM’’) provided by the Company:

December 31, December 31, 2016 2015 A. Total amount of CPMs given for the Company’s own legal personality ...... 758.698.549 438.767.502 B. Total amount of CPMs given on behalf of fully consolidated companies(*) ...... 691.827.728 571.595.334 C. Total amount of CPMs given for continuation of its economic activities on behalf of third parties ...... 175.960.000 120.665.400 D. Total amount of other CPMs ...... i. Total amount of CPMs given on behalf of the majority shareholder ...... ii. Total amount of CPMs given to on behalf of other group companies which are not in scope of B and C...... — — iii. Total amount of CPMs given on behalf of third parties which are not in scope of C...... — — A. Total amount of CPMs given for the Company’s own legal personality ...... — — 1.626.486.277 1.131.028.236

(*) Petlim Limancılık Ticaret A.¸S., which the group owns its %70 shares, has signed a project finance credit agreement with AKBANK T.A.¸S. at an amount of USD 212 million which has 13 years maturity with the first 3 years no repayment period, for the external funding of the container port project. Petkim has guaranteed the loan repayment and also amounting to 105 M TL which is its shares in Petlim Limancılık Ticaret A.¸S has been pledged. The project has financial ration liabilities that are valid during the operating period. On 20 November 2015, a mortgage amounting to USD 350 million was established by Petkim on Petlim’s land sold at a price of TL 5.650.000. The details of guarantees given as of December 31, 2016 and December 31, 2015 are as follows.

December 31, December 31, 2016 2015 Mortgages given to banks ...... 867.787.728 692.260.734 Guarantees given to banks ...... 585.141.407 277.805.781 Customs offices ...... 50.099.000 46.664.800 Turkiye¨ Elektrik Ticaret ve Taahhut¨ A.¸S...... 8.478.465 8.478.465 EMRA...... 5.600.000 5.600.000 Other ...... 109.379.677 100.218.456 1.626.486.277 1.131.028.236

Allocation of the letters of guarantee given in terms of currency type as of December 31, 2016 and December 31, 2015 are as follows:

December 31, 2016 December 31, 2015 Original currency TL Amount Original currency TL Amount US Dollar ...... 395.755.252 1.392.741.883 318.093.104 924.887.510 Euro ...... 50.000.000 185.495.000 50.627.045 160.872.500 Turkish Lira ...... — 48.249.394 — 45.268.226 1.626.486.277 1.131.028.236

F-126 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

15. Provisions, contingent assets and liabilities (Continued) Annual income plans and amounts (not discounted) regarding to the operational lease income, which are not recognized in the consolidated financial statements of the Group as of December 31, 2016 as follows:

Operational leases income 2016 2015 First 5 years ...... 313.956.394 199.203.971 5–10 years ...... 905.531.484 607.145.186 10 years and more ...... 1.926.964.074 1.739.653.261 Total ...... 3.146.451.952 2.546.002.418

Operational leases expense 2016 2015 0–1 year ...... 12.878.087 12.878.087 1–5 years ...... 4.292.695 17.170.782 Total ...... 17.170.782 30.048.869

The group has signed an operational leasing contract for naphtha tank to be effective between December 1, 2014 and April 30, 2018 at the date of December 30, 2014. STAR has rented out tanks, owned by it, and discounted amounting TL 44.000.129 + VAT for over entire duration within the context of that contract. STAR has obtained a valuation report regarding usage right value of tank within period of rent from an independent firm so as to determine fair value of related rent process. Net book value of the net rent income from tanks between December 1, 2014 and April 20, 2018, is in the range of TL 40.0000.000 TL 45.000.000. The Group signed a construction contract with a real estate company for the construction of new headquarter building which is planned to be built on its own land. In 2016, an advance payment amounting to USD 11 million has been made to real estate development company in scope of aforementioned contract and other supplementary protocols, however; the construction has not been completed with respect to decision taken on Board of Directors meeting held on December 15, 2016. It is decided to terminate aforementioned contract since the real estate company has not fulfilled its commitments mentioned in the contract in due time and an allowance related to given advances amounting to USD 11 million presented under long term prepaid expenses is recognized as of December 31, 2016 (Note 19). As of the approval of consolidated financial statements, there is an uncertainty about how the above mentioned head office construction will be completed and recognized in the Company’s accounts, and it will be determined based on the assessments of alternative completion plans of the construction.

16. Commitments As of July 25, 2014, the Group has signed a contract with STAR Rafineri A.¸S. whose main shareholder is SOCAR Turkey Enerji A.¸S. which is main shareholder of Petkim in the direction of purchasing naphtha approximately amounting to 1.600.000 tons per year and xysilen amounting to 270.000 tons per year for 20 years from STAR Rafineri which will be landed at Petkim Peninsula in order to ensure supply security and reduce costs. This contract has disclosed on PDP (Public Disclosure Platform) at the same date with contract. In addition, the Group has signed a cooperation contract with STAR Rafineri A.¸S. at the mentioned date and accordance with that contract the Group is going to sell steam for 20 years and serve solid and hazardous waste disposal, supply of workers on temporary duty and security services to STAR Rafineri which will be established by STAR Rafineri A.¸S. at Petkim Peninsula.

F-127 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

17. Employee benefits i) Short-term employee benefits:

December 31, December 31, 2016 2015 Provision for seniority incentive bonus ...... 2.617.402 3.027.856 Performance management bonus(*) ...... — 10.000.000 2.617.402 13.027.856 ii) Long-term employee benefits:

Provision for employment termination benefits ...... 79.216.848 78.796.553 Provision for unused vacation rights ...... 8.867.379 7.686.675 Provision for seniority incentive bonus ...... 3.224.095 2.643.707 91.308.322 89.126.935

(*) Provision for performance premium of personnel is presented under short term provisions account group in scope of employee benefits at the end of 2015 and it has been paid in 2016. Performance premium, which shall be paid to personnel, amounting to TL 9.524.380 as of December 31, 2016 is accrued under payables account in scope of employee benefits since the actual payment was made in February 2017 (Note 20).

Unused vacation rights Movements of the provision for unused vacation rights are as follows:

2016 2015 January 1 ...... 7.686.675 6.547.365 Charge for the period, net ...... 1.180.704 1.139.310 December 31 ...... 8.867.379 7.686.675

Performance management bonus Movements of the provision for performance management bonus are as follows:

2016 2015 January 1 ...... 10.000.000 — Payments in the period ...... (7.331.766) — Additions/ (no longer required), net ...... (2.668.234) 10.000.000 — 10.000.000

Provision for employment termination benefits Under Turkish Labour Law, the Group is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, or who is called up for military service, dies or retires after completing 25 years of service (20 years for women). The amount payable consists of one month’s salary limited to a maximum of TL 4.297,21 for each year of service as of December 31, 2016 (December 31, 2015—TL 3.828,37). The liability is not funded, as there is no funding requirement. The provision is calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees.

F-128 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

17. Employee benefits (Continued) IAS 19 requires actuarial valuation methods to be developed to estimate the enterprises’ obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:

December 31, December 31, 2016 2015 Discount rate (%) ...... 3,61 3,80 Probability of retirement (%) ...... 100,00 100,00 The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. As the maximum liability is revised semi-annually, the maximum amount of TL 4.426,16, which is effective from January 1, 2017, has been taken into consideration in the calculation of employment termination benefits of the Group (January 1, 2016—TL 4.092,53TL) The movements of the provision for seniority incentive bonus are as follows:

2016 2015 January 1 ...... 78.796.553 69.911.457 Interest cost ...... 7.091.690 2.656.636 Actuarial loss ...... 1.283.136 10.549.840 Service cost ...... 5.965.556 3.146.581 Payments during the year ...... (13.920.087) (7.467.961) December 31 ...... 79.216.848 78.796.553

Sensitivity analysis of the assumptions, that are used in order to calculate the provision of the employment termination benefit as December 31, 2016 and 2015, are follows:

December 31, 2016 December 31, 2015 Net discount rate Net discount rate 100 basis 100 basis 100 basis 100 basis point point point point Sensitivity analysis increase decrease increase decrease Rate ...... %4,61 %2,61 %4,80 %2,80 Change in liability of employment termination benefit ...... (4.641.699) 5.818.827 (2.941.096) 3.583.922

F-129 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

17. Employee benefits (Continued) For the non-union personnel working at the Group, the bonus amounting to 40 days of gross salary for 5 years seniority, 50 days of gross salary for 10 years seniority, 65 days of gross salary for 15 years seniority, 80 days of gross salary for 20 years seniority, 90 days of gross salary for 25 years and 100 days for 30 years seniority for the seniority levels in which they are entitled as of the aforementioned date and 30 days of gross salary for the following seniority levels that they are going to be entitled is paid with the gross salary of the month when they are reached to the seniority level. In case of termination of employment for any reason that does not prevent gaining severance pay, 20% of seniority incentive which the employee will gain, for each year last first seniority incentive level. In this calculation the periods which are shorter than 6 month are not considered. Periods which are more than 6 month are considered as 1 year. The seniority incentive bonus provision is calculated by estimating the present value of the future probable obligation arising from the qualification of the employees for the bonus. The movements of the provision for seniority incentive bonus are as follows:

2016 2015 January 1 ...... 5.671.563 5.648.537 Interest cost ...... 510.441 214.644 Service cost ...... 4.174.975 4.492.288 Payments during the year ...... (4.515.482) (4.683.906) December 31 ...... 5.841.497 5.671.563

18. Deferred Income a) Short-term deferred income:

December 31, December 31, 2016 2015 Order advances received ...... 28.820.322 18.740.926 Deferred income(*) ...... 6.126.429 3.184.151 34.946.751 21.925.077 b) Long-term deferred income:

December 31, December 31, 2016 2015 Long-term deferred income(*) ...... 120.807.592 54.794.114 120.807.592 54.794.114

(*) For a container port to be established inside Petkim facilities to be operated by APM Terminalleri Liman ˙I¸sletmeciligi˘ A.¸S. (APM Terminalleri), an operation agreement was signed between the Group and APMT BV. and APM Terminalleri on February 22, 2013. Under the agreement, the operations of the project developed by the Petlim will be performed by APM Terminals. The amount paid by the Group APM Terminals TL 5.095.741 in short-term deferred revenue 119.749.903 TL is followed till date to start operating in long-term deferred revenues. Deferred income shall be recorded as income on a straight line basis over the operating period.

F-130 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

19. Prepaid expenses a) Short-term prepaid expenses

December 31, December 31, 2016 2015 Advances given for inventories ...... 587.442 20.311.017 Advances given for customs affairs ...... 3.599.354 10.201.986 Prepaid rent, insurance and other expenses ...... 14.850.908 8.956.615 19.037.704 39.469.618 b) Long-term prepaid expenses

December 31, December 31, 2016 2015 Advances given for fixed assets(*) ...... 76.651.061 77.713.952 Advances given for custom works ...... 12.772.125 12.772.125 Prepaid rent, insurance and other expenses ...... 2.131.361 2.218.840 91.554.547 92.704.917 Provision for doubtful advances given(**) ...... (31.807.000) — 59.747.547 92.704.917

(*) A large part of the amount constituting the advance has been given tangible assets under the Wind Power Plant Project. (**) As disclosed in Note 15, there is an advance payment amounting to TL 31.807.000 made by the Group in scope of head office building construction. The legal follow up is ongoing against to the entity which, the impairment provision is recognized for the advances given in 2016.

20. Liabilities for employee benefits

December 31, December 31, 2016 2015 Due to personnel ...... 10.873.080 8.220.279 Personnel performance bonus accrual (Note 17) ...... 9.524.380 — Social security contribution ...... 5.032.032 4.622.508 25.429.492 12.842.787

21. Other assets and liabilities i) Other assets

December 31, December 31, 2016 2015 a) Other current assets: Value added tax (‘‘VAT’’) receivable ...... 42.714.395 33.899.334 Other ...... 1.062.999 1.197.141 43.777.394 35.096.475

F-131 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

21. Other assets and liabilities (Continued)

December 31, December 31, 2016 2015 b) Other non-current assets: Value added tax (‘‘VAT’’) receivable ...... — 26.660.801 Spare parts ...... 12.110.315 12.539.243 Other ...... 122.039 122.284 12.232.354 39.322.328 ii) Other liabilities

December 31, December 31, 2016 2015 a) Other short-term liabilities: Taxes and funds payable and other deductions ...... 7.277.511 6.136.077 Other ...... 699.008 359.334 7.976.519 6.495.411

22. Equity The shareholders of the Company and their shareholdings as of December 31, 2016 and 2015 were as follows:

December 31, 2016 December 31, 2015 Group: Shareholder: Amount Share (%) Amount Share (%) A Socar Turkey Petrokimya A.¸S. .... 765.000.000 51,00 765.000.000 51,00 A Public owned(*) ...... 735.000.000 49,00 655.176.478 43,68 A SOCAR Turkey Enerji A.¸S...... ——79.823.522 5,32 C Privatization Administration ...... 0,01 — 0,01 — Total paid share capital ...... 1.500.000.000 100 1.500.000.000 100 Adjustment to share capital ...... 238.988.496 238.988.496 Total share capital ...... 1.738.988.496 1.738.988.496

(*) SOCAR Turkey Enerji A.¸S. traded on a public BIST part; it has a rate of 1.32% per share 19.823.521,64 (December 31, 2015: rate 2,75% per share 41.278.401,47). Adjustment to share capital represents the difference between the amounts of cash and cash equivalents contributions, restated for inflation, to share capital and the amounts before the restatement. As the board of directories meeting decision taken at the December 8, 2015 in the registered capital ceiling of TL 4.000.000.000, increased 50% of the issued share capital and reached from TL 1.000.000.000 to TL 1.500.000.000. Capital increase consists from adjustments to share capital amounting to TL 247.863.787 and special fund amounting to TL 252.136.213. Group A registered shares, issued per procuration of the capital increased at an amount of TL 500.000.000, are distributed to shareholders in due form. Approved and issued capital of the Company consist of 149.999.999.999 Group A shares, each of them having a registered nominal price of 1Kr, and 1 Group C preferred stock belonging to Management (December 31, 2015—Approved and issued capital of the Company consist of 149.999.999.999 Group A shares, each of them having a registered nominal price of 1Kr, and 1 Group C preferred stock belonging to Management).

F-132 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

22. Equity (Continued) Capital of the Company is composed of all registered shares (December 31, 2015—All registered). The following matters are subject to the approval of the member of the Board of Directors representing the C type share: • The amendments on the articles of association affecting the privileges of type C, • The recording of the transfer of the registered shares in the stock ledger, • The determination of the form of the certificate of authority stated in the 31st clause of the Articles of Association, • The decision related with the reduction of the capacity of any plant by 10% owned by the Company • The foundation of new company or partnership, acquisition of a company being a partner of existing companies and/or merging with them, spin-off, changes of the titles, annulment and winding-up.

Dividend distribution Listed companies shall distribute their profit in accordance with the Capital Market Board’s Communique´ on Dividends II-19.1 which is effective from February 1, 2014. Companies shall distribute their profits as part of the profit distribution policies to be determined by their general assemblies and in accordance with the related regulation provisions. A minimum distribution rate has not been determined in these regulations. The companies pay dividends as determined in their main agreements or profit distribution policies. Furthermore, dividends may be paid in instalments with same or different amounts and profit share advances may be distributed over the profit in the interim financial statements. In accordance with the Turkish Commercial Code (TCC), no decision may be made to set aside other reserves, to transfer profits to the subsequent year or to distribute dividends to the holders of a usufruct right certificate, to the members of the board of directors or to the employees unless the required reserves and the dividend for shareholders as determined in the main agreement or in the dividend distribution policy of the company are set aside; and no dividend can be distributed to these persons unless the determined dividend for shareholders is paid in cash. The dividend distribution policy of the Company has been determined in accordance with the Communique´ on Dividends II-19-1 as follows: • In line with the determination of Profit Distribution Policy in 2013 and in the forthcoming years; the Company, in principle, accepts to distribute profits in cash to shareholders at the maximum level without disregarding its medium term and long term strategies, investment and financial plans, market conditions, and economic developments. • According to the Article numbered 37 of Association of the Company, dividends in advance can be distributed. • In the event that distributable profit is available in accordance with relevant communiques,´ the Profit Distribution resolution to be taken by the Board of Directors in the form of cash and/or shares and/or installments as long as the amount is not below than 50% of the distributable profit within the frame of the provisions of Capital Market Legislation and Turkish Commercial Code shall be submitted to the approval of General Assembly; and the distribution shall be completed within legal terms. • According to the Articles of Association of the Company, the amount to be determined by the General Assembly, not exceeding the 0,1% of distributable profits remaining after distribution of first dividend shall be distributed to Board Members.

F-133 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

22. Equity (Continued) • A consistent policy shall be followed between the benefits of the shareholders’ and the company in the application of Profit Distribution Policy. • The date of distribution shall be decided by General Assembly upon proposal of the Board. Profit distribution payments shall be completed within legal terms. For other methods of profit distribution, relevant legislation, communiques,´ and regulations of CMB shall be followed. • In the event that calculated ‘‘net distributable profit for the year’’ is below 5% of issued capital, no profit shall be distributed. • When no profit is distributed, the Board of Directors shall inform the shareholders at General Assembly meeting about the reasons and how the undistributed profits would be allocated. A provision in the main agreement is required for dividend to be distributable to holders of privileged shares, holders of usufruct right certificate, to the members of the board of directors, to the employees of the company and to non-shareholders. If, despite the fact that a provision is present in the main agreement regarding dividend distribution to these persons, a rate has not been determined, the dividend to be distributed to these persons may not exceed one fourth of the dividend distributed to shareholders under any circumstance except for those arising from privilege. In accordance with the Communique´ No:XI-29 and related announcements of CMB, effective from January 1, 2008, ‘‘Share Capital’’, ‘‘Restricted Reserves’’ and ‘‘Share Premiums’’ shall be carried at their statutory amount. The valuation differences shall be classified as follows: • the difference arising from the ‘‘Paid-in Capital’’ and not been transferred to capital yet, shall be classified under the ‘‘Inflation Adjustment to Share Capital’’; • the difference due to the inflation adjustment of ‘‘Restricted reserves’’ and ‘‘Share premium’’ and the amount has not been utilized in dividend distribution or capital increase yet, shall be classified under ‘‘Retained earnings’’. Other equity items shall be carried at the amounts calculated based on CMB Financial Reporting Standards. Adjustment to share capital has no use other than being transferred to paid-in share capital. Composition of the equity items subject to the profit distribution as per statutory financial statements of the Company is as follows:

December 31, December 31, 2016 2015 Legal reserves and special funds ...... 462.881.373 362.011.604 Net profit for the year ...... 702.820.967 573.177.217 1.165.702.340 935.188.821

In the Ordinary General Meeting dated on March 28, 2016, it is decided that profit of the year 2015 amounting to TL 472.500.000 (2015: dividend is not paid) to be distributed by cash dividends (each with a nominal value of 1 kuru¸s 100 (the kr¸s 1 amount) gross per share dividend: 0,315 TL) After withholding of dividend payment amounting to TL 445.409.278 has been completed as of December 31, 2016.

F-134 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

23. Sales and cost of sales

January 1– January 1– December 31, 2016 December 31, 2015 Domestic sales ...... 3.206.977.195 3.179.567.385 Export sales ...... 1.367.236.573 1.387.171.847 Other ...... 30.995.483 52.395.088 4.605.209.251 4.619.134.320 Less: Other discounts ...... (58.242.332) (70.957.757) Less: Sales discounts ...... (10.423.739) (11.465.978) Less: Sales returns ...... (3.952.558) (4.074.616) Sales ...... 4.532.590.622 4.532.635.969 Raw material usage ...... (2.551.956.008) (2.576.139.932) Cost of sold trade goods ...... (383.046.853) (312.021.757) Energy ...... (320.841.953) (373.394.042) Labour ...... (198.593.556) (186.797.331) Depreciation ...... (105.462.778) (99.969.974) Idle capacity expense ...... (24.340.712) (30.456.850) Packaging costs ...... (16.811.355) (24.154.226) Change in work in process ...... 56.598.375 (96.039.610) Change in finished goods ...... 64.797.270 (41.784.479) Provision for impairment of inventories (Note 10) ...... 11.047.336 15.333.603 Other ...... (106.161.563) (88.941.199) Cost of sales ...... (3.574.771.797) (3.814.365.797) Gross profit ...... 957.818.825 718.270.172

Other sales and other discounts classified under sales are composed of sales price differences between the sales order and sales transaction date. The sales prices differences for and against the benefit of the Group have been classified in other sales and other discounts, respectively.

24. Research and development expenses, marketing, selling and distribution expenses, general administrative expenses

January 1– January 1– December 31, 2016 December 31, 2015 a) General administrative expenses: Personnel expenses ...... 53.020.777 51.451.579 Outsourced services ...... 40.362.019 28.611.550 Energy expenses ...... 11.574.115 11.901.743 Depreciation and amortization ...... 7.943.247 7.813.356 Taxes, funds and fees ...... 6.573.965 5.546.511 EMRA contribution share ...... 1.837.284 1.781.592 Other ...... 16.831.896 10.645.521 138.143.303 117.751.852

F-135 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

24. Research and development expenses, marketing, selling and distribution expenses, general administrative expenses (Continued)

January 1– January 1– December 31, 2016 December 31, 2015 b) Marketing, selling and distribution expenses: Outsourced services ...... 23.782.074 15.499.682 Personnel expenses ...... 11.952.846 12.057.731 Depreciation and amortization ...... 772.786 492.489 Other ...... 5.768.515 4.247.789 42.276.221 32.297.691 c) Research and development expenses: Personnel expenses ...... 9.478.000 9.610.605 Outsourced services ...... 1.060.937 549.265 Depreciation and amortization ...... 886.846 303.793 Other ...... 1.356.836 1.279.075 12.782.619 11.742.738 Total operating expenses ...... 193.202.143 161.792.281

25. Expenses by nature

January 1– January 1– December 31, 2016 December 31, 2015 Raw materials usage, changes in work-in-process and finished goods ...... 2.430.560.363 2.713.964.021 Cost of commercial goods sold ...... 383.046.853 312.021.757 Energy ...... 332.416.067 385.295.785 Personnel expenses ...... 273.045.179 259.917.246 Depreciation and amortization ...... 115.065.657 108.579.612 Outsourced services ...... 65.205.030 44.660.497 Idle capacity expense ...... 24.340.712 30.456.850 Employment termination benefits—net ...... 998.814 12.046.150 Provision for impairment of inventories (Note 10) ...... 143.295.265 109.216.160 3.767.973.940 3.976.158.078

F-136 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

26. Other operating income and expense

January 1– January 1– December 31, 2016 December 31, 2015 Other operating income: Foreign exchange gains on trade payables ...... 84.381.243 32.129.952 Interest income on trade receivables ...... 64.525.610 51.380.063 Foreign exchange gains on trade receivables ...... 33.109.934 28.307.903 Rent income ...... 11.841.318 9.820.013 Energy maintenance income ...... 4.255.660 1.646.829 Infrastructure income ...... 1.268.386 1.105.968 Income from insurance recoveries ...... 51.486 1.054.017 Rediscount income on trade payables ...... 370.037 — Other ...... 4.359.005 2.655.564 204.162.679 128.100.309

January 1– January 1– December 31, 2016 December 31, 2015 Other operating expense: Foreign exchange losses on trade payable ...... (170.522.339) (131.177.532) Allowance for advances given (Note 19) ...... (31.807.000) — Interest expense on trade payables ...... (13.979.647) (23.303.675) Rediscount expense on trade receivables ...... (9.094.381) (8.388.176) Provision for doubtful receivables (Note 7 and 8) ...... (2.409.040) (1.341.985) Foreign exchange losses on trade receivables ...... (2.112.670) (9.012.236) Compensation and penalty charges ...... (1.336.981) (1.697.115) Litigation allowance (Note 15) ...... (492.319) (10.537) Other ...... (8.290.381) (4.696.316) (240.044.758) (179.627.572)

27. Investment activities income and expense

January 1– January 1– December 31, 2016 December 31, 2015 Income from investment activities: Rent income ...... 16.756.265 10.968.926 Proceeds from sales of property, plant and equipment ...... 566.058 13.030 17.322.323 10.981.956

January 1– January 1– December 31, 2016 December 31, 2015 Expense from investment activities Impairment on non-current assets ...... (2.667.127) — Depreciation and amortization ...... (1.532.647) — Other ...... (12.812) — (4.212.586) —

F-137 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

28. Finance income

January 1– January 1– December 31, 2016 December 31, 2015 Foreign exchange gain(*) ...... 320.054.453 385.667.891 Interest income ...... 54.088.875 33.403.052 Other ...... 4.885.142 2.597.167 379.028.470 421.668.110

(*) Foreign exchange gain related to cash and cash equivalents, financial liabilities and other liabilities.

29. Finance costs

January 1– January 1– December 31, 2016 December 31, 2015 Foreign exchange loss(*) ...... (310.644.385) (338.723.003) Interest expense ...... (19.120.786) (21.268.003) Interest expense related to employee benefits ...... (7.602.130) (2.871.280) Bank commission expense ...... (1.622.265) (911.172) (338.989.566) (363.773.458)

(*) Foreign exchange gain related to cash and cash equivalents, financial liabilities and other liabilities

30. Tax assets and liabilities i) Corporation tax:

December 31, 2016 December 31, 2015 Current income tax expense ...... 163.030.686 19.213.253 Prepaid taxes and funds ...... (114.165.868) (9.529.198) Income tax payable ...... 48.864.818 9.684.055

As of December 31 Tax expense for the year ended are detailed below:

January 1– January 1– December 31, 2016 December 31, 2015 Current income tax expense ...... (163.030.686) (19.213.253) Deferred tax income / (expense) ...... 112.834.788 84.594.675 Total tax income (expense) ...... (50.195.898) 65.381.422

The corporation tax rate of the fiscal year 2016 is 20% (December 31, 2015—20%). Corporation tax is payable at a rate of 20% on the total income of the companies after adjusting for certain disallowable expenses, exempt income (exemption for participation in subsidiaries, exemption for investment incentive allowance etc.) and allowances (such as research and development expenditure allowances). Tax returns are open for five years from the beginning of the year that follows the date of filling during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Under the Turkish taxation system, tax losses can be carried forward to offset against future taxable income for up to five years. Tax losses cannot be carried back to offset profits from previous periods.

