annual report 2014 · 2019-03-13 · koç group [s turnover omprises 8% of turkeys total gdp, and...

Annual Report 2014

1

Table of Contents

Section I : Independent Audit Report on the Annual Report 2 General Information 4 Yapı Kredi Faktoring in Brief 5 Chairman’s Letter 6 Board of Directors, Senior Management and Company Organization 7 Provided Financial Rights and R&D 8 Company Activities and Important Developments Regarding Activities 9-11 Future Outlook 11 Audit Information, Lawsuits, Subsidiaries and Affiliates, General Assembly Meetings 12 Yapı Kredi Bank 13 Financial Highlights 14 Dividend Distribution Policy, Risks and Risk Assessment Report of the Board of Directors, Miscellaneous 15 Affiliated Company Report 16

Section II : Financial tables as of 31 December 2014 and independent audit report 17-70

3

Section I

Introduction

4

General Information Company Title : Yapı Kredi Faktoring A.Ş. Annual Report Period : 01/01/2014 – 31/12/2014 Trade Registry Number : 417822 Mersis Number : 8638636782157842 Capital : 31,916,695 TL Address : Büyükdere Caddesi Yapı Kredi Plaza A Blok Kat:14 Levent, İstanbul /

Türkiye Phone / Fax Number : 212 371 99 99 / 212 371 99 00 Website : www.yapikredifaktoring.com.tr Number of Employees : 114 Branches : There are 10 branches: Adana, Ankara, Antalya, Beyoğlu, Bursa, Eminönü,

Güneşli, İzmir, Kadıköy, Kartal.

Adana Branch Reşatbey Mahallesi Atatürk Caddesi A Blok No:18/1 Kat:7 Semih Rüstem İş Merkezi Seyhan / Adana Phone : (0322) 459 04 91 Ankara Branch Atatürk Bulvarı No: 93 Kat: 5 Kızılay - Ankara Phone: (0312) 435 93 36 Antalya Branch Kızıltoprak Mahallesi Aspendos Bulvarı YKB Şubesi No:35 Antalya Phone: (0242) 312 75 40

Bursa Branch Ulubatlı Hasan Bulvarı No: 59 Osmangazi - Bursa Phone: (0224) 271 41 15

İzmir Branch Gazi Bulvarı No: 3 Egehan Kat: 4 Pasaport - İzmir Phone: (0232) 441 20 71

Shareholder Structure

Shareholders Share Ratio Amount (TL)

Yapı ve Kredi Bankası A.Ş. % 99,95 31.901.499

Temel Ticaret ve Yatırım A.Ş. % 0,04 11.393

Yapı Kredi Finansal Kiralama A.O. % 0,01 3.799

Koç Yapı Malzemeleri A.Ş. % 0,00 2

Zer Madencilik ve Dayanıklı Mallar

Yatırım Pazarlama A.Ş. % 0,00 2

%100,0 31.916.695

Beyoğlu Branch İnönü Mah. Cumhuriyet Cad. No:67A Kat:2 Şişli / İstanbul Phone: (0212) 232 77 94

Eminönü Branch Aşirefendi Cad.No:31 Sultanhamam / Eminönü İstanbul Phone: (0212) 514 36 73

Güneşli Branch Osmaniye Mah. Marmara Forum Alışveriş Merkezi B Blok (Marmara Forum Garden Office) 3.Kat No:OF-40 Bakırköy İstanbul Phone: (0212) 422 02 42

Kadıköy Branch Kozyatağı Mah.Ş.Mehmet Fatih Öngül Sok.No:1 Kat:4 Kadıköy İstanbul Phone: (0216) 362 37 30

Kartal Branch Mustafa Kemal Caddesi Şehit Gazi Sok.Adalet Sarayı arkası Hukukçular Towers - A BLok Kat : 17 Kartal İstanbul Phone: (0216) 510 60 46

5

Yapı Kredi Faktoring in Brief

Yapı Kredi Faktoring, has been the leader in the sector for the past 14 years based on the total turnover criterion. As Turkey’s leading and innovative factoring company, Yapı Kredi Faktoring boasts a solid position in the market through its strong performance, well-established structure and high quality service mentality. As the leader of the Turkish factoring market, Yapı Kredi Faktoring has 16.86% market share in total transaction volume and 14.76% in export factoring. Yapı Kredi Faktoring provides nation-wide factoring services through its Istanbul Head Office and branches located Adana, Ankara, Antalya, Beyoğlu, Bursa, Eminönü, Güneşli, İzmir, Kadıköy and Kartal. Yapı Kredi Bank and notably the synergy created by the close relationship with the bank’s nation-wide sales and services organization constitutes one of the most important service and competition advantages of Yapı Kredi Faktoring. The service points of Yapı Kredi Bank with its more than 1000 branches provide a comprehensive reach. Yapı Kredi Faktoring is a member of Factors Chain International (FCI), whose headquarters is located in Amsterdam, and also a member of the Association of Financial Institutions. Yapı Kredi Faktoring has been among the leading companies in the Best Export Factoring Companies ranking prepared globally by the FCI since 2002. In 2014, the Company service quality was considered to be ‘‘perfect’’ and the company was 2. in the ranking. Relying on its strong position in both the domestic and international markets, Yapı Kredi Faktoring displays superior activity performance through its correctly defined strategies, provides sustainable quality in factoring services via its competent and experiences team and produces strategic solutions that are specific to its customer portfolio. Thanks to its strong capital structure, extensive experience, proven service quality and expert human resources, Yapı Kredi Faktoring has been the number 1 company in the sector based on its total factoring turnover for the past 14 years.

6

Chairman’s Letter

As the uninterrupted leader of the sector with its total volume of transaction since 2001, Yapı Kredi Faktoring also

maintained its leadership in 2014.

Esteemed Shareholders, 2014 has been a year that confirmed the downward trend in global growth. Developed nations other than the United States faced a significant growth problem. On the other hand, the opinion that it would also be difficult for emerging markets to catch up with the growth rates of previous years became more widespread. This perception was further confirmed with the sharp fall in oil prices towards the end of the year and it is unlikely that it will change any time soon. This led to a sharp differentiation between oil importing and oil exporting countries among developing markets and brought along significant potential in favour of the first group, of which Turkey is a part. After failing to reach its desired results in 2014, Turkey started 2015 with fresh hope with the effect of the sharp fall in oil prices. Positioned as the country to derive the most benefit from the fall in oil prices, Turkey has not yet been able to reflect this positive situation on to asset prices and its real economy. Despite the tough competition conditions prevailing in financial markets, Yapı Kredi Faktoring has not compromised its superior customer-oriented service mentality and continued to successfully implement its healthy growth strategy in 2014 as well. Yapı Kredi Faktoring realized 15 per cent of the transaction volume in total export factoring of the sector in 2014 and maintained its uninterrupted leadership since 2001 with 16.86% market share. Of the total transaction volume, which reached 19.6 billion liras with 26 per cent increase, 85 per cent came from domestic factoring transactions and 15 per cent from international factoring transactions. With revenues attaining 161 million TL in 2014, Yapı Kredi Faktoring continued to benefit from the nationwide branch network of Yapı Kredi as it pursued its activities. Producing customer and market-oriented functional solutions and designing products that are customized according to needs in a quick fashion and at high quality standards lie at the heart of Yapı Kredi Faktoring’s service approach. While representing Yapı Kredi Faktoring’s corporate culture in the best manner, this approach also supports its growth and progress in all business processes. Moreover, included among the ‘‘Best Export Factoring Companies’’ in the world by Factors Chain International (FCI) since 2002, Yapı Kredi Faktoring took the 2. place in this ranking in 2014. Yapı Kredi Faktoring has also been awarded the global distinction of having ‘‘perfect service quality’’ by the FCI. Having assumed such an important mission as expanding the market by means of encouraging the dissemination of factoring transactions across the country and in all segments, Yapı Kredi Faktoring continues to make significant progress in terms of grassroots dissemination through its strong capital structure, its reputation in the sector and its comprehensive funding capabilities. At Yapı Kredi Faktoring, our prime responsibility for 2015 is to maintain our leadership by delivering an exemplary activity performance and to set the example for the sector as the first choice of customers via the comprehensive financial services that we offer. As we move forward with our healthy growth strategy, I would like to extend my gratitude to our customers for their unyielding confidence in us, to our shareholders for their continuous support and to our employees, who have a great share in this success, for their diligent efforts. Faik Açıkalın Chairman of the Board

7

Board of Directors, Senior Management and Company Organization

Board of Directors Internal Control Nilay Özbir

Internal Audit Pınar Adıyaman Demirtaş

General Manager

M. Coşkun Bulak

Credit Underwriting and Risk Monitoring

Atilla Kurban

Product Development and Monitoring Can Özyurt

Sales Işıl Eskici

Financial Planning and Financial Affairs

Zeynep Emecen Kandemir

Treasury and Foreign Relations S. Suhan Kaptan

Operations, IT and Administrative Affairs

Rengin Altınok

Board of Directors Faik Açıkalın Chairman Carlo Vivaldi Vice - Chairman Feza Tan Member Marco Iannaccone Member Nurgün Eyüboğlu Member M. Coşkun Bulak Member (General Manager)

Senior Management M.Coşkun Bulak General Manager Atilla Kurban Assistant General Manager - Credit Underwriting and Risk Monitoring Işıl Eskici Assistant General Manager - Sales Rengin Altınok Assistant General Manager - Operations, IT and Administrative Affairs Can Özyurt Vice President - Product Development and Monitoring S. Suhan Kaptan Vice President - Treasury and Foreign Relations Zeynep Emecen Kandemir Vice President - Financial Planning and Administration

8

Financial Rights Provided to Members of the Board and Senior Executives

The total amount of benefits such as per diems, fees, premiums, bonuses and dividends offered to Members of the Board and Senior Executives is 2,148,527 TL. The total amount of allowances, travel, accommodation and representation expenses as well as in-kind and in-cash means, insurance and similar indemnities paid to Members of the Board and Senior Executives is 268,878 TL.

Company Research and Development Activities The Company conducts research and marketing activities in order to widen its customer base and to develop its existing customer portfolio.

9

Company Activities and Important Developments Regarding Activities

Sales At Yapı Kredi Faktoring, our aim is to sustain the strong and reliable presence of our company with an increasing volume by means of establishing a sustainable and growing relationship with our customers. The Sales Department of Yapı Kredi Faktoring actively serves both domestic and international markets with the diversified range of products it offers to its customers. Yapı Kredi Faktoring achieved a total factoring turnover of 19,6 billion TL in 2014, 15% of which came from international transactions with the remaining 85% consisting of domestic transactions. As the leader of the sector based on the criterion of total turnover generated within the total sector for 14 consecutive years, Yapı Kredi Faktoring achieved a market share of 16,86% in 2014. Moreover, while Yapı Kredi Faktoring has been among the ‘‘Best Export Factoring Companies’’ selected by Factors Chain International (FCI) since 2002, in 2014 it ranked the second among FCI members world wide and its service quality was deemed to be perfect. Yapı Kredi Faktoring closely follows the developments in the market and the sector. The company added 1.556 new customers to its portfolio in 2014. Yapı Kredi Faktoring offers its services under four segments, namely Corporate, Commercial, SME and Supplier Group (suppliers and key industries), and through 10 branches. While the company achieved progress in 2014 in terms of the number of transactions and active customers through the services it offers in all segments and sectors, the increasing trend is expected to continue in 2015. Efficiency is expected to increase through new system investments to be made in 2015. More than 1000 Yapı Kredi Bank branches across the country constitute the most important distribution channel of the company in addition to its own sales organization. The company aims to continue serving and focusing on its potential and current customers in all segments and products through its ever-growing synergy with Yapı Kredi.

Credit Underwriting and Risk Monitoring Yapı Kredi Faktoring manages its credit risk with an emphasis on ‘effective risk management’ within the framework of its principal field of activity and supports sales activities with a view to fulfilling the company’s common goals. Special care is paid to avoiding high risk transactions that can tarnish the company’s reputation. Credit limits are determined by taking into account the financial structure and activity cycle of the customer and based on a payment schedule that is structured in advance in compliance with the customer’s commercial need. Risk policies that are in compliance with Yapı Kredi group are followed in monitoring and managing credit risk. In 2014, the number of employees working in credit underwriting, risk monitoring and intelligence units was increased, all relevant procedures were updated, the scope of audit processes and reporting activities was expanded and significant improvements were achieved in order to manage credit risk more effectively. Risk related reports are produced at regular intervals and the information is shared with the senior management as well as the Board of Directors. A total of 5,284 ‘credit underwriting proposals’ were evaluated and credit underwriting opinions were provided in 2014. While the non-performing credit ratio was 2.8% as of the end of 2014, it continued to be lower than the factoring sector average of 4.3% (according to BRSA data).

10

Product Development and Monitoring The Product Development and Monitoring Department assists the formulation of marketing strategies to gain new customers and to build long-term customer relations and ensures effective communication with Yapı Kredi Bank, which is the main shareholder. In addition, cooperation opportunities are developed in order for Yapı Kredi Faktoring to reach much wider customer masses by relying on the synergy created with Yapı Kredi Bank. Contributing to sustainable growth by means of developing solutions that are suitable for customer needs and closely monitoring and reporting on the progress in customer performance is also among the principal fields of work of this department. The department is also in charge of the Company’s Corporate Communication activities such as media, advertisement-promotion, meeting and seminar organization.

Treasury and Foreign Relations Funding activities are carried out by the Treasury and Foreign Relations Department. The objective of the Treasury Department is to meet the needs of customers without exposing them to the risks in the market. The general strategy of the Treasury Department is to effectively manage the Company’s asset and liability structure by protecting it from interest rate, liquidity and foreign exchange risks. Yapı Kredi Faktoring’s reputation vis-à-vis credit institutions and foreign factoring companies has always been at a very high level. Therefore, the Company boasts a wide portfolio of banks and credit opportunities.

Financial Planning and Administration The Financial Planning and Administration Department measures the Company’s performance on the basis of revenue, profitability and turnover in order to ensure that the Company reaches the corporate performance targets and to monitor these targets by taking into account the interest rate risk, market risk and operational risks. The Department secures compliance with BRSA regulations and the principles, policies and procedures of UFRS and the group and ensures that the accounting systems are also structured in harmony with these regulations. Moreover, it supports the Company’s strategic targets by means of carrying out assessments pertaining to the Company’s financial situation and providing relevant data in order to facilitate the decision-making process within the Company.

11

Operations, IT and Administrative Affairs

The administration, which previously functioned under the Financial Affairs Administration, was restructured in 2014 in the form of Operation, Information Technologies and Administrative Affairs administration to serve under a separate Deputy General Manager from an organizational point of view. In order to support the Company’s strategic growth and sales activities, minimize operational risk and to structure the appropriate services and the accompanying projects within the diverse product portfolio to work with the 10 branches and the growing number of active customers, it fulfils the following functions and organized its 2014 activities within this framework.

Managing and realizing the operational functioning of the organization (customer services, operational risk,

administrative activities within and outside the organization),

Formulating changes in practical rules and controls to ensure efficiency in the workings of Headquarters

Departments and Branches,

Minimizing Operational Risk related losses and taking action with regard to preventive measures,

Managing both system-related and infrastructure requirements through Information Technologies Management

and determining IT development requirements to the Company’s risk, service and sales related activities,

Creating project plans for 2015 in conjunction with relevant departments in line with the Company’s growth

targets and structuring projects.

The number of employees was increased in order to be able to fulfil these activities. As of 2014, the department serves with 21 staff members on the Operation side and 3 on the Information Technologies Management side. The department conducts all of its activities by means of carrying the ‘Customer-oriented operational service’ mentality onto operations. The investments to be made in the system in 2015 have been determined and work is on-going in line with the priorities that reflect the company’s growth strategy.

