PARK ELEKTRİK ANNUAL REPORT 2011

Transcription

1 PARK ELEKTRİK ANNUAL REPORT 2011

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3 Contents 3 MESSAGE FROM THE CHAIRWOMAN 5 SECTION 1: MANAGEMENT 6 MISSION, VISION AND VALUES 7 BOARD OF DIRECTORS 8 BOARD OF AUDITORS 9 AGENDA OF ORDINARY GENERAL ASSEMBLY 11 SECTION 2: PARK ELEKTRİK IN BRIEF 13 HISTORY 13 SHAREHOLDING STRUCTURE 13 PRODUCTS 13 COPPER 14 ASPHALTITE 15 MAJOR FINANCIAL INDICATORS 15 SHARE CERTIFICATE PERFORMANCE 17 SECTION 3: ASSESSMENT OF THE YEAR SECTORAL CHANGES 19 PARK ELEKTRİK IN COPPER PRODUCTION 21 ASPHALTITE PRODUCTION 21 FINANCIAL PERFORMANCE 22 HUMAN RESOURCES 23 CORPORATE SOCIAL RESPONSIBILITY 23 INVESTOR RELATIONS 23 CORPORATE GOVERNANCE RATING 25 SECTION 4: CORPORATE MANAGEMENT 27 CORPORATE GOVERNANCE COMPLIANCE DECLARATION 28 CORPORATE GOVERNANCE COMPLIANCE REPORT 33 CAPITAL MARKET BOARD SERIAL XI. NO DECLARATION 34 APPROVAL BY THE BOARD OF DIRECTORS 35 AUDITOR S REPORT 37 INDEPENDENT AUDIT REPORT PARK ELEKTRİK ANNUAL REPORT

4 Having completed 5 years in concentrate copper production, we increased our capacity, production figures and profitability in

5 Message from the Chairwoman This year we hereby present you an extraordinary design and color of annual report. Green replaces the colors representing the copper and the coal. Then, come the soil and tendrils instead of the underground and mining figures as well. We decided to bring together the copper, one of the most commonly used metals of the world, and the soil and plant in one and a single question to create this concept. WHAT IF IT DIDN T EXIST? Miraculous and productive togetherness of soil-copper and soil-tendril, sprouting of a seed planted, recall us the productivity and copiousness-the copiousness of the copper we extracted. We left behind the 5th year in concentrate copper production with regard to the matters of extraction-just like shooting tendrils-of the concentrate copper being the basic raw material of the industry due to its higher heat and electricity conductivity, its stainless metal characteristics, its corrosion resistance; and easy formability and the matter of elimination of the question WHAT IF IT DIDN T EXIST? In copper production - we launched in the second half of 2006; our production volume and productivity also increased in association with our capacity in In 2011, whereas our concentrate copper production increased by 107% compared to the previous year, our sales increased by 91% as well. Another important highlight of this year is that our Company launched cathode copper production. Specific portion of the concentrate copper production of 77,510 wmt was used for cathode copper production, so cathode copper of 2,829 tons was derived. Our production and sales of asphaltite, which constitutes 11% of our net sales proceeds, were realized in parallel with the past year as expected. While our gross profitability in the concentrate copper prices is 68% with the effect of the positive trend in the concentrate copper besides the increase in the production volume, our gross profitability in asphaltite is 20%. Corporate Governance Rating of our Company, one of the first implementers of the Corporate Governance Principles and taking place in Corporate Management Index of Istanbul Stock Exchange (ISE), increased to Accordingly, we continued to keep our forefront position among the ISE companies in Furthermore, company promoting meetings were organized in the country and abroad and our Company s performance was disclosed to local and foreign investors within the scope of our investor relations - an important constituent of the Corporate Governance Principles. Our aforesaid activities on which we had quite positive returns would also go on increasingly in the year Our Company, growing in parallel with the high rate of growth of the Turkish economy despite the economic crisis, occurred in the global economy and deepened and continued particularly in the countries of the Euro Zone in 2011, started the year 2012 with the same enthusiasm and dynamism. The year 2012 would become a year in which our Company would proceed to produce, make investment and contribute to the growth of the Turkish economy. I hereby extend my thanks to my colleagues for their peak performance and to our Group for their support throughout the year; and I greet you all with due honor, wishing that 2012 would be a better year for Turkey and the World. Nalan ERKARAKAŞ Chairwoman of the Board of Directors PARK ELEKTRİK ANNUAL REPORT

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7 Section 1 Management Park Elektrik, adopted the Corporate Governance Principles, is being managed by a competent team within the scope of its mission, vision and values. PARK ELEKTRİK ANNUAL REPORT

8 Our Mission, Vision and Values Mission To follow technology and new developments and apply the same at each stage of work, To make effort to reach ever better working conditions, To increase productivity by motivating employees, To construct secure working sites at low cost, To make use of scarce resources in an effective and efficient manner to prevent possible losses. Vision Uprising of the Company as the leader among the other companies operating in the same sector both in the country and abroad, providing the growth with a track record of high quality, reflecting the effective and balanced growth to each activity of the Company, investing in appropriate areas, enabling maximum profit for the investors by trying to get the highest efficiency through minimum cost. Our Values Honesty - The Company abides on its promises. Security and Environment - Security of our employees and protection of the environment during our activities are ensured in maximum. Appreciation - We appreciate our employees and treat them frankly and honestly. We give importance to teamwork and safe working environment. Dividend - We seek the maximum profit for our shareholders from our Company s activities. Technology - We enable the practice of high technology in our activities by following the high technology and improvements all over the world. Motivation - We provide a motivating working environment by being aware that this will increase the productivity. 6

9 Board of Directors Chairwoman Vice Chairman Executive Member Independent Member Independent Member Member Member Member Member NALAN ERKARAKAŞ ALI COŞKUN DUYAK SÜLEYMAN UYAN SÜREYYA TURGUT FERZAN ÇITICI ORHAN YÜKSEL YAKUP KAYGUSUZ CEVDET ÖZÇEVIK DOĞAN PENÇE Authorities Chairwoman, Vice Chairman as well as Members of the Board of Directors are all empowered with the authorities set forth in the relevant articles of the Turkish Commercial Code, Capital Market Law and Article 8 of our Articles of Association. Term of Office 3 years Nalan ERKARAKAŞ Mrs. Erkarakaş, firstly started to work as specialist in the Capital Market Board in 1983, served as senior officer and member of the board of directors in various banks and intermediary institutions in and has been serving as the President of the Park Holding A.Ş. Capital Markets Group since 2002 up to date. Mrs. Erkarakaş was found eligible by Young Businessmen Association of Turkey for the award of Manager of the Year in Erkarakaş additionally captured the award of Successful Businesswoman of the Year granted by Dünya Newspaper in Erkarakaş, the articles of whom were published in various newspapers and periodicals in the fields of capital markets and finance, is also member of the organizations such as TÜGİAD (Young Businessmen Association of Turkey), TKYD (Corporate Governance Association of Turkey), KOTEDER (Association of Stock Exchange Quotation Partnership Managers) and Graduates of Faculty of Political Sciences of Ankara University. She has no share in the Company. Ali Coşkun DUYAK Mr. Duyak firstly started to work in the Engineering Department of PARSAN A.Ş. in 1988 and then served as Project Coordinator in YAZEKS A.Ş. in Duyak, served as Assistant General Manager in Park Elektrik in , at the same time served as the vice chairman and member of the Board of Directors in Ciner Group Companies since then. He has no share in the Company. Süleyman UYAN Mr. Uyan firstly started to work in the field of investment banking and served as Investment Banking Coordinator in Kentbank, Assistant General Manager in Kent Yatırım, Member of the Board of Directors in Kent Portföy Yönetimi, General Manager and Executive Member of the Board of Directors of Riva Menkul Değerler since Süleyman UYAN has been a Board of Directors member and executive member of Park Elektrik. Süleyman UYAN is a member of Corporate Governance Association of Turkey. He has no share in the Company Süreyya TURGUT Süreyya TURGUT, independent member of the Board of Directors, was born in Tokat in 1951, graduated from Faculty of Political Sciences of Ankara University in Mr. TURGUT, firstly started to work as civil servant in Turkish Agriculture Equipment Office in , served as Assistant Inspector and Inspector in Ministry of Finance in , Assistant to General Manager, Member of the Board of Directors, Deputy General Manager in General Directorate of Çay İşletmeleri in and as Chief Inspector in the Ministry of Finance in and as Member of the Governmental Auditing Commission of Presidency and as the vice chairman in the same institution in He has no share in the Company. PARK ELEKTRİK ANNUAL REPORT

10 Board of Directors Ferzan ÇİTİCİ Ferzan Çitici, an independent member of the Board of Directors, worked in various judicial levels for long years. Then, he was appointed to be İstanbul-Sarıyer Chief Prosecutor in , then İstanbul Şişli Chief Prosecutor in and lastly İstanbul Chief Public Prosecutor in and afterwards he retired from his post. He has no share in the Company. Orhan YÜKSEL Mr. Yüksel, being a graduate of the Department of Business Administration of Faculty of Administrative Sciences of Marmara University, has worked in several companies in the private sector since Mr. Yüksel has served as Chief Financial Officer and at the same time as Member of the Board of Directors in Ciner Group Companies since He has no share in the Company. Yakup KAYGUSUZ Mr. Kaygusuz, graduated from the Department of Mining Engineering of the Middle East Technical University in 1990, joined our Group on March 08,1996, when he was the Manager of Turkish Coal Administration, OAL Enterprise. He has no share in the Company. Cevdet ÖZÇEVİK Mr. Özçevik, graduated as Electrical Engineer from the Ankara Governmental Engineering-Architecture Academy in 1980, joined our group on September 21, 1999, when he was working in the Soma Lignite Enterprise of the Turkish Coal Administration. He has no share in the Company. DOĞAN PENÇE Mr. Pençe, graduated from the Department of Public Administration of the Faculty of Political Sciences of Istanbul University, served as Assistant Inspector in Vakıfbank in ; as Branch Manager in the same Bank in İstanbul and worked in Regional Credits Directorate in ; as the Commercial Credits Manager in ; as Assistant to General Manager and at the same time as the Member and Chairman of the Board of Directors in Vakıf Leasing A.Ş. and Vakıf Faktoring A.Ş. in 2006; as the Vice Chairman of the Board of Auditors in Vakıfbank International A.G. Viena/Austria Bank and still serves as the Head of Finance in Park Holding A.Ş. He has no share in the Company. Board of Auditors Hakkı GÜLTEKİN Hakkı Gültekin, a graduate of Department of Economics and Finance of the Faculty of Political Sciences, served as Chief Account Specialist in the Board of Account Specialists of the Ministry of Finance of the Republic of Turkey in Gültekin, being Certified Public Accountant since 1997, is still serving as auditor in Ciner Group. Authorities As per Article 10 of our Articles of Association, duties, authorities and responsibilities of the Auditors are within the frame of the principles set forth in the relevant articles of the Turkish Commercial Code. Term of Office 1 Year 8

11 Agenda of Ordinary General Assembly Meeting ORDINARY GENERAL ASSEMBLY MEETING FOR THE YEAR 2011 OF PARK ELEKTRİK ÜRETİM MADENCİLİK SANAYİ VE TİCARET ANONİM ŞİRKETİ TO BE HELD ON MAY 30, 2012 AGENDA: 1- Opening and Organization of the Presidential Board, 2- Authorization of the Presidential Board for execution of the General Assembly Meeting Minutes, 3- Reading, discussing and ratifying the Annual Report of the Board of Directors and the report of the Board of Auditors, Independent Audit Reports as well as Financial Report including the balance sheet and the income statement for the fiscal period January 01, 2011-December 31, 2011, 4- Reading, analyzing and ratifying the Balance Sheet and Profit/Loss Statements for the fiscal period January 01, 2011-December 31, 2011, 5- Discharge by the General Assembly of the members of the Board of Directors and Board of Auditors from the activities of the year 2011, 6- Discussing and resolving at the General Assembly the proposal of the Board of Directors on distribution in cash of the gross dividend amounting to TRL 100,000,000.-, which corresponds to 67.17% of the issued capital, 7- Submission to the General Assembly - for the ratification - of the amendment of Articles 5, 6, 7, 8 of the Articles of Association and amendment draft regarding insertion of Article 21 into the Articles of Association prepared by the Board of Directors as per Communiqué Serial IV, No. 56 entered into force on December 30, 2011, Communiqué Serial IV, No. 57 entered into force on February 11, 2012; given permission upon submission of Letter dated March 27, 2012 and numbered B.02.1.SP K issued by the Capital Market Board, Letter dated April 04, 2012 and numbered B.21.0.İTG / issued by General Directorate of Internal Trade of the Ministry of Customs and Trade and Letter dated April 20, 2012 and numbered B.62.0.EP D issued by the Energy Market Regulatory Authority, 8- Submission to the shareholders at the General Assembly of the Company s Disclosure Policy, 9- Submission to the shareholders at the General Assembly of the Company s ethical principles and rules, 10- Submission to the shareholders at the General Assembly of the Company s donation and aid policy, 11- Submission to the shareholders at the General Assembly of the donation and aid made in 2011, 12- Submission to the General Assembly of the information on guarantee, pledge and mortgages given by the Company and income and benefit obtained by these third parties as per Decision dated September 09, 2009 and numbered 28/780, 13- Submission to the General Assembly of the report issued by the Board of Directors for common and sustainable transactions conducted by the Company with the related parties, 14- Election of the new members of the Board of Directors and determination of their terms of office and submission of information on the candidates of Independent Members of the Board of Directors, 15- Submission to the shareholders at the General Assembly of the information on the principles of remuneration of the members of the Board of Directors and top executives, 16- Election of the new auditor and determination of his term of office, 17- Determination of the remuneration of the members of the Board of Directors and Board of Auditors, 18- Passing resolution on appointment of DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş., recommended by the Board of Auditors within the framework of the Capital Market Law and Capital Market arrangements for the year 2012, 19- Submission to the General Assembly of the Company s Dividend Distribution Policies adopted by the Board of Directors for the information of the General Assembly within the frame of the Corporate Governance Principles and Letter dated January 27, 2006 of the Capital Market Board, 20- Submission to the General Assembly - for ratification - of the matter of possibility of the shareholders controlling the company, members of the Board of Directors, top executives and their spouses and relatives including second degree consanguinity to conduct transactions, which may result in conflict of interest, for their own account or on behalf of others, to compete with and to participate in the companies engaged in such activities as per Article of Communiqué regarding Determination and Implementation of Corporate Governance Principles and Articles 334 and 335 of the Turkish Commercial Code, 21- Wishes and Closing. PARK ELEKTRİK ANNUAL REPORT

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13 Section 2 Park Elektrik in Brief Park Elektrik expanded its production capacity based on its advantage of higher reserve and achieved considerable increase in production in PARK ELEKTRİK ANNUAL REPORT

14 Net Sales 2011 TRL 173 million % TRL 84 million 12

15 Brief History Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. was incorporated on March 18, 1994 in order to run activities in the textile sector. The Company was offered to public in October The Company, which subsequently changed and made ready its commercial title and subject of activity in order to enter into the mining and energy sectors based on the amendments made in its articles of association in 2000, completely left the textile sector in Since then, Park Elektrik has been active in the field of mining. The Company has been engaged in coal-extracting and washing activities in the course of transition period until 2006 and has been producing concentrate copper production in Siirt Madenköy dating from The Company also launched cathode copper production through a contractor company in Entire of both concentrate copper and cathode copper production of the Company is being exported. In April 2009, the Company merged with a group company namely Ceytaş Madencilik Tekstil Sanayi ve Ticaret A.Ş, the shares of which are quoted in the Istanbul Stock Exchange. This merger caused the Company to acquire an asphaltite mine in Silopi, which was taken over before from the Turkish Coal Administration by the way of royalty and the investments of which were completed. Production in the mine was launched in June The Company maintains its activities in the fields of concentrate copper, cathode copper and asphaltite production. Shareholding Structure Shareholding Structure of Park Elektrik Üretim Madencilik Sanayi Ve Ticaret A.Ş. Share Rate (%) Share Amount Park Holding A.Ş ,020,050 Park Enerji Ekipmanları Madencilik Elektrik Üretim San. ve Tic. A.Ş ,148,572 Turgay Ciner ,065,983 Others ,632,638 Total ,867,243 The Shareholding Structure changed upon merger of Park Enerji Ekipmanlari A.Ş. and Park Holding A.Ş.; and the share of Park Holding A.Ş. increased up to 61.24%. Others 31.99% Turgay Ciner 6.76% Park Enerji Ekipmanları Madencilik Elektrik Üretim San. ve Tic. A.Ş 21.60% Park Holding A.Ş % Shareholding Structure of Park Holding A.Ş. Shareholding Structure of Park Enerji Ekipmanlari Mad. Elektrik Üretim San. ve Tic. A.Ş. Share Rate (%) Share Rate (%) Turgay Ciner Others 0.01 Park Holding A.Ş Others 0.16 Products COPPER What is Copper? The copper has been used by the mankind for various purposes since the ancient times and is today one of the most important metals among the basic raw materials of industry. The copper, represented by the chemical symbol Cu, is from the same group with the silver and gold. The most significant features of the copper, which has a reddish brown color, higher rate of conductivity of heat and electricity and which is a stainless metal are that it is anti-corrosive, retractable, malleable, easily formable and convenient to take the form of thin wire and sheet. The best conductive metal after silver is the copper. Currently, the copper is the second most frequently used metal. PARK ELEKTRİK ANNUAL REPORT

16 Products The copper has taken place in the mankind history since the time immemorial. Advanced technology and production possibilities caused the areas of utilization to become diversified and increase throughout the history. Annual copper consumption per capita in the developed countries is 10 kg. This figure varies between 1-2 kg in underdeveloped countries. Copper Products Ore (a type of gravel as found in natural deposits) Copper Ore Concentrate Blister Copper Refined Copper Cathode Copper Areas of use The copper has many areas of use due to advantages based on its physical and chemical features. The copper being used in production of handcrafts, ornaments, weapons and kitchen materials in history discovered new areas of use in parallel with the development of civilization; it has become one of the indispensable raw materials of electric-electronic, construction, durable consumer goods, chemistry, tourism and agricultural sectors. Even if various materials have been developed and used instead of the copper in time, the demand for the copper continued to increase. According to the data of London Metal Exchange, 42% of the produced copper is used in the field of electricelectronic, 28% in construction; 12% in communication; 9% in general consumption; and the remaining 9% in industrial machinery sector. Areas of Use of Copper on Sectoral Basis General Consumption 9% Communication 12% Construction 28% ASPHALTITE What is asphaltite? Industrial Machinery 9% The Asphaltite is a hydrocarbon with higher thermal value, composed of or originating from the petroleum. It occurs as a result of petroleum s leaving its own field and settling along the fractures around. Its calorie varies between 5,500 and 5,800 kcal/kg. This represents an energy value that is parallel to lignite and lower than the coal. Electric- Electronic 42% Park Elektrik unearths asphaltite, one of the hidden treasures of our country, and converts it to an economic value. Areas of Use The asphaltite in Turkey is used for heating purposes in the Eastern and South Eastern Regions, even if it is rare. Besides, the asphaltite gains importance as the synthetic raw material source in recent years. Extensive areas of use of the copper Illumination stuff, Electrical wires, telephone cables, electric motors, dynamos, motor winding, power switches and water pipes, Radios and televisions, household appliances such as washing machines, dish-washers, fridges and kitchen robots, Means of transport such as ship, train and automobile, Cold air machineries and equipments, Various tools, toolkits, weapons and art products, Construction raw materials, long-lived roof and outer coating, Coins. The asphaltite was first used as fuel-oil in the power plant of 135 MW owned by Silopi Elektrik Üretim A.Ş., one of the Ciner Group of Companies. The sole means of industrial consumption of asphaltite is still being realized in Turkey only by Silopi Elektrik Üretim A.Ş. 14

