CONVENIENCE TRANSLATION INTO ENGLISH OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIOD 1 JANUARY - 31 MARCH 2014

Transcription

1 CONVENIENCE TRANSLATION INTO ENGLISH OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE INTERIM PERIOD 1 JANUARY - 31 MARCH 2014 (ORIGINALLY ISSUED IN TURKISH)

2 CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE INTERIM PERIOD 1 JANUARY - 31 MARCH 2014 CONTENTS PAGE CONDENSED CONSOLIDATED BALANCE SHEETS CONDENSED CONSOLIDATED STATEMENTS OF INCOME... 3 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME... 4 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY... 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS... 6 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS NOTE 1 GROUP S ORGANISATION AND NATURE OF OPERATIONS... 7 NOTE 2 BASIS OF PRESENTATION OF FINANCIAL STATEMENTS NOTE 3 CASH AND CASH EQUIVALENTS NOTE 4 FINANCIAL ASSETS NOTE 5 FINANCIAL LIABILITIES NOTE 6 TRADE RECEIVABLES AND PAYABLES NOTE 7 RECEIVABLES FROM FINANCE SECTOR OPERATIONS NOTE 8 INVENTORIES NOTE 9 INVESTMENT PROPERTIES NOTE 10 PROPERTY, PLANT AND EQUIPMENT NOTE 11 INTANGIBLE ASSETS NOTE 12 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES NOTE 13 OTHER ASSETS AND LIABILITES NOTE 14 REVENUE NOTE 15 RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SELLING AND DISTRIBUTION EXPENSES AND GENERAL ADMINISTRATIVE EXPENSES NOTE 16 OTHER INCOME AND EXPENSES FROM MAIN OPERATIONS NOTE 17 FINANCIAL INCOME / EXPENSES NOTE 18 TAX ASSETS AND LIABILITIES NOTE 19 EARNINGS PER SHARE NOTE 20 TRANSACTIONS AND BALANCES WITH RELATED PARTIES NOTE 21 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT NOTE 22 SUBSEQUENT EVENTS... 41

3 CONDENSED CONSOLIDATED BALANCE SHEETS AT 31 MARCH 2014 AND 31 DECEMBER 2013 ASSETS Unaudited Audited Notes 31 March December 2013 Current assets: Cash and cash equivalents Financial assets Trade receivables - Due from related parties Other trade receivables Receivables from finance sector operations Other receivables Inventories Prepaid expenses Current tax assets Other current assets Total current assets Non-current assets: Receivables from finance sector operations Investment properties Property, plant and equipment Intangible assets Deferred tax assets Prepaid expenses Other non-current assets Total non-current assets Total assets These condensed interim consolidated financial statements as of and for the interim period ended 31 March 2014 have been approved for issue by the Board of Directors on 12 May 2014 and signed on behalf of the Board of Directors by Chief Executive Officer Kamil Ba aran, Chief Financial Officer Cengiz Eroldu, and Accounting Manager Do u Özden. The accompanying notes form an integral part of these condensed interim consolidated financial statements. 1

4 CONDENSED CONSOLIDATED BALANCE SHEETS AT 31 MARCH 2014 AND 31 DECEMBER 2013 LIABILITIES Unaudited Audited Notes 31 March December 2013 Current liabilities: Short-term financial liabilities Short-term portion of long-term financial liabilities Trade payables - Due to related parties Other trade payables Employee benefit liabilities Deferred income Income taxes payable Government incentives and grants Provisions Other current liabilities - Due to related parties Other current liabilities Total current liabilities Non-current liabilities: Long-term financial liabilities Government incentives and grants Long-term provisions - Provisions for employment termination benefits Total non-current liabilities Total liabilities Equity: Paid-in share capital Inflation adjustment on equity items Other comprehensive losses to be reclassified under profit or losses - Cumulative losses on hedging ( ) ( ) - Actuarial loss on post employment termination benefit obligation (11.856) (11.856) Restricted reserves Retained earnings Net profit for the year Total equity Total liabilities and equity The accompanying notes form an integral part of these condensed interim consolidated financial statements. 2

5 CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE INTERIM PERIODS ENDED 31 MARCH 2014 AND 2013 Unaudited Unaudited 1 January - 1 January - Notes 31 March March 2013 Revenue Cost of sales (-) ( ) ( ) Gross profit from operations Revenue from finance sector operations Expenses from finance sector operations (-) (30.457) (33.535) Gross profit from finance sector operations Gross profit Marketing, selling and distribution expenses (-) 15 (46.079) (44.914) General administrative expenses (-) 15 (40.819) (34.475) Research and development expenses (-) 15 (2.656) (3.817) Other income from main operations Other expenses from main operations (-) 16 ( ) (39.386) Operating profit Financial income / (expenses) 17 (12.202) Profit before tax Tax expenses for the period (20.697) - Taxes on income (6.854) (28.117) - Deferred tax income/(expense) Net profit for the period Attributable to: Non-controlling interests - - Parent company interests Earnings per share for profit (Kr) 19 0,27 0,21 The accompanying notes form an integral part of these condensed interim consolidated financial statements. 3

