ADEL KALEMCİLİK TİCARET VE SANAYİ A.Ş€¦ · ADEL KALEMCİLİK TİCARET VE SANAYİ A.Ş....

ADEL KALEMCİLİK TİCARET VE SANAYİ A.Ş.

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS AT 31 DECEMBER 2013 (ORIGINALLY ISSUED IN TURKISH)

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS

ORIGINALLY ISSUED IN TURKISH


FINANCIAL STATEMENTS AT 31 DECEMBER 2013

CONTENTS PAGE

BALANCE SHEET ....................................................................................................................... 1-2

STATEMENT OF INCOME ....................................................................................................... 3

STATEMENT OF COMPREHENSIVE INCOME ................................................................... 4

STATEMENT OF CHANGES IN EQUITY .............................................................................. 5

STATEMENT OF CASH FLOWS .............................................................................................. 6

NOTES TO THE FINANCIAL STATEMENTS ....................................................................... 7-52

NOTE 1 ORGANIZATION AND NATURE OF OPERATIONS ........................................................................... 7

NOTE 2 BASIS OF PRESENTATION OF FINANCIAL STATEMENTS ............................................................. 8-23

NOTE 3 SEGMENT REPORTING .......................................................................................................................... 23

NOTE 4 CASH AND CASH EQUIVALENTS ....................................................................................................... 24

NOTE 5 FINANCIAL ASSETS ............................................................................................................................... 24

NOTE 6 INVESTMENTS IN JOINT VENTURES ................................................................................................. 25

NOTE 7 FINANCIAL LIABILITIES ....................................................................................................................... 25-26

NOTE 8 TRADE RECEIVABLES AND PAYABLES ............................................................................................ 26

NOTE 9 OTHER RECEIVABLES AND PAYABLES ............................................................................................ 27

NOTE 10 INVENTORIES ......................................................................................................................................... 27

NOTE 11 PROPERTY, PLANT AND EQUIPMENT ............................................................................................... 28-29

NOTE 12 INTANGIBLE ASSETS ............................................................................................................................ 30

NOTE 13 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES ................................................................ 30-31

NOTE 14 EMPLOYEE BENEFITS ........................................................................................................................... 32-33

NOTE 15 OTHER ASSETS AND LIABILITIES ...................................................................................................... 33-34

NOTE 16 EQUITY ..................................................................................................................................................... 34-36

NOTE 17 REVENUE AND COST OF SALES ......................................................................................................... 36

NOTE 18 EXPENSE BY NATURE ........................................................................................................................... 37

NOTE 19 OTHER OPERATING INCOME AND EXPENSES ................................................................................ 38

NOTE 20 FINANCIAL INCOME AND EXPENSES................................................................................................ 39

NOTE 21 TAXATION ON INCOME ........................................................................................................................ 39-40

NOTE 22 EARNINGS PER SHARE ......................................................................................................................... 40

NOTE 23 TRANSACTIONS AND BALANCES WITH RELATED PARTIES ....................................................... 41-43

NOTE 24 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT .......................................... 44-51

NOTE 25 FINANCIAL INSTRUMENTS.................................................................................................................. 52

NOTE 26 SUBSEQUENT EVENTS .......................................................................................................................... 52




BALANCE SHEET AT 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (“TRY”) unless otherwise indicated.)

1

Restated

Notes 31 December 2013 31 December 2012

Assets

Current assets: Cash and cash equivalents 4 38.699.751 1.277.594

Trade receivables 22.765.089 24.352.510

- Due from related parties 23 492.915 269.488

- Due from other parties 8 22.272.174 24.083.022

Other receivables 9 797.601 574.110

Inventories 10 76.190.352 71.371.043

Prepaid expenses 15 359.079 297.439

Current income tax asset 15 5.206.420 3.275.061

Other current assets 15 18.517.867 6.916.503

Total current assets 162.536.159 108.064.260

Non-current assets:

Financial assets 5 233.985 233.985

Investments in associates 6 747.661 337.354

Property, plant and equipment 11 30.524.973 22.152.662

Intangible assets 12 2.232.857 404.378

Deferred tax assets 21 1.888.925 498.624

Prepaid expenses 15 70.194 72.900

Other non-current assets 15 8.835.111 -

Total non-current assets 44.533.706 23.699.903

Total assets 207.069.865 131.764.163

These financial statements as at and for 31 December 2013 have been approved for issue by the Board

of Directors on 28 February 2014 and signed on its behalf by Chairman of the Audit Committee Kamil

Ömer Bozer, Audit Committee Members Hamit Sedat Eratalar, General Manager Evrim Hizaler and

Finance and Accounting Director Ceyhan Baştürk.

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




BALANCE SHEET AT 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (“TRY”) unless otherwise indicated.)

2

Restated

Notes 31 December 2013 31 December 2012

Liabilities

Current liabilities:

Financial liabilities 7 25.555.716 7.113.553

Trade payables 9.601.500 9.818.241

- Due to related parties 23 1.329.523 1.262.146

- Due to other parties 8 8.271.977 8.556.095

Payables for employee benefits 9 329.842 364.419

Other payables 9 2.340.224 1.905.730

Provisions 13 71.695 71.695

Provisions for employee benefits 14 348.020 233.646

Other current liabilities 15 1.170.638 2.426.092

Total current liabilities 39.417.635 21.933.376

Non-current Liabilities :

Financial liabilities 7 18.815.801 -

Provision for employee benefits 14 6.041.627 5.324.221

Total non-current liabilities 24.857.428 5.324.221

Equity:

Share capital 16 7.875.000 7.875.000

Adjustment to share capital 16 13.374.985 13.374.985

Other comprehensive income/expense to be

reclassified to profit or loss

- Currency translation differences 332.040 (74.230)

Other comprehensive income/expense not to be

reclassified to profit or loss

- Remeasurements of

employment termination benefit obligations (395.595) (664.210)

Restricted reserves 16 8.606.613 7.441.113

Retained earnings 16 63.339.658 52.139.450

Net income for the period 49.662.101 24.414.458

Total equity 142.794.802 104.506.566

Total liabilities and shareholders’ equity 207.069.865 131.764.163

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




STATEMENT OF INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (“TRY”) unless otherwise indicated.)

3

Restated

Profit or loss Notes 2013 2012

Revenue 17 186.099.908 159.613.655

Cost of sales (-) 17 (96.103.392) (82.078.281)

Gross profit 89.996.516 77.535.374

Marketing, selling and distribution (-) 18 (30.321.101) (24.914.379)

General and administrative expenses (-) 18 (18.422.568) (13.067.478)

Other operating income 19 778.548 1.260.888

Other operating expenses (-) 19 (2.019.985) (2.301.382)

Operating profit 40.011.410 38.513.023

Income from investing activities 19 21.771.581 -

Expenses from investing activities (-) 19 - (43.050)

Loss from investments

accounted with equity method 19 (1.402.363) (1.619.287)

Operating profit before

financial income and expense 60.380.628 36.850.686

Financial income 20 1.140.462 584.491

Financial expenses (-) 20 (5.540.038) (6.596.689)

Profit before tax from continued operations 55.981.052 30.838.488

Tax income/expense from

continued operations (6.318.951) (6.424.030)

- Income tax expense for the period (-) 21 (7.709.252) (6.576.236)

- Deferred tax income 21 1.390.301 152.206


Earnings per share 22 6,3063 3,1002





STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (“TRY”) unless otherwise indicated.)

4

Restated

Notes 2013 2012


Other comprehensive income

Items not to be reclassified to profit or loss

- Remeasurements of provision for

employment termination benefit, net of tax 14 268.615 (389.469)

Items to be reclassified to profit or loss

- Currency translation differences 6 406.270 (11.245)

Other comprehensive income, after tax - -

Total comprehensive income for the period 50.336.986 24.013.744





STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (“TRY”) unless otherwise indicated.)

5

Other Other comprehensive comprehensive income income and and expense expense to be not to be reclassified reclassified to profit or loss to profit or loss

Gain/loss on Adjustment Currency revaluation Share to share translation and Restricted Retained Net profit Total capital capital differences remeasurement reserves Earnings for the period equity

1 January 2013 (previously reported) 7.875.000 13.374.985 (74.230) - 7.441.113 51.864.709 24.024.989 104.506.566

Effect of change in accounting policy (Note 2.6) - - - (664.210) - 274.741 389.469 -

1 January 2013 (restated) 7.875.000 13.374.985 (74.230) (664.210) 7.441.113 52.139.450 24.414.458 104.506.566

Transfers - - - - 1.165.500 23.248.958 (24.414.458) - Dividend payments - - - - - (12.048.750) - (12.048.750) Total comprehensive income - - 406.270 268.615 - - 49.662.101 50.336.986

31 December 2013 7.875.000 13.374.985 332.040 (395.595) 8.606.613 63.339.658 49.662.101 142.794.802

1 January 2012 (previously reported) 7.875.000 13.374.985 (62.985) - 6.378.203 37.985.711 25.964.758 91.515.672

Effect of change in accounting policy (Note 2.6) - - - (274.741) - 274.741 -

1 January 2012 (restated) 7.875.000 13.374.985 (62.985) (274.741) 6.378.203 37.985.711 26.239.499 91.515.672

Transfers - - - - 1.062.910 25.176.589 (26.239.499) - Dividend payments - - - - - (11.022.850) - (11.022.850) Total comprehensive income - - (11.245) (389.469) - - 24.414.458 24.013.744

31 December 2012 7.875.000 13.374.985 (74.230) (664.210) 7.441.113 52.139.450 24.414.458 104.506.566





STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (“TRY”) unless otherwise indicated.)

6

Restated Notes 2013 2012

Cash flows from operating activities

Net profit before taxes 55.981.052 30.449.019

Adjustments:

Foreign exchange (income)/losses (1.132.808) (167.734) Depreciation and amortization 11,12 3.615.455 2.404.650 Loss from sales of property, plant and equipment and intangible assets 19 (21.771.581) 43.049 Provision for employment termination benefits 14 689.326 1.733.665 Unused vacation accruals 14 274.978 166.120 Bonus accruals 14 348.020 233.646 Impaiments 17.623 173.483 Provision for impairment of inventories 10 (327.704) 63.426 Loss from investments accounted with equity method 19 1.402.363 1.619.288 Interest income (278.314) (546.772) Interest expenses 20 3.388.420 5.616.604 Unearned finance income (34.389) 49.117

Net cash generated from operating activities before changes in operating assets and liabilities 42.172.441 41.837.561

Changes in operating assets and liabilities

Change in trade and other receivables 1.380.696 (7.633.226) Change in trade and other payables 183.176 5.301.814 Change in other liabilities (1.255.454) 548.653 Change in inventories (4.491.605) (16.767.122) Change in other assets (20.495.409) 1.838.874 Employment termination benefits paid 14 (246.898) (664.075) Bonus paid 14 (233.646) (239.800) Taxes paid 21 (12.915.672) (9.851.297)

Net cash used in operating activities 4.097.629 14.371.382

Purchase of property, plant and equipment and intangible assets 11,12 (19.166.193) (8.793.814) Proceeds from sale of property, plant and equipment 27.121.529 100.879 Capital increase in investments accounted with equity method 6 (1.406.400) (1.113.400) Interests received 278.314 546.772

Net cash used in investing activities 6.827.250 (9.259.563)

Dividends paid 16 (12.048.750) (11.022.850) Proceeds from borrowings 236.510.734 192.921.015 Payments of borrowings (194.170.016) (189.972.383) Interest paid (3.388.420) (5.589.314)

Net cash generated from financing activities 26.903.548 13.663.533

Currency translation differences on cash and cash transactions 6 (406.270) (11.245)

Net increase/(decrease) in cash and cash equivalents 37.422.157 (8.562.959)

Cash and cash equivalents at beginning of the period 4 1.277.594 9.840.553

Cash and cash equivalents at end of the period 4 38.699.751 1.277.594





NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2013 (Amounts expressed in Turkish Lira (“TRY”) unless otherwise indicated.)