17 Major Financial Indicators Financial Information in Brief Summary Balance Sheet (TRL, million) Total Assets Shareholders Equity Total Liabilities Summary Income Statement (TRL, million) Net Sales Gross Profit Net Profit EBITDA Margin Profit Margins (%) Gross Profit Margin Net Profit Margin EBITDA Margin Net Profits (TRL, million) Shareholders Equity (TRL, million) Share Performance Park Elektrik shares moved in a narrow band in Depending upon adverse effects in the global monetary markets and fluctuations in the stock exchanges, ISE (Istanbul Stock Exchange)-100 index recessed by 24% in Despite those, annual decrease in Park Elektrik share prices remained limited to 10%. Park Elektrik Share Price, started with the level 3.87 in 2011, increased by 15% and reached 4.46; however, it recessed in parallel with the decrease in ISE and completed the year at the level of /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/2011 PARK ELEKTRİK ANNUAL REPORT

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19 Section 3 Assessment of the Year 2011 Despite economic stagnation in the world in 2011, the global demand for copper continued to rise up. PARK ELEKTRİK ANNUAL REPORT

20 Sectoral Changes Despite the worldwide economic stagnation in the world in 2011, the global demand for copper continued to rise up. Based on increasing demand, stimulated by China maintaining its high rate growth, a positive atmosphere is created in the copper sector and the investments did not ease down. In parallel with the developing economy in the world, a constant increase is noticed in the copper demand. Whereas the concentrate copper production increases by 16% in , the metal production only increased by an annual average rate of 1.9% within the last 10 years. Considered the last six years, a higher annual average growth rate is achieved at a rate of 2.2%. The global copper consumption is 18.6 million tons as of 2010 and the consumption in 2010 indicates an increase by 9.7% compared to the previous year. In global copper production and trading, Chile, Russia, Canada, USA, Mexico and Peru are the leading countries. In , copper production of Chile increased by 680,000 tons and production of Peru and China totally increased by 1.9 million tons. In 2011, the global copper demand was higher than the copper supply and LME Copper Prices /01/ /07/ /1/ /06/ /12/2011 Source: LME this caused the copper prices to rise up. According to data, not finalized yet, demand/supply balance was closed with demand surplus of 375,000. For the copper market specialists, the demand surplus is expected to continue in 2012 and The constant increase in the global copper demand over the years and the rate of increase in copper production falling behind the demand rendered the upward course of the prices enduring during the past 10 years. Whereas the average price of 1 ton copper was USD 1,578 in 2001, this figure increased up to USD 3,684 in 2005 and USD 7,535 in The increasing trend also continued in 2011 as well and the copper price reached 8,821 USD/ton by an annual increase of 17%. 18

21 Park Elektrik in 2011 Copper Production Park Elektrik conducts its copper production activities in two categories: concentrate copper and cathode copper. Concentrated copper production of Park Elektrik was launched at the end of The Company, producing only concentrated copper until 2011, started to produce cathode copper due to its stock-keeping facility, flexibility in sales timing and higher profit margin potential by means of sub-contracting. Sale of the produced cathode copper is also performed by Park Elektrik. The operating license of the copper mine would be under the possession of Park Elektrik by Measured copper reserve of the mining zone, estimated to have measured initial reserve of 13 million tons of ore at the time of acquisition, was revised as 40 million tons ore, 31 million tons of which is measured, according to JORC report (Joint Ore Resources Code report) issued by Micromine Consulting Services in With the help of the capacity increase the second phase of this investment in occurred as of October 2011, the 2013 and to increase its ore processing production in 2011 increased by 107% capacity up to annual 1.8 million tons. compared to the year The relevant capacity increases of the Company are realized by the way of The Company used 17,268 wmt of addition of new mills and grinders to the concentrate copper of total 77,510 wmt, existing concentrate plant. which the Company produced in 2011, for cathode copper production and In 2011, the Company, coming up the produced 2,829 tons of cathode copper. concentrate copper production target of 1,210 tons of the cathode copper, 75,000 wmt, completed the year with the produced in 2011, was sold. production volume of 77,510 wmt. The concentrate copper production volumes, As of October 2011, the Company targeted by the Company for the years reached 1.2 million tons ore processing 2012 and 2013, are successively 95,000 capacity upon investment of EUR 3.5 wmt and 150,000 wmt. million and is now targeting to complete Copper Production Change Concentrate Copper (wmt) 37,426 77, % Cathode Copper (mt) - 2,829 n.m wmt: wet metric ton, mt: metric ton The relevant report states the average grade (tenor) rate of Madenköy copper zone as 2.4%. Additionally, according to this report, the average grade (tenor) rate of 31,2 million tons of the reserve was determined to be 2.26%. Madenköy copper mine is accepted as a rich mine in respect of grade when compared to the other mines and is considered to be among the younger mines in respect of mining life. The Company increased the annual ore processing capacity from 750,000 tons up to 1,200,000 tons ore in 2011 by increasing the capacity in 2011 in parallel with the reserve increase and positive global conjuncture in the copper market. Madenköy Copper Mine Reserve Ton Cu(%) Measured 31,182, Indicated 6,433, Total Measured & Indicated 37,615, Inferred 2,206, Total Mineral Resource 39,821, Source: JORC Resource Estimate Report, Micromine Capacity Increase in Copper Operations & Production Targets Ore Processing Capacity (ton) 750,000* 1,200,000 1,800,000 Concentrate Copper Production Estimate (wmt) 77,510 95, ,000 * Capacity increase from 750,000 tons up to 1.2 million tons was realized as of October PARK ELEKTRİK ANNUAL REPORT

22 Net Profit 2011 TRL 101 million +173% 2010 TRL 37 million 20

23 Park Elektrik in 2011 Asphaltite Production The Company has the right to operate asphaltite zone in Silopi, hired from the Turkish Coal Administration by the way of royalty until According to the data from the Turkish Coal Administration, there exists total proved asphaltite reserve of 35 million tons in Silopi asphaltite zone. Silopi asphaltite zone, operated by Park Elektrik, is the first and only asphaltite zone operated industrially in Turkey. Asphaltite mine in Silopi is an openpit mine at the moment. Asphaltite to be extracted by excavators is grinded and enriched at the preparatory center and made ready for use. Park Elektrik sells the entire of however, inconsiderable differences the asphaltite extracted from the occur in time. asphaltite zone in Silopi to Silopi Elektrik Üretim A.Ş., one of the The Company launched asphaltite group companies, to satisfy the production in the mid of fuel-oil needs of its power plant In 2010, full capacity production with the installed capacity of 135 was started and production of MW. Asphaltite production amount 477,000 tons was achieved in is completely determined according According to the needs of Silopi to the needs of the power plant. Elektrik, as the buyer of asphaltite, Annual asphaltite need of the power the production around 434,000 tons plant is approximately 450,000 tons was achieved in according to the current capacity; Asphaltite Production Değişim Asphaltite (tons) 476, ,333-9% Financial Performance The new reserve report and capacity increase made in parallel with this report and production increase occurred as a result of the same and higher copper prices supported by the supply deficiency in the global copper market had important role in successful financial performance of the Company in In 2011, 87% of total sales income of Park Elektrik consist of concentrate copper and cathode copper sales; and TRL 151 million of total TRL 173 million was gained from the copper operations. The capacity increase of 60%, achieved by the Company at the end of 2011, had positive effects on production and sales figures of Park Elektrik and the Company achieved the highest volumes in both production and sales in Whereas the concentrate copper production of the Company reached the highest figure that is 77,510 wmt up to date in 2011, the sales volume has become the highest as well up to date with approximately total 61,667 dmt consisting of 55,054 dmt concentrate and 1,210 tons cathode. The Company Production and sales figures, achieved by Park Elektrik since 2006 when it started to produce concentrate copper, are given as follows: Production Volumes Concentrate Copper (wmt) 13,771 52,554 64,371 63,138 37,426 77,510 Cathode Copper (mt) ,829 Asphaltite (t) , , ,333 wmt: wet metric ton, mt: metric ton, t: ton Sales Volumes used 6,613 dmt concentrate copper for production of 1,210 tons cathode copper, sold in Concentrate Copper (wmt) Cathode Copper (mt) Asphaltite (t) Dmt: dry metric tos, mt: metric ton, t: ton 6,613 dmt concentrate copper was used for production of 1,210 tons cathode. PARK ELEKTRİK ANNUAL REPORT

24 Park Elektrik in 2011 Positive results occurred in association with the reserve and capacity increases 2011 became quite a brilliant year for Park Elektrik in parallel with many positive updates in operational aspect such as reserve increase, capacity increase and commencement of cathode production. In addition to increasing volume in the production and sales of the Company, the higher copper prices in the London Metal Exchange resulted in achievement of higher sales income of TRL 173 million by the Company. Besides the sales increase, important increases occurred in the Company s margins as well. Whereas the gross profit margin increased from 52% up to 62%, operating profit margin considerably increased from 27% up to 54%. In the same period, when the increase in the EBITDA of the Company was 170%, the EBITDA margin was achieved at the rate of 65% as of the end of Park Elektrik, not being in a financial indebtedness, disclosed a record net profit of TRL 101 million in 2011 with the contribution of the financial incomes, gained from its cash and cash equivalents acquired from on its sound shareholders equity structure. On the other hand, contract profit, amounting to TRL 15 million, gained from forward sales contract concluded by the Company with the London Metal Exchange also contributed to the profitability of the Company. Whereas annual increase in the net profit of the Company was 173%, net profit margin was 58%. On the other hand, shareholders equity of the Company increased up to TRL 443 million by an increase rate of 29% and size of assets increased up to TRL 484 million by an increase rate of 31%. Human Resources Park Elektrik human resources policy and implementations are arranged within the framework of the Company s mission, vision and values. Competent personnel recruitment and self-improvement are given importance at all the stages from recruitment to career management. Efforts are made to optimize work environment and working conditions and motivating applications are conducted to increase the work efficiency. The Company, starting the year with 516 human resources, closed the year with 635 employees. As of December 2011, 20% of the employees consists of white-collar employees and 80% consists of blue-collar employees. Average year of experience of the employees is extremely higher. Average experience of the employees other than those in Siirt and Silopi is 8.5 years and more. This indicates loyalty of the employees to the Company and at the same time plays a key role in the successful operations of the Company JANUARY DECEMBER Change (%) WHITE COLLAR BLUE COLLAR TOTAL Female 15 Male 620 High School, University 103 Lycee 167 Others

25 Park Elektrik in 2011 Corporate Social Responsibility Park Elektrik generating foreign currency inflow with 100% domestic resources is a company which clearly contributes to the export income of the Company. The Company considerably contributes to the country s economy and social stability by making investment and generating employment in a district where the investments are limited and enables the country to establish a balance on regional development. On the other hand, evaluation economically of asphaltite that is a product not used industrially before is another important Investor Relations The Company offers investor relations services by replying the questions clearly and in details as required by telephone, or mail; by regularly updating the website; by talking face to face to the investors, fund managers and analysts intending to negotiate with this unit; by attending investor conferences and road-shows; and by organizing investor meetings. In 2011, a Road Show including Eastern Europe and Scandinavia was organized. After disclosure of the annual financial statements, an Analyst Meeting was organized and the results were evaluated; and the questions were answered. Besides, contribution made by the Company for the country. Services offered in the health care center of the Company in Madenköy are not only limited to the employees of the Company; and free health services are offered to the society in the relevant district by a health team consisting of a medical doctor, a health officer, a nurse and an officer. Ambulance, which belongs to the Company, is also used for the needs of the village. The Company had a police station and 8 class-primary school attendance to an International Investor Conference, organized in Istanbul, was encouraged. In 2011, 171 investor questions were replied; 5 by letter; 44 by ; and 122 by telephone. Awareness about the Company before the foreign funds was increased by the efforts of the investor relations. The Company increased the number of these activities each year and aims at ensuring the inclusion of the disclosure by the way so. The matter on which the Company s corporate governance rating is the highest is transparency. This is directly correlated with the quality constructed in Madenköy in the last years. The old village school was renovated and donated to the Ministry of Education for use as boarding for the teachers. Renovation works of Madenköy Primary School were completed and two classes were opened to education. The Company started a new campaign in 2009 to cover the educational expenses of the students in Silopi and provided a non-refundable grant by assuming educational expenses of total 400 students. of the investor relations services. According to the second rating made in 2011 by SAHA Corporate Governance Rating Corporation for the Company, the corporate governance rating of the Company is The Company, which had the first rating made in 2010, got 8.65 which is the highest note that a company subject to the rating for the first time has ever got; and in the subsequent year it enhances its rating up to The Company s rating 9.47, obtained for the public disclosure and transparency, considerably contributed to the corporate governance rating which is Corporate Governance Rating The Company s Corporate Governance Rating was updated by SAHA Kurumsal Yönetim ve Kredi Derecelendirme Hizmetleri A.Ş. with a rating 8.67 defined as very good rating. This rating accurately defines the corporate management risks of Park Elektrik and indicates that Park Elektrik manages internal audit and management mechanisms as well as risks in an extremely efficient manner. While the performance of the Company is being considered among the best applications, positive performance is noticed in respect of all the assessment criteria. RATINGS OF MAIN TOPICS Total Shareholders Public Disclosure and Transparency Beneficiaries Board of Directors PARK ELEKTRİK ANNUAL REPORT

26 24

27 Section 4 Corporate Governance Park Elektrik registered its compliance with the Corporate Governance Principles with a quite higher rating such as PARK ELEKTRİK ANNUAL REPORT

28 Contents CORPORATE GOVERNANCE DECLARATION CHAPTER I - SHAREHOLDERS 2- Investor Relations Unit 3- Exercising the Shareholders Right to Obtain Information 4- Information Concerning General Assembly 5- Voting Rights and Minority Rights 6- Profit Distribution Policy and Profit Distribution Date 7- Transfer of Shares CHAPTER II - PUBLIC DISCLOSURE AND TRANSPARENCY 8- Company Disclosure Policy 9- Significant Events of Disclosure 10- Company s Internet Website and its Content 11- Disclosure of Real Person Shareholder(s) Holding Final Dominant Share 12- Disclosure of Insiders to the Public CHAPTER III- BENEFICIARIES 13- Providing Information to Beneficiaries 14- Participation by Beneficiaries in Management 15- Human Resources Policy 16- Information Concerning Affairs with Customers and Suppliers 17- Social Responsibility CHAPTER IV- BOARD OF DIRECTORS 18- Structure, Constitution of the Board of Directors and Independent Members 19- Qualifications of the Board of Directors Members 20- Company s Mission, Vision and Strategic Objectives 21- Risk Management and Internal Audit Mechanism 22- Duties and Liabilities of the Board of Directors Members and Managers 23- Operation Principles of the Board of Directors Members 24- Business with the Company and Competition Restrictions 25- Ethical Rules 26- Number, Structure and Independency of Committees in the Board of Directors 27- Financial Rights Granted to the Board of Directors 26

29 Corporate Governance Declaration This Corporate Governance Declaration has been prepared by Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş.for disclosing to public the commitments concerning its compliance with Corporate Governance Principles, its level of compliance with such principles and its reasoning where not complied with. Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. completed at the end of 2004 the study, which it started with İyi Şirket Danışmanlık A.Ş. with a view to establishing, in the body of the Company, the concept of Corporate Governance and its mechanisms, which spread in the world fast and are deemed to be sine qua non for a good management. This study was issued by the Capital Market Board as of July 2003 and entails Corporate Governance Principles as well as international principles and sector implementations. After having being discussed, the study has been ratified at the Company s Board of Directors Meeting dated April 26th, The Corporate Governance practices were updated each year and continued thereafter. Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. proves its commitment to the principles of transparency, equality, responsibility and accountability, which constitute the keystones of the Corporate Governance, with its fast adaptation with the study carried out in the body of the Company and with its efforts relating to these principles. Unlike many companies quoted on the stock market, Park Elektrik is one of the rare companies that have handed over the management of the Company entirely to professionals. Board of Directors entirely consists of professionals and this situation fully complies with the corporate governance principles. In line with this study, the Company s executive management and all of its employees have promptly adopted the Corporate Governance system formed in the Company and its mechanisms. The Company amended its articles of association in parallel with the Corporate Governance Principles at the Ordinary General Assembly held on June 14, In summary, the amended articles of association include arrangements concerning rights granted to minority shareholders, freedom of share transfer, independence of the Board of Directors, order of the Board of Directors meetings, establishment of secretaria, constitution of committees and their independency, election criteria concerning members of the Board of Directors and arrangements concerning the general assembly. Permanency of the Corporate Governance Principles was guaranteed by such amendments made to the articles of association. The Company has made arrangements in the Board of Directors with a view to increasing its efficiency. Number of Board of Directors members has been increased from 5 to 9, two independent members have been assigned, and the structure of the Board of Directors has complied with the corporate governance principles. Election of independent members as committee members, and consequently, presence of independent members in committees has been ensured. A secretariat has been formed under the Board of Directors in order to keep and archive the minutes of Board of Directors meetings and enable the Members of the Board of Directors to easily access in the Company information. As per Article 3 of the Communiqué Serial: X, No: 19 issued by the Capital Market Board, certain arrangements have been realized in line with the Corporation Governance Principles, by increasing the effectiveness of the Audit Committee, which was established before. As a secondary committee under the Board of Directors, a Corporate Governance and Appointment Committee has been formed, its working principles have been determined and its members have been appointed. All beneficiaries have been granted the right to access information in an equal, complete, coordinated and rapid manner by building a website for the Company under the principles of transparency and disclosure to public. It is aimed by such disclosure that a management creating responsibility and value is ensured. The Corporate Governance Principles are aimed at strengthening and increasing the confidence of our existing and potential investors, our employees, regulatory authorities and international and national public opinion. There exist two main principles, within the scope of the Corporate Governance Principles, however not adopted by Park Elektrik Üretim Madencilik A.Ş. for the sake of the Company: these are cumulative voting system and submitting the real estate sales to the General Assembly for ratification. The Company is at the moment unable to apply these two principles based on the facts that these would considerably interrupt the decision-making process and result in waste of time. NALAN ERKARAKAŞ Chairwoman of the Board of Directors PARK ELEKTRİK ANNUAL REPORT