Internal Control and Internal Audit The Internal Control and Internal Audit departments strive to ensure the efficiency of the Internal Control System within the company by carrying out continuous controls on the company’s activities and operations with a view to determine and assess risks. Their independence within the organization has been ensured by rendering them answerable to the Board of Directors. The Internal Control and Internal Audit departments notify the Board of Directors of the findings they obtain as a result of their activities and matters of significance four times a year via the Audit Committee. The Audit Committee is assigned to responsible for monitoring the efficiency and adequacy of internal systems on behalf of the Board of Directors and ensuring that audit activities are sustained in a consolidated fashion. Moreover, the Internal Audit staff members have the responsibility of assessing the compliance of the activities conducted by the company within the framework of compliance controls with the legal responsibilities stipulated in the regulations published by the Banking Regulation and Supervision Agency and the Financial Crimes Investigation Board.

Future Outlook “Maintaining Leadership”

Yapı Kredi Faktoring successfully fulfilled one of its most important objectives in 2014 by becoming the sector leader. With its strong financial structure, high level of reliability and vast financing opportunities, Yapı Kredi Faktoring aims to sustain its leader position in the market with its long tradition of customer-oriented service approach. Yapı Kredi Faktoring's objective is to maintain sustainable development by means of widening its customer base as much as possible through the growing cooperation opportunities stemming from Yapı Kredi Bank and UniCredit network.

12

Audits by Regulatory Bodies and Independent Auditor

Yapı Kredi Faktoring is audited by an independent audit firm on a quarterly basis. In 2014, no public audit was made in the Company.

Lawsuits Filed against the Company

There is no lawsuit filed against the Company that may affect its financial status or operations.

Affiliates and Subsidiaries

The Company maintained its shares in Yapı Kredi Emeklilik in 2014.

Shares Amount (TL) Yapı Kredi Emeklilik A.Ş. 0.04% 26,593

26,593

In 2014, Yapı Kredi Faktoring donated TL 200,000 to Vehbi Koç Foundation, and TL 1,860 to Turkish Education Foundation, amounting to TL 201,860 in donations.

Extraordinary Assembly of Shareholders within the Period

Pursuant to Article 8 of the Articles of Association and Article 505 of Turkish Commercial Code, on 4 December 2014, the Extraordinary General Assembly has granted, with majority vote, to the Board of Directors the authority to issue debt instruments up to the maximum limit allowed in relevant regulations in accordance with the provisions of TCC and other regulations, and to determine the terms and conditions for such issuances, for a 15-month period.

13

Yapı Kredi Bank

As the fourth largest private bank in Turkey and one of the most well-established and robust players in its sector, Yapı Kredi

has been sustainably strengthening its positioning since its establishment in 1944 through a customer-centric banking

approach and focus on innovation.

Yapı Kredi serves 10.6 million customers through a widespread and multi-channel service network. The Bank operates from

more than 1,000 branches across Turkey with over 18.500 employees. Yapı Kredi offers its products and services via its

state-of-the-art alternative distribution channels (ADCs), including 3,606 ATMs (5th largest, with 7.1% market share),

innovative online banking (market leader with 13.1%), pioneering mobile banking (market leader with 11.6%), 3 award-

winning call centers, and 500,000 POS terminals. These ADCs handle 83% of total banking transactions.

Yapı Kredi is a fully integrated financial services group supported by domestic and international subsidiaries. Yapı Kredi Bank

renders banking services such as retail banking (including individual banking, SME banking, and card-payment systems),

corporate and commercial banking, and private banking and asset management. The Bank’s operations are supported by

domestic subsidiaries specializing on portfolio management, investment, financial leasing and factoring; and by foreign

banking subsidiaries in Netherlands, Russia and Azerbaijan.

For Yapı Kredi, 2014 was of particular and special importance as it marked the Bank’s 70th anniversary. Over the past 70

years, Yapı Kredi has always broken new ground in line with its “Dedication to Deliver” philosophy and customer-centric

approach.

In 2014, Yapı Kredi total assets increased by 22% annually to TL 195 billion. Yapı Kredi further accelerated its contribution

to the financing of the Turkish economy. Accordingly, total cash and non-cash loan volume increased by 27% reaching TL

174.3 billion, increasing its ranking among private banks in Turkey by 1 notch to 3rd place.

In 2014, total loan book reached TL 125.5 billion with 26% annual growth compared to sector growth of 18%. Accordingly,

the Bank increased its market share in total loans by 70 bps to 10.2%. Remixing of loan book continued towards more

profitable segments including TL company loans (+50% annually), general-purpose loans (+46% annually) and SME loans

(+49% annually). In 2014, Yapı Kredi maintained its leader position in credit cards. During the same period, total deposit

book reached TL 107.6 billion with 22% annual growth, more than twice the sector growth of 10%. This resulted in a gain of

90 bps in total deposit market share to 10.0%.

Yapı Kredi’s successful performance is supported by various subsidiaries, each among the leading companies in their

sectors. Yapı Kredi Leasing maintains its sector leadership with 18.3% market share. Yapı Kredi Asset Management (18.0%

market share in mutual funds) and Yapı Kredi Invest (7.4% market share in equity transaction volume) are the second

largest players in their respective sectors. The Bank maintained its 26-year leadership in credit cards with a market share of

20.8% in outstanding volume, 18.6% in issuing volume, 20.0% in POS volume, and 17.9% in number of cards.

81.80% of Yapı Kredi’s shares are owned by Koç Financial Services, a 50%-50% joint venture between UniCredit Group and

Koç Group. The remaining 18.20% is publicly traded on Borsa Istanbul, and Global Depositary Receipts that represent the

Bank’s shares are quoted on the London Stock Exchange.

Koç Group, founded in 1926, is the largest conglomerate in Turkey with its turnover, exports and 81 thousand employees.

Koç Group’s turnover comprises 8% of Turkey’s total GDP, and it exports comprise 10% of Turkey’s total exports.

UniCredit Group, with roots dating back to 1473, is a systematically important European financial institution based in Italy.

The Group has a widespread network of 9,000 branches and 148 thousand employees in 22 countries.

14

Financial Highlights

Turnover (million USD) 2014 2013 2012

Domestic 7,184 5,443 4,149

International 1,273 2,049 2,001

Export 1,269 2,044 1,994

Import 4 5 7

Total 8,457 7,492 6,150 Balance Sheet & Income Statement Major Accounts (thousand TL)

2014 2013 2012

Factoring receivables (net)

2,774,764

2,149,220 1,650,735

Total assets 2,813,932 2,196,454 1,791,190

Factoring payables 5,155 6,843 10,675

Shareholders' equity 232,986 263,545 219,654

Net profit 44,837 149,335 53,342

Factoring revenue 160,868 119,426 156,492

Interest income 145,046 104,996 137,461

Commission income 15,822 14,430 19,031

Total Assets (thousand TL)

2014 2,813,932

2013 2,196,454

2012 1,791,190

Factoring Receivables, net (thousand TL)

2014 2,774,764 2013 2,149,220 2012 1,650,735 Total Turnover (million USD)

2014 8.457

2013 7,492

2012 6,150

Shareholder's Equity (thousand TL)

2014 232,986

2013 263,545

2012 219,654

Factoring Revenue (thousand TL)

2014 160,868 2013 119,426 2012 156,492

15

Profit Distribution Policy

The Company distributes profits in accordance with the provisions of Turkish Commercial Code, current tax legislation, and other relevant regulations as well as the provisions of its Articles of Incorporation regarding profit distribution. Article 18 of the Articles of Association provides detailed information about the Company's profit distribution policy. In this respect, the General Assembly is authorized to pass resolutions on whether the dividend distribution shall be in cash or in the form of capital increase, whereupon bonus shares will be issued to shareholders or if part of the distribution shall be in cash and part in the form of capital increase, taking into consideration the Company’s growth targets as well as its financing requirements. After setting aside first dividend and first legal reserves from net profits as mandated by Article 18 of the Articles of Association; the General Assembly may make the decision to distribute a portion or the entire remaining amount as secondary dividends or reserve it as extraordinary reserves. Profit distribution policy must comply with the medium and long-term growth targets of the Company. The Board of Directors may review said policy, if necessary, depending on national and international economic conditions.

Risks and Risk Assessment Report of the Board of Directors

As no significant risk was identified during 2014, the Board of Directors has not drawn up a risk assessment report. On the other hand, credit risk, market risk, interest rate risk, liquidity risk, foreign exchange risk and other risk-related matters are discussed in detail in Article 22 under the Notes to the Independent Auditor’s Report.

Miscellaneous

As of 16 February 2015, Carlo Vivaldi has resigned as Board Member and Deputy CEO, and was succeeded by Niccoló Ubertalli, effective from the same date. As of 1 February 2015, Ekin Arca Kırelli was appointed as Assistant General Manager, replacing Zeynep Emecan Kandemir who has resigned as Director of Financial Planning & Financial Affairs as of 31 January 2015. As of 1 February 2015, Pınar Adıyaman Demirtaş has resigned as Director of Internal Audit, and was succeeded by Aba Kantarcı, effective from the same date.

16

Affiliated Company Report, Prepared in Accordance with Article 199 of the Turkish Commercial Code

According to Article 199 of the Turkish Commercial Code No. 6102, which came into effect on July 2012, Yapı Kredi Faktoring A.Ş. Board of Directors is obligated to prepare a report regarding relations with the controlling company and its affiliated companies, within the first three months of the relevant operating year and to indicate the conclusion part of mentioned report in its annual report. Necessary explanations regarding transactions made by Yapı Kredi Faktoring A.Ş. with related parties can be found in Note 21 of the financial report. The report issued by Yapı Kredi Faktoring A.Ş. Board of Directors on 20 February 2015 states that: “It is concluded that, in all transactions made by Yapı Kredi Faktoring A.Ş. with the controlling company and the companies affiliated to the controlling company in 2014, according to situations and conditions known to us and prevailing at the time, the related transaction was made or related measure were taken or refrained from being taken, an appropriate consideration for each transaction has been provided and there is no measure taken or refrained from being taken, which may cause the company to suffer losses and that in this context, there is no transaction or measure which may require balancing."

17

Section II

Financial Statements as of 31 December 2014

and Independent Auditor's Report

20

Table of Contents Page

Balance Sheet ................................................................................................................................................................... 21-22

Off-Balance Sheet Items .................................................................................................................................................. 23

Income Statement .................................................................................................................................................... 24

Shareholders’ Equity Profit and Loss Account Statement ................................................................................................ 25

Changes in Shareholders’ Equity ..................................................................................................................................... 26

Cash Flow Statement .................................................................................................................................................... 27

Profit Distribution Statement ............................................................................................................................................ 28

Explanatory Notes Regarding Financial Statements......................................................................................................... 29-70

Yapı Kredi Faktoring A.Ş. Financial Statements as of 31 December 2014 (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)

21

31 December 2014 31 December 2013

ASSETS Note TL FC Total TL FC Total

I. Cash, cash equivalents and Central Bank 3 - - - - - - II. Fin. Assets at fair value through profit or loss (net) 6 569 - 569 15,861 7,168 23,029 2.1 Financial assets held for trading

- - - - - -

2.2 Fin. Assets designated at fair value through profit/(loss)

- - - - - - 2.3 Derivative financial assets held for trading

569

569 15,861 7,168 23,029

III. Banks

3 3,209 21,802 25,011 604 20,168 20,772 IV. Reverse repurchase receivables

- - - - - - V. Available-for-sale financial assets (net) 7 27 - 27 27 - 27 VI. Factoring receivables 4 2,114,563 649,397 2,763,960 1,618,212 523,598 2,141,810

6.1 Discounted factoring receivables

609,950 218 610,168 598,953 1,921 600,874 6.1.1 Domestic

623,642 - 623,642 607,701 - 607,701

6.1.2 International

- 229 229 - 1,950 1,950 6.1.3 Unearned income (-)

(13,692) (11) (13,703) (8,748) (29) (8,777)

6.2 Other factoring receivables

1,504,613 649,179 2,153,792 1,019,259 521,677 1,540,936 6.2.1 Domestic

1,504,613 - 1,504,613 1,019,259 - 1,019,259

6.2.2 International

- 649,179 649,179 - 521,677 521,677 VII. Financing expenses

- - - - - -

7.1 Consumer loans

- - - - - - 7.2 Credit cards

- - - - - -

7.3 Commercial installment loans

- - - - - - VIII. Leasing

- - - - - -

8.1 Leasing receivables

- - - - - - 8.1.1 Financial leasing receivables

- - - - - -

8.1.2 Business leasing receivables

- - - - - - 8.1.3 Unearned income (-)

- - - - - -

8.2 Investments leasing

- - - - - - 8.3 Advance payments for leasing transactions

- - - - - -

IX. Other receivables

- - - - - - X. Nonperforming loans 4 10,804 - 10,804 7,410 - 7,410

10.1 Nonperforming factoring receivables

78,294 - 78,294 80,419 - 80,419 10.2 Nonperforming financial loans

- - - - - -

10.3 Nonperforming leasing receivables

- - - - - - 10.4 Specific provisions (-)

(67,490) - (67,490) (73,009) - (73,009)

XI. Derivative financial assets for hedging purposes

- - - - - - 11.1 Fair value hedge

- - - - - -

11.2 Cash flow hedge

- - - - - - 11.3 Net international investment hedge

- - - - - - XII. Marketable securities held to maturity (net)

- - - - - -

XIII. Subsidiaries (net)

- - - - - - XIV. Affiliates (net)

- - - - - -

XV. Joint ventures (net)

- - - - - - XVI. Tangible assets (net) 11 522 - 522 585 - 585 XVII. Non-tangible assets (net) 12 74 - 74 64 - 64

17.1 Goodwill

- - - - - - 17.2 Other

74 - 74 64 - 64

XVIII. Prepaid expenses 14 861 - 861 324 - 324 IXX. Current period tax assets 18 1,147 - 1,147 - - - XX. Deferred tax assets 13 10,695 - 10,695 2,433 - 2,433 XXI. Other assets 14 257 5 262 - - -

Sub total

2,142,728 671,204 2,813,932 1,645,520 550,934 2,196,454

XXII. Assets held for sale and relating to discontinued operations - - - - - - 22.1 Held for sale

- - - - - -

22.2 Relating to discounted operations

- - - - - -

2,142,728 671,204 2,813,932 1,645,520 550,934 2,196,454

Yapı Kredi Faktoring A.Ş. Financial Statements as of 31 December 2014 (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)

22

31 December

2014 31 December

2013

Liabilities Note TL FC Total TL FC Total

I. Derivative financial liabilities held for trading 9 21,262 - 21,262 1,336 6 1,342 II. Loans received 5 980,719 1,264,669 2,245,388 473,597 1,436,187 1,909,784 III. Factoring payables

4,040 1,115 5,155 3,346 3,497 6,843

IV. Leasing payables

- - - - - - 4.1 Financial leasing payables

- - - - - -

4.2 Business leasing payables

- - - - - - 4.3 Other

- - - - - -

4.4 Deferred financial leasing expenses ( - )

- - - - - - V. Marketable securities issued (net)

293,280 - 293,280 - - -

5.1 Bills 5 293,280 - 293,280 - - - 5.2 Asset-backed securities

- - - - - -

5.3 Bonds

- - - - - - VI. Other liabilities 8 1,292 243 1,535 589 284 873 VII. Other liabilities

