ŞEKER MORTGAGE FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) AS AT 30 JUNE 2015

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3 Statement of Financial Position (Balance Sheet) 1-2 Statement of Off-Balance Sheet Items 3 Statement of Profit or Loss 4 Statement of Profit or Loss and Other Comprehensive Income 5 Statement of Changes in Equity 6 Statement of Cash Flows Note 1 Organization and Nature of Operations 8 Note 2 Basis of Presentation of the Financial Statements 9-18 Note 3 Cash and Cash Equivalents 18 Note 4 Financial Assets And Liabilities At Fair Value Through Profit Or Loss 19 Note 5 Banks 20 Note 6 Financing Loans 20 Note 7 Doubtful Receivables Note 8 Tangible Assets 21 Note 9 Intangible Assets 22 Note 10 Deferred Tax Asset/ Liability 23 Note 11 Prepaid Expenses and Other Receivables 24 Note 12 Derivative Financial Liabilities Held for Trading 25 Note 13 Borrowing and Subordinated Liabilities 25 Note 14 Other Payables 26 Note 15 Deferred Income 26 Note 16 Tax Liabilities 26 Note 17 Provisions 27 Note 18 Shareholders Equity 28 Note 19 Operating Income 29 Note 20 Operating Expenses 29 Note 21 Other Operating Income 30 Note 22 Other Operating Expense 30 Note 23 Taxes On Income Note 24 Earnings / (Losses) Per Share 31 Note 25 Related Party Disclosures Note 26 Contingent Assets and Liabilities 33 Note 27 Financial Risk Management Note 28 Financial Instruments Note 29 Events After the Reporting Period 45

4 ŞEKER MORTGAGE FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) AS AT 30 JUNE 2015 (Currency: In Thousands of Turkish Lira (TL)) Reviewed Audited ASSETS Notes TL FC Total TL FC Total I. CASH AND CASH EQUIVALENTS ,245 12, ,826 10,827 II. FINANCIAL ASSETS AT FAIR VALUE THROUGH P/L (Net) 4 419,673 1, , ,376 4, , Financial assets held for trading Financial assets at fair value through profit or loss 6 348, , , , Derivative financial assets held for trading 70,923 1,259 72,182 33,892 4,057 37,949 III. BANKS 5 19,821 99, ,904 26,396 62,712 89,108 IV. RECEIVABLES FROM REVERSE REPURCHASE AGREEMENTS V. FINANCIAL ASSETS AVAILABLE-FOR-SALE (Net) VI. FINANCING LOANS 6 57,011-57,011 62,818-62, Consumer Loans 57,011-57,011 62,818-62, Credit Cards Commercial Loans with Installments VII. OTHER RECEIVABLES VIII. RECEIVABLES AT FOLLOW UP Financing Loans at Follow Up Specific Provisions (-) IX. DERIVATIVE FINANCIAL ASSETS HELD FOR RISK MANAGEMENT Fair value hedges Cash flow hedges Net foreign investment hedges X. INVESTMENT SECURITIES HELD TO MATURITY (Net) XI. INVESTMENTS IN ASSOCIATES (Net) XII. INVESTMENTS IN SUBSIDIARIES (Net) XIII. INVESTMENTS IN JOINT-VENTURES (Net) XIV. TANGIBLE ASSETS (Net) XV. INTANGIBLE ASSETS (Net) Goodwill Other XVI. PREPAID EXPENSES ,093 1, ,187 XVII. TAX ASSET OF CURRENT PERIOD XV. DEFERRED TAX ASSET XVI. OTHER ASSETS SUBTOTAL 498, , , ,321 78, ,973 XVII. (Net) Assets held for sale Assets of discontinued operations TOTAL ASSETS 498, , , ,321 78, ,973 The accompanying notes are an integral part of these financial statements. 1