30 Corporate Governance Compliance Report CHAPTER I- SHAREHOLDERS 2- INVESTOR RELATIONS UNIT The Company established an Investor Relations Unit on April 26, 2005 in order to ensure that the rights of the shareholders are exercised and to provide communication between the Company management and the shareholders. Mrs. Yeşim Bilginturan and Mr. Selim Erdoğan act as directors of the Investor Relations Unit. The Investors Relations Department reports to the Chairman of the Corporate Governance and Appointment Committee. Contact with the Investor Relations Unit can be established through the Company s website or address [email protected] or at The Investor Relations Unit informs the analysts of the analysts meetings, held periodically in accordance with the related laws and regulations and open for all the analysts, as well as important updates relating to the Company. 32 analysts from 22 different intermediary institutions attended the recent Analyst Meeting, organized by the Unit. Verbal and written questions asked to the unit are as soon as possible replied within the scope of the information disclosed to the public, and additionally, regular meetings are held with the national and international fund managers upon their requests. 3- EXERCISING THE SHAREHOLDER S RIGHT TO RECEIVE INFORMATION Website, built in April 2005, has effectively been prepared to provide investors with maximum information within shortest time in a coordinated, accurate, rapid, complete and understandable manner. The Website is under the responsibility of the Investor Relations Unit and is being updated constantly. The Company has established its disclosure policy; and this policy has been approved by the shareholders at the Ordinary General Assembly. Questions raised by the shareholders are effectively and rapidly responded by means of the investor relations unit established in the Company. Request for appointment of an independent auditor was accepted as a right in Article 12 of the Company s articles of association. However, no request has been made relating to this right. 4- INFORMATION CONCERNING GENERAL ASSEMBLY Park Elektrik Üretim Madencilik Sanayi ve Ticaret Anonim Şirketi held its Ordinary General Assembly for the year 2010 on April 11, The General Assembly convened with an attendance rate of 70.39% and number of total votes cast at the meeting was as many as 10,479,485,129. Invitation to General Assembly meeting was made 26 days prior to the meeting date in accordance with the Corporate Governance Principles of the Capital Market Board. The General Assembly was announced in Habertürk Newspaper dated March 17, 2011 and numbered 747 and in Turkish Trade Registry Gazette dated March 17, 2011 and numbered The same call was made to the relevant shareholders by PTT through registered mail on March 16, 2011 in order to ensure attendance to the General Assembly by the registered shareholders. Annual report and financial statements have been made available for the shareholders at the Company s headquarters and in the website of the Company. The Company s articles of association have been presented to the requesting investors. The Shareholders were entitled to ask questions at the General Assembly and these questions were answered in details. The call for the General Assembly was made to the shareholders 26 days prior to the meeting to increase the attendance to the General Assembly by the shareholders and to enable them to be ready enough for the meeting. Minutes of the General Assembly are made available for the review of the shareholders at the Company s headquarters and in the Company s website. At the General Assembly, in addition to discussion of the agenda items, information on donations and aids made in 2010 and guarantees, pledges and mortgages provided by the Company in favor of the third parties or incomes and interests obtained by the Company was given as per Decision dated and numbered 28/780; and the resolution on appointment of DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş., proposed by the Board of Auditors and elected by the Board of Directors for the year 2011 within the framework of the Capital Market Law and the arrangement of the Capital Market Board was ratified at the Ordinary General Assembly. 5- VOTING RIGHTS AND MINORITY RIGHTS Number of the Members of the Board of Directors has been increased to 9 upon the amendment to the articles of association at the Ordinary General Assembly Meeting. In this regard, 6 of these 9 members were elected from among the candidates to be nominated by Class A Shareholders and 3 from among the candidates to be nominated by Class B Shareholders. However, minority shares are not represented in management. However, the Company has appointed two independent members to ensure that minority shareholders are equally represented in the Board of Directors. As required by the structure of the Company and sector, the Board of Directors should pass fast and effective resolutions. In the event that the members to be elected by the cumulative voting method have adaptation problems with the Company and the sector, the decision-making process would slowdown and this might prevent the Company to make decisions timely and lead loss of profit. Therefore, no cumulative voting method is applied in the Company upon consideration of such possibilities. 6 - PROFIT DISTRIBUTION POLICY AND PROFIT DISTRIBUTION DATE Our Company makes the profit distribution within the framework of the provisions of the Turkish Commercial Code, arrangements 28

31 Corporate Governance Compliance Report of the Capital Market Board, Tax Laws and Regulations as well as the provisions of the articles of association. Dividend distribution to shareholders, also taking the growth for its objectives in the sector and investment and financing needs of the Company in the sector into consideration, will be realized by distributing profit to the shareholders in cash or as bonus shares to be issued by transfer of dividend to the capital stock or by distributing together the cash dividends and the stock dividends at specific rates. First tier legal reserve is set aside at the rates and amounts, determined by the Capital Market Law and communiqués, from the profit remained after 5% legal reserve is aside from the net profit in dividend calculation as per Article 466 of the Turkish Commercial Code. The General Assembly is authorized to distribute the balance partially or entirely as the second tier legal reserve or add to the voluntary legal reserve or set aside as extraordinary legal reserve. The profit share is to be distributed within the statutory periods determined by the related laws and regulations after delivery to the General Assembly for ratification and determination of the profit share to be distributed. 7- TRANSFER OF SHARES There is no restriction in the articles of association concerning the transfer of shares. CHAPTER II- PUBLIC DISCLOSURE AND TRANSPARENCY 8- COMPANY DISCLOSURE POLICY In order to enable each shareholder and beneficiary to follow up the developments about the Company in an equal and impartial manner, a disclosure policy based on transparency and honesty is constituted. While disclosing information to public, the Company complies with the Capital Market Law, and arrangements of the Capital Market Board (SPK) and Istanbul Stock Exchange (IMKB). Besides, the Company pays attention to realization of the Capital Market Board Corporate Governance Principles in the Company. The Board of Directors shall prepare the disclosure policy and announce it to public. The Board of Directors shall be liable to follow, review and improve the Disclosure Policy. The Corporate Governance Committee will provide the Board of Directors, Audit Committee and Financial Affairs Unit with the information as to the subjects concerning the Disclosure Policy. Mrs. Yeşim Bilginturan and Mr. Selim Erdoğan, Directors of the Investor Relations Unit, are responsible for observing and following up the disclosure policy. Persons Responsible for the Disclosure Policy and their Duties: Nalan Erkarakaş, Chairwoman of the Board of Directors Ali Coşkun Duyak, Vice Chairman of the Board of Directors Süleyman Uyan, Member Süreyya TURGUT, Member Orhan Yüksel, Member Yakup KAYGUSUZ, Member Cevdet ÖZÇEVİK, Member Ferzan Çitici, Member Doğan Pençe, Member Yeşim Bilginturan, Investor Relations Director Selim Erdoğan, Investor Relations Director 9- SIGNIFICANT EVENT OF DISCLOSURE The Company has made a total of 9 significant events of disclosure in the year 2011 and submitted such disclosures to the Capital Market Board and Istanbul Stock Exchange. Since the Company is not quoted on the foreign stock exchanges, no significant event of disclosure has been made abroad. Chairman of the Board of Directors and the persons appointed by the Board of Directors are responsible for significant events of disclosures. Assistant General Manager Tacigül Erdem and Investor Relations Unit Directors Yeşim Bilginturan and Selim Erdoğan were authorized for significant events of disclosure. In the past years, there has been no significant event of disclosure failed to timely be disclosed and there has been no sanction of the Capital Markets Board for any significant event of disclosure that was not timely made either. 10- THE COMPANY S INTERNET WEBSITE AND ITS CONTENT The Company s detailed, effective and periodically updated website was built in April This website can be reached at All the information set forth in Article , Chapter II. of the Capital Market Board Corporate Governance Principles has been given in the website in details. 11- DISCLOSURE OF REAL PERSON SHAREHOLDER(S) HOLDING FINAL DOMINANT SHARE There is no real person shareholder holding shares of the Company. However, upon consideration of Mr. Turgay Ciner s 99.99% stake in Park Holding A.Ş. and a 99.84% stake in Park Enerji Ekip. Mad.San. A.Ş., indirect share of Mr. Turgay Ciner in Park Elektrik Üretim Madencilik San. ve Tic. A.Ş. was determined to be 68%. SHAREHOLDING STRUCTURE OF PARK HOLDING A.Ş. Share Rate % Turgay Ciner Others 0.01 Total PARK ELEKTRİK ANNUAL REPORT

32 Corporate Governance Compliance Report SHAREHOLDING STRUCTURE OF PARK ENERJİ EKİPMANLARI MAD. ELEKTRİK ÜRETİM SAN. VE TİC. A.Ş. Share Rate % Park Holding A.Ş Others 0.16 Total DISCLOSURE OF INSIDERS TO THE PUBLIC The Company has disclosed insiders of the Company to the public through its website. The insiders are listed below. Furthermore, as disclosed in the Disclosure Policy, the Company applies Prohibition Period. Within the Prohibition Period, all the Company personnel are prohibited to conduct purchase and sale. Nalan Erkarakaş, Chairwoman of the Board of Directors Ali Coşkun Duyak, Vice Chairman of the Board of Directors Süleyman Uyan, Member of the Board of Directors Yakup Kaygusuz, Member of the Board of Directors Süreyya TURGUT, Member of the Board of Directors Ferzan Çitici Member of the Board of Directors Doğan Pençe, Member of the Board of Directors Cevdet ÖZÇEVİK, Member of the Board of Directors Tacigül Erdem, Assistant General Manager Murat Çolak, Head of the Accounting Department Yeşim Bilginturan, Investor Relations Director Selim Erdoğan, Investor Relations Director Sinem Ciner Çiftçi, Internal Audit Director Tuğçe Karadağ, Secretary of the Board of Directors Berkman ÖZATA, DRT Bağımsız Denetim SMM A.Ş Gökhan ALPMAN, DRT Bağımsız Denetim SMM A.Ş Uğur KUMRU, DRT Bağımsız Denetim SMM A.Ş Aziz Murat DEM İRTAŞ, DRT Bağımsız Denetim SMM A.Ş Arda KAYA, DRT Bağımsız Denetim SMM A.Ş Pınar KAYMAZ, DRT Bağımsız Denetim SMM A.Ş Ali BEKÇE, DRT Bağımsız Denetim SMM A.Ş Fulya KILINÇ, DRT Bağımsız Denetim SMM A.Ş Burçin ALTAN, DRT Bağımsız Denetim SMM A.Ş CHAPTER III- BENEFICIARIES 13- PROVIDING INFORMATION TO BENEFICIARIES Formation of the Corporate Governance Principles and its mechanisms in the Company were completed in 2005 and a disclosure policy also covering the beneficiaries has been built in this line. Under the disclosure policy, meetings for the beneficiaries (analyst meetings, quarterly assessment meetings for employees and periodic meetings for employees) have been decided to be made. Announcement for such meetings and then meeting reports will be announced also in the Company s website. 14- PARTICIPATION BY BENEFICIARIES IN MANAGEMENT The beneficiaries do not participate in management in person. However, the Company s employees are periodically invited to the Board of Directors to make explanations and forward opinions on the subjects related to their units. 15- HUMAN RESOURCES POLICY The Company has built the Human Resources Policy in writing in line with the principles concerning employment, promotion, dismissal and performance measures of employees and announced it to the public in its web-site. In addition, the processes relating to each unit and each duty in the Company were formed in writing. Syndicate representatives were authorized to govern the relations with the employees. The employees have filed no complaint concerning discrimination. 16- INFORMATION CONCERNING RELATIONS WITH CUSTOMERS AND SUPPLIERS The copper concentrate, a product of the Company, is exported and its price is determined by the London Metal Exchange. As the copper is a commodity, which has no characteristics of transformation, no study for customer pleasure was required to be held. The Company fulfilled its export liabilities timely and perfectly; no complaint and argument of the buyer relating to the company has been in question. 17- SOCIAL RESPONSIBILITY The Company continues to perform its activities within the framework of environmental policy and in accordance with the protection of nature and environment, and inspection reports prepared for mining and production fields exist. As for social responsibility, the Group, as a whole, contributes to projects realized under the title Ciner Group. In addition to the comprehensive projects continued in the body of the Group and explained in details in the website, the Company participated or initiated several social aid campaigns in order to develop the conditions of the territory where the production facilities are located and contribute to the society of the territory. Pursuant to this scope, a police station of TRL 1.65 million cost was constructed and donated to the Turkish Armed Forces; and a primary school with 8 classes, of TRL 317,600 cost, was constructed and donated to the Ministry of Education; and an old village school was renovated and again donated to the Ministry of Education for teachers housing. In addition, the Company renovated the village clinic in Siirt/Madenköy and Park Elektrik in-house health team serves all the surrounding villages through this renovated village clinic at all the operational costs of the Company. For this purpose, our Company s ambulance is used for the needs of the village society. 30

33 Corporate Governance Compliance Report CHAPTER IV- BOARD OF DIRECTORS 18- STRUCTURE, CONTITUTION OF THE BOARD OF DIRECTORS AND INDEPENDENT MEMBERS The Company s Board of Directors consists of 9 members. 8 out of these members are non-executive while the remaining 1 member is executive. Chairman of the Board of Directors is Nalan Erkarakaş and she is not an executive. Chairman of the Board of Directors and Executive Chairman are different persons. Titles and qualifications of the Board of Directors Members are given below: Nalan Erkarakaş, Chairwoman of the Board of Directors, Non- Executive Ali Coşkun Duyak, Vice Chairman of the Board, Non-Executive Süleyman Uyan, Member, Executive Doğan Pençe, Member, Non-Executive Yakup Kaygusuz, Member, Non-Executive Süreyya TURGUT, Independent Member, Non-Executive Orhan Yüksel, Member, Non-Executive Ferzan Çitici, Independent Member, Non-Executive Cevdet ÖZÇEVİK, Member Non-Executive Two independent members were appointed to the Board of Directors. These independent members are Mr. Süreyya TURGUT and Mr. Ferzan ÇİTİCİ. The independent members comply with the criteria of independence included in the Corporate Governance Principles of the Capital Market Board and submitted their independence statements to the Company. If there is a reason for annulment of the independence for our independent members, necessary procedures would be fulfilled to appoint new independent members. Whereas no restriction is applied to the independent members relating to their assumption of any extra-group tasks, the other members are restricted and prohibited to assume extra-group tasks. Board Members of the Company, not being executive, work intensely, since they have assumed other duties in the Holding. Such restriction is applied for the reason that extra-group duties would limit the time they should spend for the duties in the Company and Holding and decrease their productivity. 19- QUALIFICATIONS OF THE BOARD OF DIRECTORS MEMBERS Minimum qualifications for the Company s Board of Directors members were determined by Article 11 of the articles of association. Qualifications of the Board of Directors members comply with those set out in Articles 3.1.1, and of Chapter IV of the Capital Market Board Corporate Management Principles. The Company is ready to form training programs for members who lack certain qualifications and no such education has been needed until now. However, compliance programs were formed by the Corporate Governance Committee for the new Board of Directors Members. 20- COMPANY S MISSION, VISION AND STRATEGIC GOALS The Company s website and annual report explains the Company s mission, vision, goals and values. Mission of the Company: Following the technology and recent developments and implementing the same to each stage of business Making effort to maintain ever better working conditions Increasing the efficiency by motivating the personnel Construction of secure working sites at low cost Avoiding loss by making use of resources effectively and efficiently Vision of the Company: Leadership - Uprising of the Company as a leader among the national and international companies in the same sector. Quality - growth of the Company without any concession onquality. Growth - reflecting the effective and balanced growth to each activity of the Company and investing in appropriate areas. High performance - enabling the investors to reap maximum profits by maintaining the highest efficiency at lowest cost. The Board of Directors approves the strategic goals constituted by the executives. The cited strategic goals are prepared and approved by the Board of Directors through the proposals and opinions of the related units. Studies are started in order for immediate achievement of the goals approved. The attainment level is measured by tracing the results in the financial statement periods and at the end of the year. In order to overview the attainment level, activities and past performance of the Company, the Board of Directors is subjected to evaluation once a year. It is planned to make the investigation in accordance with the performance, attainment level, effectiveness of the activities and compliance with the Corporate Governance principles of the Board of Directors during the annual evaluation. 21- RISK MANAGEMENT AND INTERNAL AUDIT MECHANISM The Board of Directors has established a risk management mechanism in relation to the existing and potential risks of the Company. The risk management system defines maximum risks - each unit of the Company may undertake - percent of risk occurrences, precautions and control mechanisms against them. Internal audit mechanisms are applicable for following of the risk management. Efficiency of the risk management is PARK ELEKTRİK ANNUAL REPORT

34 Corporate Governance Compliance Report periodically reviewed and deficiencies and faults determined are corrected within the shortest period. In addition to the internal audit mechanism conducted in the Holding, the Company established a new Internal Audit Mechanism. The internal audit helps the Company achieve its objectives by offering a systematic and disciplined approach for the purpose of assessing and improving the productivity and efficiency of the risk management, control and management processes of the Company. The internal audit unit searches how the Company manages the existing and potential risks and whether or not existence, efficiency of the internal audits and management processes as well as organizational structure are sound against the other possible losses; and reports the results to the Company s related organ and offers solutions for the problems. Park Elektrik Internal Audit Unit consists of Sinem Ciner Çiftçi (Internal Audit Director) and one personnel. 22- DUTIES AND LIABILITIES OF THE BOARD OF DIRECTORS MEMBERS AND EXECUTIVES Duties and liabilities of the Board of Directors Members are set forth in the Company s articles of association and website. 23- OPERATION PRINCIPLES OF THE BOARD OF DIRECTORS MEMBERS Agenda of the Board of Directors meetings are determined in line with the demands of the chairman and members. Demands by the managers are also effective on the determination of the agenda. Board of Directors meetings convene at least 12 times a year as mentioned in Article 8 of the articles of association. The provision concerning absence stating, a member of Board of Directors, who fails to attend to three consecutive meetings, shall be deemed to have resigned, is set forth in the articles of association. A secretaria unit s has been formed under the Board of Director in order to keep and archive the minutes of Board of Directors meetings and provide the Members of the Board of Directors with coordinated information and Mrs. Tuğçe Karadağ has been appointed to be the Secretary of the Board of Directors. The agenda and the information and reports concerning the agenda are provided with the Members of the Board of Directors by the secretary at least 1 week prior to meetings. Reasonable and detailed cross-vote justifications in relation to issues discussed at the meeting are registered in the minutes of meeting and conveyed to the Company auditors in writing. Cross-vote justifications concerning the issues, for which the independent members to be appointed explained different opinions, will be disclosed to the public. Questions rose at the meetings by the members and their answers are recorded in the minutes of meeting. Members actual participation is ensured for the articles to be voted by the Board of Directors members who will actually attend the Board of Directors meetings as set forth in Article , Chapter IV of the Capital Market Board Corporate Governance Principles. No member of the Board of Directors, including the Chairman, is given the right of weighted voting and/ or negative veto. 24- BUSINESS WITH THE COMPANY AND COMPETITION RESTRICTIONS The Company s Board of Directors members have not entered into any business relation with the Company or competed with it in the relevant period. 25- ETHICAL RULES Ethical rules were established by the Board of Directors for the Company and the employees and disclosed to public through the Company s website. 26- NUMBER, STRUCTURE AND INDEPENDENCE OF COMMITTEES IN THE BOARD OF DIRECTORS An audit committee was formed in order for the Board of Directors to fulfill its duties and responsibilities in a duly manner. The Audit Committee consists of Süreyya Turgut, the Chairman and Süleyman Uyan, the Member. Süreyya Turgut is an independent member of the board. Süleyman Uyan is the member of the board of directors. Park Elektrik increased the efficiency of the Audit Committee, constituted in accordance with Article 3 of the Communiqué Series X, No:19 by the Capital Market Board, and executed the operations relating to arrangement of the same in accordance with Corporate Governance Principles. Besides, a Corporate Governance and Appointment Committee - as a secondary committee - was constituted under the Board of Directors. Chairman of the Corporate Governance and Appointment Committee is Ferzan Çitici, being independent member of the Board of Directors; and other members are Nalan Erkarakaş, Chairwoman of the Board of Directors and Selim Erdoğan, Investor Relations Manager. As to be applied by the Board of Directors beginning from the year 2005, the Audit Committee will convene quarterly at least 4 times a year, while the Corporate Governance and Appointment Committee will convene at least 3 times a year. Procedures to be followed by the committees during their activities have been formed in writing and disclosed to public. Provisions ruling that the Board of Directors Members will not perform duty in more than one committee are set forth in the articles of association. In the meantime, qualifications of the committee members are the same as the qualifications of the board of directors set forth in Article 10 of the articles of association. 27- FINANCIAL BENEFITS GRANTED TO THE BOARD OF DIRECTORS Rights, benefits and salary provided to the Board of Directors members will be given in line with performance criteria applied to the Board of Directors. The Company has not lent money or provided credit to any Board of Directors member or any of its managers. 32