F-138 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

30. Tax assets and liabilities (Continued) Transfer pricing The Law No: 5520 Article 13, which made new arrangements to transfer pricing, was effective from January 1 2007. With the aforementioned law, considerable amendments have been made to transfer pricing regulations by taking EU and OECD transfer pricing guidelines as a basis. In this respect, corporations should set the prices in accordance with the arm’s length principle while entering into transactions regarding the sale or purchase of goods and services with related parties. Under the arm’s length principle within the new legislation related parties must set the transfer prices for purchase and sale of goods and services as if they would have been agreed between third parties. Depending on the circumstances, a choice of accepted methods in aforementioned law of arm’s length transaction has to be made by corporations for transactions with related parties. Corporations should keep the documentary evidence within the company representing how arm’s length price has been determined and the methodology that has been chosen by use of any fiscal records and calculations in case of any request by tax authorities. Besides, corporations must report transactions with related parties in a fiscal period. If a taxpayer enters into transactions regarding the sale or purchase of goods and services with related parties, where the prices are not set in accordance with the arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. The profit distributed in a disguised manner through transfer pricing completely or partially in the last day of the fiscal period when the circumstances defined in the 13th article occurred, will be assessed as distributed profit share or transferred amount to headquarter for limited taxpayers. After the distributed profit share is considered as net profit share and complemented to gross amount, deemed profit will be subject to corporate tax. Previous taxation processes will be revised accordingly by taxpayer who distributes disguised profit. In order to make adjustments in this respect, the taxes assessed in the name of the company distributing dividends in a disguised manner must be finalized and paid. The Company has prepared a transfer pricing report for fiscal year 2015 within the scope of transfer pricing legislation and is preparing a report for fiscal year 2016. The reconciliations of the taxation on income for the years ended December 31, 2016 and 2015 were as follows:

January 1– January 1– December 31, 2016 December 31, 2015 Profit before tax ...... 781.883.244 573.827.236 Statutory tax rate ...... %20 %20 Calculated tax expense based on effective tax rate ...... (156.376.649) (114.765.447) Reconciliation between the tax provision and calculated tax: Unrecognized deferred tax on current year tax loses ...... — (5.652.557) Unrecognized deferred tax on current year tax loses, used in current year ...... 6.662.907 — Deferred tax asset related to investment incentives ...... 98.231.086 185.921.936 Income exempt from tax ...... 1.898.119 1.316.288 Non-deductible expense ...... (3.400.477) (3.480.426) The effect of permanent adjustments ...... 2.515.064 2.357.105 Other ...... 274.052 (315.477) Total tax income (expense) reported in the profit or loss statement ...... (50.195.898) 65.381.422

F-139 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

30. Tax assets and liabilities (Continued) ii) Deferred taxes Deferred tax is determined by calculating the temporary differences between the carrying amounts of assets/liabilities in the financial statements and the corresponding tax bases, used in the computation of the taxable profit, using currently enacted tax rates For the companies operating in Turkey, deferred income taxes are calculated on temporary differences that are expected to be realized or settled based on the taxable income in future periods under the liability method using a principal tax rate of 20% (December 31, 2015—20%). Details of cumulative temporary differences and the resulting deferred income tax assets and liabilities provided as of December 31, 2016 and 2015 were as follows:

Deferred income tax assets/ Taxable temporary differences (liabilities) December 31, December 31, December 31, December 31, 2016 2015 2016 2015 Difference between the carrying values and tax bases of property, plant, equipment and intangible ...... (234.712.829) (314.955.950) (46.942.565) (62.991.190) Income accrual of hedging reserve . . (7.466.471) (1.646.432) (1.493.294) (329.286) Price difference correction ...... (1.578.140) — (315.628) — Adjustment to internal rate of return . . (1.450.884) (1.202.203) (290.177) (240.441) Incurred finance cost ...... (1.004.159) (633.967) (200.832) (126.794) Other ...... — (1.474.473) — (294.895) Deferred income tax liabilities ..... (246.212.483) (319.913.025) (49.242.496) (63.982.606) Unused investment incentives ...... 947.460.922 691.151.826 250.612.314 166.103.900 Employment termination benefits and seniority incentive bonus provision . 85.053.223 84.468.116 17.010.645 16.893.623 Deferred income related to the acquisition of the right to operate . . 74.386.834 4.455.528 14.877.367 891.106 Accrued expense of personnel bonus 9.524.380 10.000.000 1.904.876 2.000.000 Income/(expense) accrual of hedging reserve ı ...... 9.459.385 11.008.960 1.891.877 2.201.792 Provision for receivable rediscounts . . 9.094.536 8.388.021 1.818.907 1.677.604 Provision for unused vacation rights . 8.867.379 7.686.675 1.773.476 1.537.335 Letter of credit interest accrual and IRR adjustment ...... 5.195.490 5.689.407 1.039.098 1.137.883 Advances given foreign exchange rate correction ...... 5.040.411 — 1.008.083 — Rent allowance fee ...... 4.643.350 4.810.680 928.670 962.136 Impairment on non-current assets . . . 2.667.127 — 533.425 — Provision for legal cases ...... 1.383.579 891.260 276.716 178.252 Provision for doubtful receivables . . . 1.128.024 5.141.764 225.605 1.028.353 Inventory impairment ...... 998.814 12.158.681 199.763 2.431.736 Other ...... 528.306 1.426.916 105.661 285.383 Deferred income tax assets ...... 1.165.431.760 847.277.834 294.206.483 197.329.103 Deferred tax assets / (liabilities)— net ...... 244.963.987 133.346.497

F-140 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

30. Tax assets and liabilities (Continued) The movement of deferred income tax is as follows:

2016 2015 January 1 ...... 133.346.497 44.480.315 Recognized in the profit or loss statement ...... 112.834.788 84.594.675 Recognized in other comprehensive income ...... (1.217.298) 4.271.507 December 31 ...... 244.963.987 133.346.497

The Group obtained a strategic investment incentive certificate from TC Ministry of Economy for PTA capacity increase project on January 4, 2013. The Group will be able to deduct 50% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 90% as subject of deduction from corporate tax. As a result of request from TC Ministry of Economy for RES investment, the project was included in the scope of the strategic incentive certificate for the request made in April 20, 2015. The Group will be able to deduct 22.2% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 90% as subject of deduction from corporate tax. The group has TL 141.442.290 unused investment incentive within the scope of strategic investment incentive certificate as of December 31, 2016. In this context, as of December 31, 2016, the Group has recognized deferred tax asset, that can be used in following periods, amounting to TL 54.941.563. The Group has obtained regional investment incentive certificates from T.C. Ministry of Economy for factory modernization investment at the date of June 15, 2012. The Group will be able to deduct 50% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 15% as subject of deduction from corporate tax. The group has TL 58.339.019 unused investment incentive within the scope of strategic investment incentive certificate as of December 31, 2016. In this context, as of December 31, 2016, the Group has recognized deferred tax asset, that can be used in following periods, amounting to TL 8.750.853. The Group has obtained large scale of investment incentive certificate from T.C. Ministry of Economy for port project investments at the date of November 20, 2014. The Group will be able to deduct 25% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 50% as subject of deduction from corporate tax. The Group has TL 747.679.613 unused investment incentives within the scope of the port project investment certificate. In this context, as of December 31, 2016, the Group has recognized deferred tax asset, that can be used in following periods, amounting to TL 186.919.903 As a result of projections made as of December 31, 2016, total investment expenditures made within the scope of total investment incentive documents foreseen to be used in deduction of expected future financial income amounted to TL 947.460.922 (December 31, 2015—691.151.826 TL).

31. Earnings per share Companies can increase their share capital by making a pro-rata distribution of shares (‘‘bonus shares’’) to existing shareholders from retained earnings. For the purpose of earnings/(loss) per share computations, the weighted average number of shares outstanding during the year has been adjusted in respect of bonus shares issues without a corresponding change in resources, by giving them retroactive effect for the year in which they were issued and for each earlier year.

F-141 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

31. Earnings per share (Continued) Earnings per share is calculated by dividing net profit for the period to weighted average number of shares in issue during that period.

January 1– January 1– December 31, 2016 December 31, 2015 Net profit for the year attributable to equity holders of the parent ...... 725.786.278 626.378.793 Weighted average number of shares with nominal value of Kr 1 each (thousand) ...... 150.000.000 150.000.000 Earnings per share (per TL 1 equivalent to 100 units of share) ...... 0,4839 0,418

32. Transactions and balances with related parties Summary of the intercompany balances as of December 31, 2016 and 2015 and significant intercompany transactions were as follows: i) Balances with related parties:

December 31, 2016 December 31, 2015 a) Other receivables from related parties: STEA¸S(1)(*) ...... 13.169.638 255.041.322 STAR(2) ...... 1.149.900 — TANAP Dogalgaz˘ ˙Ileti¸sim A.¸S.(2) ...... 1.508 7.911 14.321.046 255.049.233 b) Long term other receivables from related parties: STEA¸S(1)(*) ...... 356.875.812 50.705.413 SOCAR Power Enerji Yatırımları A.¸S.(2)(**) ...... 66.429.849 54.500.611 423.305.661 105.206.024

(*) Related with the advances given to STEA¸S. Amounting to TL 13.169.638 consist of interest and other receivables. (**) Revenue from Socar Power Enerji Yatırımları A.¸S. consist from land sale and rent receivable amounting to TL 58.935.053, interest and other receivables amounting to TL 7.494.796.

December 31, 2016 December 31, 2015 c) Short term trade payable to related parties: SOCAR Gaz Ticareti A.¸S.(2) ...... 25.217.360 30.958.921 Petrokim Trading Ltd. (‘‘Petrokim’’)(2) ...... 3.675.964 — STEA¸S(1) ...... 404.943 — Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... 284.141 347.219 STAR(2) ...... 955 — SOCAR Power Enerji Yatırımları A.¸S.(2) ...... 1.474 — 29.584.837 31.306.140

F-142 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

32. Transactions and balances with related parties (Continued) Short term trade payables to related parties mainly arise from merchandise and LPG purchases. Average maturity for short term trade payables to related parties is 15 days. (December 31, 2015— 17 days.)

December 31, 2016 December 31, 2015 d) Other payables to related parties: STAR(2) ...... 26.363.285 1.257.480 STEA¸S(1) ...... — 405.652 Due to shareholders(1) ...... 87.116 87.305 26.450.401 1.750.437

(1) Shareholders of the Company (2) The related party entities controlled by the Parent

December 31, 2016 December 31, 2015 e) Short term deferred income from related parties STAR(2)(*) ...... 4.188.726 4.156.932 SOCAR Power Enerji Yatırımları A.¸S.(2) ...... 9.374 10.305 SOCAR Teknolojik C¸oz¨ umler¨ A.¸S.(2) ...... — 846 4.198.100 4.168.083 f) Long term deferred income from related parties STAR(2)(*) ...... 8.829.511 12.705.027 8.829.511 12.705.027

(*) Short term and long term deferred income from STAR, consists of rent income that arise from one shot cash collections of the Group at the beginning of rent agreement.

December 31, 2016 December 31, 2015 g) Short term prepaid expense to related party STAR(2)(*) ...... 12.878.087 12.878.087 12.878.087 12.878.087

December 31, 2016 December 31, 2015 h) Long term prepaid expense to related party STAR(2)(*) ...... 4.292.696 17.170.782 4.292.696 17.170.782

(*) The group has signed an operational leasing contract for 3 naphtha tanks to be effective between December 1, 2014 and April 30, 2018 at the date of December 30, 2014. STAR has rented out tanks, owned by it, and discounted amounting TL 44.00.129 + VAT for over entire duration within the context of that contract. STAR has invoiced to the Group about the rents in 2015 and the Group has paid the entire amount. STAR has worked with an independent firm to valuation that fair value of tank using and they’ve sent report to the Group. In this valuation report, the present value of net rental income has identified the range of TL 40.000.000 and TL 45.000.000 between the dates of December 1, 2014 and April 30, 2018. (1) Shareholders of the Company (2) The related party entities controlled by the Parent

F-143 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

32. Transactions and balances with related parties (Continued) ii) Transactions with related parties:

January 1– January 1– December 31, 2016 December 31, 2015 a) Finance costs/(income) from related party transactions—net: STEA¸S(1)(*) ...... 72.913.287 21.001.000 SOCAR Power Enerji Yatırımları A.¸S.(2)(*) ...... 12.980.191 12.048.247 STAR(2)(*) ...... 3.688.064 237.183 Petrokim(2) ...... (1.557.210) 312.581 Socar Gaz Ticareti A.¸S.(2) ...... (40.372) 23.147 SOCAR Azerikimya Production Union(2) ...... (466) 16.820 Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... (768) (39) 87.982.726 33.638.939

(*) Revenue from STAR consist from foreign exchange income from receivable amounting to TL 71.497, other income amounting to 3.619.562 TL, revenue from STEA¸S consists interest income from receivable amounting to TL 19.656.133, foreign exchange income amounting to TL 53.209.200 TL and TL 47.954 from other income. Amounting to TL 10.257.886 receivable from Socar Power consist foreign exchange gain, amounting to TL 2.720.170 from interest income and other income amounting to TL 2.135.

January ,1– January 1– December 31, 2016 December 31, 2015 b) Service and rent purchases from related parties: STAR(2) ...... 54.617.364 20.247.893 STEA¸S(1) ...... 14.039.230 12.254.380 SOCAR Power Enerji Yatırımları A.¸S.(2) ...... 1.323.074 642.891 69.979.668 33.145.164

Service and rent purchases from STAR consist from naphtha rent expense amounting to TL 12.878.087, other rental expenses amounting to TL 30.688.859, labour purchase amounting to TL 9.569.901 and other service purchases amounting to 1.480.517. All of service purchases from STEA¸S consist of invoices and expenses of STEA¸S staff, works on behalf of Petkim amounting to TL 13.454.526, and other purchases amounting to TL 584.702.

January ,1– January 1– December 31, 2016 December 31, 2015 c) Product purchase from related parties: SOCAR Gaz Ticareti A.¸S.(2) ...... 270.118.217 335.940.076 Petrokim(2) ...... 154.803.369 76.675.484 SOCAR Turkey Petrol Enerji Dagıtım˘ A.¸S.(2) ...... 6.888.558 793.187 Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... 1.318.812 1.406.934 433.128.956 414.815.681

(1) Shareholders of the Company (2) The related party entities controlled by the Parent

F-144 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

32. Transactions and balances with related parties (Continued) d) Goods and service provided to related parties:

January ,1– January 1– December 31, 2016 December 31, 2015 STAR(2) ...... 3.936.229 1.272.025 Petrokim(2) ...... 1.416.718 — STEA¸S(1) ...... 215.456 153.983 SOCAR Power Enerji Yatırımları A.¸S.(2) ...... 2.134 2.192 SOCAR Azerikimya Production Union(2) ...... — 1.013.489 TANAP Dogalgaz˘ ˙Ileti¸sim A.¸S.(2) ...... 275 — 5.570.812 2.441.689 e) Rent income from related parties: STAR(2)(*) ...... 19.314.475 15.789.543 Socar Power Enerji Yatırımları A.¸S.(2) ...... 21.296 21.893 Socar Teknolojik C¸oz¨ umler¨ A.¸S.(2) ...... 848 170 19.336.619 15.811.606

(*) Annual rent and other income which is related to the usufruct right given to the Star

January 1– January 1– December 31, 2016 December 31, 2015 f) Key management remuneration: i. Key management remuneration—short term: Payments for salary and seniority incentives ...... 9.832.237 7.319.469 9.832.237 7.319.469 ii. Key management emoluments—long term: Provision for employment termination benefits ...... 59.492 91.398 Provision for seniority incentives ...... — 49.980 Provision for unused vacation rights ...... 369.640 540.237 429.132 681.615 10.261.369 8.001.084

(1) Shareholders of the Company (2) Shareholders of the Company or Socar’s subsidiaries

F-145 te the quality of credits. s are managed by collecting ts sales policy, the Group obtains ts sales policy, arly monitored and financial position of ng aforementioned amounts. eceivables. Receivables —— 674.471.489 14.321.046 543.663.924— 16.471.360 1.267.188.405 1.972.452.300 658.268.403— ————— 14.321.046 16.471.360— 1.267.188.405— — 1.956.249.214 — 16.203.086 ————— — (6.789.901)—— 15.819.607 ————— — (15.819.607)— ————— —— — ————— — ————— — ————— — — 2.067.122 (2.067.122) — — — 543.663.924 — — — — (17.886.729) 17.886.729 16.203.086 (6.789.901) Trade receivables(1)Trade Other receivables parties parties parties parties deposits Total Related Third Related Third Bank S. and its subsidiaries (2)...... for the year ended December 31, 2016 ...... Petkim Petrokimya Holding A.¸ Petrokimya Petkim ...... Notes to the consolidated financial statements (Continued) ...... (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish ...... )...... )...... ...... —The part of net value covered with guarantees etc. —Impairment amount ( —The part of net value covered with guarantees etc. —Impairment amount ( Net book value of assets past due but not impaired(4) or impaired(3) —The part covered by guarantees etc. due (gross book value) —Past —Not due (gross book value) Net book value of financial assets neither past due nor impaired(3) Net book value of financial assets whose conditions are renegotiated, otherwise will be classified as past due Net book value of assets impaired Off-balance items exposed to credit risk Off-balance collaterals and by restricting the average risk range for counterparties (except intercompany) in every agreement. As part of i collateral at on amount of 100% total outstanding TL trade receivables from its customers. The use credit limits is regul the customers, past experiences, reputation in market and other factors are considered by Management order to evalua The credit risk exposure in terms of financial instruments as December 31, 2016 and 2015 were follows: December 31, 2016 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36) (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See 33. Financial instruments and financial risk management a) Credit risk: Holding of financial assets involves the risk that counterparties may be unable to meet terms agreements. These (1) receivables of the Group are mainly composed thermoplastic and fiber material sales. Trade (2) Unearned credit finance income and covered parts of due overdue receivables are taken into consideration while determini (3) Considering the past experiences, Group management believes that no additional credit risk for collection of these r —The part of maximum credit risk covered with guarantees etc. A. B. C. D. E. Maximum amount of credit risk exposed as reporting date (A+B+C+D+E)

F-146 ng aforementioned amounts. ast experiences. The aging of related amounts is as follows: eceivables. 9.198.5118.571.037 — — — — — — 9.198.511 8.571.037 14.544.081 — 933.608 — 15.477.689 Receivables (14.544.081) — (933.608) — (15.477.689) 489.584.768542.226.546 360.255.257 6.510.328 1.501.989.008 2.410.981.139 — — — 489.584.768 551.425.057 360.255.257 6.510.328 1.501.989.008 2.420.179.650 Trade receivables(1)Trade Other receivables S. and its subsidiaries parties parties parties Parties deposits Total Related Third Related Third Bank ...... — ...... — ...... — — — — — — ...... — ...... — — — — — — for the year ended December 31, 2016 ...... — — — — — — Petkim Petrokimya Holding A.¸ Petrokimya Petkim Notes to the consolidated financial statements (Continued) ...... — — — — — — ...... — (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish ...... — — — — — — ...... — ...... — — — — — — )...... — )...... — — — — — — (2)...... — —The part of net value covered with guarantees etc. —Impairment amount ( —The part of net value covered with guarantees etc. —Impairment amount ( Net book value of assets past due but not impaired(4) otherwise will be classified as past due or impaired(3) —The part covered by guarantees etc. due (gross book value) —Past (A+B+C+D+E) —Not due (gross book value) Net book value of financial assets neither past due nor impaired(3) Net book value of financial assets whose conditions are renegotiated, Net book value of assets impaired Off-balance items exposed to credit risk Off-balance C. A. B. D. —The part of maximum credit risk covered with guarantees etc. (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36) (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See 33. Financial instruments and financial risk management (Continued) December 31, 2015 Maximum amount of credit risk exposed as reporting date (1) receivables of the Group are mainly composed thermoplastic and fiber material sales. Trade (2) Unearned credit finance income and covered parts of due overdue receivables are taken into consideration while determini (3) Considering the past experiences, Group management believes that no additional credit risk for collection of these r E. (4) Group management; predict that there will not be any problems with the collection of overdue financial assets based on its p

F-147 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

33. Financial instruments and financial risk management (Continued) December 31, 2016

Trade receivables Total Total 1–30 days overdue ...... 6.235.936 6.235.936 1–3 months overdue ...... 1.013.659 1.013.659 Over 3 months overdue ...... 8.953.491 8.953.491 Total overdue receivables ...... 16.203.086 16.203.086 The part covered by the guarantees ...... (6.789.901) (6.789.901) 9.413.185 9.413.185

December 31, 2015

Trade receivables Third parties Total 1–30 days overdue ...... 6.895.763 6.895.763 1–3 months overdue ...... 337.254 337.254 Over 3 months overdue ...... 1.965.494 1.965.494 Total overdue receivables ...... 9.198.511 9.198.511 The part covered by the guarantees ...... (8.571.037) (8.571.037) 627.474 627.474 b) Liquidity Risk: Prudent liquidity risk management comprises maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The ability to fund the existing and prospective debt requirements is managed by maintaining the availability of fund providers’ lines from high-quality lenders. In order to maintain liquidity, the Group management closely monitors the collection of trade receivables on time in order to and to prevent any financial burden that may result from late collections and arranges cash and non-cash credit lines with

F-148 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

33. Financial instruments and financial risk management (Continued) banks for the use of the Group. The Group’s financial liabilities and liquidity analysis into relevant maturity groupings based on the remaining period as of December 31, 2016 and 2015 are as follows:

December 31, 2016:

F-149 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

33. Financial instruments and financial risk management (Continued) December 31, 2015:

Total cash outflows per agreement Less than Agreement terms Book value (=I+II+III) 3 months (I) 3–12 months (II) 1–5 years (III) Non-derivative financials liabilities Bank borrowings—short term ...... 319.638.074 327.561.178 21.227.096 306.334.082 — Bank borrowings—current maturity of long term loans ...... 41.912.519 82.613.437 18.072.847 64.540.590 — Bank borrowings—long term ...... 914.267.416 1.195.800.443 — — 1.195.800.443 Trade payables ...... 1.110.250.720 1.116.746.133 544.372.056 572.374.077 — Trade payables to related parties ...... 31.306.140 31.512.067 31.512.067 — — Other payables to related parties ...... 1.750.437 1.750.437 1.750.437 — — Other payables ...... 2.253.728 2.253.728 2.253.728 — — Short term liabilities for employee benefits .... 18.261.053 18.261.053 18.261.053 — — Total ...... 2.439.640.087 2.776.498.476 637.449.284 943.248.749 1.195.800.443 Derivative financial liabilities Derivative cash inflows . . 1.646.432 214.737.835 48.487.835 166.250.000 — Derivative cash outflows . (11.008.960) (101.173.412) (54.952.677) (28.137.649) (18.083.086) Derivative financials liabilities (net) ...... (11.008.960) 113.564.423 (6.464.842) 138.112.351 (18.083.086) c) Market Risk: i) Foreign exchange risk The Group is exposed to currency risk on assets or liabilities denominated in foreign currencies. Management has set up a policy to balance and manage their foreign exchange risk. Existing risks are followed in meetings held by the Group’s Audit Committee and Board of Directors and foreign currencies, closely in terms of the Group’s foreign exchange position. Although the raw materials, which comprise the significant portion of production and import volume, are foreign exchange-denominated cost items, the determination of sales prices by the Group in foreign exchange terms is a factor that decreases the foreign exchange risk in the cash flows

F-150 ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— 372.767 128.204 — — 986.794 — 310.547 — 48.766.889 16.772.21448.766.889 16.772.214 — — — — (25.490.797) (128.116.650) 109.207.602 1.023 914.267.416 247.484.680 61.266.667 — 276.604.032 59.998.638 32.147.530 — 192.210.599 61.512.953 4.203.026 — 914.267.416 247.484.680 61.266.667257.067.840257.067.840 — — — 80.900.000 80.900.000257.067.840 — — — 80.900.000 — (282.558.637) (128.116.650) 28.307.602 1.023 1.225.408.874 415.308.253 5.620.152 — 2.139.676.290 662.792.933 66.886.819 — 1.531.746.732 457.905.4311.808.350.764 63.046.891 1.023 517.904.069 95.194.421 1.023 1.857.117.653 534.676.2831.032.825.508 353.667.096 95.194.421 1.023 1.417.126 — December 31, 2016 December 31, 2015 S. and its subsidiaries ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— TL TL 1.556.304 163.660 264.252 — 325.687.680325.687.680 87.275.000 87.275.000 5.000.000 5.000.000 — 325.687.680 — 87.275.000 5.000.000 — 390.148.989 93.945.230 16.048.124365.195.175 — 103.772.214992.882.588 — 274.215.880426.603.295 113.575.590 7.139.375 327.913 7.253.047 — — 365.195.175 103.772.214 — — equivalent USD EUR Other Equivalent USD EUR Other (823.012.849) (166.074.363) (63.934.171) (327.416) (497.325.169) (78.799.363) (58.934.171) (327.416) 1.172.474.367 239.001.672 89.323.077 — 1.419.485.883 387.791.470 14.392.422 327.913 1.172.474.367 239.001.6722.591.960.250 626.793.142 89.323.077 103.715.499 327.913 — 1.013.603.237 263.001.335 23.733.204 497 1.768.947.401 460.718.779 39.781.328 497 1.403.752.226 356.946.565 39.781.328 497 ...... for the year ended December 31, 2016 Petkim Petrokimya Holding A.¸ Petrokimya Petkim ...... Notes to the consolidated financial statements (Continued) ...... (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish ...... 17+18) ...... ...... 15a) ...... ...... 14 ...... 13 ...... 11a ...... 10 ...... 9 ...... ...... 18b) (18a (=1+2a+4+5a 15a. Monetary other liabilities 2a. Monetary financial assets (Cash, bank accounts included) 11a. Monetary other liabilities 11b. Non-monetary other liabilities 12. Short-term liabilities (9+10+11) payables 13. Trade 14. Financial liabilities 15b. Non-monetary other liabilities 16. Long-term liabilities (13+14+15a+15b) liabilities (12+16) 17. Total sheet derivative instruments 18. Net (liability)/asset position of off-balance sheet derivative instruments 18a. Amount of asset nature off-balance sheet derivative Instruments 18b. Amount of liability nature off-balance 22. Hedged amount for current assets 23. Hedged amount for current liabilities 1. Trade receivables 1. Trade 2b. Non-monetary financial assets 3. Current assets (1+2) receivables 4. Trade 5a. Monetary financial assets 5b. Non-monetary financial assets 6. Other assets (3+7) 8. Total payables 9. Trade 10. Financial liabilities 19. Net foreign (liability) / asset position (8 20. Net foreign currency (liability) / asset position of monetary items (UFRS7.B23) fair value of financial instruments used for foreign currency hedging 21. Total (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36) (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See 33. Financial instruments and financial risk management (Continued) currency position Foreign 7. Non-current assets (4+5+6)

