Kerevitaş Annual Report 2019 · 2020. 8. 5. · Frozen and Canned Food Kerevitaş has the widest product range in the frozen food market. The frozen food category offers consumers

Kerevitaş Annual Report 2019

Contents

KEREVİTAŞ AT A GLANCE 08 Operational Network10 Highlights 12 Vision, Mission and Values14 Our Business16 Production Capacity20 Key Indicators23 Net Sales Breakdown by Product Category24 Net Sales Breakdown by Sales Channels26 Capital and Shareholding Structure28 Success Story31 Awards and Achievements

MANAGEMENT32 Message from the Chairman of the Board and CEO34 Board of Directors 35 Senior Management

2019 ACTIVITIES36 Development of Frozen and Canned Food Sector

and Edible Oil Sector in Turkey 40 Frozen and Canned Food Business Unit 40 Activities 40 Production 40 Sales and Marketing 41 Distribution 41 Export 41 Products 41 Retail 41 HORECA 41 Export42 Edible Oil Business Unit 42 Activities 42 Production 42 Sales and Marketing 44 Distribution 45 Export 45 Products 45 Consumer Products 45 HORECA Products 45 Pastry and Catering Oils 45 Industrial Products46 Investor Relations

SUSTAINABILITY47 R&D Activities and Investments48 Human Resources52 Occupational Health and Safety53 Environmental Practices 54 Good Agricultural Practices 55 Corporate Social Responsibility

CORPORATE GOVERNANCE56 Corporate Governance Principles Compliance

Report for 2019 64 Risk Management Policies 65 Profit Distribution Proposal66 Other Issues

FINANCIAL STATEMENTS AND FOOTNOTES67 Consolidated Financial Statements as of December 31, 2019 and Independent Auditor’s Report

As the second largest Yıldız Holding-owned food company trading on the Borsa Istanbul, Kerevitaş has

preserved its strong market leadership in both frozen food and margarine.

While our astute channel-category strategies brought along growing

sales revenues, we continued to stand close to our consumers and customers to address their changing needs with

high quality products.

Support for development We undertake a major role for sustainable development towards a better future. We collaborate with farmers for the cultivation of crops across 53,174 hectares of contracted farmland, contributing to employment.

Significant results in water saving We support enhanced productivity in agricultural production and mitigation of the environmental impacts of cultivation. We have saved 5.4 million m3 of water through drip irrigation in agricultural land.

Environmentally friendly productionOur edible oil business, Besler, embarked on the “Zero-loss Journey through the Corporate Energy Movement,” helping us prevent carbon emissions equivalent to the absorption capacity of 260 thousand grown trees in a year.

Operational Network

8 Kerevitaş at a Glance

Exports to over 60 countries on 6 continentsEXPORT DESTINATIONSAfrica: Algeria, Cameroon, Egypt, Ethiopia, Gabon, Ghana, Ivory Coast, Kenya, Libya, Madagascar, Mauritius, Mauritania, Nigeria, Sudan, Tanzania, Tunisia

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

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

South America: Brazil, Colombia

North America: Canada, United States of America

Oceania: Australia

KEREVİTAŞ Annual Report 2019 9

FROZEN AND CANNED FOOD BUSINESS UNIT

Product Categories• Bakery Products: Pizza, Pastry (Börek), Puff

Pastry, Turkish Ravioli (Mantı), Flatbread (Pide), Turkish Pizza (Lahmacun)

• Fruits and Vegetables• Meat Products: Meatballs, Burgers, Chicken

Products• Potatoes and Croquettes• Canned Products: Tuna Fish, Sweet Corn,

Vegetables• Desserts: Knafeh, Pistachio Pastry, Mosaic Cake• Seafood Products: Calamari, Shrimps

Brand • SuperFresh

EDIBLE OIL BUSINESS

Product Categories• Retail - Margarine • HORECA - Pastry and Catering - Industrial Oils • Edible Oil

BrandsBizim Yağ, Teremyağ, Luna, Sabah, Yayla,Halk, Ona, Evet, Ustam, Akbis, Akao,Akrim, Arma, Mars, SPY


HighlightsKerevitaş achieved successful operational results in 2019.

Steady and Profitable Growth

NET SALES (TL MILLION)

2017 2018 2019

2,422.0 2,492.92,406.2

(*) Excluding other income and expenses from operating activities.

GROSS PROFIT (TL MILLION)

2017 2018 2019

562.9 613.4

413.7

17.2%

23.2% 24.6%

Gross Profit Margin

EBITDA(*) (TL MILLION)

2017 2018 2019

343.6 379.3

185.5

7.7%

14.2% 15.2%

EBITDA Margin


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

Leader of the Frozen Food and Margarine Market

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

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

Total Workforce

Employees

1,736 Total Export

TL Million

353.1

Export Destinations

>60Number of Factories

5


Vision, Mission and Values

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

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


Values

Consumer satisfaction

• We always prioritize consumer needs and requests. and produce accordingly.

• We always work passionately to become the market leader and a preferred brand.

• We consider consumer benefit prior to each action we take.

• We take the initiative to achieve consumer satisfaction and aim to anticipate needs before they arise.

Leadership in collaboration

• We value different perspectives and experiences, and benefit from our wealth of diversity.

• We consult each other, learn together and develop our skills. We work together as a team towards a common goal.

• We welcome everyone’s success as the Company’s success.

Leadership in quality

• We provide consumers easily accessible high-quality products and strong brands with best-in-class services.

• We aim to implement the best practices in every aspect of our operations.

• We continually raise the quality bar in production and at service stages.

Competitiveness

• We always start compelling competition across all our operations.

• We aim to reach the top in every area where we operate.

• We are swift and agile; we work hard and push the limits to provide our customers the best products first.

• We measure our performance against our own record and our competitors, and then aim to do better each time.

Innovation

• We explore, support and implement new ideas with our entrepreneurial spirit, embracing change and innovation.

• We identify fresh opportunities in the market and boost our mobility by rapidly adapting to change.

• We pioneer change, create new markets and set the trends in the industry.

• We embrace new and diverse opinions.

• We monitor innovations and developments closely and aim for continuous improvement with our R&D centers’ studies.

Result-oriented

• We are always result-oriented and preserve our energy and motivation.

• We aim to achieve sustainable results that generate value for all stakeholders.

• We put our hearts in our work with our industriousness and drive to succeed, set challenging targets and then achieve them.


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

Frozen and Canned FoodKerevitaş has the widest product range in the frozen food market. The frozen food category offers consumers bakery products, fruits and vegetables, potatoes and croquettes, meat products, seafood products and desserts. Canned food category includes canned tuna fish, sweet corn and vegetables.

In 2019, SuperFresh launched Şipşak Pizza (Instant Pizza), the first and only microwave pizza in Turkey. The product serves the modern consumer with a quick, practical and delicious offering in one-person portions.

Production is carried out in four main categories:• Retail Products• HORECA Products• Export Products• Private Label Products

Product Categories• Bakery Products- Pizza- Roll Pastry- Puff Pastry- Turkish Ravioli (Mantı)- Flatbread (Pide)- Turkish pizza (Lahmacun)

• Fruits and Vegetables

• Meat Products- Meatballs- Burgers- Chicken Products

• Potatoes and Croquettes

• Seafood Products- Calamari- Shrimps

• Canned Products- Tuna Fish- Sweet Corn- Vegetables

• Desserts- Knafeh- Pistachio Pastry- Mosaic Bars


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

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

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

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

• Industrial Products- Akbis- Akrim- Arma- Mars- Akao- Spy


• Bakery products• Frozen fruits and vegetables • Canned tuna fish• Canned fruits and vegetables• Meat products• Coated products

• Frozen potatoes and croquets• Frozen vegetables

131,000 m2 Outdoor Space

253,000 m2 Outdoor Space

43,000 m2 Indoor Space

33,000 m2 Indoor Space

6 Main Production Lines

2 Main Production Lines

Bursa Factory

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

Frozen and Canned FoodThe Leader of the Frozen Food Market with an Annual Production Capacity of 130,000 Tons

Afyon-Emirdağ Factory


Total Production Capacity

Tons/Year

130,000

Product Availability at Reaching Tables of

Points People

+36,000 20 Million

Brand Recognition*

100%

Freezers

27,000Distributors

58

Share in Branded Market**

56%

Distribution Vehicles

200

Categories

21

2 Factories

5 Continents

Exports to +20

Countries

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

SKUs in

554

Leader with


Istanbul Edible Oil Factory Adana Edible Oil FactoryOverseas/BruneiEdible Oil Factory

280,000 tons/year capacity



• The first and only factory with a fraction facility in Turkey Adana Edible Oil Factory

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

Edible OilTurkey’s Largest Edible Oil Production Capacity


Total Production Capacity

Tons/Year 3 Factories

658,000

Reaching Tables of

People

65.4 Million

Brand Recognition****

99%

Availability**

%98

Edible Oil Business Unit Brand Leader with 66% Market Share*

66%

SKUs under

518

brands

56

3 Factories

5 Continents

Exports to

+40Countries

Leadership in both the retail block and

margarine bowl segments

* Source: AC Nielsen 2019 Tonnage Share** Source: AC Nielsen 2019 Weighted Distribution*** Source: HTP December 2019**** Source: Total Brand Recognition BHT December 2019

Product Availability at

Sales Points

+115,000

Access to

Households***

16.3 Million


Key Indicators

Consolidated Financial Indicators

TOTAL ASSETS (TL MILLION)

2017 2018 2019

2,977.4 2,723.2

3,396.2


2017 2018 2019

2,422.0 2,492.92,406.2

SHAREHOLDERS’ EQUITY (TL MILLION)

2017 2018 2019

781.9

966.4

759.9

NET FINANCIAL DEBT/EBITDA*

2017 2018 2019

2.36

1.51

4.65

* Net financial debt is calculated by deducting cash and cash equivalents plus financial receivables from related parties from total financial debt.

** Excluding other income and expenses from operating activities.

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

EBITDA** (TL MILLION)

2017 2018 2019

343.6 379.3

185.5

7.7%

EBITDA Margin

14.2% 15.2%

Gross Profit Margin

GROSS PROFIT (TL MILLION)

2017 2018 2019

562.9 613.4

413.7

17.2%

23.2% 24.6%



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

Operational Indicators

Global Footprint


2017 2018 2019

2,422.0 2,492.92,406.2

EXPORT REVENUES (TL MILLION)

2017 2018 2019

386.9 353.1

315.9

Key Indicators

Asia

27 Countries74%

Africa

16 Countries 4%

Europe

20 Countries21%

Other

5 Countries2%

Exports by Continents


CONSOLIDATED TURNOVER (TL MILLION)

Net Sales Breakdown by Product CategoryHORECA

55.4%Edible Oil

5.4%

Retail - Margarine

Other

36.8%

2.0%Retail - Liquid

0.4%

KerevitaşConsolidated Turnover

TL Million2,492.9

Frozen and Canned Food

29.4%

Edible Oil

70.6%

Tuna Fish

Frozen Food

12.0%Canned Fruits and Vegetables

4.3%Other

9.5%

74.2%

Edible Oil Business Unit Total Turnover

TL Million1,760.6

2018 2019Edible Oil Business Unit 1,713.8 1,760.6Frozen and Canned Food Business Unit 708.2 732.3Consolidated Turnover 2,422.0 2,492.9

Frozen and Canned Food Business Unit

Total Turnover

TL Million732.3


Net Sales Breakdown by Sales Channels

Direct Sales

Export

33.9%

13.5%

Private Label Products

4.0%Other

2.0%Indirect Sales

46.6%

Frozen and Canned Food

29.4%

Edible Oil

70.6%Export

13.9%

Other

Indirect Sales

5.8%

17.5%

Direct Sales

Private Label Products

45.2%

17.6%

Edible Oil Business Unit Total Turnover

TL Million1,760.6

KerevitaşConsolidated Turnover

TL Million2,492.9

Frozen and Canned Food Business Total Turnover

TL Million732.3



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

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

Other

Ufuk Yatırım Yönetim ve Gayr. A.Ş.

20.00%

10.34%

Trade Türk Gıda Yatırım A.Ş.

5.42%

Murat Ülker

9.98%Yıldız Holding A.Ş.

54.27%

2019 Shareholding Structure



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

1969Export of live crayfish has begun under a cooperative society organization.

1978“Kerevitaş” was established in Akçalar village, Bursa.

1980Frozen fruit and vegetable production commences.

1989Production of bakery products has been started [pizza, puff pastry, Turkish ravioli (mantı)].

1990Launch of ‘’SuperFresh’’ brand.

1993Canned tuna fish production starts.

2008Kerevitaş was acquired by Yıldız Holding.

2013Emirdağ Factory was established.

2017Besler (owner of Marsa) was acquired.

Kerevitaş becomes the second largest food company trading on Borsa Istanbul.

The first R&D center in the frozen food sector was established.

2018Turquality brand support scheme begins.

2019The Company is included in the Sustainability Index.


Edible Oil Production Capacity

Tons/Year

658,000

Edible Oil Business Unit

Brand Recognition

99%

Frozen and Canned Food Production Capacity

Tons/Year

130,000

5 Factories


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

1994Liquid and industrial oil production was started.

1995Production of packaged margarine and packaged industrial oil started.

1996Production of bowl margarine started.

1999First time production of buttery taste margarine in Turkey.

2002Turkey’s first and only fraction factory was installed.

2012AIB (American Institute of Baking) Food Safety Certification obtained.

2013Acquisition of Marsa by Besler.

2015 Turquality brand support scheme begins.

2016Besler Food R&D Center certified by the Ministry of Industry.

Ona brand was admitted to the Turquality incentive program.

2017Brunei Factory has been opened. First liquid margarine produced.

2019Margarine with real butter content, produced as a first in Turkey.


SuperFresh Brand Leader with

Market Share

56%


Brand Recognition

100% Total Consolidated Turnover

TL 2,492.9

6 Continents

Exports to

+60Countries

Edible Oil Business Unit Brand Leader with

Market Share

66%+1,730 Employees

Product Availability at

Sales Points

+115,000



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

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

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

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

32 Management

Message from the Chairman of the Board and CEOWe are delighted to be included in BIST’s Sustainability Index, which measures companies traded on Borsa Istanbul in terms of their corporate sustainability performance.

Dear Shareholders,

As Turkey’s leading company in the frozen food and edible oil markets, Kerevitaş attained solid growth and concluded the year with a turnover of TL 2.5 billion.

In 2019, our Frozen Food and Canned Business Unit posted EBITDA of TL 138.3 million, marking a 26.1% year-on-year increase, and the Edible Oil Business Unit achieved EBITDA of TL 240 million with a 2.6% increase. According to these figures, the Company’s total EBITDA reached TL 379.3 million, marking a 10.4% growth compared to the previous year.

Thanks to astute management of cost and price balance in the sales channel and product portfolio in 2019, the growth in operating profit and profit margin was achieved at levels above our sales revenue growth.

The innovations we introduced in the edible oil segment, as well as in the frozen food and canned business, were appreciated by our customers, extending our household penetration and thus reinforcing the leading position of our SuperFresh, Bizim Yağ and Teremyağ brands. At Kerevitaş, we concluded 2019 as a strong-branded market leader with a 56% share in frozen foods and 66% in edible oils.

Exporting to more than 60 countries on six continents, Kerevitaş achieved TL 353.1 million in export revenues in 2019. Our teams expanded our brand presence in our existing markets and made major strides in entering new markets. Thanks to these developments, we aim to sustain the momentum achieved in exports each passing year, and to boost the positive impact on our profitability.

Kerevitaş continues taking exemplary steps towards sustainability; as such, the Company is now on BIST’s Sustainability Index, where Borsa Istanbul-traded companies are measured in terms of their corporate sustainability performance. We have saved 5.4 million liters of water, thanks to the drip irrigation system deployed in agricultural lands as part of our sustainability efforts.

The system has helped our farmers achieve energy savings up to TL 706 thousand and derive 308 kg more crops on a per unit area basis, equaling a total of TL 4.1 million in earnings. Furthermore, we provide our farmers with one-on-one technical support and certified seeds, in line with the appropriate planting period, the region and the soil type. The ratio of our contracted farmers reached 85%, up from 82% in 2018.

In the meantime, our edible oil business, Besler, embarked on the “Zero-Loss Journey through the Corporate Energy Movement,” helping us prevent carbon emissions equivalent to the absorption capacity of 260 thousand grown trees in a year. Yıldız Holding’s sustainability approach is the tenet of our strategy at Kerevitaş. We seek to “Make People Happy and Be Happy” as part of our sustainability strategy, and will thus continue to develop innovative projects aimed at leaving a habitable and happy world for future generations.

Focusing on consumer needs, Kerevitaş will continue to lead the fresh frozen food and edible oil markets and expand the presence of its brands in both Turkey and export markets through new product launches.

Yours sincerely,

Mehmet Tütüncü Chairman of the Board of Directors and CEO

33KEREVİTAŞ Annual Report 2019

34 Management

Board of Directors

Name Surname DutyMehmet Tütüncü ChairmanAli Ülker MemberOğuz Aldemir MemberVehbi Merzeci MemberHüseyin Avni Metinkale Member

Ahmet Murat Yalnızoğlu Independent Member

Ceyda Aydede Independent Member

Mehmet TütüncüChairman of the Board of DirectorsMr. Tütüncü obtained his BSc in Mechanical Engineering from Gazi University and his MA from the Department of Industrial and Organizational Psychology, Maltepe University. His professional career began as a Local Industry Expert at the Ministry of Industry and Commerce. He then joined Best Rothmans Entegre Sigara ve Tütün Sanayi A.Ş. where he served as Production Manager, Operations Manager and General Manager for most of the next decade. Mr. Tütüncü joined Ülker Gıda A.Ş as the Business Coordinator in 1996. He served as General Director of Ülker Biscuit and Chocolate Factories, Ülker Group Deputy Chairman, Chairman of Food and Beverages Group, Chairman of Food Group and Chairman of Ülker International Group. In 2016, he was appointed as the Regional CEO for Turkey, the Middle East, North Africa and Central Asia of pladis Global, founded under Yıldız Holding. In 2017, he also assumed responsibilities of South Asia and Latin America regions together with pladis Global Information Systems and Business Models Transformation as well as continuing his work as pladis Deputy CEO. In October 2018, he was elected as Vice Chairman of the Board of Directors at Yıldız Holding and was also appointed as Yıldız Holding CEO. Alongside his duties at Yıldız Holding, Mr. Tütüncü serves as the Chair or Member of the Board at several other companies. He is a Member of the Board of TUGIS (Turkish Food&Beverage Industry Employers Association), and holds memberships in several industrial organizations in Turkey and abroad. He also serves on the Board of Directors of FoodDrinkEurope and

FoodDrinkEurope Liaison Committee. Speaking English, Tütüncü received an IRI scholarship for a six-month program on Production, Quality Control and Maintenance Practices in Italy, attended Business Management Training Program at Boğaziçi University and received education on Marketing Techniques, International Marketing, Factory Organization and Management as well as studying Strategic Marketing at Harvard Business School, and attending various courses at IMD/Switzerland and Insead/Singapore. Married with three children, Tütüncü enjoys travelling, reading books and articles, spending time with animals and in nature, and collecting small hand-crafted boxes and objects.

Ali Ülker Board Member Ali Ülker was appointed as Chairman of Ülker Corporate Group (biscuit, chocolate, confectionary) in 2005. He began his professional career in 1985 as a trainee in the Quality Control Department of Ülker Gıda A.Ş. Between 1986 and 1998, he worked at the company’s chocolate production factories and at the company’s marketing subsidiary Atlas Gıda Pazarlama A.Ş. as a trainee, sales executive, sales coordinator, product group coordinator and product group manager, respectively. Mr. Ülker was appointed as General Manager of Atlas Gıda Pazarlama A.Ş. in 1998, Deputy Chairman of the Consumer Group in charge of Marketing and Chain Stores in 2000, and General Manager of Merkez Gıda Pazarlama A.Ş. in 2001. He was appointed as Deputy Chairman of the Organized Retail Food Group in 2002. Ali Ülker graduated from Boğaziçi University, Faculty of Economics and Administrative Sciences, Economics and Business Administration Departments. Mr. Ülker also attended various academic programs at IMD, Harvard University and Wharton School of Business. He worked on the Internal Kaizen Projects at De Boccard & Yorke Consultancy (1992) and on IESC Sales System Development and Internal Organization Projects (1997). Ali Ülker was born in 1969 and is married with three children. He speaks English and German.

Oğuz AldemirBoard MemberMr. Oğuz Aldemir graduated from Ankara University, Faculty of Political Sciences, Department of Business Administration and studied his Executive MBA from University of Chicago, Graduate School of Business, London Campus in 2007. Starting his professional career in 1993 at Procter & Gamble in the sales and marketing departments, Oğuz Aldemir joined Coca-Cola in 1997. Over the next 12 years at Coca-Cola, he served as Chain Stores Manager, Commercial Director for Ukraine Operations, Sales Director of Turkey, General Manager of Azerbaijan and Regional Director of Central Asia, respectively. In 2009, Mr. Aldemir joined Mey İçki as Executive Board Member and Director of Sales and Distribution; he played an active role in the sale of the company from TPG to Diageo in 2011. Oğuz Aldemir joined Yıldız Holding as Vice President of the Food, Frozen Products and Personal Care Group in 2013. He continues to serve as Group President of the Frozen Food, Edible Oil, Processed Meat and Personal Care Group to this day. Oğuz Aldemir is married with one child.

Vehbi MerzeciBoard MemberVehbi Merzeci was born in Istanbul in 1975, and graduated from Uludağ University, Faculty of Economics and Administrative Sciences, Department of Business Administration. He speaks English. He served as Committee Chairman and Member of the Assembly at Istanbul Chamber of Commerce and Vice Chairman of the Board of Directors at Water Products Promotion Group (STG). At present, Mr. Merzeci serves as Deputy Chairman of the Board of Directors at Istanbul Exporters’ Association of Fisheries and Animal Products; Member of the Board of the Sectors Council; and Member of TİM (Turkish Exporters Assembly). Vehbi Merzeci is also a Congress Member of Fenerbahçe Sports Club.


Senior ManagementDuty Business Unit

Mehmet Tütüncü CEO Yıldız HoldingŞükrü Çin Vice Chairman Edible Oil Business Unit, Frozen and Canned Food Business UnitSadettin Atilla Vice Chairman Supply Chain & Production Edible Oil Business Unit, KerevitaşAdnan Özşahin Group Director Export Edible Oil Business Unit, Frozen and Canned Food Business UnitVerda Duysak Group Director Marketing Edible Oil Business Unit, Frozen and Canned Food Business UnitUfuk Kasar Director, Financial Affairs Frozen and Canned Food Business UnitAdnan Kaplan Director, Financial Affairs Edible Oil Business UnitLevent Çiftçi Group Director Turkey Sales and Commercial Marketing, Frozen and Canned Food Business UnitUğur Tendik Director, Sales MarsaHatice İçeli Director R&D & Business Development Edible OilAli Kemal Kapıcıoğlu Senior Manager Commercial Marketing and Sales, BeslerMurat Turan Senior Manager Human Resources, Edible Oils, Frozen and Canned Foods

Cihan Eker Manager Information Technologies Edible Oil Business Unit, Frozen and Canned Foods Business Unit

Hüseyin Avni Metinkale Board Member Hüseyin Avni Metinkale was born in 1963 and graduated from Istanbul Technical University, Department of Business Engineering. He started his professional career in 1985 as Project Manager at Albaraka Türk Participation Bank, and then worked as Managing Partner at Pripack Ambalaj A.Ş. Since 2001, Mr. Metinkale has held various executive positions at Yıldız Holding, including Committee Chairman, Member of the Executive Committee and Director of the Packaging Group. Since 2008, he has been the General Manager of Yıldız Holding. Mr. Metinkale became General Secretary for Yıldız Holding’s Boards of Directors in 2010. He is married with four children and speaks English.