7

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Adel Kalemcilik Ticaret ve Sanayi A.Ş.’s (the “Company”) principal business activity is production of

cedar wood pencils, crayons and other stationery equipment, selling and exporting goods that are

produced in facilities, importing, purchasing and selling of any kind of primary materials, semi-

finished goods and finished goods that are also in respect to the principle business activity.

The Company was established in 17 July 1967 and at the same date registered with Istanbul Chamber

of Industry and Istanbul Chamber of Commerce with the register number of 96078.

The address of the Company’s head office is as follow:

Esentepe Mah. Anadolu Cad. No:7

34870 Kartal, İstanbul

The Company is registered with the Capital Markets Board (“CMB”) and its shares have been quoted

on the Istanbul Stock Exchange (“ISE”) since 1996. As of 31 December 2013, the publicly quoted

shares are 22.60% of the total shares. the principal shareholders and their respective shareholdings in

the Company are as follows:

Shareholders (%)

Anadolu Endüstri Holding A.Ş. 56,89

Faber-Castell Aktiengesellschaft 15,40

Publicly quoted 22,60

Other 5,11

100,00

The Company’s interest in jointly controlled entities is accounted for using the equity method:

Company name Principal activity Country (%)

LLC Faber-Castell Anadolu Trade of stationery Russia 50,00

Faber Castell Anadolu LLC is established and registered in Moscow, Russia as a jointly controlled

entity at September 13, 2011. The principal activities are; trading and distributing of stationery, art,

painting and hobby equipments and toys.





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NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

2.1 Basis of presentation

2.1.1 Financial reporting standards

The enclosed consolidated financial statements have been prepared in line with Capital Markets Board

("CMB"), Communiqué Serial: II, No. 14.1 on "Principles on Financial Reporting in Capital Market",

promulgated in Official Gazette No. 28676 dated 13 June 2013. Pursuant to Article 5 of the

Communiqué, Turkish Accounting Standards / Turkish Financial Reporting Standards ("TAS/TFRS")

enforced by Public Oversight Accounting and Auditing Standards Authority ("KGK"), and their

relevant appendices and interpretations ("TAS/TFRS") have been taken as basic

The Group has prepared its consolidated financial statements for the interim period ending on 31

December 2013 within the framework of CMB's Communiqué Serial: XII, No. 14.1 and

announcements introducing explanations to this communiqué and in line with TAS 34 "Interim

Financial Reporting" standard. Interim consolidated financial statements and notes have been

presented in accordance with the formats recommended to be applied by CMB and by including the

obligatory information.

The Company (and its Affiliates registered in Turkey) takes the Turkish Commercial Code ("TCC"),

tax legislation and Uniform Chart of Accounts introduced by Turkish Ministry of Finance as basic for

book keeping and preparation of the statutory financial statements. Interim consolidated financial

statements have been prepared in Turkish Lira based on the historical costs, as well as the financial

assets and liabilities presented with their fair values. Interim consolidated financial statements have

been arranged by applying the required adjustments and classifications to the statutory records

prepared on historical cost basis in order to provide accurate presentation in line with TAS/TFRS.

Preparation of Financial Statements in Hyperinflationary Periods

In accordance with the CMB’s decision No: 11/367 issued on 17 March 2005, companies operating in

Turkey which prepare their financial statements in accordance with the CMB Accounting Standards

(including the application of IFRS) are not subject to inflation accounting effective from 1 January

2005. Therefore, as of 1 January 2005, IAS 29 “Financial Reporting in Hyperinflationary Economies”

is not applied in the accompanying consolidated financial statements.

2.2 Summary of significant accounting policies

The significant accounting policies followed in the preparation of these financial statements are

summarised below:

2.2.1 Revenue recognition

The Company’s revenue consists of domestic and export sales of cedar wood pencils, crayons and

copy pens, pens, mechanical pencil and their mins, markers, pastels, watercolors, erasers, finger

paints, modelling clay, body-color painting and other stationery equipments by producing and

importing them.

Revenues are recognized on an accrual basis at the fair values incurred or to be incurred, when the

amount of revenue can be reliably measured and it is probable that the future economic benefits

associated with the transaction will flow to the entity. Net sales represent the fair value of goods

shipped less sales discounts and returns.





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

2.2 Summary of significant accounting policies (Continued)

2.2.1 Revenue recognition (Continued)

Revenue from the sale of goods is recognized when all the following conditions are gratified:

The significant risks and the ownership of the goods are transferred to the buyer,

The Company refrains the managerial control over the goods and the effective control over the

goods sold,

The revenue can be measured reasonably,

It is probable that the economic benefits related to transaction will flow to the entity,

The costs incurred or will be incurred in conjunction with the transaction can be measured

reliably.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the

effective interest rate applicable, which is the rate that discounts the estimated future cash receipts

through the expected life of the financial asset to that asset’s net carrying amount.

Dividend income obtained from stock investments are registered when shareholders originate to

receive dividend.

Rent income earned from real estate is booked according to straight-line method in the course of rental

contract.

When there is a significant financing element in sales, fair value is calculated with a hidden interest

rate that will appear in financing element of future cash flows. The difference is reflected according to

accrual basis to financial statements.

2.2.2 Inventories

The inventories of the Company mainly composed of raw materials, auxiliary materials, packaging

materials, semi-finished goods and pencil and other stationery equipment as finished goods.

Inventories are valued at the lower of cost or net realizable value. Cost of inventories comprises the

purchase cost and the cost of bringing inventories into their present location and condition. Bringing

inventories into their present location and condition also includes costs that are directly associated

with production such as direct labour expenses. The allocation of fixed production overheads to the

costs of conversion is based on the normal capacity of the production facilities. Idle time expenses

arising from the ceases in production other than planned in the factory’s annual production plan are

not associated with inventories and are recognised as cost of finished goods.

The cost of inventories is determined on the monthly weighted average basis. Net realizable value is

the estimated selling price in the ordinary course of business, less the costs of completion and selling

expenses.





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2.2.3 Loans and borrowing costs

Borrowings are recognised initially at the proceeds received, net of transaction costs incurred.(Note:7)

In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any

difference between proceeds (net of transaction costs) and the redemption value is recognised in the

statement of income over the period of the borrowings. When it comes to the assets which take long

time to get ready to usage and sales, borrowing costs related to production or construction are

integrated to the cost of the asset.

2.2.4 Property, plant, equipment

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is

provided on restated amounts of property, plant and equipment using the straight-line method based on

the estimated useful lives of the assets.

Depreciation is calculated according to straight-line method to carry costs of every fixed asset with

following ratios (%) while useful lives are taken as a basis:

Land improvement 3,33-50

Buildings 2-5

Machinery and equipment 8,33-10

Vehicles 20

Fixtures 20

Depreciation is not provided for land due to their indefinite useful life.

Gains or losses on disposals of property, plant and equipment are included in the related income or

expense accounts, as appropriate.

Repair and maintenance expenses are charged to the statement of income as they are incurred. Repair

and maintenance expenditures are capitalized if they result in an enlargement or substantial

improvement of the respective asset. 2.2.5 Intangible assets Intangible assets are presented with their costs after accumulated amortization and depletion and

permanent impairment are reduced from the costs. Amortization for these assets is calculated

considering their expected useful lives by using straight-line method. Expected useful lives and

straight-line methods are revised to determine potential effects of changes of estimations every year

and if there is any that change is prudentially booked. Software purchased is capitalized on the spot of purchase considering the costs that are occurred between the purchase date and the date that software becomes ready for use. Amortization of the costs is booked as their useful lives.





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2.2.6 Impairment of assets Amortization is not calculated for assets that have eternal lives such as goodwill. Every year impairment test is applied on these assets. When incidents occur that makes book value is impossible to gain back for assets that are depreciable, impairment test is applied on them. An impairment loss is recognised for the amount by which the carrying amount of the asset or a cash generating unit related to the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use. Impairment losses are recognised in the statement of income.

Impairment losses on assets can be reversed, to the extent of previously recorded impairment losses, in cases where increases in the recoverable value of the asset can be associated with events that occur subsequent to the period when the impairment loss was recorded. 2.2.7 Research and development expenses Research and development expenses are booked when they occur. Costs incurred on development projects relating to the design and testing of new or improved products are recognized as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and only if the cost can be measured reliably. Other development expenditures are recognized as an expense as incurred. Development expenditures previously recognized as an expense are not recognized as an asset in a subsequent period.

2.2.8 Borrowing costs Borrowings are recognized initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost using the effective yield method. Any difference between proceeds, net of transaction costs, and the redemption value is recognized in the income statement as financial expense over the period of the borrowings. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset in the period in which the asset is prepared for its intended use or sale. All other borrowing costs are charged to the income statement when they are incurred.

2.2.9 Financial Instruments

(i) Financial assets

Financial investments, except financial assets classified at fair value through profit or loss and financial assets initially recognized at fair value, are recognized at fair value net of directly attributable transaction costs. Investments are recognized and derecognized on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned.

Financial assets are classified into the following specified categories: financial assets classified as ‘at fair value through profit or loss’ (“FVTPL”), ‘held-to-maturity investments’, ‘available-for-sale’ (“AFS”) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.





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2.2.9 Financial Instruments (Continued)

Effective interest method

The effective interest method is used for calculating the amortized cost of a financial asset and for allocating interest income over the relevant period. The effective interest rate discounts the estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income from financial assets that are classified as held to maturity, available for sale and loans and receivables is recognized on an effective interest basis.

a) Financial assets at fair value through profit or loss Financial assets are classified as financial assets at fair value through profit or loss where the Company acquires the financial asset principally for the purpose of selling in the near future or the financial asset is a part of an identified portfolio of financial instruments that the Company manages together and has a recent actual pattern of short term profit taking as well as derivatives that are not designated and effective hedging instruments. Financial assets at fair value through profit or loss are carried at fair value, with any resulting gain or loss recognized in profit or loss incorporating any dividend or interest earned on the financial asset. Assets in this category are classified as current assets.

b) Held-to-maturity investments

Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates that

the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity

investments. Held-to-maturity investments are recorded at amortized cost using the effective interest

method less impairment, with revenue recognized on an effective yield basis.

c) Available-for-sale financial assets

Investments other than held-to-maturity financial assets, held for fair value through profit or loss and

loans and receivables are classified as available-for-sale, and are measured at subsequent reporting

dates at fair value except for available-for-sale investments that do not have quoted prices in active an

market and whose fair values can not be reliably measured are carried at cost. Gains and losses on

available for sale financial assets at amortized cost are recognized in the income statement. Gains and

losses arising from changes in fair value are recognized directly in equity, until the security is disposed

of or is determined to be impaired, at which time the cumulative gain or loss previously recognized in

equity is included in the profit or loss for the period. Impairment losses recognized in profit or loss for

equity investments classified as available-for-sale are not subsequently reversed through profit or loss.