- - - - - -

VIII. Derivative financial liabilities for hedging purposes

- - - - - - 8.1 Fair value hedge

- - - - - -

8.2 Cash flow hedge

- - - - - - 8.3 Net international investment hedge

- - - - - -

IX. Taxes and liabilities due 18 1,311 - 1,311 998 - 998 X. Provision for liabilities and expenses

13,015 - 13,015 12,429 - 12,429

10.1 Provision for reorganization

- - - - - 10.2 Provision for employee benefits 10 1,238 - 1,238 913 - 913

10.3 Other provisions 10 11,777 - 11,777 11,516 - 11,516 XI. Deferred income

- - - - - -

XII. Current period tax liabilities 18 - - - 640 - 640 XIII. Deferred tax liability 13 - - - - - - XIV. Subordinated loans

- - - - - -

Sub total

1,314,919 1,266,027 2,580,946 492,935 1,439,974 1,932,909

XV. Liabilities for property and equipment held for sale and related to discontinued operations (net) - - - - -

15.1 Held for sale

- - - - - - 15.2 Related to discounted operations

- - - - - -

XVI. Shareholders’ equity 15 232,986 - 232,986 263,545 - 263,545 16.1 Paid-in capital

31,917 - 31,917 31,917 - 31,917

16.2 Capital reserve

97,223 - 97,223 - - - 16.2.1 Share premium

- - - - - -

16.2.2 Share cancellation profits

- - - - - - 16.2.3 Other capital reserves

97,223 - 97,223 - - -

16.3 Other comprehensive accumulated income or expenses not to be re-classified in case of profit / loss (10) - (10) 12 - 12

16.4 Other comprehensive accumulated income or expenses to be re-classified in case of profit / loss - - - - - -

16.5 Profit reserves

29,642 - 29,642 51,921 - 51,921 16.5.1 Legal reserves

25,220 - 25,220 17,780 - 17,780

16.5.2 Statutory reserves

- - - - - - 16.5.3 Extraordinary reserves

4,422 - 4,422 34,141 - 34,141

16.5.4 Other profit reserves

- - - - - - 16.6 Profit / loss

74,214 - 74,214 179,695 - 179,695

16.6.1 Profit / loss carried forward

29,377 - 29,377 30,360 - 30,360 16.6.2 Current period net profit / loss

44,837 - 44,837 149,335 - 149,335

Total Liabilities 1,547,905 1,266,027 2,813,932 756,480 1,439,974 2,196,454

Yapı Kredi Faktoring A.Ş. Off-balance sheet items for the accounting period between 1 January and 31 December 2014 (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)

The following notes from a part of these financial statements.

23

Independently Audited


OFF BALANCE SHEET ITEMS

31 December 2014

31 December 2013

Note TL FC TOTAL TL FC TOTAL

I Irrevocable factoring contracts 4 1,039,778 210,878 1,250,656 202,318 178,573 380,891 II Revocable factoring contracts

263,393 81,602 344,995 222,461 71,038 293,499

III Guarantees received

2,236,775 654,080 2,890,855 1,506,431 537,257 2,043,688 IV Guarantees given 23 7,512 - 7,512 7,044 - 7,044 V Commitments

- - - - - -

5.1 Irrevocable commitments

- - - - - - 5.2 Revocable commitments

- - - - - -

5.2.1 Lease commitments

- - - - - - 5.2.1.1 Financial lease commitments

- - - - - -

5.2.1.2 Business lease commitments

- - - - - - 5.2.2 Other revocable commitments

- - - - - -

VI Derivative financial instruments

336,989 784,039 1,121,028 418,458 978,901 1,397,359 6.1 Derivative financial instruments for hedging purposes

-

- - - -

6.1.1 Fair value hedge

- - - - - - 6.1.2 Cash flow hedge

- - - - - -

6.1.3 Net international investment hedge

- - - - - - 6.2 Derivative financial instruments held for trading 23 336,989 784,039 1,121,028 418,458 978,901 1,397,359 6.2.1 Forward trading transactions

- - - - - -

6.2.2 Swap transactions

336,989 784,039 1,121,028 418,458 978,901 1,397,359 6.2.3 Options transactions

- - - - - -

6.2.4 Futures transactions

- - - - - - 6.5.5 Other

- - - - - -

VII Items held in custody

1,101,865 984,008 2,085,873 952,130 909,526 1,861,656

TOTAL OFF-BALANCE SHEET ACCOUNT

4,986,312 2,714,607 7,700,919 3,308,842 2,675,295 5,984,137

Yapı Kredi Faktoring A.Ş. Income Statement for the accounting period between 1 January and 31 December 2014 (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)

The following notes constitute a part of the accompanying financial statements.

24

INCOME AND EXPENSE ITEMS Independently Audited Independently Audited Note 31 December 2014 31 December 2013

I. INCOME FROM OPERATING ACTIVITIES

160,868 119,426

FACTORING INCOME 16 160,868 119,426

1.1 Interest Received From Factoring Receivables

145,046 104,996 1.1.1 Discounts

56,362 32,934

1.1.2 Other

88,684 72,062 1.2 Factoring Fees and Commissions 15,822 14,430 1.2.1 Discounts

5,088 4,058

1.2.2 Other

10,734 10,372

INCOME FROM FINANCIAL LOANS - -

1.3 Interest earned on financial loans

- - 1.4 Financial loan fees and commissions - -

LEASING INCOME

- -

1.5 Financial leasing income

- - 1.6 Business leasing income

- -

1.7 Leasing fees and commissions - - II. FINANCIAL EXPENSES (-)

57,502 37,134

2.1 Interest on Funds Borrowed

48,378 34,148 2.2 Interest on Factoring Payables - - 2.3 Financial leasing expenses

- -

2.4 Interest on Securities Issued 6,810 - 2.5 Other Interest Expenses

- 2

2.6 Fees and commissions paid

2,314 2,984 III. GROSS P/L (I+II)

103,366 82,292

IV. OPERATING EXPENSES (-) 17 20,098 16,393 4.1 Personnel expenses

13,891 12,151

4.2 Provision for termination benefits

36 - 4.3 Research & development expenses

- -

4.4 General administrative expenses

5,909 4,044 4.5 Other

262 198

V. GROSS OPERATING P/L (III+IV)

83,268 65,899 VI. INCOME FROM OTHER OPERATING ACTIVITIES

273,795 296,472

6.1 Interest received from banks

5,556 5,053 6.2 Interest earned on reverse repurchase transactions

- -

6.3 Interest earned on marketable securities

- - 6.3.1 Interest earned on financial assets held for trading

- -

6.3.2 Financial assets designated at fair value through profit/(loss) - - 6.3.3 Income from available-for-sale financial assets

- 127,883

6.3.4 Income from investments held to maturity - - 6.4 Dividends 21 29 - 6.5 Profit from capital market transactions

- 20,253

6.5.1 Profit from derivative financial transactions

- 20,253 6.5.2 Other

- -

6.6 Foreign exchange gains

264,931 141,695 6.7 Other 19 3,279 1,588 VII. SPECIFIC PROVISIONS FOR NON-PERFORMING LOANS (-) 4 18,068 23,089 VIII. OTHER OPERATING EXPENSES (-)

284,345 178,293

8.1 Impaired marketable securities

- - 8.1.1 Impaired financial assets designated at fair value through profit/(loss)

- -

8.1.2 Loss from available-for-sale financial assets

- - 8.1.3 Loss from investments held to maturity - - 8.2 Impaired non-current assets

- -

8.2.1 Impaired non-current tangible assets

- - 8.2.2 Impaired non-current assets held for sale and discontinued operations

- -

8.2.3 Impaired goodwill

- - 8.2.4 Other impaired non-current assets - - 8.2.5 Impaired investments in affiliates, subsidiaries and joint-ventures

- -

8.3 Loss from derivative financial transactions

42,381 928 8.4 Foreign exchange loss

241,439 176,775

8.5 Other 19 525 590 IX. NET OPERATING PROFIT/LOSS (V+…+VIII)

54,650 160,989

X. SURPLUS AMOUNT RECOGNIZED AS INCOME AFTER MERGER

- - XI. NET MONETARY POSITION PROFIT/LOSS

- -

XII. BEFORE-TAX PROFIT/LOSS FROM CONTINUING OPERATIONS (IX+X+XI) 54,650 160,989 XIII. PROVISION FOR TAX ON CONTINUING OPERATIONS (±) 18 9,813 11,654 13.1 Provision for current taxes

18,075 10,759

13.2 Expense effect of deferred taxes (+)

- 895 13.3 Income effect of deferred taxes (-)

(8,262) -

XIV. NET ANNUAL PROFIT/LOSS FROM CONTINUING OPERATIONS (XII±XIII) 44,837 149,335 XV. INCOME FROM DISCONTINUED OPERATIONS - - 15.1 Income from available-for-sale financial assets - - 15.2 Profit on affiliates, subsidiaries and joint-ventures sold - - 15.3 Other income from discontinued operations

- -

XVI. LOSSES FROM DISCONTINUED OPERATIONS (-) - - 16.1 Expenses for available-for-sale financial assets - - 16.2 Loss on affiliates, subsidiaries and joint-ventures sold - - 16.3 Expenses for other discontinued operations

- -

XVII. BEFORE-TAX PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XV-XVI) - - XVIII. PROVISION FOR TAX ON DISCONTINUED OPERATIONS (±) - - 18.1 Provision for current taxes

- -

18.2 Expense effect of deferred taxes (+)

- - 18.3 Income effect of deferred taxes (-)

- -

XIX. NET ANNUAL PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XVII±XVIII) - - XX. NET ANNUAL PROFIT/LOSS (XIV+XIX)

44,837 149,335

EARNİNGS PER SHARE

1.40 4.68

Earnings per share from continuing operations 20 1.40 4.68

Earnings per share from discontinued operations - -

EARNINGS PER DILUTED SHARE

- -

Earnings per share from continuing operations - -

Earnings per share from discontinued operations -

Yapı Kredi Faktoring A.Ş. Statement of income and expenses recognized in shareholders’ equity for the accounting period between 1 January and 31 December 2014 (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)


25


31 December

2014 31 December 2013

I. PROFIT/LOSS OF THE PERIOD 44,837 149,335 II. OTHER COMPREHENSIVE INCOME (10) 12 2.1 Not to be re-classified on Profit/Loss (10) 12 2.1.1 Tangible assets revaluation adjustments - - 2.1.2 Intangible assets revaluation adjustments - - 2.1.3 Defined Benefit Plans Reevaluation Gains / Losses (10) 12

2.1.4 Other Comprehensive Income Components that will not be Reclassified As Other Profit Or Loss - -

2.1.5 Taxes regarding other comprehensive income that will not be reclassified in profit or loss - -

2.1.5.1 Current Tax Expense / Income - - 2.1.5.2 Deferred Tax Expense / Income - - 2.2 To be reclassified on profit or loss - - 2.2.1 Foreign exchange conversion differences - -

2.2.2 Revaluation and/or reclassification income/expenses of Available-for-sale financial assets - -

2.2.3 Cash flow risk protection income/expenses - - 2.2.4 Investment risk protection income/expenses regarding foreign businesses - - 2.2.5 Other Comprehensive Income Items that would be reclassified in profit or loss - - 2.2.6 Taxes regarding other comprehensive income that will be reclassified in profit or loss - - 2.2.6.1 Current Tax Expense / Income - - 2.2.6.2 Deferred Tax Expense / Income - -

III. TOTAL COMPREHENSIVE INCOME (I+II) 44,827 149,347

Yapı Kredi Faktoring A.Ş. Changes in equity for the accounting period between 1 January and 31 December 2014 (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)


26

CHANGES IN EQUITY

Other comprehensive accumulated income or

expenses

Other comprehensive

accumulated income

or expenses

Not to be re-classified on

Profit/Loss To be reclassified on

profit or loss

Paid-in Capital

Capital Reserves

Share premium

Profit from

shares cancelled

Other capital

reserve

1

2

3 4

5

6

Profit Reserves

Legal Reserves

Statutory Reserves

Extraordinary Reserves

Other Profit Reserves

Current Period

Income/ (Loss)

Previous Period

Income/ (Loss)

Current Period Net Income/

(Loss)

Total Shareholders’

Equity

PREVIOUS PERIOD

(31/12/2013)

I. Opening Balance 16,802 12,576 - - - - - - 107,209 - - 17,780 - 11,945 53,342 219,654

II. Revisions according to TAS 8

2.1 Effect of corrections

2.2 Effect of changes in the Accounting Policy

III. New balance (I+II) 16,802 12,576 107,209 17,780 11,945 53,342 219,654

IV. Total comprehensive income 12 12

V. Capital increase with cash

VI. Capital increase with internal resources 15,115 (12,576) (2,539)

VII. Capital reserves due to inflation accounting

VIII. Convertible bonds

IX. Subordinated loans

X. Increase/decrease due to other changes (107,209) (107,209)

XI. Current net profit / loss 149,335 149,335

XII. Profit distribution 24,735

12.1 Dividend

12.2 Amount transferred to reserves 24,735 (24,735)

12.3 Other 53,342 (53,342)

Previous year adjustment effect (*) 1,753 1,753

Closing Balance (III+IV+…...+XI+XII) 31,917 - 12 - 17,780 34,141 30,360 149,335 263,545

CURRENT PERIOD

(31/12/2014)

I. Previous Closing Balance 31,917 - - - - - 12 - - - - - 17,780 - 34,141 - - 30,360 149,335 263,545

II. Revisions according to TAS 8 - - - - - - - - - - - - - - - - - - - -

2.1 Effect of corrections -

2.2 Effect of changes in the accounting policy -

III. New balance (i+ii) 31,917 - - - - - 12 - - - - - 17,780 - 34,141 - - 30,360 149,335 263,545

IV. Total comprehensive income (22) (22)

V. Capital increase with cash -

VI. Capital increase with internal resources -

VII. Capital reserves due to inflation accounting -

VIII. Convertible bonds -

IX. Subordinated loans -

X. Increase/decrease due to other changes 626 626

XI. Current net profit / loss 44,837 44,837

XII. Profit distribution - 97,223 - - - - - - - - - - 7,440 - (29,719) - - (1,609) (149,335) (76,000)

12.1 Dividend (35,000) (41,000) - (76,000)

12.2 Amount transferred to reserves 97,223 7,440 5,281 - (109,944) - -

12.3 Other

149,335 (149,335) -

Closing Balance (III+IV+…...+XI+XII) 31,917 97,223 - - - - (10) - - - - - 25,220 - 4,422 - - 29,377 44,837 232,986

(*) Differences in the previous periods’ balance, arising from the readjusted factoring receivables, have been carried back to profits from previous periods. (1) Accumulated revaluation profit/loss from tangible assets, (2) Accumulated revaluation profit/loss from defined benefit plans, (3) Other (Other comprehensive income and expenses from equity method investments not to be reclassified on profit/loss, and other accumulated comprehensive income and expenses not to be reclassified on profit/loss), (4) Foreign exchange conversion differences (5) Revaluation and/or reclassification differences of available-for-sale financial assets, (6) Other (Profit/loss from cash flow hedges, other comprehensive income and expenses from equity method investments to be reclassified on profit/loss, and other accumulated comprehensive income and expenses to be reclassified on profit/loss).