Ahmet Murat YalnızoğluBoard Member (Independent)Murat Yalnızoğlu was born in 1957 and graduated from Istanbul High School. He obtained his Bachelor’s degree from Boğaziçi University and Master’s degree from University of Florida in Industrial and Systems Engineering. Mr. Yalnızoğlu began his professional career in 1982 as an entrepreneur in information systems and software development. In 1989, he

joined Arthur Andersen and Andersen Consulting as Management Consultant specializing in information technologies. Mr. Yalnızoğlu went on to work at Coopers & Lybrand and AR-GE Consultancy as Senior Executive, Founder and Partner, delivering various strategic and organizational development consultancy projects for some of Turkey’s leading companies. Since 2006, his focus has been creating effective corporate structures particularly for large, multi-business conglomerates. Mr. Yalnızoğlu conducted numerous studies to boost effectiveness of board of directors’ activities, and achieve substantial improvements by structuring the institutions “from the top.” In addition to his work as management consultant, he also serves as a member of the board of directors at several companies. Mr. Yalnızoğlu contributes to propagating the benefits of good management by sharing his experiences in management with civil society, professional organizations and universities, at various seminars and conferences, and on social media.

Ceyda Aydede Board Member (Independent) Ceyda Aydede graduated from Industrial Engineering and started her professional career at Arthur Andersen. She later served in various positions at Migros. Combining her business experience in various sectors with a professional approach to public relations, Ceyda Aydede established Global Tanıtım in 1989 and has executed major PR projects for more than 25 years. These projects earned many national and international awards to Global Tanıtım while also bringing a high degree of recognition through prestigious awards for Ms. Aydede. In 2000, Dünya Newspaper named her the “Most Successful Businesswoman in the Public Relations Sector,” and in 2001 she was named the “Best Professional Representative of the Sector” by Ankara Public Relations Association and Ankara Chamber of Commerce. Ms. Aydede, who teaches public relations at the graduate level at Yeditepe University, is also a published author of books on public relations.

36 2019 Activities

Development of Frozen and Canned Food Sector and Edible Oil Sector in TurkeyFrozen foods prove a healthy choice in terms of quality, taste, smell and nutritional value.

Constituting one of the core business lines for Kerevitaş, the frozen food sector is a major branch of the food industry. The sector involves providing appropriate raw materials for freezing (seed selection, production, procurement); transporting raw materials to facilities under proper conditions; selecting, washing, sizing and processing the raw materials with techniques specific to the product without delay; deep freezing and packaging the materials appropriately; using the correct technology for their storage, loading, transport, distribution and consumption; and monitoring customer feedback.

The Turkish Food Codex defines quick frozen foodstuffs as those that have undergone quick-freezing where the zone of maximum crystallization is crossed as rapidly as possible, depending on the type of product. The resulting temperature of the product after thermal stabilization is continuously maintained at a level of -18° C or lower at all points. These items are marketed in such a way as to indicate that they possess this characteristic.

Freezing is the best food preservation method to maintain the quality, taste, smell and nutritional value of foods. Flash-freezing the food at -40° C transforms the water within to ice through crystallization, averting

viability of microorganisms which lead to spoilage. Freezing also minimizes chemical and biochemical changes to preserve foodstuff at their most natural state.

Maintaining temperature at -18°C in all links of the chain - from production to shipment and the point of sale - is of vital importance. Consumers who buy products stored in -18° C display cases at points of sale are advised to take these products to their freezers or cook them within two hours at most.

At present, frozen food factories employ the IQF (Individual Quick Freezing) technique to flash-freeze fruits and vegetables individually. Under this method, raw materials obtained at the source and in-season are cleaned and

individually frozen at -40° C rapidly within 5-8 minutes by applying the “Individual Quick Freezing (IQF)” process. The process freezes the water contained within the products so that the foodstuffs maintain long life without recourse to additives.

Freezing foodstuff through the IQF method thus involves freezing the cellular juice in the food with the rest of the fibers and content without rupturing the cell membranes. As products are picked in-season and frozen at its freshest state and at very low temperatures, they retain their freshness and nutritional values to the point of consumption.


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

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

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

The world’s first frozen products to be offered for sale were frozen seafood which started being produced during the 1930s in the United States, replacing canning and other earlier food storage methods. Since then, this ever-expanding market reached approximately USD 290 billion market value worldwide, with annual per capita consumption in countries such as the US, UK, and Germany standing at more than 20 kg. With consumption standing at 1 kg per capita/per annum in the Turkish market, there is a clear scope for growth.

Frozen food technology was developed as a result of long-running research, and hygiene and production standards were established methodically. Analyses confirm that frozen foods are better than fresh ones in terms of vitamins and nutritional value. Products considered to be fresh produce are actually not as fresh as perceived due to the time elapsed and the storage conditions faced in transit until reaching the market. As a result, so-called fresh produce ends up losing some of its nutritional elements.

Frozen foods, however, are delivered to the consumer after undergoing detailed quality control testing and are preserved subject to cold chain rules. No preservatives or chemicals are used in the freezing process. For this reason, as long as they are defrosted and cooked in accordance with the instructions for use, the flavors, vitamins, minerals or other valuable nutrients of frozen foods are not diminished by the freezing process.

Furthermore, thanks to the frozen food technology, it is possible to get certain seasonal products in every season with the same quality.

Frozen foods also offer economic and practical advantages. It provides water and time saving for the consumer since the food was packaged after it was already cleaned and prepared for use. Redundant parts such as leaves, stems, seeds are removed and only the edible bits are packed. Therefore, the sum paid for frozen food purchases involves only the edible net amount.

Most of the raw and auxiliary materials used in the production of frozen fruits and vegetables in Turkey are supplied locally. Kerevitaş harvests vegetables grown through the joint efforts of contracted farmers and agricultural engineers automatically with its own harvesting machinery and delivers them to the factory in 2-3 hours. Vegetables that are cleaned, sorted and washed under hygienic conditions are then flash-frozen at -40° C degrees to retain their freshness and nutritional elements as in that instant.

Supply of raw materials is one of the most crucial considerations at Kerevitaş factories. Using high quality raw materials is an essential requirement to produce high quality frozen products. As a result, the process at Kerevitaş begins with seed selection of the produce to be grown. Kerevitaş’s agricultural engineers plant from seeds that are certified, of high-yield, and are compliant with taste, appearance, and other key criteria. Planting takes place under the supervision of the Company’s agricultural engineers in areas with suitable soil structure during the appropriate planting season. Specific soil quality,

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

38 2019 Activities

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

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

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

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


Every vehicle arriving at the factory first undergoes raw material analyses by the Quality Control unit. Checks are made against the quality criteria determined for each crop; only the appropriate raw material is admitted into the factory under the supervision of food engineers. Input controls for other processes outside the premises of frozen fruit and vegetable production (e.g. Bakery Products, Coated Products, Meatball Group, et al.) are also conducted in line with relevant specifications; only ingredients suitable for production are admitted to the factory.

Depending on the type of crop, fruits and vegetables undergo the following production processes;

• Sorting: Categorization of fruits and vegetables based on their size, diameter and similar properties

• Selection: Removal of foreign substances, spoiled items, peels, shells and rogue plants

• Washing: Removal of mud, dust and other substances that might be carried along the raw material by cleaning with water

• Boiling (applied only to vegetables; fruits are not boiled): Entails immersing the vegetables in boiling water for a few minutes to halt the activity of certain enzymes that cause it to go dark and rancid

• Precooling: Applied prior to the freezing process, precooling ensures that the produce is quickly and fully frozen by reducing the core temperature and dispels any foreign substances that may remain on the surface from the final rinse

Workflows for other products processed outside the Frozen Fruit and Vegetable production factory (e.g. Bakery Products, Coated Products, Meatball Group, et al.) are drawn in accordance with the process specifications.

At the next stage, the product is air-blasted at -40° C and flash frozen via the IQF method, bringing the product’s core temperature to -18° C. Products thus frozen are transferred to cold storage warehouses at temperatures of -20° C in order to avoid disruption of the cold chain. There, the products are stored in refrigerated units until they are transported in refrigerated vehicles for sale in the target markets.

For the canned food sector, the process begins with providing suitable raw materials (seed selection, cultivation, procurement) and entails the stages of transporting raw material to the factories under appropriate conditions; selecting, washing, sorting and processing of the raw material through product-specific techniques; sterilizing, incubating and packaging of the product in appropriate form; storing, loading, transporting, distributing in accordance with the technique; and monitoring customer results after consumption.

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

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

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

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

40 2019 Activities


Sales and MarketingKerevitaş has a powerful sales and marketing network with 200 distribution vehicles and 27,000 freezer display cases, ensuring product availability at more than 36,000 locations across the domestic market. The Company boasts a sustainable sales and marketing network owing to its solid bond with 58 dealers across the domestic market. Backed by the high international brand recognition of its parent company Yıldız Holding, Kerevitaş steadily strengthens its sales and marketing organization in overseas markets, rapidly reaching new markets across the globe.

Kerevitaş is the only company that has products across all categories in the domestic frozen and canned food market under its SuperFresh brand.

SuperFresh is the fresh-frozen food market leader by far, with a 56% share among branded products. SuperFresh today enjoys 100% brand recognition. It also boasts the broadest household penetration in Turkey, compared to other branded products. SuperFresh products reach the tables of 20 million people.

In 2019, SuperFresh launched “Şipşak Pizza (Instant Pizza),” Turkey’s first and only microwave pizza, remaining the pioneer of innovation in the sector.

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

ProductionOperating under the brand name SuperFresh in frozen and canned food, Kerevitaş boasts an advanced production infrastructure in this business line. The Company’s products in this area include bakery products, fruit and vegetable products, potato and croquet products, meat products, seafood products and desserts. Canned food category includes canned tuna fish, sweet corn and vegetables.

Kerevitaş conducts production operations at two main factories. The factory located near Akçalar, Bursa comprises six main production facilities spread across premises totaling 131,000 m2 of outdoor area and 43,000 m2 of indoor space. The factory located near Emirdağ in Afyon is built across 253,000 m2 of outdoor area with 33,000 m2 of indoor space. Products produced by means of high-tech processes are stored in high capacity cold and dry storage warehouses at the Bursa and Afyon factories. Kerevitaş continually develops its production infrastructure in line with customer needs and expectations.

Activities


The brand had an active TV presence during Ramadan and in the first quarter of 2019, featuring a cooking show designed to respond to the most pressing question for those women who spend most of the day in the kitchen – what to cook today. In the show, all the products in the SuperFresh portfolio were used, while “practicality” and “taste” were highlighted as the key functional benefits for the consumer. The show became the second most-watched show among TV programs airing in the same time slot.

In Q4 2019, SuperFresh launched a new consumer communication campaign for its main category pizza with the motto “When Hungry, the Taste You’re Looking for is Ready with SuperFresh.” The campaign aired on TV and had radio coverage with an impressive jingle.

SuperFresh has an active profile in the field with in-store tastings and promotional activities. The brand also expanded its presence on the e-commerce channel, which is gaining widespread use among consumers, through product listings, special promotions and special product packaging.

DistributionEnjoying a robust domestic distribution infrastructure in frozen and canned food under the Kerevitaş brand, the

Company manages sales and distribution operations with strong and experienced exclusive distributors. Kerevitaş stands out from the competition with a strong logistics chain in frozen and canned food and the diversity of its product range. With a keen understanding that proper positioning of products is the most crucial feature of success in the frozen food sector, the Company has bolstered its reach to consumers via bespoke frozen food cabinet display case investments under the Kerevitaş brand since 1990. These freezer cabinet display cases are delivered to the sales points which exceed a certain turnover threshold under a loan agreement. The special frozen food cabinet display cases feature only Kerevitaş products and are periodically inspected by Kerevitaş staff.

ExportKerevitaş offers a wide range of products globally by its frozen and canned food business unit under the SuperFresh brand. In addition to its diverse product range and full compliance approach with international quality standards, Kerevitaş exports to more than 20 countries across five continents under its frozen and canned food business unit. With these figures, Kerevitaş achieved Turkey’s highest export in frozen and canned foods.

Products

RetailKerevitaş offers a diverse product range in the Retail Products group under frozen and canned food business unit. The Company’s products in this group range from fruit and vegetable products to bakery products, potatoes and croquet products. For more information about the Company’s products in this category, please visit: www.kerevitas.com.tr/urunler/perakende-urunler

HORECAKerevitaş’s frozen and canned food range aimed at HORECA includes a wide selection of products – from Turkish ravioli (mantı) to pizza and pastries. For more information about the products in this category, please visit: www.kerevitas.com.tr/tr/urunler/ev-disi-tuketim-urunleri

ExportThe products in the exports category of Kerevitaş’s frozen and canned food business unit comprises the Company’s entire product portfolio. For more information about the products in this category, please visit: www.kerevitas.com.tr/tr/urunler/ihracat-urunleri

42 2019 Activities


of Baking) in 2012 and ISO 22000 in 2013, Kerevitaş maintained its pioneering position with respect to quality assurance. In 2014, the Company was awarded ISO 50001 Energy Management System Certification, becoming a leading enterprise in the industry regarding energy management and sustainable operations.

Sales and MarketingKerevitaş is the indisputable leader of the market with six brands in the retail margarine category, representing a total 66% share in turnover and tonnage in the edible oil business. The product portfolio includes offerings in packaging, bowl and liquid forms for varied uses and requirements, such as cooking, pastry, buttery taste and breakfast. The Company is the market leader with Bizim Yağ and enjoys significant competitive advantages with the Teremyağ, Luna, Sabah, Yayla and Halk brands. Sales processes of the Edible Oil Business Unit are primarily performed by Yıldız Holding’s distribution subsidiaries.

Boasting the highest rates of consumption, the broadest household penetration, and the most loyal consumers, Ülker Bizim Yağ cemented its dominant position as the leader

of the packaged oil market with 38% turnover share in 2019. Bizim Yağ reinforces successful business results with continuous and high-impact communications, and also maintained intensive communication campaigns in 2019. The TV show, “What to Cook Today with Eyüp Kemal Sevinç,” covered the SuperFresh brand and Bizim Yağ in recipes presented taking the needs of the target group into account. The show became the second most-watched show among programs airing in the same time slot.

Carrying its successful profile on traditional channels onto digital platforms, Bizim Yağ maintained active communication with consumers through social media and YouTube, where consumers spend significant time. As the leader of the market, the brand embraced pastry – the target group’s first choice in the category – and launched a YouTube Channel called “Pastry is Our Business.” The channel reached 150,000 subscribers in 2019, up by 50 thousand compared to 2018, and received both the MIXX Silver Award and the YouTube Silver Award. On Instagram, the brand reached 236 thousand followers in 2019 and maintained its position as the most interactive brand in the field of food.

ProductionAfter the acquisition of Besler Gıda, Kerevitaş commenced its operations in edible oil sector. Kerevitaş now runs its liquid oil and margarine production operations at three factories located in Adana, Istanbul and Brunei. Reaching a total capacity of 61.000 tons/year across these three factories, the Company’s Marsa Adana Factory has Turkey’s largest capacity for a factory on a single site. Kerevitaş produces liquid oil and margarine and conducts the sales and marketing operations of these products in domestic and overseas markets. At its three factories operating at international quality standards, the Company manufactures a total of 518 SKUs under 56 brands, including Bizim Yağ, Teremyağ, Luna, Ona, Ustam and Evet across the Retail, HORECA and Industrial categories.

Serving as a model for the edible oil industry since it commenced production, Kerevitaş decided in 1999 to establish an Integrated Management System (ISO-9001, ISO-14001 and OHSAS-18001). The Company became the first enterprise to receive all three certifications, setting a benchmark for other industrial enterprises. By obtaining the Food Safety Certificates of AIB (American Institute

Activities

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


44 2019 Activities


The most innovative brand of the category in terms of products and communication, Teremyağ also stood out from the competition in 2019. “The Sultans of the Kitchen with Teremyağ” was launched as a digital campaign that reached 18 million people and helped create 20 thousand Iftar menus with Teremyağ during Ramadan, the most important period for the category.

Luna is the brand of “firsts” in the category and has enriched its portfolio of both conventional and olive oil products with Luna Tereyağlı, launched in 2019 as the first and only product with real butter content in the market. As for the affordable brands category, the Sabah brand has packaged margarine offerings in its portfolio, while the Halk and Yayla brands offer packaged and bowl margarine products.

Besler’s subsidiary, Marsa, is the leading brand in the pastry oils category of HORECA with “Ustam Pastry Oils.” A new digital communication strategy was developed throughout 2019 to carry Ustam’s leading and visionary profile in HORECA to digital platforms, as well as to boost brand loyalty, and reach out to new consumers. Communication activities were conducted on Ustam’s Facebook and Instagram accounts, targeted to pastry chefs. As users

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

In a market where the competition lost household penetration, Teremyağ accessed new households and increased household penetration by three points with a 13% boost in average consumption per household. Embraced by consumers as the equivalent of butter in terms of taste, Teremyağ preserved its category leadership in the image score with the proposition “the best butter taste.”

Offered as a product with cream content by the market’s most innovative brand, Teremyağ, Teremyağ Gurme Kaymaklı holds the Superior Taste Award presented by the International Taste and Quality Institute (iTQi) in recognition of foods and beverages with superior taste and quality. Teremyağ Yemek & Hamurişi, a first of its kind with its liquid form, maintained its growth momentum in 2019. This growth was bolstered through TV commercials with the slogan “The Secret to Unforgettable Rice” in Q1. Television communications guaranteed higher household penetration, and a 3-point boost for Teremyağ.

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

of Ustam products, Turkey’s leading pastry chefs, along with demo chefs for the brand, appeared in these communications. In 2019, digital communication, with a focus on the target group, helped double the interaction, which stood at 5% in 2018. Industry-specific trainings constitute another key marketing activity for the Ustam brand. In line with Ustam’s vision to be “the brand that nurtures future pastry chefs,” vocational training is offered to students in the gastronomy and cookery departments of vocational high schools and universities across Turkey. In 2019, Ustam Academy delivered Basic Pastry Cooking courses to 550 students in 16 schools. Brand communication efforts are further reinforced through advertisements published in trade magazines (e.g. FoodinLife, Gastronomi, Patisserie by FoodinLife), and participation in Turkey’s major food exhibitions such as Worldfood Istanbul and Ibatech.

DistributionKerevitaş’s domestic sales of retail products in the edible oil business unit are conducted by market-specific sales companies operating under Yıldız Holding: Horizon for the conventional channel, Pasifik for the contemporary channel and Teközel for the private label (PL) channel. The Company’s retail edible


oil products thus reach a total of 115,000 points of sale. Industrial, pastry and catering sales are distributed by Eksper Gıda, another Yıldız Holding subsidiary, in collaboration with the Company’s corporate sales and distribution department. Exports are shipped to more than 40 countries through the Company’s own sales organization.

Export As of the end of 2019, Kerevitaş exported its edible oil products to more than 40 countries in five continents. As of year-end 2019, the Company exported 44,996 tons, seven brands accounting for 79% of this figure. In 2019, the Ona brand received support under the “Turquality” brand support program introduced by the Ministry of Economy to cultivate and promote the “Made in Turkey” concept in international markets, and additional brand investments were made in target countries.

Consumer ProductsThe Group produces the Bizim Yağ, Teremyağ, Luna, Sabah, Yayla and Halk brands under the Retail category. For more information about the Company’s products in this category, please visit: www.besler.com.tr/tr/urunler/tuketici-urunleri

HORECA ProductsThe Group produces the Ustam, Akbis, Akao, Akrim, Bizim Yağ brands under the HORECA category. For more information about the Company’s products in this category, please visit: www.marsa.com.tr and www.besler.com.tr

Products Pastry and Catering Oils The Group produces the Teremyağ, Bizim Yağ, Ustam and Usta brands under the Pastry and Catering Oils category. For more information about the Company’s products in this category, please visit: https://www.ustam.com.tr/?lang=eng and www.besler.com.tr

Industrial ProductsTo receive further information about the Industrial Oils category, under which the Group produces several brands, please visit: www.marsa.com.tr and www.besler.com.tr

46 2019 Activities

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

• Monitoring and communicating to the relevant departments any amendments in the legislation,

• Performing the activities related to the Public Disclosure Platform and Central Registry Agency procedures, as well as the Corporate Governance Principles as stipulated by the Capital Markets Board.

The Shareholder Relations Unit conducts communications to promote the Company to individual and institutional investors in Turkey and abroad, as well as sends notifications to shareholders and potential investors via telephone, fax and e-mail ([email protected]).

Shareholder Relations Unit Serkan YANDI – Investor Relations Manager Ufuk KASAR – Financial Affairs Director

Contact Details for the Shareholder Relations Unit Phone: +90 (216) 524 23 92 - 0850 209 18 31 E-mail: [email protected]

Kerevitaş’s investor relations activities are conducted by the Investor Relations Department formed within the structure of the Head Office. The Department is managed by Serkan Yandı, who has a Capital Market Activities Level 3 License, as well as a Corporate Governance Rating License.

The Investor Relations Department’s primary activities include the following:

• Informing shareholders about the Company’s operations and activities,

• Responding to the questions of shareholders about the Company and exercising of partnership rights,

• Communicating all material disclosures to investors via Borsa Istanbul, Capital Markets Board and Public Disclosure Platform (KAP), pursuant to the CMB’s Communiqué on material events,

• Conducting the preparations of the General Assembly, including delivery of the required documents to shareholders and organization of the General Assembly meeting,

Investor Relations Department conducts all processes and transactions concerning shareholders.


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

Project application efforts are ongoing for the 1509 - TÜBİTAK International Industrial R&D Projects Support Program.

Furthermore, an article on “The Determination of Peroxidase Enzyme Inactivation Parameters in Vegetables” was published in the January 2018 edition of World Food Journal (Dünya Gıda). The Center also delivered a poster presentation on “Investigation of The Fermentation Activity of Different Commercial Yeasts on Dough Development in Bakery Industry” at the Second International University-Industry Business Association R&D and Innovation Congress organized by Manisa Celal Bayar University on November 14, 2018.

Placing great emphasis on R&D activities in the Edible Oil Business, Kerevitaş established Turkey’s first R&D Center in the vegetable oil and margarine sector. As the largest R&D Center in the vegetable oil and margarine sector in Turkey, the Middle East and the Balkans, Besler RDC employs more than 20 staff with relevant qualifications in their respective fields on a full and

In 2019, Kerevitaş made total investment amounting to TL 3.5 million in the frozen food business. These expenditures included sales display case and vehicle purchases as well as machinery and upgrade investments in the bakery products, fruits and vegetables and auxiliary factories. Kerevitaş Frozen Food Group R&D Center has 17 full time employees and seven part time employees with significant qualifications in their respective fields. The R&D Center, which has significant capabilities in product development, completed 13 projects and is currently working on 8 projects involving advanced technology and know-how.

Enjoying robust links to Turkey’s product development ecosystem, Kerevitaş Frozen Food Group R&D Center submitted a project application on ‘Developing Technology for the Detection of Foreign Matter in the Dough Processes of Bakery Products to Ensure Food Safety’ under TÜBİTAK 1501 - Industrial R&D Projects Support Program. However, it did not receive the funding required from TÜBİTAK. Regarding EU-backed project initiatives, approval was granted by EUROPIDES for the ‘Smart Agriculture Fields in the European Region’ project.

part time basis. The Center undertakes original projects involving cutting edge technology. The main objective of the TEYDEB projects currently underway is developing high added value products that are currently imported due to lack of local production in Turkey.

Regarding national and international projects sponsored by the public sector, the Company is involved in:• the TAGEM project, financed by the

Ministry of Agriculture as a first in the sector (Besler is the project lead in the four-party consortium)

• The first EU-Euripides project, as part of the consortium consisting of national and foreign partners (Besler is the project lead for the smart and active packaging project).

A total of seven vegetable oil and margarine projects, including the projects described above, are approved and financed by national and international organizations. Three have been finalized, and the other four are currently ongoing.

48 Sustainability

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

Kerevitaş conducts its business processes for recruitment, career planning, development and training within the framework of its Human Resources Policy and Staff Directive. All Company employees’ rights are guaranteed to ensure that they are free from any discrimination and mistreatment, Kerevitaş did not receive any complaints or grievances of discrimination in 2019.

The Company’s Human Resources Policy encompasses the following: • Measuring the performance of all

employees and ensuring that success criteria are managed in accordance with these measurements,

• Implementing transparent management,

• Providing easy access to Company executives,

• Ensuring the staff are comfortable with expressing their thoughts,

• Emphasizing business discipline, • Encouraging employees to work

together with a team spirit, • Delivering equal opportunities to

successful staff in terms of training, remuneration and career development,

• Promoting social activities.

Performance and Career Management The business results of Kerevitaş staff are evaluated within the framework of a performance management system based on targets and competencies. According to this system, employees are evaluated in terms of goals, competencies and potentials by the management. Personnel are then referred to Career Development Programs based on the feedback they receive in their evaluations.