Impairment losses recognized in profit or loss for debt instruments classified as available-for-sale are

subsequently reversed if an increase in the fair value of the instrument can be objectively related to an

event occurring after the recognition of the impairment loss.

In case of the right to receive dividend of the Company, dividends related to available-for-sale equity

instruments are recognized in profit or loss.





13




Fair value of available for sale monetary assets denominated in foreign currency is determined in that

foreign currency and converted using the spot rate at the reporting date. Change in fair value

attributable to conversion differences that result from a change in amortized cost of the asset is

recognized in profit or loss, and other changes are recognized in equity.

d) Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not

quoted in an active market are classified as “loans and receivables”. Loans and receivables are

measured at amortized cost using the effective interest method less any impairment.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance

sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or

more events that occurred after the initial recognition of the financial asset, the estimated future cash

flows of the investment have been impacted. For financial assets carried at amortized cost, the amount

of the impairment is the difference between the asset’s carrying amount and the present value of

estimated future cash flows, discounted at the original effective interest rate.

Carrying amount of the financial asset is reduced by the impairment loss directly for all financial

assets with the exception of trade receivables where the carrying amount is reduced through the use of

an allowance account. When a trade receivable is uncollectible, it is written off against the allowance

account. Subsequent recoveries of amounts previously written off are credited against the allowance

account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

With the exception of AFS equity instruments, in a subsequent period, if the amount of impairment

loss decreases and the decrease can be related objectively to an event occurring after the impairment

was recognized, the previously recognized impairment loss is reversed through profit or loss to the

extent that the carrying amount of the investment at the date the impairment is reversed does not

exceed what the amortized cost would have been had the impairment not been recognized.

In respect of AFS equity securities, any increase in fair value subsequent to an impairment loss is

recognized directly in equity.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly

liquid investments which their maturities are three months or less from date of acquisition and that are

readily convertible to a known amount of cash and are subject to an insignificant risk of changes in

value. The carrying amount of these assets approximates their fair value.





14




(ii) Financial liabilities

Financial liabilities and equity instruments issued by the Company are classified according to the

substance of the contractual arrangements entered into and the definitions of a financial liability and

an equity instrument. An equity instrument is any contract that evidences a residual interest in the

assets of the Company after deducting all of its liabilities. The accounting policies adopted for specific

financial liabilities and equity instruments are set out below.

Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.

a) Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or

it is designated as at FVTPL. Financial liabilities at FVTPL are carried at fair value, with any resultant

gain or loss recognized in profit or loss. Net gain or loss recognized in profit or loss incorporates any

interest paid on the financial liability

.

b) Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction

costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest

method plus the interest expense recognized on an effective yield basis.

The effective interest method is calculating the amortized cost of a financial liability and of allocating

interest expense over the relevant period. The effective interest rate discounts the estimated future cash

payments through the expected life of the financial liability or where appropriate, a shorter period.

(iii) Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are

subsequently re-measured at their fair value. The Company enters into currency futures contracts in

order to minimize foreign exchange basis borrowings. There is no open derivative contract entered

into as of 31 December 2013.

2.2.10 Foreign currency transactions and balances

Transactions in foreign currencies during the year have been translated at the exchange rates

prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign

currencies have been translated into TRY at the exchange rates prevailing at the balance sheet dates.

Foreign currency exchange gains or losses arising from the settlement of such transactions and from

the translation of monetary assets and liabilities are recognized in the statement of income.





15



2.2.11 Earnings per share

Earnings per share disclosed in the accompanying statement of income are determined by dividing net

income by the weighted average number of shares circulating during the period concerned.

In Turkey, companies can raise their share capital by distributing “Bonus Shares” to shareholders from

retained earnings. In computing earnings per share, such “bonus share” distributions are assessed as

issued shares. Accordingly, the retrospective effect for those share distributions is taken into

consideration in determining the weighted-average number of shares outstanding used in this

computation.

2.2.12 Subsequent events

Subsequent events comprise any event between the balance sheet date and the date of authorization of

the financial statements for publication, even if any event after balance sheet date occurred subsequent

to an announcement on the Company’s profit or following any financial information disclosed to

public.

The Company adjusts the amounts recognized in the financial statements to reflect the adjusting events

after the balance sheet date. If non-adjusting events after the balance sheet date have material

influences on the economic decisions of users of the financial statements, they are disclosed in the

notes to the financial statements.

2.2.13 Provisions, contingent liabilities and contingent assets

Provisions are recognized when the Company has a present obligation as a result of a past event, and it

is probable that the Company will be required to settle that obligation, and a reliable estimate can be

made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the

present obligation at the balance sheet date considering the risks and uncertainties surrounding the

obligation.

Where a provision is measured using the cash flows estimated to settle the present obligation, its

carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered

from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement

will be received and the amount of the receivable can be measured reliably.

2.2.14 Related parties

For the purpose of these financial statements, shareholders, key management personnel and Board

members, in each case together with their families and companies controlled by/or affiliated with

them, associated companies are considered and referred to as related parties. The transactions with

related parties for operating activities are made with prices which are convenient with market prices.





16



2.2.15 Taxes on income

Taxes include current period income taxes and deferred taxes. Current year tax liability consists of tax

liability on the taxable income calculated according to currently enacted tax rates and to the effective

tax legislation as of balance sheet date.

Deferred income tax is provided, using the liability method, for temporary differences arising between

the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Tax

bases of assets and liabilities comprise of the amounts that will affect the future period tax charges

based on the tax legislation. Currently enacted tax rates, which are expected to be effective during the

periods when the deferred tax assets will be utilised or deferred tax liabilities will be settled, are used

to determine deferred income tax.

Deferred tax liabilities are recognised for all taxable temporary differences, where deferred tax assets

resulting from deductible temporary differences are recognised to the extent that it is probable that

future taxable profit will be available against which the deductible temporary difference can be

utilised. Deferred tax assets arising from deductible temporary differences associated with such

investments and interests are only recognized to the extent that it is probable that there will be

sufficient taxable profits against which to utilize the benefits of the temporary differences and they are

expected to reverse in the foreseeable future.

Deferred tax assets and liabilities related to income taxes levied by the same taxation authority are

offset when there is a legally enforceable right to offset current tax assets against current tax liabilities.

2.2.16 Provision for employment termination benefits

Under the Turkish law and union agreements, severance payments are made to employees retiring or involuntarily leaving the Company. Such payments are considered as being part of defined retirement benefit plan as per International Accounting Standard No: 19 (Revised) “Employee Benefits” (“IAS 19”).

The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses.

2.2.17 Statement of cash flows

Cash and cash equivalents include cash and bank deposits and the investments that are readily convertible into cash and highly liquid assets with less than three months to maturity. The cash flows raised from operating activities indicate cash flows due to the Company’s operations. The cash flows due to investing activities indicate the Company cash flows that are used for and obtained from investments (investments in property, plant and equipment and financial investments).

The cash flows due to financing activities indicate the cash obtained from financial arrangements and used in their repayment.





17



2.2.18 Share capital and dividends

Ordinary shares are classified as equity. Dividends on ordinary shares are recognized in equity in the period in which they are declared.

2.2.19 Offsetting

All items with significant amounts and nature, even with similar characteristics, are presented separately in the financial statements. Insignificant amounts are grouped and presented by means of items having similar substance and function. When the nature of transactions and events necessitate offsetting, presentation of these transactions and events over their net amounts or recognition of the assets after deducting the related impairment are not considered as a violation of the rule of non-offsetting.

2.2.20 Trade receivables and provision for doubtful receivables

Trade receivables that are created by the Company by way of providing goods or services directly to a debtor are carried at amortised cost. Trade receivables are stated at face value less allowance for the unearned portion of imputed finance income included in their face values by using the effective interest rate method. Short duration receivables with no stated interest rate are measured at the original invoice amount unless the effect of imputing interest is significant. A credit risk provision for trade receivables is established if there is objective evidence that the Company will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount. The recoverable amount is the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originated receivables at inception. After allocation of impairment provision, the impairment amount is deducted from the provision and recorded as other income when it is partially or fully collected.

2.2.21 Comparative Information and Restatement of Prior Periods Financial Statements The financial statements of the Company are presented comparatively to enable the determination of the trends of the financial position and performance. The balance sheet of the Company at 31 December 2013 has been presented with the comparative financial statements of 31 December 2012 and the statement of income, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year ended 31 December 2013 have been presented with the comparative financial information, for the year ended 31 December 2012.





18


2.3 Amendments in International Financial Reporting Standards

a. Standards, amendments and IFRICs applicable to 31 December 2013 year ends

The changes below do not have any significant impact on the financial statements at 31 December 2013 - Amendment to IAS 1, ‘Financial statement presentation’, regarding other comprehensive

income; is effective for annual periods beginning on or after 1 July 2012. The main change resulting from these amendments is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI.

- Amendment to IAS 19, ‘Employee benefits’; is effective for annual periods beginning on or after 1 January 2013. These amendments eliminate the corridor approach and calculate finance costs on a net funding basis.

- Amendment to IFRS 1, ‘First time adoption’, on government loans; ; is effective for annual periods beginning on or after 1 January 2013. This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008.

- Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset and liability offsetting¸; is effective for annual periods beginning on or after 1 January 2013. This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP.

- Amendment to IFRSs 10, 11 and 12 on transition guidance; is effective for annual periods

beginning on or after 1 January 2013. These amendments provide additional transition relief to

IFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative information to

only the preceding comparative period. For disclosures related to unconsolidated structured

entities, the amendments will remove the requirement to present comparative information for

periods before IFRS 12 is first applied.

- Annual improvements 2011; is effective for annual periods beginning on or after 1 January

2013. These annual improvements address six issues in the 2009-2011 reporting cycle. It

includes changes to: IFRS 1, ‘First time adoption’, IAS 1, ‘Financial statement presentation’,

IAS 16, ‘Property plant and equipment’, IAS 32, ‘Financial instruments; Presentation’ and IAS

34, ‘Interim financial reporting’.

- IFRS 10, ‘Consolidated financial statements’; is effective for annual periods beginning on or

after 1 January 2013. The objective of IFRS 10 is to establish principles for the presentation and

preparation of consolidated financial statements when an entity controls one or more other

entity (an entity that controls one or more other entities) to present consolidated financial

statements. It defines the principle of control, and establishes controls as the basis for

consolidation. It sets out how to apply the principle of control to identify whether an investor

controls an investee and therefore must consolidate the investee. It also sets out the accounting

requirements for the preparation of consolidated financial statements.