5 ŞEKER MORTGAGE FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) AS AT 30 JUNE 2015 (Currency: In Thousands of Turkish Lira (TL)) Reviewed Audited LIABILITIES Notes TL FC Total TL FC Total I. DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING 12-1,618 1, II. BORROWINGS , , , ,153 III. FACTORING PAYABLES IV. LEASING PAYABLES Financial Leasing Payables Operating Leasing Payables Other Deferred Financial Leasing Payables V. SECURITIES ISSUED (Net) Bills Asset Backed Securities Bonos VI. MISCELLANEOUS PAYABLES ,084 69, ,556 39,683 VII. OTHER LIABILITIES VIII. DERIVATIVE FINANCIAL LIABILITIES HELD FOR RISK MANAGEMENT Fair value hedges Cash flow hedges Net foreign investment hedges IX. TAXES X. PROVISIONS 17 1,540-1,540 2,164-2, Restructuring reserves Reserve for employee benefits Other provisions ,276-1,276 1,971-1,971 XI. DEFERRED INCOME XII. TAX LIABILITY OF CURRENT PERIOD XIII. DEFERRED TAX LIABILITY ,435-1,435 XIV. SUBORDINATED LOANS 13 23,613-23,613 23,593-23,593 SUBTOTAL 27, , ,382 28, , ,239 XV. LIABILITIES FOR ASSETS HELD FOR SALE AND LIABILITIES OF DISCONTINUED OPERATIONS (Net) Held for sale Discontinued operations XVI. EQUITY 30,772-30,772 32,734-32, Paid-in capital ,000-26,000 26,000-26, Capital reserves Share premium Share cancellation profits Securities value increase fund Other comprehensive income reclassified to profit or loss Other comprehensive income non- reclassified to profit or loss Profit reserves 18 6,710-6, Legal reserves Status reserves Extraordinary reserves 6,096-6, Other profit reserves Profit or loss (1,962) - (1,962) 6,202-6, Retained Earings/(Accumulated losses) Current period net profit/loss (1,962) - (1,962) 6,202-6,202 TOTAL LIABILITIES 57, , ,154 61, , ,973 The accompanying notes are an integral part of these financial statements. 2

6 ŞEKER MORTGAGE FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF OFF-BALANCE SHEET ITEMS AS AT 30 JUNE 2015 (Currency: In Thousands of Turkish Lira (TL)) Reviewed Audited OFF-BALANCE SHEET ITEMS Notes TL FC Total TL FC Total I. RISK-BEARING FINANCING ACTIVITIES II. NON RISK-BEARING FINANCING ACTIVITIES III. COLLATERALS RECEIVED , , , ,669 IV. COLLATERALS GIVEN , , , ,555 V. COMMITMENTS 2,039-2,039 1,896-1, Irrevocable commitments Revocable commitments 1,982-1,982 1,839-1, Lease commitments Finance lease commitments Operating lease commitments Other revocable commitments 1,982-1,982 1,839-1,839 VI. DERIVATIVE FINANCIAL INSTRUMENTS 375, , , , , , Derivative financial instruments held for risk management Fair value hedges Cash flow hedges Net foreign investment hedges Trading derivatives , , , , , , Forward foreign currency purchases/sales Currency and interest rate swaps purchases/sales , , , , , , Currency, interest rate and security options purchases/sales Currency futures purchases/sales Others VII. CUSTODY AND PLEDGED ITEMS TOTAL OFF-BALANCE SHEET ITEMS 1,391, ,121 1,830,162 1,279, ,663 1,673,595 The accompanying notes are an integral part of these financial statements. 3