The Performance and Career Management System is designed to contribute to both individual and organizational development; provide employees with tools to develop and direct their careers; offer training and development opportunities for their career advancement. The system is also structured to ensure that its performance, career, succession, talent management and training/development processes function in an integrated manner.

Kerevitaş places great importance on the career expectations, professional and personal development of its employees. The Company provides its staff with the appropriate environment

Kerevitaş evaluates the business results of its staff within the framework of a performance management system based on targets and competencies.


50 Sustainability

Human Resources

also different. The primary aim of the Company in this process is to use the correct methodology for monitoring the technical and behavioral requirements of the job, using appropriate methods and placing the most suitable candidates who best fit the open positions.

Remuneration and Benefits Kerevitaş’s remuneration system is governed by a common tier structure and based on job content. Under this system, jobs are assessed through a specified job evaluation method that is designed to create a fair, competitive and market compatible wage policy. Annual market wage surveys are also consulted to determine the Company’s remuneration practices.

A market rate and performance-based remuneration policy is applied across Kerevitaş with a view toward supporting the Company’s strategy and competitive advantages.

Performance-Based Remuneration The Company’s white-collar employees are evaluated within the framework of a target and competency-based performance management system at the end of the year. These personnel are rewarded with an annual performance premium.

to develop their skills and manage their careers. Furthermore, ad hoc project teams are set up and staff rotations are organized across departments and Group companies. This effort aims to help employees gain a better understanding of the Company; enhance employee communication and synergy by bringing together diverse perspectives and varied competencies; and contribute to the development of the employees. In addition, staff are expected to be actively engaged in projects.

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

The methods employed by the Company in the selection and placement processes depend on the candidate profile. Processes employ one or several of the recruitment tools, or in certain cases, all of them, as well as the following testing and inventory applications. Competency-based interviews and case studies conducted with experienced candidates and fresh graduates are

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

A sales premium system, which is designed to encourage high performance, is available for sales staff as and when required.

Training and Development Kerevitaş offers employees various specialization programs, professional and personal development trainings and leadership development programs. These efforts ensure that personnel can plan for their personal development and professional career advancement.

Executive preparation, executive development and leadership development programs are offered to staff based on the needs and expectations of the Company and the workforce.

Kerevitaş’s learning and development tools include the following: • Learning and Development Catalogue/

Leadership Development Programs,• Mentoring and Coaching,• Professional Expertise Programs,• Foreign Language Training/Conference

and Summit Attendance,• Standard Trainings,• Electronic Libraries and Online

Development Tools,• Orientation Program.


Human Resources Profile

Blue Collar Seniority

5-10 years

23%

10-15 years

15%

15-20 years

4%

20 years and more

1-5 years

8%

51%

10-15 years

15%5-10 years

27%

15-20 years

9%

1-5 years

42%

Associate degree

10%

Undergraduate degree and higher

1%High school and lower

89% Blue Collar Education Status

Associate degree

7%

30 and under

17%Female

34%

High school and lower

15%

45 and over

22%

Undergraduate degree and higher

Between 31-44

Male

78%

61%

66%

20 years and more

7%

White Collar Seniority

White Collar Education Status

Age Distribution Employee Gender Distribution

52 Sustainability

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

As one of Turkey’s largest food manufacturers, Kerevitaş places great emphasis on occupational health and safety. Aiming for full compliance with legal and regulatory requirements and achievement of a “Zero Accident” risk approach, the Company embraces a sustainable occupational health and safety culture across the organization thanks to its conscious employees. Compared to the previous period, the Company reduced the Lost Time Frequency Rate (LTFR) and Accident Severity Rate (ASR) by 37.73% and 64.33% respectively, thanks to the sustainable safety approach. The risk score was also reduced by 83.42% through the improvements made as a result of line-based risk analyses. Kerevitaş’s sustainable occupational safety culture is based on the following core concepts: • Leadership and Engagement:

Actively supporting employee trainings to achieve common occupational safety goals at executive levels.

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

• Internal Communication: Establishing internal communication channels to enhance occupational health and safety.

• Safe Workplace: Providing the

technical infrastructure at international standards to ensure a sustainable occupational safety culture.

• Risk Management and Process Design:

Outlining the Risk Management Overview through the Occupational Safety Committee established with the involvement of the Leadership Team.

Further efforts are underway to ensure that the corporate health and safety culture is embraced by all employees. OHS field tours, virtual reality trainings, visual trainings to highlight erroneous behavior and job-specific trainings are organized with the active involvement of senior managers.

In 2019, a total of 10,348 hours per person were delivered in OHS training.

Kerevitaş embraces a sustainable occupational health and safety culture across the organization thanks to its conscious employees.


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

Kerevitaş released its 2018 Sustainability Report this year. In an attempt to preserve biodiversity, the Company partnered with the Hatay Environmental Protection Foundation and commenced the “Ecological Research Project on the Eurasian Otter (Lutra Lutra) Population in the Uluabat and İznik Lakes.” This pilot project is aimed at determining the streams, lakes and ponds that are vital for the survival and conservation of Eurasian Otters, classified as “near threatened” by the International Union for Conservation of Nature (IUCN). The species’ population, distribution and habitat, their food sources, social behavior and interaction with humans, and the threats facing them, as well as the necessary measures for conservation of the species, will be identified as part of the project. Kerevitaş also pays utmost attention to protecting the ecological balance of soil in all its production activities. The Company preserves water sources through drip irrigation, while contributing to the ecological balance of agricultural lands through practices that reduce the use of pesticides.

Kerevitaş encourages drip irrigation for agricultural land. In 2019, drip irrigation was used on 15,705 hectares, and sprinkling irrigation applied on 5,089 hectares, on a total of 2,080 hectares of agricultural land for sweet corn.

Farmers employing the drip irrigation method were supported with subsidies. The average yield in drip irrigation fields corresponded to 1,553 kg/decares (24,405 tons of crops), while the average yield for sprinkling irrigation stood at 1,245 kg/decares (6,343 tons of crops). Drip irrigation helped farmers save some 4,648 tons in water and TL 706,725 in energy. Reaching 308 kg crops per decare with drip irrigation, farmers gained 4,837,140 kg more in yield compared to sprinkling irrigation.

As an enterprise operating in the food industry, Kerevitaş is focused on mitigating the environmental impact of its operations. Operating in line with the HACCP Quality Management System, the Company observes international environmental standards in all its business processes – from raw material supply to waste management.

Conducting its business activities in full compliance with applicable environmental legal and regulatory requirements, Kerevitaş takes all necessary measures to avoid environmental pollution at its production facilities. As a result, the Company faced no complaints or grievances in this area in 2019.

While providing its employees customized training in environmental sustainability, the Company focuses particularly on mitigating the environmental impact of its production factories.

Combating Climate Change Kerevitaş conducted all its production processes during the fiscal year 2019 in line with its goal of combating climate change. The Company implements numerous projects related to the efficient use of resources, particularly agricultural resources; effective water and waste management; and conservation of energy. With these efforts, the Company is steadily reducing its energy consumption per unit ton produced at its Bursa Factory, which manufactures frozen and canned food. Kerevitaş aims to expand these energy conservation efforts at the Bursa Factory, which minimize carbon emissions from its operations, to its other production facilities in the coming period.

Drip Irrigation in Contracted Agricultural LandKerevitaş encourages drip irrigation on agricultural land that supplies the Company with raw materials on a contract basis. This practice significantly reduces the use of natural resources, while also boosting production efficiency.

54 Sustainability

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

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

Viewing its support of agricultural production and farmers among its core strategic priorities, the Company produced potatoes, sweet corn, peas, green beans, spinach, broccoli and cauliflower across 5,3174 hectares of contracted farmland in 2019. Supplying certified seeds, fertilizers and agrochemicals to contracted farmers, Kerevitaş also produced 5,136 tons of certified potato seeds during the year. Committed to conscious production, Kerevitaş supports sustainable farming practices by providing fertilization, pesticide and spraying training to farmers.

While contracted farmers received training support in these key areas, the raw materials obtained were dispatched for testing by the Quality Department for pesticide residue, GMO and heavy metal analysis. Test results validated the absence of pesticide residues, heavy metals and GMOs in the raw materials.

Farmers cultivating a total of 2,081 hectares of farmland for sweet corn production were informed of benefits and encouraged to adopt drip irrigation. Sweet corn was also introduced as a second crop after the pea harvest across 189,7 hectares.

RATIO OF CONTRACTED FARMERS

2017 2018 2019

82% 85.5%86%

RATIO OF CONTRACTED RAW MATERIAL SUPPLY

2017 2018 2019

83% 85%89%


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

Kerevitaş conducts its corporate social responsibility activities under the umbrella of its parent company, Yıldız Holding. The Company considers corporate social responsibility activities as an obligation arising from its role as a producer. By creating a wide range of choices for the individual food needs of the community, making the food offerings accessible and affordable, and executing an open and responsible communications strategy, the Company encourages healthy nutrition and physical activity.

Kerevitaş conducts all its business operations by considering the community’s health as its top priority. Seeing the Company’s social investments as critically important as its industrial investments, Kerevitaş supports cultural, artistic, sports and educational projects that promote social development.

In addition to leading the way for the development of the food sector, Kerevitaş also places emphasis on projects that will create social benefit. Working tirelessly to fulfill its duty to build a happier society, Kerevitaş delivers projects and undertakes various sponsorships in sports, arts and education through its parent company, Yıldız Holding.

In addition to leading the way for the development of the food sector, Kerevitaş also places emphasis on projects that will create social benefit.

56 Corporate Governance

Corporate Governance Principles Compliance Report for 2019

PART I – STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLESPursuant to the Capital Markets Board (CMB) Communiqué and Article 6362 of Capital Markets Law No: 6362, dated 06.12.2012, and II-17.1 “Corporate Governance Communiqué” announced on January 3, 2014, issuance of a Corporate Governance Compliance Report and compliance with specified Corporate Governance Principles became mandatory for companies trading on Borsa Istanbul (BIST). Accordingly, Kerevitaş resolved to closely adhere to the mandatory requirements imposed by the CMB. Further efforts to ensure compliance with the non-mandatory principles in the Communiqué are currently underway.

The reasons relating to the non-compliant sections of the Corporate Governance Principles are as follows:

No model or mechanism was created for stakeholders to participate in the Company’s management. However, the Independent Members of the Board of Directors ensure that all stakeholders as well as the Company and shareholders are duly represented in the management. Kerevitaş takes into consideration the advice, suggestions and opinions of employees, suppliers, various non-governmental organizations and all other stakeholders.

Some members of the Board of Directors assume duties on multiple committees.

Pursuant to Article 4.6.5 of the “Corporate Governance Principles,” the remuneration of members of the Board of Directors and senior managers, as well as all other benefits granted to these parties, are publicly disclosed in the Annual Report. However, the disclosures

are not made individually but collectively as benefits extended to the Board of Directors and senior management.

There is no explicit provision in the Articles of Association granting shareholders the right to call for a “private audit” at the General Assembly. Regarding the assignment of a special auditor, our opinion is that the related regulations of the TCC and CMB are sufficient. Pursuant to the provisions of the Turkish Code of Commerce No. 6102, which came into force on 01.07.2012, the Company is aware of the right of every shareholder to request a private audit.

Although the non-mandatory principles yet to be implemented have caused no conflicts of interest among stakeholders to date, the Company nevertheless aims to implement the rest of the Corporate Governance Principles in due time.

Even though the ultimate aim is to fully comply with the non-mandatory Corporate Governance Principles, full compliance has not been achieved as of yet due to the difficulties faced in implementation of certain principles. In addition, some of the principles do not correspond to the current structure of the market and the Company. Work is underway regarding adoption of the principles that have not yet been implemented. These principles will be adopted following completion of the relevant administrative, legal, and technical infrastructure procedures that will contribute to the effective management of the Company.

Pursuant to the Resolution of the Capital Markets Board dated 10.01.2019 and numbered 2/49, Corporate Governance Compliance Reporting as per the Communiqué No. II-17.1 shall be uploaded to the Public Disclosure Platform (KAP),

using the templates called Corporate Governance Compliance Report (URF) and Corporate Governance Information Form (KYBF). The related reporting can be seen at: https://www.kap.org.tr/tr/sirket-bilgileri/ozet/1002-kerevitas-gida-sanayi-ve-ticaret-a-s. The below mentioned Corporate Governance Principles Compliance Report is in the public domain, at the addresses https://www.kerevitas.com.tr/en and http://www.kerevitas.com.tr/tr/yatirimci-iliskileri/kurumsal/kurumsal-yonetim-ilkeleri-uyum-raporu

PART II – SHAREHOLDERS

2.1 Investor Relations DepartmentKerevitaş’s investor relations activities are conducted by the Investor Relations Department based at the Company headquarters. The Department is managed by Serkan Yandı, who holds a Capital Markets Activities Level 3 License, as well as a Corporate Governance Rating License.

The Investor Relations Department’s primary activities include the following:

• Informing shareholders about the Company’s operations and activities,

• Responding to the questions of shareholders about the Company and exercising of partnership rights,

• Communicating all material disclosures to investors via Borsa Istanbul, Capital Markets Board and Public Disclosure Platform (KAP), pursuant to the CMB’s Communiqué on material events.

• Conducting the preparations of the General Assembly, including delivery of the required documents to shareholders and organization of the General Assembly meeting,

• Monitoring and communicating to the relevant departments any amendments in the legislation,


• Performing the activities related to the Public Disclosure Platform and Central Registry Agency procedures, as well as the Corporate Governance Principles as stipulated by the Capital Markets Board.

The Shareholder Relations Unit conducts communications to promote the Company to individual and institutional investors in Turkey and abroad, as well as sends notifications to shareholders and prospective investors via telephone, fax and e-mail ([email protected]).

Shareholder Relations Unit Serkan YANDI – Investor Relations Manager Ufuk KASAR – Financial Affairs Director

Contact Details for the Shareholder Relations UnitPhone: 0216 524 23 92 / 0850 209 18 31 E-mail: [email protected]

2.2 Shareholders’ Right to Information Except for information that is considered to be either trade secret or insider information, all written or verbal requests received from shareholders for information during the reporting period are met. We provided shareholders with all the information required to exercise their shareholder rights robustly via the annual report, material disclosures, and replies to individual inquiries. Auditing principles and procedures are outlined in Article 16 of the Company’s Articles of Association. No requests for private auditor were raised by the shareholders during the fiscal year 2019.

2.3 General Assembly MeetingsPursuant to Article 1527 of Turkish Commercial Code (TCC) No. 6102, dated January 13, 2011 stipulating that online participation in general assembly meetings, making proposals and statements online, and online voting shall have the same legal force in all aspects as participating and voting in any general assembly meeting in person; and that all companies trading on the Stock Exchange are obliged to set up and maintain a system allowing online participation in general assembly meetings and voting; the electronic general assembly convenes on the same date running in parallel with the physical general assembly.

One General Assembly meeting was organized in 2019, being the Ordinary General Assembly meeting for the year 2018, which was held on March 27, 2019.

2.4 Voting and Minority RightsAccording to the Articles of Association, each share of the Company has one vote.

Any shareholder who is entitled to attend General Assembly meetings may attend the meetings online in accordance with Article 1527 of the Turkish Commercial Code. Pursuant to the Regulation on the General Assemblies of Joint Stock Companies to Be Held via Electronic Means, the Company may set up an electronic General Assembly system or procure any system developed for this purpose to ensure that shareholders are able to attend, express their views, make suggestions, and cast their votes via electronic communication means. Pursuant to the relevant provision in the Articles of Association, shareholders and their proxies are allowed to exercise their respective rights at any General Assembly meeting, under aforementioned regulations via the electronic system set up for this purpose.

The Company does not grant any privileges to share groups or shares. There is no cross-shareholding between the Company and any of its shareholders. The Company does not practice cumulative voting.

The Articles of Association does not contain any provision prohibiting proxy voting by persons who are not themselves shareholders of the Company.

2.5 Dividend RightsThe Company has a clear and consistent Profit Distribution Policy determined in accordance with the Turkish Commercial Code, Capital Markets Law, tax laws, other relevant laws, rules and regulations, and the Company’s Articles of Association. This Policy was submitted for the approval of shareholders at the General Assembly, detailed in the annual report and disclosed to the general public via the corporate website.

The Company’s Profit Distribution Policy is determined in accordance with the provisions of the Turkish Commercial Code, Capital Markets Law, Tax Law, other relevant laws, rules and regulations and the article related to profit distribution in the Company’s Articles of Association, while taking into due consideration the Company’s strategies, operational performance, financial situation and market developments.

Subject to approval of the General Assembly upon the proposal of the Board of Directors, and any amendments thereof, and also subject to the legislation in force in Turkey, Kerevitaş resolves to distribute dividends corresponding to at least 10% of the net distributable period profit as cash dividends and/or as bonus shares, on condition that the cash flow requirements the Company are taken into consideration.



The profit distribution proposal of the Board of Directors, consisting of the Company’s Profit Distribution Policy, Capital Markets Board regulations and the details set forth in the Corporate Governance Principles, is included in the annual report and communicated to the public via the Public Disclosure Platform and the website of the Company.

The Policy is reviewed annually by the Board of Directors in view of domestic and global economic conditions and any possible setbacks, the circumstances of ongoing projects, and the financial resources of the Company.

The Profit Distribution Policy adopts a balanced approach between the interests of shareholders and the interests of the Company. Under the Company’s Profit Distribution Policy, dividends are distributed equally to all existing shares as of the date of distribution, with no privileges. The Company does not issue advance dividends.

2.6 Share TransfersThere are no provisions in the Company’s Articles of Association that bar or restrict the shareholders from freely transferring their shares.

PART III – PUBLIC DISCLOSURE AND TRANSPARENCY

3.1 Information PolicyKerevitaş outlined an Information Policy based on transparency and accuracy to ensure that each shareholder and stakeholder has equal and impartial access to follow company developments and public disclosures. The Information Policy is disclosed to the public at www.kerevitas.com.tr/en

3.2 Company Website and Its ContentsThe Company website can be accessed at www.kerevitas.com.tr and the Company’s investor relations website is located at http://www.kerevitas.com.tr/tr/yatirimci-iliskileri The following information is available on the website for the purposes of informing the shareholders:

• About the Company• Ethical Principles• Information about the Board of

Directors and Senior Management• Committees• Company’s Shareholding Structure• Organizational Chart• Trade Registry Information and

Company Profile• Articles of Association• Financial Statements and Footnotes• Annual Reports• Material Disclosures• Corporate Governance Principles

Compliance Report • Information on the General Assembly

(Notice, Agenda, Minutes, List of Attendance, Proxy Voting Form Template, and General Assembly Information Document)

• Corporate Information Policy• Policies• Investor Presentations• Frequently Asked Questions

3.3 Annual ReportThe Company’s Annual Report is compiled in compliance with CMB’s II-17.1 “Corporate Governance Communiqué,” Corporate Governance Principles, and other clauses specified in the relevant legislation to ensure full and accurate access of shareholders and the public to information related to the Company’s business activities.

PART IV – STAKEHOLDERS

4.1 Information of StakeholdersIn cases where there is no regulatory or contractual framework governing the rights of stakeholders, Kerevitaş endeavors to protect stakeholder rights in good faith and within means available to the Company with due consideration to the reputation of the Company.

Furthermore, Kerevitaş employees have access to the circulars and announcements through the Company’s internal portal, and important announcements are conveyed promptly to all employees via e-mail.

There are no restrictions that obstruct or inhibit stakeholders from contacting the Corporate Governance Committee or the Audit Committee about any Company transactions they deem either unethical or in breach of applicable regulations. All stakeholders may contact these committees via any means of communication they prefer.

4.2 Stakeholder Participation in ManagementAccording to the Articles of Association, the Board of Directors has a minimum of five and maximum of seven members who are elected by the General Assembly upon nomination by various shareholders as prescribed by the Articles of Association. The current Board of Directors is comprised of seven members, two of whom are independent members. The Company does not have any practices related to stakeholder participation in management.


4.3 Human Resources PolicyKerevitaş has established and effectively implemented a Human Resources Policy. Issues within this framework such as recruitment policies, career planning, employee development and training policies are outlined within the Staff Directive. The rights of all Company employees are secured in a way that they are free from any discrimination or mistreatment. The Company did not face any complaints or grievances of discrimination.

The Company’s Human Resources policy encompasses the following:• Measuring the performance of all

employees and ensuring that success criteria are managed in accordance with these measurements,

• Implementing transparent management,

• Providing easy access to Company executives,

• Ensuring the staff are comfortable with expressing their thoughts,

• Emphasizing business discipline,• Encouraging employees to work

together with a team spirit,• Delivering equal opportunities to

successful staff in terms of training, remuneration and career development,

• Promoting social activities.

4.4 Code of Conduct and Social ResponsibilityGuided by its sense of responsibility, recognition of duty and depth of expertise arising from operating in the food industry, Kerevitaş aims to generate added value that meets society’s needs in the most efficient manner and at the highest quality level. Therefore, the

Company takes all necessary measures to mitigate environmental pollution that may arise from its production activities. The Company also established treatment facilities as stipulated by law. No complaints in this area were received by the Company during the reporting period. Prompted by a keen awareness that the industry it operates in requires well-qualified, highly skilled human resources in the face of supply challenges due to the nature of the national education system, the Company aims to cater to requests for internship placements from secondary and higher education institutions to the maximum extent possible. While the Code of Conduct adopted by Yıldız Holding is generally applied across all its subsidiaries including Kerevitaş, the details of the Code of Conduct are disclosed to the shareholders on the Company’s website as part of the Information Policy.

PART V – BOARD OF DIRECTORS

5.1 Structure and Organization of the Board of DirectorsThe Company’s Board of Directors consists of seven members. Subsequent to the General Assembly meetings where the Members of the Board of Directors are elected, a Chairman and Deputy are appointed with a resolution on the division of duties and responsibilities.

Both executive and non-executive members are present at the Board of Directors. The majority of the Board Members are non-executive members. Non-executive Members also include Independent Members, satisfying all of the criteria set out in the Capital Markets Law, who have the capabilities to perform their duties with impartiality, and who can dedicate sufficient time and effort to monitor the functions of the Company and fulfill all the responsibilities vested to them as independent members.

Approval is sought from the General Assembly for the Chairman and Members of the Board of Directors regarding their involvement in or association with companies operating in the same business area of the Company, in person or on behalf of others in line with the relevant articles of the Turkish Commercial Code (TCC).

Details of the Company’s Board of Directors are as follows.

Name Surname DutyMehmet Tütüncü ChairmanAli Ülker MemberOğuz Aldemir MemberVehbi Merzeci MemberHüseyin Avni Metinkale MemberAhmet Murat Yalnızoğlu Independent

MemberCeyda Aydede Independent

Member



STATEMENT OF INDEPENDENCE

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


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

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

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

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

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

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

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

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

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

Yours sincerely,

Ahmet Murat Yalnızoğlu



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

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

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

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

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

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

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

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

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

Yours sincerely,

Ceyda Aydede



5.2 Code of Conduct of the Board of Directors The Board of Directors shall perform and execute the duties assigned to it by the provisions of the Turkish Commercial Code, Capital Markets Board, other relevant laws, rules and regulations, as well as the Articles of Association and resolutions adopted by the General Assembly in this regard. All businesses and transactions not stipulating a General Assembly resolution according to laws and the Articles of Association are conducted by the Board of Directors. As it performs the duties and responsibilities assigned to it, the Board of Directors may delegate these in part to the committees established within the Company and/or to Company executives, provided that this delegation does not absolve the Board of its responsibilities.

The Board of Directors made 48 (forty eight) resolutions during the meetings it held between January 1 and December 31, 2019. The Board of Directors meets as regularly and as often as necessary to effectively conduct its business and affairs. The Chairman of the Board of Directors sets the agenda of the board meetings in consultation with the other members of the Board and the Company’s Chief Executive Officer/General Manager.

The Board of Directors shall meet with a quorum of at least more than one-half of the number of members and resolve by a majority of members present at the meeting. In the event of a tie, the

issue shall be discussed again at the next meeting. If there is a tie again at the second meeting, the proposal is deemed to have been rejected. During the meetings held in the 2019 accounting period, Board Members have not expressed any opposing opinion to the Board Resolutions.