6 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE INTERIM PERIODS ENDED 31 MARCH 2014 AND 2013 Unaudited Unaudited 1 January - 1 January - 31 March March 2013 Net profit for the period Other comprehensive income: Other comprehensive income to be reclassified under profit / loss -Cumulative gains on cash flow hedge Other comprehensive income (after tax) Total comprehensive income Attributable to: Non-controlling interests - - Parent company interests The accompanying notes form an integral part of these condensed interim consolidated financial statements. 4

7 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE INTERIM PERIODS ENDED 31 MARCH 2014 AND 2013 Inflation adjustment Cumulative Net profit Paid-in on equity Restricted losses Actuarial Retained for the Total share capital items reserves on hedging (*) gain / (loss) earnings period equity Balances at 1 January 2013 (previously reported) ( ) TAS 19 adjustments (9.270) (6.286) - Balances at 1 January 2013 (restated) ( ) (9.270) Transfers ( ) - Dividends paid ( ) - ( ) Total comprehensive income (*) Balances at 31 March ( ) (9.270) Balances at 1 January ( ) (11.856) Transfers ( ) - Dividends paid ( ) - ( ) Total comprehensive income (*) Balances at 31 March ( ) (11.856) (*) Net off deferred tax amount. The accompanying notes form an integral part of these condensed interim consolidated financial statements. 5

8 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE INTERIM PERIODS ENDED 31 MARCH 2014 AND Unaudited Unaudited 1 January - 1 January - Notes 31 March March 2013 Cash flows from operating activities Profit before tax Adjustments to reconcile income before tax to net cash generated from operating activities Depreciation and amortization 10, Interest expenses 16, Interest income 16,17 (19.796) (24.805) Provision for employment termination benefits Gain on sale of property, plant and equipment - (114) Finance loans bad debt provision - (837) Warranty provision Operating profit before working capital changes Net working capital changes in: Trade receivables and due from related parties ( ) Inventories ( ) (56.295) Other current/non-current assets and other receivables (84.156) (2.276) Receivables from finance sector operations Trade payables and due to related parties ( ) Other current liabilities Other current/ non-current payables and goverment incentives (22.517) (5.575) Employee termination benefits paid (6.758) (5.679) Taxes paid (2.608) - Warranty payments 12 (7.131) (10.803) Other libilities due to related parties Net cash generated from operating activities Investing activities Interest received Financial investments matured Financial assets 4 ( ) (199) Purchase of tangible and intangible assets 10, 11 (64.030) (35.486) Proceeds from sale of tangible and intangible assets 10, Cash flow hedges accounted under equity Net cash generated from/(used in) investing activities (88.154) Financing activities Interest paid (14.811) Dividend paid ( ) ( ) Proceeds from bank loans Bank loans paid - (64.137) Net cash used in financing activities ( ) Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The accompanying notes form an integral part of these condensed interim consolidated financial statements.

9 NOTE 1 - GROUP S ORGANISATION AND NATURE OF OPERATIONS Tofa Türk Otomobil Fabrikas A.. ( the Company or Tofa ) was established in 1968 as a Turkish-Italian cooperation venture. The core business of the Company is manufacturing, exporting and selling passenger cars and light commercial vehicles under licenses of Fiat Auto S.p.A. ( Fiat ). The Company, which is a joint venture of Koç Holding A.. ( Koç Holding ) and Fiat, also produces various automotive spare parts used in its automobiles. The Company s head office is located at Büyükdere Cad. No: 145 Zincirlikuyu li, stanbul. The manufacturing facilities are located at Bursa. The Company manufactures its cars, except for Mini Cargo and New Doblo, pursuant to license agreements between the Company and Fiat. The Company has been registered with the Turkish Capital Market Board ( CMB ) and quoted on the stanbul Stock Exchange ( ISE ) since 1991, its shares are still exchanged in Borsa stanbul A.. ( BIST ). The Company conducts a significant portion of its business with affiliates of Koç Holding and Fiat Group (Note 19). As of 31 March 2014 and 31 December 2013, consolidated subsidiaries of the Company are as follows: % of ownership 31 March 31 December Name of the company Operating area Koç Fiat Kredi Tüketici Finansman A.. ( KFK ) Consumer financing %99,9 %99,9 Fer Mas Oto Ticaret A.. Trading of automobile and spare parts %100,0 %100 For the purpose of the condensed consolidated financial statements, the Company and its consolidated subsidiaries are referred to as the Group. The average number of personnel in accordance with their categories is as follows: 31 March December 2013 Blue-collar White-collar