19


2.3 Amendments in International Financial Reporting Standards (Continued)

- IFRS 11, ‘Joint arrangements’; is effective for annual periods beginning on or after

1 January 2013. IFRS 11 is a more realistic reflection of joint arrangements by focusing on the

rights and obligations of the arrangement rather than its legal form. There are two types of joint

arrangement: joint operations and joint ventures. Joint operations arise where a joint operator

has rights to the assets and obligations relating to the arrangement and therefore accounts for its

interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator

has rights to the net assets of the arrangement and therefore equity accounts for its interest.

Proportional consolidation of joint ventures is no longer allowed.

- IFRS 12, ‘Disclosures of interests in other entities’; is effective for annual periods beginning on

or after 1 January 2013. IFRS 12 includes the disclosure requirements for all forms of interests

in other entities, including joint arrangements, associates, special purpose vehicles and other off

balance sheet vehicles.

- IFRS 13, ‘Fair value measurement’ ; is effective for annual periods beginning on or after

1 January 2013. IFRS 13 aims to improve consistency and reduce complexity by providing a

precise definition of fair value and a single source of fair value measurement and disclosure

requirements for use across IFRSs. The requirements, which are largely aligned between IFRS

and US GAAP, do not extend the use of fair value accounting but provide guidance on how it

should be applied where its use is already required or permitted by other standards within IFRSs

or US GAAP.

- IAS 27 (revised 2011), ‘Separate financial statements’; is effective for annual periods

beginning on or after 1 January 2013. IAS 27 (revised 2011) includes the provisions on separate

financial statements that are left after the control provisions of IAS 27 have been included in the

new IFRS 10.

- IAS 28 (revised 2011), ‘Associates and joint ventures’; is effective for annual periods beginning

on or after 1 January 2013. IAS 28 (revised 2011) includes the requirements for joint ventures,

as well as associates, to be equity accounted following the issue of IFRS 11. - IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ is effective for annual

periods beginning on or after 1 January 2013. This interpretation sets out the accounting for

overburden waste removal (stripping) costs in the production phase of a mine. The

interpretation may require mining entities reporting under IFRS to write off existing stripping

assets to opening retained earnings if the assets cannot be attributed to an identifiable

component of an ore body.





20

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


b. New IFRS standards, amendments and IFRICs effective after 1 January 2014: The changes below do not have any significant impact on the financial statements at 31 December 2013 - Amendment to IAS 32, ‘Financial instruments: Presentation’, on asset and liability offsetting is

effective for annual periods beginning on or after 1 January 2014.These amendments are to the application guidance in IAS 32, ‘Financial instruments: Presentation’, and clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.

- Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities is effective for

annual periods beginning on or after 1 January 2014. These amendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead, they will measure them at fair value through profit or loss. The amendments give an exception to entities that meet an ‘investment entity’ definition and which display particular characteristics. Changes have also been made IFRS 12 to introduce disclosures that an investment entity needs to make.

- Amendment to IAS 36, 'Impairment of assets' on recoverable amount disclosures is effective for

annual periods beginning on or after 1 January 2014.This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

- Amendment to IAS 39 ‘Financial Instruments: Recognition and Measurement’ - ‘Novation of

derivatives is effective for annual periods beginning on or after 1 January 2014. This amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument to a central counterparty meets specified criteria.

- IFRIC 21, 'Levies' is effective for annual periods beginning on or after 1 January 2014. This is

an interpretation of IAS 37, 'Provisions, contingent liabilities and contingent assets'. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

- IFRS 9 ‘Financial instruments’ – classification and measurement; is effective for annual periods

beginning on or after 1 January 2015. This standard on classification and measurement of financial assets and financial liabilities will replace IAS 39, ‘Financial instruments: Recognition and measurement’. IFRS 9 has two measurement categories: amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the IAS 39 requirements.

https://pwcinform.pwc.com/inform2/show?action=informContent&id=1147163412176000





21

NOTE 2 - BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (Continued)


- These include amortised-cost accounting for most financial liabilities, with bifurcation of

embedded derivatives. The main change is that, in cases where the fair value option is taken for

financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded

in other comprehensive income rather than the income statement, unless this creates an

accounting mismatch. This change will mainly affect financial institutions.

- Amendments to IFRS 9,‘Financial instruments’, regarding general hedge. These amendments

to IFRS 9, 'Financial instruments', bring into effect a substantial overhaul of hedge accounting

that will allow entities to better reflect their risk management activities in the financial

statements.

- Amendment to IAS 19 regarding defined benefit plans; ; is effective for annual periods

beginning on or after 1 July 2014. These narrow scope amendments apply to contributions from

employees or third parties to defined benefit plans. The objective of the amendments is to

simplify the accounting for contributions that are independent of the number of years of

employee service, for example, employee contributions that are calculated according to a fixed

percentage of salary.

- Annual improvements 2012; is effective for annual periods beginning on or after 1 July 2014.

These amendments include changes from the 2010-12 cycle of the annual improvements

project, that affect 7 standards:

- IFRS 2, ‘Share-based payment’

- IFRS 3, ‘Business Combinations’

- IFRS 8, ‘Operating segments’

- IFRS 13, ‘Fair value measurement’

- IAS 16, ‘Property, plant and equipment’ and IAS 38,‘Intangible assets’

- Consequential amendments to IFRS 9, ‘Financial instruments’, IAS 37, ‘Provisions, contingent

liabilities and contingent assets’, and

- IAS 39, Financial instruments - Recognition and measurement’.

Annual improvements 2013; is effective for annual periods beginning on or after 1 July 2014. The

amendments include changes from the 2011-2013 cycle of the annual improvements project that affect

4 standards:

- IFRS 1, ‘First time adoption’

- IFRS 3, ‘Business combinations’

- IFRS 13, ‘Fair value measurement’ and

- IAS 40, ‘Investment property’.





22


2.4 Changes in the Accounting Policies and Errors

Significant changes in accounting policies or significant errors are corrected, retrospectively; by

restating the prior period financial statements. There are no significant changes in the accounting

policies for the period of 1 January - 31 December 2013.

2.5 Financial statements of joint ventures operating in other countries

Foreign currency transactions are translated into the functional currency using the exchange rates

prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange

gains and losses resulting from the settlement of such transactions and from the translation at

period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are

recognised in the consolidated statement of loss.

The results and financial position of all the Group entities that have a functional currency different

from the presentation currency are translated into the presentation currency as follows:

- assets and liabilities are translated at the closing rate at the date of that balance sheet,

- income and expenses are translated at average exchange rates unless this average is not

reasonable approximate of the cumulative effect of the prevailing on the transaction dates in

which case income and expenses are translated at the rate on the dates of the transactions, and

- exchange differences resulted from translation of net assets both with the closing rate and

average rate are recognised as a separate component of equity (currency translation difference)

and in the other comprehensive income.

2.6 Comparatives and adjustment of prior periods’ financial statements

The Company's consolidated financial statements for the current period are prepared in comparison

with the previous periods in order to be able to determine the financial position and performance

trends. The comparative information is reclassified when necessary with the aim of ensuring

consistency with the presentation of the current period's consolidated financial statements.

In this context, the Company early adopted the revision in IAS 19 and has accounted for the

remeasurements of provision for employment termination benefits in other comprehensive income,

which was priorly accounted for in the statement of income.





23


2.6 Comparatives and adjustment of prior periods’ financial statements (Continued)

The effects of this corrections on the financial statements for the year ended 31 December 2012 are as

follows:

Other Profit

Retained comprehensive for the

earnings income period

31 December 2012 (previously reported) 51.864.709 (11.245) 24.024.989

Change in the accounting policy in relation to

employment termination benefits, net of tax 274.741 (389.469) 389.469

31 December 2012 (Restated) 52.139.450 (400.714) 24.414.458

In accordance with the announcement regarding the financial statements and note formats, which

would be prepared as per the decision taken at CMB meeting No. 20/670 dated 07 June 2013, the

Group has made the necessary classifications according to the changes in display made in the current

period, in consolidated financial statements of the period.

NOTE 3 - SEGMENT REPORTING

The Company, which is incorporated and domiciled in Turkey, has primary operation of production of

cedar wood pencils, crayons and other stationery equipment, sell and export goods that are produced

in facilities, import purchase and sell of any kind of primary materials, semi-finished goods and

finished goods. The Company’s operating segments, nature and economic characteristics of products,

nature of production processes, classification of customers in terms of risk for their products and

services and methods used to distribute their products are similar. Furthermore, the Company structure

has been organized to operate in one segment rather than separate business segments. Consequently,

the business activities of the Company are considered to be in one operating segment and the operating

results, resources to be allocated to the segment and assessment of performance are managed in this

respect.





24

NOTE 4 - CASH AND CASH EQUIVALENTS

31 December 2013 31 December 2012

Cash on hand - 4.201

Demand deposits 374.693 657.995

Time deposits 38.314.949 615.087

Other cash and cash equivalents 10.109 311

38.699.751 1.277.594

There are no blocked deposits as of 31 December 2013 and 2012. As of 31 December 2013, time

deposits amounting to TRY 6.427.699.Maturity of the deposits is less than one month and effective

rate for TRY denominated deposit is 0,1%.Time deposits amounting to TRY 19.087.250.The maturity

of the time deposits is one month and effective rate for TRY denominated deposits is 3,7%.Time

deposits amounting to TRY 12.800.000.Maturity of the time deposits is less than one month and

effective rate for TRY denominated deposit is 7,3%.

NOTE 5 - FINANCIAL INVESTMENTS


(%) TRY (%) TRY

Ülkü Kırtasiye Ticaret ve Sanayi A.Ş. 7,67 233.985 7,67 233.985

Tasfiye halinde Anelsan A.Ş. 1,50 746.014 1,50 746.014

Less: provision for impairment - (746.014) - (746.014)

233.985 233.985

Since Anelsan A.Ş., of which the Company has investment with a share of 1,5%, has negative net

assets, the total of the investment has been impaired.





25

NOTE 6 - INVESTMENT IN JOINT VENTURES

Jointly controlled entity of the Company as of 31 December 2013 and 2012 is as follows:

31 December 2013 Pay (%)31 December 2012 Pay (%)

LLC Faber-Castell Anadolu 747.661 50,00 337.354 50,00

Movement in jointly controlled entity during 2013:

2013 2012

Opening 337.354 854.486

Cost of establishment of jointly controlled entity 1.406.400 1.113.400

Share of loss in the joint ventures accounted

using the equity method (Note 19) (1.402.363) (1.619.287)

Effect of currency translation differences 406.270 (11.245)

Closing 747.661 337.354

Assets, liabilities, net sales and profit/(loss) of the joint ventre as of 31 December 2013 and 2012 are as

follows:

2013 Assets Liabilities Net sales Profit/(loss)

LLC Faber-Castell Anadolu 5.470.833 4.858.967 8.814.895 (2.804.726)

2012 Assets Liabilities Net sales Profit/(loss)

LLC Faber-Castell Anadolu 4.732.010 4.104.049 5.296.579 (3.238.574)

NOTE 7 - FINANCIAL LIABILITIES

31 December 2013 Interest rate % TRY amount

Short term borrowings

EURO borrowings (*

) 3,35 - 3,43 22.281.969

USD borrowings 3,15 3.273.443

TRY borrowings 0,00 304

25.555.716

(*) This borrowing amount is composed of the principle amount lended in order to finance the construction of

the new plant in Şekerpınar land. The interest payment of the loan will be paid in less then 12 months and

reltaed interest accrual was classified in short term borrowings. The principle of the loan will be paid in long-

term.