5.3 Number, Structure, and Independence of Committees under the Board of Directors

5.3.1 Audit CommitteeThe Audit Committee is responsible for ensuring that the Company’s financial and operational activities are performed in a robust manner. Operating under the Board of Directors, the Committee is charged with overseeing the Company’s accounting system, audit and disclosure of financial information, and the functioning and effectiveness of the internal audit system. The Audit Committee is comprised of two Independent Board Members. The Committee convenes at least four times a year, and in 2019 it convened 4 (four) times. Chairman of the Audit Committee is Ahmet Murat YALNIZOĞLU, and Member of the Audit Committee is Ceyda AYDEDE.

5.3.2 Corporate Governance CommitteeThe Corporate Governance Committee was established in line with the Capital Markets Board’s Corporate Governance Principles Communiqué. The Committee monitors the Company’s business and governance processes in accordance with the Corporate Governance Principles of the CMB. Due to its organizational structure, the Board of Directors did not institute a separate Nomination Committee and Remuneration

Committee; instead, the Board charged the Corporate Governance Committee with fulfilling the duties of these committees. The Corporate Governance Committee convenes at least four times a year, and in 2019 it convened 4 (four) times. Chairperson of the Corporate Governance Committee is Ceyda AYDEDE, and Members of the Committee are Ahmet Murat YALNIZOĞLU and Serkan YANDI.

5.3.3 Early Detection of Risk CommitteePursuant to the relevant clause of the Capital Markets Board’s Corporate Governance Principles Communiqué, the Company established an Early Detection of Risk Committee to operate under the Board of Directors. The Committee is charged with the early detection of risks that may jeopardize the existence, development and continuity of the Company; adoption and implementation of necessary measures to mitigate these risks; and the execution of other risk management efforts. The Committee meets at least once every three months and presents the results of its meeting to the Board of Directors. In 2019, the Early Detection of Risk Committee met 6 (six) times.

Chairman of the Early Detection of Risk Committee is Ahmet Murat YALNIZOĞLU, and Member of the Committee is Hüseyin Avni METINKALE.

The members of the Committee are elected from among the members of the Board of Directors within the current structure of the Board.


5.4 Risk Management and Internal Audit CommitteeThe Company’s risk management related activities are carried out by the Early Detection of Risk Committee. The Company is also audited regularly by the audit departments of its parent company (Yıldız Holding A.Ş.) and an independent audit firm. The findings of these audits are communicated to the members of the Audit Committee and the Board of Directors. The work flows and procedures of the Company, in addition to the duties and responsibilities of employees are monitored within the framework of risk management and are subject to ongoing audits and inspections.

5.5 Strategic Objectives of the Company Kerevitaş’s first and foremost strategic objective is to stand out as a company that respects its customers; engages employees at every level of the organization to participate in the management of the Company; embraces continuous and non-formal learning; strives to continuously enhance the quality/HACCP Management System without compromising on the quality and safety of food under any circumstances; closely follows the technological advancements in the industry; remains innovative and entrepreneurial; respects the environment and the laws; and above all, values people. The Company aims to effectively identify customers’ needs and expectations and to respond to them in full, in order to maintain its pioneering position in the industry. The policies and targets set for this purpose

are mandatory. Employees in all units and levels across the organization must work in accordance with the Quality/HACCP Management System. The Company’s objective is to work diligently at every stage of its operations – from sourcing the raw materials to delivering the products to their final destination. The top priority for the Company is to strive to generate added value for the stakeholders across the entire production process, which extends from the seed to the table.

The Company aims to implement digital transformation projects in order to be a trailblazer in terms of digitalization and business methods in the industry; achieve sustainable growth and success; develop consistently; implement fresh business strategies in the most efficient and agile way; conduct business operations at lower costs but with higher productivity; and improve the lives of, add value to and, hence, win the hearts of its stakeholders, customers, consumers and employees.

Kerevitaş sets long-term goals, develops three-year strategic plans and prepares annual budgets in line with these goals. At the end of each operating period, the Company’s performance is evaluated against the specified targets.

5.6 Remuneration of the Board of DirectorsThe guidelines for remuneration of senior executives of the Company were laid out in writing. These guidelines were presented to the shareholders under a separate agenda item at the Ordinary General Assembly Meeting held on April 11, 2018 and published in the Company’s annual report and on the corporate website. No other benefits are provided to the Chairman and Members of the Board of Directors except for the remuneration and attendance fee determined by the General Assembly. Wages of the Board Members are determined by the General Assembly considering the financial situation of the Company, separately for each member. At the Ordinary General Assembly Meeting held on April 11, 2018, it was decided that only independent members are paid wages, and the amount to be monthly net TL 5,000. During the reporting period, no loans were extended to Board Members or senior managers; in addition, no guarantees such as sureties were granted and no credit facilities were provided as a personal loan through a third party to the Board members or senior managers.


Risk Management Policies

Corporate risk management efforts at Kerevitaş consist of a systematic process implemented across the entire organizational structure of the Company. The entire risk management process is influenced by the Company’s Board of Directors, senior management as well as the entire workforce. The aim is to determine strategies for identifying potential incidents that may affect Kerevitaş, manage risks and provide an acceptable level of assurance for the Company to achieve its goals.

The Company’s risk management activities are overseen by the Risk Committee. The Company is also audited regularly by the audit departments of its parent company (Yıldız Holding A.Ş.) and an independent audit firm. The findings of these audits are communicated to the members of the Audit Committee and the Board of Directors. The work flows and procedures of the Company, and duties and responsibilities of employees, are monitored within the framework of corporate risk management and are subject to ongoing audits and inspections.


Profit Distribution Proposal

The Company’s Profit Distribution Policy is determined in accordance with the provisions of the Turkish Commercial Code, Capital Markets Law, Tax Law, other relevant laws, rules and regulations and the article related to profit distribution in the Company’s Articles of Association, while taking into due consideration the Company’s strategies, operational performance, financial situation and market developments.

Subject to approval of the General Assembly upon the proposal of the Board of Directors, and any amendments thereof, and also subject to the legislation in force in Turkey, Kerevitaş resolves to distribute dividends corresponding to at least 10% of the net distributable period profit as cash dividends and/or as bonus shares, on condition that the cash flow requirements the Company are taken into consideration.

The profit distribution proposal of the Board of Directors, consisting of the Company’s Profit Distribution Policy, Capital Markets Board regulations and the details set forth in the Corporate Governance Principles is included in the annual report and communicated to the public on the website of the Company and on the Public Disclosure Platform within the statutory periods.

The Policy is reviewed annually by the Board of Directors in view of domestic and global economic conditions and any possible setbacks, the circumstances of ongoing projects, and the financial resources of the Company. The Profit Distribution Policy adopts a balanced approach between the interests of shareholders and the interests of the Company. Under the Company’s Profit Distribution Policy, dividends are distributed equally to all existing shares as of the date of distribution, with no privileges. The Company does not issue advance dividends.


Other Issues

Number, Structure and Independence of Committees Established under the Board of Directors

Audit CommitteeThe Audit Committee is responsible for ensuring that the Company’s financial and operational activities are performed in a robust manner. The Audit Committee is comprised of two Independent Board Members. The Committee convenes at least four times a year, and in 2019 it convened 4 (four) times.

Corporate Governance Committee The Corporate Governance Committee was established in line with the Capital Markets Board’s Corporate Governance Principles Communiqué. The Committee monitors the Company’s business and governance processes in accordance with the Corporate Governance Principles of the CMB. The Corporate Governance Committee convenes at least four times a year, and in 2019 it convened 4 (four) times.

Early Detection of Risk CommitteeThe Early Detection of Risk Committee was established to operate under the Board of Directors. The Committee is charged with the early detection of risks that may jeopardize the existence, development and continuity of the Company; adoption and implementation of necessary measures to mitigate these risks; and the execution of other risk management efforts in line with the provisions of the Capital Markets Board’s Corporate Governance Principles Communiqué. The Committee meets at least once every three months and presents the results of its meeting to the Board of Directors. In 2019, the Early Detection of Risk Committee met 6 (six) times.

Rights Provided to Board Members and Senior ManagersThe guidelines for remuneration of senior executives of the Company were laid out in writing. These guidelines were presented to the shareholders under a separate agenda item at the Ordinary General Assembly Meeting held on April 11, 2018 and published in the Company’s annual report and on the corporate website.

No other benefits are provided to the Chairman and Members of the Board of Directors except for the remuneration and attendance fee determined by the General Assembly. Wages of the Board Members are determined by the General Assembly considering the financial situation of the Company, separately for each member. At the Ordinary General Assembly Meeting held on April 11, 2018, it was decided that only Independent Members are paid wages, and the amount to be monthly net TL 5,000. During the reporting period, no loans were extended to Board Members or senior managers; in addition, no guarantees such as sureties were granted and no credit facilities were provided as a personal loan through a third party to the Board members or senior managers.

Material Events after the Reporting PeriodOn February 5, 2020, Kerpe Gıda San. ve Tic. A.Ş. was registered and establishment procedures completed as a fully-owned company of Kerevitaş Gıda Sanayi ve Ticaret A.Ş. with a capital of TL 50,000 to be engaged in the production, trade, marketing and export of any kind of agricultural and animal products.

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

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

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


70 Financial Statements and Footnotes




CONTENTS PAGE

CONSOLIDATED STATEMENT OF FINANCIAL POSITION........................................... 1-2

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHERCOMPREHENSIVE INCOME ................................................................................................ 3

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

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ..................................... 6-73

NOTE 1 GROUP’S ORGANIZATION AND NATURE OF OPERATIONS .......................................... 6-7NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS ............... 8-34NOTE 3 SEGMENT REPORTING........................................................................................................ 35-36NOTE 4 RELATED PARTY DISCLOSURES ....................................................................................... 37-39NOTE 5 TRADE RECEIVABLES AND PAYABLES ........................................................................... 40NOTE 6 OTHER RECEIVABLES AND PAYABLES ........................................................................... 41NOTE 7 INVENTORIES ....................................................................................................................... 41NOTE 8 PREPAID EXPENSES AND DEFERRED REVENUE ............................................................ 42NOTE 9 INVESTMENT PROPERTIES ................................................................................................ 42-43NOTE 10 PROPERTY, PLANT AND EQUIPMENT .............................................................................. 44-46NOTE 11 RIGHT OF USE ASSETS........................................................................................................ 47NOTE 12 INTANGIBLE ASSETS .......................................................................................................... 47-48NOTE 13 GOVERMENT GRANTS AND INCENTIVES ....................................................................... 48NOTE 14 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES ................................................. 49NOTE 15 COMMITMENTS AND CONTINGENCIES ........................................................................... 50NOTE 16 PAYABLES RELATED TO EMPLOYEE BENEFITS ............................................................ 51-52NOTE 17 OTHER ASSETS AND LIABILITIES ..................................................................................... 53NOTE 18 CAPITAL, RESERVES AND OTHER EQUITY ITEMS ......................................................... 54NOTE 19 REVENUE AND COST OF SALES ........................................................................................ 55NOTE 20 GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH ANDDEVELOPMENT EXPENSES ................................................................................................................ 55-56NOTE 21 OTHER INCOME AND EXPENSES FROM OPERATING ACTIVITIES .............................. 56-57NOTE 22 INCOME AND EXPENSES FROM INVESTMENT ACTIVITIES ......................................... 57NOTE 23 FINANCIAL INCOME AND EXPENSES............................................................................... 57NOTE 24 INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) ............... 58-60NOTE 25 EARNING PER SHARE / (LOSS) ........................................................................................... 61NOTE 26 FINANCIAL INSTRUMENTS ................................................................................................ 61NOTE 27 BORROWINGS ...................................................................................................................... 61-62NOTE 28 NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS ........... 63-72NOTE 29 CASH AND CASH EQUIVALENTS ...................................................................................... 72NOTE 30 DISCLOSURE OF INTEREST IN OTHER ENTITIES ............................................................ 73NOTE 31 SUBSEQUENT EVENTS........................................................................................................ 73

74-75

76

77

78

79-146

79-8081-107108-109110-112

113114114115

115-116117-119

120120-121

121122123

124-125126127128

128-129129-130

130130

131-133134134

134-135136-145

145146146


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


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

1

AuditedCurrent Year

AuditedPrior Year

Notes31 December

201931 December

2018ASSETSCurrent Assets 1.533.120.810 1.795.523.526Cash and cash equivalents 29 13.208.215 19.448.273Trade receivables 5 447.038.978 509.398.900 - Trade receivables from related parties 4 269.099.666 337.686.279 - Trade receivables from third parties 5 177.939.312 171.712.621Other receivables 6 638.071.763 858.314.676 - Other receivables from related parties 4 632.699.658 853.122.409 - Other receivables from third parties 6 5.372.105 5.192.267Inventories 7 417.527.030 363.038.616Prepaid expenses 8 10.733.554 20.397.419Current income tax assets 24 15.473 4.867.349Other current assets 17 6.525.797 20.058.293Non-Current Assets 1.190.054.386 1.181.848.860Other receivables 6 1.466.589 5.487.505 - Other receivables from third parties 6 1.466.589 5.487.505Financial investments 26 1.394.933 1.420.594Investment properties 9 219.842.001 212.107.001Property, plant and equipment 10 865.150.925 874.144.623Right of use assets 11 4.245.452 -Intangible assets 12 15.045.787 11.167.324Prepaid expenses 8 8.069.552 4.177.578Deferred tax assets 24 74.839.147 59.951.124Other non-current assets 17 - 13.393.111TOTAL ASSETS 2.723.175.196 2.977.372.386

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




1

AuditedCurrent Year

AuditedPrior Year

Notes31 December

201931 December







2

AuditedCurrent Year

AuditedPrior Year

Notes31 December

201931 December

2018LIABILITIESCurrent Liabilities 620.562.397 735.713.313Short-term borrowings 27 71.353.171 317.984.874 - Bank loans 27 70.057.502 317.984.874 - Lease liabilities 27 1.295.669 -Trade payables 5 385.132.347 367.605.640 - Trade payables to related parties 4 50.952.499 46.417.101 - Trade payables to third parties 5 334.179.848 321.188.539Other payables 6 111.081.307 2.699.321 - Other payables to related parties 4 111.081.307 2.351.507 - Other payables to third parties 6 - 347.814Payables related to employee benefits 16 12.020.130 11.559.769Deferred income 8 4.492.874 2.928.650Current income tax liabilities 24 16.460.798 14.384.165Short-term provisions 15.027.956 11.355.282 - Short-term provisions for employee benefits 16 11.458.762 10.111.477 - Other short-term provisions 14 3.569.194 1.243.805Other current liabilities 17 4.993.814 7.195.612Non-Current Liabilities 1.136.232.930 1.459.677.628Long-term borrowings 27 2.878.423 -Lease liabilities 27 2.878.423 -Other payables 6 1.031.988.897 1.364.244.005 - Other payables to related parties 4 1.031.988.897 1.364.244.005Long-term provisions 33.225.074 30.305.487 - Long-term provisions for employee benefits 16 33.225.074 30.305.487Deferred tax liabilities 24 68.140.536 65.128.136Total Liabilities 1.756.795.327 2.195.390.941

EQUITYPaid in capital 18 662.000.000 662.000.000Other comprehensive income or expenses not bereclassified to profit or loss 313.272.561 313.720.126 - Gains on revaluation of plant, property and equipment 314.411.591 314.411.591 - Losses on remeasurement of defined benefit plans (10.340.254) (9.892.689) - Gains on revaluation of investment properties 9.201.224 9.201.224Other comprehensive income or expenses to bereclassified to profit or loss 102.626.699 84.400.388- Currency translation differences 102.626.699 84.400.388Share premium 702.050 702.050Restricted reserves 18 36.192.002 36.192.002Effect of business combinations under common control (895.717.515) (895.717.515)Retained earnings 399.294.136 433.864.245Net profit/loss for the year 137.831.653 (34.570.109)Equity holders of the parent 756.201.586 600.591.187Non-controlling interests 210.178.283 181.390.258Total Equity 966.379.869 781.981.445TOTAL LIABILITIES AND EQUITY 2.723.175.196 2.977.372.386





1

AuditedCurrent Year

AuditedPrior Year

Notes31 December

201931 December






CONSOLIDATED STATEMENT OF PROFIT OR LOSSAS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

3

AuditedCurrent Year

AuditedPrior Year

1 January - 1 January -

Notes31 December

201931 December

2018Revenue 19 2.492.865.759 2.422.035.082Cost of sales (-) 19 (1.879.435.873) (1.859.089.302)Gross profit 613.429.886 562.945.780General administrative expenses (-) 20 (59.295.803) (52.804.351)Marketing expenses (-) 20 (220.546.434) (208.124.491)Research and development expenses (-) 20 (3.930.240) (3.137.542)Other income from operating activities 21 46.714.455 66.165.579Other expenses from operating activities (-) 21 (63.926.322) (114.442.085)OPERATING PROFIT 312.445.542 250.602.890

Income from investment activities 22 130.825.599 97.364.001Expenses from investment activities (-) 22 (13.499.824) (25.063.173)OPERATING PROFIT/LOSS BEFORE FINANCIAL INCOME / (EXPENSE) 429.771.317 322.903.718

Financial expenses (-) 23 (224.254.342) (364.915.670)PROFIT/LOSS BEFORE TAX FROM CONTINUING OPERATIONS 205.516.975 (42.011.952)Tax expense/income from continuing operations (46.593.957) 8.520.795- Current tax expense 24 (57.388.020) (14.384.165)- Deferred tax income/expense 24 10.794.063 22.904.960

PROFIT/(LOSS) FOR THE YEAR 158.923.018 (33.491.157)Profit/loss for the year attributable to:Non-controlling interests 21.091.365 1.078.952Equity holders of the parent 137.831.653 (34.570.109)

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

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

Other Comprehensive Income 25.475.406 58.022.158

TOTAL COMPREHENSIVE INCOME 184.398.424 24.531.001

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





1

AuditedCurrent Year

AuditedPrior Year

Notes31 December

201931 December



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CONSOLIDATED STATEMENT OF CASH FLOWSAS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018 (Amounts expressed in Turkish Lira (“TL” unless otherwise stated.)

5

AuditedCurrent Year

AuditedPrior Year

1 January- 1 January-Notes 31 December 2019 31 December 2018

CASH FLOWS FROM OPERATING ACTIVITIES 372.120.032 319.367.934

Net profit/loss for the year 158.923.018 (33.491.157)Adjustments to reconcile net profit/loss for the year 225.010.998 353.942.713Adjustments related to depreciation and amortization expenses 10, 11, 12 49.689.074 44.703.930Adjustments related to provision for/reversal of impairment loss 2.569.547 7.404.311

- Adjustments related to impairment loss on receivables 5 2.581.000 4.446.232- Adjustments related to impairment on inventories, net 7 (37.114) (81.921)- Adjustments related to impairment of financial investments 26 25.661 3.040.000

Adjustments related to provisions 26.090.281 17.501.050- Adjustments related to provisions for employee benefits 16 23.719.629 17.448.314- Adjustments related to lawsuit provisions 14 2.370.652 52.736

Adjustments related to interest income and expenses 94.898.650 118.670.385- Adjustments related to interest and commission expenses 23 205.003.483 198.203.467- Adjustments related to interest income 22 (110.104.833) (79.533.082)

Changes in unrealized foreign currency translation differences 23 18.039.315 166.500.016Adjustments related to tax expense/(income) 24 46.593.957 (8.520.795)Adjustments related to (gain)/loss on fair value 9 (7.735.000) (11.322.568)Adjustments related to (gain)/loss on disposal of non-current assets 22 (5.134.826) 19.006.384Changes in working capital 58.822.615 21.707.437Changes in trade receivables 59.778.922 59.319.137

- Increase/decrease in trade receivables from third parties (8.807.691) 42.508.624- Increase/decrease in trade receivables from related parties 68.586.613 16.810.513

Changes in inventories (54.451.300) (27.529.451)Changes in other receivables related with operations 36.538.576 4.880.230Changes in trade payables 17.526.707 (17.896.349)

- Increase / decrease in trade payables to third parties 12.991.309 (62.668.552)- Increase / decrease in trade payables to related parties 4.535.398 44.772.203

Changes in other payables (570.290) 2.933.870Cash generated from operations 442.756.631 342.158.993Cash outflows on payment of provisions for employee benefits 16 (20.177.088) (15.150.156)Income taxes paid 24 (50.459.511) (7.640.903)CASH FLOWS FROM INVESTING ACTIVITIES 106.035.135 74.975.107Payments for purchase of property, plant and equipment and intangible assets (17.169.796) (39.151.571)

- Payments for purchases of property, plant and equipment 10 (13.873.905) (36.393.235)- Payments for purchases of intangible assets 12 (3.295.891) (2.758.336)

Proceeds from sale of property, plant and equipment and intangible assets 10, 12 13.100.098 281.413Proceeds from sale of investment properties - 34.312.183Interest income from investing activities 110.104.833 79.533.082

CASH FLOWS FROM FINANCING ACTIVITIES (476.196.915) (812.150.981)Cash inflows from borrowings received 27 178.554.522 423.567.788Cash outflows on repayment of borrowings 27 (439.287.687) (1.504.631.453)Cash outflows on repayment of obligations under financial leases - (1.119.525)Payments of lease liabilities 27 (2.124.187) -Interest paid (205.003.483) (359.071.856)Increase/(decrease) in other payables to related parties, net (8.336.080) 629.104.065

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

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





1

AuditedCurrent Year

AuditedPrior Year

Notes31 December

201931 December






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

6

NOTE 1 – GROUP’S ORGANISATION AND NATURE OF OPERATIONS

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

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

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

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

As of 31 December 2019 and 2018, the principal shareholders and their respective shareholding rates inthe Company are as follows:

31 December 2019 31 December 2018(%) (%)

Yıldız Holding A.Ş. 54,27 46,14Ufuk Yatırım Yönetim ve Gayrimenkul A.Ş. 10,34 10,34Murat Ülker 9,98 9,98Ahsen Özokur - 8,13Trade Türk Gıda Yatırım A.Ş. 5,42 7,23Other 20,00 18,19

100 100

As of 31 December 2019, the number of employees employed by the Group is 1.736 (31 December2018: 2.224).





7

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

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

Direct and Indirect Effective Ownership %

Countries ofactivitySubsidiaries 31 December

201931 December2018 Nature of business

Besler Gıda ve Kimya San. Ve Tic. A.Ş. 100,00 100,00 TurkeyProduction and Trading ofOil and Oil Products

Berk Enerji Üretimi A.Ş. (*) 88,07 88,07 Turkey Generation of Electricity

Marsa Yağ Sanayi ve Tic. A.Ş. (*) 70,00 70,00 TurkeyProduction and Trading ofOil and Oil Products

Western Foods and Packaging SDN BHD (*) 70,00 70,00 BruneiProduction and Trading ofOil and Oil Products

(*) The Group has indirect ownership.

Operations of subsidiaries

Acquisition of Besler Shares

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

Approval of the financial statements

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





8

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS2.1 - Basis of Presentation

Statement of Compliance with TAS

The accompanying financial statements are prepared in accordance with the requirements of theCommuniqué Serial II, no: 14.1 “Basis of Financial Reporting in Capital Markets” as issued by CapitalMarkets Board of Turkey (“CMB”) which was published in the Official Gazette No:28676 on 13 June2013. The accompanying financial statements have been prepared in accordance with the TurkishAccounting Standards (“TAS”) and interpretations that have been put into effect by the Public OversightAccounting and Auditing Standards Authority of Turkey (“POA”) under Article 5th of the Communiqué.

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

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

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

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

Functional Currency

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

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

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

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

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





9

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

Going Concern

The consolidated financial statements of the Group are prepared on a going concern basis.

Basis of Consolidation

(a) Subsidiaries

Subsidiaries are entities over which the group has control. The group controls an entity when the groupis exposed to, or has rights to, variable returns from its involvement with the entity and has the abilityto affect those returns through its power over the entity. Subsidiaries are fully consolidated from thedate on which control is transferred to the Group. They are deconsolidated from the date that controlceases.

Inter-company transactions, balances and unrealised gains and losses on transactions between groupcompanies are eliminated.

(b) Changes in ownership interests in subsidiaries without change of control

Changes in the Group's ownership interests in subsidiaries that do not result in the loss of control overthe subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interestsand the non-controlling interests are adjusted to reflect the changes in their relative interests in thesubsidiaries. Any difference between the amount by which the non-controlling interests are adjusted andthe fair value of the consideration paid or received is recorded directly in equity and attributed to ownersof the Company.