F-151 Profit/Loss Equity ———— (137.457) 137.457 — — (137.457) 137.457 — — 1.854.950 (1.854.950) — — 30.713.818 (30.713.818) — — (58.444.890) 58.444.890(27.731.072) 27.731.072(23.718.938) — 23.718.938 — — — — — (21.863.988) 21.863.988 — — (49.732.517) 49.732.517 — — Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency S. and its subsidiaries ...... for the year ended December 31, 2016 ) ...... Petkim Petrokimya Holding A.¸ Petrokimya Petkim Notes to the consolidated financial statements (Continued) ...... (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish ) ...... ) ...... ...... Total (3+6+9) Total 3-USD effect—net (1+2) 2-The part hedged for USD risk ( 2-The Change of EUR by 10% against TL: 4-Asset/Liability denominated in EUR—net part hedged for EUR risk ( 5-The 6-EUR effect—net (4+5) (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36) (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See 33. Financial instruments and financial risk management (Continued) of sensitivity analysis for foreign currency risk: Table December 31, 2016 Change of USD by 10% against TL: 1-Asset/Liability denominated in USD—net Change of other currencies by 10% against TL: 7-Assets/liabilities denominated in other foreign currencies—net part hedged for other foreign currency risk ( 8-The 9-Other foreign currency effect—net (7+8)

F-152 (309)(309) — — — — Profit/Loss Equity 8.995.024 (8.995.024) — — (2.549.080) 2.549.080 — — 25.706.78434.701.808 (25.706.784) (34.701.808) — — — — (37.251.197) 37.251.197 — — (37.251.197) 37.251.197 — — Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency S. and its subsidiaries ...... 309 for the year ended December 31, 2016 ) ...... — — — — Petkim Petrokimya Holding A.¸ Petrokimya Petkim Notes to the consolidated financial statements (Continued) ...... 309 ...... (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish ) ...... — — — — ) ...... ...... Total (3+6+9) Total 9-Other foreign currency effect—net (7+8) 8-The part hedged for other foreign currency risk ( 8-The (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36) (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See 33. Financial instruments and financial risk management (Continued) December 31, 2015 Change of USD by 10% against TL: 1-Asset/Liability denominated in USD—net 2-The part hedged for USD risk ( 2-The 3-USD effect—net (1+2) part hedged for EUR risk ( 5-The 6-EUR effect—net (4+5) Change of other currencies by 10% against TL: 7-Assets/liabilities denominated in other foreign currencies—net Change of EUR by 10% against TL: 4-Asset/Liability denominated in EUR—net

F-153 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

33. Financial instruments and financial risk management (Continued) The total export and import amounts from Turkey for the years ended December 31 are as follows:

2016 2015 Original amount TL Original amount TL USD...... 239.964.703 736.735.103 276.737.097 760.997.731 EUR...... 182.543.988 613.510.009 199.984.546 613.411.516 Total export ...... 1.350.245.112 1.374.409.247 USD...... 934.910.668 2.818.264.560 772.743.974 2.089.975.758 EUR...... 42.161.459 141.096.281 26.847.943 80.082.894 British Sterling ...... 960.874 3.907.898 815.364 3.311.364 Japanese Yen ...... 350.586.584 10.302.785 155.575.210 3.712.495 Swiss Frank ...... 1.090.198 3.330.522 77.111 227.838 Total import ...... 2.976.902.046 2.177.310.349 ii) Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. These exposures are managed by balancing interest rate sensitive assets and liabilities. The Group’s interest rate position as of December 31, 2016 and 2015 is presented below:

2016 2015 Financial instruments with fixed interest rate Financial liabilities —USD financial liabilities ...... 150.804.153 125.792.463 —EUR financial liabilities ...... 74.195.279 63.552.000 —TL financial liabilities ...... 90.591.326 159.744.159 Financial instruments with variable interest rate —USD financial liabilities ...... 1.089.659.334 769.924.450 —EUR financial liabilities ...... 282.941.706 143.410.917 For the year round, if the interest rates increase/decrease by 100 base points ceteris paribus, the interest expense will change by +/() 6.807.733 TL (December 31, 2015—3.417.400 TL). iii) Price risk The Group’s operational profitability and cash inflows from its operations are exposed to risk arising from fluctuations in naphtha prices which are affected by competition in the petrochemical sector and raw material prices. The Group management manages the risk by regularly reviewing the amount of inventory held on hand and takes action for cost reduction to decrease the pressure of cost on the prices. Existing risks are monitored through regular meetings by the Group’s Board of Directors. The Group sets its sales prices considering certain indicators of petrochemical products in domestic and foreign markets. The changes in foreign markets are monitored through the worldwide publications comparing most attainable competitive market prices of Western Europe, Asia and US contract, spot and factory prices and computing actual import costs to Turkey. While the Group determines the domestic market prices, it considers the indicators such as price information obtained from the market players and sector publications and Group’s production levels, stock levels and order amounts received.

F-154 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

33. Financial instruments and financial risk management (Continued) The Group also uses some derivative financial instruments, mainly Naphtha, to hedge cash flow risk arising from raw material price risk. d) 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 to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of debt/equity ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total liabilities (including short term financial liabilities, current portion of long term financial liabilities, long term financial liabilities, trade payables, other payables, deferred income, other current liabilities and short term liabilities for employee benefits, as shown in the balance sheet) less cash and cash equivalents:

December 31, 2016 December 31, 2015 Total debt ...... 3.045.454.256 2.531.491.279 Less: Cash and cash equivalents and short term financial investments (Note 4 and 5) ...... (1.267.188.405) (1.501.989.008) Net debt ...... 1.778.265.851 1.029.502.271 Total equity ...... 3.069.440.026 2.805.383.497 Debt/equity ratio ...... 58% 37%

34. Financial instruments (fair value and financial risk management disclosures) Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists. The estimated fair values of financial instruments have been determined by the Group using available market information and appropriate valuation methodologies. However, judgment is necessarily required to interpret market data to estimate the fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Group can realize in a current market exchange. The methods and assumptions stated below are used in the estimation of the fair values of the financial instruments of which fair values are measurable:

Financial liabilities Trade payables, payables to related parties and other monetary liabilities are estimated to be presented with their discounted carrying amounts, they are considered to approximate to their fair values, and the

F-155 (Convenience translation into English of the consolidated financial statements originally issued in Turkish—See Note 36)

34. Financial instruments (fair value and financial risk management disclosures) (Continued) fair values of balances denominated in foreign currencies, which are translated at year-end exchange rates, are considered to approximate carrying values. Fair values of short-term bank borrowings and other financial liabilities are assumed to approximate their carrying values due to their short term. Long-term floating rate bank loans’ interest rates are updated according to the changing market conditions, it is assumed to represent the value of the fair value is the carrying value of these loans. Long-term fixed-rate loan, when evaluated with a fixed interest rate as of the balance sheet date, it is observed its fair value is close to the carrying value.

Fair value estimation The Group’s financials classification of fair value of asset and liabilities were as follows: Level 1: Depend on registered price (unadjusted) in the active market; Level 2: Depend on data that are explicitly (via price in active market) or implicitly (derivate from price in active market) observable. Level 3: Not depend on observable market data December 31, 2016 and 2015, fair value and book value of financial statement were as follows:

December 31, 2016 Level 1 Level 2 Level 3 Total Derivative financial instruments ...... — 7.466.471 — 7.466.471 Total asset ...... — 7.466.471 — 7.466.471 Derivative financial instruments ...... — 9.459.385 9.459.385 Total liabilities ...... — 9.459.385 — 9.459.385

December 31, 2015, fair value and book value of financial statement were as follows:

December 31, 2015 Level 1 Level 2 Level 3 Total Derivative financial instruments ...... — 1.646.432 — 1.646.432 Total asset ...... — 1.646.432 — 1.646.432 Derivative financial instruments ...... — 11.008.960 — 11.008.960 Total liabilities ...... — 11.008.960 — 11.008.960

35. Subsequent events None.

36. Disclosure of other matters Convenience translation to English: As at December 31, 2016, the accounting principles described in Note 2.4 (defined as Turkish Accounting Standards/Turkish Financial Reporting Standards) to the accompanying financial statements differ from International Financial Reporting Standards (‘‘IFRS’’) issued by the International Accounting Standards Board with respect to the application of inflation accounting, certain reclassifications and also for certain disclosures requirement of the POA/CMB. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with IFRS.

F-156 (Convenience translation of the independent auditors’ report into English and consolidated financial statements originally issued in Turkish)

Petkim Petrokimya Holding Anonim Sirketi¸ and Its Subsidiaries Consolidated financial statements for the period between January 1–December 31, 2015 together with report of independent auditors

F-157 Petkim Petrokimya Holding Anonim Sirketi¸ and Its Subsidiaries

Table of contents Page Independent auditors’ report ...... F-159–F-160 Consolidated statement of financial position ...... F-161–F-162 Consolidated statement of profit or loss and other comprehensive income ...... F-163 Consolidated statement of changes in equity ...... F-164 Consolidated statement of cash flows ...... F-165 Notes to the consolidated financial statements ...... F-166–F-233

F-158 (Convenience translation into English of independent auditors’ report originally issued in Turkish)

Independent auditors’ report on the consolidated financials statements To the Board of Directories of Petkim Petrokimya Holding Anonim Sirketi¸ We have audited the accompanying consolidated statement of financial position of Petkim Petrokimya Holding Anonim Sirketi¸ (‘‘Petkim’’ or the Company) and its Subsidiaries (together referred as ‘‘the Group’’) as at December 31, 2015 and the related consolidated statement of profit or loss and comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and explanatory notes.

Management’s responsibility for the financial statements The Group’s management is responsible for the preparation and fair presentation of financial statements in accordance with the Turkish Accounting Standards (‘‘TAS’’) and for such internal controls as management determines is necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud.

Independent Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Our audit was conducted in accordance with Sstandards on Aauditing as issued by the Capital Markets Board of Turkey and Auditing Standards which are part of the Turkish Auditing Standards asstandards on auditing issued by Public Oversight Accounting and Auditing Standards Authority (‘‘POA’’). Those standards require that ethical requirements are complied with and that the independent audit is planned and performed to obtain reasonable assurance whether the financial statements are free from material misstatement. Independent audit involves performing independent audit procedures to obtain independent audit evidence about the amounts and disclosures in the financial statements. The independent audit procedures selected depend on our professional judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to error and/or fraud. In making those risk assessments; the Company’s internal control system is taken into consideration. Our purpose, however, is not to express an opinion on the effectiveness of internal control system, but to design independent audit procedures that are appropriate for the circumstances in order to identify the relation between the financial statements prepared by the Group and its internal control system. Our independent audit includes also evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Company’s management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained during our audit is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Petkim Petrokimya Holding A.¸S. and its Subsidiaries as at December 31, 2015 and their financial performance and cash flows for the year then ended in accordance with the Turkish Accounting Standards.

Reports on other responsibilities arising from regulatory requirements 1) Auditors’ report on Risk Management System and Committee prepared in accordance with paragraph 4 of Article 398 of Turkish Commercial Code (‘‘TCC’’) 6102 is submitted to the Board of Directors of the Company on March 3, 2016. 2) In accordance with paragraph 4 of Article 402 of the TCC, no significant matter has come to our attention that causes us to believe that the Company’s bookkeeping activities for the period 1 January–31 December 2015 and financial statements are not in compliance with the code and provisions of the Company’s articles of association in relation to financial reporting..

F-159 3) In accordance with paragraph 4 of Article 402 of the TCC, the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit. Guney¨ Bagımsız˘ Denetim ve Serbest Muhasebeci Mali Mu¸¨savirlik Anonim Sirketi¸ A member firm of Ernst & Young Global Limited

Cem U¸carlar, SMMM Partner March 3, 2016 ˙Istanbul, Turkey

F-160 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

Petkim Petrokimya Holding A.¸S. and Its Subsidiaries Consolidated statement of financial position at December 31, 2015 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

Current year Previous year Audited Audited Notes December 31, 2015 December 31, 2014 Assets Current assets ...... 2.767.573.102 1.767.709.192 Cash and cash equivalents ...... 4 1.341.536.749 702.158.128 Financial investments ...... 5 160.452.259 — Trade receivables —Trade receivables from third parties ...... 7 551.425.057 522.028.996 —Trade receivables from related parties ...... 32 — 246.651 Other receivables —Other receivables from related parties ...... 32 255.049.233 18.721.644 —Other receivables from third parties ...... 8 6.510.328 2.582.910 Derivative financial assets ...... 9 1.646.432 1.445.166 Inventories ...... 10 363.508.864 431.973.190 Prepaid expenses —Prepaid expenses to third parties ...... 19 39.469.618 43.238.711 —Prepaid expenses to related parties ...... 32 12.878.087 12.878.087 Other current asset ...... 21 35.096.475 32.435.709 Non-current assets ...... 2.693.092.226 2.020.547.900 Financial investments ...... 5 8.910.000 — Other receivables —Other receivables from related parties ...... 32 105.206.024 51.791.682 Investment property ...... 11 1.469.935 1.461.758 Property, plant and equipment ...... 12 2.276.634.074 1.817.284.723 Intangible assets ...... 13 18.327.669 16.697.372 Prepaid expenses —Prepaid expenses from third parties ...... 19 92.704.917 24.712.059 —Prepaid expenses from related parties ...... 32 17.170.782 30.048.869 Deferred tax assets ...... 30 133.346.497 44.480.315 Other non-current assets ...... 21 39.322.328 34.071.122 Total assets ...... 5.460.665.328 3.788.257.092

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

F-161 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

Petkim Petrokimya Holding A.¸S. and Its Subsidiaries Consolidated statement of financial position at December 31, 2015 (Continued) (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

Current year Previous year Audited Audited Notes December 31, 2015 December 31, 2014 Liabilities Current liabilities ...... 1.584.388.339 1.136.768.697 Short-term financial liabilities ...... 6 319.638.074 352.914.646 Current portion of long-term financial liabilities ...... 6 41.912.519 43.108.180 Derivative financial liabilities ...... 9 11.008.960 — Trade payables —Trade payables to related parties ...... 32 31.306.140 37.895.925 —Trade payables to third parties ...... 7 1.110.250.720 631.153.338 Short-term liabilities for employee benefits ...... 20 8.261.053 25.793.321 Other payables —Other payables to related parties ...... 32 1.750.437 11.213.876 —Other payables to third parties ...... 8 2.253.728 1.487.502 Deferred income —Deferred income from related parties ...... 32 4.168.083 4.286.908 —Deferred income from third parties ...... 18 21.925.077 14.090.157 Short term provisions —Provision for employee benefits ...... 17 13.027.856 3.517.037 —Other short-term provisions ...... 15 2.706.226 5.166.629 Current tax liabilities ...... 30 9.684.055 — Other current liabilities ...... 21 6.495.411 6.141.178 Non-current liabilities ...... 1.070.893.492 468.227.528 Long-term financial liabilities ...... 6 914.267.416 324.567.369 Deferred income —Deferred income from related parties ...... 32 12.705.027 16.579.501 —Deferred income from third parties ...... 18 54.794.114 48.490.336 Long term provisions —Provision for employee benefits ...... 17 89.126.935 78.590.322 Total liabilities ...... 2.655.281.831 1.604.996.225 Equity ...... 2.805.383.497 2.183.260.867 Share capital ...... 22 1.500.000.000 1.000.000.000 Adjustment to share capital ...... 22 238.988.496 486.852.283 Other comprehensive income / (expense) not to be reclassified to profit or loss —Actuarial loss arising from defined benefit plan ...... (23.668.037) (15.228.165) Other comprehensive income / (expense) to be reclassified to profit or loss —Hedging reserve ...... (7.490.023) 1.156.133 Gain on sale of subsidiary that do not result in loss of control ...... 22 214.187.872 466.324.085 Restricted reserves ...... 36.548.777 8.356.700 Retained earnings ...... 156.442.236 178.181.398 Net profit for the year ...... 626.378.793 6.452.915 Equity holders of the parent ...... 2.741.388.114 2.132.095.349 Non controlling interest ...... 63.995.383 51.165.518 Total liabilities and equity ...... 5.460.665.328 3.788.257.092

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

F-162 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

Petkim Petrokimya Holding A.¸S. and Its Subsidiaries Consolidated statement of profit or loss and comprehensive income for the year ended December 31, 2015 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

Current year Previous year Audited Audited January 1– January 1– December 31, December 31, Notes 2015 2014 Sales ...... 23 4.532.635.969 4.132.846.077 Cost of sales () ...... 23 (3.816.426.528) (4.047.377.938) Gross profit ...... 716.209.441 85.468.139 General and administrative expenses ()...... 24 (117.751.852) (99.763.548) Marketing, selling and distribution expenses ()...... 24 (32.297.691) (26.520.156) Research and development expenses () ...... 24 (11.742.738) (11.890.488) Other operating income ...... 26 131.035.297 119.102.981 Other operating expense ()...... 26 (169.532.903) (126.974.273) Operating profit / (loss) ...... 515.919.554 (60.577.345) Income from investment activities ...... 27 13.030 2.712.214 Operating profit / (loss) before financial expense .... 515.932.584 (57.865.131) Finance income ...... 28 421.668.110 140.993.206 Finance expense () ...... 29 (363.773.458) (144.899.570) Profit / (loss) before taxation ...... 573.827.236 (61.771.495) Current year tax expense ...... 30 (19.213.253) — Deferred tax income / (expense) ...... 30 84.594.675 70.450.261 Net profit for the period ...... 639.208.658 8.678.766 Other comprehensive income Not to be reclassified to profit or loss —Actuarial gain / (loss) arising from defined benefit plan . (10.549.840) (2.928.452) —Deferred tax effect of actuarial gain / (loss) arising from defined benefit plan ...... 2.109.968 585.690 To be reclassified to profit or loss —Hedging reserve gain / (loss) ...... (10.807.695) 1.445.166 —Deferred tax effect of hedging reserve gain / (loss) . . . 2.161.539 (289.033) Other comprehensive loss (after tax) ...... (17.086.028) (1.186.629) Total comprehensive income ...... 622.122.630 7.492.137 Distribution of income for the period Minority interest ...... 12.829.865 2.225.851 Equity holders of the parent ...... 626.378.793 6.452.915 Earnings per share (Kuru¸s)—Minority interest ...... 0,009 0,001 Earnings per share (Kuru¸s)—Equity holders of the parent ...... 31 0,418 0,004 Distribution of comprehensive income: Minority interest ...... 12.829.865 2.225.851 Equity holders of the parent ...... 609.292.765 5.266.286

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

F-163 48.939.667 48.939.667 (47.000.000) (47.000.000) — (47.000.000) 6.452.915 — 6.452.915 2.225.851 8.678.766 4.702.772 (48.896.680) 44.193.908 — — — Gain on 466.324.085 — — — 466.324.085 — 466.324.085 S. and Its Subsidiaries profit or loss be reclassified to for the year ended December 31, 2015 (2.342.762) 1.156.133 — — 6.452.915 — 5.266.286 2.225.851 7.492.137 Consolidated statement of changes in equity profit or loss income / (expense) to to be reclassified Other comprehensive Petkim Petrokimya Holding A.¸ Petrokimya Petkim Other comprehensive income / (expense) not (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish Adjustment Actuarial loss sale of Net profit Equity Non ——— —— — — — (8.439.872) — (8.439.872) — (8.646.156) (8.646.156) — — — — — — 28.192.077 (6.452.915) — (21.739.162) 626.378.793 — — — — — 626.378.793 609.292.765 — 12.829.865 (17.086.028) 622.122.630 — — — 626.378.793 12.829.865 (17.086.028) 639.208.658 — The accompanying notes form an integral part of these consolidated financial statements. Share to share arising from defined subsidiary Restricted for the Retained holders of controlling Total capital capital benefit plan Hedging reserve (Note 22) reserves year earnings the parent Interest equity 500.000.000 (247.863.787) — — (252.136.213) — — — — — — 1.000.000.000 486.852.283 (12.885.403) — — 3.653.928 48.896.680 180.987.490 1.707.504.978 — 1.707.504.978 1.000.000.000 486.852.283 (15.228.165) 1.156.133 466.324.085 8.356.700 6.452.915 178.181.398 2.132.095.349 51.165.518 2.183.260.867 1.000.000.000 486.852.283 (15.228.165) 1.156.133 466.324.085 8.356.700 6.452.915 178.181.398 2.132.095.349 51.165.518 2.183.260.867 1.500.000.000 238.988.496 (23.668.037) (7.490.023) 214.187.872 36.548.777 626.378.793 156.442.236 2.741.388.114 63.995.383 2.805.383.497 ..... — — ...... — — — — ...... — — — — — — ...... — — — — — — — ...... — — — — — — — — — ...... — — — — — ...... (Note 22) (Note 22) (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish) January 1, 2014 Transfers Dividend payment Share transfer to minority interest Gain on sale of subsidiary Other comprehensive income / (loss)Net profit for the period — — (2.342.762) 1.156.133 — — — — (1.186.629) — (1.186.629) Total comprehensive income Total December 31, 2014 Transfers January 1, 2015 Capital increase by bonus issue Other comprehensive income / (loss) Net profit for the period comprehensive income Total December 31, 2015

F-164 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

Petkim Petrokimya Holding A.¸S. and Its Subsidiaries Consolidated statement of cash flows for the year ended December 31, 2015 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

Current year Previous year Audited Audited January 1– January 1– Notes December 31, 2015 December 31, 2014 Cash flows from operating activities: Profit / (loss) before taxation ...... 573.827.236 (61.771.495) Adjustments to reconcile profit / (loss)before tax to net cash generated from operating activities: Depreciation and amortization ...... 12–13 113.732.702 89.580.561 Interest income ...... 28 (33.403.052) (14.402.000) Interest expense ...... 29 24.139.283 7.216.987 Provision for legal cases ...... 15 10.537 731.271 Provision for settlement fee of tax inspection, net ...... 15 — 1.700.000 Provision for employment termination benefits, net ...... 17 5.803.217 6.461.030 Gain on sale of property, plant and equipment, net ...... 27 (13.030) (2.712.214) Provision for doubtful receivables ...... 7–8 1.341.985 4.453.420 Provision for seniority incentive bonus, net ...... 17 4.706.932 4.236.684 Provision for unused vacation rights, net ...... 17 1.139.310 1.016.908 Provision for impairment on inventories ...... 10 12.046.150 26.539.025 Provision for personnel bonus ...... 17 10.000.000 — EMRA allowance expenses ...... 15 283.077 28.283 Trade receivable rediscount expense ...... 26 2.354.847 3.065.598 Trade payable rediscount expense ...... 23 (2.060.731) (3.839.696) Accrual of incentive on loan interest ...... 8 (1.647.621) (1.487.002) Unrealized foreign currency (gains) / losses on borrowings ...... 185.837.329 30.173.099 Generated by before changes in operating assets and liabilities ..... 898.098.171 90.990.459 Changes in the assets and liabilities: Trade receivables ...... (32.846.242) 220.736.921 Inventories ...... 56.418.176 5.687.256 Other receivables ...... (292.021.728) 45.970.957 Other current assets and prepaid expenses ...... 4.654.263 3.398.460 Other non-current assets and prepaid expenses ...... (60.365.979) (53.785.485) Trade payables ...... 481.158.113 (283.135.652) Trade payables to related parties ...... (15.499.785) (4.683.312) Other payables ...... (8.697.215) 1.839.254 Short term provisions for employee benefits, deferred income, current tax liabilities and other liabilities ...... (2.768.833) (16.883.085) Other long term liabilities ...... 2.429.304 12.033.790 Seniority incentive bonus paid ...... 17 (4.683.906) (3.640.915) Employment termination benefit paid ...... 17 (7.467.961) (13.679.923) Notice pay liability paid ...... (6.693.107) (4.533.973) Taxes paid ...... 30 (9.529.198) — Tax penalties paid ...... (1.721.600) — Paid litigation provisions ...... 15 (1.054.017) — Guarantor fee paid ...... — (30.968.257) Net cash generated by / (used in) operating activities ...... 999.408.456 (30.653.505) Investing activities: Short term financial investments ...... (160.452.259) — Purchase of property, plant and equipment and intangible assets ...... 12–13 (574.908.796) (425.070.121) Proceeds from sales of property, plant and equipment and intangible assets 201.299 3.323.893 Gain on sale of subsidiary ...... — 580.750.000 Net cash generated by / (used in) investing activities ...... (735.159.756) 159.003.772 Financing activities: Interest received ...... 29.877.952 13.863.150 Proceeds from borrowings ...... 1.244.687.447 715.548.533 Redemption of borrowings ...... (885.080.341) (381.745.723) Interest paid ...... (14.355.137) (5.900.523) Dividend paid ...... — (47.000.000) Net cash generated by / (used in) financing activities ...... 375.129.921 294.765.437 Net increase / (decrease) in cash and cash equivalents ...... 639.378.621 423.115.704 Cash and cash equivalents at the beginning of the period ...... 4 702.158.128 279.042.424 Cash and cash equivalents at the end of the period ...... 4 1.341.536.749 702.158.128

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

F-165 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

Petkim Petrokimya Holding A.¸S. and Its Subsidiaries Notes to the consolidated financial statements for the year ended December 31, 2015 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

1. Organization and nature of operations Petkim Petrokimya Holding A.¸S. (‘‘Petkim’’ or ‘‘the Company’’) was established on April 3, 1965. The Company started its investment activities in ˙Izmit-Yarımca and initially established the Ethylene, Polyethylene, Chlorine Alkali, VCM and PVC plants in 1970 in the Yarımca Complex. During the course of the Company, construction of other plants continued. In 1985, Aliaga˘ Petrochemical Complex was established. The Company has 14 main plants, 1 bag production unit and 1 solid waste incineration facility. The Company operates its facilities in the petrochemical sector in Turkey. The Company is mainly engaged in the following fields: • To establish and to operate factories, plants either at home or abroad in relation to the petrochemistry, chemistry and such other industrial sectors, • To process and to treat the raw materials and supplementary/auxiliary substances, materials and chemicals necessary for the production of petrochemicals, chemicals and such other materials/ substances by procuring such materials/substances either from home or abroad, to produce such materials/substances, and to carry out and to perform the domestic and international trading thereof, • In accordance with the Law 4628 on the Electricity Market, and the related legislation thereto, to establish power plants as per the auto-producer’s license in order to meet its own need for electricity and heat/thermal energy at first, to generate electricity and heat/thermal energy, to sell the generated electricity and heat/thermal energy and/or the capacity to other legal persons holding the requisite licenses or to the eligible consumers as per the mentioned legislation in case of any surplus production, and to carry out and to perform the activities in relation to the obtainment of any and all kinds of equipment and fuel in relation to the electricity power/generating plant provided that such activities are not of commercial nature, • To carry out and to perform the activities in relation to the importation or purchase from domestic resources, of natural gas on wholesale and retail basis, utilization, storage of natural gas imported and purchased, in accordance with the legislation thereto, • To carry out and to perform pilotage, trailer and mooring activities, to operate ports, cruise ports, passenger terminals, seaports, docks, harbors, berths, liquid fuel/liquefied petroleum pipeline and buoy systems, and such other similar onshore facilities/plants, and to be involved in port management activities, to offer port, agency, provision, bunkering services, and to provide that such services are offered by 3rd parties either by way of leasing or such other methods when required, and to purchase, to have built and to lease, to sell the necessary vessels/naval platforms, and to establish either domestic or international partnerships in relation thereto, to operate warehouses, and to offer warehousing services, • To support and to donate to the foundations, associations, educational institutions, which have been established for social purposes, and to such other persons, institutions and organizations in accordance with the principles prescribed by the Capital Market Board. The ‘‘Share Sales Agreement’’, with respect to the sales of 51% of shares of Petkim Petrokimya Holding A.¸S. (which has been in the privatization process for several years) to SOCAR & Turcas Petrokimya A.¸S. (‘‘STPA¸S’’), 44% of which previously owned by the Republic of Turkey Ministry Privatization Administration (‘‘Administration’’) and 7% State Pension Fund (‘‘Emekli Sandıgı˘ Genel Mud¨ url¨ u¨g˘u’’)¨ transferred to Republic of Turkey Social Security Institution, was signed on May 30, 2008. On June 22, 2012, the public shares amounting to 10,32% of the Company capital which belonged to Prime Ministry Privatization Administration was sold to SOCAR ˙Izmir Petrokimya A.¸S (‘‘S˙IPA¸S’’) which is the subsidiary of the Company’s main shareholder, SOCAR Turkey Enerji A.¸S. (‘‘STEA¸S’’).