7 ŞEKER MORTGAGE FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF PROFIT OR LOSS FOR THE INTERIM PERIOD ENDED 30 JUNE 2015 (Currency: In Thousands of Turkish Lira (TL)) INCOME AND EXPENSE ITEMS Reviewed Not Reviewed Reviewed Not Reviewed Current Period Current Period Prior Period Prior Period Notes ( ) ( ) ( ) ( ) I. OPERATING INCOME 15,931 6,037 29,900 26, FACTORING INCOME Interest income from factoring Discounted Other Fees and commisions paid Discounted Other INCOME FROM FINANCING LOANS 19 15,931 6,037 29,900 26, Interest income from financing loans 14,679 5,385 27,487 24, Fees and commissions received from financing loans 1, ,413 1, INCOME FROM LEASING Financial leasing income Operating Leasing income Fees and commisions from leasing II. FINANCIAL EXPENSES (-) (6,202) (3,241) (4,941) (2,511) 2.1. Interest on borrowings (2,233) (1,209) (1,969) (1,060) 2.2. Interest on factoring payables Finance lease expenses Interest on shares issued Other interest expenses (1) - (24) (9) 2.6. Fees and commissions paid (3,968) (2,032) (2,948) (1,442) III. Gross (I+II) 9,729 2,796 24,959 23,783 IV. OPERATING EXPENSES (-) 20 (4,350) (2,183) (4,999) (2,638) 4.1. Personnel Expenses 20.1 (1,905) (933) (2,016) (994) 4.2. Reserve for employee termination benefits (27) (14) (27) (14) 4.3. Development and Research Expenses General administrative expenses 20.2 (2,418) (1,236) (2,956) (1,630) 4.5. Others V. GROSS OPERATING EXPENSES 5, ,960 21,145 VI. OTHER OPERATING INCOME 21 63,934 17,489 31,573 12, Interest income from bank loans 2,131 1,108 1, Interest income from reverse repurchase agreements Interest income from securities Trading securities Financial assets at fair value through profit or loss Financial assets available-for-sale Investment securities held-to-maturity Dividend Income Trading account income 60,890 15,592 7,883 (466) Derivative financial instruments 60,890 15,592 7,883 (466) Others Foreign exchange gain ,395 11, Others VII. PROVISIONS FOR RECEIVABLES AT FOLLOW-UP (272) (56) (248) (163) VIII. OTHER OPERATING EXPENSE (-) 22 (71,476) (21,002) (43,330) (23,004) 8.1. Impairment losses on securities Impairment losses on financial assets at fair value through profit/loss Impairment losses on financial assets available-for -sale Impairment losses on investment securities held-to-maturity Impairment losses on non-current assets Impairment losses on tangible assets Impairment losses assets held for sale and assets of discontinued operations Impairment losses on goodwill Impairment losses on other intangible assets Impairment losses on associates, subsidiaries and joint-ventures Loss on derivative financial instruments, Net (9,036) (6,987) (22,220) (18,627) 8.4. Foreign exchange loss, Net (62,440) (14,015) (21,023) (4,319) 8.5. Others - - (87) (58) IX. NET OPERATING PROFIT/LOSS (I+ +VI) (2,435) (2,956) 7,955 9,980 X. INCOME SURPLUS AFTER MERGER OPERATIONS - - XI. NET MONETARY POSITION PROFIT/LOSS - - XII. OPERATING PROFIT/LOSS BEFORE TAX (VII+VIII+IX) (2,435) (2,956) 7,955 9,980 XIII. OPERATING TAX PROVISION (±) 23 (473) (589) 1,585 1, Current tax provision Deferred tax expense effect (+) 6,880 (331) 4,177 3, Deferred tax income effect(-) (7,353) (258) (2,592) (1,333) XIV. OPERATING PROFIT/LOSS (X±XI) (1,962) (2,367) 6,370 7,987 XV. INCOME FROM DISCONTINUED OPERATIONS Income from assets held for sale Income from sale of associates, subsidiaries and joint-ventures Others XVI. EXPENSES ON DISCONTINUED OPERATIONS (-) Expense on assets held for sale Loss on sale of associates, subsidiaries and joint-ventures Others XVII. PROFIT/LOSS BEFORE TAXES ON DISCONTINUED OPERATIONS (XIII-XIV) XVIII. PROVISION FOR TAXES OF DISCONTINUED OPERATIONS (±) Current tax expense Deferred tax expense Deferred tax income XIX. NET PROFIT/LOSS AFTER TAXES ON DISCONTINUED OPERATIONS (XV±XVI) XX. NET PROFIT/LOSS (XII+XVII) (1,962) (2,367) 6,370 7,987 The accompanying notes are an integral part of these financial statements. 4