(c) Losses control of subsidiaries

When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and iscalculated as the difference between (i) the aggregate of the fair value of the consideration received andthe fair value of any retained interest and (ii) the previous carrying amount of the assets (includinggoodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previouslyrecognized in other comprehensive income in relation to that subsidiary are accounted for as if the Grouphad directly disposed of the related assets or liabilities of the subsidiary (i.e. transfer to profit / loss ortransfer to retained earnings in accordance with TFRSs). The fair value of any investment retained afterthe sales of a subsidiary at the date when control is lost, is regarded as the fair value on initial recognitionaccounting within the scope of TFRS 9 Financial Instruments: Recognition and Measurement, whenapplicable, the cost on initial recognition of an investment in an associate or a joint venture.




10

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

Comparative Information and Restatement of Prior Period Consolidated Financial Statements

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

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

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

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

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

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





10

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

Comparative Information and Restatement of Prior Period Consolidated Financial Statements

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

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

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

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

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

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





11

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

2.2 - Changes in Accounting Policies (Continued)

TFRS 16 Leases

The accounting policies of the Group in relation to adoption of TFRS 16 are provided below:

Right of use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date theunderlying asset is available for use). Right-of-use assets are measured at cost, less any accumulateddepreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The amountis adjustes when the lease liability is revalued. The recognised right-of-use assets are depreciated oncomponent basis when it is deemed as necessary.

The right of use asset is initially recognized at cost comprising of:a) amount of the initial measurement of the lease liability,b) any lease payments made at or before the commencement date, less any lease incentives

received,c) any initial direct costs incurred by the Group

Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the leaseterm, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of itsestimated useful life and the lease term.

Lease assets are subject to impairment test.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the presentvalue of lease payments to be made over the lease term.

Lease payments included in the measurement of the lease liability at the commencement date of thelease includes the lease payments will be made during the term of the lease and the unpaid leasepayments existing at the commencement date of the lease and comprised as followings:

a) Fixed payments,b) Variable lease payments that depend on an index or a rate, initially measured using the index or

rate as the commencement date,c) Amounts expected to be paid by the Group within the scope of residual value commitmentsd) If the Group is reasonably sure that it will use the purchase option, the price of use of this option

ande) If the Group is reasonably certain to exercise an extension option, and penalties for early

termination of a lease unless the Group is reasonably certain to terminate early.

The variable lease payments that do not depend on an index or a rate are recognised as expense in theperiod on which the event or condition that triggers the payment occurs

When determining the revised discount rate for the remainder of the group rental period, the Group usesthe implicit interest rate if the implicit interest rate in the lease can be easily determined; In case it cannotbe determined easily, it determines the alternative borrowing interest rate on the date of the Group's re-evaluation.




12



Lease liabilities (Continued)

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

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

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

Short-term leases and leases of low-value assets

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

Transition to IFRS 16:

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

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

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

Assets 6.298.281

Right-of-use assets 6.298.281

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





12



Lease liabilities (Continued)

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

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

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

Short-term leases and leases of low-value assets

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

Transition to IFRS 16:

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

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

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

Assets 6.298.281

Right-of-use assets 6.298.281

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





13


2. 3 - Changes in Accounting Estimates and Errors

If changes in accounting estimates and errors are related only for one period, changes are applied in thecurrent year but if the changes in estimates affect following periods, changes are applied both in currentand following years prospectively. In current year, there are no significant changes in the accountingestimates of the Group.

The accounting errors identified are corrected retrospectively and prior year financial statements arerestated. In current year, there are no changes in accounting estimates and no errors identified.

2.4 - New and Revised Turkish Accounting Standards

The new standards, amendments and interpretations

The accounting policies adopted in preparation of the consolidated financial statements as atDecember 31, 2019 are consistent with those of the previous financial year, except for the adoption ofnew and amended TFRS and TFRIC interpretations effective as of January 1, 2019. The effects of thesestandards and interpretations on the Group’s financial position and performance have been disclosed inthe related paragraphs.

i) The new standards, amendments and interpretations which are effective as at January 1,2019 are as follows:

TFRS 16 Leases

In April 2018, POA has published a new standard, TFRS 16 'Leases'. The new standard brings mostleases on-balance sheet for lessees under a single model, eliminating the distinction between operatingand finance leases. Lessor accounting however remains largely unchanged and the distinction betweenoperating and finance leases is retained. TFRS 16 supersedes TAS 17 'Leases' and related interpretationsand is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted.

Lessees have recognition exemptions to applying this standard in case of short-term leases (i.e., leaseswith a lease term of 12 months or less) and leases of ’low-value’ assets (e.g., personal computers, officeequipment, etc.). At the commencement date of a lease, a lessee measures the lease liability at the presentvalue of the lease payments that are not paid at that date (i.e., the lease liability), at the same daterecognises an asset representing the right to use the underlying asset (i.e., the right-of-use asset) anddepreciates it during the lease term. The lease payments shall be discounted using the interest rateimplicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, thelessee shall use the lessee’s incremental borrowing rate. Lessees are required to recognise the interestexpense on the lease liability and the depreciation expense on the right-of-use asset separately.

Lessees are required to remeasure the lease liability upon the occurrence of certain events (e.g. a changein the lease term, a change in future lease payments resulting from a change in an index or rate used todetermine those payments). Under these circumstances, the lessee recognises the amount of theremeasurement of the lease liability as an adjustment to the right-of-use asset.




14


2.4 - New and Revised Turkish Accounting Standards (Continued)

The new standards, amendments and interpretations (Continued)

Transition to TFRS 16:

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

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

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

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

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

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

TFRIC 23 Uncertainty over Income Tax Treatments

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

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

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






14




Transition to TFRS 16:

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

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

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

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



TFRIC 23 Uncertainty over Income Tax Treatments

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

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

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






15




Annual Improvements – 2015–2017 Cycle

In January 2019, POA issued Annual Improvements to TFRS Standards 2015–2017 Cycle, amendingthe following standards:· TFRS 3 Business Combinations and TFRS 11 Joint Arrangements — The amendments to TFRS

3 clarify that when an entity obtains control of a business that is a joint operation, it remeasurespreviously held interests in that business. The amendments to TFRS 11 clarify that when an entityobtains joint control of a business that is a joint operation, the entity does not remeasure previouslyheld interests in that business.

· TAS 12 Income Taxes — The amendments clarify that all income tax consequences of dividends(i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises.

· TAS 23 Borrowing Costs — The amendments clarify that if any specific borrowing remainsoutstanding after the related asset is ready for its intended use or sale, that borrowing becomespart of the funds that an entity borrows generally when calculating the capitalisation rate ongeneral borrowings.

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

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

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

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



Prepayment Features with Negative Compensation (Amendments to TFRS 9)

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

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







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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 upto the date of issuance of the consolidated financial statements are as follows. the Group will make thenecessary changes if not indicated otherwise, which will be affecting the consolidated financialstatements and disclosures, when the new standards and interpretations become effective.

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

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

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

TFRS 17 - The new Standard for insurance contracts

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

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





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Definition of a Business (Amendments to TFRS 3)

In May 2019, the PAO issued amendments to the definition of a business in TFRS 3 BusinessCombinations. The amendments are intended to assist entities to determine whether a transaction shouldbe accounted for as a business combination or as an asset acquisition.

The amendments:- clarify the minimum requirements for a business;- remove the assessment of whether market participants are capable of replacing any missing

elements;- add guidance to help entities assess whether an acquired process is substantive;- narrow the definitions of a business and of outputs; and- introduce an optional fair value concentration test.

The amendments to TFRS 3 are effective for annual reporting periods beginning on or after 1 January2020 and apply prospectively. Earlier application is permitted.

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

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

In June 2019, the PAO issued amendments to TAS 1 Presentation of Financial Statements and TAS 8Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’across the standards and to clarify certain aspects of the definition. The new definition states that,’Information is material if omitting, misstating or obscuring it could reasonably be expected to influencedecisions that the primary users of general purpose financial statements make on the basis of thosefinancial statements, which provide financial information about a specific reporting entity. Theamendments clarify that materiality will depend on the nature or magnitude of information, or both. Anentity will need to assess whether the information, either individually or in combination with otherinformation, is material in the context of the financial statements.

The amendments to TFRS 3 are effective for annual reporting periods beginning on or after 1 January2020 and apply prospectively. Earlier application is permitted.





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

The amendments to TAS 1 and TAS 8 are required to be applied for annual periods beginning on orafter 1 January 2020. The amendments must be applied prospectively and earlier application ispermitted.


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

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

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

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

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

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

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





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

The amendments to TAS 1 and TAS 8 are required to be applied for annual periods beginning on orafter 1 January 2020. The amendments must be applied prospectively and earlier application ispermitted.


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

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

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

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

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

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

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





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2.5 - Summary of Significant Accounting Policies

Related Parties

A related party is a person or entity that is related to the entity that is preparing its financial statements.

a) A person or a close member of that person's family is related to a reporting entity if that person:

(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.

The income from the sale of the goods is recognized as soon as all the following conditions are met.

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 thateach 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 jointventure 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 itselfsuch 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 a reporting entityand a related party, regardless of whether a price is charged.

Revenue recognition

The revenue of the Group mainly consists of frozen food, canned food and oil sales.

The Group recognizes revenue based on the following five main principles: according to TFRS 15“Revenue from Contracts with Customers”:

- Identification of customer contracts- Identification of performance obligations- Determination of transaction price in the contract- Allocation of price to performance obligations

- Recognition of revenue when the performance obligations are fulfilled.




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2.5 - Summary of Significant Accounting Policies (Continued)

Revenue recognition (Continued)

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

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

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

Dividend and interest income:

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

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





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Revenue recognition (Continued)

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

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

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

Dividend and interest income:

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

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





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Inventories

Inventories are stated at the lower of cost and net realizable value. Net realizable value represents theestimated selling price less all estimated costs of completion and costs necessary to make the sale. Whenthe net realizable value of inventory is less than cost, the inventory is written down to the net realizablevalue and the expense is included in statement of profit or loss in the period the write-down or lossoccurred. When the circumstances that previously caused inventories to be written down below cost nolonger exist or when there is clear evidence of an increase in net realizable value because of changedeconomic circumstances, the amount of the write-down is reversed. The reversal amount is limited tothe amount of the original write-down. Inventories have been valued with weighted average cost method.

Property, Plant and Equipment

Land and buildings held for use in the production or supply of goods or services, or for administrativepurposes, are stated in the consolidated statement of financial position at their revalued amounts, beingthe fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequentaccumulated impairment losses. Revaluations are performed with sufficient regularity such that thecarrying amounts do not differ materially from those that would be determined using fair values at theend of each reporting period.

Any revaluation increase arising on the revaluation of such land and buildings is recognized in othercomprehensive income and accumulated in equity, except to the extent that it reverses a revaluationdecrease for the same asset previously recognized in profit or loss, in which case the increase is creditedto profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amountarising on the revaluation of such land and buildings is recognized in profit or loss to the extent that itexceeds the balance, if any, held in the properties’ revaluation reserve relating to a previous revaluationof that asset.

Properties in the course of construction for production, supply or administrative purposes are carried atcost, less any recognized impairment loss. Cost includes professional fees and, for qualifying assets,borrowing costs capitalized in accordance with the Group’s accounting policy. Such properties areclassified to the appropriate categories of property, plant and equipment when completed and ready forintended use. Depreciation of these assets, on the same basis as other property assets, commences whenthe assets are ready for their intended use.




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

Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairmentlosses.

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

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

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

Useful Life (Year)

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





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

Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairmentlosses.

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

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

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

Useful Life (Year)

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





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Intangible Assets

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulatedamortization and accumulated impairment losses. Amortization is recognized on a straight-line basisover their estimated useful lives. The estimated useful life and amortization method are reviewed at theend of each reporting period, with the effect of any changes in estimate being accounted for on aprospective basis. Intangible assets with indefinite useful lives that are acquired separately are carriedat cost less accumulated impairment losses. Estimated useful life of intangible assets are between 2 and15 years.

Internally generated intangible assets – Research and Development

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase ofan internal project) is recognized if, and only if, all of the following have been demonstrated:

· The technical feasibility of completing the intangible asset so that it will be available for use orsale,

· The intention to complete the intangible asset and use or sell it,

· The ability to use or sell the intangible asset,

· How the intangible asset will generate probable future economic benefits

· The availability of adequate technical, financial and other resources to complete the developmentand to use or sell the intangible asset; and

· The ability to measure reliably the expenditure attributable to the intangible asset during itsdevelopment.




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Intangible Assets (Continued)

Internally generated intangible assets – Research and Development (Continued)

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

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

Derecognition of intangible assets

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

Impairment of Assets Other Than Goodwill

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

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





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Intangible Assets (Continued)

Internally generated intangible assets – Research and Development (Continued)

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

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

Derecognition of intangible assets

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

Impairment of Assets Other Than Goodwill

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

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





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Impairment of Assets Other Than Goodwill (Continued)

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

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

Borrowing Costs

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

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

Financial Assets

Classification and Measurement

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

(a) Financial assets measured at amortized cost

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





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

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

Impairment

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

The Group has preferred to apply “simplified approach” for the recognition of impairment losses ontrade receivables, carried at amortized cost and that do not comprise of any significant financecomponent. In accordance with the simplified approach, Group measures the loss allowances regardingits trade receivables at an amount equal to lifetime expected credit losses except incurred credit lossesin which trade receivables are already impaired for a specific reason. In calculation of the expectedcredit losses, the future estimations of the Group are taken into account together with past credit lossexperiences.

In all other cases of impairment on financial assets, 12-month expected credit loss calculation is applied.12-month expected credit loss is the expected credit loss due to defaults within 12 months after thereporting period.

If the amount of the impairment subsequently decreases due to an event occurring after the write-down,the provision related to impairment is released and the release of the provision is credited to profit orloss.

(b) Financial assets measured at fair value

Assets that are held by the management for the collection of contractual cash flows and for selling thefinancial assets are measured at their fair value. If the management do not plan to dispose these assetsin 12 months after the balance sheet date, they are classified as non-current assets. The Group make achoice for the equity instruments during the initial recognition and elect profit or loss or othercomprehensive income for the presentation of fair value gain and loss:

i) “Financial assets carried at fair value through profit or loss” are assets that are not measured atamortized cost or at fair value through other comprehensive income. Gains and losses on valuation ofthese financial assets are accounted for under the consolidated statement of income.

ii) Financial assets carried at fair value through other comprehensive income comprise of “financialassets” in the statement of financial position. The Group measures these assets with their fair values.Gains or losses on a financial asset measured at fair value through other comprehensive income isrecognized in other comprehensive income, except for impairment gains or losses and foreign exchangegains and losses until the financial asset is derecognized or reclassified. When the financial assets carriedat fair value through other comprehensive income are sold, fair value gain or loss classified in othercomprehensive income is classified to retained earnings.





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(b) Financial assets (Continued)

Trade Receivables

Trade receivables that are created by way of providing services directly to a debtor are measured atamortized cost, using the effective interest rate method, Short-term trade receivables with no statedinterest rate are measured at the original invoice amount unless the effect of imputing interest issignificant.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highlyliquid investments which their maturities are three months or less from date of acquisition and that arereadily convertible to a known amount of cash and are subject to an insignificant risk of changes invalue.

Recognition and derecognition of financial assets

The Group recognises a financial asset or a financial liability in its statement of financial position when,and only, the entity becomes a party to the contractual provisions of the instrument. The Groupderecognizes a financial asset only when the contractual rights to the cash flows from the asset expire,or when it transfers the financial asset and substantially all the risks and rewards of ownership of theasset to another party. If the Group neither transfers nor retains substantially all the risks and rewards ofownership and continues to control the transferred asset, the Group recognizes its retained interest in theasset and an associated liability for amounts it may have to pay. If the Group retains substantially all therisks and rewards of ownership of a transferred financial asset, the Group continues to recognize thefinancial asset and also recognizes a collateralized borrowing for the proceeds received. An entity shallremove a financial liability from its statement of financial position when, and only, the obligationspecified in the contract is discharged or cancelled or expires.

Financial liabilities

The Group's financial liabilities and equity instruments are classified based on contractual arrangementsand the definition of a financial liability and an equity instrument. A financial liability is measured atfair value during its initial recognition. During the initial recognition of financial liabilities whose fairvalue difference is not reflected in profit or loss, transaction costs that can be directly associated withthe undertaking of the relevant financial liability are added to the fair value in question. Financialliabilities are accounted over the amortized cost value by using the effective interest method togetherwith the interest expense calculated over the effective interest rate in the following periods.




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Financial liabilities (Continued)

Fair values, as much as possible, are derived from current market prices in active markets, if notavailable, are determined through the appropriate way of discounted cash flows and option pricingmodels.

Financial liabilities at fair value through profit or loss

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

Other Financial Liabilities

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

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

The effective interest method is a method of calculating the amortized cost of a financial liability and ofallocating interest expense over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash payments through the expected life of the financial liability, or, whereappropriate, a shorter period.

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

Effect of Exchange Differences

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

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





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Financial liabilities (Continued)

Fair values, as much as possible, are derived from current market prices in active markets, if notavailable, are determined through the appropriate way of discounted cash flows and option pricingmodels.

Financial liabilities at fair value through profit or loss

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

Other Financial Liabilities

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

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

The effective interest method is a method of calculating the amortized cost of a financial liability and ofallocating interest expense over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash payments through the expected life of the financial liability, or, whereappropriate, a shorter period.

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

Effect of Exchange Differences

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

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





29



Effect of Exchange Differences (Continued)

Exchange differences are recognized in profit or loss in the period in which they arise except for:

· Exchange differences on foreign currency borrowings relating to assets under construction forfuture productive use, which are included in the cost of those assets where they are regarded asan adjustment to interest costs on those foreign currency borrowings;

· Exchange differences on transactions entered into in order to hedge certain foreign currencyrisks (see below for hedging accounting policies); and

· Exchange differences on monetary items receivable from or payable to a foreign operation forwhich settlement is neither planned nor likely to occur, which form part of the net investmentin a foreign operation, and which are recognized in the foreign currency translation reserve andrecognized in profit or loss on disposal of the net investment.

Assets and liabilities of the Group’s foreign operations are presented in TL considering exchange ratesprevailing at the reporting date. Income and expenses are translated by using the average rates calculatedfor the year when the transaction occurred, unless significant fluctuation has happened in exchange rates.In case of any significant fluctuation in exchange rates, the transaction is translated by using theexchange rate at the transaction date. The translation difference is accounted under comprehensiveincome as a component of equity.

Earnings Per Share

Earnings per share disclosed in the consolidated statement of comprehensive income are determined bydividing net earnings by the weighted average number of shares that have been outstanding during therelated period.

In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“bonusshares”) to existing shareholders from retained earnings on equity items. Such kind of bonus shares aretaken into consideration in the computation of earnings per share as issued share certificates. For thepurpose of earnings per share computations, the weighted average number of shares outstanding duringthe period 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 each earlier year.

Events After the Reporting Period

Events after the reporting period are those events that occur between the balance sheet date and the datewhen the financial statements are authorized for issue, even if they occur after an announcement relatedwith the profit for the year or public disclosure of other selected financial information.

The Group adjusts the amounts recognized in its financial statements if adjusting events occur after thebalance sheet date. The events that do not require correction after the reporting period are disclosed inthe footnotes of the consolidated financial statements, in case they are the issues affecting the economicdecisions of the users of the financial statements.




30



Provisions, Contingent Assets and Liabilities

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

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

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

Reporting of Financial Information According to Department

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

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

Government Grants and Incentives

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

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

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

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





30



Provisions, Contingent Assets and Liabilities

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

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

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

Reporting of Financial Information According to Department

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

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

Government Grants and Incentives

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

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

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

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





31



Investment Properties

Investment properties are properties held to earn rentals and/or for capital appreciation, includingproperty under construction for such purposes. Investment properties are measured initially at cost,including transaction costs. Subsequent to initial recognition, investment properties are stated at fairvalue. Gains or losses arising from changes in the fair values of investment properties are included inthe profit or loss in the year in which they arise.

An investment property is derecognized upon disposal or when the investment property is permanentlywithdrawn from use and no future economic benefits are expected from disposal. Any gain or loss arisingon derecognition of the property is included in profit or loss in the period in which the property isderecognized.

Transfers are made to or from investment property only when there is a change in use. For a transferfrom investment property that is measured at fair value to owner occupied property, the deemed cost forsubsequent accounting is the fair value at the date of change in use. If owner occupied property becomesan investment property that is measured at fair value, the Group accounts for such property in accordancewith the policy stated under “Property, Plant and Equipment” up to the date of change in use.

Fair value of investment properties is determined by valuation companies which have enough experiencein valuation of investment property and have CMB valuation certificate. Investment properties areclassified in level 2 of the fair value hierarchy table.

Corporate taxes

Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated taxreturn. Therefore, provisions for taxes, as reflected in the accompanying consolidated financialstatements, have been calculated on a separate-entity basis.

Income tax expense represents the sum of the current income tax and deferred tax.

Current income tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profitbefore tax’ as reported in the consolidated statement of profit or loss because of items of income orexpense that are taxable or deductible in other years and it excludes items that are never taxable ordeductible. The Group’s current tax is calculated using tax rates that have been enacted or substantivelyenacted by the end of the reporting period.

Deferred tax

Deferred tax liability or asset is recognized on temporary differences between the carrying amounts ofassets and liabilities in the financial statements and the corresponding tax bases which are used in thecomputation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporarydifferences. Deferred tax assets are recognized for all deductible temporary differences to the extent thatit is probable that taxable profits will be available against which those deductible temporary differencescan be utilized. Such deferred tax assets and liabilities are not recognized if the temporary differencearises from goodwill or from the initial recognition (other than in a business combination) of other assetsand liabilities in a transaction that affects neither the taxable profit nor the accounting profit.




32

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

Corporate taxes (Continued)

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the periodin which the liability is settled or the asset realized, based on tax rates (and tax laws) that have beenenacted or substantively enacted by the end of the reporting period. The measurement of deferred taxliabilities and assets reflects the tax consequences that would follow from the manner in which the Groupexpects, 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 currenttax assets against current tax liabilities and when they relate to income taxes levied by the same taxationauthority and the Group intends to settle its current tax assets and liabilities on a net basis.

For the purposes of measuring deferred tax liabilities and deferred tax assets for investment propertiesthat are measured using the fair value model, the carrying amounts of such properties are presumed tobe recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted whenthe investment property is depreciable and is held within a business model whose objective is to consumesubstantially all of the economic benefits embodied in the investment property over time, rather thanthrough sale. The management reviewed the Group’s investment property portfolios and concluded thatnone of the Group’s investment properties are held under a business model whose objective is toconsume substantially all of the economic benefits embodied in the investment properties over time,rather than through sale. Therefore, the management has determined that the ‘sale’ presumption set outin the amendments to TAS 12 is not rebutted.

Current and deferred tax for the period

Current and deferred tax are recognized as in profit or loss, except when they relate to items that arerecognized in other comprehensive income or directly in equity.





32

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

Corporate taxes (Continued)

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the periodin which the liability is settled or the asset realized, based on tax rates (and tax laws) that have beenenacted or substantively enacted by the end of the reporting period. The measurement of deferred taxliabilities and assets reflects the tax consequences that would follow from the manner in which the Groupexpects, 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 currenttax assets against current tax liabilities and when they relate to income taxes levied by the same taxationauthority and the Group intends to settle its current tax assets and liabilities on a net basis.

For the purposes of measuring deferred tax liabilities and deferred tax assets for investment propertiesthat are measured using the fair value model, the carrying amounts of such properties are presumed tobe recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted whenthe investment property is depreciable and is held within a business model whose objective is to consumesubstantially all of the economic benefits embodied in the investment property over time, rather thanthrough sale. The management reviewed the Group’s investment property portfolios and concluded thatnone of the Group’s investment properties are held under a business model whose objective is toconsume substantially all of the economic benefits embodied in the investment properties over time,rather than through sale. Therefore, the management has determined that the ‘sale’ presumption set outin the amendments to TAS 12 is not rebutted.

Current and deferred tax for the period

Current and deferred tax are recognized as in profit or loss, except when they relate to items that arerecognized in other comprehensive income or directly in equity.





33



Employee Benefits

Termination and retirement benefits:

Under Turkish law and union agreements, lump sum payments are made to employees retiring orinvoluntarily leaving the Group. Such payments are considered as being part of defined retirementbenefit plan as per TAS 19 (Revised) Employee Benefits (“TAS 19”).

The retirement benefit obligation recognized in the consolidated statement of financial positionrepresents the present value of the defined benefit obligation. The actuarial gains and losses arerecognized in other comprehensive income.