10 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 2.1 Basis of presentation Financial reporting standards The accompanying consolidated financial statements are prepared in accordance with the Communiqué Serial II, No:14.1, Principles of Financial Reporting in Capital Markets ( the Communiqué ) published in the Official Gazette numbered on 13 June According to the article 5 of the Communiqué, consolidated financial statements are prepared in accordance with Turkish Accounting Standards/Turkish Financial Reporting Standards ( TAS/TFRS ) and its addendum and interpretations ( IFRIC ) issued by Public Oversight Accounting and Auditing Standards Authority ( POA ) Turkish Accounting Standards Boards. Group prepared its condensed consolidated interim financial statements for the period ended 31 March 2014 in accordance with the TAS 34 Interim financial reporting in the framework of the Communiqué Serial: XII and numbered 14.1 and its related announcements. The interim condensed consolidated financial statements and its accompanying notes are presented in compliance with the format recommended by CMB, including its mandatory information. In compliance with the TAS 34, entities have preference in presenting their interim consolidated financial statements whether full set or condensed. In this framework, Group prefered to present its interim consolidated financial statements in condensed. Group s interim condensed consolidated financial statement does not include all disclosures and notes that should be included at year-end financial statements. Therefore the interim condensed consolidated financial statements should be examined together with the year-end financial statements. In accordance with the decision taken in the CMB meeting numbered 20/670 held on 7 June 2013, and in compliant with the announcement related to the format of financial statements and its accompanying notes, comparative figures have been reclassified to conform to the changes in presentation in the current period. With the decision taken on 17 March 2005, the CMB announced that, effective from 1 January 2005, the application of inflation accounting is no longer required for companies operating in Turkey and preparing their financial statements in accordance with the financial reporting standards accepted by the CMB ( CMB Financial Reporting Standards ). Accordingly, TAS 29, Financial Reporting in Hyperinflationary Economies, issued by the POA, has not been applied in the financial statements for the accounting year commencing 1 January Group and its subsidiaries operating in Turkey, maintains its accounting records and prepares its statutory financial statements in accordance with the Turkish Commercial Code (the TCC ), tax legislation and the uniform chart of accounts issued by the Ministry of Finance. The interim condensed consolidated financial statements, except for the financial asset and liabilities presented with their fair values, are maintained under historical cost conversion in TRY. These interim condensed consolidated financial statements are based on the statutory records, which are maintained under historical cost conversion, with the required adjustments and reclassifications reflected for the purpose of fair presentation in accordance with the TAS/TFRS. 8

11 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) Comparatives and adjustment of prior periods financial statements In order to allow for the determination of the financial situation and performance trends the Group s interim consolidated financial statements have been presented comparatively with the previous year. Where necessary, comparative figures have been reclassified to conform to the changes in presentation in the current period. The Group has amended the calculation method of unused investment incentive used in corporate tax income calculation and correspondingly in the final Corporate Tax Income Declaration, subject to tax calculation in the consolidated financial statements at 31 December As a result of the mentioned method change and in order to be consistent with the financial statements of the current period, Deferred tax asset and Taxation on Income classified under the consolidated balance sheets at 31 December 2013, have increased by TRY In accordance with the decision taken in the CMB meeting numbered 20/670 held on 7 June 2013, and in compliant with the announcement related to the format of financial statements and its accompanying notes, comparative figures have been reclassified to conform to the changes in presentation in the current period. Reclassifications made in the interim condensed consolidated income statement as of 31 March 2013 are as follows: - Foreign exchange gain and losses and interest income and losses amounting to TRY and TRY respectively, accounted under the accounts of Financial income and Financial expenses are related with trade receivables and payables and not related with financing activities, reclassified under the accounts of Other income from main activities and Other expenses from main activities. According to TAS 19 (amendment), Employee benefits, effective for annual periods beginning on or after 1 January 2013, changes in the standard should be applied retrospectively and the previous year s financial statements should be restated. Accordingly, gains/losses occurred due to the changes in the actuarial assumptions used in the calculation of employee termination benefit should be reclassified to the comprehensive income statement. In this context, Group has restated its consolidated financial statements as of 1 January Accordingly, actuarial loss amounting to TRY in gross, deducting its tax effect amounting to TRY2.318, TRY9.270 net amount is reflected to other comprehensive income Functional and reporting currency The Group s functional and reporting currency is Turkish Lira ( TRY ). 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 re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation are recognized in the consolidated statement of income Basis of consolidation The control relation is normally evidenced when the Company owns, either directly or indirectly, more than 50% of the voting rights of a company s share capital and is able to govern the financial and operating policies of an enterprise so as to benefit from its activities. During consolidation intercompany balances and transactions, including inter-company profits and unrealized profits and losses are eliminated. The consolidated financial statements are prepared using consistent accounting policies for similar transactions and other events in similar circumstances. Minority shares of the Company in subsidiaries were not recognized under non-controlling interest ( Minority Interests or Noncontrolling Interests ) since they do not have a material effect in consolidated financial statements. Financial statements of the Company and its subsidiaries subject to consolidation were prepared as of the same date. 9