35 SPK Seri XI, NO:29-9 Beyan DETAILS OF THE BOARD OF DIRECTORS RESOLUTION REGARDING ACCEPTANCE OF FINANCIAL STATEMENTS AND ANNUAL REPORTS DATE: March 16, 2012 NUMBER: 12 OUR DECLARATION OF RESPONSIBILITY PURSUANT TO ARTICLE 9 OF THE SECTION THREE OF THE COMMUNIQUÉ SERIAL XI, NO. 29 BY THE CAPITAL MARKET BOARD We hereby declare that; A) Our Company s financial statements and footnotes for the period , issued within the framework of the International Accounting and Financial Reporting Standards as per the provisions of the Communiqué regarding Principles on Financial Reporting in the Capital Market and approved by the Board of Directors Resolution dated March 16, 2012 and No. 12, were examined by us, B) Under light of the information possessed by our Company within the sphere of duty and liability, the financial statements and the report do not contain any false explanation on important issues or any incompleteness that may be misleading as of the date when such explanation was made, C) Under the light of the information possessed by our Company within the sphere of duty and liability, financial statements and information related to other financial issues accurately reflect the truth with regard to our Company s financial status and operating results beginning from the period referred to in the report. Süleyman UYAN Member of the Board of Directors Tacigül ERDEM Assistant General Manager PARK ELEKTRİK ANNUAL REPORT

36 Board Resolution Approval of the Annual Report Resolution Date: March 16, 2012 BOARD OF DIRECTOR Resolution No: 2012/12 The Board of Directors of Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. convened on March 16, 2012 and resolved unanimously that the annual report for the year 2011 submitted for ratification of the Board of Directors and attached hereto would be accepted and submitted for the information of the shareholders. NALAN ERKARAKAŞ Chairwoman of the Board of Directors Ali Coşkun DUYAK Vice Chairman of the Board of Directors SÜLEYMAN UYAN Executive Board Member ORHAN YÜKSEL Board Member DOĞAN PENÇE Board Member CEVDET ÖZÇEVİK Board Member SÜREYYA TURGUT Board Member FERZAN ÇİTİCİ Board Member YAKUP KAYGUSUZ Board Member 34

37 Auditors Report TO GENERAL ASSEMBLY OF PARK ELEKTRİK ÜRETİM MADENCİLİK SANAYİ VE TİCARET A.Ş. COMPANY Title Head Office Registered Capital Issued Capital Subject of Activity AUDITORS Name of Auditor and Auditors Term of Office, Partnership status Capacity as the Shareholder Number of Attended Board of DIrectors and SupervIsory Board MeetIngs Scope of the examinations made on the Company s calculations, books and documents, date of examination and outcome Number and Results of ExamInatIons on the Accounts and Books as well as Documents of the Company and their outcome as per Subpara 3, Paragraph 1, ArtIcle 353 of Turkish CommerciaL Code Result of the InvestIgatIon CarrIed out as per Subpara. 1 Paragraph 4 of ArtIcle 353 of TurkIsh CommercIal Code : Park Elektrik Üretim Madencilik Sanayi ve Ticaret Anonim Şirketi : Istanbul : TRY 300,000,000.- : TRY 148,867,243.- : The subject of activity of the Company covers searching and extracting, processing any and all kinds of metals, metal ores and metal derivatives; processing, refining and fining down any kind of metal or metal derivatives; ; constructing, operating cogeneration power plants to satisfy the need of electricity, energy and steam, selling the excess energy; producing every kind of fiber from glass, mine and mine derivations and producing every kind of product from fiber; constructing, operating or selling power plants for electricity generation and distribution. : : : Hakkı GÜLTEKİN 1 Year/Not a Shareholder of the Company. Not Shareholder. : Attended to 4 Board of Directors meetings in the capacity of the Company Auditor. : : : It is determined that the legal records based on valid documents and the Balance Sheet and Profit-Loss Statements were duly issued in accordance with the records and accounting procedures and principles have been complied, as a result of the examinations we performed on 08/04/2011, 04/07/2011, 09/09/2011, 30/12/2011 in order to obtain information concerning partnership activities and to ensure that legal book records be duly kept. Monies, taxes and duty stamps and stocks in the cash register of the Company were counted and recorded, and no deficiency or irregularity was noticed in terms of consistence of these values with the legal books as a result of the counts and examinations we performed on 08/04/2011, 04/07/2011, 09/09/2011, 30/12/2011 It is determined through monthly examination on the records and cash register of the Company that the commercial papers such as checks, bonds, title deeds, investment incentive licenses were duly safeguarded and there is no pledge and escrow at the cash register of the Company. ComplaInts and MalpractIces Informed and ActIons Taken AgaInst : No complaint or information as to corrupted practices has been communicated to our Board of Auditors within the year; and no malpractice has been encountered in the examinations carried out by our Board. I have examined the account transactions of Park Elektrik Üretim Madencilik San. Tic. A.Ş. for the fiscal period of January 01, 2011 December 31, 2011 in accordance with the Turkish Commercial Code, Articles of Association and other legislation and related generally accepted accounting principles and standards. In my opinion, balance sheet as of December 31, 2011, enclosed hereto and the contents of which I approved, reflects the financial status of the Company on the relevant date and the Income Statement for the term of January 01, December 31, 2011 reflects the results of the activities of the related term, all in correct and accurate manner. I hereby submit to your voting the approval of the Balance Sheet and income statement, and the discharge of the Board of Directors. Sincerely March 15, 2012 Auditor Hakkı GÜLTEKİN PARK ELEKTRİK ANNUAL REPORT

38 PARK ELEKTRİK ÜRETİM MADENCİLİK SANAYİ VE TİCARET A.Ş. FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2011 (TRANSLATED INTO ENGLISH FROM THE ORIGINAL TURKISH REPORT) 36

39 DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Sun Plaza, Bilim Sokak No: Maslak, Şişli İstanbul, Türkiye Tel: Fax: CONVENIENCE TRANSLATION OF THE REPORT AND FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH INDEPENDENT AUDITORS REPORT To the Board of Directors of Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. We have audited the accompanying balance sheet of Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. ( the Company ) as of 31 December 2011 and the related statements of comprehensive income, changes in shareholder s equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting standards published by the Capital Markets Board (the CMB ). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards published by the CMB. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, auditor considers internal control relevant to the Company s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Conclusion In our opinion, based on our audits the accompanying financial statements present fairly, in all material respects, the financial position of Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. as of 31 December 2011 and the results of its operations and its cash flows for the year then ended in accordance with the financial reporting standards published by the Capital Markets Board. Istanbul, 16 March 2012 DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Berkman Özata Partner Member of Deloitte Touche Tohmatsu Limited PARK ELEKTRİK ANNUAL REPORT

40 Table of Contents Page BALANCE SHEET 1-2 COMPREHENSIVE STATEMENT OF INCOME 3 STATEMENT OF CHANGES IN EQUITY 4 STATEMENT OF CASH FLOWS 5 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 ORGANIZATION AND OPERATIONS OF THE COMPANY 6 NOTE 2 BASIS OF THE FINANCIAL STATEMENTS 7 25 NOTE 3 BUSINESS COMBINATIONS 25 NOTE 4 SEGMENT REPORTING NOTE 5 CASH AND CASH EQUIVALENTS 27 NOTE 6 FINANCIAL INVESTMENTS 27 NOTE 7 FINANCIAL BORROWINGS 28 NOTE 8 TRADE RECEIVABLES AND PAYABLES NOTE 9 OTHER RECEIVABLES AND PAYABLES 29 NOTE 10 INVENTORIES 30 NOTE 11 INVESTMENT PROPERTY 30 NOTE 12 PROPERTY, PLANT AND EQUIPMENT NOTE 13 INTANGIBLE FIXED ASSETS NOTE 14 GOODWILL 35 NOTE 15 GOVERNMENT GRANTS AND INCENTIVES 35 NOTE 16 PROVISIONS, CONTINGENT ASSETS AND LIABILITIES NOTE 17 COMMITMENTS 41 NOTE 18 EMPLOYEE BENEFITS / RETIREMENT PAY PROVISIONS NOTE 19 OTHER ASSETS AND LIABILITIES NOTE 20 EQUITY NOTE 21 SALES AND COST OF SALES 46 NOTE 22 RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SELLING AND DISTRIBUTION EXPENSES, GENERAL ADMINISTRATIVE EXPENSES 47 NOTE 23 EXPENSES BY NATURE NOTE 24 OTHER OPERATING INCOME / (EXPENSES) 48 NOTE 25 FINANCIAL INCOME 49 NOTE 26 FINANCE EXPENSES 49 NOTE 27 TAX ASSETS AND LIABILITIES NOTE 28 EARNINGS PER SHARE 52 NOTE 29 RELATED PARTY DISCLOSURES NOTE 30 NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS NOTE 31 EVENTS AFTER THE BALANCE SHEET DATE 67 NOTE 32 OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE FINANCIAL STATEMENTS OR OTHER ISSUES REQUIRED FOR THE CLEAR UNDERSTANDING OF FINANCIAL STATEMENTS 68 38

41 Balance Sheet as of 31 December 2011 Audited Audited 31 December 31 December ASSETS Notes Current Assets Cash and Cash Equivalents Trade Receivables Due from Related Parties Other Trade Receivables Other Receivables Due from Related Parties Other Receivables Inventories Other Current Assets Non-current Assets Other Receivables Financial Investments Investment Property Property, Plant and Equipment Intangible Fixed Assets Goodwill Deferred Tax Assets Other Non-current Assets TOTAL ASSETS The accompanying notes form an integral part of these financial statements. PARK ELEKTRİK ANNUAL REPORT

42 Balance Sheet as of 31 December 2011 Audited Audited 31 December 31 December LIABILITIES Notes Current Liabilities Financial Leasing Liabilities Trade Payables Due to Related Parties Other Trade Payables Other Payables Due to Related Parties Other Payables Current Tax Liability Provisions Other Current Liabilities Non-current Liabilities Financial Leasing Liabilities Provisions for Employee Benefits EQUITY Share Capital Inflation Adjustments to Share Capital Premium in Excess of Par Subsidiary Emission Premiums Valuation Funds Legal Reserves Special Reserves Retained Earnings Net Profit / (Loss) for the Period TOTAL LIABILITIES AND EQUITY The accompanying notes form an integral part of these financial statements. 40

43 Statement of Comprehensive Income for the Period Ended 31 December January - 1 January - 31 December 31 December Notes Sales revenue Cost of sales (-) / Cost of services(-) 21 ( ) ( ) Gross profit Marketing, selling and distribution expenses (-) ( ) ( ) General administrative expenses (-) ( ) ( ) Other operating income Other operating expenses (-) 24 ( ) ( ) Operating profit Financial income Financial expenses (-) 26 ( ) ( ) Profit before taxation from continued operations Tax charge from continued operations ( ) ( ) Current tax charge 27 ( ) ( ) Deferred tax benefit / (charge) Profit from continued operations Profit / (loss) after taxation from discontinued operations - - Profit / (loss) for the period Other comprehensive income Changes in revaluation fund of property, plant and equipment Total comprehensive income Earnings per share 28 0, ,00250 The accompanying notes form an integral part of these financial statements. PARK ELEKTRİK ANNUAL REPORT

44 Statement of Changes in Equity for the Period Ended 31 December 2011 Notes Share Capital Inflation Adjustments to Share Capital Premium in Excess of Par Subsidiary Emission Premiums Valuation Funds Legal Reserves Special Reserves Retained Earnings / (Accumulated Losses) Net Profit / (Loss) for the Period) Total Equity Balances as of 1 January 2011, Transfers ( ) - Valuation fund depreciation charge ( ) Legal reserves ( ) - - Total comprehensive income for the period Balance as of 31 December Balances as of 1 January Transfers ( ) - Valuation fund depreciation charge ( ) Legal reserves ( ) - - Amortization of property, plant and equipment renovation fund Total comprehensive income for the period (75) - - (75) Balance as of 31 December The accompanying notes form an integral part of these financial statements. 42

45 Statement of Cash Flows for the Period Ended 31 December January - 1 January - 31 December 31 December STATEMENT OF CASH FLOWS Notes Net profit for the period Amortization and depreciation of fixed assets Provision for employment termination benefits Provision for unused vacation and seniority allowance Allowance for diminution in value of inventories (73.181) - Provisions released 16 ( ) (58.000) - Provision for doubtful receivables 8 (80.573) (42.665) - Tax expense Interest income 25 ( ) ( ) - Unrealized foreign exchange (gains) / losses ( ) ( ) - Discount expense / (income) ( ) - (Gain) / loss on sales of fixed assets (38.172) - Other provisions Operating cash flows provided before changes in working capital (Increase) / decrease in trade receivables (Increase) / decrease in inventories 10 ( ) ( ) (Increase) / decrease in other receivables 9 ( ) ( ) Increase / (decrease) in trade payables (Increase) / decrease in other current assets ( ) Increase / (decrease) in provisions Increase / (decrease) in other payables 19 ( ) Increase / (decrease) in other current and non-current liabilities 19 ( ) ( ) Income taxes paid 27 ( ) ( ) Interest paid 26 ( ) ( ) Employment termination benefits paid 18 ( ) ( ) Unused vacation rights paid 18 (52.610) - Cash (used in) / generated from operations Cash flows from investing activities Acquisitions of fixed assets ( ) ( ) Proceeds from sales of fixed assets Interest received Net cash generated from investing activities ( ) Cash flows from financing activities Cash paid on finance leases 7 ( ) - Financial borrowings paid 7 - (28) Effect of foreign exchange (gains) / losses Net cash used in financing activities Increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period The accompanying notes form an integral part of these financial statements. PARK ELEKTRİK ANNUAL REPORT

46 1. Organization and Operations of the Company Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. ( the Company ) was established in 1994 and the Company engages in mining; mine ore and mineral extraction; mine processing; purification and refining of any kind of mine that it produces or provides; establishing and operating cogeneration plants for the need of electricity, energy and steam needs; excess energy sales; all kinds of fiber production from glass mine and mine in general; all kinds of production using fiber; electricity production and distribution and establishing and operating electricity plants; any kind of trading businesses in relation to such plants; establishing and processing plants for the electrical energy production and also engages in the acquisition, performing leasing transactions and energy sale of electrical energy production companies to companies with wholesale and retail licenses as well as regular customers through bilateral agreements. Upon the approval and issuance of Decision No: 6/141 by Capital Markets Board (the CMB) on 24 March and the General Assembly s approval registered on 30 April 2010, the Company has merged with Ceytaş Madencilik Tekstil Sanayi ve Ticaret A.Ş. through take over applying the requirements set out in Article 451 of the Turkish Commercial Code and Articles of the Corporate Tax Law in accordance with the CMB s Communiqué Serial: I, No: 31 Principles of Business Combinations. The Company s legal headquarter is located at Paşalimanı Caddesi No: 41 Üsküdar / Istanbul. One of the Company s branches, Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. Madenköy Branch is established in Madenköy - Şirvan / Siirt and engages in concentrated copper production and one of its other branches, Park Elektrik Üretim Madencilik Sanayi ve Ticaret A.Ş. Silopi Branch, is established for extracting asphaltite in Silopi / Şırnak. One of its branches, which is established to engage in the textile business and is located at Kapıkule Yolu in Edirne, has become idle since the Company has ceased its textile operations. Similarly, another branch of the Company established to operate as a spinning mill in Ceyhan / Adana which was taken over following the merger is also an idle facility. As of 30 December 2011, the Company has 635 employees (31 December 2009: 516). 31,99% of the Company s capital is listed on the stock exchange. Park Holding A.Ş. and Park Enerji Ekipmanları Madencilik Elektrik Üretim Sanayi ve Ticaret A.Ş. have 10% or more shareholding in the Company s share capital. The Company s shareholding structure is presented as below: 31 December December 2010 Shareholders Shareholding ratio (%) Amount Shareholding ratio (%) Amount Park Holding A.Ş. 39, , Park Enerji Ekip. Mad. Elektrik Ürt. San. ve Tic. A.Ş. (*) 21, , Turgay Ciner 6, , Other 31, , Total 100, , (*) In compliance with Turkish Commercial Code and Corporate Tax Code, shareholder Park Enerji Ekipmanları Madencilik Elektrik Üretim Sanayi ve Ticaret A.Ş. is merged without dissolution with Park Holding A.Ş. in February 29, 2012, including all assets and liabilities. As a result of this merger, share of Park Holding A.Ş. in the Company increased from 39,65% to 61,24%. Approval of Financial Statements The financial statements were approved by the board of directors and authorized for issue on 16 March 2012 The Company s General Assembly has the authority to alter financial statements. 44

47 2. Basis of the Financial Statements 2.1 Basis of Presentation Preparation of Financial Statements and Accounting Standards The Company maintains its books of account and prepares its statutory financial statements in accordance with accounting principles in the Turkish Commercial Code ( TCC ) and tax legislation. The Capital Markets Board (the CMB ) Communiqué Serial: XI, No: 29 Financial Reporting Standards in Capital Markets ( Communiqué Serial: XI, No: 29 ) sets out principles and standards on the preparation and presentation of financial statements. The Communiqué is applicable commencing from the first interim financial statements prepared subsequent to 1 January As per this communiqué, financial statements should be prepared in accordance with the International Financial Reporting Standards ( IAS/IFRS ) as endorsed by the European Union ( EU ). However, companies will apply IASs/IFRSs until the differences between the standards accepted by the European Union and the standards issued by International Accounting Standards Board ( IASB ) are announced by Turkish Accounting Standards Board ( TASB ). In this respect, Turkish Accounting / Financial Reporting Standards that are issued by TASB and are not controversial to the adopted standards shall be taken as a basis in the application. As the differences between the International Financial Reporting Standards ( IAS/IFRS ) as endorsed by the European Union and the Turkish Accounting/Financial Reporting Standards ( TAS/TFRS ) have not been declared as of the date of this report, the accompanying financial statements and notes are prepared in accordance with IAS/IFRS as declared in the Communiqué Serial: XI, No: 29 with the required formats announced by the CMB on 14 April 2008 and 9 January The financial statements have been prepared on the historical cost basis except for the revaluation of certain non-current assets and financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The Company has no seasonal changes that might have significant effect on its operations. Functional Currency Financial statements of the Company are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the financial statements, the results and financial position are expressed in Turkish Lira ( TL ), which is the functional and presentation currency of the Company. 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 and preparing their financial statements in accordance with the CMB Accounting Standards (including companies adopting IFRSs) are not subject to inflation accounting effective from 1 January Therefore, effective from 1 January 2005, IAS 29 Financial Reporting in Hyperinflationary Economies is not applied in the accompanying financial statements. Basis of Consolidation Park Termik Elektrik Sanayi ve Ticaret A.Ş. s share capital, in which the Company has TL of participation, amounts to TL Since share participation is low and the entity is not directly under the control of the Company nor the Company has no significant influence, the Company s participation in Park Termik Elektrik Sanayi ve Ticaret A.Ş. is carried at cost (Note 6). PARK ELEKTRİK ANNUAL REPORT