F-166 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

Petkim Petrokimya Holding A.¸S. and Its Subsidiaries Notes to the consolidated financial statements (Continued) for the year ended December 31, 2015 (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.)

1. Organization and nature of operations (Continued) SOCAR Turkey Enerji A.¸S. and SOCAR ˙Izmir Petrokimya A.¸S., which is the %100 subsidiary of SOCAR Turkey Enerji A.¸S and owns 10,32% shares of the Group, have merged as of September 22, 2014. As of December 31, 2015 and December 31, 2014 the ultimate shareholder of the Company is State Oil Company of Azerbaijan Republic (‘‘SOCAR’’). The Group is registered at the Capital Markets Board (‘‘CMB’’) and its shares have been quoted in Istanbul Stock Exchange (‘‘ISE’’) since July 9, 1990. Consolidated financial statements were approved to be issued by the Board of Directors March 3, 2016 and signed by Mr. Sadettin Korkut, General Manager and Mr. Rıza Bozoklar, Vice President of Finance, on behalf of the Board of Directors. General Assembly and relevant regulators has the right to modify legal financial statements and the consolidated financial statements.

Subsidiaries The Company has participated to Petlim Limancılık Ticaret A.¸S. (‘‘Petlim’’) with the capital of TL 100.000 and the share of 99,99%, according to the decision of Board of Director dated April 28, 2010 and numbered 64/132, to implement port activities. With the general assembly resolution dated, November 13, 2012, the share capital of Petlim has been increased to TL 8.000.000. With the general assembly resolution dated, September 30, 2013, the share capital of Petkim has been increased from TL 8.000.000 to TL 83.000.000 and the share of 100% transferred to Petkim. With the general assembly resolution dated, November 17, 2014, the share capital of Petlim has been increased from TL 83.000.000 to TL 150.000.000. The company has founded a company with the name of the Petkim Specialities Muhendislik¨ Plastikleri Sanayi ve Ticaret A.¸S. with the capital of TL 100.000 and the share of 100%, to carry out its production activities in high value-added advanced engineering plastics (masterbach, compound) and high-tech chemicals. Petkim and its subsidiaries are referred together as ‘‘the Group’’. 45 million shares, representing 30% of share capital of Petlim Limancılık Ticaret A.¸S., which is subsidiary of the Company, has been purchased by Goldman Sachs International (‘‘GSI’’, together with its subsidiaries ‘‘GS’’) as of December 18, 2014 in exchange for 250 million USD Dollars. At the same date, in the consequence of put option contract signed by STEA¸S with GSI, it has undertaken guarantor liability regarding of liabilities of Petkim due to share transfer agreement, if required and in the event of contract conditions the right of selling shares of Petlim by GS˙I to STEA¸S has been originated (‘‘Put option Contract’’). Within the mentioned put option contract, no later than 7 years following the signed share transfer agreement, it has been agreed on public offering of shares of Petlim (public offering), in accordance with those regulations agreed by the parties and in consequence of option relation, loss of GSI shall be compensated by STEA¸S. (Note 22) The number of personnel in the Group is 2.471 as of December 31, 2015 (December 31, 2014—2.425).

December 31, 2015 December 31, 2014 Union(*) ...... 1.918 1.907 Non-union(**) ...... 553 518 2.471 2.425

(*) Indicates the personnel who are members of Petrol ˙I¸s Union. (**) Indicates the personnel who are not members of Petrol ˙I¸s Union

F-167 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

1. Organization and nature of operations (Continued) The registered address of the Group as of the date of these consolidated financial statements is as follows: PK. 12, 35800 Aliaga,˘ ˙Izmir

2. Basis of presentation of consolidated financial statements 2.1 Basis of presentation Accounting standards The consolidated financial statements and disclosures have been prepared in accordance with the communique´ numbered II-14.1 ‘‘Communique´ on the Principles of Financial Reporting in Capital Markets’’ (‘‘the Communique’’)´ announced by the Capital Markets Board (‘‘CMB’’) (hereinafter will be referred to as ‘‘the CMB Reporting Standards’’) on June 13, 2013 which is published on Official Gazette numbered 28676. Companies should apply Turkish Accounting Standards / Turkish Financial Reporting Standards and interpretations regarding these standards as adopted by Public Oversight Accounting and Auditing Standards Authority of Turkey (‘‘POA’’). With the decision taken on March 17, 2005, the CMB announced that, effective from January 1, 2005, the application of inflation accounting is no longer required for listed companies in Turkey. The Group’s financial statements have been prepared in accordance with this decision.

2.2 Changes in TFRS The new standards, amendments and interpretations The accounting policies adopted in preparation of the consolidated financial statements as at 31 December 2015 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS and TFRIC interpretations effective as of 1 January 2015. The effects of these standards and interpretations on the Group’s financial position and performance have been disclosed in the related paragraphs. i) The new standards, amendments and interpretations which are effective as at January 1, 2015 are as follows: TAS 19 Defined Benefit Plans: Employee Contributions (Amendment) TAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. The amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. The amendment did not have a significant impact on the consolidated financial statements of the Group.

Annual Improvements to TAS/TFRSs In September 2014, POA issued the below amendments to the standards in relation to ‘‘Annual Improvements—2010–2012 Cycle’’ and ‘‘Annual Improvements—2011–2013 Cycle.

F-168 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) Annual Improvements—2010–2012 Cycle TFRS 2 Share-based Payment: Definitions relating to performance and service conditions which are vesting conditions are clarified. The amendment is effective prospectively.

TFRS 3 Business Combinations The amendment clarifies that all contingent consideration arrangements classified as liabilities (or assets) arising from a business combination should be subsequently measured at fair value through profit or loss whether or not they fall within the scope of IAS 39 (or IFRS 9, as applicable). The amendment is effective for business combinations prospectively.

TFRS 8 Operating Segments The changes are as follows: i) An entity must disclose the judgements made by management in applying the aggregation criteria in IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are ‘similar’. ii) The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker. The amendments are effective retrospectively.

TAS 16 Property, Plant and Equipment and TAS 38 Intangible Assets The amendment to TAS 16.35(a) and TAS 38.80(a) clarifies that revaluation can be performed, as follows: i) Adjust the gross carrying amount of the asset to market value or ii) determine the market value of the carrying amount and adjust the gross carrying amount proportionately so that the resulting carrying amount equals the market value. The amendment is effective retrospectively.

TAS 24 Related Party Disclosures The amendment clarifies that a management entity—an entity that provides key management personnel services—is a related party subject to the related party disclosures. . In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. The amendment is effective retrospectively.

Annual Improvements—2011–2013 Cycle TFRS 3 Business Combinations The amendment clarifies that: i) Joint arrangements are outside the scope of TFRS 3, not just joint ventures ii) The scope exception applies only to the accounting in the financial statements of the joint arrangement itself. The amendment is effective prospectively.

TFRS 13 Fair Value Measurement The portfolio exception in TFRS 13 can be applied to financial assets, financial liabilities and other contracts within the scope of IAS 39 (or IFRS 9, as applicable). The amendment is effective prospectively.

F-169 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) TAS 40 Investment Property The amendment clarifies the interrelationship of TFRS 3 and TAS 40 when classifying property as investment property or owner-occupied property. The amendment is effective prospectively. The amendments did not have a significant impact on the consolidated financial statements of the Group. ii) Standards issued but not yet effective and not early adopted Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the consolidated financial statements are as follows. The Group will make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial statements and disclosures, when the new standards and interpretations become effective.

TFRS 9 Financial Instruments—Classification and measurement As amended in December 2012 and February 2015, the new standard is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. Phase 1 of this new TFRS introduces new requirements for classifying and measuring financial instruments. The amendments made to TFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair value option (FVO) liabilities and requires that the change in fair value of a FVO financial liability attributable to credit risk is presented under other comprehensive income. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is adopted by POA.

TFRS 11 Acquisition of an Interest in a Joint Operation (Amendment) TFRS 11 is amended to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. This amendment requires the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in TFRS 3 Business Combinations, to apply all of the principles on business combinations accounting in TFRS 3 and other TFRSs except for those principles that conflict with the guidance in this TFRS. In addition, the acquirer shall disclose the information required by TFRS 3 and other TFRSs for business combinations. These amendments are to be applied prospectively for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The amendments will not have an impact on the financial position or performance of the Group.

TAS 16 and TAS 38—Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to TAS 16 and TAS 38) The amendments to TAS 16 and TAS 38, have prohibited the use of revenue-based depreciation for property, plant and equipment and significantly limiting the use of revenue-based amortisation for intangible assets. The amendments are effective prospectively for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The amendments will not have an impact on the financial position or performance of the Group.

TAS 16 Property, Plant and Equipment and TAS 41 Agriculture (Amendment)—Bearer Plants TAS 16 is amended to provide guidance that bearer plants, such as grape vines, rubber trees and oil palms should be accounted for in the same way as property, plant and equipment in TAS 16. Once a bearer plant is mature, apart from bearing produce, its biological transformation is no longer significant in generating future economic benefits. The only significant future economic benefits it generates come from the agricultural produce that it creates. Because their operation is similar to that of manufacturing,

F-170 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) either the cost model or revaluation model should be applied. The produce growing on bearer plants will remain within the scope of TAS 41, measured at fair value less costs to sell. Entities are required to apply the amendments for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The amendment is not applicable for the Group and will not have an impact on the financial position or performance of the Group.

TAS 27 Equity Method in Separate Financial Statements (Amendments to TAS 27) In April 2015, Public Oversight Accounting and Auditing Standards Authority (POA) of Turkey issued an amendment to TAS 27 to restore the option to use the equity method to account for investments in subsidiaries and associates in an entity’s separate financial statements. Therefore, an entity must account for these investments either: • At cost • In accordance with IFRS 9, Or • Using the equity method defined in TAS 28 The entity must apply the same accounting for each category of investments. The amendment is effective for annual periods beginning on or after January 1, 2016. The amendments must be applied retrospectively. Early application is permitted and must be disclosed. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.

TFRS 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments) In February 2015, amendments issued to TFRS 10 and TAS 28, to address the acknowledged inconsistency between the requirements in TFRS 10 and TAS 28 in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture, to clarify that an investor recognises a full gain or loss on the sale or contribution of assets that constitute a business, as defined in TFRS 3, between an investor and its associate or joint venture. The gain or loss resulting from the re-measurement at fair value of an investment retained in a former subsidiary should be recognised only to the extent of unrelated investors’ interests in that former subsidiary. An entity shall apply those amendments prospectively to transactions occurring in annual periods beginning on or after January 1, 2016. Earlier application is permitted. The amendment is not applicable for the Group and will not have an impact on the financial position or performance of the Group.

TFRS 10, TFRS 12 and TAS 28: Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10 and IAS 28) In February 2015, amendments issued to TFRS 10, TFRS 12 and TAS 28, to address the issues that have arisen in applying the investment entities exception under TFRS 10 Consolidated Financial Statements. The amendments are applicable for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The amendment is not applicable for the Group and will not have an impact on the financial position or performance of the Group.

TAS 1: Disclosure Initiative (Amendments to TAS 1) In February 2015, amendments issued to TAS 1. Those amendments include narrow-focus improvements in the following five areas: Materiality, Disaggregation and subtotals, Notes structure, Disclosure of accounting policies, Presentation of items of other comprehensive income (OCI) arising from equity accounted investments. The amendments are applicable for annual periods beginning on or

F-171 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) after January 1, 2016. Earlier application is permitted. These amendments are not expected have significant impact on the notes to the consolidated financial statements of the Group.

Annual Improvements to TFRSs—2012–2014 Cycle In February 2015, POA issued, Annual Improvements to TFRSs 2012-2014 Cycle. The document sets out five amendments to four standards, excluding those standards that are consequentially amended, and the related Basis for Conclusions. The standards affected and the subjects of the amendments are: • IFRS 5 Non-current Assets Held for Sale and Discontinued Operations—clarifies that changes in methods of disposal (through sale or distribution to owners) would not be considered a new plan of disposal, rather it is a continuation of the original plan • IFRS 7 Financial Instruments: Disclosures—clarifies that i) the assessment of servicing contracts that includes a fee for the continuing involvement of financial assets in accordance with IFRS 7; ii) the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report • IAS 19 Employee Benefits—clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located • IAS 34 Interim Financial Reporting—clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report The amendments are effective for annual periods beginning on or after January 1, 2016, with earlier application permitted. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.

The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA) The following standards, interpretations and amendments to existing IFRS standards are issued by the IASB but not yet effective up to the date of issuance of the financial statements. However, these standards, interpretations and amendments to existing IFRS standards are not yet adapted/issued by the POA, thus they do not constitute part of TFRS. The Group will make the necessary changes to its consolidated financial statements after the new standards and interpretations are issued and become effective under TFRS.

Annual Improvements—2010–2012 Cycle IFRS 13 Fair Value Measurement As clarified in the Basis for Conclusions short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial. The amendment is effective immediately.

Annual Improvements—2011–2013 Cycle IFRS 15 Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. The new five-step model in the standard provides the recognition and measurement requirements of revenue. The standard applies to revenue from contracts with customers and provides a model for the sale of some

F-172 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) non-financial assets that are not an output of the entity’s ordinary activities (e.g., the sale of property, plant and equipment or intangibles). IFRS 15 original effective date was January 1, 2017. However, in September 2015, IASB decided to defer the effective date to reporting periods beginning on or after January 1, 2018, with early adoption permitted. Entities will transition to the new standard following either a full retrospective approach or a modified retrospective approach. The modified retrospective approach would allow the standard to be applied beginning with the current period, with no restatement of the comparative periods, but additional disclosures are required. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.

IFRS 9 Financial Instruments—Final standard (2014) In July 2014 the IASB published the final version of IFRS 9 Financial Instruments. The final version of IFRS 9 brings together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting. In addition, IFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value. The Standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. However, the Standard is available for early application. In addition, the own credit changes can be early applied in isolation without otherwise changing the accounting for financial instruments. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.

IFRS 16 Leases In January 2016, the IASB has published a new standard, IFRS 16 ‘Leases’. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 ‘Leases’ and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has also been applied. The Group is in the process of assessing the impact of the standard on financial position or performance of the Group.

IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses (Amendments) In January 2016, the IASB issued amendments to IAS 12 Income Taxes. The amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. The amendments clarify the requirements on recognition of deferred tax assets for unrealised losses, to address diversity in practice. These amendments are to be retrospectively applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. However, on initial application of the amendment, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. If the Group applies this relief, it shall disclose that fact. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.

F-173 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) IAS 7 ‘Statement of Cash Flows (Amendments) In January 2016, the IASB issued amendments to IAS 7 ‘Statement of Cash Flows’. The amendments are intended to clarify IAS 7 to improve information provided to users of financial statements about an entity’s financing activities. The improvements to disclosures require companies to provide information about changes in their financing liabilities. These amendments are to be applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. When the Group first applies those amendments, it is not required to provide comparative information for preceding periods. The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.

2.4 Summary of important accounting policies The significant accounting policies applied in the preparation of the consolidated financial statements are summarized below:

Basis of consolidation The consolidated financial statements comprise the financial statements of Petkim, Petlim in which Petkim has a shareholding interest of %70 (December 31, 2014—70%) and Petkim Specialities Muhendislik¨ Plastikleri Sanayi ve Ticaret A.¸S. in which Petkim has a shareholding interest of 100% (December 31, 2014—None). Subsidiary is consolidated from the date on which control is transferred to Petkim until the date on which the control is transferred out of Petkim. As stated above, the consolidated financial statements consist of the financial statements of Petkim and its subsidiaries which it controls. This control is normally evidenced when Petkim owns, either directly or indirectly, more than 50% of the voting rights of a company’s share capital and is able to govern the financial and operating policies of an enterprise so as to benefit from its activities. Subsidiary is consolidated by using full consolidation method, accordingly the registered subsidiary values are netted off with the related equity items. Balances and transactions between Petkim and its subsidiary, including intercompany profits and unrealized profits and losses (if any) are eliminated. Consolidated financial statements are prepared using uniform accounting policies for transactions and other events in similar circumstances.

F-174 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) Spare parts and material stocks are valued at the lower of cost and net recoverable value. The cost of spare parts and material stocks consist of purchase materials and other costs that are necessary to bring them to their present location and condition. The costs of spare parts and material stocks are determined on a weighted average basis by the Group (Notes 10).

Property, plant and equipment Property, plant and equipment are carried at cost less accumulated depreciation and impairment losses if any. Historical costs include the costs directly related to the acquisition of property plant and equipment. Costs incurred after the acquisition can be capitalized to the net book value of the assets or can be booked as another asset if and only if it is probable that the future economic benefits will flow to the Group and cost of the asset can be measured reliably. Repair and maintenance expenses are charged to the consolidated statement of comprehensive income as they incurred. Repair and maintenance expenditures are capitalized if they result in an enlargement or substantial improvement of the respective asset. Depreciation is provided using the straight-line method based on the estimated useful lives of the net assets (Note 12). Spare parts and material stocks qualify as property, plant and equipment when they are expected to be used more than one period and only in connection with an item of property, plant and equipment. Spare parts and material stocks are carried at cost less the accumulated depreciation which is calculated over the remaining useful life of the related item of property, plant and equipment. Buildings, machinery and equipment are capitalized and depreciated when they are in the condition necessary for operations in the manner intended by the management. Residual values of property, plant and equipment are deemed as insignificant. The useful lives of property, plant and equipment are as follows:

Useful life Land improvements ...... 4–50 years Buildings ...... 18–50 years Machinery and equipment ...... 4–68 years Motor vehicles ...... 5 years Furniture and fixtures ...... 3–20 years Other fixed assets ...... 5 years Leasehold Improvements ...... 3 years The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted on a prospective basis. Land is not depreciated as it is deemed to have an indefinite useful life. Gains or losses on disposals of property, plant and equipment are included in the other operating income and expense accounts, in the consolidated statement of comprehensive income as appropriate.

Intangible assets Intangible assets comprise acquired rights, information systems and software and capitalized development costs. Intangible assets are amortized on a straight-line basis over their estimated useful lives from the date of acquisition. In case of impairment, the carrying values of the intangible assets are written-down to their recoverable amounts (Note 13). The estimated useful lives of intangible assets are as follows:

Useful life Rights and software ...... 3–15 years

F-175 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) Investment properties Land and buildings held for rental yields or for capital appreciation or both, rather than for use in the production or supply of goods or services or for administrative purposes or sale in the ordinary course of business are classified as ‘‘investment property and accounted for at their acquisition cost in the consolidated statement of financial position. Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Gains or losses on disposals of investment properties are included in the other operating income and expense accounts, as appropriate (Note 11).

F-176 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) Impairment exists if the carrying value of an asset or a cash-generating unit is greater than its recoverable amount, which is the higher of value in use or fair value less costs to sell. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. When the recoverable amount of an asset (or a cash-generating unit) is lower than its carrying value, the asset’s (or cash-generating unit’s) carrying value is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statement of comprehensive income. An impairment loss recognized in prior periods for an asset is reversed if the subsequent increase in the asset’s recoverable amount is caused by a specific event since the last impairment loss was recognized. Such a reversal amount cannot be higher than the previously recognized impairment and is recognized in the consolidated statement of comprehensive income. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: • Significant financial difficulty of the issuer or obligor, • A breach of contract, such as a default or delinquency in interest or principal payments • For economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider, • It becomes probable that the borrower will enter bankruptcy or other financial reorganization, • Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets.

Financial assets Financial assets of the Group consist of cash and cash equivalents, trade receivables, due from related parties and other receivables. Financial liabilities consist of trade payables, due to related parties, other payables and financial liabilities.

Cash and cash equivalents Cash and cash equivalents consist of cash in hand, deposits at banks and highly liquid investments with insignificant risk of change in fair value and with maturity periods of three months or less (Note 4).Time deposits with maturity periods of three months or more has shown in financial investments (Note 5).

Financial Investments It is determined by means of omission of provision for losses, if available, from the registered acquisition cost of financial asset provided that the financial assets, in which the Group has a share under 20%, have not any fair value registered in stock exchange and a fair value assumption/appraisal cannot be performed since the other methods used in the calculation of fair value are not appropriate and a fair value cannot be measured in a trustable manner (Note 5).

Trade receivables and provision for impairment Trade receivables that are realized by the Group by way of providing goods or services directly to a debtor are carried at amortized cost using the effective interest rate method (Note 7).

F-177 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) Investments held to maturity Investments held to maturity are recognized initially at fair value including the costs directly related to the acquisition and subsequently measured at amortized cost using the effective interest method. Financial income related to investments held to maturity is recognized in the consolidated statement of income.

Trade payables Trade payables are recognized initially at fair value of and subsequently measured at amortized cost using the effective interest method (Note 7).

Bank borrowings Bank borrowings are recognized initially at the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortized cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of comprehensive income over the period of the borrowings. If the maturity of the bank borrowings is less than 12 months at the balance sheet date, these are classified in current liabilities; and if more than 12 months, they are classified under non-current liabilities (Note 6).

Recognition and de-recognition of financial instruments The Group recognizes a financial asset or financial liability in its consolidated statement of financial position when and only when it becomes a party to the contractual provisions of the instrument. The Group derecognizes a financial asset or a portion of financial asset when and only when it loses control of the contractual rights that comprise the financial asset or a portion of financial asset. The Group derecognizes a financial liability when liability is extinguished that is when the obligation specified in the contract is discharged, cancelled and expired. All regular way purchases and sales of financial assets are recognized on the trade date i.e. the date that the Group commits to purchase or to sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.

Derivative financial instruments and hedging activities Derivative financial instruments are initially recognised at the acquisition cost reflecting the fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. The derivative instruments of the Group mainly consist of foreign exchange forward contracts and currency/interest rate swap instruments. These derivative transactions, even though providing effective economic hedges under the Group risk management position, do not generally qualify for hedge accounting under the specific rules and are therefore treated as derivatives held for trading in the consolidated financial statements. The fair value changes for these derivatives are recognised in the consolidated income statement.

F-178 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) The hedging transactions of the Group that qualify for hedge accounting are accounted for as follows:

Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of hedged asset or liability attributable to the hedged risk is recorded as part of the carrying value of the hedged asset or liability during the effective hedging relationship. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item, for which the effective interest method is used, is amortised using a recalculated effective interest rate.