12 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) Significant accounting judgments estimates and assumptions The preparation of financial statements requires the Group management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates. Those estimates are reviewed periodically, and as adjustments become necessary they are reported in earnings in the periods in which they become known. Significant estimates used in the preparation of these financial statements and the significant judgments with the most significant effect on amounts recognized in the financial statements are as follows: a) The Company determines warranty provision by considering the past warranty expenses and remaining warranty period per vehicle. b) A specific credit risk provision for loan impairment has been established to provide for management s estimate of credit losses as soon as the recovery of an exposure is identified as doubtful. Impairment and uncollectability are measured and recognized individually for loans and receivables that are individually significant, and measured and recognized on a portfolio basis for a group of similar loans and receivables that are not individually identified as impaired. As of 31 March 2014, general provisions for finance loans amounted to TRY (31 December 2013: TRY12.422) has been booked in the consolidated financial statements. 2.2 Amendments in International Financial Reporting Standards Group has implemented the new and revised standards and interpretations effective from 1 January 2014 which are related to its main operations. Standards, amendments and interpretations effective from periods on or after 1 January 2014: - Amendment to TAS 32, Financial instruments:statements, is effective for annual periods beginning on or after 1 January This amendment updates the application guidance in TAS 32, Financial instruments: Presentation, to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. 10

13 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) - Amendments to TFRS 10, Consolidated financial statements, TFRS 12 and TAS 27 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 TFRS 12 to introduce disclosures that an investment entity needs to make. - - Amendments to TAS 36, Impairment of assets is effective for annual periods beginning on or after 1 January These amendments address the disclosure of information about the recoverable amount of impaired asset. - Amendment to TAS 39 Financial instruments: Recognition and measurement, on novation of derivatives and hedge accounting, Income taxes, is effective for annual periods beginning on or after 1 January These narrow-scope amendments allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. - TFRIC 21, Levies is effective for annual periods beginning on or after 1 January This interpretation is on TAS 37, Provisions, contingent liabilities and contingent assets. TAS 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. Standards, amendments and interpretations to existing standards that are not yet required and will not have a significant effect on the financial statements of the Group as of 1 March Amendment to TAS 19 defined benefit plans is effective for annual periods beginning on/after 1 July 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 cycle of the annual improvements project, that affect 7 standards: TFRS 2, Share-based payment TFRS 3, Business Combinations TFRS 8, Operating segments TFRS 13, Fair value measurement TAS 16, Property, plant and equipment and TAS 38, Intangible assets Consequential amendments to TFRS 9, Financial instruments, TAS 37, Provisions, contingent liabilities and contingentassets TAS 39, Financial instruments Recognition and measurement. 11

14 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) - Annual improvements 2013, is effective for annual periods beginning on or after 1 July 2014 These amendments include changes from the cycle of the annual improvements project, that affect 4 standards: TFRS 1, First time adoption TFRS 3, Business combinations TFRS 13, Fair value measurement and TAS 40, Investment property. - TFRS 9 Financial instruments classification and measurement is effective for annual periods beginning on/after 1 January 2018 This standard on classification and measurement of financial assets and financial liabilities will replace TAS 39, Financial instruments: Recognition and measurement. TFRS 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 TAS 39 requirements. 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 TFRS 9, Financial instruments, regarding general hedgeaccounting, is effective for annual periods beginning on/after 1January These amendments to TFRS 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. - TFRS 14 Regulatory deferral accounts is effective for annual periods beginning on/after 1January TFRS 14, Regulatory deferral accounts permits first time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt TFRS. However, to enhance comparability with entities that already apply TFRS and do not recognise such amounts, the standard requires that the effect of rate regulation must be presented separately from other items. This standart is not endoursed by POA yet. Group assumes that those changes in ammendments will not couse a material impact on condensed consolidated financials. 2.3 Summary of significant accounting policies The condensed consolidated interim financial statements as of and for three months period ended 31 March 2014 have been prepared in accordance with TAS 34. Except for the above mentioned policy change in Note 2.1.2, the accounting policies used in the preparation of these condensed interim consolidated financial statements as of and for three months period ended 31 March 2014 are consistent with those used in the preparation of annual consolidated financial statements as of and for the year ended 31 December Accordingly, these condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements as of and for the year ended 31 December