Statement of Cash Flows

In the statement of cash flows, cash flows during the period are classified under operating, investing orfinancing activities.

Cash flows from operating activities indicate cash flows due to the Group entities’ operations.

Cash flows due to investing activities indicate the Group cash flows that are used for and obtained frominvestments (investments in property, plant and equipment and financial investments).

Cash flows due to financing activities indicate the cash obtained from financial arrangements and usedin their repayment.

Share Capital and Dividends

Common shares are classified as equity. Dividends on common shares are recognized in equity in theperiod in which they are approved and declared.

2.6 - Significant Accounting Judgements, Estimates and Assumptions

During the implementation of accounting policies specified in note 2.5, the management made the followingcomments (except for the estimates below), which have a significant impact on the amounts recognized inthe financial statements:

Provisions Related to Employee Benefits

Provisions related to defined benefit plans of the employees are determined by actuarial assumptionsincluding discount rates, future salary increases and employee turnover rates. As these plans are longterm, these assumptions contain significant uncertainties. Details on provisions for employee benefitsare provided in Note 16.




34


2.6 - Significant Accounting Judgements, Estimates and Assumptions (continued)

Deferred taxes

Deferred tax assets and liabilities are recorded using substantially enacted tax rates for the effect oftemporary differences between book and tax bases of assets and liabilities. Currently, there are deferredtax assets recognised on tax loss carry-forwards and deductible temporary differences, all of which couldbe utilized in the taxable income in the future. Partial or fully recoverable amount of deferred tax assetsare evaluated under current conditions. During the evaluation, future projected income, current yearlosses, due date of tax loss carry forwards and other deductible temporary differences and tax-planningstrategies that would, if necessary, be implemented are taken into consideration.

Expected Credit Loss

The Group has preferred to apply “simplified approach” the recognition of expected credit losses ontrade receivables. In accordance with this method, if any provision provided to the trade receivables asa result of a specific events, the Group measures expected credit loss from these receivables by the life-time expected credit loss by using an impairment matrix. The calculation of expected credit loss isperformed based on the past experience of the Group and its expectation based on the macroeconomicindications.

TFRS 5 Assessment of Assets Held for Sale and Discontinued Operations

As announced on the Public Disclosure Platform ('KAP') on 8 November 2019, ÜNLÜ Yatırım HoldingA.Ş. ve Ünlü Menkul Değerler A.Ş. has been authorized to investigate the possibilities of selling theB2B business unit (out-of-home consumption unit) including Marsa Yağ Sanayi ve Tic. A.Ş., and itssubsidiary Western Foods and Packaging SDN BHD and for this purpose, to negotiate with potentialbuyers, to provide information flow and coordination (Transaction). Also, as announced by the Groupon ('KAP') on 26 December 2019, a mutual confidentiality agreement was signed and negotiationsstarted with some strategic investors on 26 December 2019, to evaluate the opportunities for cooperationin relation to frozen food and canned food business. In addition, Morgan Stanley & Co International plc("Morgan Stanley") has been authorized to investigate possible collaborations.

In accordance with the above explanations, the Group has assessed its assets and liabilities subject tothe related transactions in accordance with TFRS 5 'Assets Held for Sale and Discontinued Operations'standard and decided that as of balance sheet date, related asset group did not meet the criteria inaccorance paragraph 7, the asset is available for immediate sale and in accorance paragraph 8, the sale ishighly probable. In making this assessment, the Group has considered that related assets are not beingactively marketed due to the fact that their current fair value is not observable, it is unlikely that thesetransaction decisions will be recognized as a completed sale within one year from decision date andpossibility of the approval of the sale transaction by the shareholders could not be evaluated as of thebalance sheet date.

2.7 – Convenience Translation into English of Consolidated Financial Statements

The accounting principles described in Note 2 (defined as Turkish Accounting Standards/TurkishFinancial Reporting Standards) to the accompanying consolidated financial statements differ fromInternational Financial Reporting Standards (“IFRS”) issued by the International Accounting StandardsBoard with respect to the application of inflation accounting, classification of some income statementitems and also for certain disclosure requirements of the POA.





34


2.6 - Significant Accounting Judgements, Estimates and Assumptions (continued)

Deferred taxes

Deferred tax assets and liabilities are recorded using substantially enacted tax rates for the effect oftemporary differences between book and tax bases of assets and liabilities. Currently, there are deferredtax assets recognised on tax loss carry-forwards and deductible temporary differences, all of which couldbe utilized in the taxable income in the future. Partial or fully recoverable amount of deferred tax assetsare evaluated under current conditions. During the evaluation, future projected income, current yearlosses, due date of tax loss carry forwards and other deductible temporary differences and tax-planningstrategies that would, if necessary, be implemented are taken into consideration.

Expected Credit Loss

The Group has preferred to apply “simplified approach” the recognition of expected credit losses ontrade receivables. In accordance with this method, if any provision provided to the trade receivables asa result of a specific events, the Group measures expected credit loss from these receivables by the life-time expected credit loss by using an impairment matrix. The calculation of expected credit loss isperformed based on the past experience of the Group and its expectation based on the macroeconomicindications.

TFRS 5 Assessment of Assets Held for Sale and Discontinued Operations

As announced on the Public Disclosure Platform ('KAP') on 8 November 2019, ÜNLÜ Yatırım HoldingA.Ş. ve Ünlü Menkul Değerler A.Ş. has been authorized to investigate the possibilities of selling theB2B business unit (out-of-home consumption unit) including Marsa Yağ Sanayi ve Tic. A.Ş., and itssubsidiary Western Foods and Packaging SDN BHD and for this purpose, to negotiate with potentialbuyers, to provide information flow and coordination (Transaction). Also, as announced by the Groupon ('KAP') on 26 December 2019, a mutual confidentiality agreement was signed and negotiationsstarted with some strategic investors on 26 December 2019, to evaluate the opportunities for cooperationin relation to frozen food and canned food business. In addition, Morgan Stanley & Co International plc("Morgan Stanley") has been authorized to investigate possible collaborations.

In accordance with the above explanations, the Group has assessed its assets and liabilities subject tothe related transactions in accordance with TFRS 5 'Assets Held for Sale and Discontinued Operations'standard and decided that as of balance sheet date, related asset group did not meet the criteria inaccorance paragraph 7, the asset is available for immediate sale and in accorance paragraph 8, the sale ishighly probable. In making this assessment, the Group has considered that related assets are not beingactively marketed due to the fact that their current fair value is not observable, it is unlikely that thesetransaction decisions will be recognized as a completed sale within one year from decision date andpossibility of the approval of the sale transaction by the shareholders could not be evaluated as of thebalance sheet date.

2.7 – Convenience Translation into English of Consolidated Financial Statements

The accounting principles described in Note 2 (defined as Turkish Accounting Standards/TurkishFinancial Reporting Standards) to the accompanying consolidated financial statements differ fromInternational Financial Reporting Standards (“IFRS”) issued by the International Accounting StandardsBoard with respect to the application of inflation accounting, classification of some income statementitems and also for certain disclosure requirements of the POA.





35

NOTE 3 – SEGMENT REPORTING

The main operations of the Group are production and distributing frozen and canned vegetables andfruits, frozen and canned sea food, frozen pastry products, croquettes, canned tuna fish and edible oil.Operating segments are determined and reported in a manner consistent with the reporting provided tothe Board of Directors and their strategic decision-making processes.

The Board of Directors and top management monitor the operations of the Group on the basis of thedifferent business units, which are “frozen and canned food” and “edible oil”.

The segment information for the periods 1 January – 31 December 2019 and 2018 are as follows:

31 December 2019

Frozen andCanned Edible Oil

ConsolidationAdjustment

Total Assets / Liabilities Accordingto Consolidated Financial

StatementsSegment assets 1.552.663.889 2.103.400.286 (932.888.979) 2.723.175.196Segment liabilities 942.916.664 842.267.642 (28.388.979) 1.756.795.327

31 December 2018

Frozen andCanned Edible Oil

ConsolidationAdjustment

Total Assets / Liabilities Accordingto Consolidated Financial

StatementsSegment assets 1.892.978.441 1.999.507.699 (915.113.754) 2.977.372.386Segment liabilities 1.248.137.895 957.866.800 (10.613.754) 2.195.390.941

31 December 2019Frozen and

Canned Edible OilConsolidation

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

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

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




36

NOTE 3 – SEGMENT REPORTING (Continued)



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



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





36

NOTE 3 – SEGMENT REPORTING (Continued)



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



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





37

NOTE 4 – RELATED PARTY DISCLOSURES

Due to related parties, due from related parties and summary of significant transactions with relatedparties as of 31 December 2019 and 2018 are as follows.

The related parties listed below are composed of Yıldız Holding group companies.

31 December 31 DecemberTrade receivables from related parties 2019 2018Pasifik Tük.Ürün. San.ve Tic. A.Ş. 106.338.214 94.876.877Yeni Teközel Markalı Ürünler Dağıtım Hizmetleri A.Ş. 50.246.363 64.651.298Horizon Hızlı Tüketim Ürünleri Paz. ve Tic. A.Ş. 37.205.473 33.502.877G2mEksper Satış ve Dağıtım Hizmetleri A.Ş. (*) 35.196.843 23.869.436Önem Gıda San. ve Tic. A.Ş. 15.332.731 19.990.789Ülker Bisküvi San. A.Ş. 6.199.929 47.865.941Bizim Toptan Satış Mağazaları A.Ş. 6.192.651 -Biskot Bisküvi Gıda San. Tic. A.Ş. 2.866.752 33.281.340PNS Pendik Nişasta San. A.Ş. 2.675.679 3.400.873Ülker Çikolata San. A.Ş. 1.767.027 9.261.519Other 5.078.004 6.985.329

269.099.666 337.686.279

(*) G2m Dağıtım Paz. ve Tic. A.Ş. and Eksper Tüketim Mad. Sat. ve Paz. A.Ş. merged on 28 February2019 and have been operating under the title of G2mEksper since 27 March 2019.

31 December 31 DecemberTrade payables to related parties 2019 2018Yıldız Holding A.Ş. 38.691.398 40.424.517Aytaç Gıda Yatırım A.Ş. 4.004.572 -Most Teknoloji Çözümleri A.Ş. 2.908.364 -Önem Gıda San. ve Tic. A.Ş. 213.896 2.409.791Şok Marketler Ticaret A.Ş. 89.813 2.367.273Other 5.044.456 1.215.520

50.952.499 46.417.101

Due from related parties and due to related parties balances comprised of purchasing and selling goodsand services. Supply of goods comprise of mainly purchases of raw materials. Average days ofmaturities is 90 days.

Other receivables from related parties 31 December 2019 31 December 2018Yıldız Holding A.Ş. (*) 632.699.658 853.122.409

632.699.658 853.122.409

(*) The relevant amount comprised of loans granted to Yıldız Holding. The average interest rate is20,00% for TL.




38

NOTE 4 – RELATED PARTY DISCLOSURES (Continued)

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

111.081.307 2.351.507

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

1.031.988.897 1.364.244.005

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

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

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

Transactions with related parties comprised of purchasing and selling goods and services. Purchases aremainly comprised of purchases of raw materials.


Sales of goods31 December

201931 December

2018Pasifik Tük. Ürün. San. ve Tic. A.Ş. 368.571.175 341.053.126Yeni Teközel Markalı Ürünler Dağıtım Hizmetleri A.Ş. 249.597.516 221.262.581Horizon Hızlı Tüketim Ürünleri A.Ş. 178.101.609 231.243.789Ülker Bisküvi San. A.Ş. 173.255.479 178.415.239G2mEksper Satış ve Dağıtım Hizmetleri A.Ş. 111.156.630 123.899.480Biskot Bisküvi Gıda San. Tic. A.Ş. 99.847.266 103.208.906Önem Gıda San. ve Tic. A.Ş. 63.682.102 51.897.975Ülker Çikolata San. A.Ş. 43.219.200 31.841.791Bizim Toptan Satış Mağazaları A.Ş. 33.012.277 26.073.848PNS Pendik Nişasta San. A.Ş. 16.057.213 7.260.937Other 9.109.110 11.672.132

1.345.609.577 1.327.829.804





38

NOTE 4 – RELATED PARTY DISCLOSURES (Continued)

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

111.081.307 2.351.507

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

1.031.988.897 1.364.244.005

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

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

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

Transactions with related parties comprised of purchasing and selling goods and services. Purchases aremainly comprised of purchases of raw materials.


Sales of goods31 December

201931 December

2018Pasifik Tük. Ürün. San. ve Tic. A.Ş. 368.571.175 341.053.126Yeni Teközel Markalı Ürünler Dağıtım Hizmetleri A.Ş. 249.597.516 221.262.581Horizon Hızlı Tüketim Ürünleri A.Ş. 178.101.609 231.243.789Ülker Bisküvi San. A.Ş. 173.255.479 178.415.239G2mEksper Satış ve Dağıtım Hizmetleri A.Ş. 111.156.630 123.899.480Biskot Bisküvi Gıda San. Tic. A.Ş. 99.847.266 103.208.906Önem Gıda San. ve Tic. A.Ş. 63.682.102 51.897.975Ülker Çikolata San. A.Ş. 43.219.200 31.841.791Bizim Toptan Satış Mağazaları A.Ş. 33.012.277 26.073.848PNS Pendik Nişasta San. A.Ş. 16.057.213 7.260.937Other 9.109.110 11.672.132

1.345.609.577 1.327.829.804





39

NOTE 4 – RELATED PARTY DISCLOSURES (Continued)1 January - 1 January -

Purchase of goods and services31 December

201931 December

2018Yıldız Holding A.Ş. 20.795.093 3.884.856Şok Marketler Ticaret A.Ş. 18.919.142 4.917.796Most Teknoloji Çözümleri A.Ş 6.630.189 -Aytaç Gıda Yatırım San. Tic. A.Ş. 5.314.467 689.265Önem Gıda San. ve Tic. A.Ş. 3.649.741 8.433.964Pasifik Tük. Ürün. San. ve Tic. A.Ş. 2.946.632 948.731Sağlam İnşaat Taahhüt Tic. A.Ş. 1.654.929 -İzsal Gayrimenkul Geliştirme A.Ş. 869.776 581.615Bizim Toptan Satış Mağazaları A.Ş. 692.396 338.389Other 2.091.455 1.412.461

63.563.820 21.207.077

1 January - 1 January -Service, rent and other income 31 December 2019 31 December 2018Sağlam İnşaat Taahhüt Tic. A.Ş. 229.858 181.126Bizim Toptan Satış Mağazaları A.Ş. 213.704 -PNS Pendik Nişasta San. A.Ş. 170.281 130.301Pakyağ Endüstriyel 131.543 120.581Kellog Med Gıda Tic. Ltd. Şti. - 644.536Other 19.999 18.505

765.385 1.095.049

1 January - 1 January -Commission and financial expense 31 December 2019 31 December 2018Yıldız Holding A.Ş. 195.542.668 123.907.331Other 112.125 732.598

195.654.793 124.639.9291 January - 1 January -

Investment income 31 December 2019 31 December 2018Yıldız Holding A.Ş. (*) 64.450.709 67.412.688Other 468.649 141.152

64.919.358 67.553.840

(*) Income from investment activities comprised of interest and exchange differences.

Key management compensation:

Key management personnel of the Company consist of the members of Board of Directors and membersof Executive Board. The compensation of key management personnel comprises salaries, bonus, healthinsurance and transportation. The compensation of key management during the years are as follows:

1 January - 1 January -31 December 2019 31 December 2018

Salaries and other benefits 13.285.307 10.066.323 13.285.307 10.066.323




40

NOTE 5 – TRADE RECEIVABLES AND PAYABLES

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

Current trade receivables 31 December 2019 31 December 2018Trade receivables 167.487.930 178.566.631Notes receivable 35.536.453 15.650.061Provision for doubtful receivables (-) (25.085.071) (22.504.071)Trade receivables, net 177.939.312 171.712.621

Trade receivables from related parties (Note 4) (*) 269.099.666 337.686.279 447.038.978 509.398.900

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

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

Movement of Provision for Doubtful Receivables1 January - 31

December 20191 January - 31

December 2018Opening balance (22.504.071) (17.524.795)Charge for the year (Note 21) (3.544.989) (5.148.022)Currency translation gain/loss - (533.044)Collections (Note 21) 963.989 701.790End of the period (25.085.071) (22.504.071)

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

385.132.347 367.605.640

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





40

NOTE 5 – TRADE RECEIVABLES AND PAYABLES

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

Current trade receivables 31 December 2019 31 December 2018Trade receivables 167.487.930 178.566.631Notes receivable 35.536.453 15.650.061Provision for doubtful receivables (-) (25.085.071) (22.504.071)Trade receivables, net 177.939.312 171.712.621

Trade receivables from related parties (Note 4) (*) 269.099.666 337.686.279 447.038.978 509.398.900

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

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

Movement of Provision for Doubtful Receivables1 January - 31


December 2018Opening balance (22.504.071) (17.524.795)Charge for the year (Note 21) (3.544.989) (5.148.022)Currency translation gain/loss - (533.044)Collections (Note 21) 963.989 701.790End of the period (25.085.071) (22.504.071)

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

385.132.347 367.605.640

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





41

NOTE 6 - OTHER RECEIVABLES AND PAYABLES

Other Receivables31 December 31 December

Other Current Receivables 2019 2018Other receivables from related parties (Note 4) 632.699.658 853.122.409Tax receivables 2.425.683 1.162.688Export progress receivables 1.357.577 1.703.431Receivables from personnel 112.820 206.225Other miscellaneous receivables 1.476.025 2.119.923

638.071.763 858.314.676

31 December 31 DecemberOther Non-Current Receivables 2019 2018Deposits and guarantees given 1.466.589 5.487.505

1.466.589 5.487.505

Other Payables31 December 31 December

Other Current Liabilities 2019 2018Other payables to related parties (Note 4) 111.081.307 2.351.507Other miscellaneous liabilities - 347.814

111.081.307 2.699.321

31 December 31 DecemberOther Non-Current Liabilities 2019 2018Other non-current liabilities to related parties (Note 4) 1.031.988.897 1.364.244.005

1.031.988.897 1.364.244.005

NOTE 7 – INVENTORIES31 December 31 December

2019 2018Raw materials 180.438.575 159.508.188Work in process 130.445.513 103.990.332Finished goods 82.937.793 77.426.201Trade goods 14.475.143 13.744.374Other inventory 9.646.710 8.823.339Provision for impairment of inventory (-) (416.704) (453.818)

417.527.030 363.038.616

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

1 January - 31December 2019


Opening balance (453.818) (535.739)Charge for the year (Note 21) (416.704) (338.640)Provisions no longer required (Note 21) 453.818 420.561End of period (416.704) (453.818)




42

NOTE 8 – PREPAID EXPENSES AND DEFERRED REVENUE

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

10.733.554 20.397.419

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

8.069.552 4.177.578

31 December 31 DecemberShort-Term Deferred Income 2019 2018Advances received 3.678.382 1.801.805Deferred income 814.492 1.126.845

4.492.874 2.928.650

NOTE 9 – INVESTMENT PROPERTIES

Cost Value 1 January 2019 DisposalsChange infair value 31 December 2019

Land & building 212.107.001 - 7.735.000 219.842.001212.107.001 - 7.735.000 219.842.001

Cost Value 1 January 2018 DisposalsChange infair value

31 December2018

Land & building 254.103.000 (53.318.567) 11.322.568 212.107.001 254.103.000 (53.318.567) 11.322.568 212.107.001

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





42

NOTE 8 – PREPAID EXPENSES AND DEFERRED REVENUE

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

10.733.554 20.397.419

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

8.069.552 4.177.578

31 December 31 DecemberShort-Term Deferred Income 2019 2018Advances received 3.678.382 1.801.805Deferred income 814.492 1.126.845

4.492.874 2.928.650

NOTE 9 – INVESTMENT PROPERTIES

Cost Value 1 January 2019 DisposalsChange infair value 31 December 2019

Land & building 212.107.001 - 7.735.000 219.842.001212.107.001 - 7.735.000 219.842.001

Cost Value 1 January 2018 DisposalsChange infair value

31 December2018

Land & building 254.103.000 (53.318.567) 11.322.568 212.107.001 254.103.000 (53.318.567) 11.322.568 212.107.001

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





43

NOTE 9 – INVESTMENT PROPERTIES (Continued)

Fair value of investment properties

31 December 2019Level 1 Level 2 Level 3

Investment properties - 219.842.001 - Total - 219.842.001 -


Investment properties - 212.107.001 - Total - 212.107.001 -

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

The table above present the fair value hierarchy of investment properties of the Group as of 31 December2019 and 31 December 2018. The levels of hierarchies of fair values are detailed below.

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

or liability, either directly or indirectly,Level 3: Inputs for the asset or liability that are not based on observable market data

Valuation techniques used to derive level 2 fair values.

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


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(1.

304.

280)

(66

8.25

9) (

416.

339.

012)

Net

Boo

k V

alue

819.

153.

047

874.

144.

623

(*) O

ther

tang

ible

ass

ets c

onsi

st o

f ref

riger

ated

cab

inet

s.

(**)

Tra

nsfe

rs to

inta

ngib

le a

sset

s.




46

NOTE 10 – PROPERTY, PLANT AND EQUIPMENT (Continued)

The Group decided to apply “Fair Value Model” to land, land improvements and buildings in accordancewith “TAS 16 Property, Plant and Equipment”, and performed revaluation through obtaining a valuationreport from a CMB licenced valuation firm as of 31 December 2018.

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

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

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


or liability, either directly or indirectly,Level 3: Inputs for the asset or liability that are not based on observable market data.

Valuation techniques used to derive level 2 fair values



Land - 402.515.109 -Land improvement - 6.926.303 -Buildings - 253.597.554 -

Total - 663.038.966 -31 December 2018

Level 1 Level 2 Level 3Land - 402.506.901 -Land improvement - 7.569.058 -Buildings - 240.012.107 -

Total - 650.088.066 -

The total mortgage and pledge on the property, plant and equipments is TL 573.420.000 (31 December2018: TL 643.433.495).





46

NOTE 10 – PROPERTY, PLANT AND EQUIPMENT (Continued)

The Group decided to apply “Fair Value Model” to land, land improvements and buildings in accordancewith “TAS 16 Property, Plant and Equipment”, and performed revaluation through obtaining a valuationreport from a CMB licenced valuation firm as of 31 December 2018.

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

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

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


or liability, either directly or indirectly,Level 3: Inputs for the asset or liability that are not based on observable market data.

Valuation techniques used to derive level 2 fair values



Land - 402.515.109 -Land improvement - 6.926.303 -Buildings - 253.597.554 -

Total - 663.038.966 -31 December 2018

Level 1 Level 2 Level 3Land - 402.506.901 -Land improvement - 7.569.058 -Buildings - 240.012.107 -

Total - 650.088.066 -

The total mortgage and pledge on the property, plant and equipments is TL 573.420.000 (31 December2018: TL 643.433.495).





47

NOTE 11 – RIGHT OF USE ASSETS

Cost Value-Effect ofIFRS 16

1 January2019

Effect of Changein Accounting

Policy (Note 2.4) Additions Disposals

CurrentYear

Depreciation31 December

2019Buildings - 3.673.285 - (430.259) 3.243.026Motor Vehicles - 2.624.996 - (1.622.570) 1.002.426

- 6.298.281 - (2.052.829) 4.245.452

Interest expenses on lease liabilities are TL 588.967 (31 December 2018: None).

The effective interest rate and foreign currency position of lease liabilities arising from the leasetransactions within the scope of the right of use assets are presented in Note 27.