26

NOTE 7 - FINANCIAL LIABILITIES (Continued)


Long term borrowings

EURO borrowings (*

) 3,35 - 3,43 18.815.801

18.815.801


Short term borrowings

TRY borrowings 0,00 - 6,00 4.343.935

USD borrowings 4,90 2.769.618

7.113.553

(*) This borrowing amount is composed of the principle amount lended in order to finance the construction of

the new plant in Şekerpınar land. The interest payment of the loan will be paid in less then 12 months and

reltaed interest accrual was classified in short term borrowings. The principle of the loan will be paid in long-

term.

The Company did not give any guarantee for its financial liabilities. Since the maturities of the

financial liabilities are short, the carrying values are approximate to the fair values of financial

liabilities.

NOTE 8 - TRADE RECEIVABLES AND PAYABLES

Trade receivables 31 December 2013 31 December 2012

Notes receivable (Dipnot 2.4) 14.312.037 17.958.940

Trade receivables 8.671.771 6.826.792

Less: Unearned finance income (-) (190.597) (199.296)

Less: Provision for doubtful receivables (-) (521.037) (503.414)

22.272.174 24.083.022

Trade payables 31 December 2013 31 December 2012

Suppliers 7.247.157 4.110.707

Other trade payables 1.074.206 4.466.049

Less: Unearned credit finance charges (-) (49.386) (20.661)

8.271.977 8.556.095





27

NOTE 9 - OTHER RECEIVABLES AND PAYABLES

Short term other receivables 31 December 2013 31 December 2012

Deposits and guarantees given 544.823 462.487

Receivables from personnel 245.149 102.869

Other 7.629 8.754

797.601 574.110

Employee termination benefits 31 December 2013 31 December 2012

Payables to personnel 329.842 364.419

329.842 364.419

Short term other payables 31 December 2013 31 December 2012

Taxes and duties payables 1.837.966 1.484.158

Social Security Instution premium payables 500.821 408.836

Other 1.437 12.736

2.340.224 1.905.730

NOTE 10 - INVENTORIES


Raw materials and supplies 17.458.868 16.880.147

Semi-finished goods 3.399.908 3.945.844

Finished goods 31.701.262 22.494.122

Trade goods 22.927.506 28.159.865

Other inventories 804.630 320.591

Less: Provision for impairment on inventories (101.822) (429.526)

76.190.352 71.371.043

Movements of provision for impairment on inventories as of 31 December 2013 and 2012 are as

follows:

2013 2012

Balance at the beginning of the period 429.526 366.100

Additions - 63.426

Reversal of provision (-) (327.704) -

Balance at the end of the period 101.822 429.526

CONVENIENCE TRANSLATION INTO ENGLISH OF FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH



28

NOTE 11 - PROPERTY, PLANT AND EQUIPMENT

Land Machinery and Furniture Construction in

Land(*)

improvements(*)

Buildings(*)

equipments Vehicles and fixtures progress Total

As of 1 January 2013 Cost 2.728.729 964.626 13.933.001 76.097.836 459.489 8.609.397 1.166.480 103.959.558

Accumulated depreciation - (720.083) (8.444.217) (67.598.347) (273.680) (4.770.569) - (81.806.896)

Net book value 2.728.729 244.543 5.488.784 8.499.489 185.809 3.838.828 1.166.480 22.152.662

Opening 2.728.729 244.543 5.488.784 8.499.489 185.809 3.838.828 1.166.480 22.152.662

Additions - 1.200 20.850 3.897.536 269.813 4.529.058 9.501.295(**)

18.219.752

Cost of disposals - (70.690) (6.631.067) (1.974.896) - (130.584) - (8.807.237)

Accumulated depreciation of disposals - 6.908 1.414.519 1.952.321 - 83.541 - 3.457.289

Transfers - - - 93.604 - - (1.290.858) (1.197.254)

Current period depreciation - (27.966) (100.136) (1.726.529) (45.178) (1.400.430) - (3.300.239)

Closing 2.728.729 153.995 192.950 10.741.525 410.444 6.920.413 9.376.917 30.524.973

As of 31 December 2013 Cost 2.728.729 895.136 7.322.784 78.114.080 729.302 13.007.871 9.376.917 112.174.819


Net book value 2.728.729 153.995 192.950 10.741.525 410.444 6.920.413 9.376.917 30.524.973

(*) On 15 October 2012, the Company has publicly announced through KAP that; the Company has initiated valuation process for the sales of its land and buildings located in Istanbul, Kartal, 4458 block, 139 section, 28, 38, 39, 164 and 165 parcels which is 16.681 metresquares in total. Those assets were valued by three seperate independent real estate valuation companies licensed by the Capital Markets Board and were valued between TRY 22 million and TRY 27 million exluding value added taxes. On 8 March 2013, the Board of Directors has autorised the Company management to continue their preperation and work in relation to moving the Company to Kocaeli, Çayırova, Şekerpınar and the sales process of the land and buildings through tender and as cash in advance.

(**) The amount includes the borrowings costs that were capitalised in the context of IAS 23 for the construction in progress in Şekerpınar. As of 31 December 2012, TRY1.445.307 of the depreciation expense is included in “cost of goods sold” and TRY1.854.932 is included in “general administrative expenses”




29

NOTE 11 - PROPERTY, PLANT AND EQUIPMENT (Continued)

Machinery Construction

Land and Furniture in

Land improvements Buildings equipments Vehicles and fixtures progress Total

As of 1 January 2012

Cost 2.728.729 891.826 13.786.471 74.437.543 459.489 5.551.052 45.000 97.900.110


Net book value 2.728.729 202.582 5.497.096 6.049.895 208.006 1.404.946 45.000 16.136.254

Opening 2.728.729 202.582 5.497.096 6.049.895 208.006 1.404.946 45.000 16.136.254

Additions - 72.800 3.920 3.517.228 - 3.120.488 1.929.040 8.643.476

Cost of disposals - - - (2.379.485) - (62.143) - (2.441.628)

Accumulated depreciation of disposals - - - 2.253.051 - 44.649 - 2.297.700

Transfers - - 142.610 522.550 - - (807.560) (142.400)

Current period depreciation - (30.839) (154.842) (1.463.750) (22.197) (669.112) - (2.340.740)

Closing 2.728.729 244.543 5.488.784 8.499.489 185.809 3.838.828 1.166.480 22.152.662

As of 31 December 2012

Cost 2.728.729 964.626 13.933.001 76.097.836 459.489 8.609.397 1.166.480 103.959.558


Net book value 2.728.729 244.543 5.488.784 8.499.489 185.809 3.838.828 1.166.480 22.152.662

As of 31 December 2012, TRY1.241.564 of the depreciation expense is included in “cost of goods sold” and TRY1.099.176 is included in “general administrative expenses”.





30

NOTE 12 - INTANGIBLE ASSETS

2013 2012

As of 1 January Cost 693.416 400.678 Accumulated amortization (289.038) (225.128)

Net book value 404.378 175.550

Net book value at the beginning of the period 404.378 175.550

Additions 958.779 150.338 Transfers 1.197.254 142.400 Disposals (12.338) - Amortization (315.216) (63.910)

Net book value at the end of the period 2.232.857 404.378

As of 31 December Cost 2.837.111 693.416 Accumulated amortization (604.254) (289.038)

Net book value 2.232.857 404.378

Amortization expense is included in “general administrative expenses”.

NOTE 13 - PROVISIONS, COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES

Provisions


Provision for lawsuits 71.695 71.695

71.695 71.695

Contingent liabilities

Under 7th Tax Court Decision No. 2008/2839, File No: 2007/2133, dated 20 October 2008, communicated to the Company on 9 January 2009, the Company was subject to payment of TRY 71.695 (TRY 50.313 anti-damping tax, TRY 21.382 delay interest) to the Haydarpaşa Customs Administration; the Company filed an objection to this decision with the Council of State on 29 January 2009.

Contingent assets

Debt enforcement proceedings were initiated at the Istanbul 13th Enforcement Office under file No.

2004/16698 E. regarding Adel Kalemcilik Ticaret ve Sanayi A.Ş.’s receivables from nine cheques,

amounting to TRY 304.315 in total. The enforcement has been finalised. The debtor company filed a

property declaration stating that it has no distrainable properties.

Since Adel Kalemcilik Ticaret ve Sanayi A.Ş. could not collect its receivables due to its current account relationship with its client, amounting to TRY 17.357, an action for debt was filed with the Kadıköy 2nd Commercial Court of First Instance with file number 2009/761 E. The receivables were registered in order table in Kadıköy Bankruptcy Office with file number 2009/47 E. Because of this pendency, it was decided to not to finalise the case.





31

NOTE 13 - PROVISIONS, COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES

(Continued)

Since Adel Kalemcilik Ticaret ve Sanayi A.Ş. could not collect its receivables due to its current account relationship with its client, amounting to TRY 173.483, an executive proceeding was started with the İstanbul 18th Enforcement Office with file number 2012/18797 E. It was levied a distraint to debtor's real estate and 8 vehicles. In addition, relying on such receivables, executive proceedings were started with the İstanbul 18th Enforcement Office with file number 2012/20785 E. and with the Kartal 1st Enforcement Office with file number 2012/6142 E. On 31 January 2013, a notice of levy was sent to several banks. The Company had an ongoing lawsuit with the general directorate of highways in relation to the expropriated price of the assets of Company located in Giresun, Ulper, 640B14C3C section, 134 block 1 parcel. Such lawsuit was concluded on 19 July 2013 and the Company was decided to have TRY445.137 as expropriated price and interets amounting to TRY 6.364. The desicion was taken to court of appeal by both parties.