15 NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.4 Segment reporting Since the Company operates in one business segment and the operations are held in Turkey, there is no segment reporting. The information regarding the sales of the Company as to domestic and export sales and the categorization of sales as to product type is disclosed in Note 14. NOTE 3 - CASH AND CASH EQUIVALENTS 31 March December 2013 Cash in hand 14 5 Due from banks - demand deposits time deposits Total The breakdown of time deposits is as follows: 31 March December 2013 Effective Effective Amount interest rate Amount interest rate (TRY equivalent) per annum (%) (TRY equivalent) per annum (%) TRY ,65-12, ,25-9,90 EUR ,20-3, ,85-3,60 Total As of 31 March 2014, the maturities of time deposits vary between 1-63 days (31 December 2013: between 1 and 47 days). As of 31 March 2014, the portion amounting to TRY (31 December 2013: TRY ) of the total demand and time deposits are deposited at the bank which is a related party of the Group. As of 31 March 2014 and 2013, cash and cash equivalents for the purpose of condensed consolidated statements of cash flows are as follows: 31 March March 2013 Cash and banks Less: interest accruals (3.037) (3.336)

16 NOTE 4 - FINANCIAL ASSETS a) Short-term financial assets Short term financial assets of the Group consists of time deposits amounting to TRY with a maturity of 119 days containing an interest rate of 3,3%. (31 December 2013: TRY with a maturity of 181 days containing an interest rate of 3,3%). b) Available for sale financial investments As of 31 March 2014, the Group has available for sale financial investments amounting to TRY295 (31 December 2013: TRY132). NOTE 5 - FINANCIAL LIABILITIES a) Short-term financial liabilities 31 March December 2013 Original Original Amount Amount Interest rate amount Amount interest rate (thousand) (TRY) (%) (thousand) (TRY) (%) Borrowings in TRY (*) ,50-11 Borrowings in EUR Euribor + 0, Total b) Short-term portion of long-term financial liabilities 31 March December 2013 Original Effective Original Effective amount Amount interest rate amount Amount interest rate (thousand) (TRY) per annum (%) (thousand) (TRY) per annum(%) Borrowings in TRY ,25-13, ,25-14,35 Borrowings in EUR Euribor + 0, Euribor + 0,15 Euribor + 2,60 Euribor + 1,96 Bonds ( 1,2,3,,8 ) ,76-10, ,76-10,27 Total

17 NOTE 5 - FINANCIAL LIABILITIES (Continued) c) Long-term financial liabilities 31 March December 2013 Original Effective Original Effective amount Amount interest rate amount Amount interest rate (thousand) (TRY) per annum (%) (thousand) (TRY) per annum(%) Borrowings in TRY (*) ,25-13, ,25-14,35 Borrowings in EUR Euribor + 0, Euribor+0,15 Euribor + 2,60 Euribor+1,96 Bonds ( 1,2,3,.,8 ) ,76-10, ,76-10,27 Total (*) The whole short term bank borrowings which are denominated in TRY and the whole long-term bank borrowings which are denominated in TRY comprise bank borrowings obtained by KFK, consolidated subsidiary, to finance consumer financing loans. (1) Based on the board of directors meeting decision at 1 November 2010 of Group s subsidiary KFK, according to the Capital Market Law no 2499 with the necessary permission, commercial papers amounting to TRY comprise of bonds which is issued on 26 January 2011 with 36 months maturity, 9,36% coupon interest rate, and TRY nominal value at maturity as interest payment every 6 months and principal + interest payment at the maturity. These commercial papers were sold to Yap Kredi Bank A.. which is a related party to the Group with closed issuance. (2) Based on the board of directors meeting decisions at 10 February 2012 and 18 October 2012 of Group s subsidiary KFK, according to the Capital Market Law no 2499 with the necessary permission, commercial papers amounting to TRY comprise of bonds which is issued on 12 November 2012 with 24 months maturity, 8,14% coupon interest rate, and nominal value at maturity. These commercial papers were sold to Yap Kredi Yat m Menkul De erler A.. which is a related party to the Group with exclusive issuance. (3) Based on the board of directors meeting decision at 18 October 2012 of Group s subsidiary KFK, according to the Capital Market Law no 2499 with the necessary permission, commercial papers amounting to TRY comprise of bonds which is issued on 24 December 2012 with 18 months maturity, 7,56% coupon interest rate, and nominal value at maturity. These commercial papers were sold to Yap Kredi Yat m Menkul De erler A.. which is a related party to the Group with exclusive issuance. (4) Based on the board of directors meeting decision at 18 October 2012 of Group s subsidiary KFK, according to the Capital Market Law no 2499 with the necessary permission, commercial papers amounting to TRY comprise of bonds which is issued on 28 December 2012 with 20 months maturity, 7,65% coupon interest rate, and nominal value at maturity. These commercial papers were sold to Yap Kredi Yat m Menkul De erler A.. which is a related party to the Group with closed issuance. 15