Yapı Kredi Faktoring A.Ş. Cash Flow Statement for the accounting period between 1 January and 31 December 2014 (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)


27

Independently Independently

audited audited

Note


A. Cash Flow from Operating Activities 1.1 Operating Profit before Changes in Operating Assets and Liabilities 72,486 49,615

1.1.1 Received Interests/Leasing Income

150,602 110,049 1.1.2 Paid Interests/Leasing Expenses

(55,188) (34,150)

1.1.3 Leasing Expenses

- - 1.1.4 Dividends Received

29 -

1.1.5 Fees and Commissions Received 16 15,822 14,430 1.1.6 Other Income

- -

1.1.7 Collections from Written-off Non-Performing Receivables 4 1,103 1,140 1.1.8 Cash Payments to Staff and Service Providers (13,927) (12,151) 1.1.9 Taxes Paid 18 (19,222) (10,119) 1.1.10 Other

(6,733) (19,584)

1.2 Change in Operating Assets and Liabilities (291,452) (138,606)

1.2.1 Net Decrease (Increase) in Factoring Receivables

(625,544) (498,485) 1.2.1 Net Decrease (Increase) in Financial Loans

- -

1.2.1 Net Decrease (Increase) in Leasing Receivables

- - 1.2.2 Net Decrease (Increase) in Other Assets

(799) 144

1.2.3 Net Decrease (Increase) in Factoring Payables

(1,688) (3,832) 1.2.3 Net Decrease (Increase) in Leasing Payables

- -

1.2.4 Net Decrease (Increase) in Loans Received

335,604 362,721 1.2.5 Net Decrease (Increase) in Payables Due

- -

1.2.6 Net Decrease (Increase) in Other Payables

975 846

I. Net Cash Flow from Operating Activities (218,966) (88,991)

B. Cash Flow from Investing Activities

-

2.1 Acquisition of Affiliates, Subsidiaries and Joint Ventures - - 2.2 Proceeds from sale of affiliates, subsidiaries and joint-ventures - - 2.3 Purchase of tangible and intangible assets 11.12 (208) (265) 2.4 Proceeds from sale of tangible and intangible assets 11.12 - 165 2.5 Purchase of available-for-sale financial assets

- -

2.6 Proceeds from sale of available-for-sale financial assets

- 107,552 2.7 Purchase of held-to-maturity investments

- -

2.8 Proceeds from sale of held-to-maturity investments

- - 2.9 Other

- -

II. Net cash flow from investing activities (208) 107,452

C. Cash flow from financing activities

224,000 -

3.1 Cash obtained from funds borrowed and securities issued 300,000 - 3.2 Funds repaid and stocks and bonds repurchased - - 3.3 Capital market instruments issued

- -

3.4 Dividend payments

(76,000) -

3.5 Financial leasing payments

- - 3.6 Other

- -

III. Net cash flow from financing activities

224,000 -

IV. Effects of exchange rate changes on cash and cash equivalents (587) (185)

V. Net decrease (increase) in cash and cash equivalents 4,239 18,276

VI. Cash and cash equivalents at beginning of year 3 20,772 2,496

VII. Cash and cash equivalents at end of year 25,011 20,772

Yapı Kredi Faktoring A.Ş. Profit Distribution Statement for the accounting period between 1 January and 31 December 2014 (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)


28

ONE THOUSAND TL

Current period Previous period

(31/12/2014) (*) (31/12/2013)

I. Distribution of annual profit 1.1 Profit 54,650 160,989

1.2 Taxes and statutory liabilities payable (-) (9,813) (11,654) 1.2.1 Corporate income tax (income tax) (18,075) (10,759) 1.2.2 Income tax withheld - - 1.2.3 Other taxes and statutory liabilities (***) 8,262 (895)

A. Net profit (1.1 - 1.2) 44,837 149,335

1.3 Accumulated loss (-) - - 1.4 First legal reserve (-) - - 1.5 Other statutory reserves (-)(**) - (97,223)

B Distributable Net Profit of the Period [(a-(1.3+1.4+1.5)] 44,837 52,112

1.6 First dividend to shareholders (-) - - 1.6.1 To owners of ordinary shares - (1,596) 1.6.2 To owners of privileged shares - - 1.6.3 To owners of privileged shares - - 1.6.4 To profit sharing bonds - - 1.6.5 To holders of profit and loss sharing certificates - - 1.7 Dividend to employees (-) - - 1.8 Dividends to board of directors (-) - - 1.9 Second dividend to shareholders (-) - - 1.9.1 To owners of ordinary shares - (39,404) 1.9.2 To owners of privileged shares - - 1.9.3 To owners of privileged shares - - 1.9.4 To profit sharing bonds - - 1.9.5 To holders of profit and loss sharing certificates - - 1.10 Second legal reserve (-) - (3,940) 1.11 Statutory reserves (-) - - 1.12 Extraordinary reserves - 7,172 1.13 Other reserves - - 1.14 Special funds - -

- -

II. Distribution of reserves

2.1 Appropriated reserves - - 2.2 Second legal reserves (-) - (3,500) 2.3 Dividends to shareholders (-) - - 2.3.1 To owners of ordinary shares - (35,000) 2.3.2 To owners of privileged shares - - 2.3.3 To owners of privileged shares - - 2.3.4 To profit sharing bonds - - 2.3.5 To holders of profit and loss sharing certificates - - 2.4 Dividends to employees (-) - - 2.5 Dividends to board of directors (-) - -

III. Profit per Share

3.1 To owners of ordinary shares (TL) - 4.68 3.2 To owners of ordinary shares (%) - - 3.3 To owners of privileged shares (TL) - - 3.4 To owners of privileged shares (%) - -

IV. Dividend per share

4.1 To owners of ordinary shares (TL) - - 4.2 To owners of ordinary shares (%) - - 4.3 To owners of privileged shares (TL) - - 4.4 To owners of privileged shares (%)

(*) Since the profit distribution proposal had not been prepared by the Board of Directors, only the amount of profit available for distribution is recognized in 2014 profit distribution statements.

(**) As per the General Assembly resolution, the tax-exempt amount (75%) of the gains from the sale of Allianz Sigorta A.Ş. shares on 12 July 2013, amounting to TL 97,223 according the profit distribution statement for 2013, was classified under capital reserves account for 2014.

(***) The BRSA has expressed its opinion that, income generated from deferred tax assets may not be qualified as cash or internal resource, and as such, the income generated in this manner should not be classified as part of the current term income subject to dividend distribution and capital increase. As of 31 December 2014, the Company

has deferred tax income amounting to TL 8,262 (31 December 2013: None).

Yapı Kredi Faktoring A.Ş. 31 Aralık 2014 tarihi itibariyle finansal tablolara ilişkin açıklayıcı dipnotlar (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)

29

1. Company Organization and the Field of Activity

Yapı Kredi Faktoring A.Ş. (“the Company”) was established in Istanbul on 25 March 1999 under the title of Koç Faktoring Hizmetleri A.Ş. The Company is a member of Koç Finansal Hizmetler A.Ş. (“KFH”), which was established on 16 March 2006. KFH signed a strategic partnership agreement with UniCredito Italiano S.p.A. (“UCI”) under a resolution adopted by the Koç Group on 12 October 2002. On 31 October 2007, KFH transferred its shares in the Company over to Yapı ve Kredi Bankası A.Ş., who became the major shareholder of the Company with 99.95% share. The Company offers factoring services in Turkey and abroad.

A member of Factors Chain International (“FCI”), the Company also operates in both domestic and international markets (exports and imports) under Law No. 6361 on Financial Leasing, Factoring and Financing Companies, enacted on 13 December 2013.

Koç Faktoring Hizmetleri A.Ş. merged with Yapı Kredi Faktoring A.Ş. on 29 December 2006 by taking over the Company’s entire assets and liabilities without liquidation, and changed its name to Yapı Kredi Faktoring A.Ş.

The Company’s main office is located at Büyükdere Caddesi Yapı Kredi Plaza A Blok Kat: 14 Levent, Istanbul - Turkey. The company employs 114 personnel as of 31 December 2014 (2013: 91). The Company is engaged primarily in factoring services in a single geographic area: Turkey. On 30 January 2015, the Board of Directors approved the disclosure of the Company’s financial statements, which may be amended by General Assembly. 2. Basis of presentation of financial statements 2.1 Basis of presentation

2.1.1 Accounting standards

The Company financial statements are prepared in thousand Turkish Lira (TL), within the framework of the "Communiqué on Uniform Chart of Accounts to be Implemented by Financial Leasing, Factoring and Financing Companies and Its Explanation as well as the Form and Scope of Financial Statements to Be Announced to Public" ("Communiqué on Financial Statements") issued by the Banking Regulation and Supervision Agency ("BRSA") and published on the Official Gazette No. 28861 of 24 December 2013, and in accordance with Turkish Accounting/Financial Reporting Standards (“TAS/TFRS”) issued by the Public Oversight Accounting and Auditing Standards Authority (“POA”). Financial statements of Financial Leasing, Factoring and Financial Companies are prepared and publicly disclosed in accordance with BRSA guidelines. The financial statements have been prepared on the historical cost basis except for derivative financial instruments presented at their fair values.

Yapı Kredi Faktoring A.Ş. Notes to Financial Statements as of 31 December 2014 (continued) (Figures expressed in thousand Turkish Lira (TL) unless otherwise stated)

30

2. Basis of presentation of financial statements (continued) 2.1.2 Functional currency The accompanying financial statements are prepared in thousand TL, in accordance with the historical cost basis, reflecting the changes in general purchasing power of TL until 31 December 2004), except for financial assets and liabilities at fair value. The accompanying financial statements are presented in the functional currency circulated in the economic environment where the Company carries on business. The Company’s financial position and business results are presented in Turkish Lira, the currency designated by the Company for its financial statements. 2.1.3 Offsetting Financial assets and liabilities are offset and the net amount is reported in the balance sheet when the Company has a legally enforceable right to offset the recognized amounts and there is an intention to collect/pay related financial assets and liabilities on a net basis, or to realize the asset and settle the liability simultaneously. 2.1.4 Going concern The Company has prepared the accompanying financial statements on a going concern basis. 2.2. Changes in accounting policies 2.2.1 Changes in accounting policies Significant changes in accounting policies are applied retrospectively or prospectively, depending on the newly applied accounting standard. No significant changes occurred in the Company’s accounting policy during the fiscal year. 2.2.2 Changes and errors in accounting estimates Changes in accounting estimates that relate to only one period are applied in the current period, whereas changes that relate to future periods are applied both in the current and following periods prospectively No significant changes occurred in the Company’s accounting estimates during the fiscal year. Significant errors in accounting are corrected retrospectively and financial statements for the relevant periods are restated. 2.2.3 Comparative information and adjustments in financial statements for the previous accounting

period

The Company’s financial statements are prepared comparatively with the previous fiscal period, in order to determine the financial situation and performance trends. As the presentation or classification of the financial statement items change, financial statements for the previous year are reclassified accordingly to explain the changes and ensure comparability. 2.2.4 Amendments and interpretations Accounting policies serving as a basis for the financial statements for the fiscal year ending on 31 December 2014 are consistent with those used in the previous year, with the exception of new and amended TAS/TFRS standards and interpretations effective as of 01 January 2014, which are listed below. The effects of these standards and interpretations on the Company’s financial position and performance are discussed in their relevant sections.


31

2. Basis of presentation of financial statements (continued) New standards, amendments and interpretations effective as of 01 January 2014:

TAS 32 Financial Instruments: Presentation – Offsetting the Financial Assets and Liabilities (amendment)

The amendment clarifies the meaning of the connotation; “having a current legal right regarding the offsetting of the accounted amounts” and application area of TAS 32 offsetting principles regarding no concurring and gross settlement of the account systems (such as clearing offices). The standard did not have any significant impact on the Company’s financial position or performance. TFRS Interpretation 21, Levies

The interpretation clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability can only be accrued progressively if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, no liability is recognized before the specified minimum threshold is reached. The interpretation is not applicable for the Company and did not have any impact on its financial position or performance. TAS 36 Impairment of Assets - Recoverable amount disclosures for non-financial assets (Amended)

As a consequential amendment to TFRS 13 Fair Value Measurement, some of the disclosure requirements in TAS 36 Impairment of Assets regarding measurement of the recoverable amount of impaired assets has been modified. The amendments required additional disclosures about the measurement of impaired assets (or a group of assets) with a recoverable amount based on fair value minus their costs of disposal. The standard did not have any significant impact on the Company’s financial position or performance. TAS 39 Financial Instruments: Accounting and Measurement – Novation of derivatives and continuation of hedge accounting (Amendment)

The amendment provides an exception to the requirement for the discontinuation of hedge accounting in circumstances when a hedging instrument is required to be novated to a central counterparty as a result of laws or regulations. The standard did not have any impact on the Company’s financial position or performance. TFRS 10 Consolidated Financial Statements (amendment)

The TFRS 10 standard is amended to bring an exception regarding keeping the companies that fits into the definition of an investment company exempted from consolidation provisions. With this exception for the consolidation provisions, the investment companies are required to account their joint ventures by the fair value within the framework of TFRS 9 Financial Instruments standards. The amendment did not have any impact on the Company’s financial position or performance.


32

2. Basis of presentation of financial statements (continued)

ii) Standards issued but not in effect or early adopted

New standards, interpretations and amendments that have been declared as of the approval date of the financial statements, but not implemented or adopted early by the Company for the current reporting period are as follows. Unless otherwise indicated, the Company will make necessary amendments in its financial statements and disclosures after new standards and interpretations take effect. TFRS 9 Financial Instruments – Classification and Measurement

As amended in December 2012, the new standard is effective for accounting periods beginning 1 January 2015 onwards. The first phase of TFRS 9 introduces new provisions for classifying and measuring financial instruments. The amendments made to TFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair value option liabilities and requires that the change in fair value of a fair value option financial liability attributable to credit risk is presented under other comprehensive income. The Company will evaluate the impact of the standard on its financial position and performance as the other stages of the standard are approved by the POA. TAS 19 Defined Benefit Plans: Employee Contributions (Amendment)

TAS 19 mandates that an entity has to consider contributions from employees or third parties when accounting for defined benefit plans. The amendments clarifies that, if the amount of the contributions is independent of the number of years of service, contributions may be recognized as a reduction in the service cost in the period in which the related service is rendered, instead of attributing the contributions to the periods of service. The amendments will be applied retrospectively to accounting periods beginning 1 July 2014 onwards. The amendments will not have any impact on the Company’s financial position and performance. TFRS 11 – Accounting for Acquisitions of Interests in Joint Operations (Amendments)

TFRS 11 has been amended to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. The amendment requires that the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in TFRS 3, is required to apply all of the principles on business combinations accounting in TFRS 3 and other TFRSs with the exception of those principles that conflict with the guidance in TFRS 11. Additionally, the acquirer has to disclose information as required by TFRS 3 and other TFRSs regarding business combinations. The amendments will be applied prospectively to accounting periods beginning 1 January 2016 onwards. Early adoption is permitted. The amendments will not have any impact on the Company’s financial position and performance.


33

2. Basis of presentation of financial statements (continued) TAS 16 and TAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments

to IAS 16 and IAS 38)

The amendments to TAS 16 and TAS 38 have prohibited the use of revenue-based depreciation for tangible assets, and significantly limited the use of revenue-based amortisation for intangible assets The amendments will be applied prospectively to accounting periods beginning 1 January 2016 onwards. Early adoption is permitted. The mentioned amendment will not have any impact on the Company’s financial position and performance. TAS 16 Tangible Assets and IAS 41 Agriculture: Bearer Plants (Amendments)

TAS 16 has been amended regarding the accounting of "bearer plants". The amendments provide the definition for bearer plant as a living plant that is used in the production or supply of agricultural produce after maturation, is expected to bear produce for more than one period, and is kept by the enterprise throughout its productive life. However, as mature bearer plants no longer undergo significant biological transformation and are used solely to grow produce, the amendments bring bearer plants from the scope of TAS 41 into the scope of TAS 16, and therefore enable entities to measure them at cost subsequent to initial recognition or at revaluation. The amendments also clarify that produce growing on bearer plants will be measured using the fair value less costs to sell approach prescribed by TAS 41. The amendments will be applied prospectively to accounting periods beginning 1 January 2016 onwards. Early adoption is permitted. The amendments are not applicable for the Company and will not have any impact on its financial position or performance. Annual Improvements to TAS/TFRS

In September 2014, POA issued the following amendments to the standards in relation to “Annual Improvements - 2010–2012 Period” and “Annual Improvements - 2011–2013 Period". The amendments are effective for accounting periods beginning 1 July 2014 onwards. Annual improvements - 2010–2012 Period

TFRS 2 Share-based Payment Definitions relating to vesting conditions have changed and performance condition and service condition are defined in order to clarify various issues. The change will be applied prospectively. TFRS 3 Business Combinations

Contingent consideration in a business acquisition that is not classified as equity is subsequently measured at fair value through profit or loss, regardless of whether it falls under the scope of TFRS 9 Financial Instruments or not. The change will be applied prospectively for the business mergers. TFRS 8 Operational Segments The amendments are; i) Operating segments may be combined/aggregated if they are consistent with the core principles of the standard. ii) The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker. The amendments will be applied retrospectively.