48 2. Basis of the Financial Statements (Cont d) 2.2 Changes in Accounting Policies Changes to accounting policies are applied retrospectively and the prior period s financial statements are restated accordingly. 2.3 Changes in the Accounting Estimates and Errors If the application of changes to the accounting estimates affects the financial results of a specific period, the accounting estimate change is applied to that specific period, if they affect the financial results of current and following periods; the accounting policy estimate is applied prospectively to the period in which such change is made. The Company did not have any major changes in the accounting estimates during the current period. Significant accounting errors identified in the current period are applied retrospectively and prior year financial statements are restated accordingly. 2.4 New and Revised International Financial Reporting Standards a) New and Revised IFRSs applied with no material effect on the consolidated financial statements The following new and revised IFRSs have also been adopted in these financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements. Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010) The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in the statement of changes in equity or in the notes to the financial statements. Since the comprehensive income of the Company is disclosed in notes, this change had no effect on financial statements. IAS 24 Related Party Disclosures (as revised in 2009) IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities. The Company and its subsidiaries are not government-related entities The application of this revised IAS 24 has not had any material impact on the amounts reported for the current year. 46

49 2.Basis of the Financial Statements (Cont d) 2.4 New and Revised International Financial Reporting Standards (Cont d) (a) New and Revised IFRSs applied with no material effect on the consolidated financial statements (Cont d) Amendments to IAS 32 Classification of Rights Issues The amendments address the classification of certain rights issues denominated in a foreign currency as either equity instruments or as financial liabilities. Under the amendments, rights, options or warrants issued by an entity for the holders to acquire a fixed number of the entity s equity instruments for a fixed amount of any currency are classified as equity instruments in the financial statements of the entity provided that the offer is made pro rata to all of its existing owners of the same class of its non-derivative equity instruments. Before the amendments to IAS 32, rights, options or warrants to acquire a fixed number of an entity s equity instruments for a fixed amount in foreign currency were classified as derivatives. The amendments require retrospective application. The application of the amendments has had no effect on the amounts reported in the current and prior years because the Company has not issued instruments of this nature. Amendments to IFRS 3 Business Combinations As part of Improvements to IFRSs issued in 2010, IFRS 3 was amended to clarify that the measurement choice regarding non-controlling interests at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entity s net assets in the event of liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless another measurement basis is required by other Standards. In addition, IFRS 3 was amended to provide more guidance regarding the accounting for share-based payment awards held by the acquiree s employees. Specifically, the amendments specify that share-based payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS 2 Sharebased Payment at the acquisition date ( market-based measure ). The application of the amendments has had no effect on the amounts and disclosures reported in the current and prior years because the Company has not acquisition transaction. PARK ELEKTRİK ANNUAL REPORT

50 2. Basis of the Financial Statements (Cont d) 2.4 New and Revised International Financial Reporting Standards (Cont d) (a) New and Revised IFRSs applied with no material effect on the consolidated financial statements (Cont d) Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC 14 addresses when refunds or reductions in future contributions should be regarded as available in accordance with paragraph 58 of IAS 19; how minimum funding requirements might affect the availability of reductions in future contributions; and when minimum funding requirements might give rise to a liability. The amendments now allow recognition of an asset in the form of prepaid minimum funding contributions. The application of the amendments has not had material effect on the Company s financial statements. The Interpretation provides guidance on the accounting for the extinguishment of a financial liability by the issue of equity instruments. Specifically, under IFRIC 19, equity instruments issued under such arrangement will be measured at their fair value, and any difference between the carrying amount of the financial liability extinguished and the consideration paid will be recognized in profit or loss. The application of IFRIC 19 has had no effect on the amounts reported in the current and prior years because the Company has not entered into any transactions of this nature. Improvements to IFRSs issued in 2010 Improvements to IFRSs issued in 2010 has not had any material effect on amounts reported in the financial statements. (b) New and Revised IFRSs in issue but not yet effective The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective: Amendments to IFRS 7 IFRS 9 IFRS 10 IFRS 11 IFRS 12 IFRS 13 Amendments to IAS 1 Amendments to IAS 12 IAS 19 (as revised in 2011) IAS 27 (as revised in 2011) IAS 28 (as revised in 2011) IFRIC 20 Amendments to IAS 32 Disclosures Transfers of Financial Assets1 Financial Instruments2 Consolidated Financial Statements5 Joint Arrangements5 Disclosure of Interests in Other Entities5 Fair Value Measurement5 Presentation of Items of Other Comprehensive Income3 Deferred Tax Recovery of Underlying Assets4 Employee Benefits5 Separate Financial Statements5 Investments in Associates and Joint Ventures5 Stripping Costs in the Production Phase of a Surface Mine5 Financial Instruments: Presentation - Offsetting of Financial Assets and Financial Liabilities6 48

51 2. Basis of the Financial Statements (Cont d) 2.4 New and Revised International Financial Reporting Standards (Cont d) (b) New and Revised IFRSs in issue but not yet effective (Cont d) The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period. The company management does not anticipate that these amendments to IFRS 7 will have a significant effect on the Company s disclosures. However, if the Company enters into other types of transfers of financial assets in the future, disclosures regarding those transfers may be affected. The amendments to IFRS 7 require an entity to disclose information about rights of offset and related agreements for financial instruments under an enforceable master netting agreement or similar arrangement. The new disclosures are required for annual or interim periods beginning on or after 1 January IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition. Key requirements of IFRS 9 are described as follows: IFRS 9 requires all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability s credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss. PARK ELEKTRİK ANNUAL REPORT

52 2. Basis of the Financial Statements (Cont d) 2.4 New and Revised International Financial Reporting Standards (Cont d) (b) New and Revised IFRSs in issue but not yet effective (Cont d) IFRS 9 was amended to defer the mandatory effective date of both the 2009 and 2010 versions of IFRS 9 to annual periods beginning on or after 1 January Prior to the amendments, application of IFRS 9 was mandatory for annual periods beginning on or after 1 January The amendments continue to permit early application. The amendments modify the existing comparative transition disclosures in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and IFRS 7 Financial Instruments: Disclosures. Instead of requiring restatement of comparative financial statements, entities are either permitted or required to provide modified disclosures on transition from IAS 39 Financial Instruments: Recognition and Measurement to IFRS 9 depending on the entity s date of adoption and whether the entity chooses to restate prior periods. The company management anticipates that IFRS 9 will be adopted in the Company s consolidated financial statements for the annual period beginning 1 January 2015 and that the application of IFRS 9 may have significant impact on amounts reported in respect of the Company s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed. In May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011). Key requirements of these five Standards are described below. IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. SIC-12 Consolidation Special Purpose Entities has been withdrawn upon the issuance of IFRS 10. Under IFRS 10, there is only one basis for consolidation, which is control. In addition, IFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor s returns. Extensive guidance has been added in IFRS 10 to deal with complex scenarios. IFRS 11 replaces IAS 31 Interests in Joint Ventures. IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. SIC-13 Jointly Controlled Entities Non-monetary Contributions by Venturers has been withdrawn upon the issuance of IFRS 11. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under IAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations. In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportionate accounting. IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/ or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than those in the current standards. These five standards are effective for annual periods beginning on or after 1 January Earlier application is permitted provided that all of these five standards are applied early at the same time. The company management anticipates that these five standards will be adopted in the Company s consolidated financial statements for the annual period beginning 1 January

53 2. Basis of the Financial Statements (Cont d) 2.4 New and Revised International Financial Reporting Standards (Cont d) (b) New and Revised IFRSs in issue but not yet effective (Cont d) IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments: Disclosures will be extended by IFRS 13 to cover all assets and liabilities within its scope. IFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted. The directors anticipate that IFRS 13 will be adopted in the Company s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard may affect the amounts reported in the financial statements and result in more extensive disclosures in the financial statements. The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis. The amendments to IAS 12 are effective for annual periods beginning on or after 1 January The directors anticipate that the application of the amendments to IAS 12 in future accounting periods may result in adjustments to the amounts of deferred tax liabilities recognized in prior years regarding the Company s investment properties of which the carrying amounts are presumed to be recovered through sale. However, the directors have not yet performed a detailed analysis of the impact of the application of the amendments and hence have not yet quantified the extent of the impact. The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the corridor approach permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognized immediately through other comprehensive income in order for the net pension asset or liability recognized in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. PARK ELEKTRİK ANNUAL REPORT

54 2. Basis of the Financial Statements (Cont d) 2.4 New and Revised International Financial Reporting Standards (Cont d) (b) New and Revised IFRSs in issue but not yet effective (Cont d) The amendments to IAS 19 are effective for annual periods beginning on or after 1 January 2013 and require retrospective application with certain exceptions. The directors anticipate that the amendments to IAS 19 will be adopted in the Company s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the amendments to IAS 19 may have impact on amounts reported in respect of the Company s defined benefit plans. However, the directors have not yet performed a detailed analysis of the impact of the application of the amendments and hence have not yet quantified the extent of the impact. On 19 October 2011 the IASB issued an Interpretation, IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine, clarifying the requirements for accounting for stripping costs in the production phase of a surface mine. The Interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. The Interpretation is effective for annual periods beginning on or after 1 January 2013 with earlier application permitted. 2.5 Summary of Significant Accounting Policies Revenue Recognition Revenue is measured at fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates, and other similar allowances. Sale of goods Revenue from sale of goods is recognized when all the following conditions are satisfied: the Company transfers all the significant risks and rewards of ownership of the goods to the buyer; the Company has no continuing managerial involvement associated with the ownership or significant control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Company; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Rendering of services Revenue earned from rendering services is recognized by using a reference to the stage of completion of the contract. If contractual revenue cannot be measured reliably, revenue is measured as the recoverable amount of the expenses assumed. Dividend and interest revenue Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount (Note 25). Dividend revenue from investments is recognized when shareholders have the right to receive such payment. Rental income Rental income from properties is recognized on a straight-line basis over the term of the relevant lease (Note 24). 52

55 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) Inventories Inventories are stated at the lower of cost and net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory, with the majority being valued on a weighted average out basis. Net realizable value represents the estimated selling price less all estimated costs of completion and costs necessary to make a sale. When the net realizable value of inventory is less than cost, inventory is written down to net realizable value and expense is included in statement of income/(loss) in the period in which the write-down or loss occurred. When circumstances that previously caused inventories discounted to net realizable value no longer exist or when there is clear evidence of an increase in net realizable value because of the changes in economic circumstances, the amount of the write-down is reversed. The reversal amount is limited to the amount of the initial write-down. Fixed and variable overheads do not include borrowing costs. If costs of inputs include finance costs, fair value is measured by discounting future payments using the imputed interest rate of finance costs. TL of interest cost arising from the difference between the carrying amount and nominal value resulted during and at the end of the period is recognized as interest expense (31 December 2010: TL ) (Notes 10, 26). Property, Plant and Equipment Land, buildings, machinery and equipment are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. Any revaluation increase arising on the revaluation of such land, buildings, machinery and equipment is credited in equity to the properties revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognized in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged to profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirement of a revalued property, the related revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Depreciation charge in profit or loss arising from revaluation is transferred from retained earnings to revaluation reserve. Any property, plant and equipment other than land, buildings, machinery and equipment acquired before 1 January 2005 are carried at restated historical cost adjusted for the effects of inflation until 31 December 2004, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Property, plant and equipment acquired in subsequent periods are carried at acquisition cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Assets in the course of construction for rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognized impairment loss. Cost includes professional fees. For assets that need considerable time to be ready for sale or use, borrowing costs are capitalized in accordance with the Company s accounting policy. As it is for the other fixed assets, such assets are depreciated when the assets are ready for their intended use. Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction, over their estimated useful lives, using the straight-line and diminishing balance method. Estimated useful lives, residual value and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Assets held under finance leases are depreciated over their expected useful lives on the same basis as assets acquired or, where shorter, the term of the relevant lease. PARK ELEKTRİK ANNUAL REPORT

56 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) Property, Plant and Equipment (Cont d) The Company s real estates in Siirt were reviewed and a valuation study was made by a valuation firm in December, 2010 and those assets were brought to their fair value and reflected in the financial statements accordingly. Valuation study is based on the land value (TL ) determined by using the market approach and construction cost value (TL ) and machinery and equipment value (TL ) determined by using the cost method and valuation difference before taxation TL (after taxation TL ) in the carrying value of immovable that are subject to valuation is presented in Valuation Funds under the equity accounts at the balance sheet. The Company s real estates in Edirne were reviewed and a valuation study was made by a valuation firm in December, 2008 and those assets were brought to their fair value and reflected in the financial statements accordingly. Valuation study is based on the land value (TL ) determined by using the market approach and construction cost value (TL ) determined by using the cost method and net valuation difference in the carrying value of immovable (TL ) that are subject to valuation is presented in Valuation Funds under the equity accounts at the balance sheet. Land and buildings, machinery and fixtures of Ceytaş Madencilik Tekstil Sanayi ve Ticaret A.Ş. of which the Company has merged with the balance sheet values at 30 April 2009, were reviewed and a valuation study was made by a valuation firm as of 31 December Those assets were brought to their fair value and reflected in the financial statements accordingly. The valuation study of long lived assets like land as at 31 December 2008 was performed by using the Market Value (Imputed Value) method, which is a reliable and realistic technique; the valuation study of buildings was performed by using the Cost method; and the valuation study of machinery and fixtures was performed based on the market data. As a result of the valuation study, the total value of land, buildings, machinery and fixtures is determined as TL , which includes TL of land, TL of buildings, TL of machinery and TL of fixtures. The merged company s valuation difference of TL arising from the difference between revalued amounts and carrying value is recognized and presented as the merger effect under Valuation Funds in equity at the balance sheet (Note 20). Expected useful lives for property, plant and equipment are as follows: Buildings Land improvements Machinery and equipment Vehicles Furniture and fixtures Leasehold improvements (Siirt / Madenköy, Şırnak / Silopi) Other property, plant and equipment Useful life years 8-25 years 3-15 years 4-7 years 4-16 years 3-25 years 4 years Gain or loss arising on the disposal or retirement of a property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the profit or loss. Intangible Fixed Assets Intangible fixed assets acquired Intangible fixed assets acquired separately are carried at cost, less accumulated amortization and any accumulated impairment losses. Amortization is charged on a straight-line basis over their estimated useful lives. Estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis. 54

57 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) Intangible Fixed Assets (Contn d) Computer software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives. Costs associated with developing or maintaining computer software programs are recognized as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the Company, and that will probably generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. Costs include software development employee costs and an appropriate portion of relevant overheads. Computer software development costs recognized as assets are amortized over their estimated useful lives. Trademarks and Licenses Trademarks and licenses acquired are carried at historical cost. Trademarks and licenses have finite useful lives and are carried at cost less accumulated amortization. Trademarks and licenses acquired are depreciated over their expected useful lives using the straight line amortization method. Intangible fixed assets acquired in a business combination Intangible fixed assets acquired in a business combination are identified and recognized separately from goodwill where they meet the definition of an intangible fixed asset and their fair value can be measured reliably. Cost of such intangible fixed assets is the fair value at the acquisition date. Subsequent to initial recognition, intangible fixed assets acquired in a business combination are carried at cost, less accumulated amortization and any accumulated impairment losses, on the same basis as intangible fixed assets acquired separately. Estimated useful lives of intangible fixed assets are amortized based on the following useful lives: Rights (Trademark, licenses, copy rights, patents, software, etc.) Useful life 2-10 years Impairment of Assets Assets with indefinite useful life, such as goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset s fair value less costs to sell or value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Mineral Exploitation Costs Costs associated with mining preparation expenses (geophysical, topographical, geological etc.) are recognized as an expense as incurred, except where they are expected to contribute to sustainable capital growth in the future. In such cases, those expenses are capitalized and depreciated over the useful life of the mine when the mine reaches its trading production capacity. Research and preparation costs written off as expense prior to the development and construction period of a mine cannot be capitalized even though a mine reserve with trading nature is explored following the related period. PARK ELEKTRİK ANNUAL REPORT

58 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take considerable time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income from the temporary investment made by using the unused loan portion is written off against borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred Financial Instruments Financial assets and financial liabilities are recognized on the Company s balance sheet when the Company becomes a party to the contractual provisions of the financial instrument. 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. 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. Effective interest method The effective interest method is calculating the amortized cost of a financial asset and of 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. 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 recognized at amortized cost using the effective interest method less impairment, with revenue recognized on an effective yield basis. 56

59 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) Financial Instruments (Cont d) Financial Assets (cont d) Available-for-sale financial assets Quoted equity investments and quoted certain debt securities held by the Company that are traded in an active market are classified as available- for-sale financial assets and are stated at fair value. The Company also has investments in unquoted equity investments that are not traded in an active market but are also classified as available-for-sale financial assets and stated at cost since their value cannot be reliably measured. Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets, which are recognized in profit or loss. Where the investment is disposed of or impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss. Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company has the right to receive such dividends. Fair value of available-for-sale monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. Foreign exchange gains and losses recognized in profit or loss are determined based on the amortized cost of the monetary asset. Other foreign exchange gains and losses are recognized in other comprehensive income. 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. At initial recognition, trade receivables, loan receivables and other receivables are recognized at fair value. Loans and receivables are measured at amortized cost using the effective interest method. Reverse repurchase agreements Marketable securities held as part of commitments to resale ( reverse repo ) are recognized as funds lend under marketable securities reverse repurchase agreements and accounted for under cash and cash equivalents in the balance sheet. The difference between purchase and resale prices is accounted for as interest and amortized during the period of the agreement. 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 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 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 for 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. PARK ELEKTRİK ANNUAL REPORT

60 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) Financial Instruments (Cont d) Financial Assets (cont d) Impairment of financial assets (cont d) 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. 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. 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. 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. 58