18 NOTE 5 - FINANCIAL LIABILITIES (Continued) (5) Based on the board of directors meeting decision at 4 April 2013 of Group s subsidiary KFK, according to the Capital Market Law no 2499 with the necessary permission, commercial papers amounting to TRY comprise of bonds which is issued on 27 May 2013 with 24 months maturity, 6,76% coupon interest rate, and nominal value with principle and interest payment at maturity. These commercial papers were sold to Yap Kredi Yat m Menkul De erler A.. which is a related party to the Group with closed issuance (6) Based on the board of directors meeting decision at 4 April 2013 of Group s subsidiary KFK, according to the Capital Market Law no 2499 with the necessary permission, commercial papers amounting to TRY comprise of bonds which is issued on 27 May 2013 with 20 months maturity, 6,80% coupon interest rate, with principle and interest payment at maturity. These commercial papers were sold to Yap Kredi Yat m Menkul De erler A.. which is a related party to the Group with closed issuance. (7) Based on the board of directors meeting decision at 4 April 2013 of Group s subsidiary KFK, according to the Capital Market Law no 2499 with the necessary permission, commercial papers amounting to TRY comprise of bonds which is issued on 30 September 2013 with 21 months maturity, 9,72% coupon interest rate, and nominal value with principle and interest payment at maturity. These commercial papers were sold TSKB A.. which is a conduit with closed issuance. (8) Based on the board of directors meeting decision at 4 April 2013 of Group s subsidiary KFK, according to the Capital Market Law no 2499 with the necessary permission, commercial papers amounting to TRY comprise of bonds which is issued on 14 November 2013 with 24 months maturity, 10,27% coupon interest rate and nominal value with principle and interest payment at maturity. These commercial papers were sold toyap Kredi Yat m Menkul De erler A.. which is a related party to the Group with closed issuance. Financial liabilities denominated in TRY has bear fixed interest rates while financial liabilities denominated Euro and USD bear floating interest rates. As of 31 March 2014, the portion amounting to TRY (31 December 2013: TRY ) of short-term and long-term financial liabilities are obtained through banks which are related parties of the Group. 16

19 NOTE 5 - FINANCIAL LIABILITIES (Continued) The redemption schedule of the long-term bank borrowings as of 31 March 2014 and 31 December 2013 is as follows: 31 March December years years years years years and more Total Long-term loans denominated in Euro were obtained to finance the investment to manufacture New Doblo and Mini Cargo light commercial vehicles. According to the manufacturing agreements signed by the Group, the repayment obligations related to these loans obtained for New Doblo is guaranteed by Fiat and Mini Cargo is guaranteed by Fiat and PSA through future purchases. The Group has obtained EUR 350 million long-term loan limit in 2006 based on two different manufacturing agreements with the participation of various financial institutions to be utilized in investment of Mini Cargo. Long-term loans -obtained in relation with the investment for Mini Cargo model- have been started to be paid beginning from the year 2008 till 2015 in equal installments. As of 31 March 2014, the remaining balance of the loan is TRY (equivalent of EUR thousand) (31 December 2013: TRY (equivalent of EUR thousand). The Group s exposure to foreign exchange rate and interest fluctuations for the loan obtained in relation with the investment for Mini Cargo model is undertaken by Fiat and PSA. At 4 March 2008, a loan agreement has been signed between the Company and i) Societe Generale, Credit Agricole, Fortis Bank S.A., Ing Bank NV and Intesa Sanpaolo banks as regulator, grantor and guarantor ii) EIB as guarantor and credit grantor and iii) Servizi Assicurativi per il Commercio Estreo S.p.A. (SACE) as guarantor role in the consortium amounting to EUR450 million. The loans, amounting to TRY (equivalent of EUR thousand) have been utilized as of 31 March 2014 (31 December 2013: TRY (equivalent of EUR thousand) and have a maturity of ten years with two years grace period and it has been used for financing investment expenditures regarding the development and production of New Doblo. The Group s exposure to foreign exchange rate and interest fluctuations for the loan obtained in relation with the investment for New Doblo model is undertaken by Fiat. In 2011, The Group has obtained a credit line by EUR36 million in order to use in capacity increase of New Doblo constructions. The repayment of principle amounts will be on equal installments starting in 2013 until As of 31 March 2014, the remaining balance of the loan amount to TRY (equivalent of EUR thousand). The Group has obtained a credit by TRY (equivalent of EUR thousand) from Citibank N.A. on 11 April 2011 and a credit by TRY (equivalent of EUR thousand) from HSBC PLC on 31 March 2014 and TRY (equivalent of EUR thousand) from Eximbank on 25 March 2014 and a credit with a export commitment by TRY (equivalent of EUR thousand) on 31 March