Cash flow hedge Hedges of exposures to variability in cash flows that are attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect profit and loss are designated as cash flow hedges by the Group. Changes in the fair value of derivatives, designated as cash flow hedges and qualified as effective, are recognised in equity as ‘‘hedging reserves’’. Where the forecasted transaction or firm commitment results in the recognition of an asset or of a liability, the gains and losses previously recognised under equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Otherwise, amounts recognised under equity are transferred to the consolidated income statement in the period in which the hedged firm commitment or forecasted transaction affects the consolidated income statement. If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or losses previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.

Related parties Parties are considered related to the Company if (a) A person or a close member of that person’s family is related to a reporting entity if that person: (i) has control or joint control over the reporting entity, (ii) has significant influence over the reporting entity, or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. (b) An entity is related to a reporting entity if any of the following conditions applies: (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), (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member), (iii) Both entities are joint ventures of the same third party, (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity,

F-179 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) (v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity, (vi) The entity is controlled or jointly controlled by a person identified in (a), (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity) A related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged. Key management personnel are identified as Board of Directors, general manager and vice general managers (Note 32).

Current and deferred income tax Taxes include current period income taxes and deferred taxes. Current year tax liability consists of tax liability on the taxable income calculated according to currently enacted tax rates and to the effective tax legislation as of balance sheet date (Note 30). Deferred income tax is provided, using the liability method, for temporary differences arising between the tax bases of assets and liabilities and their carrying values. Deferred income tax is determined using tax rates that have been enacted by the balance sheet date. Tax is recognized in the consolidated statement of comprehensive income, except to the extent that it relates to items recognized in equity. Taxes arisen on items recognized in equity are recognized directly in equity. Deferred income tax liabilities are recognized for all taxable temporary differences; whereas deferred income tax assets resulting from deductible temporary differences are recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilized. Deferred income tax asset is recognized to the extent that it is probable that the entity will have sufficient taxable profit in the same period as the reversal of the deductible temporary difference arising from tax losses carried forward. Deferred income tax assets and deferred income tax liabilities related to income taxes levied by the same taxation authority are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities. Deferred income tax assets and deferred income tax liabilities are classified as long-term in the consolidated financial statements (Note 30).

F-180 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. Furthermore, the Group has an employee benefit plan, namely ‘‘Seniority Incentive Bonus’’, which is paid to employees with a certain level of seniority (Note 17). In the consolidated financial statements, the Group has recognized a liability using the ‘‘Projected Unit Credit Method’’ based upon factors derived using the Group’s experience of personnel terminating and being eligible to receive benefits, discounted by using the current market yield at the balance sheet date on government bonds. All actuarial gains and losses are recognized in the consolidated statement of comprehensive income.

Revenue recognition Revenue is based on the invoiced amount of products sold and services given. Revenues are recognized on an accrual basis at the time deliveries or acceptances are made, when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to the Group, at the fair value of consideration received or receivable. Risks and rewards are transferred to customers, when the transfer of ownership has realized. Net sales represent the invoiced value of goods sold less sales returns and commission and exclude related taxes. Interest income is recognized on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. When the arrangement effectively constitutes a financing transaction, 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 recognized as interest income on a time proportion basis that takes into account the effective yield on the asset.

F-181 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) Transactions in foreign currency Transactions in foreign currencies during the year have been translated at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated into Turkish Lira at the exchange rates prevailing at the balance sheet date. Foreign exchange gains or losses arising from the settlement of such transactions and from the translation of monetary assets and liabilities are recognized in the consolidated statement of comprehensive income.

Accounting policies, changes in accounting estimates and errors Material changes in accounting policies or material errors are corrected, retrospectively; by restating the prior period financial statements. The effect of changes in accounting estimates affecting the current period is recognized in the current period; the effect of changes in accounting estimates affecting current and future periods is recognized in the current and future periods.

Critical accounting estimates and judgments Preparation of consolidated financial statements requires the use of estimates and assumptions that may affect the amount of assets and liabilities recognized as of the balance sheet date, disclosures of contingent assets and liabilities and the amount of revenue and expenses reported. Although, these estimates and assumptions rely on the management’s best knowledge about current events and transactions, actual outcomes may vary from those estimates and assumptions. Significant estimates of the Group management are as follows: a) There are numerous transactions and calculations in the ordinary course of business, whose impact on income taxes requires significant judgment in determining the provision for income taxes. The Group recognizes deferred income tax liabilities for anticipated taxable events and recognizes deferred income tax assets on loss carry forwards, tax credits and deductible temporary differences to the extent that the realization of the related tax benefit through the future taxable profits is probable. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax expense and deferred tax expense in the period of realization of the final tax outcome. As a result of the projections made by the Group management by using its best estimates deferred income tax asset regarding to the unused investment incentives was recognized in the consolidated financial statements (Note 30). b) Tangible and intangible assets have been depreciated and amortized by using estimated useful lives. Estimated useful lives determined by management have been disclosed in Note 12 and Note 13. c) Reserve for retirement pay is determined by using actuarial assumptions (discount rates, future salary increases and employee turnover rates) (Note 17). d) Provision for doubtful receivables is an estimated amount that management believes to reflect for possible future losses on existing receivables that have collection risk due to current economic conditions. During the impairment test for the receivables, the debtors, other than related parties, are assessed with their prior year performances, their credit risk in the current market, and their individual performances after the balance sheet date up to the issuing date of the consolidated financial statements and furthermore, the renegotiation conditions with these debtors are considered (Note 7 and 8). e) The management of the Group reserves provision for inventories which it thinks will not be used based on the evaluation of past experience and general economic conditions and for inventory amounts the net realizable value of which it believes has fallen below the costs (Note 10).

F-182 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

2. Basis of presentation of consolidated financial statements (Continued) f) VAT amount, that is did not foresee using in less than a year, is classified to other intangible asset by the Group Management (Note 21). g) Discounted letter of credits for the raw material purchases has been assessed as trade payable by the group management (Note 7)

Share capital and dividends Ordinary shares are classified as equity. Dividends payable on ordinary shares are recognized as an appropriation of the profit in the period they are declared.

3. Segment reporting Including petrochemical and port services, the Group has two main fields of activity. a) Revenue

January 1– January 1– December 31, 2015 December 31, 2014 Petrochemical ...... 4.533.431.442 4.132.860.349 Port services ...... — — Total before elimination ...... 4.533.431.442 4.132.860.349 Eliminations and adjustments of consolidation ...... (795.473) (14.272) 4.532.635.969 4.132.846.077

F-183 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

3. Segment reporting (Continued) b) Operating profit

January 1– January 1– December 31, 2015 December 31, 2014 Petrochemical ...... 545.573.333 24.112.310 Port services ...... (36.242.038) (26.567.742) Total before elimination ...... 509.331.295 (2.455.432) Eliminations and adjustments of consolidation ...... 6.588.259 (58.121.913) 515.919.554 (60.577.345) c) Depreciation and amortization

January 1– January 1– December 31, 2015 December 31, 2014 Petrochemical ...... (113.598.533) (89.453.398) Port services ...... (25.886.955) (11.912.688) Total before elimination ...... (139.485.488) (101.366.086) Eliminations and adjustments of consolidation ...... 25.752.786 11.785.525 (113.732.702) (89.580.561) d) Profit before taxation

January 1– January 1– December 31, 2015 December 31, 2014 Petrochemical ...... 625.075.416 27.391.813 Port services ...... (30.759.953) (27.023.881) Total before elimination ...... 594.315.463 367.932 Eliminations and adjustments of consolidation ...... (20.488.227) (62.139.427) 573.827.236 (61.771.495) e) Net profit for the year

January 1– January 1– December 31, 2015 December 31, 2014 Petrochemical ...... 616.871.622 53.848.606 Port services ...... 42.825.263 16.969.587 Total before elimination ...... 659.696.885 70.818.193 Eliminations and adjustments of consolidation ...... (20.488.227) (62.139.427) 639.208.658 8.678.766

F-184 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

3. Segment reporting (Continued) f) Investment expense

January 1– January 1– December 31, 2015 December 31, 2014 Petrochemical ...... 158.240.038 224.275.742 Port services ...... 462.906.710 279.373.819 Total before elimination ...... 621.146.748 503.649.561 Eliminations and adjustments of consolidation ...... (46.237.952) (78.579.440) 574.908.796 425.070.121 g) Total asset

December 31, 2015 December 31, 2014 Petrochemical ...... 4.845.019.577 3.752.021.478 Port services ...... 977.224.062 457.283.940 Total before elimination ...... 5.822.243.639 4.209.305.418 Eliminations and adjustments of consolidation ...... (361.578.311) (421.048.326) 5.460.665.328 3.788.257.092

4. Cash and cash equivalents

December 31, 2015 December 31, 2014 Cash ...... — 924 Banks ...... 1.341.536.749 702.157.204 —Foreign currency demand deposits ...... 6.477.785 537.690 —Foreign currency time deposits ...... 1.106.344.117 628.754.154 —TL demand deposits ...... 11.158.398 3.086.360 —TL time deposits ...... 217.556.449 69.779.000 1.341.536.749 702.158.128

As of December 31, 2015, foreign currency time deposits consist of overnight and monthly deposits. The effective weighted average interest rates for USD and EUR 2,75% and 1,24%, respectively (December 31, 2014—USD 2,06%, EUR 1,97%.). The monthly effective weighted average interest for the USD time deposit is 2,52% (December 31, 2014: USD 2,83%.) As of December 31, 2015, TL time deposits consist of overnight and monthly deposits and bear the effective interest rate of 12,55% (December 31, 2014—overnight 10,06%). As of December 31, 2015, the Group has no blockage on its bank deposits (December 31, 2014—None). Based on the independent data with respect to the credit risk assessment of the banks at which the Group has deposits, are sufficient in terms of credit quality of the banks. The fair values of cash and cash equivalents approximate carrying values, including accrued income at the respective balance sheet dates.

F-185 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

5. Financial investments a) Short-term financial investments

December 31, December 31, 2015 2014 Time deposits longer than 3 months ...... 158.880.000 — Interest accrual ...... 1.572.259 — 160.452.259 —

The Group has EUR 50.000.000 time deposit consist of more than three months deposits, bear the effective interest of 1,72%. The related amount has been classified under the financial investments. b) Long-term financial investments The details of financial assets available for sale and percentage of shares are below:

December 31, 2015 December 31, 2014 Shares (%) TL Amount Shares (%) TL Amount SOCAR Power Enerji Yatırımları A.¸S...... %9,90 8.910.000 —— 8.910.000 —

6. Financial liabilities a) Short term liabilities

December 31, December 31, 2015 2014 Short-term bank borrowings ...... 308.155.137 352.830.791 Short-term installment of long term borrowings ...... 40.001.436 41.875.571 Interest accruals ...... 13.394.020 1.316.464 361.550.593 396.022.826

Bank borrowings amounting to TL 9.744.159 as of December 31, 2015 (December 31, 2014— TL 5.000.430) are overnight loans without bearing any interest and used for the month-end Social Security Institution (‘‘SSI’’) payments and Custom transactions.

F-186 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

6. Financial liabilities (Continued) As of December 31, 2015 and 2014, the amounts of short term bank borrowings and interest rates are as follows:

December 31, 2015 Nominal Original interest rate (%) currency Amount Short-term bank borrowings USD borrowings ...... Libor + %1,1 51.042.433 148.410.978 TL borrowings ...... %11, %10,90 159.744.159 159.744.159 Interest accruals ...... — — 11.482.937 319.638.074

December 31, 2014 Nominal Original interest rate (%) currency Amount Short-term bank borrowings USD borrowings ...... Libor + %0,5, Libor + %1, %1,8 149.998.000 347.830.361 TL borrowings ...... — 5.000.430 5.000.430 Interest accruals ...... — — 83.855 352.914.646

December 31, 2015 Nominal Original interest rate (%) currency Amount Short-term instalment of long-term bank borrowings USD borrowings ...... Libor + %1,70, Libor + %3,75 9.533.457 27.719.479 EUR borrowings ...... Libor + %3 3.865.168 12.281.957 Interest accruals ...... — — 1.911.083 41.912.519

December 31, 2014 Nominal Original interest rate (%) currency Amount Short-term instalment of long-term bank borrowings USD borrowings ...... Libor + %1,70, Libor +%3,75 13.254.478 30.735.809 EUR borrowings ...... Libor + %3 3.949.290 11.139.762 Interest accruals ...... — — 1.232.609 43.108.180

The fair values of bank borrowings are disclosed in Note 33. As of December 31, 2015, the Group has given guarantee letter amounting to USD 51.691.457 and EUR 40.127.045 to financial institutions (December 31, 2014—USD 61.800.000).

F-187 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

6. Financial liabilities (Continued) b) Long-term bank borrowings

December 31, 2015 Original Maturities Interest rate (%) currency Amount Long-term bank borrowings USD borrowings ...... December 22, 2017 Libor + %1,70 7.634.701 22.198.658 December 22, 2022 %4,26 43.263.332 125.792.463 March 30, 2028 Libor + %4,675 196.586.647 571.595.335 EUR borrowings ...... March 22, 2022 Libor + %3 21.266.667 67.576.960 September 29, 2023 Libor + %0,872 20.000.000 63.552.000 October 2, 2023 %1,64 20.000.000 63.552.000 914.267.416

The Group’s short term bank loan, amounting to TL 150.298.082 has floating rate and interest rate is Libor + 1,1% (December 31, 2014—TL 255.130.391—Libor + 0,5%, Libor + 1%). Current portion of long term financial liabilities’ amounting to TL 41.912.519 has floating rate and interest rate is Libor + 1,70%, Libor + 3,75%, (December 31, 2014: TL 43.108.180—Libor + 1,70%, Libor + 3% and Libor + 3,75%). Long term bank loans, amounting to TL 480.684.553 has floating rate and interest rate is, Libor + 0,872%, Libor + 1,70%, Libor + 3% and Libor + 4,675% (December 31, 2014: TL 167.830.029— Libor + 0.872%, Libor + 1,70% , Libor + 3% and Libor + 3,75%).

December 31, 2014 Original Maturities Interest rate (%) currency Amount Long-term bank borrowings USD borrowings ...... June 14, 2016 Libor + %3,75 1.357.143 3.147.079 December 22, 2017 Libor + %1,70 16.117.709 37.375.356 December 22, 2017 %4,26 43.263.332 100.323.340 EUR borrowings ...... March 22, 2022 Libor + %3 25.133.334 70.893.594 September 2, 2023 %1,64 20.000.000 56.414.000 October 29, 2023 Libor + %0,872 20.000.000 56.414.000 324.567.369

F-188 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

6. Financial liabilities (Continued) As of December 31, 2015 and 2014 the principal repayment schedule of the borrowing is as follows:

December 31, December 31, 2015 2014 Original currency Original currency (USD) (USD) 2015 ...... — 13.722.850 2016 ...... 9.840.151 9.840.151 2017 ...... 8.483.008 8.483.008 2018 ...... 27.139.078 8.483.005 2019 ...... 10.448.871 8.483.005 2020 ...... 11.431.805 8.483.005 2021 ...... 16.149.884 8.483.005 2022 ...... 21.261.137 8.483.005 2023 ...... 20.641.598 — 2024 ...... 30.470.930 — 2025 ...... 38.334.396 — 2026 ...... 37.351.463 — 2027 ...... 23.590.398 — 2028 ...... 2.182.112 — Total ...... 257.324.831 74.461.034

December 31, December 31, 2015 2014 Original currency Original currency (Euro) (Euro) 2015 ...... — 4.254.457 2016 ...... 3.866.667 3.866.667 2017 ...... 6.943.590 6.943.590 2018 ...... 10.020.513 10.020.513 2019 ...... 10.020.513 10.020.513 2020 ...... 10.020.513 10.020.513 2021 ...... 10.020.513 10.020.513 2022 ...... 8.087.180 8.087.180 2023 ...... 6.153.846 6.153.846 Total ...... 65.133.335 69.387.792

7. Trade receivables and payables a) Short-term trade receivables

December 31, 2015 December 31, 2014 Trade receivables ...... 565.969.138 535.561.962 565.969.138 535.561.962 Provision for doubtful receivables ...... (14.544.081) (13.532.966) 551.425.057 522.028.996

F-189 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

7. Trade receivables and payables (Continued) As of December 31, 2015, weighted average yearly effective interest rates for the calculated not accrued income arising from short term trade receivables in TL, USD and EUR are 11,91%, 5,21% and 5,04%, respectively (December 31, 2014—TL, USD and EUR—14,19%, 5,44% and 3,59%) The aging analysis of trade receivables including doubtful receivables as of December 31, 2015 and 2014 is as follows:

December 31, 2015 December 31, 2014 Overdue receivables ...... 23.742.592 23.323.956 0–30 days ...... 236.226.997 162.818.081 31–60 days ...... 115.299.387 126.561.661 61–90 days ...... 98.795.660 127.545.525 91 days and over ...... 91.904.502 95.312.739 565.969.138 535.561.962

As of December 31, 2015, trade receivables amounting to TL 23.742.592 (December 31, 2014— TL 23.323.956) of total overdue receivables amounting to TL 8.276.402 (December 31, 2014— TL 6.157.795) were past due, however, the Group holds guarantee letters amounting to TL 6.937.558 (December 31, 2014—TL 6.020.007) for such receivables (Note 33). Furthermore, trade receivables from foreign customers amounting to TL 3.609.750 (December 31, 2014—TL 3.633.195), are guaranteed with letter of credits amounting TL 1.633.479 (December 31, 2014—553.012). Furthermore, the Group has accounted provision for doubtful receivables for the TL 14.544.081 portion of its past due receivables (December 31, 2014—TL 13.532.966). Concentrations of credit risk with respect to trade receivables are limited due to the Group’s widely diversified customer base, covering the spectrum of manufacturing and distribution and the variety of available end markets in which they sell. As part of its sales policy, the Group obtains 100% of total outstanding TL trade receivables from its customers. An appropriate provision is provided by the Group according to the past experiences of the collections of trade receivables. Therefore, management believes that no additional credit risk exists beyond the Group’s trade receivables, which have been identified as doubtful receivable and have been fully provided for. The average maturity dates of trade receivables are 44 days (December 31, 2014—63).

Letters of guarantee received for trade receivables The Group’s receivables mainly arise from sales of thermoplastics and fiber materials. As of December 31, 2015, total amount of letters of guarantee received and bank guarantees within the context of direct order collection system (‘‘DOCS’’) from domestic and foreign customers are amounting to TL 989.576.591 TL (December 31, 2014—1.061.468.492 TL) (Note 15) The movement of the provision for doubtful receivables during the year is as follows:

Overdue period December 31, 2015 December 31,2014 0–1 month ...... 1.435.524 2.032.808 1–3 months ...... 8.922.096 7.250.043 Over 3 months ...... 13.384.972 14.041.105 23.742.592 23.323.956

F-190 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

7. Trade receivables and payables (Continued) The movement of the provision for doubtful receivables during the year is as follows:

2015 2014 January 1 ...... (13.532.966) (9.448.949) Additions during the year (Note 26) ...... (1.341.985) (4.084.017) Provisions no longer required ...... 330.870 — December 31 ...... (14.544.081) (13.532.966) b) Other short-term trade payables

December 31,2015 December 31,2014 Trade payables, net ...... 1.103.997.061 625.806.070 Expense accruals ...... 6.253.659 5.347.268 1.110.250.720 631.153.338

Letter of credits amounting to TL 837.790.691 of total short-term trade payable were due to the banks to finance the purchases of Naphtha. The average maturity for the letter of credit transactions is 296 days and accrued interest amounting to TL 5.689.406 has followed in the same account (December 31, 2014—275.223.684 TL and the average maturity is 307 days). Average maturity for short-term trade payables other than letter of credits is 29 days as of December 31, 2015 (December 31, 2014—45 days). The effective weighted average interest rates used in the calculation of finance costs of short-term trade payables are 13,93%, 3,38% and 3,38% for TL, USD and EUR denominated trade payables, respectively (December 31, 2014—The effective weighted average interest rates of short-term trade payables for TL, USD and EUR denominated trade payables are 11,34%, 2,95% and 2,95% respectively).

8. Other receivables and payables

December 31, 2015 December 31, 2014 a) Other short-term receivables Receivables from contract of port services ...... 3.764.943 — Loan interest incentive accrual ...... 1.647.621 1.487.002 Receivables from compensation of occupational accidents . . . 326.008 326.008 Freight receivables ...... 118.000 162.323 Receivables from personnel ...... 18.351 23.662 Insurance receivables ...... — 319.000 Other ...... 1.569.013 1.198.523 7.443.936 3.516.518 Provision for other doubtful receivables ...... (933.608) (933.608) 6.510.328 2.582.910

F-191 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

8. Other receivables and payables (Continued) The movement of the provision for other doubtful receivables during the year is as follows:

2015 2014 January 1 ...... (933.608) (564.205) Additions in the year (Note 26) ...... — (369.403) December 31 ...... (933.608) (933.608)

December 31, 2015 December 31, 2014 b) Other short-term payables Deposits and guarantees received ...... 2.193.874 1.460.974 Other ...... 59.854 26.528 2.253.728 1.487.502

9. Derivative financial instruments The amounts of derivative financial instruments as of December 31, 2015 and 2014 are as follows:

December 31, 2015 December 31, 2014 Asset Liability Asset Liability Hedging reserve ...... 1.646.432 11.008.960 1.445.166 — 1.646.432 11.008.960 1.445.166 —

December 31, 2015 December 31, 2014 ContractFair value Contract Fair value Amount (TL) Asset Liability Amount (TL) Asset Liability Hedging reserve: Foreign currency forward transactions . 257.067.840 1.646.432 659.638 52.747.090 1.445.166 — Futures commodity trading operations . . 149.529.817 — 10.349.322 ——— 406.597.657 1.646.432 11.008.960 52.747.090 1.445.166 —

Derivatives held for hedging: The Group’s hedging transactions that fulfil the conditions of hedge accounting from financial risk are classified as derivatives for hedging purposes. Depending on the Group’s sales prices per customer contracts are set in TL, in US Dollar or in Euro, which is based on prices for raw material purchases in US Dollars, it is reflected in the sales price in US Dollar exchange rate. The Group has signed a contract that related to the amount of EUR 80.900.000 to foreign currency forward transactions to hedge against currency exchange risks in 2015. The fair value as of December 31, 2015 amounting to TL 986.794 is shown in the balance sheet as derivative instruments; the gain is recognized in the statement of comprehensive income under hedge funds. (December 31, 2014—TL 1.445.166) The group has signed contracts amounting to TL 83.123.923 naphtha purchases and TL 56.056.572 final product sales as of December 31, 2015, in order to hedge the cash flow risk against the naphtha

F-192 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

9. Derivative financial instruments (Continued) purchases that is opened to price risk on purchase dates. Group management has assessed the results of hedging transactions as effective and hedge transactions have been accounted in the hedging fund under comprehensive income statement. As of December 31, 2015 the fair value of TL 10.349.322 has been accounted under derivative instruments in balance sheet (December 31, 2014—None).

10. Inventories

December 31, 2015 December 31, 2014 Raw materials ...... 112.685.870 68.815.200 Work-in-progress ...... 94.789.137 190.828.746 Finished goods ...... 90.622.291 132.406.770 Trade goods ...... 19.207.550 25.623.038 Goods-in-transit ...... 33.907.481 14.434.214 Other inventories ...... 24.342.685 27.244.975 375.555.014 459.352.943 Less: Provision for impairment on inventories ...... (12.046.150) (27.379.753) 363.508.864 431.973.190

Movements of provision for impairment on inventories for the years ended December 31, 2015 and 2014 are as follows:

2015 2014 January 1 ...... (27.379.753) (840.728) Charge during the year for impairment of inventory (Note 23) ...... (12.046.150) (26.539.025) Realized in the period ...... 27.379.753 — December 31 ...... (12.046.150) (27.379.753)

Allocation of the provision for impairment on inventories in terms of inventory type is as follows:

December 31, 2015 December 31, 2014 Raw materials ...... — 2.483.300 Work-in-progress ...... 10.041.552 11.920.373 Finished goods ...... 1.150.298 11.470.833 Trade goods ...... 583.877 662.734 Other inventories ...... 270.423 842.513 December 31 ...... 12.046.150 27.379.753

As of December 31, 2015, provision for impairment on inventories decreased from TL 27.379.753 to TL 12.046.150. The reason of the impairment of inventories is the difference between sales and cost price, as product sales price decreased due to the decrease in naphtha price.

F-193 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

11. Investment property

December 31, 2015 December 31, 2014 Investment property(*) ...... 1.469.935 1.461.758 1.469.935 1.461.758

(*) 30 years right of construction of the land, that is 1.969.478,40 m2, is given to the Star Rafineri A.¸S. (‘‘STAR’’) by Group. The annual cost of the land, that is located in Aliaga˘ district Arap¸ciftligi,˘ is USD 4.630.057,88 and the cost will be increased at the rate of Libor + 1% each year. 30 years right of construction of the land, that is 11.017.36 m2, is given to the Air Liquide Gaz Sanayi ve Ticaret A.¸S. by the group. The market value of the land has been determined as TL 2.500.000. In 2010, the market value of the portion of the land with the area of 1.375.000 m2 and acquisition cost of TL 1.020.532 has been determined as TL 177.500.000 and TL 126.000.000 as of December 31, 2010 respectively by Artı Gayrimenkul Degerleme˘ ve Danı¸smanlık A.¸S. and Elit Gayrimenkul Degerleme˘ A.¸S. that are licensed by the Capital Market Board. According to the Elit Gayrimenkul Degerleme˘ A.¸S. to Socar Turkey Enerji A.¸S.—major valuation report which was prepared by shareholder of the Group, for the mentioned land in January 2013, the market value of the land has been determined as TL 378.125.000. The increase of the market value of the mentioned land resulted from the approval of the change of construction plan and the investments made by Star Rafineri A.¸S. to the land for making the land possible to invest. Movements of investment properties for the years ended December 31, 2015 and 2014 are as follows:

2015 2014 January 1 ...... 1.461.758 1.020.532 Transfers(*) ...... 8.177 441.226 December 31 ...... 1.469.935 1.461.758

(*) The land, amounting to TL 8.177 is transferred from property, plant and equipment in 2015. (Note 12) (December 31, 2014: 441.226).