61 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) Business Combinations and Goodwill The acquisition of subsidiaries and businesses are accounted for using the purchase method. Cost of acquisition is measured at the aggregate of fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree s identifiable assets, liabilities and contingent liabilities that meet the recognition criteria under IFRS 3 Business Combinations are recognized at fair value at the date of acquisition, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are recognized and measured at fair value, less costs to sell. Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Company s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If, after reassessment, the Company s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognized immediately in profit or loss. In business combinations under common control, assets and liabilities subject to business combination are accounted for at carrying value in consolidated financial statements. Statements of income are consolidated starting from the beginning of the fiscal year in which the business combination is realized. Any positive or negative goodwill arising from such business combinations is not recognized in the financial statements. Residual balance calculated by netting off investment in subsidiary and the share acquired in subsidiary s equity is directly accounted for under equity as effect of business combinations under common control. If the initial accounting for a business combination can be determined only provisionally by the end of the period in which the combination is affected because either the fair values to be assigned to the acquiree s identifiable assets, liabilities or contingent liabilities or the cost of the combination can be determined only provisionally, the combination is accounted using such provisional values. Any adjustments to those provisional values as a result of completing the initial accounting are recognized within twelve months of the acquisition date. The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling interests proportion of the net fair value of the assets, liabilities and contingent liabilities recognized. Foreign Currency Transactions Financial statements of the Company are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the financial statements, the results and financial position of each entity are expressed in Turkish Liras ( TL ), which is the functional currency of the Company, and the presentation currency for the financial statements. In the preparation of the Company s financial statements, transactions in currencies other than TL (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognized in profit or loss in the period in which they arise except for: Exchange differences which relate to assets under construction for future productive use, which are included in the cost of those assets where they are regarded as an adjustment to interest costs on foreign currency borrowings; Exchange differences on transactions entered into in order to hedge certain foreign currency risks (see below for hedging accounting policies). PARK ELEKTRİK ANNUAL REPORT

62 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) 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 related period. Weighted average number of ordinary shares outstanding during the period is the number of ordinary shares outstanding at the beginning of the period, adjusted by the number of ordinary shares repurchased or issued during the period multiplied by a time-weighted factor. 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 treated as issued shares. Accordingly, the retrospective effect for such share distributions is taken into consideration in determining the weighted-average number of shares outstanding used in this computation. Events after the Balance Sheet Date Events after the balance sheet date comprise any events between the balance sheet date and the date of authorization of the financial statements for issue, even if any events after the balance sheet date occurred subsequent to the announcement of the Company s profit or the publicly disclosed financial information. The Company restates its financial statements if such adjusting subsequent events arise. Provisions, Contingent Assets and Liabilities 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 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. Segment Reporting The Company has one business segment in Turkey determined by the management based on information available for the evaluation of performances and the allocation of resources. For the purposes of segment reporting, the Company has split its segments into industrial segments since the Company s risks and returns are primarily affected by the differentiation of goods produced and services rendered. The Company mainly operates in the mining sector and it produces concentrated copper and asphaltite coal. Since the Company assesses its operational results and its performance based on its IFRS financial statements, IFRS financial statements are used in the preparation of segment reporting. Based on the internal reporting made to the decision makers, Asphaltite and Copper Ore are determined as two industrial segments of the Company. The Company s financial reporting is based on these segments (Note 4). Discontinued Operations Discontinued operations are separable parts of the Company which either are classified as held-for-sale or disposed of operations and its cash flows. Discontinued operations represent separate business or geographical segment and they are a part of disposal plans or are held for sale subsidiaries. The Company s discontinued operations are carried at the lower of the book value of the assets and liabilities and fair value less costs to sell. 60

63 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) Government Incentives and Grants Grants from the government are recognized at fair value where there is a reasonable assurance that the grants will be received and the Company meets all the requirements. Government grants related to costs are accounted as income on a consistent basis over the related periods with the matching costs. Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to income statement on a straight-line basis over the expected lives of the related assets (Note 15). Investment Properties Investment properties which are held to earn rentals and/or for capital appreciation are carried at cost less accumulated depreciation and any accumulated impairment losses. Carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day to day servicing of an investment property. Depreciation is charged on a straight line basis. The depreciation period for investment property is 50 years. Investment properties are derecognized when they are disposed of, or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in profit or loss in the year of retirement or disposal. Taxation and Deferred Income Taxes Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax Tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax Deferred tax liability or asset is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which is used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. Carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. PARK ELEKTRİK ANNUAL REPORT

64 2. Basis of the Financial Statements (Cont d) 2.5 Summary of Significant Accounting Policies (Cont d) Taxation and Deferred Income Taxes (Cont d) Deferred tax (Cont d) Carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Measurement of deferred tax liabilities and assets reflects the tax results that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognized directly in equity, or where they arise from the initial accounting for a business combination (Note 27). In business combinations, tax effect is taken into account in calculating goodwill or determining the excess of the acquirer s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities over cost. Employee Benefits / Retirement Pay Provisions Under the Turkish law and union agreements, severance payments are made to employees retiring or involuntarily leaving the Company. Such payments are considered as part of defined retirement benefit plans as per International Accounting Standard 19 (Revised) Employee Benefits ( IAS 19 ). In this context, in addition to the salary, the Company provides various benefits, such as; bonuses; fuel and food support; leaves of absence, national holidays, marriage, birth and death; and educational incentives to its employees. 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 and reflected in the financial statements. All actuarial gains and losses calculated are presented in the statement income (Note 18). Statement of Cash Flows The Company prepares the statement of cash flows as an integral part of its of financial statements in order to enable financial statement users to understand the changes in its net assets, financial structure and timing and amount of its cash flows in changing conditions. Cash flows for the period are reported based on the operating, investment and financial operations of the Company. Share Capital and Dividends Ordinary shares are classified as equity. Dividends on ordinary shares are reclassified as dividend payables by offsetting against retained earnings in the period in which they are approved and disclosed. 62

65 2. Basis of the Financial Statements (Cont d) 2.6 Significant Accounting Estimates and Assumptions The Company management makes estimates and assumptions for future periods. For the following reporting period, estimates and assumptions that may have significant effect on the carrying amount of assets and liabilities are summarized as follows: Inventories are stated at the lower of cost and net realizable value. When the net realizable value of inventories is less than cost, inventories are discounted to net realizable value. In this respect, impairment recognized as expense in the statement of income amounts to TL (31 December 2010: TL ). Impairment measured for loans and receivables represent the difference between the present value and carrying amount of estimated future cash flows discounted by using the effective interest rate of the financial asset, and as of the balance sheet date, the Company has calculated TL of impairment for its trade receivables (31 December 2010: TL ). 3. Business Combinations None. 4. Segment Reporting Since the Company s Management assesses its operational results and its performance based on its IFRS financial statements, IFRS financial statements are used in the preparation of segment reporting. Based on the internal reporting made to the decision makers and as a result of the merger on 30 April 2009, Asphaltite and Copper Ore are determined as two industrial segments as follows. a) Statement of income analysis for the period 1 January 31 December December 2011 Copper Ore Asphaltite Unallocated Total Sales revenue (net) Cost of sales ( ) ( ) ( ) ( ) Gross profit Marketing, selling and distribution expenses (-) ( ) General administrative expenses (-) ( ) Other operating income Other operating expenses (-) ( ) Financial income Financial expenses (-) ( ) Tax charge for the period ( ) Profit for the period PARK ELEKTRİK ANNUAL REPORT

66 4. Segment Reporting (Cont d) (a) Statement of income analysis for the period 1 January - 31 December December 2010 Copper Ore Asphaltite Unallocated Total Sales revenue (net) Cost of sales ( ) ( ) ( ) ( ) Gross profit Marketing, selling and distribution expenses (-) ( ) General administrative expenses (-) ( ) Other operating income Other operating expenses (-) ( ) Financial income Financial expenses (-) ( ) Tax charge for the period ( ) Profit for the period b) Segment assets Copper Ore Asphaltite 31 December 2011 (Export) (Domestic) Unallocated Total Net book value of ınvestment property Net book value of property, plant and equipment Net book value of intangible fixed assets Depreciation and amortization charges Acquisitions of fixed assets Construction in progress December 2010 Net book value of property, plant and equipment Net book value of intangible fixed assets Depreciation and amortization charges Acquisitions of fixed assets Construction in progress

67 5. Cash and Cash Equivalents 31 December 31 December Cash on hand Cash in banks Demand deposits Time deposits (with maturities three months or less) As of 31 December 2011, the Company has TL time deposits (31 December 2010: TL ). Time deposits have maturity of 2 January As of 31 December 2011, the Company has no blocked cash or cash equivalents (31 December 2010: None). 6. Financial Investments a) Short-term financial investments As of 31 December 2011, the Company has no short term financial investments (31 December 2010: None). b) Long-term financial investments 31 December 31 December Long-term financial investments Financial investments without an active market carried at cost Financial assets without having an active market carried at cost Unquoted equity shares with an carrying amount of TL , of which s fair values cannot be measured reliably due to having wide range of estimated values and estimated values cannot be measured reliably, are carried at cost, less impairment loss, if any (31 December 2010: TL ). Shareholders 31 December December 2010 Shareholding ratio Amount Shareholding ratio Amount Park Termik Elektrik Sanayi ve Ticaret A.Ş. 10% % Total PARK ELEKTRİK ANNUAL REPORT

68 7. Financial Leasing Liabilities 31 December 31 December Financial leasing liabilities Payable within one year Payable between two to five years Less: Future interest charges ( ) - Present value of finance lease obligation Payable within one year Payable between two to five years Net book value of leasing assets classified to machinery and equipment and construction in progress amounts to TL Finance leases have an average effective rate of 5,5% and a lease term of 3 years. The Company is entitled to the ownership of the equipment at the end of lease term. The Company s obligations under finance leases are secured by the lessors title to the leased assets. Payments are fixed by a plan and there is no contingent leasing payments. 8. Trade Receivables and Payables Trade Receivables 31 December 31 December Short-term trade receivables Trade receivables Allowance for doubtful trade receivables (-) ( ) ( ) Other trade receivables Due from related parties in trade receivables amounts to net TL and it is detailed in Note 29 (31 December 2010: TL ). Maturity analysis of receivables is summarized in Note 30. The analysis of allowance for doubtful past due receivables is presented as below: 31 December 31 December Within 3-12 months - - Within 1-5 years years or more Allowance has been made for estimated irrecoverable amounts. Allowance is determined based on the Company s past experience. While the Company makes estimations on the collectability of its receivables, it assesses whether there are any changes to the loan quality of these receivables as of balance sheet date. Therefore, the Company s Management believes allowance doubtful receivable amount presented in the accompanying financial statements are appropriate. The movement of allowance for doubtful receivables is as follows: 66

69 8. Trade Receivables and Payables (cont d) Movement of allowance for doubtful trade receivables Opening balance, 1 January ( ) ( ) Released / cancelled receivable Foreign currency exchange differences ( ) (14.989) Closing balance, 31 December ( ) ( ) The Company has no guarantees received for past due receivables (31 December 2010: None). Trade Payables 31 December 31 December Short-term trade payables Trade payables Other trade payables Due to related parties in trade payables amounts to net TL and it is detailed in Note 29 (31 December 2010: TL ). 9. Other Receivables and Payables 31December 31 December Other short-term receivables Due from related parties (non-trading) Other sundry receivables Allowance for doubtful other receivables (-) (29.041) (29.041) Deposits and guarantees given Due from related parties in other receivables amounts to TL and it is detailed in Note 29 (31 December 2010: TL ). Other long-term receivables consist of deposits given amounting to TL (31 December 2010: TL ). 31 December 31 December Other short-term payables Taxes and dues payable Social security premiums payables Due to personnel Dividend payables Other sundry payables Due to related parties in other payables amounts to net TL and it is detailed in Note 29 (31 December 2010: TL ). PARK ELEKTRİK ANNUAL REPORT

70 10. Inventories 31 December 31 December Raw materials Finished goods Other inventories Allowance for diminution in value of inventories (-) (23.572) (23.509) The charges for credit terms, which are arising from the difference between the carrying amount and nominal value amounting to TL in the current period (31 December 2010: TL ), are recognized as interest expense (Note 26). The movement of allowance for diminution in value of inventories is as follows: Opening balance, 1 January (23.509) (96.690) Charge for the period (63) (23.509) Provision released Closing balance, 31 December (23.572) (23.509) 11. Investment Properties Cost Buildings Total Opening balance, 1 January Additions Transfers from construction in progress Closing balance, 31 December Accumulated amortization Opening balance, 1 January Charge for the period Closing balance, 31 December Carrying value as of 31 December As of 31 December 2011, there are TL mortgages on the Company s investment properties (31 December 2010: None). As of 31 December 2011, TL investment properties amortization included in general administrative expenses. The fair value of the Company s investment property as of 31 December 2011 is USD The fair value of the Company s investment property at 31 December 2011 has been arrived at on the basis of a valuation carried out at that date by 18 August 2011, independent valuers not connected with the Company. Independent valuers are one of the in accredited independent valuers by Capital Market Board of Turkey, and have appropriate qualifications and recent experience in the valuation of properties in the relevant locations. The valuation, which conforms to International Valuation Standards, was arrived at by reference to market evidence of transaction prices for similar properties. 68

71 12. Property, Plant and Equipment Cost Land Land improvements Buildings Machinery and equipment Vehicles Furniture and fixture Other fixed assets Leasehold improvements Construction in progress Total Opening balance, 1 January Additions Disposals ( ) (38.475) ( ) - ( ) - ( ) Transfers from construction in progress Closing balance, 31 December ( ) ( ) Accumulated depreciation Opening balance, 1 January Charge for the period Disposals ( ) (38.475) ( ) - ( ) - ( ) Closing balance, 31 December Carrying value as of 1 January Carrying value as of 31 December As of 31 December 2011, TL of depreciation expense is provided for property, plant and equipment of which TL is included in production costs, TL is included in idle capacity expenses and TL is included in general administrative expenses. PARK ELEKTRİK ANNUAL REPORT

72 12. Property, Plant and Equipment (Cont d) Cost Land Land improvements Buildings Machinery and equipment Vehicles Furniture and fixture Other fixed assets Leasehold improvements Construction in progress Total Opening balance, 1 January Additions Revaluation funds Transfers from intangible fixed assets Disposals (68.905) ( ) (55.268) - ( ) (84.371) ( ) Transfers from construction in progress ( ) (5.200) Closing balance, 31 December Accumulated depreciation Opening balance, 1 January Charge for the period Transfers from intangible fixed assets - - (11.920) Corrections (218) (218) Disposals (6.890) (78.029) (53.771) - ( ) - ( ) Closing balance, 31 December Carrying value as of 1 January Carrying value as of 31 December As of 31 December 2010, TL of depreciation expense is provided for property, plant and equipment of which TL is included in production costs, TL is included in idle capacity expenses and TL 593 is included in general administrative expenses and the remaining TL 75 is netted off against renovation fund. 70

73 12. Property, Plant and Equipment (Cont d) The carrying values of Company s revalued land, building, machinery and machinery determined on historical cost basis are as follows: 31 December December 2010 Land Buildings Machinery and equipment Total Intangible Fixed Assets Cost Mineral exploitation costs Research expenses Development costs Rights Total Opening balance, 1 January Additions Closing balance, 31 December Accumulated amortization Opening balance, 1 January Charge for the period Closing balance, 31 December Carrying value as of 1 January Carrying value as of 31 December As of 31 December 2011, intangible fixed assets amortization amounting to TL is included in production cost. PARK ELEKTRİK ANNUAL REPORT

74 13. Intangible Fixed Assets (Cont d) Cost Mineral exploitation costs Research expenses Research and Development Leasehold improvements Rights Total Opening balance, 1 January Additions Disposals (147) (147) Transfers to property, plant and equipment ( ) - ( ) Closing balance, 31 December Accumulated amortization Opening balance, 1 January Transfers to property, plant and equipment ( ) - ( ) Charge for the period Disposals (53) (53) Closing balance, 31 December Opening balance, 1 January Closing balance, 31 December As of 31 December 2010, out of TL intangible assets amortization, TL is included in production costs and TL is included in idle capacity expenses. 72

75 14. Goodwill None. 15. Government Grants and Incentives The Company uses employee insurance premium incentives and energy incentives for its copper plant in Siirt / Madenköy in accordance with Investment and Employment Incentives Law No: 5084 issued on 29 January For other plants, the Company uses social security premium incentives in accordance with the requirements of Law No: By using TL of insurance premium incentive and TL of energy incentive, the Company has netted off TL and TL from general production expenses and general administrative expenses respectively in the January - December 2011 period (31 December 2010: TL of tax and social security premium incentives, TL of energy incentive; netted off with TL general production expenses, TL general administrative expenses and TL idle capacity expenses). 16. Provisions, Contingent Assets and Liabilities Provisions 31 December 31 December Short-term provisions Provision for litigation Quarry Government Share Other liabilities and provisions Total As of 31 December 2011, total of pending lawsuits filed against the Company amounts to TL (31 December 2010: TL ). TL of these lawsuits relates to personnel claims (31 December 2010: TL ). As explained above, the Company, in the current period, has become a party to various lawsuits both as a defendant and plaintiff during the course of its business. In this respect, the Company management believes that there are no undisclosed or uncovered lawsuits and legal proceedings that may have an adverse effect over the Company s financial position or results of its operations. The movement of provisions for litigation during the current period is presented as below: Opening balance, 1 January Charge for the period Provision released ( ) Closing balance, 31 December Guarantees 31 December December 2010 Guarantees received (TL) FC Balance Equivalent of TL FC Balance Equivalent of TL Letters of guarantees (TL) Letters of guarantees (EUR) Letters of guarantees(usd) Promissory notes (TL) Promissory noted (EUR) Cash guarantees (TL) Total PARK ELEKTRİK ANNUAL REPORT

76 16. Provisions, Contingent Assets and Liabilities (Cont d) Guarantees (cont d) The details of the Company s Guarantees/Pledges/Mortgages ( GPMs ) position as of 31 December 2011 and 31 December 2010 is presented as follows: 31 December 31 December Guarantees/Pledge/Mortgage given by the Company A. GPMs given on behalf of its own legal entity i. Promissory notes ii.cash guarantees B. GPMs given on behalf of consolidated subsidiaries - - C. GPMs given on behalf of third parties within ordinary business activities - - D. GPMs given for other purposes i. on behalf of parent company (*) ii. on behalf of other group companies not covered by B and C iii. on behalf of other third parties not covered by C - - Total (*) Company has given a mortgage amounting to USD on behalf of its main shareholder Park Holding for ordinary course of business. In response to the letter received from Capital Markets Board in December 26, 2011, the Company is working on to release this mortgage. (**) Except for the GPMs given on behalf of parent company, all GPMs are denominated in TL, therefore original currencies are not disclosed in the above table. Proportion of GPMs given to the Company s equity as of 31 December 2011 is 15,45% (31 December 2010: 0,71%). The Company receives bails from the Group companies in return for the loans used, and similarly, it gives bails for the Group companies. Undue principal balances of used loans are presented under the Risk Amount heading in the below tables. Risk amount shown in the table is related to non-cash loans. Bails, that do not carry any risks are related to unused loans or loans used and paid by the Group companies in accordance with the general loan agreements, are presented in the below tables, since they are still included in bank confirmations. 74

77 16. Provisions, Contingent Assets and Liabilities (Cont d) Guarantees (cont d) 31 December 2011 Related Parties Nature of Relationship Given Guarantees / Bails Commitments Amount Risk Amount Park Holding Shareholder Given Bail - USD Given Bail - Euros Given Bail - TL Given Mortgage-USD Park Enerji Ekipmanları Shareholder Given Bail - TL Turgay Ciner Shareholder Given Bail - USD Park Teknik Group company Given Bail - USD Given Bail - Euros Given Bail - TL Ciner Görsel Yayınlar Group company Given Bail - Euros Park Denizcilik Hopa Liman Group company Given Bail - TL Park Termik Elektrik Associate Given Bail - USD Eti Soda Group company Given Bail - USD Total Given Bail - USD Given Mortgage-USD Given Bail - Euros Given Bail - TL PARK ELEKTRİK ANNUAL REPORT