8 ŞEKER MORTGAGE FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE INTERIM PERIOD ENDED 30 JUNE 2015 (Currency: In Thousands of Turkish Lira (TL)) RECOGNIZED INCOME AND EXPENSE ITEMS UNDER EQUITY Reviewed Reviewed I. CURRENT PERIOD PROFIT/LOSS (1,962) 6,370 II. OTHER COMPREHENSIVE INCOME Items that will not be Reclassified to Profit or Loss Tangible Assets Revaluation Increases/Decreases Intangible Assets Revaluation Increases/Decreases Employee Benefits Re-Measuring Loss/Income Other Comprehensive Income that will not be Reclassified to Profit or Loss Taxes related with Comprehensive Income that will not be Reclassified to Profit or Loss Current Tax Income/Expense Deferred Tax Income/Expense Items that may be Reclassified subsequently to Profit or Loss Foreign Exchange Differences for Foreign Currency Transactions Value Increases or Decreases on Assets Held for Sales Cash Flow Hedge Income/Losses Net Investment Hedge Income/Losses Other Comprehensive Income that may be Reclassified subsequently to Profit or Loss Taxes related with Comprehensive Income that may be Reclassified subsequently to Profit or Loss Current Tax Income/Expense Deferred Tax Income/Expense - - III. TOTAL COMPREHENSIVE INCOME (I+II) (1,962) 6,370 The accompanying notes are an integral part of these financial statements. 5

9 ŞEKER MORTGAGE FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF CHANGES IN EQUITY FOR THE INTERIM PERIOD ENDED 30 JUNE 2015 (Currency: In Thousands of Turkish Lira (TL)) CHANGES IN EQUITY Paid-in Capital Capital Share Cancellation Reserves Share Premium Profits Other Accumulated Comprehensive Income that will be not reclassified to Profit/Loss Other Accumulated Comprehensive Income that may be reclassified subsequently to Profit/Loss Other Capital Reserves Profit Reserves Legal Reserves Prior Period ( ) (Reviewed) I. Balance at the Beginning of the Period ( ) 26, ,521 II. Correction Made According to TAS Effect of Correction of Errors Effect of Changes in Accounting Policies III. New Balance (I+II) 26, ,521 IV. Total Comprehensive İncome V. Cash Capital Increase VI. Capital Increase from internal reserves VII. Paid-in-Capital Inflation Adjustment VIII. Convertible Bonds IX. Subordinated Loans X. Increases / Decreases due to other changes XI. Profit for the Period ,370-6,370-6,370 XII. Profit Distribution (159) (159) Dividend Paid Transfer to Reserves (159) (159) Other Balance at the End of the Period ( ) 26, ,370 32,891 Current Period ( ) (Reviewed) I. Balance at the Beginning of the Period ( ) 26, ,202 6, ,734 II. Correction Made According to TAS Effect of Correction of Errors Effect of Changes in Accounting Policies III. New Balance (I+II) 26, ,202 6, ,734 IV. Total Comprehensive İncome V. Cash Capital Increase VI. Capital Increase from internal reserves VII. Paid-in-Capital Inflation Adjustment VIII. Convertible Bonds IX. Subordinated Loans X. Increases / Decreases due to other changes XI. Profit for the Period (1,962) - (1,962) - (1,962) XII. Profit Distribution , ,892 - (6,202) (6,202) Dividend Paid Transfer to Reserves , ,892 - (6,202) (6,202) Other Balance at the End of the Period ( ) 26, , ,096 - (1,962) - (1,962) - 30,772 Statuory Reserves Extraordinary Reserves Profit Reserves Current Period Profit/Loss Prior Period Profit/Loss Net Current Period Profit/Loss Non-Controlling Interest Total Equity 1, Revaluation increase/decrease of property and equipment, 2, Employee benefits re-measuring income/loss, 3, Other (Other comprehensive income related with equity pick up investment portions and accumulated other comprehensive income components that will not be re-classified to profit/loss) 4, Foreign currency translation differences for foreign operations, 5, Net change in fair value of available-for-sale financial assets, 6, Other (Cash flow hedge income/ (losses), accumulated other comprehensive income components that may re-classified subsequently to profit/loss) The accompanying notes are an integral part of these financial statements. 6