F-194 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

12. Property, plant and equipment The movements of tangible assets and related accumulated depreciation for the years ended December 31, 2015 and 2014 are as follows:

December 31, Transfers December 31, 2014 Additions (Note 11 ve13) Disposals 2015 Cost: Land ...... 13.208.763 — (8.177) — 13.200.586 Land improvements ..... 108.396.415 — 5.561.156 — 113.957.571 Buildings ...... 169.032.795 — 2.585.248 (382.369) 171.235.674 Machinery and equipment 6.381.145.390 — 55.110.339 — 6.436.255.729 Motor vehicles ...... 10.576.693 — 1.771.691 (29.115) 12.319.269 Furniture and fixtures .... 67.789.913 — 6.939.741 (26.848) 74.702.806 Other fixed assets ...... 996.152 — — — 996.152 Leasehold improvements . 581.831 — — — 581.831 Construction in progress(*) ...... 488.649.086 574.908.796 (75.762.598) — 987.795.284 7.240.377.038 574.908.796 (3.802.600) (438.332) 7.811.044.902 Accumulated depreciation: Land improvements ..... (82.575.675) (2.513.804) — — (85.089.479) Buildings ...... (95.524.377) (3.656.754) — 194.239 (98.986.892) Machinery and equipment (5.179.977.175) (101.293.438) — — (5.281.270.613) Motor vehicles ...... (9.276.064) (662.797) — 29.115 (9.909.746) Furniture and fixtures .... (54.532.020) (3.247.840) — 26.709 (57.753.151) Other fixed assets ...... (996.152) — — — (996.152) Leasehold improvements . (210.852) (193.943) — — (404.795) (5.423.092.315) (111.568.576) — 250.063 (5.534.410.828) Net book value ...... 1.817.284.723 2.276.634.074

F-195 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

12. Property, plant and equipment (Continued)

December 31, Transfers December 31, 2013 Additions (Note 11 ve13) Disposals 2014 Cost: Land ...... 9.367.988 — 4.452.454 (611.679) 13.208.763 Land improvements ...... 101.187.700 — 7.208.715 — 108.396.415 Buildings ...... 166.065.628 — 2.967.167 — 169.032.795 Machinery and equipment . . 6.062.574.658 — 318.570.732 — 6.381.145.390 Motor vehicles ...... 10.151.874 — 424.819 — 10.576.693 Furniture and fixtures ...... 62.239.292 — 6.623.704 (1.073.083) 67.789.913 Other fixed assets ...... 996.152 — — — 996.152 Leasehold improvements . . . 581.831 — — — 581.831 Construction in progress(*) . 409.087.104 425.070.121 (345.508.139) — 488.649.086 6.822.252.227 425.070.121 (5.260.548) (1.684.762) 7.240.377.038 Accumulated depreciation: Land improvements ...... (80.457.199) (2.118.476) — — (82.575.675) Buildings ...... (91.957.310) (3.567.067) — — (95.524.377) Machinery and equipment . . (5.101.542.319) (78.434.856) — — (5.179.977.175) Motor vehicles ...... (8.821.318) (454.746) — — (9.276.064) Furniture and fixtures ...... (53.078.079) (2.527.024) — 1.073.083 (54.532.020) Other fixed assets ...... (996.152) — — — (996.152) Leasehold improvements . . . (16.909) (193.943) — — (210.852) (5.336.869.286) (87.296.112) — 1.073.083 (5.423.092.315) Net book value ...... 1.485.382.941 1.817.284.723

As of December 31, 2015, transfers amounting to TL 3.794.423 is transferred to intangible asset (December 31, 2014 TL 4.819.322), TL 8.177 is transferred to investment properties (December 31, 2014 TL 441.226). (*) Since the construction in progress contains incomplete projects, as of balance sheet date they have not been capitalized yet. As December 31, 2015, investment expense, amounting to TL 152.268.574, is performed by Petkim, amounting to TL 422.640.222 is performed by Petlim. (December 31, 2014—Petkim: TL 224.275.742, Petlim: TL 200.794.379). As of December 31, 2015, Petlim Limancılık Ticaret A.¸S. has given 1st degree mortgage in favor of Akbank T.A.¸S. on its land amounting to USD 350 million on the date of November 20, 2015 (December 31, 2014—None). The Group compared the investment loans in foreign currency to the TL market loan interest and capitalized the borrowing cost amounting to TL 18.366.327 (December 31 2014—TL 16.318.767) (Note 29). The rate that group has used to determine the capitalized finance cost is 11,59% (December 31, 2014—11,97%) which is weighted average effective interest rate of the investment loans. Depreciation charges amounting to TL 111.568.576 for the year ended December 31, 2015 (December 31, 2014—TL 87.296.112) were allocated to cost of sales by TL 90.846.512 (December 31, 2014—TL 66.008.084), to idle capacity expenses by TL 8.554.895 (December 31, 2014—TL 8.542.313), to inventories by TL 5.153.090 (December 31, 2014—TL 6.532.713), to general administrative expenses by TL 6.276.974 (December 31, 2014—TL 5.537.312), to marketing, selling and distribution expenses by TL 492.489 (December 31, 2014—TL 334.738), and to research and development expenses by TL 244.616 (December 31, 2014—TL 340.952). The major part of the additions to machinery and equipment as of December 31, 2015 related to the modernization of production facilities and machineries which are classified under construction in progress as of December 31, 2014 and completed in year 2015. The Group’s management plans to

F-196 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

12. Property, plant and equipment (Continued) increase the efficiency and environmental compliance with these investments. Construction in progress as of December 31, 2015 has similar characteristics with previous year’s construction in progress. There is no financial leasing as of December 31, 2015 (December 31, 2014—None).

13. Intangible assets The movements of intangible assets and related accumulated amortization for the years ended December 31, 2015 and 2014 are as follows:

December 31, Transfers December 31, 2014 Additions (Note 12) Disposals 2015 Cost: Rights and software ...... 26.476.207 — 3.794.423(*) — 30.270.630 26.476.207 — 3.794.423 — 30.270.630 Accumulated amortization: Rights and software ...... (9.778.835) (2.164.126) — — (11.942.961) (9.778.835) (2.164.126) — — (11.942.961) Net book value ...... 16.697.372 18.327.669

December 31, Transfers December 31, 2013 Additions (Note 12) Disposals 2014 Cost: Rights and software ...... 21.656.885 — 4.819.322(*) — 26.476.207 21.656.885 — 4.819.322 — 26.476.207 Accumulated amortization: Rights and software ...... (7.494.386) (2.284.449) — — (9.778.835) (7.494.386) (2.284.449) — — (9.778.835) Net book value ...... 14.162.499 16.697.372

(*) Transfers, that are performed during December 31, 2015 and 2014 periods, include software that are used during production process and other license. There is no mortgage on intangible assets as of December 31, 2015 (31 December, 2014—None). Amortization charges amounting to TL 2.164.126 (31 December 2015—2.284.449 TL) for the year ended December 31, 2015 were allocated to cost of sales by TL 568.567 (31 December 2014—590.431 TL), to research and development expenses by TL 59.177 (31 December 2014—290.433 TL), and to general administrative expenses by TL 1.536.382 (31 December 2014—1.403.585 TL).

14. Government grants As of December 31, 2015, government grants consist of research and development incentives granted from TUB¨ ˙ITAK amounting to TL 1.539.637 (31 December 2014: 1.407.362 TL) and TL 132.275 (31 December 2014: 40.744 TL) of that incentives grant has been presented in income statement.

F-197 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

15. Provisions, contingent assets and liabilities

December 31, December 31, 2015 2014 a) Short-term provisions: Provision for EMRA(*) contribution share ...... 1.763.480 1.480.403 Provision for legal cases ...... 942.746 1.986.226 Provision for tax inspection settlement fee(**) ...... — 1.700.000 2.706.226 5.166.629

(*) Energy Market Regulatory Authority Movements of the provision for EMRA contribution share is as follows:

2015 2014 January 1 ...... 1.480.403 1.452.120 Change in the period, net ...... 283.077 28.283 December 31 ...... 1.763.480 1.480.403

Movements of the provision for legal cases contribution share is as follows:

2015 2014 January 1 ...... 1.986.226 1.254.955 Change in the period ...... 10.537 731.271 Paid in the period (Note 26) ...... (1.054.017) — December 31 ...... 942.746 1.986.226

Other tax penalties that are detailed below resulted favor of the Group. • Pursuant to article 53/c of the Customs Regulation, on the grounds that the contractual stamp duty paid upon import was not included in VAT, the VAT of the stamp duty on November 26, 2012 which is TL 160.930 and a fine of 3 times the VAT which is TL 482.760, by Aliaga˘ Customs Directorate in 2009, • Pursuant to article 53/c of the Customs Regulation, on the grounds that the contractual stamp duty paid upon import was not included in VAT, the VAT of the stamp duty on December 18, 2012 which is TL and a fine of 3 times the VAT which is TL 823.877, by Aliaga˘ Customs Directorate in 2010, • Within the scope of article 53/c of the Customs Regulation, stamp duty by Aliaga˘ Tax Office upon the request of Aliaga˘ Customs Directorate amounting to a total of TL 9,6 million for the years 2008-2009-2010-2011 and 2012 on December 24, 2013 and tax loss of TL 9,6 million regarding the imports performed. The management of the Group believes that its practices regarding the mentioned communiques´ are in compliance with legal regulations and it has used all of its legal rights including objection, reconciliation

F-198 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

15. Provisions, contingent assets and liabilities (Continued) and initiating a legal process and the applications have resulted in favor of the Group. Accordingly, no risk remains in the financial statements regarding these notifications.

December 31, December 31, 2015 2014 b) Guarantees received: Bank guarantees within the context of DOCS ...... 599.275.848 738.632.376 Letters of guarantee received from customers ...... 310.208.811 278.268.951 Letters of guarantee received from suppliers ...... 167.392.899 99.212.914 Receivable insurance ...... 76.290.860 29.998.145 Mortgages ...... 2.000.000 2.000.000 Policies received ...... 1.000.000 865.440 Cheques received ...... 801.072 2.864.606 Letters of credit received ...... — 8.838.974 1.156.969.490 1.160.681.406

Allocation of the letters of guarantee received in terms of currency type is as follows:

December 31, 2015 December 31, 2014 Original Original currency TL Amount currency TL Amount Turkish Lira ...... — 739.630.915 — 846.462.355 US Dollar ...... 93.457.040 271.735.689 113.722.353 263.710.764 Euro ...... 45.795.629 145.520.192 17.891.812 50.467.435 Japanese Yen ...... 1.737.553 41.837 —— British Pound ...... 9.500 40.857 —— Swiss Francs ...... ——17.460 40.852 1.156.969.490 1.160.681.406

December 31, December 31, 2015 2014 c) Guarantees given: Letters of guarantee given ...... 438.767.502 347.421.165 438.767.502 347.421.165

F-199 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

15. Provisions, contingent assets and liabilities (Continued) Collaterals, Pledges and Mortgages (‘‘CPM’’) provided by the Company:

December 31, December 31, 2015 2014 A. Total amount of CPMs given for the Company’s own legal personality ...... 438.767.502 347.421.165 B. Total amount of CPMs given on behalf of fully consolidated companies(*) ...... 571.595.334 — C. Total amount of CPMs given for continuation of its economic activities on behalf of third parties ...... 120.665.400 — D. Total amount of other CPMs i. Total amount of CPMs given on behalf of the majority shareholder ...... — — ii. Total amount of CPMs given to on behalf of other group companies which are not in scope of B and C...... — — iii. Total amount of CPMs given on behalf of third parties which are not in scope of C...... — — 1.131.028.236 347.421.165

(*) Petlim Limancılık Ticaret A.¸S., which the group owns its %70 shares, has signed a project finance credit agreement with AKBANK T.A.¸S. at an amount of USD 212 million which has 13 years maturity with the first 3 years no repayment period, for the external funding of the container port project. Petkim has guaranteed the loan repayment and also amounting to 105 M TL which is its shares in Petlim Limancılık Ticaret A.¸S has been pledged. There are three covenant conditions of the loan agreements, the one on the construction period (credit / Total Shareholders’ Equity Ratio does not exceed the 75:25 ratio), and two covering after the period of project activities. On November 20, 2015, Petlim Limancılık Ticaret A.¸S. has given 1st degree mortgage amounting to USD 350 million in favor of Akbank T.A.¸S. on its land, which has been sold to Petlim by Petkim amounting to TL 5.650.000 (December 31, 2014—None). It would be appropriate to take into account the amount of the land value instead of mortgage amount.

December 31, December 31, 2015 2014 Mortgages given to banks ...... 692.260.734 — Guarantees given to banks ...... 277.805.781 143.308.020 Customs offices and Republic of Turkey Prime Ministry Undersecretaries of Customs ...... 46.664.800 113.584.281 Turkiye¨ Elektrik Ticaret ve Taahhut¨ A.¸S...... 8.478.465 8.478.465 EMRA...... 5.600.000 8.475.000 Other ...... 100.218.456 73.575.399 1.131.028.236 347.421.165

Allocation of the letters of guarantee given in terms of currency type is as follows:

December 31, 2015 December 31, 2014 Original Original currency TL Amount currency TL Amount US Dollar ...... 318.093.104 924.887.510 86.865.000 201.431.249 Euro ...... 50.627.045 160.872.500 10.500.000 29.617.350 Turkish Lira ...... — 45.268.226 — 116.372.566 1.131.028.236 347.421.165

F-200 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

Operational leases income 2015 2014 0–1 year ...... 14.261.363 10.968.926 1–5 year(s) ...... 60.206.567 45.691.663 5 year and more ...... 493.081.329 358.975.604 Total ...... 567.549.259 415.636.193

Operational leases expense 2015 2014 0–1 year ...... 12.878.087 12.878.087 1–5 year(s) ...... 17.170.782 30.048.869 Total ...... 30.048.869 42.926.956

F-201 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

17. Employee benefits

December 31, December 31, 2015 2014 i) Short-term employee benefits Provision for seniority incentive bonus ...... 3.027.856 3.517.037 Performance bonus ...... 10.000.000 — 13.027.856 3.517.037 ii) Long-term employee benefits Provision for employment termination benefits ...... 78.796.553 69.911.457 Provision for unused vacation rights ...... 7.686.675 6.547.365 Provision for seniority incentive bonus ...... 2.643.707 2.131.500 89.126.935 78.590.322

Unused vacation rights: Movements of the provision for unused vacation rights are as follows:

2015 2014 January 1 ...... 6.547.365 6.192.081 Changes in the Period, net ...... 1.139.310 1.016.908 Transfer to employment termination benefit, seniority incentive bonus and unused vacation (Note 20) ...... — (661.624) December 31 ...... 7.686.675 6.547.365

Provision for employment termination benefits Under Turkish Labour Law, the Group is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, or who is called up for military service, dies or retires after completing 25 years of service (20 years for women). The amount payable consists of one month’s salary limited to a maximum of TL 3.828,37 for each year of service as of December 31, 2015 (December 31, 2014—TL 3.438,22). The liability is not funded, as there is no funding requirement. The provision is calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. IAS 19 requires actuarial valuation methods to be developed to estimate the enterprises’ obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:

December 31, December 31, 2015 2014 Discount rate (%) ...... 3,80 3,80 Probability of retirement (%) ...... 100,00 100,00 The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. As the maximum liability is revised semi-annually, the maximum

F-202 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

17. Employee benefits (Continued) amount of TL 4.092,53 , which is effective from January 1, 2016, has been taken into consideration in the calculation of employment termination benefits of the Group (January 1, 2015—TL 3.451,37 TL) The movements of the provision for seniority incentive bonus are as follows:

2015 2014 January 1 ...... 69.911.457 85.484.667 Interest cost ...... 2.656.636 3.248.418 Actuarial loss ...... 10.549.840 2.905.184 Service cost ...... 3.146.581 3.212.612 Transfer to employment termination benefit, seniority incentive bonus and unused vacation payable (Note 20) ...... — (11.259.501) Payments during the year ...... (7.467.961) (13.679.923) December 31 ...... 78.796.553 69.911.457

Sensitivity analysis of the assumptions, that are used in order to calculate the provision of the employment termination benefit as December 31, 2015 and 2014, are follows:

December 31, 2015 December 31, 2014 Net discount rate Net discount rate 100 basis 100 basis 100 basis 100 basis point point point point Sensitivity analysis increase decrease increase decrease Rate ...... %4,80 %2,80 %4,80 %2,80 Change in liability of employment termination benefit ...... (2.941.096) 3.583.922 (2.941.096) 3.583.922

Provision for seniority incentive bonus: The Group has an employee benefit plan, namely ‘‘Seniority Incentive Bonus’’, which is paid to employees with a certain level of seniority. Seniority incentive bonus is a benefit provided to the personnel to promote their loyalty to the job and workplace. The bonus amounting to 40 days of gross salary for 5 years seniority, 50 days of gross salary for 10 years seniority, 65 days of gross salary for 15 years seniority, 80 days of gross salary for 20 years seniority, 90 days of gross salary for 25 and 100 days of gross salary for 30 years seniority is paid to the union personnel with the gross salary of the month when they are reached to the seniority level. In case of termination of employment for any reason that does not prevent gaining severance pay, 20% of seniority incentive which the employee will gain, for each year last first seniority incentive level. In this calculation the periods which are shorter than 6 month are not considered. Periods which are more than 6 month are considered as 1 year. For the non-union personnel working at the Group, the bonus amounting to 40 days of gross salary for 5 years seniority, 50 days of gross salary for 10 years seniority, 65 days of gross salary for 15 years seniority, 80 days of gross salary for 20 years seniority, 90 days of gross salary for 25 years and 100 days for 30 years seniority for the seniority levels in which they are entitled as of the aforementioned date and 30 days of gross salary for the following seniority levels that they are going to be entitled is paid with the gross salary of the month when they are reached to the seniority level. In case of termination of employment for any reason that does not prevent gaining severance pay, 20% of seniority incentive which the employee will gain, for each year last first seniority incentive level. In this calculation the

F-203 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

17. Employee benefits (Continued) periods which are shorter than 6 month are not considered. Periods which are more than 6 month are considered as 1 year. The seniority incentive bonus provision is calculated by estimating the present value of the future probable obligation arising from the qualification of the employees for the bonus. IAS 19 requires that actuarial valuation methods to be developed to estimate the employee benefit provisions. The following actuarial assumptions have been used in the calculation of the total provision:

December 31, December 31, 2015 2014 Discount rate (%) ...... 3,80 3,80 Probability of retirement (%) ...... 100,00 100,00 The movements of the provision for seniority incentive bonus are as follows:

2015 2014 January 1 ...... 5.648.537 5.318.371 Interest cost ...... 214.644 202.098 Actuarial loss ...... — 23.268 Service cost ...... 4.492.288 4.034.586 Transfer to employment termination benefit, seniority incentive bonus and unused vacation (Note 20) ...... — (288.871) Payments during the year ...... (4.683.906) (3.640.915) December 31 ...... 5.671.563 5.648.537

18. Deferred Income a) Short-term deferred income: December 31, December 31, 2015 2014 Order advances received ...... 18.740.926 13.280.798 Deferred income ...... 3.184.151 809.359 21.925.077 14.090.157 b) Long-term deferred income: December 31, December 31, 2015 2014 Long-term deferred income(*) ...... 54.794.114 48.490.336 54.794.114 48.490.336

(*) For a container port to be established inside Petkim facilities to be operated by APM Terminalleri Liman ˙I¸sletmeciligi˘ A.¸S. (APM Terminalleri), an operation agreement was signed between the Group and APMT BV. and APM Terminalleri on February 22, 2013. Under the agreement, the amount paid by the Group APM Terminals TL 2.234.292 in short-term deferred revenue 54.740.511 TL is followed till date to start operating in long-term deferred revenues. Business transition period will take place in 2016.

F-204 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

19. Prepaid expenses a) Short-term prepaid expenses December 31, December 31, 2015 2014 Advances given for inventories ...... 20.311.017 24.026.384 Advances given for customs affairs ...... 10.201.986 14.004.351 Prepaid rent, insurance and other expenses ...... 8.956.615 5.207.976 39.469.618 43.238.711 b) Long-term prepaid expenses December 31, December 31, 2015 2014 Advances given for fixed assets(*) ...... 77.713.952 22.405.739 Advances given for custom works ...... 12.772.125 — Prepaid rent, insurance and other expenses ...... 2.218.840 2.306.320 92.704.917 24.712.059

(*) A large part of the amount constituting the advance has been given tangible assets under the Wind Power Plant Project.

20. Liabilities for employee benefits

December 31, December 31, 2015 2014 Due to personnel ...... 8.220.279 9.271.096 Social security contribution ...... 40.774 4.312.229 Employment termination benefit, seniority incentive bonus and unused vacation payable to employees (Note 17) ...... — 12.209.996 8.261.053 25.793.321

21. Other assets and liabilities i) Other assets December 31, December 31, 2015 2014 a) Other current assets: Value added tax (‘‘VAT’’) receivable ...... 33.899.334 29.118.763 Other ...... 1.197.141 3.316.946 35.096.475 32.435.709

F-205 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

21. Other assets and liabilities (Continued)

December 31, December 31, 2015 2014 b) Other non-current assets: Value added tax (‘‘VAT’’) receivable(*) ...... 26.660.801 22.875.889 Spare parts ...... 12.539.243 11.072.898 Other ...... 122.284 122.335 39.322.328 34.071.122

(*) VAT amount, that is predicted not to use within a year, is classified to non-current asset. ii) Other liabilities December 31, December 31, 2015 2014 a) Other short-term liabilities: Taxes and funds payable and other deductions ...... 6.136.077 5.917.747 Other ...... 359.334 223.431 6.495.411 6.141.178

22. Equity The shareholders of the Company and their shareholdings as of December 31, 2015 and 2014 were as follows:

December 31, 2015 December 31, 2014 Group: Shareholder: Amount Share (%) Amount Share (%) A Socar Turkey Petrokimya A.¸S. .... 765.000.000 51,00 510.000.000 51,00 A Public owned(*) ...... 655.176.478 43,68 386.784.319 38,68 A SOCAR Turkey Enerji A.¸S.(**) ..... 79.823.522 5,32 103.215.681 10,32 C Privatization Administration ...... 0,01 — 0,01 — Total paid share capital ...... 1.500.000.000 100 1.000.000.000 100 Adjustment to share capital ...... 238.988.496 486.852.283 Total share capital ...... 1.738.988.496 1.486.852.283

(*) SOCAR Turkey Enerji A.¸S. traded on a public BIST part; it has a rate of 2.75% per share 41.278.401, 47. (**) SOCAR Turkey Enerji A.¸S. and SOCAR ˙Izmir Petrokimya A.¸S. that SOCAR Turkey Enerji A.¸S. owned 100% subsidiary and the Group owned 10.32% sharing, is united as of September 22, 2014. Adjustment to share capital represents the difference between the amounts of cash and cash equivalents contributions, restated for inflation, to share capital and the amounts before the restatement. As the ordinary general meeting decision taken at the March 29, 2013, companies registered capital is increased to TL 4.000.000.000 from TL 300.000.000; it is divided to 400.000.000.000 shares with a face value of Kuru¸s 1 (‘‘Kr’’) each. As the board of directories meeting decision taken at the December 8, 2015 in the registered capital ceiling of TL 4.000.000.000, increased 50% of the issued share capital and reached from TL 1.000.000.000 to TL 1.500.000.000. Capital increase consists from adjustments to share capital amounting to TL 247.863.787 and special fund amounting to TL 252.136.213. Group A registered

F-206 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

22. Equity (Continued) shares, issued per procuration of the capital increased at an amount of TL 500.000.000, are distributed to shareholders in due form. Approved and issued capital of the Company consist of 149.999.999.999 Group A shares, each of them having a registered nominal price of 1Kr, and 1 Group C preferred stock belonging to Management (December 31, 2014—59.999.999.999 Group A shares and 40.000.000.000 Group B shares, each of them having a registered nominal price of 1Kr, and 1 Group C preferred stock belonging to Management). Capital of the Company is composed of all registered shares (December 31, 2014—All registered). The following matters are subject to the approval of the member of the Board of Directors representing the C type share: • The amendments on the articles of association affecting the privileges of type C, • The recording of the transfer of the registered shares in the stock ledger, • The determination of the form of the certificate of authority stated in the 31st clause of the Articles of Association, • The decision related with the reduction of the capacity of any plant by 10% owned by the Company • The foundation of new company or partnership, acquisition of a company being a partner of existing companies and/or merging with them, spin-off, changes of the titles, annulment and winding-up.