78 16.Provisions, Contingent Assets and Liabilities (Cont d) Guarantees (cont d) 31 December 2010 Related Parties Nature of Relationship Given Guarantees / Bails Commitments Amount Risk Amount Park Holding Shareholder Given Bail - USD Given Bail - Euros Given Bail - TL Park Enerji Ekipmanları Shareholder Given Bail - TL Turgay Ciner Shareholder Given Bail - USD Park Teknik Group company Given Bail - TL Given Bail - USD Given Bail - Euros Görsel Yayınlar Group company Given Bail - Euros Park Denizcilik Hopa Liman Group company Given Bail - TL Park Termik Elektrik Associate Given Bail - USD Eti Soda Group company Given Bail - USD Total Given Bail - USD Total Given Bail - Euros Total Given Bail - TL

79 16. Provisions, Contingent Assets and Liabilities (Cont d) Guarantees (cont d) 31 December 2011 Related Parties Nature of Relationship Received Guarantees / Bails Commitments Amount Risk Amount Park Holding, Park Enerji Ekipmanları and Turgay Ciner Park Holding, Park Termik and Turgay Ciner Park Holding, Park Teknik and Turgay Ciner Park Holding, Park Termik, Park Teknik and Turgay Ciner Park Holding, Park Termik, Park Teknik, Turgay Ciner and Park Enerji Ekipmanları Park Termik, Park Teknik and Turgay Ciner Park Holding Turgay Ciner Park Holding, Park Teknik, Park Enerji Ekipmanları Shareholder Shareholder / Associate Shareholder / Associate / Group company Shareholder / Associate / Group company Shareholder / Associate / Group company Shareholder / Associate / Group company Shareholder Shareholder Shareholder / Associate / Group company Received Bail - TL Received Bail - TL Received Bail - USD Received Bail - USD Received Bail - TL Received Bail - TL Received Bail - USD Received Bail - Euros Received Bail - CHF Received Bail TL Received Bail - TL Received Bail - USD Received Bail - USD Received Bail -TL Received Bail EURO Received Bail - TL Received Bail - TL Total Received Bail - USD Total Received Bail - Euros Total Received Bail - CHF Total Received Bail - TL PARK ELEKTRİK ANNUAL REPORT

80 16. Provisions, Contingent Assets and Liabilities (Cont d) Guarantees (cont d) 31 December 2010 Related Parties Nature of Relationship Received Guarantees / Bails Commitments Amount Risk Amount Park Holding, Park Enerji Ekipmanları and Turgay Ciner Park Holding, Park Termik and Turgay Ciner Park Holding, Park Teknik and Turgay Ciner Park Holding, Park Termik, Park Teknik and Turgay Ciner Park Holding, Park Termik, Park Teknik, Turgay Ciner and Park Enerji Ekipmanları Park Holding, Park Termik, Park Teknik and Turgay Ciner Shareholder Shareholder / Associate Shareholder / Associate / Group company Shareholder / Associate / Group company Shareholder / Associate / Group company Shareholder / Associate / Group company Received Bail - TL Received Bail - TL Received Bail - USD Received Bail - USD Received Bail - TL Received Bail - TL Received Bail - USD Received Bail - Euros Received Bail - CHF Received Bail - TL Received Bail - USD Received Bail - TL Park Holding Shareholder Received Bail - USD Turgay Ciner Park Holding, Park Teknik, ve Park Enerji Ekipmanları Shareholder Shareholder/ Group company Received Bail TL Received Bail TL Total Received Bail - USD Received Bail - Euros Received Bail - CHF Received Bail - TL

81 17. Commitments Operating Leases The Company has no finance lease transactions. However, the Company has operating lease transactions with the Group companies or third parties and the details of its operating lease transactions are as follows: 1 January - 1 January - 31 December 31 December Land rent expenses Building rent expenses Vehicle rent expenses Machinery rent expenses Quarry rent expenses Export Commitments As of the balance sheet date, the Company has no export commitments (31 December 2010: No commitment.). 18. Employee Benefits / Retirement Pay Provisions Short-term The Company provides unused vacation liability for the employees unused vacation leaves in prior periods (Note 19) Opening balance, 1 January Payments during the period (-) (52.610) - Increases during the period (+) Closing balance, 31 December Long-term Retirement Pay Provisions Under the Turkish Labor Law, the Company is required to pay employment termination benefits to each employee whose employment contract is expired in a way that the employee is entitled to receive termination benefits. The Company is also required to pay retirement pay to employees who are entitled to a retirement in accordance with Law No: 2242 dated 6 March 1981, Law No: 4447 dated 25 August 1999 and the amended Article 60 of the existing Social Insurance Code No: 506. The retirement pay provision ceiling is revised semi-annually and, effective from 1 October 2012, provision ceiling amounting to TL 2.805,04 is taken into consideration in the calculation of provision for employment termination benefits (31 December 2010: ceiling effective from 1 January 2011 amounting to TL 2.623,23). PARK ELEKTRİK ANNUAL REPORT

82 18. Employee Benefits / Retirement Pay Provisions (Cont d) Retirement Pay Provisions (cont d) The liability is not funded, as there is no funding requirement. Provision is calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. Revised IFRS 19 Employee Benefits requires actuarial valuation methods to be developed to estimate the Company s obligation under the defined benefit plans. Accordingly, the following actuarial assumptions are used in the calculation of the total liability. Principal assumption is that maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as of 31 December 2011 and 31 December 2010, provision is calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. Provisions at the respective balance sheet are calculated assuming an annual inflation rate of 5,10% (31 December 2010: 5,10%) and a discount rate of 10,00% (31 December 2010: 10,00%), the real discount rate is approximately 4,66% (31 December 2010: 4,66%). The anticipated rate of forfeitures is considered. The movement of the employment termination benefits is as follows: Opening balance, 1 January Payments during the period (-) ( ) ( ) Interest cost Service cost Closing balance, 30 September Other Assets and Liabilities 31 December 31 December Other current assets Prepaid expenses Income accruals Prepaid taxes and dues Business advances Personnel advances Other VAT Deferred VAT Order advances given Due from related parties in other current assets amounts to net TL and is presented in Note 28 (31 December 2010: TL ). 80

83 19. Other Assets and Liabilities (Cont d) 31 December 31 December Other non-current assets Advances given Prepaid expenses December 31 December Other current liabilities Deferred revenues Expense accruals Unused vacation liability Other VAT Equity a) Share Capital The Company s share capital structure as of 31 December 2011 and 31 December 2010 is presented as follows: Shareholders 31 December December 2010 Shareholding ratio Amount Shareholding ratio Amount Park Holding 39,65% ,65% Park Enerji Ekipmanları 21,60% ,60% Turgay Ciner 6,76% ,76% Other 31,99% ,99% Total 100,00% ,00% Information Regarding to Equity Shares Group A Type Nominal Value (TL) Share Participation In the name ,29% Rights Election of 6 members of the Board of Directors and members of Audit Committee B In the name ,08% Election of 3 members of the Board of Directors B Bearer ,63% ,00% The Company s Extraordinary General Assembly approved the change in Article 6, which is related to Share Capital, in its Articles of Association at the meeting held on 13 March In accordance with the related change, TL of B Group shares, which represent the share capital, has been registered in the name of the shareholders and the registered capital ceiling is increased to TL Amendment to the Company s Articles of Association was registered and published in the Turkish Trade Registry Gazette as at 13 March 2009 and 18 March 2009, respectively. PARK ELEKTRİK ANNUAL REPORT

84 20. Equity (Cont d) a) Share Capital (cont d) In accordance with the Business Combination Agreement which was made in relation to the merger with Ceytaş Madencilik Tekstil Sanayi ve Ticaret A.Ş. and approved and registered on 30 April 2009 in the Extraordinary General Assembly of 2008, the Company s issued share capital was increased from TL to TL by an increase of TL using the merger exchange rate of 1, b) Inflation Adjustments to Share Capital The Company s prior inflation adjustments to share capital was TL after netting off accumulated losses and out of this amount TL was used in increase of share capital in The remaining TL is presented under the adjusted share capital. Inflation adjustments to share capital amounting to TL transferred as a result of the merger with Ceytaş Madencilik Tekstil Sanayi ve Ticaret A.Ş. is recognized under the adjusted share capital in the accompanying financial statements and the details of the adjusted share capital is presented below. 31 December 31 December Inflation adjustment Inflation adjustment merger effect Nominal share capital Adjusted share capital c) Premium in Excess of Par and Cancellation Profits The Company has TL of premium in excess of par transferred as a result of the merger with Ceytaş Madencilik Tekstil Sanayi ve Ticaret A.Ş. (31 December 2010: TL ). d) Subsidiary Emission Premiums The Company has TL of subsidiary emission premiums transferred as a result of the merger with Ceytaş Madencilik Tekstil Sanayi ve Ticaret A.Ş. (31 December 2010: TL ). e) Valuation Funds As at 31 December 2008, the Company has recognized TL of revaluation fund as a result of the valuation of land and buildings in Edirne, which are classified under the Property, Plant and Equipment account at the balance sheet, at their fair values. Additionally, the Company has TL of revaluation fund transferred as a result of the merger with Ceytaş Madencilik Tekstil Sanayi ve Ticaret A.Ş.. This amount refers to the net amount revaluation fund after deduction of deferred tax liabilities and depreciation charges corresponding to the revaluation differences of the related assets and presented under the Valuation Funds account in equity as TL The details of revaluation funds at the balance sheet are summarized as follows: 31 December 31 December Revaluation fund of property, plant and equipment Merger effect Depreciation charge ( ) ( )

85 20. Equity (Cont d) f) Restricted Reserves Appropriated from Profits Legal reserves consist of first and second legal reserves, appropriated in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of historical statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the historical paid-in share capital. The second legal reserve is appropriated after the first legal reserve and dividends, at the rate of 10% per annum of all cash dividend distributions. 31 December December 2010 First legal Second legal First legal Second legal reserves reserves reserves reserves Opening Appropriated during the year Total g) Retained Earnings / Accumulated Losses The Company has made the required adjustments to its financial statements in accordance with the CMB s Communiqué Serial: XI, No: 29 and presented the details of the readjusted retained earnings / accumulated losses as follows Opening balance, 1 January Net profit of the prior year Appropriation of legal reserves ( ) ( ) Revaluation fund depreciation charge Closing balance, 31 December h) Profit Distribution In accordance with the Capital Markets Board s (the CMB ) Decree issued as of 27 January 2010, listed companies are not required to comply with the requirements of minimum profit distribution in distributing profits derived from the operations in 2011 (31 December 2010: 20%), and accordingly, profit distribution should be made based on the requirements set out in the CMB s Communiqué Serial: IV, No: 27 Principles of Advance Dividend Distribution of Companies that are subject to the Capital Markets Board Regulations, terms of articles of association and profit distribution policies publicly disclosed by the companies. PARK ELEKTRİK ANNUAL REPORT

86 21.Sales and Cost of Sales 1 January - 1 July - 31 December 31 December Sales revenue Domestic sales Export sales Sales discount - (27.525) Other deductions - (167) January - 1 July - 31 December 31 December Sales quantities Concentrated copper (Dmt) Cathode copper (Mt) Asphaltite (tones) Approximately 99% of domestic sales are made to a Group company and export sales are fully made to Belgium. 1 January - 1 July - 31 December 31 December Cost of sales Cost of raw materials Labor costs General production expenses Cost of production Change in finished goods ( ) ( ) Finished goods at the beginning of the period Finished goods at the end of the period Cost of the finished goods sold Purchases of trade goods Cost of trade goods sold Cost of services rendered Cost of other sales January - 1 July - 31 December 31 December Production quantities Concentrated copper (Wmt) Copper cathode (Mt) Asphaltite (tones) Copper cathode requires concentrated copper as main input during the production process Wmt concentrated copper produced during the period also includes those that were used for the production of copper cathode. 84

87 22. Research and Development Expenses, Marketing, Selling and Distribution Expenses, General Administrative Expenses 1 January - 1 January - 31 December 31 December Marketing, sales and distribution expenses General administrative expenses January - 1 January - Marketing, selling and distribution 31 December 31 December expenses Material expenses Transportation expenses Freight expenses Export expenses Other January - 1 January - 31 December 31 December General administrative expenses Consultancy expenses Personnel expenses Donations and other aids Taxes and dues Rent expenses Retirement pay and unused vacation Depreciation expenses Other Expenses by Nature 1 January - 1 January - Depreciation and amortization 31 December 31 December expenses Cost of production General administrative expenses Idle capacity expenses Renovation fund PARK ELEKTRİK ANNUAL REPORT

88 23. Expenses by Nature (Cont d) 1 January - 1 January - 31 December 31 December Personnel expenses Cost of production Wages and salaries Employee benefits General administrative expenses Wages and salaries Employee benefits Other Operating Income / (Expenses) 1 January - 1 January - 31 December 31 December Other operating income Provisions released Rent income Other operating income and profits The Company has entered into a sales agreement, in which underlying prices are determined based on the London Metal Exchange prices, in the current period. However, during the period aforementioned agreement has been annulled and TL decrease in liabilities arising from the price declines is recognized as other income due the annulment of this agreement. (31 December 2010: TL ) 1 January - 1 January - 31 December 31 December Other operating expenses Provision expenses Other extraordinary expenses and losses Idle capacity expenses Idle capacity expenses amounting to TL consists of TL of depreciation expenses attributable to the idle factory building in Edirne, TL of depreciation expenses attributable to the idle spinning mill, its machinery and fixtures in Ceyhan / Adana. 86

89 25. Financial Income 1 January - 1 January - 31 December 31 December Interest income Financial income on sales Foreign exchange gains Discount income Dividend income from associates Finance Expenses 1 January - 1 January - 31 December 31 December Discount expenses Foreign Exchange losses Financial expense on purchases Interest expenses Other financial expenses Finance expenses regarding to extended credit terms amounting to TL includes TL of inventory purchases and TL of service purchases (31 December 2010: Finance expenses regarding to extended credit terms amounting to TL included TL of inventory purchases and TL 373 of services purchases). The Company has not any finance expenses incurred in the current period, which are attributed or attributable to property, plant and equipment (31 December 2010: None). PARK ELEKTRİK ANNUAL REPORT

90 27. Tax Assets and Liabilities Deferred Tax Assets and Liabilities The Company recognizes deferred tax assets and liabilities based upon the temporary differences between its financial statements as reported in accordance with IFRS and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for IFRS and tax purposes. 31 December December 2010 Deferred tax assets Deferred tax liabilities (-) ( ) ( ) Deferred tax liabilities (net) Deferred tax assets / (liabilities) 31 December December 2010 Useful life and valuation differences on property, plant and equipment and intangible fixed assets ( ) ( ) Retirement pay provision Discount on receivables and payables (2.124) Allowance for borrowings and expenses Revaluation of inventories Other Corporate Tax 31 December December 2010 Corporate tax provision ( ) ( ) Prepaid tax (-) Tax provision in balance sheet ( ) ( ) The Company is subject to applicable Turkish corporate tax legislation. Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back nondeductible expenses, and by deducting dividends received from resident companies, other exempt income and investment incentives utilized. The effective tax rate level for 2011 is 20% (2010: 20%). In Turkey, advance tax returns are filed on a quarterly basis. 20% of temporary tax rate is applied during the taxation of corporate income (2010: 20%). Tax charge calculated over the profit for the period ended as of 30 September 2011 amounts to TL (31 December 2010: TL ). Losses can be carried forward for offset against future taxable income for up to 5 years. Losses cannot be carried back for offset against profits from previous periods. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns between 1 25 April following the close of the accounting year to which they relate (Companies with special accounting periods file their tax returns between 1-25 of the fourth month subsequent to the fiscal year end). Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five years. 88

91 27. Tax Assets and Liabilities (Cont d) Income Withholding Tax In addition to corporate taxes, companies should also calculate income withholding taxes on any dividends distributed, except for companies receiving dividends who are resident companies in Turkey and Turkish branches of foreign companies. The rate of income withholding tax is 10% starting from 24 April This rate was increased from 10% to 15% effective from 22 July Undistributed dividends incorporated in share capital are not subject to income withholding taxes. The reconciliation of tax expense / income and accounting profit in accordance with IAS 12 is summarized below. 1 January - 31 December January - 31 December 2010 Current corporate tax liability ( ) ( ) Deferred tax income / (loss) Taxation in the statement of income ( ) ( ) Reconciliation of tax provisions 1 January - 31 December January - 31 December 2010 Profit before tax and non-controlling interests Applicable tax rate 20% 20% Expected taxation Tax effects of: - non-deductible expenses non-taxable income and other exempts ( ) ( ) - non-taxable temporary differences ( ) ( ) Taxation in the statement of income PARK ELEKTRİK ANNUAL REPORT

92 28. Earnings Per Share Earnings per share 1 January - 31 December January - 31 December 2010 Average number of shares in circulation during the period (in full) Net profit for the period Earnings per share 0, , Related Party Disclosures Due from Related Parties 31 December 2011 Type of Trade Other Other Current Related party Relationship Receivables Receivables Assets Total Park Holding A.Ş. Shareholder Park Termik Elektrik San. ve Tic.AŞ. Subsidiaries Silopi Elektrik Üretim A.Ş. Group company Due from executive personnel Personnel Others Personnel Total Discount (42.858) (24.501) - (67.359) Net December 2010 Type of Trade Other Other Current Related party Relationship Receivables Receivables Assets Total Park Holding A.Ş. Shareholder Silopi Elektrik Üretim A.Ş. Group company Due from personnel Personnel Others Personnel Total Discount (18.475) - - (18.475) Net

93 29. Related Party Disclosures (Cont d) Due to Related Parties 31 December 2011 Type of Trade Other Related party Relationship Payables Payable Total Park Holding AŞ. Shareholder Park Enerji Ekip Maden San.Tic.AŞ. Shareholder Ciner Yapı Teknik İnş. San.ve Tic.AŞ. Group company Havaş Turizm Seyahat ve Kargo Taş. A.Ş. Group company Park Sigorta Ara.Hiz.Ltd.Şti. Group company Park Teknik Elk.Mad.Turz.San.Tic.A.Ş. Group company Park Toptan Elk.Enerji Sat.San.ve Tic.A.Ş. Group company Due to personnel Personnel Dividend payable to shareholders Shareholder Total Discount (35.113) - (35.113) Net December 2010 Type of Trade Other Related party Relationship Payables Payable Total Havaş Turizm Seyahat ve Kargo Taş. A.Ş. Group company Park Sigorta Ara.Hiz.Ltd.Şti. Group company Park Toptan Elk.Enerji Sat.San.ve Tic.A.Ş. Group company Due to personnel Personnel Dividend payable to shareholders Shareholder Total Discount (4.002) - (4.002) Net PARK ELEKTRİK ANNUAL REPORT