Commitments and guarantees given


Letter of credit commitments 5.766.673 5.090.877 Letters of guarantee 227.917 206.049

The details of collaterals, pledges and mortgages (“CPM”) of the Company at 31 December 2013 and 2012 are as follows:

31 December 2013

CPM given by the Company TRY Equivalent USD Euro TRY

A. CPM given on behalf of the Company’s legal personality 227.917 - - 227.917

B. CPM given on behalf of fully consolidated subsidiaries - - - - C. CPM given for continuation of its economic activities on behalf of third parties - - - -

D. Total amount of other CPM i. CPM given on behalf of the Parent - - - - ii. CPM given on behalf of the Group’s companies excluding the articles B and C - - - - iii.CPM given on behalf of third parties excluding the article C - - - -

227.917 - - 227.917

31 December 2012

CPM given by the Company TRY Equivalent USD Euro TRY

A. CPM given on behalf of the Company’s legal personality 206.049 - - 206.049

B. CPM given on behalf of fully consolidated subsidiaries - - - -

C. CPM given for continuation of its economic activities on behalf of third parties - - - -

D. Total amount of other CPM i CPM given on behalf of the Parent - - - - ii. CPM given on behalf of the Group’s companies excluding the articles B and C - - - - iii. CPM given on behalf of third parties excluding the article C - - - -

206.049 - - 206.049

Proportion of other CPM’s on equity at 31 December 2013 are 0,16% respectively (2012: 0,20%).





32

NOTE 14 - EMPLOYEE BENEFITS

Short term employee benefits 31 December 2013 31 December 2012

Accruals for bonus 348.020 233.646

348.020 233.646

Long term employee benefits 31 December 2013 31 December 2012

Provision for employment termination benefits 5.056.283 4.613.855

Accruals for unused vacation 985.344 710.366

6.041.627 5.324.221

The movement of accruals for unused vacation as of 31 December 2013 and 2012 are as follows::

2013 2012

Beginning of the period 710.366 544.246

Provision for the period 274.978 166.120

End of the period 985.344 710.366

Employment termination benefits

Under the Turkish Labour Law, the Company is required to pay termination benefits to each employee

who has completed one year of service and who achieves the retirement age (58 for women and 60 for

men) and whose employment is terminated without due cause, is called up for military service, or dies.

The liability is not funded, as there is no funding requirement.

Provision for employment termination benefits is calculated by estimating the present value of the

future probable obligation arising from the retirement of the employees of the Company. International

Financial Reporting Standards require actuarial valuation methods to be developed to estimate the

enterprise's obligation under defined benefit plans. Accordingly the following actuarial assumptions

were used in the calculation of the total provision:


Discount rate (%) 3,95 2,48

Turnover rate to estimate the probability of retirement (%) 100 100

At 31 December 2013 the amount payable consists of one month's salary limited to a maximum of

TRY 3,254 (31 December 2012: TRY3,034) for each year of service.





33

NOTE 14 - EMPLOYEE BENEFITS (Continued)

The principal assumption is that the maximum liability for each year of service will increase in line

with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the

anticipated effects of future inflation. As the maximum liability is revised semi-annually, the

maximum amount of 3.438,22 TL (1 January 2013: 3.129,25 TL) which is effective from 1 January

2014, has been taken into consideration in calculating the provision for employment termination

benefits of the Company.

Movements of the provision for employment termination benefits in 2013 and 2012 were as follows:

2013 2012

Beginning of the period 4.613.855 3.544.265

Sevice cost 928.517 1.040.698

Interest cost 96.578 206.131

Payments (246.898) (664.075)

Remeasurements of

employment termination benefit (335.769) 486.336

End of the period 5.056.283 4.613.855

NOTE 15 - OTHER ASSETS AND LIABILITIES

Short term prepaid expenses 31 December 2013 31 December 2012

Prepaid expenses 359.079 297.439

359.079 297.439

Current income tax asset 31 December 2013 31 December 2012

Prepaid taxes and funds (Note 21) 5.206.420 3.275.061

5.206.420 3.275.061

Other current assets 31 December 2013 31 December 2012

Advances given 11.410.960 1.123.876

Transferred Value Added Tax (“VAT”) 7.067.982 5.310.482

Job advances 34.671 24.564

Other 4.254 457.581

18.517.867 6.916.503





34

NOTE 15 - OTHER ASSETS AND LIABILITIES (Continued)

Other non-current assets 31 December 2013 31 December 2012

Advances given 8.835.111 -

8.835.111 -

The balance is composed of advances given to Aytaç İnşaat San. ve Tic. A.Ş. for the construction of

the new plant in Şekerpınar.

Long term prepaid expenses 31 December 2013 31 December 2012

Prepaid expenses 70.194 72.900

70.194 72.900

Other current liabilities 31 December 2013 31 December 2012

Advances received (Note 2.4.) 1.170.638 2.426.092

1.170.638 2.426.092

This liability consists of checks that have been obtained as a guarantee of customer orders.

NOTE 16 - EQUITY

Paid-in capital

The Company’s shareholders and their shares in paid-in capital are as follows:


Share % Amount Share % Amount

Anadolu Endüstri Holding A.Ş. 56,89 4.479.718 56,89 4.479.718

Faber-Castell Aktiengesellschaft 15,40 1.212.647 15,40 1.212.647

Publicly quoted 22,60 1.779.853 22,60 1.779.853

Other 5,11 402.782 5,11 402.782

Paid-in capital 100,00 7.875.000 100,00 7.875.000

Adjustment to share capital 13.374.985 13.374.985

Total share capital 21.249.985 21.249.985

Adjustment to share capital represents the restatement effect of cash and cash equivalent contributions

to share capital. The Company is not included in registered capital system.





35

NOTE 16 - EQUITY (Continued)

Total shares, share groups and concessions:

While, 1.212.647.073 of the total shares of the Company amounting to TRY 1.212.647 are registered in

accordance with Foreign Capital Regulations, 6.662.352.927 of the total shares amounting to

TRY 6.662.353 are bearer shares. There are no privileges to the shareholders regarding Board of Directors

election.

Restricted Reserves

According to Turkish Commercial Code (“TCC”), legal reserves are consist of two parts as the first

and second reserves. According to TCC, the first legal reserves is allocated from the 5% of net profit

for the year until the amount reaches to 20% of paid in capital. The second legal reserves is allocated

from the 10% of the dividend distributed which exceeds the 5% of the paid in capital.

According to TCC, unless the legal reserves exceeds the 50% of paid in capital, they could be utilesed

solely through offsetting the net losses incurred. In the context of Corporate Tax Law 5520 Article 5/e,

as a result of sales of property and financial investments, 75% of gain on sales was classified as Profit

from the sale of “participation shares and property”.


Legal reserves 7.321.694 6.156.194

Profit from the sale of participation shares and property 1.284.919 1.284.919

8.606.613 7.441.113

Retained earnings

Retained earnings consist of extraordinary reserves and other retained earnings. Based on CMB regulations, breakdown of the retained earnings is as follows:


Extraordinary reserves 61.848.346 50.648.138 Other retained earnings 1.491.312 1.491.312

63.339.658 52.139.450

Dividend distribution

Based on the CMB Decree 7/242, dated 25 February 2005, if the amount of profit distributions calculated in accordance with the net distributable profit requirements of the CMB does not exceed the statutory net distributable profit, the total amount of distributable profit should be distributed. If it exceeds the statutory net distributable profit, the total amount of the statutory net distributable profit should be distributed. It is stated that dividend distributions should not be made if there is a loss in either the financial statements prepared in accordance with CMB regulations or in the statutory financial statements. Based on CMB Decree No. 02/51, dated 27 January 2010, there is no mandatory minimum profit distribution requirement for the quoted entities at the stock exchange.

Inflation adjustment difference in equity can be utilized in issuing bonus shares and in offsetting accumulated losses; the carrying amount of extraordinary reserves could have been utilized in issuing bonus shares, cash dividend distribution and offsetting accumulated losses. However, adjustment to share capital is taxable if it is used in cash dividend distribution.





36

NOTE 16 - EQUITY (Continued)

The Company management’s profit distribution decision will be taken in General Assembly meeting.

If the profit is going to be distributed, the total amount should be funded from statutory distributable

profits.

During the General Assembly on 6 May 2013, based on the Board of Directors minute dated 9 April

2013 and in accordance within the framework of CMB's Communiqué Serial:XI No: 29 dated 9

January 2009, dividend distribution was intercoursed and decided to be distributed which constitute

153% of the paid in capital amounting to gross TRY12.048.750 and net TRY10.241.437,50.

Accordingly, as agreed on 6 May 2013, the dividend which was attributable to gross TRY1.53 per

TRY1 nominal share (%127), net TRY1,3005 (105,05) was began to be distributed on 31 May 2013

and concluded on 4 June 2013 as cash.

Details of dividend distribution are as follows:

2013 2012

Dividends paid to shareholders 12.048.750 10.001.250

Board of Directors share from profit - 1.021.600

12.048.750 11.022.850

NOTE 17 - REVENUE AND COST OF SALES

2013 2012

Domestic sales 224.920.805 194.605.154

Foreign sales 10.014.415 8.513.454

Sales discounts (-) (48.835.312) (43.504.953)

Net sales 186.099.908 159.613.655

Cost of sales (-) (96.103.392) (82.078.281)

Gross profit 89.996.516 77.535.374

2013 2012

Raw materials used 35.293.882 32.161.463

Labor costs 8.040.533 6.492.314

Overhead costs 12.526.653 11.847.525

Depreciation and amortization expenses 1.445.307 1.241.564

Change in semi-finished goods inventory 545.936 (389.971)

Change in finished goods inventory (9.207.140) (6.708.484)

Cost of goods sold 48.645.171 44.644.411

Cost of trade goods sold 47.458.221 37.433.870

Cost of sales 96.103.392 82.078.281





37

NOTE 18 - EXPENSE BY NATURE

Details of operating expenses are as follows :

2013 2012

Raw materials and trade goods 75.536.205 62.918.959

Personnel expenses 29.567.465 24.692.840

Domestic sale expenses 11.742.867 8.858.940

Outsourcing expenses 4.233.612 6.784.227

Advertising expenses 3.695.483 2.217.114

Depreciation and amortization 3.615.455 2.404.650

Rent expenses 2.775.537 1.161.848

Licence fees 2.496.861 1.975.033

Repair and maintenance expenses 1.831.521 2.153.298

Fuel, water and electricity expenses 1.593.426 1.355.276

Information technologies expenses 1.575.011 1.393.735

Other 1.112.381 914.875

Tax and duties 1.074.289 557.823

Export expenses 755.299 532.180

International travel expenses 645.823 372.300

Domestic travel expenses 588.551 261.785

Travelling expenses 571.538 434.703

Insurance expenses 521.127 434.751

Market research and quality enhancement expenses 348.085 205.005

Communication expenses 212.863 191.527

Other supplies 204.050 128.597

Stationery expenses 149.612 110.672

144.847.061 120.060.138

Expenses by nature comprise cost of sales, research and development costs, selling, marketing and

distribution expenses and general administrative expenses.