34

2. Basis of presentation of financial statements (continued) TAS 16 Tangible Assets and TAS 38 Intangible Assets

The amendments to TAS 16.35(a) and TAS 38.80(a) clarify that revaluation can be performed as follows: i) Adjust the gross carrying amount of the asset to market value or ii) determine the market value of the carrying amount and adjust the gross carrying amount proportionately so that the resulting carrying amount equals the market value. The amendment will be applied retrospectively. TAS 24 Related Party Disclosures The amendment clarifies that a management entity – an entity that provides key management personnel services – is a related party subject to the related party disclosures. The amendment will be applied retrospectively. Annual Improvements - 2011-2013 Period

TFRS 3 Business Combinations The amendment clarifies that; i) Joint arrangements, as well as joint ventures, are outside the scope of TFRS 3 ii) The scope exception applies only to the accounting in the financial statements of the joint arrangement itself. The amendment will be applied prospectively. TFRS 13 Basis for Conclusions on Fair Value Measurement

The amendment clarifies that portfolio exception in TFRS 13 is applicable not only to financial assets and financial liabilities but to all other contracts under the scope of TAS 39. The amendment will be applied prospectively. TAS 40 Investment Property The amendment clarifies the interrelationship of TFRS 3 and TAS 40 when classifying property as investment property or owner-occupied property. The amendment will be applied prospectively. The amendments are not expected to have any material impact on the Company’s financial position or performance. New standards, amendments and interpretations that are issued by the International Accounting

Standards Board (IASB), but not issued by POA

The following standards, interpretations and amendments to existing IFRS standards are issued by the IASB but not yet effective up to the date of issuance of the consolidated financial statements. However, these standards, interpretations and amendments to existing IFRS standards are not yet adopted/issued by the POA, thus they do not constitute part of TFRS. The Company will make the necessary changes to its financial statements after the new standards and interpretations are issued and become effective under TFRS.


35

2. Basis of presentation of financial statements (continued) Annual Improvements - 2010–2012 Cycle

TFRS 13 Fair Value Measurement As it is explained in the Justifications of the Decision, short term commercial amounts receivable and payables, that the amount of interest had not been indicated; may be denoted over its invoice amount, in situations where the discount effect is unimportant. The amendments will be applied immediately. Annual Improvements - 2011-2013 Cycle

IFRS 15 - Revenue from Contracts with Customers

In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. The new five-step model in the standard provides the recognition and measurement requirements of revenue. The standard applies to revenue from contracts with customers and provides a model for the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., the sale of tangible assets). IFRS 15 is effective for accounting periods beginning 1 January 2017 onwards. Early adoption is permitted. Entities will transition to the new standard following either a full retrospective approach or a modified retrospective approach. The modified retrospective approach would allow the standard to be applied beginning with the current period, with no restatement of the comparative periods, but additional disclosures are required. The impact of the amendment on the financial position or performance of the Company is under evaluation. IFRS 9 Financial Instruments - Final Standard (2014)

In July 2014 the IASB published the final version of IFRS 9 Financial Instruments. The final version of IFRS 9 brings together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting. In addition, IFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value. The standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment. IFRS 9 is effective for accounting periods beginning 1 January 2018 onwards; however, early adoption is permitted. In addition, the own credit changes can be early applied in isolation without otherwise changing the accounting for financial instruments. The impact of the standard on the financial position or performance of the Company is under evaluation. IAS 27 - Equity Method in Separate Financial Statements (Amendments to IAS 27(

In August 2014, IASB issued an amendment to lAS 27 to restore the option to use the equity method to account for investments in subsidiaries and associates in an entity’s separate financial statements. Therefore, an entity must account for these investments either: • At cost, • In accordance with IFRS 9 (or lAS 39), or • Using the equity method


36


The entity must apply the same accounting for each category of investments. The amendment is effective for accounting periods beginning 1 January 2016 onwards, and must be applied retrospectively. Early application is permitted and must be disclosed. The impact of the amendment on the financial position and performance of the Company is under evaluation. IFRS Annual Improvements, 2012-2014 Cycle

In September 2014, IASB issued their annual cycle of improvements to IFRSs, Annual Improvements to IFRSs 2012-2014 Cycle. The document sets out five amendments to four standards, excluding those standards that are consequentially amended, and the related Basis for Conclusions. The standards affected and the subjects of the amendments are: - IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – changes in methods of disposal

- IFRS 7 Financial Instruments: Disclosures – servicing contracts; applicability of the amendments to IFRS 7 to condensed interim financial statements

- lAS 19 Employee Benefits – regional market issue regarding discount rate

- lAS 34 Interim Financial Reporting – disclosure of information "elsewhere in the interim financial report"

The amendment is effective for accounting periods beginning 1 January 2016 onwards, with earlier adoption permitted. The impact of the amendments on the financial position or performance of the Company is under evaluation. IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments)

In September 2014, IASB issued amendments to IFRS 10 and IAS 28, to address the acknowledged inconsistency between the requirements in IFRS 10 and lAS 28 in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture, to clarify that an investor recognizes a full gain or loss on the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture. The gain or loss resulting from the re-measurement at fair value of an investment retained in a former subsidiary should be recognized only to the extent of unrelated investors’ interests in that former subsidiary. The amendment is effective for accounting periods beginning 1 January 2016 onwards, and must be applied prospectively. Early adoption is permitted. The amendments are not applicable for the Company and will not have any impact on its financial position or performance. IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10 and lAS 28)

In December 2014, IASB issued amendments to IFRS 10, IFRS 12 and lAS 28, to address several issues that have arisen in applying the investment entities exception under IFRS 10 Consolidated Financial Statements. The amendments are effective for accounting periods beginning 1 January 2016 onwards. Early adoption is permitted. The amendments are not applicable for the Company and will not have any impact on its financial position or performance.


37

2. Basis of presentation of financial statements (continued) IAS 1: Disclosure Initiative (Amendments to lAS 1)

In December 2014, IASB issued amendments to lAS 1. Those amendments include narrow-focus improvements in the following five areas: Materiality, disaggregation and subtotals, notes structure, disclosure of accounting policies, presentation of items of other comprehensive income arising from equity accounted investments The amendments are effective for accounting periods beginning 1 January 2016 onwards. Early adoption is permitted. The amendments are not expected to have any significant impact on the Company’s financial position or performance. 2.3 Summary of significant accounting policies.

The significant accounting policies applied in the preparation of the financial statements are summarized below. Cash and cash equivalents

Cash and cash equivalents are reflected with their cost values in the balance sheet. Cash and cash equivalents comprise cash in hand, cash deposits with banks, short- term highly liquid investments readily convertible to cash, highly liquid investments with a low risk of value change, and having maturities of up to 3 months (Footnote 3) Related parties

For the purposes of the financial statements, the Company’s shareholders, Koç Holding A.Ş. and UniCredit (“UCI”) group companies with indirect financial interest in the Company, and their respective board members and executive managers are defined as “related parties” (Note 21). A related party is a person or entity that is related to the entity that is preparing its financial statements (referred to as the 'reporting entity') (a) A person or a close member of that person's family is related to a reporting entity if that person:

(i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.

(b) An entity is related to a reporting entity if any of the following conditions applies: (i) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and

fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a

group of which the other entity is a member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment defined benefit plan for the benefit of employees of either the reporting entity or

an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers

are also related to the reporting entity. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management

personnel of the entity (or of a parent of the entity). 2. Basis of presentation of financial statements (continued)

A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

Factoring receivables and impairment

Factoring receivables represent financial assets created through financing of debtors. Factoring receivables are first recognized at their acquisition cost and then valued at their costs discounted using the effective interest rate method. The factoring receivables provision for the impairment of investments in factoring is established based on a credit review of the receivables portfolio. The Company has set this provision in accordance with the BRSA's "Communiqué on the Procedures Regarding the Provisions to Be Provided for the Loans of Leasing, Factoring and Financing Companies” (“Provisions Communiqué”) which was published in the Official Gazette No. 28851 of 24 December 2013. According to the Communiqué, specific provisions are set in following proportions: minimum


38

20% for collateralized factoring receivables overdue for 90 to 180 days, minimum 50% for collateralized factoring receivables overdue for 180 to 360 days, and 100% for collateralized factoring receivables overdue for more than 1 year. By taking into account all data concerning the credibility level of debtors and the principles of reliability and prudence provided under the Communiqué on the Conceptual Framework Regarding the Preparation and Presentation of Financial Statements, promulgated by the Turkish Accounting Standards Board in Official Gazette No. 25702 on 16 January 2005, the Company also creates specific provisions for receivables without including collaterals, even if they are collected when due or are not overdue beyond the time limits given above. The Communiqué on Provisions states, but not requires, that a general provision, not directly related to any specific transaction, may be created for potential, unmeasured losses associated with any principal or interest or both that are not overdue or are overdue for less than ninety days. The Company creates general provisions for its factoring receivables that have not yet become doubtful. Receivables that cannot be collected, whether in whole or in part, are written off only after the relevant debtor is ruled insolvent by a court of competent jurisdiction. Once a receivable is written off, the provision created for the receivable is reversed and the receivable is removed from assets. Any account receivable written off in any previous year but later collected is recognized as income. Available-for-sale financial assets

Financial assets held for an indefinite period for investment purposes and disposed of to meet the need for cash or depending on changes in interest rates, exchange rates or stock prices are classified as available-for-sale financial assets. The Company’s management classifies these assets at the date of their acquisition.


39


All financial assets are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition. Financial assets, classified as available-for-sale financial assets after being reflected in the financial statements, are measured at fair value as long as it is possible to do so reliably. The publicly traded financial assets in which the Company holds a share of less than 20% are measured at their bid prices quoted in the Istanbul Stock Exchange on the date of the balance sheet, while those not publicly traded are measured at their acquisition costs in cases where their reasonable value or fair value cannot be measured reliably due to the fact that the other methods normally used to measure their fair value are inapplicable. The effect of all changes in fair values is accounted for in shareholders’ equity. In cases where permanent impairment of the market value of any such assets is determined, the effect of such impairment is reflected on the statement of income. After the disposal of these assets, all accumulated fair value adjustments are posted to the statement of income. Impairment of non-financial assets

At each balance sheet date, the Company reviews all of its non-financial assets to identify any indication that a non-financial asset may be impaired. The Company calculates that asset’s recoverable amount if such indication is identified. The recoverable amount of an asset or a cash-generating unit is the higher of that asset’s or unit’s fair value less costs to sell and its value in use. When calculating the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset. Impairment losses are assessed at each balance sheet date whether there is an indication that an impairment loss has decreased or no longer exists. Impairment loss is reversed in the event of a change in the estimations used to measure the recoverable amount. Interest income and expenses

Interest income and expenses are recognized on an accrual basis, using the effective interest rate method. Foreign currency transactions

Foreign currency transactions are translated into TL with the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of cash assets and liabilities denominated in foreign currencies are recognized in the income statement. These amounts are adjusted to the exchange rates applicable at the balance sheet date.


40

2. Basis of presentation of financial statements (continued) Intangible assets

All tangible assets items are recognized at cost, which is calculated by deducting their accumulated depreciation from their inflation-adjusted acquisition costs up until 31 December 2004. The depreciable amount is calculated over these assets’ estimated useful life by using the straight-line method. The estimated useful life of these assets is as follows:

Furniture and fixture 5 years Office equipment and motor vehicles 5 years Leasehold improvements shorter of lease period or useful life Tangible assets with book values greater than their estimated recoverable amounts are represented in the financial statements with their recoverable amounts. Any profit or loss on the disposal of a tangible asset is measured by comparing its book value and sales price and taken into account in operating profit calculation. Expenses arising on a future date in respect of an asset may be capitalized if they improve the future economic benefit of the asset. All other items of expense are accounted for in the income statement on an accrual basis. Intangible assets

Intangible assets mainly comprise of software costs and are amortized at their inflation-adjusted costs over a period of five years up until 31 December 2004. Software maintenance costs and similar expenses are represented as expense in financial statements. However, the Company capitalizes the expenses it incurred to improve the useful life and economic benefits of the existing software by including these expenses into their acquisition costs.. Financial liabilities

Financial liabilities (borrowings and marketable securities issued) are represented at cost, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost using the effective yield method; any difference between proceeds, net of transaction costs, and the redemption value is recognized in the statement of profit or loss over the period. Employee benefits

Obligations related to employee termination and vacation rights are accounted for in accordance with “Turkish Accounting Standard for Employee Benefits” (“TAS 19”) and are classified under “Provision for Employee Benefits” account in the balance sheet. Under the Turkish Labour Law, the Company is required to pay a specific amount to the employees who have retired or whose employment is terminated other than for the reasons specified in the Turkish Labour Law Provision for termination benefits is calculated over the current amounts of potential legal liabilities by using certain actuarial estimates and then recognized in the financial statements (Note 10). The actuarial losses and gains after January 1, 2013 had been accounted under the shareholders’ equity according to the revised TAS 19 standard. The Company pays obligatory social security contributions to the Social Security Authority. The Company has no other obligations towards the Social Security Authority, as long as these contributions are paid. These social contributions are recognized as personnel expenses in the year they are paid


41

2. Basis of presentation of financial statements (continued) Provisions, contingent assets and liabilities

In order to recognize provisions in its financial statements, the Company must have a legal or promissory obligation arising from a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and that the amount of the obligation can be reliably estimated. If these criteria are not met, the Company discloses these matters in the notes to its financial statements. Where the effect of the time value of money is material, provisions are determined at the best estimate of the present value of the cash outflows required to settle an obligation. When determining the discount rate to be used to calculate the present amount of the provisions, the interest rate prevailing in the relevant market and the risk specific to the obligation are taken into account. Contingent assets are accounted for when the realization of income is virtually certain. Otherwise, they are only disclosed in the notes to the financial statements Recognition of revenues and expenses

(i) Fees and commissions

Fees and commissions collected for factoring services are recognized in the income statement, depending on the period of the transaction involved.

(ii) Dividends

Dividends received by the Company are recognized as income on the date the Company becomes entitled

to them. (iii) Other income and expenses

Other income and expenses are accounted for on an accrual basis.

(iv) Financial revenues/(expenses)

Financial revenues comprise interest income and foreign exchange gains. Financial expenses represent loan interest expenses, exchange rate expenses and other financial expenses.

Taxes on corporate income Corporate income tax

Corporate income tax is calculated in accordance with the relevant provisions of the Tax Procedure Code and tax expenses other than the corporate income tax are accounted for as part of operating expenses. Corporate income tax is offset only if the Company currently has a legally enforceable right to set off current tax assets against current tax liabilities or if these tax assets and tax liabilities are associated with income tax collected by the same tax authority.