NOTE 12 – INTANGIBLE ASSETS

Cost Value1 January

2019 Additions Disposals Transfers(*)

Currencytranslationdifferences

31 December2019

Rights 12.123.329 146.573 (458.678) - 484.775 12.295.999Development expenses 10.887.057 3.149.318 (2.404.776) 5.826.418 - 17.458.017

Other intangible assets 694.962 - - - - 694.96223.705.348 3.295.891 (2.863.454) 5.826.418 484.775 30.448.978

Accumulated Amortization 1 January 2019 Additions Disposals Transfers

Currencytranslationdifferences

31 December2019

Rights (10.603.310) (819.331) - - 8.838 (11.413.803)Development expenses (1.425.880) (1.881.758) - - - (3.307.638)Other intangible assets (508.834) (172.916) - - - (681.750)

(12.538.024) (2.874.005) - - 8.838 (15.403.191) Net Book Value 11.167.324 15.045.787

(*) Transfers comprised of transfers from property, plant and equipment

Cost Value 1 January 2018 Additions Disposals Transfers (*)

Currencytranslationdifferences 31 December 2018

Rights 11.537.077 462.163 - 86.972 37.117 12.123.329Development expenses 3.399.355 2.296.173 - 5.191.529 - 10.887.057Other intangible assets 743.284 - (48.322) - - 694.962

15.679.716 2.758.336 (48.322) 5.278.501 37.117 23.705.348

Accumulated Amortization 1 January 2018 Additions Disposals Transfers

Currencytranslationdifferences 31 December 2018

Rights (8.956.709) (1.645.366) - - (1.235) (10.603.310)Development expenses (85.865) (1.340.015) - - - (1.425.880)Other intangible assets (360.811) (196.345) 48.322 - - (508.834)

(9.403.385) (3.181.726) 48.322 - (1.235) (12.538.024) Net Book Value 6.276.331 11.167.324

(*) Transfers comprised of transfers from property, plant and equipment




48

NOTE 12 – INTANGIBLE ASSETS (Continued)

Allocation of depreciation and amortization expenses as of 1 January - 31 December 2019 and 2018 areas follows:

1 January-31 December

1January-31 December

2019 2018Cost of sales (Note 19) (37.063.586) (34.412.784)Marketing expense (Note 20) (8.583.171) (6.700.079)General administration expenses (Note 20) (2.029.277) (1.901.430)Research and development expenses (Note 20) (2.013.040) (1.689.637)

(49.689.074) (44.703.930)

NOTE 13 - GOVERNMENT GRANTS AND INCENTIVES

On 31 August 2016, the Company received Investment Incentive Certificate no. 125488 from theGeneral Directorate of Incentives and Foreign Investment. The certificate is valid for a three years perioduntil 26 December 2020. The support elements stipulated by the Investment Incentive Certificate wereas follows: 100% customs exemption, value added tax exemption, 7 years support of employer's shareof social security premium, 80% Investment Contribution Rate and 40% tax deduction. The total amountof investment stipulated in the Investment Incentive Certificate was TL 15.600.000. As of 31 December2019, the investment amount realized under the incentive certificate was TL 5.793.736. (31 December2018: TL 5.043.736)

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

The rights that the Group has available to all companies meeting the criteria required by the legislationwithout sector separation: Incentives covered by the research and development law (100% corporate taxexemption etc.), inward processing permit documents, social security institution incentives andinsurance premium employer's share support.





48

NOTE 12 – INTANGIBLE ASSETS (Continued)

Allocation of depreciation and amortization expenses as of 1 January - 31 December 2019 and 2018 areas follows:

1 January-31 December

1January-31 December

2019 2018Cost of sales (Note 19) (37.063.586) (34.412.784)Marketing expense (Note 20) (8.583.171) (6.700.079)General administration expenses (Note 20) (2.029.277) (1.901.430)Research and development expenses (Note 20) (2.013.040) (1.689.637)

(49.689.074) (44.703.930)

NOTE 13 - GOVERNMENT GRANTS AND INCENTIVES

On 31 August 2016, the Company received Investment Incentive Certificate no. 125488 from theGeneral Directorate of Incentives and Foreign Investment. The certificate is valid for a three years perioduntil 26 December 2020. The support elements stipulated by the Investment Incentive Certificate wereas follows: 100% customs exemption, value added tax exemption, 7 years support of employer's shareof social security premium, 80% Investment Contribution Rate and 40% tax deduction. The total amountof investment stipulated in the Investment Incentive Certificate was TL 15.600.000. As of 31 December2019, the investment amount realized under the incentive certificate was TL 5.793.736. (31 December2018: TL 5.043.736)

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

The rights that the Group has available to all companies meeting the criteria required by the legislationwithout sector separation: Incentives covered by the research and development law (100% corporate taxexemption etc.), inward processing permit documents, social security institution incentives andinsurance premium employer's share support.





49

NOTE 14 – PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

Contingent Assets and Liabilities

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

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

164.359.587 146.938.697

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

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

2.287.758.980 2.297.664.535

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

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

3.569.194 1.243.805

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

Movement of provision for lawsuits1 January - 31


December 2018Opening 1.186.233 1.133.497Charge for the period (Note 21) 2.370.652 52.736End of the period 3.556.885 1.186.233


ON

VE

NIE

NC

E T

RA

NSL

AT

ION

INT

O E

NG

LIS

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HE

CO

NSO

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AT

ED

FIN

AN

CIA

LST

ATE

ME

NTS

OR

IGIN

ALL

Y IS

SUE

D IN

TU

RK

ISH

(NO

TE

2.7

)

KE

RE

VİT

AŞ

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A S

AN

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E TİC

AR

ET

A.Ş

. AN

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S SU

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TO C

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DA

TED

FIN

AN

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L ST

ATE

MEN

TSA

S A

T A

ND

FO

R T

HE

YEA

R E

ND

ED 3

1 D

ECEM

BER

201

9 A

ND

201

8 (A

mou

nts e

xpre

ssed

in T

urki

sh L

ira (“

TL”

unle

ss o

ther

wise

stat

ed.)

50

NO

TE

15

– C

OM

MIT

ME

NT

S A

ND

CO

NT

ING

EN

CIE

SG

uara

ntee

, ple

dge

and

mor

tgag

es g

iven

by

the

Gro

upG

uara

ntee

, ple

dge

and

mor

tgag

es (“

GPM

”) in

resp

ect o

f com

mitm

ent a

nd c

ontin

genc

ies r

ealiz

ed in

the o

rdin

ary

cour

se o

f bus

ines

s giv

en fo

r the

yea

rs e

nded

31

Dec

embe

r 201

9 an

d 31

Dec

embe

r 201

8 ar

e as

follo

ws:

31 D

ecem

ber

2019

31 D

ecem

ber

2018

Ori

gina

lC

urre

ncy

Am

ount

TL

Equ

ival

ent

Ori

gina

l Cur

renc

yA

mou

ntT

L e

quiv

alen

t

A. C

PMs g

iven

for C

ompa

ny’s

ow

n le

gal p

erso

nalit

y (*

)TL

1.58

9.59

1.59

81.

589.

591.

598

TL1.

620.

995.

223

1.62

0.99

5.22

3U

S D

olla

r11

7.53

2.63

969

8.16

7.38

2U

S D

olla

r12

8.58

2.20

367

6.45

8.11

2B.

CPM

s giv

en o

n be

half

of fu

lly c

onso

lidat

ed c

ompa

nies

TL-

-TL

211.

200

211.

200

C. C

PMs g

iven

in th

e nor

mal

cou

rse

of b

usin

ess a

ctiv

ities

on

beha

lf of

third

par

ties

--

--

-D

. Tot

al a

mou

nt o

f oth

erC

PMs

--

--

-i.

Tota

l am

ount

of C

PMs g

iven

on

beha

lf of

the

pare

nt-

- -

--

ii. T

otal

am

ount

of C

PMs g

iven

to o

n be

half

of o

ther

Gro

upco

mpa

nies

whi

ch a

re n

ot in

scop

e of

B a

nd C

--

--

-iii

. Tot

al a

mou

nt o

f CPM

s giv

en o

n be

half

of th

ird p

artie

sw

hich

are

not

in sc

ope

of C

--

--

-

2.28

7.75

8.98

0 2

.297

.664

.535

As

of 3

1 D

ecem

ber

2019

, the

Gro

up h

as e

xpor

t com

mitm

ents

of U

SD 9

50.0

00 a

nd E

UR

9.68

5.82

0 (3

1 D

ecem

ber

2018

: USD

: 56.

282.

289

EUR

3.50

0.00

0). T

he fu

lfillm

ent

perio

d of

exp

ort c

omm

itmen

ts is

two

year

s.(*

) O

n Fe

brua

ry 2

018,

Yıldız

Hol

ding

A.Ş

. sta

rted

nego

tiatio

ns w

ith th

e cr

edito

rs in

ord

er to

ref

inan

ce th

e lo

an p

ayab

les

for

whi

ch n

o gu

aran

tee

was

pro

vide

d an

d th

eba

lanc

es w

hich

are

use

d by

the

itsel

f and

by

vario

us Yıldız

Hol

ding

gro

up e

ntiti

es in

con

nect

ion

with

the

mis

cella

neou

s loa

n ag

reem

ents

the

Hol

ding

com

pany

ent

ered

into

with

Tur

kish

ban

ks. T

he p

urpo

se o

f the

se n

egot

iatio

ns is

to m

ove

all l

oan

paya

ble

bala

nces

to th

e le

vel o

f Yıldız

Hol

ding

A.Ş

. with

in th

e fra

mew

ork

of a

sin

gle

mat

urity

, int

eres

t rat

e an

d pa

ymen

t pla

n.Th

e ba

nk lo

ans o

f the

Com

pany

and

it’s

subs

idia

ries w

hich

in to

tal T

L 74

5 m

illio

n in

cas

h an

d TL

202

mill

ion

non-

cash

con

tinge

ncie

s wer

e m

oved

to th

e lev

el o

f Yıldız

Hol

ding

A.Ş

. thr

ough

synd

icat

ion.

The

Com

pany

’s to

tal d

ebt h

as n

ot in

crea

sed

as a

resu

lt of

the s

yndi

cate

d lo

an b

ut c

ash

and

non-

cash

loan

s are

mov

ed to

Yıldız

Hol

ding

A.Ş

. lev

el.

In a

dditi

on th

e G

roup

pro

vide

d gu

aran

tee

to Yıldız

Hol

ding

A.Ş

. with

in th

e sc

ope

and

limite

d to

cas

h an

d no

n-ca

sh lo

ans

belo

ngin

g to

the

Gro

up th

at a

rem

oved

to Yıldız

Hol

ding

A.Ş

. lev

el. S

ome

real

est

ates

of t

he G

roup

whi

ch h

ave

a m

arke

t val

ue o

f 573

.4 m

illio

n TL

hav

e be

en p

rovi

ded

as a

mor

tgag

e an

d fin

anci

alin

vest

men

ts w

ith a

fair

valu

e of

TL

2.7

mill

ion

wer

e pl

edge

d to

ban

ks.





51

NOTE 16 – PAYABLES RELATED TO EMPLOYEE BENEFITS

31 December 31 DecemberPayables related to employee benefits 2019 2018Due to personnel 8.670.608 8.320.214Social security premiums payable 3.349.522 3.239.555

12.020.130 11.559.769

31 December 31 DecemberShort-term provisions for employee benefits 2019 2018Provisions for performance premium 6.973.630 6.278.726Provisions for unused vacations 4.485.132 3.832.751

11.458.762 10.111.477

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



Opening balance 6.278.726 6.664.769Charge for the year 6.973.630 6.278.726Cash payments during the year (6.278.726) (6.664.769)End of the period 6.973.630 6.278.726

The movement of provisions for unused vacations as of 1 January - 31 December 2019 and 2018 are asfollows:



Opening balance 3.832.751 4.649.817Charge for the year 2.213.823 1.722.745Used (1.561.442) (2.539.811)End of the period 4.485.132 3.832.751

31 December 31 DecemberNon-current provisions for employee benefits 2019 2018Provisions for employee termination benefits 33.225.074 30.305.487

33.225.074 30.305.487




52

NOTE 16 – PAYABLES RELATED TO EMPLOYEE BENEFITS (Continued)

Provision for Employee Termination Benefit

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

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

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

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

The movement of provisions of employee termination benefit as of 1 January - 31 December 2019 and2018 are as follows:



Opening balance 30.305.487 25.473.247Service cost 13.320.632 8.510.885Interest cost 1.211.544 935.958Actuarial loss 724.331 1.330.973

Payments during the year (12.336.920) (5.945.576)End of the period 33.225.074 30.305.487





52

NOTE 16 – PAYABLES RELATED TO EMPLOYEE BENEFITS (Continued)

Provision for Employee Termination Benefit

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

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

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

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

The movement of provisions of employee termination benefit as of 1 January - 31 December 2019 and2018 are as follows:



Opening balance 30.305.487 25.473.247Service cost 13.320.632 8.510.885Interest cost 1.211.544 935.958Actuarial loss 724.331 1.330.973

Payments during the year (12.336.920) (5.945.576)End of the period 33.225.074 30.305.487





53

NOTE 17 – OTHER ASSETS AND LIABILITIES

31 December 31 DecemberOther Current Assets 2019 2018Deferred VAT 6.296.097 19.841.830Other VAT 229.700 216.463

6.525.797 20.058.293

31 December 31 DecemberOther Non-Current Assets 2019 2018Deferred VAT - 13.393.111

- 13.393.111

31 December 31 DecemberOther Current Liabilities 2019 2018Other current liabilities 3.075.555 50.636Taxes and funds payables 1.918.259 7.144.976

4.993.814 7.195.612




54

NOTE 18 – CAPITAL, RESERVES AND OTHER EQUITY ITEMS

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

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

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

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

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

Restricted Reserves and Retained Earnings

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

As of 31 December 2019, restricted reverses are amounting to TL 36.192.002 (31 December 2018: TL36.192.002). There are no remaining period profit and other sources subject to profit distribution afterdeducting previous year’s losses recorded in statutory records of the Company.

31 December 31 DecemberRestricted reserves 2019 2018Legal reserves 36.192.002 36.192.002

36.192.002 36.192.002





54

NOTE 18 – CAPITAL, RESERVES AND OTHER EQUITY ITEMS

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

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

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

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

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

Restricted Reserves and Retained Earnings

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

As of 31 December 2019, restricted reverses are amounting to TL 36.192.002 (31 December 2018: TL36.192.002). There are no remaining period profit and other sources subject to profit distribution afterdeducting previous year’s losses recorded in statutory records of the Company.

31 December 31 DecemberRestricted reserves 2019 2018Legal reserves 36.192.002 36.192.002

36.192.002 36.192.002





55

NOTE 19 – REVENUE AND COST OF SALES


Domestic sales 2.582.722.172 2.418.693.782Export sales 353.104.091 386.994.158Other income (1.246.512) 13.875.352Gross sales 2.934.579.751 2.819.563.292Sales returns and discounts (-) (441.713.992) (397.528.210)Net sales 2.492.865.759 2.422.035.082Cost of sales (-)- Raw materials (1.379.854.706) (1.507.010.276)- Labour costs (81.182.263) (73.600.279)- Depreciation and Amortization Expense(Note 10-11-12) (37.063.586) (34.412.784)- Manufacturing overhead costs (381.335.318) (244.065.963)Cost of sales (-) (1.879.435.873) (1.859.089.302)Gross profit 613.429.886 562.945.780

NOTE 20 – GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES,RESEARCH AND DEVELOPMENT EXPENSES

1 January - 1 January -Selling and marketing expenses 31 December 2019 31 December 2018Personnel expenses (63.975.534) (49.787.626)Transportation expenses (57.782.929) (59.376.787)Advertisement expenses (35.030.693) (37.136.466)Outsourced benefits and services expenses (13.234.041) (17.198.170)Energy expenses (11.757.806) (9.591.568)Rent expenses (10.121.615) (9.838.857)Depreciation and amortization expense (Note 10-11-12) (8.583.171) (6.700.079)Maintenance and repair expenses (4.447.614) (3.852.905)Export expenses (2.387.575) (2.221.550)Consultancy expenses (1.116.093) (536.301)Other (12.109.363) (11.884.182)

(220.546.434) (208.124.491)




56

NOTE 20 – GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES,RESEARCH AND DEVELOPMENT EXPENSES (Continued)

1 January - 1 January -General administrative expense 31 December 2019 31 December 2018Personnel expenses (23.185.468) (21.772.999)Outsourced benefits and services expenses (14.965.395) (13.850.064)Consultancy expenses (6.607.376) (7.813.607)Depreciation and amortization expense (Note 10-11-12) (2.029.277) (1.901.430)Rent expenses (1.646.794) (1.688.372)Communication expenses (590.631) (642.039)Energy expenses (435.357) (1.894.510)Other (9.835.505) (3.241.330)

(59.295.803) (52.804.351)

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

(3.930.240) (3.137.542)

NOTE 21 – OTHER INCOME AND EXPENSE FROM OPERATING ACTIVITIES

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

46.714.455 66.165.579





56

NOTE 20 – GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES,RESEARCH AND DEVELOPMENT EXPENSES (Continued)

1 January - 1 January -General administrative expense 31 December 2019 31 December 2018Personnel expenses (23.185.468) (21.772.999)Outsourced benefits and services expenses (14.965.395) (13.850.064)Consultancy expenses (6.607.376) (7.813.607)Depreciation and amortization expense (Note 10-11-12) (2.029.277) (1.901.430)Rent expenses (1.646.794) (1.688.372)Communication expenses (590.631) (642.039)Energy expenses (435.357) (1.894.510)Other (9.835.505) (3.241.330)

(59.295.803) (52.804.351)

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

(3.930.240) (3.137.542)

NOTE 21 – OTHER INCOME AND EXPENSE FROM OPERATING ACTIVITIES

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

46.714.455 66.165.579





57

NOTE 21 – OTHER INCOME AND EXPENSE FROM OPERATING ACTIVITIES (Continued)

1 January - 1 January -Other Expense from Operating Activities 31 December 2019 31 December 2018Foreign exchange losses from operating activities (30.219.269) (84.169.183)Restructuring and one-off expenses (8.006.104) -Finance charges on term sales (5.244.769) (4.786.348)Provision expenses of lawsuits (Note 14) (2.370.652) (52.736)Provision expenses for doubtful receivables (Note 5) (3.544.989) (5.148.022)Provision expenses for impairment of inventories (Note 7) (416.704) (338.640)Official board fees for capital increase - (3.547.902)Other (14.123.835) (16.399.254)

(63.926.322) (114.442.085)

NOTE 22 – INCOME AND EXPENSES FROM INVESTMENT ACTIVITIES

1 January - 1 January -Income from Investment Activities 31 December 2019 31 December 2018Interest income 110.104.833 79.533.082Gain on fair value of investment property (Note 9) 7.735.000 11.322.568Rent income 7.583.648 6.287.415Gain on sale of fixed assets 5.402.118 220.936

130.825.599 97.364.001

1 January - 1 January -Expense from Investment Activities 31 December 2019 31 December 2018Foreign exchange loss on investing activities (13.232.532) (19.227.320)Losses on sale of fixed assets (267.292) (5.835.853)

(13.499.824) (25.063.173)

NOTE 23 – FINANCIAL INCOME AND EXPENSES

1 January - 1 January -Financial expense 31 December 2019 31 December 2018Interest expense (142.925.349) (141.876.391)Commission expenses (62.078.134) (56.327.076)Foreign exchange losses (18.039.315) (166.500.016)Financial expense on employee termination benefit (1.211.544) (212.187)

(224.254.342) (364.915.670)




58

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

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

16.445.325 9.516.816

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

Total temporary differences Deferred tax assets / (liabilities)31 December 31 December 31 December 31 December

2019 2018 2019 2018Provisions for employee

termination benefits 33.225.074 30.305.487 6.849.485 6.061.098Provisions for doubtful receivables 9.958.309 8.557.408 2.190.828 1.882.630Provisions for lawsuits 3.556.885 1.186.233 782.515 260.971Provision for unused vacations 4.485.132 3.832.751 963.678 806.922Provision for ımpairment on

inventories 416.704 453.818 91.675 90.763Carry-forward tax losses (*) 315.971.611 248.462.700 63.012.505 50.518.674Deferred income - 1.126.845 - 247.906Provision of performance premium 6.973.630 6.278.726 1.534.199 1.381.319Foundation and organization

expenses 927.144 927.144 185.429 185.429Net differences between the carrying values and tax bases of

investment properties (200.760.120) (172.049.654) (17.462.658) (15.043.714)Revaluation differences on

property, plant and equipment (455.777.944) (462.560.453) (48.575.679) (52.845.239)Other (14.819.872) 6.389.390 (2.873.366) 1.276.229Deferred tax assets, net (295.843.447) (327.089.605) 6.698.611 (5.177.012)

(*) As of 31 December 2019, based on the projections and future estimations, deferred tax asset is notrecognized on unused carry-forward tax losses amounting to TL 73.496.855. (31 December 2018: TL85.132.753). TL 60.752.097 of the amount on which deferred tax asset is not calculated, belongs to 2015and the term of use is 2020.

Details of carry-forward tax losses are as below:

31 December 31 December2019 2018

2020 20.554.830 20.554.8302021 72.117.625 72.117.6252022 74.179.085 74.179.0852023 73.812.657 73.812.6572024 43.578.317 7.798.5032025 31.729.097 -

315.971.611 248.462.700





58

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

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

16.445.325 9.516.816

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

Total temporary differences Deferred tax assets / (liabilities)31 December 31 December 31 December 31 December

2019 2018 2019 2018Provisions for employee

termination benefits 33.225.074 30.305.487 6.849.485 6.061.098Provisions for doubtful receivables 9.958.309 8.557.408 2.190.828 1.882.630Provisions for lawsuits 3.556.885 1.186.233 782.515 260.971Provision for unused vacations 4.485.132 3.832.751 963.678 806.922Provision for ımpairment on

inventories 416.704 453.818 91.675 90.763Carry-forward tax losses (*) 315.971.611 248.462.700 63.012.505 50.518.674Deferred income - 1.126.845 - 247.906Provision of performance premium 6.973.630 6.278.726 1.534.199 1.381.319Foundation and organization

expenses 927.144 927.144 185.429 185.429Net differences between the carrying values and tax bases of

investment properties (200.760.120) (172.049.654) (17.462.658) (15.043.714)Revaluation differences on

property, plant and equipment (455.777.944) (462.560.453) (48.575.679) (52.845.239)Other (14.819.872) 6.389.390 (2.873.366) 1.276.229Deferred tax assets, net (295.843.447) (327.089.605) 6.698.611 (5.177.012)

(*) As of 31 December 2019, based on the projections and future estimations, deferred tax asset is notrecognized on unused carry-forward tax losses amounting to TL 73.496.855. (31 December 2018: TL85.132.753). TL 60.752.097 of the amount on which deferred tax asset is not calculated, belongs to 2015and the term of use is 2020.

Details of carry-forward tax losses are as below:


2020 20.554.830 20.554.8302021 72.117.625 72.117.6252022 74.179.085 74.179.0852023 73.812.657 73.812.6572024 43.578.317 7.798.5032025 31.729.097 -

315.971.611 248.462.700





59

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

Movements in deferred tax assets as of 1 January - 31 December 2019 and 2018 are as follows:



Opening (5.177.012) (27.380.221)Charged to profit or loss 10.794.063 22.904.960Actuarial gain charged to equity 162.344 266.195Revaluation differences charged to equity - (1.204.457)Currency translation differences 919.216 236.511End of the period 6.698.611 (5.177.012)

Income tax expense for the years ended 31 December 2019 and 31 December 2018 comprised of thefollowing items:


Current income tax expense (57.388.020) (14.384.165)Deferred tax income 10.794.063 22.904.960Total tax income (46.593.957) 8.520.795

The reconciliation of the current tax income and current profit before tax are as follows:

Total charge for the year can be reconciled 1 January - 1 January - to the accounting profit as follows: 31 December 2019 31 December 2018Profit / (loss) from before tax 205.516.975 (42.011.952)Domestic income tax rate 22% 22%Tax income / (expense) at the domestic income tax rate (45.213.735) 9.242.629Expenses that are not deductible in determining taxableprofit (2.636.384) (7.331.443)Deferred tax provision - 3.015.759Revenue that is exempt from taxation 2.134.966 2.755.970Other tax expenses (878.804) 837.880Income tax expense recognised in profit or loss (46.593.957) 8.520.795




60


Corporate Tax

The Group is subject to Turkish corporate taxes. Provision is made in the accompanying financialstatements for the estimated charge based on the Group’s results for the years and periods. Turkish taxlegislation does not permit a parent company and its subsidiary to file a consolidated tax return.Therefore, current income taxes recognised in the accompanying consolidated financial statements, havebeen calculated on a separate-entity basis.

Corporate tax is applied on taxable corporate income, which is calculated from the statutory accountingprofit by adding back non-deductible expenses, and by deducting dividends received from residentcompanies, other exempt income and investment incentives utilized.