2013 2012

Cost of sales 96.103.392 82.078.281

Marketing, selling and distribution expenses 30.321.101 24.914.379

General and administrative expenses 18.422.568 13.067.478

144.847.061 120.060.138

Allocation of personnel expenses to cost of sales, selling, marketing and distribution expenses and

general administrative expenses:

2013 2012

Cost of sales 11.899.896 11.193.503

General and administrative expenses 10.582.356 7.627.637

Marketing, selling and distribution expenses 7.085.213 5.871.700

29.567.465 24.692.840





38

NOTE 19 - OTHER OPERATING INCOME AND EXPENSES

2013 2012

Other operating income

Foreign exchange gains 397.970 152.926

Insurance benefits 29.891 981.211

Income from services 23.958 21.780

Compensation income 17.623 -

Rental income 10.560 9.350

Other 298.546 95.621

778.548 1.260.888

2013 2012

Other operating expense

Donations 1.850.000 1.700.000

Accrued financial expenses (34.389) 80.841

Other 204.374 520.541

2.019.985 2.301.382

Other income from investing activities are as follows:

2013 2012

Income/(loss) from investing activities

Gain/(loss) on sales of property, plant and equipment 21.771.581 (43.050)

21.771.581 (43.050)

On 27 June 2013, the Company has sold its property registered in Istanbul, Büyükçekmece, Esenyurt

amounting to TRY 27.850.000 and in accordance with the desicion made by Board of Directors dated

24 June 2013, it was planned to account for the 75% of the gain on sales of property under equity (in

accordance with Corporate Tax Law Artice 5/e). Baed on the Law, the amount accounted for under

equity shall not be utilised for the following five years.

2013 2012

Loss on investments

Using equity accounting method

LLC Faber-Castell Anadolu (Note 6) (1.402.363) (1.619.287)

(1.402.363) (1.619.287)





39

NOTE 20 - FINANCIAL INCOME AND EXPENSES

2013 2012

Financial income

Foreign exchange gains 862.148 37.719

Interest income 278.314 546.772

1.140.462 584.491

2013 2012

Financial expenses

Interest expenses 3.388.420 5.616.604

Foreign exchange losses 1.994.956 447.895

Interest expense on employment termination benefits 96.578 206.131

Other 60.084 326.059

5.540.038 6.596.689

NOTE 21 - TAXATION ON INCOME

2013 2012

Taxation on income (-) (7.709.251) (6.576.236)

Deferred tax income 1.390.301 152.206

Total tax expense (net) (6.318.951) (6.424.030)

Reconciliation between current year tax expense and profit is as follows:

2013 2012

Profit before tax 55.981.052 30.838.488

Tax rate %20 %20

Calculated tax expense 11.196.211 6.167.698

Discount and additions (4.877.260) 256.332

Tax expense 6.318.951 6.424.030


Current income tax liabilities 7.709.252 6.576.236

Less: Corporate income taxes paid (12.915.672) (9.851.297)

Current income tax liabilities (net) ( Note 15) (5.206.420) (3.275.061)





40

NOTE 21 - TAXATION ON INCOME (Continued) Prepaid corporate income taxes are included as part of other current assets to be offset against future

tax liabilities in the accompanying balance sheet at 31 December 2013 and 2012 (Note 15).

Temporary Differences Deferred taxation 31 December 31 December 31 December 31 December 2013 2012 2013 2012

Provision for employee benefits 5.056.284 4.613.855 1.011.257 922.771 Property, plant and equipment and intangible assets 2.500.729 (4.113.239) 500.146 (822.648) Provision for unused vacation 985.343 710.366 197.069 142.073 Provision for unused Adel Club points 798.990 122.751 159.798 24.550 Accruals for premiums 348.020 233.646 69.604 46.729 Provision for impairment of inventories 101.822 429.526 20.364 85.905 Provision for lawsuits 50.313 50.313 10.063 10.063 Unearned credit finance expense on trade receivables 49.192 29.653 9.838 5.931 Promotional materials 4 85.472 1 17.094 Accruals for personnel bonus - 192.094 - 38.419 Accruals for dealer premiums - 1.663 - 333 Revenue cut-off (207.597) - (41.519) - Provision for returns (141.604) - (28.321) - Unearned credit finance income on trade payables (58.459) (27.173) (11.692) (5.435) Unearned credit finance expense on notes receivables (48.050) 164.177 (9.610) 32.835 Other 9.637 16 1.927 4

Deferred tax asset, net 1.888.925 498.624

2013 2012

Opening 498.624 346.418

Deferred tax income 1.390.301 152.206

Closing deferred tax asset, net 1.888.925 498.624





41

NOTE 22 - EARNINGS PER SHARE

Earnings per share for each class of share disclosed in the income statement is determined by dividing the net income attributable to that class of share by the weighted average number of shares of that class outstanding during the year. Earnings per share in terms of share groups are as follows:

2013 2012

Net profit for current period 49.662.101 24.414.458 Weighted average number of ordinary shares with nominal value TRY each 7.875.000 7.875.000

Earnings per share 6,3063 3,1002

NOTE 23 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES

a) Related party balances Receivables Payables 31 December 31 December 31 December 31 December 2013 2012 2013 2012

LLC Faber-Castell Anadolu 245.186 106.707 - - A.W. Faber-Castell Ceska Rep. SPOL s.r.o. 94.120 29.298 - - A.W. Faber-Castell Italia s.r.l 76.948 11.406 - - PT Faber-Castell International Indonesia 40.504 14.274 - - A.W. Faber-Castell (aust) pty ltd a.c.n. 17.641 - - - A.W. Faber-Castell Vetrieb GmbH 9.759 - 131 - Efes Pazarlama A.Ş. 4.269 27.482 - - Anelsan Anadolu Elekt. A.Ş. 2.220 - - 1.119 A.W. Faber-Castell Peruana SA 473 398 - - Coco-Cola İçecek A.Ş. - 9.911 - - Anadolu Termik Santralları Elektrik Üretim A.Ş. - 8.272 - - Faber-Castell U.S.A. Inc. - - - 839 Anadolu Isuzu Oto. San. ve Tic. A.Ş. - - 2.360 31.862 Çelik Motor Tic. A.Ş. - - 2.327 5.590 Alternatif Bank A.Ş. - 511 - - Anadolu Restoran İşletmeleri Ltd. Şti. - - 155.203 523.428 Anadolu Efes Biracılık ve Malt San. A.Ş. - 56.772 - 6.552 Efestur Turizm İşletmeleri A.Ş. - - 63.439 13.670 Ülkü Kırtasiye A.Ş. - - 74.256 36.483 Anadolu Endüstri Holding A.Ş. - - 134.787 94.584 Anadolu Sigorta Acentalığı A.Ş. - - 33.507 84.277 Anadolu Bilişim Hizmetleri A.Ş. - - 518.196 434.983 Other 1.925 5.032 354.390 35.271

493.045 270.063 1.338.596 1.268.658

Less: unearned credit finance income (-) (130) (575) (9.073) (6.512)

492.915 269.488 1.329.523 1.262.146





42

NOTE 23 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued)

b) Transactions with related parties

Purchases of goods 2013 2012

A.W. Faber-Castell Vetrieb GmbH 14.260.894 19.285.742

A.W. Faber-Castell (Guangzhou) Stationery Co. Ltd. 6.849.068 6.326.143

A.W. Faber Castell (M) Sdn. Bhd. 5.563.289 4.365.769

A.W. Faber Castell Peruana S.A. 1.872.463 1.577.514

A.W. Faber Castell(I) Pvt. Ltd. India 1.077.546 467.751

P.T. A.W. Faber Castell Ind. 643.536 748.408

A.W. Faber Castell Brezilya S.A. 440.813 605.957

Eberhard Faber Vertieb GmbH 1.604 279.004

Other - 253.385

30.709.213 33.909.673

Purchases of services 2013 2012

Ülkü Kırtasiye A.Ş. 3.088.814 1.650.903

Anadolu Bilişim Hizmetleri A.Ş. 3.047.939 1.908.273

Anadolu Endüstri Holding A.Ş. 1.615.510 1.395.195

Anadolu Restoran İşletmeleri Ltd. Şti. 1.378.809 1.086.930

Efestur Turizm İşletmeleri A.Ş. 1.168.496 1.027.567

Çelik Motor Tic. A.Ş. 958.412 747.470

Other 675.153 458.262

11.933.133 8.274.600

Sales of goods 2013 2012

A.W. Faber-Castell Ceska Rep. SPOL s.r.o 453.982 205.256

A.W. Faber-Castell Vetrieb GmbH 325.628 335.211

LLC Faber-Castell Anadolu 298.429 399.522

A.W. Faber-Castell Italia s.r.l 253.940 111.947

A.W. Faber Castell Brezilya S.A. 131.425 81.661

A.W. Faber Castell Peruana S.A. 130.696 95.489

Faber-Castell Argentina 98.352 -

PT Faber-Castell International Indonesia 94.886 41.865

Efes Pazarlama A.Ş. 84.115 52.128

Alternatif Bank 41.221 40.863

Faber-Castell U.S.A. Inc. 23.709 10.605

Anadolu Efes Biracılık ve Malt San. A.Ş. 22.489 33.586

Other 111.245 111.237

2.070.117 1.519.370





43

NOTE 23 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued)

Sales of services 2013 2012

A.W. Faber-Castell Vetrieb GmbH 1.067.019 -

LLC Faber-Castell Anadolu 200.835 41.271

Ülkü Kırtasiye A.Ş. 30.367 21.120

Other 11.614 10.514

1.309.835 72.905

Financial income / (expenses) - net 2013 2012

Alternatif Bank 161.492 259.285

Ülkü Kırtasiye A.Ş. - (316.912)

Alternatif Yatırım A.Ş. (42) -

161.450 (57.627)

Other transactions 2013 2012

Anadolu Eğitim ve Sosyal Yardım Vakfı(*)

1.850.000 1.700.000

Other (7.381) 44.519

1.842.619 1.744.519

(*)

Donations were made to Anadolu Eğitim ve Sosyal Yardımlaşma Vakfı.

c) Key management compensation

Key management consists of the Chairman of the Board and the General Manager. Key management

compensation provided or will be provided is as follows:

2013 2012

Short term employee benefits 4.529.660 3.716.831

Employment termination benefits 165.906 134.067

Post-employment benefits - -

Other long term benefits - -

Share based payments - -

4.695.566 3.850.898





44

NOTE 24 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

a) Capital Risk Management

The Company manages its capital to ensure that entities in the Company will be able to continue as a

going concern while maximizing its profit and market value through the optimization of the debt and

equity balance.

The Company’s equity comprised of borrowings, cash and cash equivalents and respectively share

capital, capital reserves, profit reserves and retained earnings items.

Risks, associated with each capital class, and the capital cost are evaluated by the top management. It

is aimed that the capital structure will be set in balance by means of new borrowings or repaying the

existing debts as well as dividend payments and new share issuances based on the top management

evaluations.

The Company monitors capital by using debt to total capital ratio. This ratio is calculated by dividing

the net debt by total capital. The net debt is calculated by excluding the cash and cash equivalent

amounts from the total debt amount (including credits, leasing and commercial debts as indicated in

the balance sheet). Total capital is calculated by adding net debt to shareholders’ equity as indicated in

the balance sheet.

General strategy of the Company based on shareholders’ equity is not different from previous periods.

The Company does not conduct hedging contracts (including derivative financial instruments) for the

purpose of diversifying foreign currency fluctuation risks.