10 ŞEKER MORTGAGE FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF CASH FLOWS FOR THE INTERIM PERIOD ENDED 30 JUNE 2015 (Currency: In Thousands of Turkish Lira (TL)) STATEMENT OF CASH FLOWS Reviewed Reviewed Notes ( ) ( ) A. CASH FLOWS FROM OPERATIONS 1.1 Operating profit/(loss) before changes in operating assets and liabilities 39,044 3, Interests received 23,046 14, Lease Expenses (53) (94) Dividends received Fees and commissions received 1,224 2, Other income Collection from previously written-off loans and other receivables Payments to personnel and service suppliers (4,297) (4,905) Taxes paid (178) (201) Others 19,028 (8,919) 1.2 Changes in operating assets and liabilities (9,775) (25,987) Net (increase) decrease in financing loans (24,865) (75,279) Net (increase) decrease in other assets (1,932) (15,551) Net (increase) decrease in borrowings (11,893) 72, Net (increase) decrease in matured payables Net (increase) decrease in other liabilities 28,915 (7,786) I. Net cash (used in)/provided from operations 29,269 (22,979) B. CASH FLOWS FROM INVESTING ACTIVITIES 2.1 Cash paid for purchase of associates, subsidiaries and joint-ventures Cash obtained from sale of associates, subsidiaries and joint-ventures Purchases of tangible assets 8, 9 (59) (104) 2.4 Sales of tangible assets Cash paid for purchase of financial assets available-for-sale Cash obtained from sale of financial assets available-for-sale Cash paid for purchase of investment securities held-to-maturity Cash obtained from sale of investments held-to-maturity Others - - II. Net cash used in investing activities (59) (104) - C. CASH FLOWS FROM FINANCING ACTIVITIES Cash obtained from funds borrowed and securities issued Cash used for repayment of funds borrowed and securities issued Equity instruments issued Dividends paid Payments for finance leases Others III. Net cash (used in)/provided from financing activities IV. Effect of change in foreign exchange rate on cash and cash equivalents - - V. Net increase/(decrease) in cash and cash equivalents 29,210 (23,083) VI. Cash and cash equivalents at beginning of period 88,141 65,149 VII. Cash and cash equaivalents at the end of period ,351 42,066 The accompanying notes are an integral part of these financial statements. 7

11 For the Interim Period Ended 30 June ORGANIZATION AND NATURE OF OPERATIONS Şeker Mortgage Finansman A.Ş. ( the Company ) was established on 9 January 2008 under the title of İstanbul Finansman Anonim Şirketi after obtaining establishment license from Banking Regulation and Supervision Agency ( BRSA ) in November 2007 with the related Decree No: 90 Regulation on Lending Transactions on 30 September 1983, and within the framework of other Laws, Decrees and Regulations related to Banking Law No: 5411 in order to operate as a consumer finance company. The Company s financial activities were deemed appropriate in accordance with Article 7 of the Regulation on Leasing, Factoring and Financing Companies Establishment and Operations based on Banking Regulation and Supervision Board decision No: 2715 on 24 July The main purpose and business area of the Company is to provide financing to consumers by crediting for procurement of all kinds of goods and services in accordance with the related regulations. The Company changed its title as İstanbul Mortgage Finansman A.Ş. with the Board of Directors decision on 31 July Title change was registered by İstanbul Trade Registry Office on 8 August 2008 and published on the Trade Registry Gazette with numbered 7138 on 29 August The Company converted its title to Şeker Mortgage Finansman A.Ş. with the Board of Directors decision on 14 October Title change was registered by İstanbul Trade Registry Office on 20 October 2008 and published on the Trade Registry Gazette with numbered 7677 on 26 October Share transfer negotiations between the Company s main shareholder Ipotek Financing S.A (domiciled in Luxembourg) and Şekerbank T.A.Ş. approved by BRSA with the letter numbered on 22 September 2010, was resulted on 21 December Şekerbank T.A.Ş. has taken over units of stocks which makes up 51% of the Company s shares belonging to Ipotek Financing S.A. with the transfer share agreement. The Company s marketing, sales, financing and lending activities were started by the campaign began on 20 April 2011 and carried out with the Şekerbank T.A.Ş. by the permission which given to Şekerbank T.A.Ş. based on the BRSA s decision no: 3993 on 31 December 2010 and published on the Official Gazette numbered (5.Repeating) and relation to introduction of the Company s products through branches and alternative distribution channels. The Company s primary objective is to operate in the field of housing finance. The Company registered at the following address: Barbaros Bulvarı No: 149 Kat: 7 Balmumcu, İstanbul/Türkiye The shareholder structure of the Company is as follows: Share (%) Share (%) Şekerbank T.A.Ş Ipotek Financing S.A Şeker Yatırım Menkul Değerler AŞ <1 <1 Şeker Finansal Kiralama AŞ <1 <1 Şeker Faktoring AŞ <1 <1 Total The number of personnel of the Company is 29 as at 30 June 2015 (31 December 2014: 33). 8