Corporate tax rate in Turkey is 20%. The Corporate tax rate is applied to the corporate income of thecorporations, which is the result of the addition of expenses that are not allowed to be deducted inaccordance with the tax laws and the exemptions and discounts included in the tax laws. The 7061numbered law on the Amendment of Some Tax Laws was approved by the Turkish Grand NationalAssembly on 28 November 2017 and entered into force by being published in the Official Gazette dated5 December 2017. In accordance with the article 91 of the mentioned Law and the provisional article 10added to the Corporate Tax Law, the corporate tax rate was increased from 20% to 22% for 2018, 2019and 2020. Unless there is a new regulation as from 2021, it is foreseen that the corporate tax rate willcontinue to be applied as 20%.

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

Deferred Tax

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

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

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





60


Corporate Tax

The Group is subject to Turkish corporate taxes. Provision is made in the accompanying financialstatements for the estimated charge based on the Group’s results for the years and periods. Turkish taxlegislation does not permit a parent company and its subsidiary to file a consolidated tax return.Therefore, current income taxes recognised in the accompanying consolidated financial statements, havebeen calculated on a separate-entity basis.

Corporate tax is applied on taxable corporate income, which is calculated from the statutory accountingprofit by adding back non-deductible expenses, and by deducting dividends received from residentcompanies, other exempt income and investment incentives utilized.

Corporate tax rate in Turkey is 20%. The Corporate tax rate is applied to the corporate income of thecorporations, which is the result of the addition of expenses that are not allowed to be deducted inaccordance with the tax laws and the exemptions and discounts included in the tax laws. The 7061numbered law on the Amendment of Some Tax Laws was approved by the Turkish Grand NationalAssembly on 28 November 2017 and entered into force by being published in the Official Gazette dated5 December 2017. In accordance with the article 91 of the mentioned Law and the provisional article 10added to the Corporate Tax Law, the corporate tax rate was increased from 20% to 22% for 2018, 2019and 2020. Unless there is a new regulation as from 2021, it is foreseen that the corporate tax rate willcontinue to be applied as 20%.

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

Deferred Tax

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

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

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





61

NOTE 25 – EARNING PER SHARE / (LOSS)


Net gain / (loss) for the year attributable to equityholders of the parent 137.831.653 (34.570.109)Weighted average number of shares 662.000.000 638.765.556Earning per share / (loss) 0,21 (0,05)

NOTE 26 – FINANCIAL INVESTMENTS


Associates 4.460.594 4.460.594Impairment on associate shares (-) (3.065.661) (3.040.000)

1.394.933 1.420.594

The Group has been accounting financial investments of Pakyağ Endüstriyel Ürünler Sanayi ve TicaretA.Ş., PNS Pendik Nişasta Sanayi A.Ş. and Baytom Makine Sanayi ve Ticaret A.Ş. with their cost valuesless impairment. The Group is in the opinion that the fair values of the shares converge to the cost lessimpairment values.

As of 1 January - 31 December 2019 and 31 December 2018 movements of provisions for impairmentof financial investment are as follows:



Opening balance (3.040.000) (2.500.000)Addition (25.661) (3.040.000)Reversals - 2.500.000End of the period (3.065.661) (3.040.000)

NOTE – 27 BORROWINGS

31 December 31 DecemberShort term borrowings 2019 2018Short term foreign currency loans 70.057.502 317.825.705Short term ("TL") loans - 159.169Short term lease labilities 1.295.669 -

71.353.171 317.984.874

31 December 31 DecemberLong term borrowings 2019 2018Long term lease labilities 2.878.423 -

2.878.423 -




62

NOTE 27 – BORROWINGS (Continued)

As of 31 December 2019 and 2018 details of short-term borrowings are as follows:

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

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

70.057.502

31 December 2018Original Currency Maturity (%) Original Amount TL EquivalentEUR January 2019 3,75 3.602.261 296.111.277

USDJanuary 20019-October 2019 3,17 56.285.289 21.714.428

TL January 2019 19,01 57.002 159.169317.984.874

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

31 December 2019 31 December 20182019 - 317.984.8742020 70.057.502 -

70.057.502 317.984.874

Movement of borrowings 1 January - 31December 2019


Opening 317.984.874 1.393.314.745Foreign exchange differences 12.805.793 166.500.016Increase in interest accrual - (160.766.222)Borrowing received in current year 178.554.522 423.567.788Payments in current year (439.287.687) (1.504.631.453)End of the period 70.057.502 317.984.874

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

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

4.174.092

Lease liability1 January –

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





62

NOTE 27 – BORROWINGS (Continued)

As of 31 December 2019 and 2018 details of short-term borrowings are as follows:

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

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

70.057.502

31 December 2018Original Currency Maturity (%) Original Amount TL EquivalentEUR January 2019 3,75 3.602.261 296.111.277

USDJanuary 20019-October 2019 3,17 56.285.289 21.714.428

TL January 2019 19,01 57.002 159.169317.984.874

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

31 December 2019 31 December 20182019 - 317.984.8742020 70.057.502 -

70.057.502 317.984.874

Movement of borrowings 1 January - 31December 2019


Opening 317.984.874 1.393.314.745Foreign exchange differences 12.805.793 166.500.016Increase in interest accrual - (160.766.222)Borrowing received in current year 178.554.522 423.567.788Payments in current year (439.287.687) (1.504.631.453)End of the period 70.057.502 317.984.874

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

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

4.174.092

Lease liability1 January –

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





63

NOTE 28 – NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIALINSTRUMENTS

a) Capital Risk Management

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

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

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


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

b) Financial Risk Factors

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

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


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66

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

b.1) Credit Risk (Continued)

As of 31 December 2019 and 2018, the aging of trade receivables that are past due but not impaired areas below:


Past due up to 30 days 23.468.097 19.517.390Past due 1 - 3 months 4.150.103 2.498.276Past due 3 - 12 months 1.332.340 1.912.715Past due 1 - 5 year 15.407 20.372Total past due receivables 28.965.947 23.948.753Secured portion of receivables by guarantees 21.072.903 6.932.658

b.2) Liquidity Risk

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

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

Contractual MaturitiesNon-Derivative Financial Liabilities

31 December 2019Carrying

value

TotalContractual

Cash Outflows(I+II+III)

Less than 3months (I)

3 to 12months (II)

1 to 5 years(III)

Borrowings 70.057.502 70.057.502 - 70.057.502 -Lease Liabilities 4.174.092 4.174.092 323.917 971.752 2.878.423Trade payables to thirdparties 334.179.848 334.179.848 326.337.875 7.841.973 -Trade payables torelated parties 50.952.499 50.952.499 50.952.499 - -Other payables torelated parties 1.143.070.204 1.143.070.204 111.081.307 - 1.031.988.897Payables to employees 12.020.130 12.020.130 12.020.130 - -

1.614.454.275 1.614.454.275 500.715.728 78.871.227 1.034.867.320

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





66


b.1) Credit Risk (Continued)

As of 31 December 2019 and 2018, the aging of trade receivables that are past due but not impaired areas below:


Past due up to 30 days 23.468.097 19.517.390Past due 1 - 3 months 4.150.103 2.498.276Past due 3 - 12 months 1.332.340 1.912.715Past due 1 - 5 year 15.407 20.372Total past due receivables 28.965.947 23.948.753Secured portion of receivables by guarantees 21.072.903 6.932.658

b.2) Liquidity Risk

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

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



value

TotalContractual



3 to 12months (II)

1 to 5 years(III)

Borrowings 70.057.502 70.057.502 - 70.057.502 -Lease Liabilities 4.174.092 4.174.092 323.917 971.752 2.878.423Trade payables to thirdparties 334.179.848 334.179.848 326.337.875 7.841.973 -Trade payables torelated parties 50.952.499 50.952.499 50.952.499 - -Other payables torelated parties 1.143.070.204 1.143.070.204 111.081.307 - 1.031.988.897Payables to employees 12.020.130 12.020.130 12.020.130 - -

1.614.454.275 1.614.454.275 500.715.728 78.871.227 1.034.867.320






67


b.2) Liquidity Risk (Continued)



value

TotalContractual



3 to 12months (II)

1 to 5 years(III)

Borrowings 317.984.874 317.984.874 184.757.548 133.227.326 -Trade payables tothird parties 321.188.539 321.188.539 270.994.858 50.193.681 -Trade payables torelated parties 46.417.101 46.417.101 46.417.101 - -Other payables tothird parties 347.814 347.814 347.814 - -Other payables torelated parties 1.366.595.512 1.366.595.512 2.351.507 - 1.364.244.005Payables to employees 11.559.769 11.559.769 11.559.769 - -

2.064.093.609 2.064.093.609 516.428.597 183.421.007 1.364.244.005


b.3) Market Risk Management

Due to its operations, the Group exposed to financial risks related to changes in foreign exchange ratesand interest rates

The Group evaluates market risk with sensitivity analysis.

The Group’s market risk management policies have not changed during the period compared to previousperiod.

b.3.1) Currency Risk Management

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

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




68


b.3) Market Risk (Continued)

31 December 2019 TL Amount US Dollar Euro Other1. Trade Receivables 46.080.327 5.287.553 2.120.167 73.4032a. Monetary Financial Assets 4.814.838 738.418 62.024 2.1102b. Non-monetary Financial Assets - - - -3. Other 1.340.486 82.805 127.637 -4.CURRENT ASSETS (1+2+3) 52.235.651 6.108.776 2.309.828 75.5135. Trade Receivables - - - -6a. Monetary Financial Assets - - - -6b. Non-monetary Financial Assets - - - -7. Other 4.166.709 - 626.516 -8. NON-CURRENT ASSETS (5+6+7) 4.166.709 - 626.516 -9. TOTAL ASSETS (4+8) 56.402.360 6.108.776 2.936.344 75.51310. Trade Payable 135.962.717 2.931.841 17.697.280 126.66211. Financial Liabilities 70.057.502 949.629 9.685.821 -12a. Monetary Other Liabilities 391.360 - 58.846 -12b. Non-Monetary Other Liabilities - - - -13. CURRENT LIABILITIES (10+11+12) 206.411.579 3.881.470 27.441.947 126.66214. Trade Payable - - - -15. Financial Liabilities - - - -16a. Monetary Other Liabilities 166.457.472 28.022.200 - -16b. Non-Monetary Other Liabilities - - - -17. NON-CURRENT LIABILITIES (14+15+16) 166.457.472 28.022.200 - -18. TOTAL LIABILITIES (13+17) 372.869.051 31.903.670 27.441.947 126.66219 Off-balance Sheet Derivative InstrumentsNet Asset/Liability Position (19a - 19b) - - - -19.a Amount of active foreign derivative currencyoff-balance sheet - - - -19.b. Amount of passive foreign derivative currencyoff-balance sheet - - - -20.Net Foreign Currency Assets/(Liabilities) Position (9-18+19) (316.466.691) (25.794.894) (24.505.603) (51.149)21.Monetary Items Net Foreign Currency Assets /(Liabilities)(1+2a+3+5+6a-10-11-12a-14-15-16a) (316.466.691) (25.794.894) (24.505.603) (51.149)22. Fair value of financial instruments used for currency hedge - - - -23. Hedged foreign currency assets - - - -24. Export 320.206.484 47.795.053 7.380.683 318.01024. Import 524.612.156 66.763.528 22.966.948 32.736





68



31 December 2019 TL Amount US Dollar Euro Other1. Trade Receivables 46.080.327 5.287.553 2.120.167 73.4032a. Monetary Financial Assets 4.814.838 738.418 62.024 2.1102b. Non-monetary Financial Assets - - - -3. Other 1.340.486 82.805 127.637 -4.CURRENT ASSETS (1+2+3) 52.235.651 6.108.776 2.309.828 75.5135. Trade Receivables - - - -6a. Monetary Financial Assets - - - -6b. Non-monetary Financial Assets - - - -7. Other 4.166.709 - 626.516 -8. NON-CURRENT ASSETS (5+6+7) 4.166.709 - 626.516 -9. TOTAL ASSETS (4+8) 56.402.360 6.108.776 2.936.344 75.51310. Trade Payable 135.962.717 2.931.841 17.697.280 126.66211. Financial Liabilities 70.057.502 949.629 9.685.821 -12a. Monetary Other Liabilities 391.360 - 58.846 -12b. Non-Monetary Other Liabilities - - - -13. CURRENT LIABILITIES (10+11+12) 206.411.579 3.881.470 27.441.947 126.66214. Trade Payable - - - -15. Financial Liabilities - - - -16a. Monetary Other Liabilities 166.457.472 28.022.200 - -16b. Non-Monetary Other Liabilities - - - -17. NON-CURRENT LIABILITIES (14+15+16) 166.457.472 28.022.200 - -18. TOTAL LIABILITIES (13+17) 372.869.051 31.903.670 27.441.947 126.66219 Off-balance Sheet Derivative InstrumentsNet Asset/Liability Position (19a - 19b) - - - -19.a Amount of active foreign derivative currencyoff-balance sheet - - - -19.b. Amount of passive foreign derivative currencyoff-balance sheet - - - -20.Net Foreign Currency Assets/(Liabilities) Position (9-18+19) (316.466.691) (25.794.894) (24.505.603) (51.149)21.Monetary Items Net Foreign Currency Assets /(Liabilities)(1+2a+3+5+6a-10-11-12a-14-15-16a) (316.466.691) (25.794.894) (24.505.603) (51.149)22. Fair value of financial instruments used for currency hedge - - - -23. Hedged foreign currency assets - - - -24. Export 320.206.484 47.795.053 7.380.683 318.01024. Import 524.612.156 66.763.528 22.966.948 32.736





69



31 December 2018 TL Amount US Dollar Euro Other1. Trade Receivables 70.840.960 10.637.608 2.392.750 68.3092a. Monetary Financial Assets 11.607.897 2.020.094 162.264 4202b. Non-monetary Financial Assets - - - -3. Other 16.507.576 2.762.519 306.207 24.0714.CURRENT ASSETS (1+2+3) 98.956.433 15.420.221 2.861.221 92.8005. Trade Receivables - - - -6a. Monetary Financial Assets - - - -6b. Non-monetary Financial Assets - - - -7. Other - - - -8. NON-CURRENT ASSETS (5+6+7) - - - -9. TOTAL ASSETS (4+8) 98.956.433 15.420.221 2.861.221 92.80010. Trade Payable 290.077.586 35.616.281 16.859.559 171.80811. Financial Liabilities 317.849.858 56.285.289 3.606.269 -12a. Monetary Other Liabilities 170.592 30.286 1.868 -12b. Non-Monetary Other Liabilities - - - -13. CURRENT LIABILITIES (10+11+12) 608.098.036 91.931.856 20.467.696 171.80814. Trade Payable - - - -15. Financial Liabilities - - - -16a. Monetary Other Liabilities - - - -16b. Non-Monetary Other Liabilities - - - -17. NON-CURRENT LIABILITIES (14+15+16) - - - -18. TOTAL LIABILITIES (13+17) 608.098.036 91.931.856 20.467.696 171.80819 Off-balance Sheet Derivative InstrumentsNet Asset/Liability Position (19a - 19b) - - - -19.a Amount of active foreign derivative currencyoff-balance sheet - - - -19.b. Amount of passive foreign derivative currencyoff-balance sheet - - - -20.Net Foreign Currency Assets/(Liabilities) Position (9-18+19) (509.141.603) (76.511.635) (17.606.475) (79.008)21.Monetary Items Net Foreign Currency Assets /(Liabilities)(1+2a+3+5+6a-10-11-12a-14-15-16a) (509.141.603) (76.511.635) (17.606.475) (79.008)22. Fair value of financial instruments used for currency hedge - - - -23. Hedged foreign currency assets - - - -24. Export 358.094.717 72.029.557 5.870.123 151.01224. Import 522.898.402 77.471.656 18.869.472 296.633




70


Sensitivity Analysis to Currency Risk

The Group is mainly exposed to foreign currency risks in US Dollars and Euro. The following tableshows the Group’s sensitivity to a 10% increase and decrease in USD and Euro. 10% is the sensitivityrate used when reporting foreign currency risk internally to key management personnel and representsmanagement’s assessment of the possible change in foreign exchange rates. The sensitivity analysis onlyincludes outstanding foreign currency denominated monetary items and adjusts their translation at theperiod end for a 10% change in foreign currency rates. This analysis comprises the borrowings used forforeign operations within the Group outside the functional currency. A positive number indicates anincrease in profit / loss and other equity.

Profit/Loss

31 December 2019Appreciation foreign

currencyDepreciation foreign

currencyIn case of US Dolar increases in 10% against TL1- US Dollar net asset/liability (15.322.683) 15.322.6832- US Dollar hedged portion (-) - -3- Net effect of US Dollar (1 +2) (15.322.683) 15.322.683In case of Euro increases in 10% against TL4- Euro net asset/liability (16.297.696) 16.297.6965- Euro hedged portion (-) - -6- Net effect of Euro (4+5) (16.297.696) 16.297.696TOTAL (3+6) (31.620.379) 31.620.379

Profit/Loss



currencyIn case of US Dollar increases in 10% against TL1- US Dollar net asset/liability (40.252.006) 40.252.0062- US Dollar hedged portion (-) - -3- Net effect of US Dollar (1 +2) (40.252.006) 40.252.006In case of Euro increases in 10% against TL4- Euro net asset/liability (10.613.183) 10.613.1835- Euro hedged portion (-) - -6- Net effect of Euro (4+5) (10.613.183) 10.613.183TOTAL (3+6) (50.865.189) 50.865.189





70


Sensitivity Analysis to Currency Risk

The Group is mainly exposed to foreign currency risks in US Dollars and Euro. The following tableshows the Group’s sensitivity to a 10% increase and decrease in USD and Euro. 10% is the sensitivityrate used when reporting foreign currency risk internally to key management personnel and representsmanagement’s assessment of the possible change in foreign exchange rates. The sensitivity analysis onlyincludes outstanding foreign currency denominated monetary items and adjusts their translation at theperiod end for a 10% change in foreign currency rates. This analysis comprises the borrowings used forforeign operations within the Group outside the functional currency. A positive number indicates anincrease in profit / loss and other equity.

Profit/Loss



currencyIn case of US Dolar increases in 10% against TL1- US Dollar net asset/liability (15.322.683) 15.322.6832- US Dollar hedged portion (-) - -3- Net effect of US Dollar (1 +2) (15.322.683) 15.322.683In case of Euro increases in 10% against TL4- Euro net asset/liability (16.297.696) 16.297.6965- Euro hedged portion (-) - -6- Net effect of Euro (4+5) (16.297.696) 16.297.696TOTAL (3+6) (31.620.379) 31.620.379

Profit/Loss



currencyIn case of US Dollar increases in 10% against TL1- US Dollar net asset/liability (40.252.006) 40.252.0062- US Dollar hedged portion (-) - -3- Net effect of US Dollar (1 +2) (40.252.006) 40.252.006In case of Euro increases in 10% against TL4- Euro net asset/liability (10.613.183) 10.613.1835- Euro hedged portion (-) - -6- Net effect of Euro (4+5) (10.613.183) 10.613.183TOTAL (3+6) (50.865.189) 50.865.189





71


b.3.1) Interest Rate Risk Management

The Group’s borrowings with fixed and variable interest rates exposes the Group to interest rate risk.

As at 31 December, the interest rate profile of the Group’s interest-bearing financial instruments are asfollows:

31 December 31 DecemberInterest Position 2019 2018Fixed interest rate instruments

Borrowings 74.231.594 317.984.874Cash and cash equivalents 5.025.617 4.208.720Trade receivables 447.038.978 509.398.900Other receivables 638.071.763 858.314.676Trade payables 385.132.347 367.605.640Other payables 111.081.307 2.699.321Lease liabilities 4.174.092 -

The sensitivity analyses below have been determined based on the exposure to interest rates for bothderivatives and non-derivative instruments at the balance sheet date. For floating rate liabilities, theanalysis is prepared assuming the amount of liability outstanding at the balance sheet date wasoutstanding for the whole year. A 100-basis point increase or decrease is used when reporting interestrate risk internally to key management personnel and represents management’s assessment of thereasonably possible change in interest rates. If interest rates had been 50 basis points higher/lower andall other variables were held constant, there would be no impact on Group’s net profit for the year ended31 December 2019 (31 December 2018: None).

b.4) Categories of financial instruments and fair values

Financialliabilities at

amortized cost Carrying value Fair value Note31 December 2019Financial assetsCash and cash equivalents 13.208.215 13.208.215 13.208.215 29Trade receivables from third parties 177.939.312 177.939.312 177.939.312 5Trade receivables from related parties 269.099.666 269.099.666 269.099.666 4Other receivables from third parties 6.838.694 6.838.694 6.838.694 6Other receivables from related parties 632.699.658 632.699.658 632.699.658 4Other financial assets 1.394.933 1.394.933 1.394.933 26Financial liabilitiesBorrowings 74.231.594 74.231.594 74.231.594 27Trade payables to third parties 334.179.848 334.179.848 334.179.848 5Trade payables to related parties 50.952.499 50.952.499 50.952.499 4Trade payables to third parties 1.143.070.204 1.143.070.204 1.143.070.204 4

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




72


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


amortized cost Carrying value Fair value Note31 December 2018Financial assetsCash and cash equivalents 19.448.273 19.448.273 19.448.273 29Trade receivables from third parties 171.712.621 171.712.621 171.712.621 5Trade receivables from related parties 337.686.279 337.686.279 337.686.279 4Other receivables from third parties 10.679.772 10.679.772 10.679.772 6Other receivables from related parties 853.122.409 853.122.409 853.122.409 4Other financial assets 1.420.594 1.420.594 1.420.594 2Financial liabilitiesBorrowings 317.984.874 317.984.874 317.984.874 27Trade payables to third parties 321.188.539 321.188.539 321.188.539 5Trade payables to related parties 46.417.101 46.417.101 46.417.101 4Other payables to third parties 347.814 347.814 347.814 6Other payables to related parties 1.366.595.512 1.366.595.512 1.366.595.512 4


NOTE 29 – CASH AND CASH EQUIVALENTS


Cash on hand 1.484 75.478Cash at banks 10.637.633 17.701.180- Demand deposits 5.612.016 13.492.460- Time deposits (*) 5.025.617 4.208.720

Other cash equivalents 2.569.098 1.671.61513.208.215 19.448.273

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





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


amortized cost Carrying value Fair value Note31 December 2018Financial assetsCash and cash equivalents 19.448.273 19.448.273 19.448.273 29Trade receivables from third parties 171.712.621 171.712.621 171.712.621 5Trade receivables from related parties 337.686.279 337.686.279 337.686.279 4Other receivables from third parties 10.679.772 10.679.772 10.679.772 6Other receivables from related parties 853.122.409 853.122.409 853.122.409 4Other financial assets 1.420.594 1.420.594 1.420.594 2Financial liabilitiesBorrowings 317.984.874 317.984.874 317.984.874 27Trade payables to third parties 321.188.539 321.188.539 321.188.539 5Trade payables to related parties 46.417.101 46.417.101 46.417.101 4Other payables to third parties 347.814 347.814 347.814 6Other payables to related parties 1.366.595.512 1.366.595.512 1.366.595.512 4


NOTE 29 – CASH AND CASH EQUIVALENTS


Cash on hand 1.484 75.478Cash at banks 10.637.633 17.701.180- Demand deposits 5.612.016 13.492.460- Time deposits (*) 5.025.617 4.208.720

Other cash equivalents 2.569.098 1.671.61513.208.215 19.448.273

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





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NOTE 30 – DISCLOSURE OF INTERESTS IN OTHER ENTITIES

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

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

1 January -31 December 2019

1 January -31 December 2018

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

31 December 2019Non-

controllingshare

Non-controllingincome / (expense)

Accumulated non-controlling interest

Marsa Yağ Sanayi ve Tic. A.Ş. 30,00% 28.146.002 209.606.946

31 December 2018Non-

controllingshare

Non-controllingincome / (expense)

Accumulated non-controlling interest

Marsa Yağ Sanayi ve Tic. A.Ş. 30,00% 8.119.991 181.109.294

NOTE 31 – SUBSEQUENT EVENTS

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



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Kerevitaş Gıda Sanayi ve Ticaret A.Ş.Kısık Mah. Yenişen Sok. Yıldız Holding B Blok Apt. No: 8 B/1 Üsküdar/Istanbul-TurkeyTel: 0850 209 16 16 Fax: +90 (212) 421 2674E-mail: [email protected]

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Kerevitaş Annual Report 2019 · 2020. 8. 5. · Frozen and Canned Food Kerevitaş has the widest product range in the frozen food market. The frozen food category offers consumers