20 NOTE 6 - TRADE RECEIVABLES AND PAYABLES a) Trade receivables 31 March December 2013 Trade receivables Doubtful trade receivables Less: provision for doubtful receivables (6.104) (7.210) Less: unearned credit finance income (3.134) (1.925) Total Movement of the provision for doubtful receivables is as follows: 31 March March January Increase during the period (1.106) - 31 March Collaterals received related with trade receivables As of 31 March 2014, the letter of guarantees, guarantee notes, mortgages and direct debit system limit (payment guarantee limit secured by the banks) obtained as collateral for trade receivables amounts to TRY38.713, TRY17.511, TRY11.137, and TRY respectively (31 December 2013: letter of guarantees amounting to TRY48.065, guarantee notes amounting to TRY17.207, mortgages amounting to TRY and direct debit system limit amounting to TRY ). b) Trade payables 31 March December 2013 Trade payables Less: not accrued credit finance expense (3.550) (2.330) Total

21 NOTE 7 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS March December 2013 Short-term consumer financing loans Non-performing loans Provisions for impairment on loans Less: provision for specific loan impairment (13.803) (12.828) Less: provision for general loan impairment (6.882) (6.861) Total Long-term consumer financing loans Less: provision for general loan impairment Provision for general loan impairment (5.391) (5.561) Total As of 31 March 2014, TRY and foreign currency denominated loans originated by the Group bear interest rates ranging between 0,070% and 1,73 % per month (31 December 2013: between 0,070% and 1,73%) and there is no foreign exchange loan (31 December 2013: 0,075%) The maturities of long-term consumer financing loans are as follows: Years 31 March December to 2 years to 3 years to 4 years More than 4 years Total As of 2014 and 2013, movements of the provision for loan impairment are as follows: 31 March March 2013 Beginning of the period - 1 January Current year provision Recoveries from loans under follow-up (645) (729) End of the period - 31 March

22 NOTE 7 - RECEIVABLES FROM FINANCE SECTOR OPERATIONS (Continued) The Group has obtained pledge rights as a guarantee for its consumer financing loans, up to total amount of receivables, depending on the agreement between the Group and the consumers. As of 31 March 2014, the fair value of guarantees obtained for the consumer loans, which have been impaired, amounts to TRY1.350 (31 December 2013: TRY1.367). Furthermore, the Group obtains mortgage guarantees where necessary. The Group has mortgage guarantee on vehicles for all consumer financing loans that Group booked special provision amounting to TRY (31 December 2013: TRY12.828). NOTE 8 - INVENTORIES 31 March December 2013 Raw materials Work-in-progress Finished goods Imported vehicles Spare parts Goods in transit Less: provision for impairment on inventories (-) (4.279) (2.925) Total NOTE 9 - INVESTMENT PROPERTIES The movement of investment properties for three-months period ended 31 March 2014 and 2013 is as follows: January, net book value Fair value increase (*) March, net book value (*) As of 31 December 2013, the fair value of the property has been determined as TRY (2012: TRY24.100) by using benchmarking method. Relevant valuation report is based on valuation determined by an independent firm which has CMB license and necessary professional experience. 20

23 STATEMENTS FOR THE INTERIM PERIOD ENDED 31 MARCH 2014 NOTE 10 - PROPERTY, PLANT AND EQUIPMENT The movement of property, plant and equipment and the accumulated depreciation for three-months interim period ended 31 March 2014 is as follows: Land, land improvements Machinery and Furniture Leasehold Construction and buildings equipments and fixtures Vehicles improvements in progress Total As of 1 January Cost Accumulated depreciation ( ) ( ) ( ) (30.569) (5.411) - ( ) Net book value January 2014, net book value Additions Disposals, net - (48) (52) (432) - - (532) Transfers (15.813) - Depreciation charge for the period (1.809) (35.398) (6.075) (838) (84) - (44.204) 31 March 2014, net book value As of 31 March 2014 Cost Accumulated depreciation ( ) ( ) ( ) (31.407) (5.495) - ( ) 31 March 2014, net book value As of 31 March 2014 there are no pledged assets as collateral ( 31 December 2013: None). As of 31 March 2014, the cost of tangible assets which are fully depreciated and still in use amounts to TRY1.827 (31 December 2013: TRY1.850). 21