Net debt/ (equity+net debt) ratio is as of 31 December 2013 and 2012 as follows:


Total liabilities 53.973.017 16.931.794

Less: liquid assets (38.699.751) (1.277.594)

Net debt 15.273.266 15.654.200

Equity 142.794.802 104.506.566

Equity+net debt 158.068.068 120.160.766

Net debt/ (Equity+net debt) ratio 10% 13%





45


(Continued)

b) Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including currency risk,

fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.

c) Foreign currency risk management

Certain transactions denominated in foreign currencies results in foreign currency.

The Company exposed to currency risk as the mismatch between foreign currency denominated assets and liabilities. Currency risk is due to future transactions and difference between assets and liabilities recognised.

The Company’s assets and liabilities denominated in foreign currencies at 31 December 2013 and 2012 are as follows:


Assets 37.596.985 3.082.402 Liabilities (43.672.817) (2.895.706)

Net balance sheet position (6.075.832) 186.696

The Company mainly exposes foreign currency risk of USD and EUR. Profit/ (loss) 31 December 2013 Gain Loss

Change in USD against TRY by +/- 10%:

1- USD net asset/liabilities 637.967 (637.967) 2- USD net hedged amount (-) - - 3- USD net effect (1+2) 637.967 (637.967)

Change in EUR against TRY by +/- 10%:

4- Euro net asset/liabilities (1.245.550) 1.245.550 5- Euro net hedged amount (-) - - 6- Euro net effect (4+5) (1.245.550) 1.245.550

Change in Other foreign currency against TRY by +/- 10%:

7- Other foreign currency net asset/liabilities - - 8- Other foreign currency net hedged amount (-) - - 9- Other foreign curency net effect (4+5) - -

(607.583) 607.583





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(Continued)

Profit/ (loss) 31 December 2012 Gain Loss

Change in USD against TRY by +/- 10%:

1- USD net asset/liabilities (31.701) 31.701 2- USD net hedged amount (-) - - 3- USD net effect (1+2) (31.701) 31.701

Change in EUR against TRY by +/- 10%:

4- Euro net asset/liabilities 50.370 (50.370) 5- Euro net hedged amount (-) - - 6- Euro net effect (4+5) 50.370 (50.370)

18.669 (18.669)




47

NOTE 24 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued) The breakdown of the Company’s foreign currency denominated monetary and non-monetary assets and liabilities as of the balance sheet date are as follows: 31 December 2013 31 December 2012

TRY Equivalent USD EUR GBP Other TRY Equivalent USD EUR GBP Other

1. Trade Receivables 1.428.960 498.623 124.212 - - 907.800 377.178 100.116 - -

2a. Monetary Financial Assets 25.591.384 23.717 8.697.690 - - 223.609 94.122 23.739 - -

2b. Non-monetary Financial Assets - - - - - - - - - - 3. Other 10.576.641 3.981.506 707.956 - - 1.950.993 973.107 91.990 - -

4. Total Current Assets (1+2+3) 37.596.985 4.503.846 9.529.858 - - 3.082.402 1.444.407 215.845 - -

5. Trade Receivables - - - - - - - - - -

6a. Monetary Financial Assets - - - - - - - - - -

6b. Non-monetary Financial Assets - - - - - - - - - - 7. Other - - - - - - - - - -

8. Total Non-current Assets (5+6+7) - - - - - - - - - -

9. Total Assets (4+8) 37.596.985 4.503.846 9.529.858 - - 3.082.402 1.444.407 215.845 - -

10. Trade Payables 389 180 1 - - 30.192 14.877 1.561 - -

11. Financial Liabilities 43.578.325 1.500.000 13.750.000 - - 2.769.871 1.553.837 - - -

12a. Other Monetary Liabilities 94.103 14.549 21.472 - - 95.643 53.527 97 - -

12b. Other Non-monetary Liabilities - - - - - - - - - -

13. Total Current Liabilities (10+11+12) 43.672.817 1.514.729 13.771.473 - - 2.895.706 1.622.241 1.658 - -

14. Trade Payables - - - - - - - - - -

15. Financial Liabilities - - - - - - - - - -

16a. Other Monetary Liabilities - - - - - - - - - -

16b. Other Non-monetary Liabilities - - - - - - - - - -

17. Total Non-current liabilities (14+15+16) - - - - - - - - - -

18. Total liabilities (13+17) 43.672.817 1.514.729 13.771.473 - - 2.895.706 1.622.241 1.658 - -

19. Net asset/liability position of off-balance sheet derivatives (19a-19b) - - - - - - - - - -

19a. Total asset hedged amount - - - - - - - - - -

19b. Total liability hedged amount - - - - - - - - - -

20. Net asset/liability position of foreign currency (9-18+19) (6.075.832) 2.989.117 (4.241.615) - - 186.696 (177.834) 214.187 - -

21. Monetary items net asset/liability position of foreign currency (1+2a+3+5+6a-10-11-12a-14-15-16a) (6.075.832) 2.989.117 (4.241.615) - - 186.696 (177.834) 214.187 - -

22. Fair value of hedged funds of foreign currency - - - - - - - - - -

23. Hedged amount of foreign currency assets - - - - - - - - - -

24. Hedged amount of foreign currency liabilities - - - - - - - - - - 25. Export 9.867.037 3.513.673 1.255.594 - - 8.675.021 3.294.290 1.202.636 - - 26. Import 60.458.324 20.565.654 8.181.273 153.925 7.330.531 58.353.856 18.566.008 10.713.493 101.186 4.800.000





48


(Continued)

d) Interest rate risk

As of 31 December 2013, the Company has borrowings with variable interest rates amounting to Euro

13.750.000 for the construction of new plant in Şekerpınar. Since such investment is evaluated to be a

qualifying asset, an important portion of the borrowing costs will not recognised under income

statement (2012: none).

e) Credit risk management

Ownership of financial assets involves the risk that counterparties may be unable to meet the terms of

their agreements. Collection risk of the Company mainly derived from trade receivables. Trade

receivables are netted in balance sheet after provisions for doubtful receivables which are in line with

the Company policies and procedures.

The majority of the Company’s sales are made in domestic through distributors and wholesalers.

Approximately 53% of total sales are produced products. Trade goods are foreign originated.

Therefore, trade goods costs of the Company are bearing foreign exchange rate risk. Raw material

prices are dependent to general price movements in the country approximately. 95% of the total sales

of the Company are made in domestic market and price level is determined by the fluctuations in

foreign exchange rates.

The Company performs collection from distributors by checks. Since the drawers of these checks are

generally distributors, the risk is distributed. As a result of these procedures, the Company did not

incur any significant risk for receivables collection.




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NOTE 24 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued) Trade receivables Other receivables Bank 31 December 2013 Related Party Other Related Party Other deposits Derivatives

Maximum credit risk based on financial instruments as of reporting date 492.915 22.272.174 797.601 - 38.689.642 - - Collateralized or secured with guarantees part of maximum credit risk 9.757.438 - - - -

A. Net book value of not due or not impaired financial assets 492.915 22.272.174 797.601 - 38.689.642 - B. Carrying amount of financial assets whose term has been renegotiated, otherwise past due or impaired - - - - - - C. Net carrying amount of financial assets past due but not impaired - - - - - -

- Under guarantee - - - - - -

D. Net carrying amount of financial assets impaired

- past due (gross carrying value) - 521.037 - - - - - impaired (-) - (521.037) - - - - - Net carrying amount of financial assets under guarantee - - - - - -

- not past due (gross carrying value) - impaired (-) - - - - - -

- Net carrying amount of financial assets under guarantee - - - - - -

E. Off- balance sheet items which include credit risk - - - - - -




50

NOTE 24 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Continued)

Trade receivables Other receivables Bank

31 December 2012 Related Party Other Related Party Other deposits Derivatives

Maximum credit risk based on

financial instruments as of reporting date 269.488 24.083.022 574.110 - 1.273.082 -

- Collateralized or secured with guarantees

part of maximum credit risk - 2.805.672 - - - -

A. Net book value of not due or not impaired financial assets 269.488 24.083.022 574.110 - 1.273.082 -

B. Carrying amount of financial assets whose term has been renegotiated, otherwise past due or impaired - - - - - -

C. Net carrying amount of financial assets past due but not impaired - - - - - -

- Under guarantee - - - - - -

D. Net carrying amount of financial assets impaired

- past due (gross carrying value) - 503.414 - - - - - impaired (-) - (503.414) - - - - - Net carrying amount of financial assets under guarantee - - - - - -

- not past due (gross carrying value) - impaired (-) - - - - - - - Net carrying amount of financial assets under guarantee - - - - - -

E. Off- balance sheet items which include credit risk





51


(Continued)

Guarantees received from the customers by the Company are as follows:


Letter of guarantees 8.164.856 1.525.000

Mortgages 770.000 820.000

Guarantee notes 720.144 436.234

Pledge agreement 78.000 -

Guarantee cheques 24.438 24.438

9.757.438 2.805.672

f) Liquidity risk management

The Company manages its liquidity risk by maintaining adequate reserves, banking facilities and

reserve borrowing facilities through a constant monitoring forecast and actual cash flows and

matching the maturity profile of the financial assets and liabilities.

Liquidity risk tables

Conservative liquidity risk management requires maintaining adequate reserves in addition to having

the ability to utilize adequate level of credit lines and funds as well as closing market positions.

Funding risk attributable to the current and future potential borrowing needs is managed by providing

continuous access to adequate number of creditors with high quality.

The following table details the Company’s expected maturity for its financial and other liabilities.

Total

Carrying contractual Less than 3-12 1-5 Over

31 December 2013 value cash outflow 3 months months years 5 years

Financial liabilities 44.371.517 45.783.581 304.261 8.318.987 37.160.332 -

Trade payables 8.271.977 8.321.363 8.321.363 - - -

Other payables 2.670.066 2.670.066 2.670.066 - - -

Total

Carrying contractual Less than 3-12 1-5 Over

31 December 2012 value cash outflow 3 months months years 5 years

Financial liabilities 7.113.553 7.152.162 4.343.237 2.808.925 - -

Trade payables 8.556.095 8.576.756 8.576.756 - - -

Other payables 2.270.149 2.270.149 2.270.149 - - -





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NOTE 25 - FINANCIAL INSTRUMENTS

The Company management believes that the carrying values of financial assets are reflecting the fair

values.

Objectives of Financial Risk Management:

Finding access to financial markets and managing financial risks arisen from operational activities of the

Company fall under the responsibility of the Company’s finance department. Aforementioned risks

include market risk (foreign exchange risk, interest rate risk and price risk). Financial risk covers market

risk (exchange rate risk, fair value of interest risk and price risk), credit risk liquidity risk and cash flow

risk.

The Company does not use forward foreign currency transaction agreements as a financial instrument.

No derivative financial instruments are held by the Company in order to minimize or hedge these risks.

The Company does not hold trading securities (including derivative financial instruments) or trade

financial instruments.

NOTE 26 - SUBSEQUENT EVENTS

Based on the desicion of Board of Directors dated 25 July 2011, the Company has participated to the

capital increase in LLC Faber-Castell Anadolu by its share (50%) amounting to Ruble 26.000.000 out of

total Ruble 52.000.000 on 21 January 2014.

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