F-207 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

22. Equity (Continued) of the provisions of Capital Market Legislation and Turkish Commercial Code shall be submitted to the approval of General Assembly; and the distribution shall be completed within legal terms. • According to the Articles of Association of the Company, the amount to be determined by the General Assembly, not exceeding the 0,1% of distributable profits remaining after distribution of first dividend shall be distributed to Board Members. • A consistent policy shall be followed between the benefits of the shareholders’ and the company in the application of Profit Distribution Policy. • The date of distribution shall be decided by General Assembly upon proposal of the Board. Profit distribution payments shall be completed within legal terms. For other methods of profit distribution, relevant legislation, communiques,´ and regulations of CMB shall be followed. • In the event that calculated ‘‘net distributable profit for the year’’ is below 5% of issued capital, no profit shall be distributed. • When no profit is distributed, the Board of Directors shall inform the shareholders at General Assembly meeting about the reasons and how the undistributed profits would be allocated. A provision in the main agreement is required for dividend to be distributable to holders of privileged shares, holders of usufruct right certificate, to the members of the board of directors, to the employees of the company and to non-shareholders. If, despite the fact that a provision is present in the main agreement regarding dividend distribution to these persons, a rate has not been determined, the dividend to be distributed to these persons may not exceed one fourth of the dividend distributed to shareholders under any circumstance except for those arising from privilege. As of December 31, 2015, the Group has such restricted reserves amounting to TL 36.548.777 (December 31, 2014 TL 8.356.700) The Group’s accumulated earnings amounting to TL 156.442.236 has been classified in retained earnings under ‘‘Equity’’ in the consolidated balance sheet (December 31, 2013—TL 178.181.398 under retained earnings). In accordance with the Communique´ No:XI-29 and related announcements of CMB, effective from January 1, 2008, ‘‘Share Capital’’, ‘‘Restricted Reserves’’ and ‘‘Share Premiums’’ shall be carried at their statutory amount. The valuation differences shall be classified as follows: • the difference arising from the ‘‘Paid-in Capital’’ and not been transferred to capital yet, shall be classified under the ‘‘Inflation Adjustment to Share Capital’’; • the difference due to the inflation adjustment of ‘‘Restricted reserves’’ and ‘‘Share premium’’ and the amount has not been utilized in dividend distribution or capital increase yet, shall be classified under ‘‘Retained earnings’’. Other equity items shall be carried at the amounts calculated based on CMB Financial Reporting Standards. Adjustment to share capital has no use other than being transferred to paid-in share capital. Composition of the equity items subject to the profit distribution as per statutory financial statements of the Company is as follows:

December 31, 2015 December 31, 2014 Legal reserves and special funds ...... 362.011.604 50.174.012 Net profit for the year ...... 573.177.217 563.841.531 935.188.821 614.015.543

F-208 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

22. Equity (Continued) Gain on sale of subsidiary shares do not result in loss of control 45 million shares, representing 30% of capital of Petlim Limancılık Ticaret A.¸S. which is subsidiary of the Company has been purchased by Goldman Sachs International (‘‘GSI’’, together with its subsidiaries ‘‘GS’’) in exchange for 250 million USD Dollars (‘‘Share Transfer Agreement’’). At the same date, in the consequence of put option contract signed by STEA¸S with GSI, it has undertaken guarantor liability regarding of liabilities of Petkim due to share transfer agreement, if required and in the event of contract conditions the right of selling shares of Petlim by GS˙I to STEA¸S has been originated (‘‘Put option Contract’’). Within the mentioned put option contract, no later than 7 years following the signed share transfer agreement, it has been agreed on public offering of shares of Petlim (public offering), in accordance with those regulations agreed by the parties and in consequence of option relation, loss of GSI shall be compensated by STEA¸S. STEA¸S has committed to purchase of shares held by GSI in case of not occurring of public offering or not procuring the certain conditions of contract despite occurring the public offering as a matter of put option contract by the demand of GSI. Hence, STEA¸S’s warranty obligation given to the GSI is going to be valid for 7 years following the signing of the share purchase agreement. Owing to the fact that the public offering of Petlim Shares within 3 years following the signing of Share Transfer Agreement has been planned, the parties has come to an agreement on warranty service provided to Petkim in the consequence of put option contract by STEA¸S, is going to carry on for 3 years following the signing of share transfer agreement. It has been decided to collect mentioned service fee for 3 years in a one-shot payment on corresponding of discounted rate for 3 years without VAT which is 2,35% per year (Service Fee). In accordance with agreement between STEA¸S and Petkim, STEA¸S states not reflecting addition warranty service fee to Petkim in case of not offering Petlim Shares to public within 3 years or in other words in case of continuing of put option right of STEA¸S given to GSI also after 3 years. In this way, a three year service fee amounting TL 40.942.875 corresponding USD 17.625.000 which is calculated discounted 2,35% per year has been deducted from gain on sale of subsidiary, which has been reflected to equity by taking tax effect into consideration and deducting the tax effect. As a result of the information that is mentioned above, analysis of the profit on sale of subsidiary as follows:

Sales amount of the Petlim’s 30% shares ...... 580.750.000 The net book value of the shares sold ...... (48.939.667) Pre-tax profit on sale of shares ...... 531.810.333 Calculated tax ()...... (26.590.517) Cost of guarantor service, net off tax () ...... (38.895.731) Net profit on sale of shares ...... 466.324.085

F-209 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

23. Sales and cost of sales

January 1– January 1– December 31, 2015 December 31, 2014 Domestic sales ...... 3.179.567.385 2.957.595.900 Export sales ...... 1.387.171.847 1.240.335.518 Other sales ...... 52.395.088 15.982.745 4.619.134.320 4.213.914.163 Less: Other discounts ...... (70.957.757) (67.604.731) Less: Sales discounts ...... (11.465.978) (9.445.833) Less: Sales returns ...... (4.074.616) (4.017.522) Sales ...... 4.532.635.969 4.132.846.077 Raw material usage ...... (2.576.139.932) (2.972.666.181) Cost of sold trade goods ...... (312.021.757) (471.526.160) Energy ...... (373.394.042) (349.711.411) Labour ...... (186.797.331) (130.988.048) Depreciation ...... (99.969.974) (74.550.397) Change in work in process ...... (96.039.610) 58.183.871 Change in finished goods ...... (41.784.479) (17.916.703) Idle capacity expense ...... (30.456.850) (28.890.677) Packaging costs ...... (24.154.226) (12.924.517) Rediscount income / (expense) on trade payables ...... (2.060.731) (3.839.696) Provision for impairment of inventories (Note 10) ...... (12.046.150) (26.539.025) Other ...... (61.561.446) (16.008.994) Cost of sales ...... (3.816.426.528) (4.047.377.938) Gross profit ...... 716.209.441 85.468.139

24. Research and development expenses, marketing, selling and distribution expenses, general administrative expenses a) General administrative expenses:

January 1– January 1– December 31, 2015 December 31, 2014 Personnel expenses ...... 51.451.579 38.494.546 Outsourced services ...... 28.611.550 24.526.920 Energy expenses ...... 11.901.743 12.204.184 Depreciation and amortization ...... 7.813.356 6.940.897 Taxes, funds and fees ...... 5.546.511 6.295.606 Employment termination benefits ...... 3.146.581 3.212.612 EMRA contribution share ...... 1.781.592 1.497.881 Other ...... 7.498.940 6.590.902 117.751.852 99.763.548

F-210 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

24. Research and development expenses, marketing, selling and distribution expenses, general administrative expenses (Continued)

January 1– January 1– December 31, December 31, 2015 2014 b) Marketing, selling and distribution expenses: Outsourced services ...... 15.499.682 12.546.734 Personnel expenses ...... 12.057.731 8.825.427 Export fee expenses ...... 985.025 1.357.534 Depreciation and amortization ...... 492.489 334.738 Other ...... 3.262.764 3.455.723 32.297.691 26.520.156 c) Research and development expenses: Personnel expenses ...... 9.610.605 9.351.753 Outsourced services ...... 549.265 1.023.531 Depreciation and amortization ...... 303.793 631.385 Other ...... 1.279.075 883.819 11.742.738 11.890.488 Total operating expenses ...... 161.792.281 138.174.192

25. Expenses by nature

January 1– January 1– December 31, December 31, 2015 2014 Raw materials usage, changes in work-in-process and finished goods ...... 2.713.964.021 2.932.399.013 Energy ...... 385.295.785 361.915.595 Cost of commercial goods sold ...... 312.021.757 471.526.160 Personnel expenses ...... 259.917.246 187.659.774 Depreciation and amortization ...... 108.579.612 82.457.417 Outsourced services ...... 44.660.497 38.097.185 Idle capacity expense ...... 30.456.850 28.890.677 Employment termination benefits—net ...... 3.146.581 3.212.612 Provision for impairment of inventories (Note 10) ...... 12.046.150 26.539.025 Other ...... 108.130.310 52.854.672 3.978.218.809 4.185.552.130

F-211 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

26. Other operating income and expense

January 1– January 1– December 31, December 31, 2015 2014 Other operating income: Interest income on trade receivables ...... 43.346.125 38.837.080 Foreign exchange gains on trade payables ...... 32.129.952 35.759.536 Foreign exchange gains on trade receivables ...... 28.307.903 23.380.585 Rent income ...... 20.788.939 12.959.801 Paid litigation provision ...... 1.054.017 — Energy maintenance income ...... 1.646.829 1.134.752 Infrastructure income ...... 1.105.968 989.610 Income from insurance recoveries ...... 357.410 258.271 TUBITAK research and development support income (Note 14) ..... 132.275 40.744 Other ...... 2.165.879 5.742.602 131.035.297 119.102.981

January 1– January 1– December 31, December 31, 2015 2014 Other operating expense: Foreign exchange losses on trade payable ...... (131.177.532) (86.495.233) Interest expense on trade payables ...... (21.242.944) (16.570.095) Foreign exchange losses on trade receivables ...... (9.012.236) (3.109.997) Rediscount expense on trade receivables ...... (2.354.847) (3.065.598) Compensation and penalty charges ...... (1.697.115) (2.252.288) Provision for doubtful receivables (Note 7 and 8) ...... (1.341.985) (4.453.420) Litigation allowance (Note 15) ...... (10.537) (731.271) Other ...... (2.695.707) (10.296.371) (169.532.903) (126.974.273)

27. Investment activities income and expense

January 1– January 1– December 31, December 31, 2015 2014 Income from investment activities: Proceeds from sales of property, plant and equipment and intangible assets ...... 13.030 2.712.214 13.030 2.712.214

F-212 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

28. Finance income

January 1– January 1– December 31, December 31, 2015 2014 Foreign exchange gain(*) ...... 385.667.891 126.591.206 Interest income ...... 33.403.052 14.402.000 Other ...... 2.597.167 — 421.668.110 140.993.206

(*) Foreign exchange gain related to cash and cash equivalents, financial liabilities and other liabilities.

29. Finance costs

January 1– January 1– December 31, December 31, 2015 2014 Foreign exchange loss(*) ...... (338.723.003) (137.472.708) Interest expense ...... (24.139.283) (7.216.987) Bank commission expense ...... (911.172) (209.875) (363.773.458) (144.899.570)

(*) Foreign exchange gain related to cash and cash equivalents, financial liabilities and other liabilities The Group has investments in foreign currency loans compared with market TL interest rates and a total of 18.366.237 TL has been capitalized under tangible assets (December 31, 2014—16.318.767 TL) (Note 12).

30. Tax assets and liabilities i) Corporation tax: December 31, December 31, 2015 2014 Corporate and income tax payable ...... 19.213.253 — Prepaid corporate tax ...... (9.529.198) — Tax liability of profit ...... 9.684.055 —

As of December 31 Tax expense for the year ended are detailed below:

January 1– January 1– December 31, December 31, 2015 2014 Current income tax expense ...... (19.213.253) — Deferred tax income / (expense) ...... 84.594.675 70.450.261 Total tax expense ...... 65.381.422 70.450.261

The corporation tax rate of the fiscal year 2015 is 20% (December 31, 2014—20%). Corporation tax is payable at a rate of 20% on the total income of the companies after adjusting for certain disallowable expenses, exempt income (exemption for participation in subsidiaries, exemption for investment incentive allowance etc.) and allowances (such as research and development expenditure allowances). No other tax liabilities arise other than the event of dividend distribution (except for the 19,8% withholding

F-213 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

30. Tax assets and liabilities (Continued) taxes paid in the event of the utilization of investment incentive allowance within the scope of Income Tax Law temporary clause 61). With the article 5 of the law 6009 adopted by Turkish National Assembly on July 23, 2010 and published on the official gazette on August 1, 2010, phrase in the temporary article numbered 69 of Income Tax Law numbered 193 stating that’’ might be offset from the fiscal gain within the context of the laws and regulations(including tax rate) applicable at this date’’, was substituted as ‘‘might be offset from fiscal gain within the context of the laws and regulations(including tax rate specified in paragraph 2 article 61 of this law) applicable at this date’’. In addition, a phrase coming after the substituted phrase stating that ‘‘investment incentives which will be deducted from fiscal gain during determination of tax base cannot be greater than 25% of the gain and tax is calculated from remaining gain according to applicable tax rate’’ was also added. With the above mentioned amendments, a. Unused and carried investment incentive amounts might be used without any period limitation but the amount of investment incentive that can be deducted was restricted up to the limit of 25% of fiscal gain. b. The practice of applying income tax rate (20%–40%) applicable as of December 31, 2005 for income tax payers and 30% for corporate tax payers on remaining tax base, if any, after deducting investment incentive was abandoned and principle of using applicable tax rate (15%–35% for income tax payers and 20% for corporation tax payers) of the period investment incentive used is adopted. c. With the phrase added to paragraph 1 of article 69 (‘‘including tax rate specified in paragraph 2 article 61 of this law’’) 19,8% of income tax cut is applied to fiscal gains for which investment incentive (applied before April 24, 2003) is applied but ceded to following period due to inadequate fiscal gain, parallel to former application. Hence, 19,8% stoppage application, formerly called ‘‘withholding investment incentive’’ remained unchanged. As of December 31, 2015, total deferred asset calculated over its unused investment incentive is TL 163.218.583 (2014—TL 82.622.109). Tax returns are open for five years from the beginning of the year that follows the date of filling during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Under the Turkish taxation system, tax losses can be carried forward to offset against future taxable income for up to five years. Tax losses cannot be carried back to offset profits from previous periods.

Transfer pricing The Law No: 5520 Article 13, which made new arrangements to transfer pricing, was effective from January 1 2007. With the aforementioned law, considerable amendments have been made to transfer pricing regulations by taking EU and OECD transfer pricing guidelines as a basis. In this respect, corporations should set the prices in accordance with the arm’s length principle while entering into transactions regarding the sale or purchase of goods and services with related parties. Under the arm’s length principle within the new legislation related parties must set the transfer prices for purchase and sale of goods and services as if they would have been agreed between third parties. Depending on the circumstances, a choice of accepted methods in aforementioned law of arm’s length transaction has to be made by corporations for transactions with related parties. Corporations should keep the documentary evidence within the company representing how arm’s length price has been determined and the methodology that has been chosen by use of any fiscal records and calculations in case of any

F-214 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

30. Tax assets and liabilities (Continued) request by tax authorities. Besides, corporations must report transactions with related parties in a fiscal period. If a taxpayer enters into transactions regarding the sale or purchase of goods and services with related parties, where the prices are not set in accordance with the arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. The profit distributed in a disguised manner through transfer pricing completely or partially in the last day of the fiscal period when the circumstances defined in the 13th article occurred, will be assessed as distributed profit share or transferred amount to headquarter for limited taxpayers. After the distributed profit share is considered as net profit share and complemented to gross amount, deemed profit will be subject to corporate tax. Previous taxation processes will be revised accordingly by taxpayer who distributes disguised profit. In order to make adjustments in this respect, the taxes assessed in the name of the company distributing dividends in a disguised manner must be finalized and paid. The reconciliations of the taxation on income for the years ended December 31, 2015 and 2014 were as follows:

January 1– January 1– December 31, December 31, 2015 2014 Profit before taxation on income / (expense) ...... 573.827.236 (61.771.495) Tax calculated at enacted tax rates ...... (114.765.447) 12.354.299 The effect of adjustments do not create deferred tax ...... 2.357.105 2.017.105 Unrecognized deferred tax on current year tax loses ...... (5.652.557) (5.067.976) Created deferred tax due to increase in investment incentives ...... 185.921.936 65.317.602 Deductible income effect ...... 1.316.288 8.906 Disallowable expenses ...... (3.480.426) (4.337.086) Other ...... (315.477) 157.411 65.381.422 70.450.261 ii) Deferred taxes The Group recognizes deferred income tax assets and liabilities based upon temporary differences arising between their financial statements as reported under the CMB Financial Reporting Standards and the statutory tax financial statements. For the companies operating in Turkey, deferred income taxes are calculated on temporary differences that are expected to be realized or settled based on the taxable income in future periods under the liability method using a principal tax rate of 20% (December 31, 2014—20%).

F-215 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

30. Tax assets and liabilities (Continued) Details of cumulative temporary differences and the resulting deferred income tax assets and liabilities provided as of December 31, 2015 and 2014 were as follows:

Deferred income tax assets/ Taxable temporary differences (liabilities) December 31, December 31, December 31, December 31, 2015 2014 2015 2014 Difference between the carrying values and tax bases of property, plant, equipment and intangible ...... (314.955.950) (343.525.095) (62.991.190) (68.705.019) Income accrual of hedging reserve . . . (1.646.432) (1.445.166) (329.286) (289.033) Adjustment to internal rate of return . . (1.202.203) (718.924) (240.441) (143.785) Unincurred finance cost ...... (633.967) (2.716.301) (126.794) (543.260) Other ...... (1.474.473) (874.479) (294.895) (174.896) Deferred income tax liabilities ..... (319.913.025) (349.279.965) (63.982.606) (69.855.993) Unused investment incentives ...... 691.151.826 351.002.892 166.103.900 82.622.109 Employment termination benefits and seniority incentive bonus provision . . 84.468.116 75.559.940 16.893.623 15.111.988 Inventory impairment ...... 12.158.681 27.379.753 2.431.736 5.475.951 Accrued expenses of hedging ...... 11.008.960 — 2.201.792 — Accrued expense of personnel bonus . 10.000.000 — 2.000.000 — Rent allowance fee ...... 9.266.208 7.551.178 1.853.242 1.510.236 Unearned credit finance income ..... 8.388.021 8.033.938 1.677.604 1.606.788 Provision for unused vacation rights . . 7.686.675 6.547.365 1.537.335 1.309.473 Letter of credit interest accrual and IRR adjustment ...... 5.689.407 — 1.137.883 — Provision for doubtful receivables .... 5.141.764 3.969.181 1.028.353 793.836 Provision for legal cases ...... 891.260 1.986.226 178.252 397.245 Recognizing research & development expenses, net ...... 528.306 528.306 105.661 105.661 Provision for employment termination benefits, seniority incentives, unused vacation ...... — 12.209.996 — 2.441.999 SOCAR Turkey Enerji A.¸S. (‘‘STEA¸S’’) guarantee cost ...... — 40.942.875 — 2.047.144 Adjustment to foreign currency transaction of goods are lack of documents ...... — 4.105.116 — 821.023 Other ...... 898.610 464.275 179.722 92.855 Deferred income tax assets ...... 847.277.834 540.281.041 197.329.103 114.336.308 Deferred tax assets / (liabilities)— net ...... 133.346.497 44.480.315

F-216 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

30. Tax assets and liabilities (Continued) The movement of deferred income tax is as follows:

Deferred tax asset / (liabilities)—net

2015 2014 January 1 ...... 44.480.315 (1.723.230) Tax expense recognized in income statement ...... 84.594.675 70.450.261 Tax recognized directly in the shareholders’ equity ...... 4.271.507 296.657 Net off from gain on the sale of subsidiary shares ...... — (24.543.373) December 31 ...... 133.346.497 44.480.315

Under the Turkish taxation system, tax losses can be carried forward to offset against future taxable income for up to 5 years. Financial losses cannot be deducted from retained earnings. As of December 31, 2015, the Group has not any financial loss (December 31, 2014—None). As of December 31, 2015, the Group has TL 691.151.826 unused investment incentive for which the realization of the related tax benefit through the future taxable profit has deemed probable with respect to its projections (December 31, 2014—TL 351.002.892). The Group obtained a strategic investment incentive certificate from TC Ministry of Economy for PTA capacity increase project on January 4, 2013. The Group will be able to deduct 50% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 90% as subject of deduction from corporate tax. The group has TL 94.987.701 unused investment incentive within the scope of strategic investment incentive certificate as of December 31, 2015. In this context, as of December 31, 2015, the Group has rcognized deferred tax asset, that can be used in following periods, amounting to TL 47.493.851 (December 31, 2014—TL 20.702.551). The Group has obtained regional investment incentive certificates from T.C. Ministry of Economy for factory modernization investment at the date of June 15, 2012. The Group will be able to deduct 50% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 15% as subject of deduction from corporate tax. The Group has TL 12.455.513 investment incentives within the scope of the regional investment certificate. In this context, as of December 31, 2015, the Group has recognized deferred tax asset, which can be used in following periods, amounting to TL 1.868.327. The Group has obtained large scale of investment incentive certificate from T.C. Ministry of Economy for port project investments at the date of November 20, 2014. The Group will be able to deduct 25% of the expenditures within the investment period that are in the scope of the investment incentives, from tax base, up to 50% as subject of deduction from corporate tax. The Group has TL 583.708.611 unused investment incentives within the scope of the port project investment certificate. In this context, as of December 31, 2015, the Group has recognized deferred tax asset, that can be used in following periods, amounting to TL 116.741.722.

F-217 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

January 1– January 1– December 31, 2015 December 31, 2014 Net profit for the year belongs to equity holders of the parent . 626.378.793 6.452.915 Weighted average number of shares with nominal value of Kr 1 each (thousand) ...... 150.000.000 150.000.000 Earnings per share (Kuru¸s) ...... 0,418 0,004

32. Transactions and balances with related parties Summary of the intercompany balances as of December 31, 2015 and 2014 and significant intercompany transactions were as follows: i) Balances with related parties:

December 31, 2015 December 31, 2014 a) Other receivables from related parties: SOCAR Turkey Enerji A.¸S.(‘‘STEA¸S’’)(1)(**) ...... 255.041.322 9.275.600 TANAP Dogalgaz˘ ˙Ileti¸sim A.¸S.(2) ...... 7.911 — Star Rafineri A.¸S. (‘‘STAR’’)(2) ...... — 9.446.044 255.049.233 18.721.644 b) Long term other receivables from related parties: SOCAR Power Enerji Yatırımları A.¸S.(2)(*) ...... 54.500.611 51.791.682 SOCAR Turkey Enerji A.¸S.(‘‘STEA¸S’’)(1)(**) ...... 50.705.413 — 105.206.024 51.791.682

(*) Revenue from Socar Power Enerji Yatırımları A.¸S. consist from land sale and rent receivable amounting to TL 43.180.543, interest and other receivables amounting to TL 11.320.068 (December 31, 2014: TL 49.171.320 land sale and rent receivables, TL 2.620.362 interest and other receivables). (**) The fund made available to STEA¸S that TL 252.961.200 and TL 2.080.122 portion of the fund consist other receivables; 14,59% and 3,81% interest rates are applied respectively TL and USD receivables. (1) Shareholders of the Company (2) Shareholders of the Company or Socar’s subsidiaries

F-218 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

32. Transactions and balances with related parties (Continued)

December 31, 2015 December 31, 2014 c) Trade receivables form related parties: SOCAR Azerikimya Production Union(2) ...... — 246.651 — 246.651

December 31, 2015 December 31, 2014 d) Short term trade payable to related parties: SOCAR Gaz Ticareti A.¸S.(2) ...... 31.164.848 37.668.892 Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... 347.219 390.220 STAR(2) ...... — 19.714 31.512.067 38.078.826 Less: Unearned credit finance income ...... (205.927) (182.901) 31.306.140 37.895.925

Short term trade payables to related parties mainly arise from merchandise and LPG purchases. Average maturity for short term trade payables to related parties is 17 days. (December 31, 2014— 15 days.) e) Other payables to related parties: STAR(2) ...... 1.257.480 — STEA¸S(1) ...... 405.652 11.126.571 Due to shareholders(1) ...... 87.305 87.305 1.750.437 11.213.876

December 31, 2015 December 31, 2014 f) Short term deferred income from related parties STAR(2)(*) ...... 4.156.932 4.277.252 SOCAR Power Enerji Yatırımları A.¸S.(2) ...... 10.305 9.656 SOCAR Teknolojik C¸oz¨ umler¨ A.¸S.(2) ...... 846 — 4.168.083 4.286.908 g) Long term deferred income from related parties STAR(2)(*) ...... 12.705.027 16.579.501 12.705.027 16.579.501

(*) Short term and long term deferred income from STAR, consists of rent income that arise from one shot cash collections of the Group at the beginning of rent agreement. (1) Shareholders of the Company (2) Shareholders of the Company or Socar’s subsidiaries

F-219 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

32. Transactions and balances with related parties (Continued)

December 31, 2015 December 31, 2014 h) Short term prepaid expense to related party STAR(2)(*) ...... 12.878.087 12.878.087 12.878.087 12.878.087

December 31, 2015 December 31, 2014 i) Long term prepaid expense to related party STAR(2)(*) ...... 17.170.782 30.048.869 17.170.782 30.048.869

(*) Long and short term prepaid expense to STAR, consists of rent expense of naphtha tank. The group has signed an operational leasing contract for 3 naphtha tanks to be effective between December 1, 2014 and April 30, 2018 at the date of December 30, 2014. STAR has rented out tanks, owned by it, and discounted amounting TL 44.00.129 + VAT for over entire duration within the context of that contract. STAR has invoiced to the Group about the rents in 2015 and the Group has paid the entire amount. STAR has worked with an independent firm to valuation that fair value of tank using and they’ve sent report to the Group. In this valuation report, the present value of net rental income has identified the range of TL 40.000.000 and TL 45.000.000 between the dates of December 1, 2014 and April 30, 2018. ii) Transactions with related parties:

January 1– January 1– December 31, 2015 December 31, 2014 a) Finance costs/(income) from related party transactions—net: STEA¸S(1)(*) ...... 21.001.000 722.086 SOCAR Power Enerji Yatırımları A.¸S.(2)(*) ...... 12.048.247 5.004.591 Petrokim(2) ...... 312.581 985.785 STAR(2)(*) ...... 237.183 5.086.426 Socar Gaz Ticareti A.¸S.(2) ...... 23.147 179.408 SOCAR Azerikimya Production Union(2) ...... 16.820 (455) Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... (39) 3.410 33.638.939 11.981.251

(*) Group has generated interest income at rate of 14.59% regarding TL receivables, at rate of 3,43% regarding USD receivables from SOCAR Power Enerji A.¸S. and at rate of 14,59% regarding TL receivables, at rate of 3,81% regarding USD receivables from SOCAR Turkey Enerji A.¸S. Revenue from STAR consist from interest income from receivable amounting to TL 218.264 , foreign exchange income—loss TL 19.001 , rediscount income amounting to TL 82, revenue from STEA¸S consists interest income from receivable amounting to TL 10.489.206, foreign exchange income—loss amounting to TL 10.513.053 , rediscount expense amounting to TL 1.259 receivable from Socar Power consist foreign exchange gain—loss amounting to 9.778.983 and interest income amounting to TL 2.269.264.