24 STATEMENTS FOR THE INTERIM PERIOD ENDED 31 MARCH 2014 NOTE 10 - PROPERTY, PLANT AND EQUIPMENT (Continued) The movement of property, plant and equipment and the accumulated depreciation for three-months interim period ended 31 March 2013 is as follows: Land, land improvements Machinery and Furniture Leasehold Construction and buildings equipments and fixtures Vehicles improvements in progress Total As of 1 January Cost Accumulated depreciation ( ) ( ) ( ) (27.292) (5.075) - ( ) Net book value January 2013, net book value Additions Disposals, net - (623) (30) (480) - - (1.133) Transfers (5.847) - Depreciation charge for the period (1.753) (39.564) (5.740) (462) (84) - (47.603) 31 March 2013, net book value As of 31 March 2013 Cost Accumulated depreciation ( ) ( ) ( ) (27.754) (5.159) - ( ) 31 March 2013, net book value As of 31 March 2013 there are no pledged assets as collateral ( 31 December 2012: None). As of 31 March 2013, the cost of tangible assets which are fully depreciated and still in use amounts to TRY1.870 (31 December 2012: TRY1.871). 22

25 NOTE 11 - INTANGIBLE ASSETS The movements of intangibles for three-months interim period ended 31 March 2014 and 2013 are as follows: License, fee and development costs Other Total As of 1 January 2014 Cost Accumulated amortization ( ) (42.451) ( ) Net book value January 2014, net book value Additions Disposals, net Transfers Amortization charge for the period (38.687) (2.205) (40.892) 31 March 2014, net book value As of 31 March 2014 Cost Accumulated amortization ( ) (44.656) ( ) 31 March 2014, net book value License, fee and development costs Other Total As of 1 January 2013 Cost Accumulated amortization ( ) (34.566) ( ) Net book value January 2013, net book value Additions Disposals, net Transfers Amortization charge for the period (40.015) (1.973) (41.988) 31 March 2013, net book value As of 31 March 2013 Cost Accumulated amortization ( ) (36.539) ( ) 31 March 2013, net book value Intangible assets are started to be amortized when the related assets are ready to be used. In relation to this, the Group has intangible assets amounting to TRY (31 December 2013: TRY ), which are not started to be amortised. As of 31 March 2014, cost of intangible assets which are fully depreciated and still in use amounts to TRY (31 December 2012: TRY ) 23

26 NOTE 12 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES Short-term provisions: 31 March December 2013 Provision for warranty Provision for legal cases Administrative expense accruals Other Total (*) Movement of the warranty provision is as follows: 31 March March January Paid during the year (7.131) (10.803) Increase in provision during the period March Litigations against the Group As of 31 March 2014 the total amount of outstanding legal claims brought against the Group is TRY7.670 (31 December 2013: TRY7.670). The Group has booked a reserve amounting to TRY4.407 (31 December 2013: TRY4.407) in the financial statements. Tax penalties The tax audit reports related with financial years that have been prepared following a tax inspection, are delivered to the Company in December 2013 by the Presidency of Tax Audit Committee of stanbul Large Scaled Tax Payers. In these tax audit reports, various payments made to foreign based tax payer institutions are critised because of witholding and VAT as a responsible issues. In accordance with the tax audit reports, Tofa is imposed to pay 13,4 million TRY as tax base and TRY23.8 million tax penalty in 2008, TRY8.4 million tax base and TRY14.9 million tax penalty in 2009, TRY9.1 million tax base and TRY16.2 million tax penalty in The announcement of these reports and their details had been made by the Company on 16 December 2013 and 30 December 2013 via POA. On the other hand, The tax audit reports related with financial years that have been prepared following a tax inspection, are delivered to the Company by the Presidency of Tax Audit Committee of stanbul Large Scaled Tax Payers. In these tax audit reports various payments made to foreign based tax payer institutions are critised because of witholding and VAT as a responsible issues. In accordance with the tax audit reports, Tofa is imposed to pay TRY5.1 million as tax base and TRY5.1 million tax penalty in 2011, TRY4.8 million tax base and TRY4.8 million tax penalty in The announcement of these reports and their details had been made by the Company on 11 April 2014 via POA. According to the Company, practices subject to critisizm, is in compliance and consistent with the related regulations and international agreements regarding to the prevention of double taxation. The Company is planning to perform all its legal rights including settlement and all other legal process with regard to these reports. In case of a possible legal process, it is more likely to result in favor of the Company than against the Company, no additional provision is reflected to the financial statements of the Company. 24