42

2. Basis of presentation of financial statements (continued) Deferred taxes

Deferred taxes are calculated, using the liability method, on all temporary differences at the balance sheet date between the carrying amount and tax base of assets and liabilities for financial reporting purposes and then recognized as income or expense, as the case may be, in the income statement. If the tax relates to items that are credited or charged directly to equity, the effects of the tax should also be charged or credited directly to equity. Currently enacted tax rates are used to determine deferred taxes at the balance sheet.

Deferred tax liabilities are calculated for all taxable temporary differences, while deferred tax assets, consisting of deductible temporary differences, are measured to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized.

If the Company currently has a legally enforceable right to set off its current tax assets and current tax liabilities, it should set off its deferred tax assets against its deferred tax liabilities (Note 13). Deferred tax assets are measured at the tax rates applicable to the period when the asset is realized or the liability is settled. Earnings per share Earnings per share recognized in the income statement are calculated by dividing the annual net profit by the weighted average number of ordinary shares outstanding during the period involved (Note 20). In Turkey, companies are allowed to increase their capital by issuing shares (“bonus issue”) to their existing shareholders pro-rata the shares held by them out of retained earnings and equity revaluation fund. When calculating the earnings per share, this bonus issue is treated as issued shares. Accordingly, the weighted average number of outstanding shares used to calculate the earnings per share is measured by adjusting the bonus issue retrospectively. Derivative financial instruments

Derivative financial instruments are initially classified in the balance sheet at their fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Derivative financial instruments, although used within the framework of the Company’s risk management policy, are recognized as derivatives held for trading as they do not qualify for hedge accounting. Gains and losses originating from changes in the fair value of these instruments are recognized in the line item “other operating income/expenses” in the income statement. Forward foreign exchange contracts are valued on the basis of discounted cash flows. Financial lease

A finance lease, which transfer substantially all the risks and rewards incidental to ownership of the leased asset, is classified in “tangible assets” at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments, while liabilities arising from the lease are classified in “financial leasing liabilities”.


43


Interest paid under a lease agreement is recognized as expense in the income statement throughout the term of the lease agreement. Tangible assets held under the lease agreement are depreciated over the estimated useful life of the assets. Share capital and dividends

Ordinary shares are classified as share capital. Dividends on ordinary shares are recognized in the period they are disclosed. Indispensable and unavoidable expenses incurred directly in relation to a capital increase are classified in the total paid-in share capital. Events after the reporting period

Adjusting events occurred after the reporting period and providing further evidence (that require correction) of the Company’s financial position at the end of the reporting period are recognized in the accompanying financial statements. Nonadjusting events are disclosed in the notes to the accompanying financial statements if and to the extent they would have significant importance. 2.4 Critical accounting assessments, estimates and assumptions

The preparation of unconsolidated financial statements requires the use of certain critical accounting estimates and assumptions affecting the assets and liabilities disclosed in the balance sheet, or the contingent assets and liabilities, and the income and expenses reported to have been incurred during the period involved. Although based on the best estimates and knowledge of the Company’s Management, the actual results may differ from these estimates. Critical assessments, estimates and assumptions that would significantly affect both the accompanying financial statements and the carrying amounts of recognized assets and liabilities in the next period include: Recognition of deferred tax assets; Deferred income tax assets are classified to the extent that the related tax benefit is probable. The amount of profits that may be taxed in the future and the amount of prospective tax benefits are based on the medium term business plan prepared by the Company’s Management and the extrapolated estimates made thereafter. The business plan is based on Management expectations regarded as reasonable under the circumstances. As of 31 December 2014, the Company’s total deferred tax assets is TL 10,695. (Deferred tax assets on 31 December 2013: TL 2,433) Impairment of factoring receivables; The assumptions and methods used to estimate the timing and volume of prospective cash flows from factoring receivables are frequently reviewed in order to resolve any differences between estimated impairment of factoring receivables and actual losses incurred. The Company created a general provision of TL 67,490 (31 December 2013: TL 73,009) for impaired factoring receivables (Note 4).

Pending tax penalties; As stated in Note 10, as a result of the industry-wide tax audit about unearned revenues

and principal amounts of doubtful receivables from factoring transactions undergoing litigation or execution not

classified as revenue, the Fiscal Administration investigated the tax calculations of the Company for the years

2007 and 2008 and levied on the Company a total penalty of TL 5,965. The Company’s Management first chose

the way to negotiate, then after the negotiation did not result in any way, took legal action against the penalty. The Company created a provision of TL 1,325 in the financial statements of 31 December 2013, based on the examination of sectoral precedents. As the lawsuit was concluded in the Company's favor during the 2014 fiscal year, this provision was canceled.


44

3. Cash assets and banks

2014 2013

Cash - - Banks 25,011 20,772 -demand deposits 2,018 1,814 -time deposits 22,993 18,958

25,011 20,772

There is no lien or restriction on the Company’s bank deposits. As of 31 December 2014, the amount of cash and cash equivalents used in the cash flow statement is TL 25,011 (2013: TL 20,772). 4. Factoring receivables

2014 2013

Domestic factoring receivables, net 2,128,255 1,626,960 Export & Import factoring receivables, net 649,408 523,627 Doubtful factoring receivables, net 78,294 80,419

Gross factoring receivables 2,855,957 2,231,006

Provision for impairment of doubtful factoring receivables (67,490) (73,009)

Unearned interest income (13,666) (8,204) Unearned commission income (37) (573)

Factoring receivables, net 2,774,764 2,149,220

Unearned interest income represents revenues collected in advance, calculated on the basis of the maturities of factoring receivables.

As of 31 December 2014, the total amount of postdate cheques and bills received by the Company against its factoring receivables is TL 352,285 (2013: TL 211,693). These cheques and bills are classified in off-balance sheet accounts. As of 31 December 2014, the Company’s domestic factoring receivables of TL 1,401,725 (2014: TL 1,182,787) and export factoring receivables of TL 573,536 (2013: 286,199) both represent irrevocable transactions (at the Company’s risk). In addition, as of 31 December 2014, irrevocable transactions amounting to TL 1,250,656 (2013: TL 380,891) are classified in off-balance sheet accounts.

2014 2013

Gross factoring receivables:

Fixed rate 2,363,837 1,786,330 Variable rate 492,120 444,676

2,855,957 2,231,006


45

4. Factoring receivables (continued)

Analysis of factoring receivables:

2014 2013

Neither overdue nor impaired 2,763,960 2,141,810 Overdue, but not impaired - -

Impaired 78,294 80,419

Gross 2,842,254 2,222,229

(Less): Provision for impairment (67,490) (73,009)

Net factoring receivables 2,774,764 2,149,220

As of 1 January 2008, the Company calculates and classifies all incurred and probable losses associated with factoring receivables in accordance with the BRSA communiqué and relevant regulations. Breakdown of factoring receivables by maturity:

2014 2013

0 - 1 month 1,918,296 1,435,085 1 - 3 month 460,499 436,127 3 - 12 month 377,948 251,414 1 year and over 18,021 26,594

2,774,764 2,149,220

Changes in provisions for impairment of doubtful factoring receivables:

2014 2013

1 January 73,009 51,060

Provision created during the period 18,068 23,089 Receivables disposed during the period(*) (22,484) - Collections from provisions (1,103) (1,140) Transferred from general provisions - - Foreign exchange difference, other expenses - -

31 December 67,490 73,009

(*) On 26 July 2014, the Company sold non-performing cash receivables amounting to TL 22,484 to Vera Varlık Yönetim A.Ş. for TL 70.

Additionally, the Company created a general provision of TL 10,127 (2013: TL 9,023) for unimpaired factoring receivables (Note 10). The expense associated with this provision in 2014 was TL 1,104 (2013: 1,140). As of 31 December 2014, total restructured factoring receivables is TL 9,438 (2013: TL 1,812).


46

4. Factoring receivables (continued)

Breakdown of gross factoring receivables by industry, 31 December 2014 and 2013:

2014 % 2013 %

Pharmaceuticals, Chemicals and Dyes 785,512 28 489,910 23 Metal Working 607,349 22 543,834 25 Automotive 410,920 15 461,680 21 Other 335,006 12 221,689 10 Textiles 168,265 6 108,439 5 Manufacturing 166,380 6 110,144 5 Electronics and Optics 143,961 5 102,840 5 Construction 113,291 4 76,700 4 Food and Beverage 44,080 2 33,984 2

2,774,764 100 2,149,220 100

5. Borrowings and marketable securities issued

Borrowings as of 31 December 2013 and 2014: 2014 2013

Effective

interest % Currency TL Effective

interest % Value in foreign

currency

TL

Domestic Banks TL 10.97 980,719 980,719 8.96 457,062 457,062 USD 2.57 35,304 81,866 - - - EUR 2.75 15,215 42,918 - - - Foreign Banks EUR 1.51 322,971 911,004 1.31 398,266 1,169,508 TL - - - 9.35 16,535 16,535 USD 1.90 96,512 223,801 1.31 121,787 259,929 GBP 4.60 1,343 5,080 3.43 1,922 6,750

2,245,388 1,909,784


Marketable Securities Issued (Bonds) 293,280 -

293,280 -

In 2014, the Company performed the following security issuances: TL 75.000 in nominal value (Annual Compound Interest Rate: 9.39%), maturity date 15 January 2015; TL 150.000 in nominal value (Annual Compound Interest Rate: 9.93%), maturity date 16 April 2015; TL 75.000 in nominal value (Annual Compound Interest Rate: 9.11%), maturity date 21 May 2015.


47

6. Derivative financial assets held for trading 2014 2013 TL FC TL FC

Adjustment to derivative financial Instruments measured at fair value (Note 22) 569 - 15,861 7,168 7. Available-for-sale financial assets 2014 2013

Available-for-sale financial assets 27 27 Breakdown of available-for-sale financial assets, 31 December 2014 and 2013: 2014 2013 % TL % TL

Allianz Yaşam ve Emeklilik A.Ş. (recognized at cost) 0.04 27 0.04 27 27 27

8. Other payables

2014 2013

Commissions payable 195 283 Various expense accruals 101 223 Other 1,239 367 1,535 873

9. Derivative financial liabilities held for trading

2014 2013

TL FC TL FC

Adjustment to derivative financial Instruments measured at fair value (Note 22) 21,262 - 1,336 6 10. Provisions for liabilities and expenses Provision for employee benefits, 31 December 2014 and 2013:

2014 2013

Provision for accrued but unused paid leave 954 687 Provision for termination benefits 284 226 1,238 913


48

10. Provision for liabilities and expenses (continued)

The Company creates provision for termination benefits as follows: Pursuant to the applicable labour legislation in Turkey, the Company is required to pay lump-sum termination benefits to each employee who has completed over one year of service with the Company and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The amount payable consists of one month’s salary limited to a maximum of TL 3,438 as of 31 December 2014 (31 December 2013: TL 3.254) for each period of service. Figures are expressed in whole TL. There is no legal requirement to fund the provision for employee termination benefits. Provision for termination benefits is calculated over the estimated current value of the potential liability to pay employees who may be entitled to pension benefits. TFRS requires entities to develop actuarial valuation methods to estimate the provision required for termination benefits. Accordingly, the following actuarial assumptions were used to calculate the total liability:

2014 2013

Discount rate (%) 3.50 4.78 Turnover ratio used to estimate the probability of retirement (%) 8 20 The basic actuarial assumption is that the maximum liability for each year of service will be increased in line with the inflation rate. Thus, the discount rate applied represents the expected real rate for the effects of future inflation. As the ceiling of statutory termination pay is revised semi-annually, provision for the Company’s maximum liability will be calculated over TL 3,541, which shall be effective as of 1 January 2015 (1 January 2014: TL 3,438). Figures are expressed in whole TL. Changes in the provision for termination benefits for 2012 are as follows:

2014 2013

1 January 226 298 Termination benefits paid (54) (106) Cost of services 126 8 Interest expense 8 14 Actuarial gain / (loss) (22) 12

31 December 284 226

Details of provisions for other liabilities and expenses, 31 December 2013 and 2014:

2014 2013

General provision for factoring receivables (Note 4) 10,127 9,023 Accrual for staff bonus 1,650 1,168 Provision for tax penalties (*) - 1,325

11,777 11,516


49

10. Provisions for liabilities and expenses (continued)

Acting in line with the principles of prudence, the Company provides general provisions for potential, unmeasured losses associated with any principal or interest, or both, on factoring receivables that are not overdue or overdue for less than ninety days. (*) As a result of the industry-wide investigation of unearned revenues and principal amounts of doubtful

receivables from factoring transactions undergoing litigation or execution not classified as revenue, the Revenue Administration audited the tax calculations of the Company for the years 2007 and 2008 and levied on the Company a total penalty of TL 5,965. The Company first sought to negotiate with the Revenue Administration, and then to challenge the levy at court as no agreement could be reached. The Company created a provision of TL 1,325 in the financial statements of 31 December 2013, based on the examination of sectoral precedents. As the lawsuit was concluded in the Company's favor during the 2014 fiscal year, this provision was canceled.

Changes in general provisions:

2014 2013

1 January 9,023 7,883

Provision created during the period 1,104 1,140 Transfers to specific provisions -

31 December 10,127 9,023

11. Tangible assets

1 January

2014 Additions Disposals

31 December 2014

Cost:

Furniture and fixture 2,276 133 - 2,409 Motor Vehicles - - - - Leasehold improvements 733 7 - 740

3,009 140 - 3,149

Accumulated depreciation:

Furniture and fixture (1,956) (117) - (2,073) Motor Vehicles - - - - Leasehold improvements (468) (86) - (554)

(2,424) (203) - (2,627)

Net book value 585 (63) - 522


50

11. Tangible Assets (continued)

1 January

2013 Additions Disposals

31 December 2013

Cost:

Furniture and fixture 2,183 190 (97) 2,276 Motor Vehicles - - - - Leasehold improvements 726 75 (68) 733

2,909 265 (165) 3,009

Accumulated depreciation:

Furniture and fixture (1,962) (86) 92 (1,956) Motor Vehicles - - - - Leasehold improvements (464) (72) 68 (468)

(2,426) (158) 160 (2,424)

Net book value 483 107 (5) 585

As of 31 December 2014, there is no lien or restriction on tangible assets (2013: None) 12. Intangible assets

1 January 2014

Additions Disposals 31 December 2014

Software cost 2,228 69 - 2,297 Accumulated redemption (2,164) (59) - (2,223)

Net book value 64 10 - 74

1 January 2013

Additions Disposals 31 December 2013

Software cost 2,264 71 (107) 2,228 Accumulated redemption (2,231) (40) 107 (2,164)

Net book value 33 31 - 64


51

13. Deferred tax assets/liabilities

The cumulative temporary differences subject to deferred tax has been calculated, and the deferred income tax assets and liabilities as of 31 December 2014 and 2013 are shown in the following table, which was prepared using the applicable tax rates:

Cumulative temporary differences Deferred income tax Assets/

(liabilities)

2014 2013 2014 2013

Provision for impaired doubtful factoring receivables 15,079 31,194 3,016 6,239 Provision for termination benefits 284 226 57 45 Provision for annual paid leave 954 687 191 137 Expense accrual on derivatives contracts 44,291 1,341 8,858 268 Provision for premiums 1,650 1,168 330 234 Other 1,131 808 226 162

Deferred tax assets 63,389 35,424 12,678 7,085

Provision for impaired doubtful factoring receivables(**) (5,888) - (1,178) - Cancellation of the provision for tax settlement lawsuit (1,325) - (265) - Net difference between carrying value and tax base of tangible assets

- (233) - (47)

Income accrual on derivatives contracts (569) (23,029) (114) (4,605) Other (2,131) - (426) -

Deferred tax liabilities (9,913) (23,262) (1,983) (4,652)

Deferred income tax assets/(liabilities), net 53,476 12,162 10,695 2,433

Deferred tax assets action statement is as follows:

Net 2014 2013

1 January 2,433 (2,223)

Recognized in income statement (Note 18) (8,262) (895) Recognized in equity statement - 5,551 31 December 10,695 2,433

14. Prepaid expenses and other Assets 2014 2013

Prepaid expenses 861 324 861 324

2014 2013

Other assets 262 - 262 -


52

15. Shareholders' Equity Within the framework of the permission of the Ministry of Customs and Trade; and under the scope of adaptation to the Turkish Commercial Code No: 6102 and Financial Leasing, Factoring and Financing Companies Law No: 6361; the Company’s paid-in capital had been raised to TRY 31.917 (2013: 31.917), divided into 31.916.695 (2013: 16.802.326) share certificates each with a nominal value of TRY 1.