(1) Shareholders of the Company (2) Shareholders of the Company or Socar’s subsidiaries

F-220 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

32. Transactions and balances with related parties (Continued)

January ,1– January 1– December 31, 2015 December 31, 2014 b) Service and rent purchases from related parties: STAR(2) ...... 20.247.893 14.683.009 STEA¸S(1) ...... 12.254.380 10.058.378 SOCAR Power Enerji Yatırımları A.¸S.(2) ...... 642.891 407.526 33.145.164 25.148.913

Service and rent purchases from STAR consist from naphtha rent expense amounting to TL 12.878.087, other rental expenses amounting to TL 678.963, labour purchase amounting to TL 4.545.009 and other service purchases amounting to 2.145.834. All of service purchases from STEA¸S consist of invoices and expenses of STEA¸S staff, works on behalf of Petkim. c) Product purchase from related parties: SOCAR Gaz Ticareti A.¸S.(2) ...... 335.940.076 312.817.391 Petrokim(2) ...... 76.675.484 87.017.414 Azoil Petrolcul¨ uk¨ A.¸S.(2) ...... 1.406.934 1.533.807 SOCAR Turkey Petrol Enerji Dagıtım˘ A.¸S.(2) ...... 793.187 — 414.815.681 401.368.612

Product purchases from SOCAR Gaz Ticareti A.¸S. and Petrokim in the period ended December 31, 2015 consist of natural gas and LPG which are used as raw materials in the production of the Group d) Product and service sales to related parties: January 1– January 1– December 31, 2015 December 31, 2014 SOCAR Azerikimya Production Union(2) ...... 1.013.489 2.089.565 STAR(2) ...... 1.272.025 827.238 STEA¸S(1) ...... 153.983 134.194 SOCAR Power Enerji Yatırımları A.¸S.(2) ...... 2.192 25.366 2.441.689 3.076.363 e) Rent income from related parties: STAR(2) ...... 15.789.543 8.717.314 Socar Power Enerji Yatırımları A.¸S.(2) ...... 21.893 29.753 Socar Teknolojik C¸oz¨ umler¨ A.¸S.(2) ...... 170 — 15.811.606 8.747.067

(1) Shareholders of the Company (2) Shareholders of the Company or Socar’s subsidiaries

F-221 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

32. Transactions and balances with related parties (Continued)

January 1– January 1– December 31, 2015 December 31, 2014 f) Key management emoluments: i. Key management emoluments—short term: Payments for salary and seniority incentives ...... 7.319.469 5.249.880 Provision for unused vacation ...... 540.237 384.922 7.859.706 5.634.802 ii. Key management emoluments—long term: Provision for employment termination benefits ...... 91.398 63.766 Provision for seniority incentives ...... 49.980 25.757 141.378 89.523 8.001.084 5.724.325

The Group classifies the general manager, assistant general managers, and board of directors and audit committee members as executive management Key management emoluments consist of salary and travel payments; employment termination benefits, seniority incentive bonus and vacation pays made to the key management and their provisions for the period in which they incurred.

F-222 te the quality of credits. s are managed by collecting ts sales policy, the Group obtains ts sales policy, arly monitored and financial position of Receivables — 489.584.768 — — — 489.584.768 — 551.425.057— 360.255.257— ————— 6.510.328 542.226.546— 1.501.989.008 360.255.257—— 2.420.179.650 6.510.328 ————— — 1.501.989.008 9.198.511— 8.571.037 2.410.981.139 — ————— 14.544.081— ————— (14.544.081)— ————— — ————— —— ————— — — — — 933.608 (933.608) — — — — — (15.477.689) 15.477.689 9.198.511 8.571.037 Trade receivables(1)Trade Other receivables parties parties parties parties deposits Total Related Third Related Third Bank S. and Its Subsidiaries (2)...... Notes to the consolidated financial statements ...... for the year ended December 31, 2015 (Continued) Petkim Petrokimya Holding A.¸ Petrokimya Petkim ...... (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish ...... ) ...... ) ...... ...... —The part of net value covered with guarantees etc. —Impairment amount ( —The part of net value covered with guarantees etc. —Impairment amount ( Net book value of assets past due but not impaired(4) past due or impaired(3) —The part covered by guarantees etc. due (gross book value) —Past —Not due (gross book value) Net book value of financial assets neither past due nor impaired(3) Net book value of financial assets whose conditions are renegotiated, otherwise will be classified as Net book value of assets impaired Off-balance items exposed to credit risk Off-balance A. Maximum amount of credit risk exposed as reporting date (A+B+C+D+E) —The part of maximum credit risk covered with guarantees etc. B. C. D. E. (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish) 33. Financial instruments and financial risk management a) Credit risk: Holding of financial assets involves the risk that counterparties may be unable to meet terms agreements. These collaterals and by restricting the average risk range for counterparties (except intercompany) in every agreement. As part of i collateral at on amount of 100% total outstanding TL trade receivables from its customers. The use credit limits is regul the customers, past experiences, reputation in market and other factors are considered by Management order to evalua The credit risk exposure in terms of financial instruments as December 31, 2015 and 2014 were follows: December 31, 2015

F-223 ng aforementioned amounts. ast experiences. The aging of related amounts is as follows: eceivables. 9.790.9906.573.018 — — — — — — — — 9.790.990 6.573.018 13.532.966 — 933.608 — — 14.466.574 (13.532.966) — (933.608) — — (14.466.574) 478.292.343 — — — — 478.292.343 Receivables Trade receivables(1)Trade Other receivables parties parties parties Parties deposits assets Total 246.651 512.238.006 70.513.326 2.582.910 702.157.204 — 1.287.738.097 246.651 522.028.996 70.513.326 2.582.910 702.157.204 — 1.297.529.087 Related Third Related Third Bank Financial S. and Its Subsidiaries (2)...... Notes to the consolidated financial statements ...... — for the year ended December 31, 2015 (Continued) Petkim Petrokimya Holding A.¸ Petrokimya Petkim ...... — — — — — — — ...... — ...... — — — — — — — (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish ...... — — — — — — — ...... — ...... — — — — — — — ...... — ...... — — — — — — — ) ...... — ) ...... — — — — — — — ...... — — — — — — — —The part of net value covered with guarantees etc. —Impairment amount ( —Impairment amount ( —The part of net value covered with guarantees etc. Net book value of assets past due but not impaired(4) past due or impaired(3) —The part covered by guarantees etc. due (gross book value) —Past —Not due (gross book value) Net book value of financial assets neither past due nor impaired(3) Net book value of financial assets whose conditions are renegotiated, otherwise will be classified as Net book value of assets impaired Off-balance items exposed to credit risk Off-balance C. A. B. D. E. —The part of maximum credit risk covered with guarantees etc. Maximum amount of credit risk exposed as reporting date (A+B+C+D+E) (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish) (1) receivables of the Group are mainly composed thermoplastic and fiber material sales. Trade (2) Unearned credit finance income and covered parts of due overdue receivables are taken into consideration while determini (3) Considering the past experiences, Group management believes that no additional credit risk for collection of these r 33. Financial instruments and financial risk management (Continued) December 31, 2014 (4) Group management; predict that there will not be any problems with the collection of overdue financial assets based on its p

F-224 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

33. Financial instruments and financial risk management (Continued) December 31, 2015

Related Trade receivables parties Third parties Total 1–30 days overdue ...... — 6.895.763 6.895.763 1–3 months overdue ...... — 337.254 337.254 Over 3 months overdue ...... — 1.965.494 1.965.494 Total overdue receivables ...... — 9.198.511 9.198.511 The part covered by the guarantees ...... — 8.571.037 8.571.037 627.474

December 31, 2014

Related Trade receivables parties Third parties Total 1–30 days overdue ...... — 7.250.043 7.250.043 1–3 months overdue ...... — 2.032.808 2.032.808 Over 3 months overdue ...... — 508.139 508.139 Total overdue receivables ...... — 9.790.990 9.790.990 The part covered by the guarantees ...... — — 6.573.018 3.217.972 b) Liquidity Risk: Prudent liquidity risk management comprises maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The ability to fund the existing and prospective debt requirements is managed by maintaining the availability of fund providers’ lines from high-quality lenders. In order to maintain liquidity, the Group management closely monitors the collection of trade receivables on time in order to and to prevent any financial burden that may result from late collections and arranges cash and non-cash credit lines with

F-225 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

December 31, 2015:

Total cash outflows per Book agreement Less than 3 3–12 1–5 Agreement terms value (=I+II+III) months (I) months (II) years (III) Non-derivative financials liabilities Bank borrowings— short term ...... 319.638.074 327.561.178 21.227.096 306.334.082 — Bank borrowings— current maturity of long term loans ... 41.912.519 82.613.437 18.072.847 64.540.590 — Bank borrowings— long term ...... 914.267.416 1.195.800.443 — — 1.195.800.443 Trade payables ..... 1.110.250.720 1.116.746.133 544.372.056 572.374.077 — Trade payables to related parties .... 31.306.140 31.512.067 31.512.067 — — Other payables to related parties .... 1.750.437 1.750.437 1.750.437 — — Other payables ..... 2.253.728 2.253.728 2.253.728 — — Short term liabilities for employee benefits ...... 18.261.053 18.261.053 18.261.053 — — Derivative financial liabilities Derivative cash inflows ...... 214.737.835 48.487.835 166.250.000 — Derivative cash outflows ...... (81.013.604) (54.476.328) (26.537.276) — Derivative financials Liabilities (net) .... 133.724.231 (5.988.493) 139.712.724 —

F-226 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

33. Financial instruments and financial risk management (Continued) December 31, 2014:

Total cash outflows per Book agreement Less than 3 3–12 1–5 Agreement terms value (=I+II+III) months (I) months (II) years (III) Non-derivative financials Liabilities Bank borrowings—short term ...... 352.914.646 353.272.546 283.705.546 69.567.000 — Bank borrowings—current maturity of long term loans ...... 43.108.180 48.799.930 6.876.595 41.923.335 — Bank borrowings—long term ...... 324.567.369 351.324.375 — — 351.324.375 Trade payables ...... 631.153.338 633.414.699 489.910.461 143.504.238 — Trade payables to related parties ...... 37.895.925 38.078.826 38.078.826 — — Other payables to related parties ...... 11.213.876 11.213.876 11.213.876 — — Other payables ...... 1.487.502 1.487.502 1.487.502 — — Short term liabilities for employee benefits .... 25.793.321 25.793.321 25.793.321 — — Derivative financial liabilities Derivative cash inflows . . . 53.965.000 10.633.107 43.331.893 — Derivative financials Liabilities, net ...... 1.445.166 53.965.000 10.633.107 43.331.893 — c) Market Risk: i) Foreign exchange risk The Group is exposed to currency risk on assets or liabilities denominated in foreign currencies. Management has set up a policy to balance and manage their foreign exchange risk. Existing risks are followed in meetings held by the Group’s Audit Committee and Board of Directors and foreign currencies, closely in terms of the Group’s foreign exchange position. Although the raw materials, which comprise the significant portion of production and import volume, are foreign exchange-denominated cost items, the determination of sales prices by the Group in foreign exchange terms is a factor that decreases the foreign exchange risk in the cash flows.

F-227 ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— 9.899.771 4.269.167 — — 1.445.166 — 512.343 — 46.517.134 20.060.000 — — 46.517.134 20.060.000 — — 52.747.090 — 18.700.000 — 312.455.746641.410.589 95.433.453 273.486.143 32.316.486 2.446.709 16.500.868 — 953.866.335 368.919.596 34.763.195 16.500.868 579.382.717 243.887.824 4.843.340 7.861.264 391.022.396 163.348.482 4.337.080 — 980.304.884 411.505.473 9.180.420 7.861.264 324.567.369 60.738.184 65.133.333 — 324.567.369 60.738.184 65.133.333 — (304.488.784) (83.264.061) (39.550.558) 8.639.604 (304.488.784) (83.264.061) (39.550.558) 8.639.604 (304.488.784) (83.264.061) (39.550.558) 8.639.604 1.000.383.469 388.979.596 34.763.195 16.500.868 1.304.872.253 472.243.657 74.313.753 7.861.264 December 31, 2015 December 31, 2014 ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— ———— 372.767 128.204 — — 986.794 — 310.547 — TL TL 48.766.889 16.772.214 — — 48.766.889 16.772.214 — — S. and Its Subsidiaries 276.604.032 59.998.638 32.147.530 — 192.210.599 61.512.953 4.203.026 — 914.267.416 247.484.680 61.266.667 — 257.067.840 — 80.900.000 — 914.267.416 247.484.680 61.266.667 — equivalent USD EUR Other Equivalent USD EUR Other (282.558.637) (128.116.650) 28.307.602 1.023 (282.558.637) (128.116.650) 28.307.602 1.023 (282.558.637) (128.116.650) 28.307.602 1.023 1.531.746.732 457.905.431 63.046.891 1.023 1.808.350.764 517.904.069 95.194.421 1.023 1.857.117.6531.032.825.508 534.676.283 95.194.421 353.667.096 1.023 1.417.126 — 1.225.408.874 415.308.253 5.620.152 — 2.139.676.290 662.792.933 66.886.819 — for the year ended December 31, 2015 ...... Petkim Petrokimya Holding A.¸ Petrokimya Petkim Notes to the consolidated financial statements (Continued) ...... (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish ...... 17+19) ...... 15a) ...... 14 17) ...... 13 19b) ...... ...... 11a ...... 10 ...... ...... 9 ...... ...... derivative instruments (19a monetary items (UFRS7.B23) (=1+2a+4+5a foreign currency hedging 2a. Monetary financial assets (Cash, bank accounts included) 2b. Non-monetary financial assets (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish) 1. Trade receivables 1. Trade 33. Financial instruments and financial risk management (Continued) currency position Foreign 3. Current assets (1+2) receivables 4. Trade 5a. Monetary financial assets 5b. Non-monetary financial assets 8. Total assets (3+7) 8. Total 6. Other 7. Non-current assets (4+5+6) 9. Trade payables 9. Trade 10. Financial liabilities 11a. Monetary other liabilities 11b. Non-monetary other liabilities 12. Short-term liabilities (9+10+11) 13. Trade payables 13. Trade 14. Financial liabilities 15a. Monetary other liabilities 15b. Non-monetary other liabilities 16. Long-term liabilities (13+14+15) 23. Hedged amount for current assets 24. Hedged amount for current liabilities 17. Total liabilities (12+16) 17. Total 18. Net liability/asset position (8 sheet 19. Net (liability)/asset position of off-balance sheet derivative instruments 19a. Amount of asset nature off-balance sheet derivative instruments 19b. Amount of liability nature off-balance 20. Net foreign (liability) / asset position(8 21. Net foreign currency (liability) / asset position of fair value of financial instruments used for 22. Total

F-228 ———— ———— Profit/Loss Equity 309 (309) — — 309 (309) — — 8.995.024 (8.995.024) — — (2.549.080) 2.549.080 — — 25.706.78434.701.808 (25.706.784) (34.701.808) — — — — (37.251.197) 37.251.197(37.251.197) 37.251.197 — — — — Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency S. and Its Subsidiaries ...... for the year ended December 31, 2015 ) ...... Petkim Petrokimya Holding A.¸ Petrokimya Petkim ...... Notes to the consolidated financial statements (Continued) ...... (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish )...... )...... ...... Total (3+6+9) Total 9—Other foreign currency effect—net (7+8) 6—EUR effect—net (4+5) Change of other currencies by 10% against TL: 7—Assets/liabilities denominated in other foreign currencies—net 8—The part hedged for other foreign currency risk ( 2—The part hedged for USD risk ( 3—USD effect—net (1+2) Change of EUR by 10% against TL: 4—Asset/Liability denominated in EUR—net 5—The part hedged for EUR risk ( (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish) Change of USD by 10% against TL: 1—Asset/Liability denominated in USD—net December 31, 2015 33. Financial instruments and financial risk management (Continued) of sensitivity analysis for foreign currency risk: Table

F-229 Profit/Loss Equity 15.25115.251 (15.251) (15.251) — — — — 5.274.709 (5.274.709) — — (5.881.317) 5.881.317 — — (25.174.169) 25.174.169 — — (19.308.103) 19.308.103(19.308.103) 19.308.103 — — — — (11.156.026) 11.156.026 — — Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency S. and Its Subsidiaries ...... for the year ended December 31, 2015 ) ...... — — — — Petkim Petrokimya Holding A.¸ Petrokimya Petkim ...... Notes to the consolidated financial statements (Continued) ...... (Amounts expressed in Turkish Lira (‘‘TL’’), unless otherwise indicated.) (Amounts expressed in Turkish )...... — — — — )...... ...... Total (3+6+9) Total 9—Other foreign currency effect—net (7+8) 8—The part hedged for other foreign currency risk ( (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish) Change of USD by 10% against TL: 1—Asset/Liability denominated in USD—net 3—USD effect—net (1+2) December 31, 2014 2—The part hedged for USD risk ( Change of EUR by 10% against TL: 4—Asset/Liability denominated in EUR—net 6—EUR effect—net (4+5) Change of other currencies by 10% against TL: 7—Assets/liabilities denominated in other foreign currencies—net 5—The part hedged for EUR risk ( 33. Financial instruments and financial risk management (Continued)

F-230 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

33. Financial instruments and financial risk management (Continued) The total export and import amounts from Turkey for the years ended December 31 are as follows:

2015 2014 Original Original amount TL amount TL USD...... 276.737.097 760.997.731 407.647.779 883.966.438 EUR...... 199.984.546 613.411.516 115.643.321 336.619.543 Total export ...... 1.374.409.247 1.220.585.981 USD...... 772.743.974 2.089.975.758 1.472.804.025 3.209.950.347 EUR...... 26.847.943 80.082.894 49.613.574 144.348.766 British Sterling ...... 815.364 3.311.364 418.250 1.523.221 Japanese Yen ...... 155.575.210 3.712.495 79.159.606 1.670.650 Swiss Frank ...... 77.111 227.838 394.710 963.677 Total import ...... 2.177.310.349 3.358.456.661 ii) Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. These exposures are managed by balancing interest rate sensitive assets and liabilities. The Group’s interest rate position as of December 31, 2015 and 2014 is presented below:

2015 2014 Financial instruments with fixed interest rate Financial liabilities —USD financial liabilities ...... 370.336.623 193.107.167 —EUR financial liabilities ...... 63.552.000 56.413.999 —TL financial liabilities ...... 169.339.992 5.000.430 Financial instruments with variable interest rate —USD financial liabilities ...... 528.104.897 326.526.750 —EUR financial liabilities ...... 144.484.496 139.541.849 In case of +/ () 1% change in variable rate loans interest expense will change by +/ () TL 9.168.278 (December 31, 2014—TL 4.660.686). iii) Price risk The Group’s operational profitability and cash inflows from its operations are exposed to risk arising from fluctuations in naphtha prices which are affected by competition in the petrochemical sector and raw material prices. The Group management manages the risk by regularly reviewing the amount of inventory held on hand and takes action for cost reduction to decrease the pressure of cost on the prices. Existing risks are monitored through regular meetings by the Group’s Board of Directors. The Group sets its sales prices considering certain indicators of petrochemical products in domestic and foreign markets. The changes in foreign markets are monitored through the worldwide publications comparing most attainable competitive market prices of Western Europe, Asia and US contract, spot and factory prices and computing actual import costs to Turkey. While the Group determines the domestic market prices, it considers the indicators such as price information obtained from the market players and sector publications and Group’s production levels, stock levels and order amounts received.

F-231 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

33. Financial instruments and financial risk management (Continued) d) 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 to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of debt/equity ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total liabilities (including short term financial liabilities, current portion of long term financial liabilities, long term financial liabilities, trade payables, other payables, deferred income, other current liabilities and short term liabilities for employee benefits, as shown in the balance sheet) less cash and cash equivalents:

December 31, 2015 December 31, 2014 Total debt ...... 2.529.727.799 1.517.722.237 Less: Cash and cash equivalents and short term financial investments (Note 4 and 5) ...... (1.501.989.008) (702.158.128) Net debt ...... 1.027.738.791 815.564.109 Total equity ...... 2.805.383.497 2.183.260.867 Debt/equity ratio ...... 37% 37%

F-232 (Convenience translation of an auditors’ report and consolidated financial statements originally issued in Turkish)

34. Financial instruments (fair value and financial risk management disclosures) (Continued) Fair values of short-term bank borrowings and other financial liabilities are assumed to approximate their carrying values due to their short term. Long-term floating rate bank loans’ interest rates are updated according to the changing market conditions, it is assumed to represent the value of the fair value is the carrying value of these loans. Long-term fixed-rate loan, when evaluated with a fixed interest rate as of the balance sheet date, it is observed its fair value is close to the carrying value.

Fair value estimation The Group’s financials classification of fair value of asset and liabilities were as follows:

Level 1: Depend on registered price (unadjusted) in the active market; Level 2: Depend on data that are explicitly (via price in active market) or implicitly (derivate from price in active market) observable. Level 3: Not depend on observable market data December 31, 2015 and 2014, fair value and book value of financial statement were as follows:

December 31, 2014, fair value and book value of financial statement were as follows:

December 31, 2014 Level 1 Level 2 Level 3 Total Derivative financial instruments ...... — 1.445.166 — 1.445.166 Total asset ...... — 1.445.166 — 1.445.166 Total liabilities ...... — — — —

35. Subsequent events None.

36. Disclosure of other matters None.

F-233 THE ISSUER Petkim Petrokimya Holding A.¸S. Siteler Mh. Necmettin Giritlioglu Cd. No:6 Aliaga˘ 35800 ˙Izmir Turkey

TRUSTEE BNY Mellon Corporate Trustee Services Limited One Canada Square London E14 5AL United Kingdom

PRINCIPAL PAYING AGENT AND TRANSFER AGENT U.S. PAYING AGENT The Bank of New York Mellon, London Branch The Bank of New York Mellon, New York Branch One Canada Square 101 Barclay Street London E14 5AL New York NY 10286 United Kingdom United States of America

REGISTRAR The Bank of New York Mellon SA/NV, Luxembourg Branch Vertigo Building—Polaris 2-4 rue Eugene` Ruppert L-2453 Luxembourg Grand Duchy of Luxembourg

LEGAL ADVISERS To the Issuer as to Turkish law To the Issuer as to English law and United States law Akol Ozok¨ Namlı Avukatlık Ortaklıgı˘ Linklaters LLP Trump Towers 2, Floor 35 One Silk Street 34387 Mecidiyekoy London EC2Y 8HQ Istanbul United Kingdom Turkey To the Joint Lead Managers as To the Joint Lead Managers as to Turkish law to English and United States law Paksoy Ortak Avukat Burosu Latham & Watkins (London) LLP Orjin Maslak 99 Bishopsgate Eski Buy¨ ukdere¨ Caddesi No:27 K:11 Maslak 34485 London EC2M 3XF Istanbul United Kingdom Turkey

To the Trustee Latham & Watkins (London) LLP 99 Bishopsgate London EC2M 3XF United Kingdom

AUDITORS Guney¨ Bagımsız˘ Denetim ve Serbest Muhasebeci Mali PwC Bagımsız˘ Denetim ve Serbest Muhasebeci Mali Mu¸¨savirlik A.¸S. (a member firm of Ernst & Young Global Limited) Mu¸¨savirlik A.¸S. Suleyman¨ Seba Cad. BJK Plaza No:48 B Blok, Maslak Mahallesi Eski Buy¨ ukdere¨ Cad. Orjin Maslak Plaza Kat 9 Akaretler 34357 Be¸sikta¸s No: 27 ˙Istanbul Kat: 2-3-4 Daire: 54-57-59 Turkey Sarıyer 34485 ˙Istanbul Turkey

LISTING AGENT Arthur Cox Listing Services Limited Earlsfort Centre Ten Earlsfort Terrace Dublin 2 Ireland You should rely only on the information contained in this offering memorandum. None of the Issuer or the Joint Lead Managers has authorised anyone to provide you with information that is different from the information contained herein. If given, any such information should not be relied upon. U.S.$500,000,000 5.875 per cent. None of the Issuer or the Joint Lead Managers Notes due 2023 is making an offer of the Notes in any jurisdiction where the Offering is not permitted. You should not assume that the information contained in this offering memorandum is accurate as of any date other than the date on the front cover of this offering memorandum. 8JAN201811595616

TABLE OF CONTENTS Petkim Petrokimya Page Holding A.¸S. IMPORTANT NOTICES ...... i FORWARD-LOOKING STATEMENTS ...... v HISTORICAL AND CURRENT MARKET AND INDUSTRY DATA ...... v PRESENTATION OF FINANCIAL AND Joint Global Coordinators OTHER INFORMATION ...... viii EXCHANGE RATE INFORMATION ...... xii SUMMARY ...... 1 Goldman Sachs J.P. Morgan RISK FACTORS ...... 21 International SELECTED HISTORICAL AND OTHER FINANCIAL INFORMATION ...... 43 CAPITALISATION ...... 47 USE OF PROCEEDS ...... 48 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Joint Bookrunners AND RESULTS OF OPERATIONS ...... 49 BUSINESS OF THE GROUP ...... 78 Goldman Sachs J.P. Morgan Citigroup INDUSTRY OVERVIEW ...... 101 DIRECTORS, SENIOR MANAGEMENT AND International CORPORATE GOVERNANCE ...... 119 CERTAIN REGULATORY MATTERS ...... 124 SHAREHOLDERS AND RELATED PARTY TRANSACTIONS ...... 133 TERMS AND CONDITIONS OF THE NOTES 137 Joint Lead Managers SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM . . 174 TAXATION ...... 176 Societ´ e´ Gen´ erale´ VTB Capital BOOK-ENTRY, DELIVERY AND FORM . . . . 180 SUBSCRIPTION AND SALE ...... 182 SELLING AND TRANSFER RESTRICTIONS . 185 GENERAL INFORMATION ...... 188 INDEX TO FINANCIAL STATEMENTS ..... F-1 22 January 2018

OFFERING MEMORANDUM