94 29. Related Party Disclosures (Cont d) Goods and Services Purchased from Related Parties 31 December 2011 Related party Relationship Goods Service Fixed Assets Interest Rent Other Total -Park Holding A.Ş. Shareholder Park Enerji Ekip.Mad.Elektrik Ürt.San.ve Tic. A.Ş. Shareholder Ciner Hava Taşımacılığı A.Ş. Group company Ciner Yapı Teknik İnşaat San. Ve Tic.AŞ. Group company Ciner Turizm Tic. İnş. Serv. Hizm. A.Ş. Group company Eti Soda Üretim Pazarlama Nak.San.Tic.A.Ş. Group company Habertürk Gazetecilik ve Matbaacılık A.Ş. Group company Havaş Turizm Sey.ve Kargo Taş. A.Ş. Group company Park İnş.Turizm Maden San.ve Tic.AŞ. Group company Park Teknik Mad.Tur.San.ve Tic.A.Ş. Group company Park Termik Elektrik San.ve Tic.A.Ş. Associate Park Toptan Elk. Enerji Sat. San.ve Tic.A.Ş. Group company Park Sigorta Aracılık Hiz.Ltd.Şti. Group company Silopi Elektrik Üretim A.Ş. Group company Total December 2010 Related party Relationship Goods Service Fixed Assets Interest Rent Other Total -Park Holding A.Ş. Shareholder Park Enerji Ekip.Mad.Elektrik Ürt.San.ve Tic. A.Ş. Shareholder Ciner Turizm Tic. İnş. Serv. Hizm. A.Ş. Group company Habertürk Gazetecilik ve Matbaacılık A.Ş. Group company Havaş Turizm Sey.ve Kargo Taş. A.Ş. Group company Park Teknik Madencilik Turizm San. ve Tic. A.Ş. Group company Park Termik Elektrik San.ve Tic.A.Ş. Associate Park Toptan Elektrik Enerjisi Satış San. ve Tic. A.Ş. Group company Park Makine Yedek Parça San. A.Ş. Group company Park Sigorta Aracılık Hiz. Ltd. Şti. Group company Silopi Elektrik Üretim A.Ş. Group company , Total

95 29. Related Party Disclosures (Cont d) Goods and Services Sold to Related Parties 31 December 2011 Related party Type of Relationship Goods Service Fixed Assets Interest and Exchange Gains Rent Others Total -Park Holding A.Ş. Shareholder Park Enerji Ekip.Mad.Elektrik Ürt.San.ve Tic. A.Ş. Shareholder Havaş Turizm Sey. Ve Kargo Taş. A.Ş. Group company Kazan Soda Maden Enerji Nakliyat San.Tic. A.Ş. Group company Park Teknik Mad.Tur.San.ve Tic.A.Ş. Group company Park Termik Elektrik San.ve Tic.A.Ş. Associate Silopi Elektrik Üretim A.Ş. Group company Total December 2010 Related party Type of Relationship Goods Service Fixed Assets Interest and Exchange Gains Rent Others Total -Park Holding A.Ş. Shareholder Park Enerji Ekip.Mad.Elektrik Ürt.San.ve Tic. A.Ş. Shareholder Eti Soda Üretim Pazarlama Nak.San.Tic.A.Ş. Group company Havaş Turizm Sey. Ve Kargo Taş. AŞ. Group company Park Teknik Mad.Tur.San.ve Tic.A.Ş. Group company Park Termik Elektrik San.ve Tic.A.Ş. Associate Silopi Elektrik Üretim A.Ş. Group company Total Short term benefits provided to directors and executive personnel 1 January - 31 December January - 31 December 2010 Wages, premiums and other similar benefits Total retirement pay provision and unused vacation liability as of balance sheet date PARK ELEKTRİK ANNUAL REPORT

96 29. Related Party Disclosures (Cont d) Nature of Related Party Transactions The Company s due to / from related parties and all other transactions denominated in US Dollars has been followed in TL starting from 1 January Interest rate applied between January-March is 8,54%, between April- June is 9,012%, between July-September is 10,141% and between October-December is 12,389%, for trade transactions, interest rate applied between January-June is 9,012%, between July-September is 10,141% and between October-December is 9,198% for finance transactions (31 December 2010: USD 9,198% for both trade and financial transactions). Park Holding A.Ş. The Company lends a portion of excess cash as a financial liability to Park Holding A.Ş. The Company earns interest income from its financial receivables depending on above stated interest rates. As stated above, the company, earns interest from its financial and trade receivables from related parties. As a result of this, the Company, gained TL (2010: TL ) interest income from Park Holding A.Ş. The Company gets management consultancy and other services for its ordinary course of business from Park Holding A.Ş. Some noteworthy consultancy and services received from Park Holding A.Ş. are; carrying-out all purchasing functions, investment and implementation activities of information technologies, technical and know-how support for all human resources processes, support for financial planning and tax planning, and consultancy on legal matters. Other Group Companies The Company purchases mineral extraction service from Park Teknik Madencilik Turizm Sanayi ve Ticaret A.Ş. for its mining activities in Siirt / Madenköy. The Company purchases electricity from Park Toptan Elektrik Enerjisi Satış Sanayi ve Ticaret A.Ş. for its mining activities in Siirt / Madenköy facility. The Company rents company cars from Havaş Turizm Seyahat ve Kargo Taşımacılığı A.Ş. The Company purchases insurance contracts from Park Sigorta Aracılık Hizmetleri Ltd. Şti. The Company supplies asphaltite to Silopi Elektrik Üretim A.Ş. s thermal power plant in Sırnak / Silopi. 30. Nature and Level of Risks Derived From Financial Instruments a) Capital Risk Management The Company manages its capital to ensure that it will maintain its status as a going concern while maximizing the return of stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of debts including the borrowings and other debts disclosed in Notes 7 and 8, cash and cash equivalents disclosed in Note 5 and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in Note 20. The Management of the Company considers the cost of capital and risks associated with each class of capital. The Management of the Company aims to balance its overall capital structure through the payment of dividends, new share issues and the issue of new debt or the redemption of existing debt. 94

97 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) a) Capital Risk Management (Cont d) The Company controls its capital using the net debt / total equity ratio. This ratio is the calculated as net debt divided by the total equity amount. Net debt is calculated as total liability amount (comprises of financial liabilities, leasing and trade payables as presented in the balance sheet) less cash and cash equivalents. As of 31 December 2011 and 31 December 2010, the Company s net debt / total equity ratio is detailed as follows: 31 December December 2010 Finance borrowings and trade payables Other payables from related parties (*) ( ) ( ) Cash and cash equivalents (-) ( ) ( ) Net debt - -- Total equity Net debt / total equity ratio (%) 0,00 0,00 (*) The Company s cash resources used by the parent company, Park Holding, are offset against finance borrowings and trade receivables in the net borrowing calculation. The Company has not made any changes to its overall capital risk management policy in the current period. b) Financial Risk Factors The Company s activities expose it to various 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 the potential adverse effects over the Company s financial performance. The Company manages its financial instruments centrally in accordance with the Company s risk policies through the Financial Transactions Department. The Company s cash inflows and outflows are monitored by using the reports prepared on a daily, weekly and monthly basis and the related data is compared to the monthly and yearly cash flow budgets. Risk management is carried out by the Risk Management Department which is independent from steering, under the policies approved by the Board of Directors. The Company s Risk Management Department identifies, evaluates and hedges financial risks in close cooperation with the Company s operating units. The Board of Directors sets out written principles for overall risk management, as well as written policies covering specific areas, such as; foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. (b.1) Credit Risk Management Credit risk refers to the risk that counterparty will default on its contractual obligations. The Company s Management mitigates such risk by putting limitations on the contracts with counterparties and obtaining sufficient collaterals, where appropriate. The Company exports its entire copper products and receives 90% of its export income in advance (cash). Therefore, its customer and credit risk is at minimum. Trade receivables are evaluated based on the Company s policies and procedures and presented net of doubtful provision in the financial statements accordingly (Note 8). PARK ELEKTRİK ANNUAL REPORT

98 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) b) Financial Risk Factors (cont d) (b.1) Credit Risk Management (cont d) Receivables Credit risks exposed through types of financial instruments Trade Receivables Other Receivables 31 December 2011 Related Parties Third Parties Related Parties Third Parties Cash and Cash Equivalents Maximum credit risk exposed as of the balance sheet date (*) (A +B+C+D+E) Maximum risk portion covered by guarantees, collaterals, etc A. Net book value of financial assets neither overdue nor impaired Portion covered by guarantees, collaterals, etc B. Net book value of financial assets that are renegotiated or otherwise will be accepted as overdue or impaired Portion covered by guarantees, collaterals, etc C. Net book value of assets over due but not impaired Portion covered by guarantees, collaterals, etc D. Net book value of impaired assets - Past due(gross carrying amount) Impairment (-) - ( ) - (29.041) - - Net value portion covered by guarantees, collaterals, etc Undue (gross carrying amount) Impairment (-) Net value portion covered by guarantees, collaterals, etc E. Off-balance sheet items with credit risk (*) Factors that increase the credit reliability, such as; guarantees received, are not taken into consideration in the calculation. 96

99 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) b) Financial Risk Factors (cont d) (b.1) Credit Risk Management (cont d) Receivables Credit risks exposed through types of financial instruments Trade Receivables Other Receivables 31 December 2010 Related Parties Third Parties Related Parties Third Parties Cash and Cash Equivalents Maximum credit risk exposed as of the balance sheet date (*) (A +B+C+D+E) Maximum risk portion covered by guarantees, collaterals, etc A. Net book value of financial assets neither overdue nor impaired Portion covered by guarantees, collaterals, etc B. Net book value of financial assets that are renegotiated or otherwise will be accepted as overdue or impaired Portion covered by guarantees, collaterals, etc C. Net book value of assets over due but not impaired Portion covered by guarantees, collaterals, etc D. Net book value of impaired assets Past due(gross carrying amount) Impairment (-) - ( ) - (29.041) - - Net value portion covered by guarantees, collaterals, etc Undue (gross carrying amount) Impairment (-) Net value portion covered by guarantees, collaterals, etc E. Off-balance sheet items with credit risk (*) Factors that increase the credit reliability, such as; guarantees received, are not taken into consideration in the calculation. PARK ELEKTRİK ANNUAL REPORT

100 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) b) Financial Risk Factors (cont d) (b.1) Credit Risk Management (cont d) Past due but unimpaired assets are presented as below: 31 December December 2010 One month due Due within 1-3 months - 31 Due within 3-12 months Due within 1-5 years Total overdue receivables (b.2) Liquidity Risk Management The Company manages its liquidity through a systematic monitoring of its cash flows and matching the maturities of its assets and liabilities to maintain adequate funds and loan reserves. Liquidity risk tables Conservative liquidity risk management requires maintaining adequate reserves, having the ability to utilize adequate level of credit lines and funds, and closing market positions. Funding risk attributable to current and future potential borrowing needs is managed by providing ongoing access to adequate number of creditors with high quality. The following table details the Company s financial liabilities and their maturities. The tables below have been drawn up based on the undiscounted liabilities and earliest payment dates of financial liabilities. Interest to be paid over those liabilities are included and summarized in the below table: Contractual maturities Carrying value Total cash outflows in accordance with contracts ( I+II+III) 31 December 2011 Less than 3 months (I) 3-12 months (II) 1-5 years (III) Non-derivative financial liabilities Financial leasing liabilities Trade payables Other payables Other liabilities Contractual maturities Carrying value Total cash outflows in accordance with contracts ( I+II+III) 31 December 2010 Less than 3 months (I) 3-12 months (II) 1-5 years (III) Non-derivative financial liabilities Financial leasing liabilities Trade payables Other payables Other liabilities

101 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) b) Financial Risk Factors (cont d) (b.3) Market risk management The Company s activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rates. At a Company level, market risk exposures are measured by sensitivity analysis. When compared to prior periods, there has been no change in the Company s exposure to market risks, hedging methods used or the measurement methods used for such risks. As the Company policy, due to / from related party transactions denominated in US Dollars have been followed in TL starting from the beginning of Accordingly, the Company starts to determine maturities for all of its receivables and payables in TL. (b.3.1) Foreign currency risk management Foreign currency risk is the risk of volatility in the foreign currency denominated monetary assets, monetary liabilities and off-balance sheet liabilities due to changes in currency exchange rates. The breakdown of the Company s foreign currency denominated monetary and nonmonetary assets and liabilities as of the balance sheet date are as follows: PARK ELEKTRİK ANNUAL REPORT

102 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) b) Financial Risk Factors (cont d) (b.3.1) Foreign currency risk management (cont d) 31 December 2011 TL Equivalent US Dollars Euro GBP Others 1. Trade Receivables a. Monetary Financial Assets b. Non-monetary Financial Assets Other CURRENT ASSETS Trade Receivables a. Monetary Financial Assets b. Non-monetary Financial Assets Other NON-CURRENT ASSETS TOTAL ASSETS Trade Payables Financial Liabilities a. Other Monetary Liabilities b. Other Non-monetary Liabilities CURRENT LIABILITIES Trade Payables Financial Liabilities a. Other Monetary Liabilities b. Other Non-monetary Liabilities NON-CURRENT LIABILITIES TOTAL LIABILITIES Net assets / (liability ) position of off balance sheet derivative items / (19a - 19b) Net foreign currency assets / (liability) position ( ) Net foreign currency asset / (liability) position of monetary items (1+2a+5+6a a a) ( ) Fair value of derivative instruments used in foreign currency hedge Total amount of assets hedged Total amount of liabilities hedged Export Import

103 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) b) Financial Risk Factors (cont d) (b.3.1) Foreign currency risk management (cont d) 31 December 2010 TL Equivalent US Dollars Euro GBP Others 1. Trade Receivables a. Monetary Financial Assets b. Non-monetary Financial Assets Other CURRENT ASSETS Trade Receivables a. Monetary Financial Assets b. Non-monetary Financial Assets Other NON-CURRENT ASSETS TOTAL ASSETS Trade Payables Financial Liabilities a. Other Monetary Liabilities b. Other Non-monetary Liabilities CURRENT LIABILITIES Trade Payables Financial Liabilities a. Other Monetary Liabilities b. Other Non-monetary Liabilities NON-CURRENT LIABILITIES TOTAL LIABILITIES Net assets / (liability ) position of off balance sheet derivative items / (19a - 19b) Net foreign currency assets / (liability) position Net foreign currency asset / (liability) position of monetary items (1+2a+5+6a a a) Fair value of derivative instruments used in foreign currency hedge Total amount of assets hedged Total amount of liabilities hedged Export Import PARK ELEKTRİK ANNUAL REPORT

104 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) The Company is mainly exposed to Euro and US Dollar risks. Effects of other currencies are immaterial. Assets and liabilities denominated in foreign currencies are translated at the exchange rates announced by the Turkish Central Bank as of 31 December 2011 (31 December 2011: US Dollar 1 = TL 1,8889 and Euro 1 = TL 2,4438, 31 December 2010: US Dollar 1 = TL 1,5460 and Euro 1 = TL 2,0491). The table below presents the Company s sensitivity to a 10% deviation in foreign exchange rates (especially US Dollars and Euros). 10% is the rate used by the Company when generating its report on exchange rate risk; the related rate stands for the presumed possible change in the foreign currency rates by the Company s Management. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. This analysis includes foreign currency denominated bank loans other than the functional currency of the ultimate user or borrower of the bank loans. The positive amount indicates increase in profit / loss or equity. Foreign currency sensitivity 31 December 2011 Profit / Loss Appreciation of foreign currency Depreciation of foreign currency Change of US Dollar against TL by 10% US Dollars net assets / liabilities ( ) Change of Euro against TL by 10% Euro net assets / liabilities ( ) Change of other currencies against TL by 10% Other currencies net assets / liabilities (23.951) Total ( ) 31 December 2010 Profit / Loss Appreciation of foreign currency Depreciation of foreign currency Change of US Dollar against TL by 10% US Dollars net assets / liabilities ( ) Change of Euro against TL by 10% Euro net assets / liabilities 3 (3) Change of other currencies against TL by 10% Other currencies net assets / liabilities - - Total ( ) 102

105 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) b) Financial Risk Factors (cont d) (b.3.2) Interest rate risk management The Company s exposure to interest rate risk is related to its financial liabilities. The Company s financial liabilities mostly consist of floating interest rate borrowings. Based on the current balance sheet composition of the Company, if the interest rates were increased / decreased by 1% for TL with the assumption of keeping all other variables constant, the effect on net profit / loss for the period before taxation would increase by TL as of 31 December 2011 (31 December 2010: TL ). Interest rate sensitivity The Company s financial instruments with interest rate sensitivity are as follows: 31 December 2011 Floating Interest Fixed Interest Non-interest Bearing Financial assets Cash and cash equivalents Trade receivables Due from related parties Other receivables Total Financial liabilities Financial leasing liabilities Trade payables Due to related parties Other payables December 2010 Floating Interest Fixed Interest Non-interest Bearing Financial assets Cash and cash equivalents Trade receivables Due from related parties Other receivables Total Financial liabilities Trade payables Due to related parties PARK ELEKTRİK ANNUAL REPORT

106 30. Nature and Level of Risks Derived From Financial Instruments (Cont d) Financial Instruments Classification 31 December 2011 Financial liabilities carried at using the effective interest method Loans and receivables Financial assets and liabilities at f air value through profit or loss Carrying value Notes Financial assets Cash and cash equivalents Trade receivables Due from related parties Other receivables Financial investments Financial liabilities Leasing liabilities Trade payables Due to related parties December 2010 Financial assets Cash and cash equivalents Trade receivables Due from related parties Other receivables Financial investments Financial liabilities Leasing liabilities Trade payables Due to related parties

107 31. Events after the Balance Sheet Date Siirt/Madenköy company in the workplace, collective bargaining agreements between Turkey Mine Workers Union began on February 6, Mining license with license number 2371 for Siirt / Şirvan / Madenköy area is extended to February 7, 2037 by Ministry of Energy and Natural Resources, General Directorate of Mining Affairs. The mining area is also expanded from 453,13 hectares to 1.035,23 hectares. In compliance with Turkish Commercial Code and Corporate Tax Code, shareholder Park Enerji Ekipmanları Madencilik Elektrik Üretim Sanayi ve Ticaret A.Ş. is merged without dissolution with Park Holding A.Ş. in February 29, 2012, including all assets and liabilities. As a result of this merger, share of Park Holding A.Ş. in the Company increased from 39,65% to 61,24%. The Company terminated a financial leasing agreement amounting to EUR on February 17, As a result of this termination, financial lease liability amounting to TL and tangible fixed assets amounting to TL is derecognized in financial statements. In response to the letter received from Capital Markets Board in December 26, 2011, the Company is working on to release the mortgage given on behalf of the parent company Park Holding A.Ş. PARK ELEKTRİK ANNUAL REPORT

108 32. Other Issues That Significantly Affect The Financial Statements or Other Issues Required For The Clear Understanding of Financial Statements As of 31 December 2011, total insurance on assets amounts to TL (31 December 2010: TL ). According to the reserve estimation report regarding copper concentrate mine of the Company in Siirt/Madenköy, and prepared by Micromine Consulting Services ( MCS, a division of Micromine Proprietary Limited) in accordance with JORC, which is an international reserve estimation standard; Madenköy Copper Deposit is identified as 3 different ore deposits with different purities, and in aggregate, total reserve is determined as tons, of which tons is proven (measured) reserve. Average purity of the reserve is determined as 2,40%. As of October 2011, tons of the reserve have been used in production. As a result of production capacity increase operations, in connection with the increased reserves; the production capacity is increased from tons/year to tons/year, and operations to increase production capacity to tons/year are still in progress. As of December 2011, the Company has invested EUR for its capacity increase operations. 106

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