The book values of the share capital issued and paid in as of 31 December 2014 and 2013 are as follows:

2014 2013

Share (%) TL Share (%) TL

Yapı ve Kredi Bankası A.Ş. 99.95 31,902 99.95 31,902 Other 0.05 15 0.05 15 100.00 31,917 100.00 31,917 As per the General Assembly resolution, the tax-exempt amount (75%) of the gains from the sale of Allianz Sigorta A.Ş. shares on 12 July 2013, amounting to TL 97,223 according the profit distribution statement for 2013, was classified under capital reserves account for 2014. In statutory financial statements, accumulated profits may be distributed except for legal reserves and subject to following requirements for legal reserves. The TCC stipulates that the first legal reserve is appropriated out of taxable profits at the rate of 5 % per annum, until the total reserve reaches 20 % of the Company’s paid-in share capital. After the dividend payment of 5%, 10% of the total amount to be distributed to entitled shareholders is set aside and included to first legal reserve. Under the TCC, the legal reserves may only be used to offset losses unless they exceed 50 % of paid-in share capital, and may not be used for any other purpose. According to Law No. 5228 on Amendments to Certain Tax Laws published in Official Gazette No. 25539 ıf 31 July 2004, inflation adjustments to shareholders’ equity line items arising from inflation adjusted financial statements and recognized in “Accumulated Profit/Loss” may be offset against inflation-adjusted accumulated losses or included in share capital by corporate taxpayers, and this transaction is treated as a dividend distribution. The BRSA has expressed its opinion that, income generated from deferred tax assets may not be qualified as cash or internal resource, and as such, the income generated in this manner should not be classified as part of the current term income subject to dividend distribution and capital increase. As of 31 December 2014, the Company has deferred tax income amounting to TL 8,262 (31 December 2013: None).

All “inflation-adjustments to shareholders’ equity” may only be used to increase capital through bonus issues or to offset losses, while the carrying amount of extraordinary reserves are permitted to be used to increase capital through bonus issues, payment of cash dividends or to offset losses. In 2014, the Company paid dividends amounting to TL 76,000.


53

16. Income from operating activities

2014 2013

Interest income on factoring operations 145,046 104,996 Factoring fees and commissions 15,822 14,430

160,868 119,426

17. Operating expenses

2014 2013

Personnel expenses:

Salaries 10,860 9,621 Social security contributions 1,265 950 Staff insurance costs 740 574 Other 1,026 1,006

13,891 12,151

Provision for termination benefits 36 - General administrative expenses:

IT expenses 1,045 491 Rents 985 716 Travel expenses 937 429 Audit and consultancy expenses 715 235 Contribution to expenses 682 531 Tax, duty and charge expenses 421 553 Marketing and advertising expenses 224 102 Donations 202 152 Other 200 398 Membership dues 166 154 Communication expenses 127 103 Non-allowable expenses 118 129 Stationary expenses 87 51

5,909 4,044

Depreciation expenses (Note 11, 12) 262 198

Operating Expenses – total 20,098 16,393


54

18. Provision for taxes on continuing operations

2014 2013

Provision for current period corporate income tax 18,075 10,759 Less: prepaid taxes (19,222) (10,119)

Current period tax liability/(asset) (net) (1,147) 640

Banking and Insurance Transactions Tax due 857 664 Staff income tax due 219 167 Social security contributions due 206 152 Other taxes 29 15

Taxes and liabilities 1,311 998

Corporate Tax Law No. 5422 has been superseded by Law No. 5520 on 13 June 2006. Many of the provisions of the new Corporate Tax Law No. 5520 came into effect on 1 January 2006. Accordingly, the corporate income tax rate applicable under the new law is 20% (2013: 20%). This rate is applied to the tax base of corporate income, which is calculated by the inclusion of non-deductible expenses and the deduction of exemptions (such as for returns from associates, investment incentives, etc.) and incentives (such as R&D incentives). If no dividend is paid, no other tax is applicable (except for withholding at the rate of 19.8%, which is calculated over investments incentives benefited under Temporary Article 61 of the Corporate Tax Law). No tax is withheld from dividends paid to non-resident taxpayers generating income through an entity or a permanent representative in Turkey or to resident taxpayers. However, dividends paid to all other individuals and entities are subject to a withholding tax of 10%. Injection of profit into capital is not treated as dividend. Corporations are required to calculate advance corporate tax based on their quarterly profits at a rate of 20%. Advance corporate tax returns are submitted by the 14th day of the second month of the following quarter, and is payable by the end of the 17th day of the same month. Advance corporate income tax payments made during the year are offset against the final corporate tax liability of the company In the event of any interim tax remaining after the deduction, the entity is entitled to claim it in cash or offset it against any other tax liability. The tax laws in Turkey do not allow the tax authority to accept offers in compromise from taxpayers to settle tax liabilities. Corporate income tax returns must be filed with the relevant tax office no later than the close of business on the 25th day of the fourth month following the end of each financial year. Authorized tax inspectors are given the power to audit all accounting records of entities covering the past five years and, if they discover any irregularity or error in the records, they may impose a tax penalty, changing the tax otherwise due.


55

18. Provision for taxes on continuing operations (continued)

The tax laws in Turkey allow entities to deduct only those financial losses disclosed in their tax returns for the last 5 years from their current year profit. However, such losses may not be offset against accumulated profits. Tax expenses recognized in the Company’s income statements for the fiscal years ending on 31 December 2014 and 2013 are summarized below:

2014 2013

Corporate income tax (expense) (18,075) (10,759) Deferred income tax income/(expense) (Note 13) 8,262 (895)

Total tax (expense) (9,813) (11,654)

Reconciliation of the current year tax expense and the theoretical tax expense calculated over the statutory tax rate applicable to the Company:

2014 2013

Pre-tax profit 54,650 160,989

Theoretical tax expense at the applicable rate of 20 % 10,930 32,198 Non-allowable expenses and other expenses, net 3,170 6,598 Income exempt from tax, net (4,287) (25,253) Loss from previous year to be set-off - (1,889)

Current year tax expense 9,813 11,654

19. Other operating income/expenses Other operating income

2014 2013

Provision expenses charged to customers 1,852 1,535 Income from canceled provisions (Note 10) 1,325 - Other 102 53

3,279 1,588

Other operation expenses

2014 2013

Taxes, duties and charges 45 50 Other 480 540

525 590


56

20. Earnings per share

Earnings for per share have been given below;

2014 2013

Net profit attributable to shareholders 44,837 149,335 Weighted average number of ordinary shares issued (each with nominal value of TL)

31,916,695 31,916,695

Earnings per share (shown in TL) 1.40 4.68

21. Related party explanations Balance sheet items

2014 2013

Banks Shareholders Yapı ve Kredi Bankası A.Ş.

Time deposit 22,993 636 Demand deposit 1,754 18,957

24,747 19,593

Other related parties Factoring receivables

Türkiye Petrol Rafinerileri A.Ş. 655,000 390,000 Tofaş Türk Otomobil Fabrikası A.Ş. 132,392 49,259 Otokoç Otomotiv Tic. ve San. A.Ş. 32,683 23,237 Otokar Otomotiv ve Savunma Sanayi A.Ş. 25,086 - Ford Otomotiv San. A.Ş. 20,024 106,799 Koç Sistem Bilgi ve İletişim Hizmetleri A.Ş. 4,697 4,267

869,882 573,562

Other receivables

Other related parties

YKS Tesis Yönetim Hizmetleri A.Ş. - 4 Financial liabilities Shareholders Yapı Kredi Bankası A.Ş.

206

150


57

21. Related party explanations (continued)

Financial liabilities 2014 2013

Other related parties Unicredito Austria S.p.A 690,694 1,070,399 Yapı Kredi Nederland N.V. 6,764 11,477

697,458 1,081,876

Other liabilities Other related parties

Koç Holding A.Ş. - 56 Otokoç Otomotiv Tic. Ve San. A.Ş. 33 28 Zer Merkezi Hizmetler ve Ticaret A.Ş. 29 23 Opet Petrolcülük A.Ş. 4 4 Koç Sistem Bilgi ve İletişim Hizmetleri A.Ş. 3 1 Setur Servis Turistik A.Ş. 1 1

70 113

Income statement items Interest income on factoring operations

Other related parties

Türkiye Petrol Rafinerileri A.Ş.

9,707

16,269

Ford Otomotiv Sanayi A.Ş. 4,397 2,801 Otokoç Otomotiv Ticaret ve Sanayi A.Ş. 1,269 317 Tofaş Türk Otomobil Fabrikası A.Ş. 325 2,981 Koç Sistem Bilgi ve İletişim Hizmetleri A.Ş. 214 202

15,912 22,570


58


2014 2013

Interest income on non-factoring operations

Shareholders

Yapı ve Kredi Bankası A.Ş. 5,553 5,015

5,553 5,015

Commission income on factoring operations Other related parties Ford Otomotiv Sanayi A.Ş. 53 77 Otokoç Otomotiv Tic.ve San A.Ş. 17 5 Aygaz A.Ş 3 4

73 86

Income on non-factoring operations Other related parties

Aygaz A.Ş. - 2

- 2

General administrative expenses Shareholders

Yapı ve Kredi Bankası A.Ş. 1,236 879 Other related parties

Zer Merkezi Hizmetler ve Ticaret A.Ş. 565 384 Otokoç Otomotiv Ticaret ve Sanayi A.Ş. 363 259

Allianz Yaşam ve Emeklilik A.Ş. 320 246 YKS Tesis Yönetim Hizmetleri A.Ş. 159 152 Opet Petrolcülük A.Ş. 122 92 Koç Sistem Bilgi ve İletişim Hizmetleri A.Ş. 80 109 Setur Servis Turistik A.Ş. 74 60 Koç Holding A.Ş. 7 86 Akpa Dayanıklı Tüketim LPG ve Akaryakıt Ürünleri Paz. A.Ş. 2 2

2,929 2,269


59


2014 2013

Interest expenses

Shareholders Yapı ve Kredi Bankası A.Ş. 1,043 2,473 Other related parties

Unicredito Austria S.p.A 10,444 11,326 Yapı Kredi Nederland N.V. 392 771 Unicredito Italiano S.p.A - -

11,878 14,570

Dividend income

Other related parties Allianz Yaşam ve Emeklilik A.Ş. 29 -

29 -

Wages and other financial benefits provided to board members and executive officers

Wages and other financial benefits provided to board members and executive officers 2,149 2,282 Off-balance sheet transactions

Derivative contracts with Yapı ve Kredi Bankası A.Ş.

2014 2013

Value in foreign

currency

TL Value in foreign currency

TL

Forward contract purchases EUR 87,310 246,275 235,300 690,958 USD - - 1,100 2,348 TL 99,897 99,897 - -

346,172 693,306


60


2014 2013

Value in Foreign

currency TL

Value in Foreign

currency TL

Forward contract sales TL 70,039 70,039 403,091 403,091 USD 126,598 293,568 126,878 270,795 EUR 1,000 2,821 - - GBP 715 2,571 33 117

369,000 674,003

Letters of Guarantee 2014 2013

Yapı ve Kredi Bankası A.Ş. 7,154 6,692 22. Nature and extent of exposure to risks arising from financial instruments

Financial instruments and financial risk management Credit Risk Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge its obligation. The Company is exposed to credit risk as it is engaged primarily in factoring transactions. The Company manages its exposure to credit risk by assigning certain limits to customers that are likely to give rise to credit risk, monitoring expected repayments closely, and by receiving adequate security from customers with low credit quality. The Company’s exposure to credit risk is concentrated in Turkey where it carries on a majority of its operations. To avoid undue concentration of credit risk, the Company provides a high number of customers from different industries.

Geographical breakdown of the Company’s assets and liabilities, 31 December 2013 and 2014:

2014 Assets % Liabilities %

Turkey 2,813,932 100 1,441,061 55 European countries - - 1,139,885 45

2,813,932 100 2,580,946 100

2013 Assets % Liabilities %

Turkey 2,196,454 100 496,722 26 European countries - - 1,436,187 74

2,196,454 100 1,932,909 100


(61)

22. Nature and extent of exposure to risks arising from financial instruments (continued) The Company’s maximum credit risk exposure:

2014 2013

Factoring

receivables Banks Derivative

instruments Factoring

receivables Banks Derivative

instruments

Maximum credit risk exposure at reporting date (*) 2,774,764 25,011 569 2,149,220 20,772 - A. Net book value of financial assets not overdue or impaired 2,753,833 25,011 569 2,132,787 20,772 - - Not overdue or impaired (gross book value) 2,763,960 25,011 569 2,141,810 20,772 - - General provision for credits (-) (**) (10,127) - - (9,023) - - B. Book value of financial assets whose terms have been renegotiated and that would otherwise be

overdue or impaired - - - - - - C. Net book value of assets due, but not impaired - - - - - - D. Net book value of assets impaired 10,804 - 7,410 - - - Overdue (gross book value) 78,294 - - 80,419 - - - Impaired (-) (67,490) - - (73,009) - - E. Off-balance sheet items exposed to credit risk - - - - - -

(*) Credit enhancement instruments, such as collaterals, have not been taken into account in the calculation of this amount. (**) Pursuant to the Communiqué on Provisions, the Company creates specific provisions for these receivables, though not past due under the Communiqué, at the rates it sets in accordance with its

principles of reliability and prudence. The aging assets table in Note 4 shows factoring receivables that are overdue but not impaired.


(62)

22. Nature and extent of exposure to risks arising from financial instruments (continued) Market risk

Market risk is the risk that the Company’s earnings or capital, or its ability to meet business objectives will be adversely affected by fluctuations in interest rates, foreign exchange rates, inflation rate or market prices. The Company manages market risk with a focus on currency risk and interest rate risk. The Company’s Risk Management Policies are determined by the Company’s Board of directors. The Company is responsible for implementing these Risk Management Policies. As a factoring services provider, the Company is exposed to currency risk, interest rate risk and liquidity risk as a result of meeting the financial needs of its customers. The Company’s Fund Management Department focuses on the structure of the Company’s assets and liabilities to manage exposure to these risks. The Fund Management Department is responsible for creating necessary funds for the Company, balancing the Company’s short position and exposure to interest rate risk, and managing liquidity surplus, if any. The Company’s primary guidelines for managing exposure to market risk are as follows:

Yapı ve Kredi Bankası A.Ş. (“YKB”) Market Risk Management Department and the Board of Directors are regularly updated on the Company’s changing exposure to risks, and important decisions regarding market risk are taken by the Board of Directors.

All market risks are managed by the Company’s Fund Management Department;

The Financial Control Department exercises its functions independently of the Fund Management Department and reports directly to the General Manager;

Interest rate risk and currency risk are managed by the Fund Management Department within the framework of the powers granted to it.

Interest rate risk

Changes in market interest rates, causing fluctuations in the prices of financial instruments, require the Company to manage its exposure to interest rate risk. The Company’s Fund Management Department closely monitors the Company’s interest rate-sensitive assets, liabilities and off-balance sheet accounts on a daily basis. Besides, the Company’s Financial Control Department reports the Company’s exposure to interest rate risks by showing them on monthly time bands according to their respective maturities. Interest rate risk sensitivity (Basis Point Value) analyses are performed monthly by YKB’ Market Risk Management Department on currency and maturity basis. This Department also performs Value at Risk analyses and reports its findings, in comparison with the risk limits set under the Risk management Policies, on a monthly basis. According to the analysis of 31 December 2014, the Company’s sensitivity to interest rate fluctuations increased 1 base point up to TL 58.9.


(63)

22. Nature and extent of exposure to risks arising from financial instruments (continued)

Average interest rates on financial instruments: 2014 2013

USD$ (%) EUR (%) TL (%) USD$ (%) EUR (%) TL (%) Assets Banks - time deposits 1.80% 1.60% 7.5 % 1% 2.46% 4.68% Factoring receivables, net 4.16% 4.16% 11.98% 4.79% 4.79% 11.67% Liabilities Financial liabilities 2.08% 1.57% 10.97% 1.49% 1.50% 8.60%

The following tables provide an analysis of the Company’s assets and liabilities at the reporting date on the basis of the length of time remaining before the next change in interest rate in the contract and according to related maturity dates:

3 to 12 Over 2014 Up to 3 months Months 1 year Unclassified Total

Bank deposits and cash assets 22,993 - - 2,018 25,011 Derivative financial instruments held for trading

-

- - - 569 569

Available-for-sale financial assets - - - 27 27 Factoring receivables 1,399,399 377,948 18,021 979,396 2,774,764 Tangible Assets - - - 522 522 Intangible assets - - - 74 74 Prepaid expenses - - - 861 861 Deferred tax assets - - - 10,695 10,695 Other assets - - - 262 262 Current year tax assets - - - 1,147 1,147

Total assets 1,422,392 377,948 18,021 995,571 2,813,932

Derivative financial liabilities held for trading - - - 21,262 21,262

Borrowings 1,683,759 561,424 - 205 2,245,388 Factoring payables 5,155 - - - 5,155 Other marketable securities issued 74,735 218,545 - - 293,280 Miscellaneous payables - - - 1,535 1,535 Taxes and liabilities - - - 1,311 1,311 Provision for liabilities and expenses - - - 13,015 13,015 Deferred tax liabilities - - - - -

Total liabilities 1,763,649 779,969 - 37,328 2,580,946

Net re-pricing gap

(341,257) (402,021) - 958,243 232,986


(64)


3 - 12 Over 2013 Up to 3 months months 1 year Unclassified Total

Bank deposits and cash in hand - - - 20,772 20,772 Derivative financial assets held for trading - - - 23,029 23,029 Available-for-sale financial assets - - - 27 27 Factoring receivables 1,193,084 251,414 26,594 678,128 2,149,220 Tangible Assets - - - 585 585 Intangible assets - - - 64 64 Prepaid expenses - - - 324 324 Deferred tax assets - - - 2,433 2,433 Other assets - - - - -

Total Assets 1,193,084 251,414 26,594 725,362 2,196,454

Derivative financial liabilities held for trading - - - 1,342 1,342 Borrowings 1,909,784 - - - 1,909,784 Factoring payables 6,843 - - - 6,843 Miscellaneous payables - - - 873 873 Taxes and liabilities - - - 998 998 Provision for liabilities and expenses - - - 12,429 12,429 Deferred tax liabilities - - - - - Current period tax liability - - - 640 640

Total liabilities 1,916,627 - - 16,282 1,932,900

Net re-pricing gap (723,543) 251,414 26,594 709,080 263,545


(65)


Liquidity risk

Liquidity risk Liquidity risk is the risk that the Company will have difficulty in meeting its net funding needs. Liquidity risk can be caused by market disruptions or credit downgrades that would result in the depletion of certain sources of funding in the short run. The Company’s management manages this risk by diversifying its financial resources and prioritizing liquidity in a manner to ensure appropriate balance between cash and cash-equivalent assets. Additionally, the Management maintains an adequate level of funding by shareholders and high quality investors in an effort to meet its existing and future funding needs and to survive the effects of potential changes in demand.

The table below shows a breakdown of the assets and liabilities according to their maturities as of 31 December 2014 and 2013, respectively. The amounts disclosed in the table represent contractual, undiscounted cash flows. The table also includes the interest amounts to be collected and paid on the Company’s assets and liabilities

Total

contractual

cash inflow/

Book

2014 outflow 1 to 3

months 3 to 12

months Over 1 year Unclassified Value

Bank deposits and cash assets 25,011 22,993 - - 2,018 25,011 Derivative financial assets

held for trading 569 - - - 569 569 Available-for-sale financial assets 27 - - - 27 27 Factoring receivables 2,788,225 1,399,399 377,948 18,021 979,396 2,774,764 Tangible Assets 522 - - - 522 522 Intangible assets 74 - - - 74 74 Prepaid expenses 861 - - - 861 861 Deferred tax assets 10,695 - - - 10,695 10,695 Other assets 262 - - - 262 262 Current tax assets 1,147 - - - 1,147 1,147

Total Assets 2,827,393 1,422,392 377,948 18,021 995,571 2,813,932

Derivative financial liabilities

held for trading 21,262 - - - 21,262 21,262 Borrowings 2,280,566 1,482,909 561,424 201,055 - 2,245,388 Factoring payables 5,155 5,155 - - - 5,155 Marketable securities issued 293,280 74,735 218,545 - - 293,280 Other liabilities 1,535 - - - 1,535 1,535 Taxes and liabilities 1,311 - - - 1,311 1,311 Provision for liabilities and expenses 13,015 - - - 13,015 13,015 Deferred tax liabilities - - - - - -

Total liabilities 2,616,124 1,562,799 779,969 201,055 37,123 2,580,946

Net 211,269 (140,407) (402,021) (183,036) 958,448 232,986


(66)


Total contractual cash inflow/ Book 2013 outflow 1 to 3

months 3 to 12

months Over 1

year Unclassified Value

Bank deposits and cash assets 20,772 18,957 - - 1,815 20,772 Derivative financial assets held for trading 23,029 - - - 23,029 23,029 Available-for-sale financial assets 27 - - - 27 27 Factoring receivables 2,157,997 1,193,084 251,414 26,594 678,128 2,149,220 Tangible assets 585 - - - 585 585 Intangible assets 64 - - - 64 64 Prepaid expenses 324 - - - 324 324 Deferred tax assets 2,433 - - - 2,433 2,433 Other assets - - - - - -

Total assets 2,205,231 1,212,041 251,414 26,594 706,405 2,196,454

Derivative financial liabilities Held for trading 1,342 - - - 1,342 1,342 Borrowings 1,911,671 995,553 766,410 147,821 - 1,909,784 Factoring payables 6,843 6,843 - - - 6,843 Other payables 873 - - - 873 873 Taxes and liabilities 998 - - - 998 998 Provisions for liabilities and expenses

12,429 - - - 12,429 12,429

Deferred tax liabilities - - - - - - Current period tax liability 640 - - - 640 640

Total liabilities 1,934,796 1,002,396 766,410 147,821 16,282 1,932,909

Net 270,435 209,645 (514,996) (121,227) 692,028 263,545

Derivative financial instruments

Cash inflow 565,421.61 142,567.08 - 707,989 Cash outflow 550,742.35 138,628.58 - 689,371

Currency risk The value of assets and liabilities denominated in foreign currencies creates the currency risk. The Company carries a certain foreign currency position as a result of its operations. The Company’s foreign currency position is monitored by the Fund Management Department on a daily basis and is also reported by the Financial Planning and Control Department on a monthly basis by preparing tables based on maturities and currency types. The Company aims to maintain its foreign currency position at a level that does not exceed EUR 2,500,000 (+/-). The Company also engages in forward foreign exchange transactions to match its foreign currency-denominated assets and liabilities. The table below shows the Company’s sensitivity to a 10% change in the exchange rates of USD and EUR. The amounts shown in the table represent the effect of a 10% increase in the exchange rates of USD and EUR against TL on the income statement The analysis assumes that all variables, particularly interest rates, remain constant.

Profit/(Loss) Profit/(Loss)

2014 2013

USD 201 374 EUR (154) (29)

In case of a 10% decrease in TL against USD and EUR, the amounts stated above will be reflected as negatives in the income statement.


(67)


The Company’s foreign currency position as of 31 December 2014 and 2013 is presented below:

2014 USD EUR Other TL Total

Banks 7,810 13,810 182 3,209 25,011 Derivative financial assets held for trading - - - 569 569 Available-for-sale financial assets - - - 27 27 Factoring receivables (*) 642,978 515,829 14,789 1,601,168 2,774,764 Tangible assets - - - 522 522 Intangible assets - - - 74 74 Prepaid expenses - - - 861 861 Other assets 5 - - 257 262 Deferred tax assets - - - 10,695 10,695 Current tax assets - - - 1,147 1,147

Total Assets 650,793 529,639 14,971 1,618,529 2,813,932

Derivative financial liabilities held for trading - - - 21,262 21,262 Borrowings 305,668 953,922 5,079 980,719 2,245,388 Factoring payables 411 401 303 4,040 5,155 Other marketable securities issued - - - 293,280 293,280 Other payables 23 156 64 1,292 1,535 Taxes and liabilities and current period tax payable - - - 1,311 1,311 Provisions for liabilities and expenses - - - 13,015 13,015

Total Liabilities 306,102 954,479 5,446 1,314,919 2,580,946

Net Position 344,691 (424,840) 9,525 303,610 232,986

Derivative Financial Instruments (342,676) 426,376 (9,345) (98,415) (24,060)

2013 USD EUR Other TL Total

Banks 1,587 18,479 102 604 20,772 Derivative financial assets held for trading 16 23,013 - - 23,029 Available-for-sale financial assets - - - 27 27 Factoring receivables (*) 522,895 456,691 9,699 1,159,935 2,149,220 Tangible assets - - - 585 585 Intangible assets - - - 64 64 Prepaid expenses - - - 324 324 Other assets - - - - - Deferred tax assets - - - 2,433 2,433

Total Assets 524,498 498,183 9,801 1,163,972 2,196,454

Derivative financial liabilities held for trading 6 - - 1,336 1,342 Borrowings 259,929 1,169,508 6,750 473,597 1,909,784 Factoring payables 577 2,568 352 3,346 6,843 Other payables 4 241 39 589 873 Taxes and liabilities and current period tax payable - - - 1,638 1,638 Provisions for liabilities and expenses - - - 12,429 12,429 Deferred tax liabilities - - - - -

Total liabilities 260,516 1,172,317 7,141 492,935 1,932,909

Net position 263,982 (674,134) 2,660 671,037 263,545

Derivative financial instruments (268,447) 705,641 (117) (418,458) 18,619

(*) This includes the foreign currency-denominated factoring receivable of TL 524,199 (2013: TL

456,663) stated on the “TL” column on the balance sheet


(68)


The foreign exchange rates used by the Company as of 31 December 2014 and 2013 in the translation of its foreign currency- denominated assets and liabilities in to TL are as follows.

2014 2013

EUR 2.8207 2.9365 USD 2.3189 2.1343 GBP 3.5961 3.5114

Fair value measurement of financial instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (other than in a forced sale) between market participants at the measurement date. The best indication of fair value is a quoted price, if any, in an active market. The Company has estimated the fair values of its financial instruments, using relevant market information and adequate fair valuation techniques. However, using market information to measure fair values of financial instruments requires interpretation and judgment skills. Accordingly, the estimates presented in the accompanying financial statements are not necessarily indicative of the fair values that the Company could achieve in a current market transaction. Fair values of financial instruments are measured on the basis of reliable information from the capital markets in Turkey. Fair values of other financial instruments are measured with reference to the current price of a similar instrument or by using assumption techniques, such as discounting futures cash flows using current market interest rates. Fair values of short-term assets and liabilities are expected to be close to their carrying values due to the negligible effect of discount. Carrying values of factoring accounts, along with the provisions for doubtful accounts, are assumed to have been measured at fair value due to their short-term nature. Fair values of the loans received by 31 December 2014 are calculated as TL 2,258,362 (2013: TL 1,928.882), by discounting future cash flows using current market interest rates. Fair value hierarchy

Categorization of financial assets and liabilities, which are reflected in financial statements at fair value, into the following different levels based on observable inputs used to measure their fair values in accordance with TFRS 7: Level 1: Financial assets and liabilities are measured on the basis of the stock exchange prices quoted

for identical assets and or liabilities in active markets. Level 2: Financial assets and liabilities are measured on the basis of inputs, other quoted market prices

included in Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3: Financial assets and liabilities are measured on the basis of inputs that are unobservable in

active markets and cannot be used to measure the fair value of an identical asset or liability.


(69)


Fair value levels of financial instruments:

2014

Level 1 Level 2 Level 3

Financial assets at fair value - - - through profit or loss - - - Derivative financial assets held for trading - 569 - Available-for-sale financial assets 27 - - -

Total assets 27 569 -

Derivative financial liabilities held for trading - 21,262 - - -

Total liabilities - 21,262 -

2013

Level 1 Level 2 Level 3

Financial assets at fair value through profit or loss - - - Derivative financial assets held for trading - 23,029 - Available-for-sale financial assets 27 - -

Total assets 27 23,029 -

Derivative financial liabilities held for trading - 1,342 -

Total liabilities - 1,342 -

Since Allianz Yaşam ve Emeklilik A.Ş. shares are categorized as available-for-sale financial assets, and thus not listed on the stock exchange, their values are recognized at cost and not included in the table above. Capital management

In accordance with Article 12 of the Regulation on the Formation and Operations of Financial Leasing, Factoring and Financial Companies”, published in Official Gazette of 24 December 2013, it is mandatory to achieve and maintain a minimum shareholders’ equity to total assets ratio of 3%.


(70)


As of 31 December 2014, it is mandatory to achieve and maintain a minimum shareholders’ equity to total assets ratio of 3%.

2014 2013 Total Assets (A) 2,813,932 2,196,454 Total Shareholders’ Equity (B) 232,986 263,545 Total Shareholders’ Equity / Total Assets (B/A) 8% 12%

23. Provisions, contingent assets and liabilities

2014 Indefinite

Letters of guarantee given TL 7,512 2013 Indefinite

Letters of guarantee given TL 7,044

The Company issued letters of guarantee, amounting to TL 7,512, to courts and customs houses (2013: TL 7,044).

The Company measures its derivative instruments at fair value, and all positive changes in fair value are reflected in "derivative financial assets held for trading”, while negative differences are reflected in “derivative financial liabilities held for trading”. The following table shows the derivative instruments held for trading that represent the Company’s forward buy-sell contracts as of 31 December 2014 and 2013:

Forward Transactions

2014 2013 Value in

Foreign Currency

TL Value in Foreign

Currency

TL

Forward contract purchases

EUR 152,160 429,197 240,300 705,641 USD - - 1,100 2,348 TL 119,286 119,287 - - 548,484 707,989

Forward contract sales TL 217,702 217,702 418,458 418,458 USD 147,775 342,676 126,878 270,795 EUR 1,000 2,821 - - GBP 2,599 9,345 33 117 572,544 689,370

Total 1,121,028 1,397,359

24. Events after the reporting period

None

annual report 2014 · 2019-03-13 · koç group [s turnover omprises 8% of turkeys total gdp, and...

Documents