12 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS 2.1 Basis of Presentation Accounting Principles The Company prepared accompanying financial statements in accordance with the Regulation on Accounting Practices and Financial Statements of Financial Leasing, Factoring and Financing Companies and the Communiqué on Uniform Chart of Accounts and Prospectus to be implemented by Financial Leasing, Factoring and Financing Companies and on Financial Statements to be announced to Public published in the Official Gazette dated 24 December 2013 and numbered and Turkish Accounting Standards and Turkish Financial Reporting Standards published by Public Oversight Accounting and Auditing Standards Institute (POA) and other regulations, communiqués, and circulars (all of them referred to Reporting Standards ) announced by BRSA in respect of accounting and financial reporting. The Company s financial statements as of and for the interim period ended 30 June 2015 have been approved by the Board of Directors on 10 August The General Assembly has the power to amend the financial statements after their issue. Additional paragraph for convenience translation to English The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries, in which the accompanying financial statements are to be distributed, and International Financial Reporting Standards ( IFRS ), may have significant influence on the accompanying condensed interim financial statements. Accordingly, the accompanying condensed interim financial statements are not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in such countries and IFRS Functional and presentation currency The presentation and functional currency of the Company is TL Change in accounting policies Changes in accounting policies are applied retrospectively and the prior year financial statements are restated. There is no change in the accounting policies Accounting Estimates The preparation of financial statements in conformity with Reporting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Accounting estimates mainly used are presented in the following note: Note 4 Financial assets at fair value through profit or loss 9

13 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.1 Basis of Presentation (continued) New standards and interpretations adopted as at 30 June 2015 The standards and interpretations adopted in The Company applied all of the relevant and required standards and interpretations of TAS/TFRS as at 30 June Standards and interpretations not yet issued as at 30 June 2015 There have been new standards and interpretations not yet adopted to the accompanying financial statements as at and for the interim period ended 30 June 2015 and have not been applied in preparing these financial statements. Those which may be relevant to the Company are set out below; Standards issued but not yet effective and not early adopted TFRS 9 Financial Instruments Classification and measurement As amended in December 2012, the new standard is effective for annual periods beginning on or after 1 January Phase 1 of this new TFRS 9 introduces new requirements for classifying and measuring financial assets and liabilities. The amendments made to TFRS 9 will mainly affect the classification and measurement of financial assets and measurement of fair value option (FVO) liabilities and requires that the change in fair value of a FVO financial liability attributable to credit risk is presented under other comprehensive income. Early adoption is permitted. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company. TAS 16 and TAS 38 Clarification of acceptable methods of depreciation and amortization The amendments to TAS 16 Property, Plant and Equipment explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment. The amendments to TAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortization methods for intangible assets is inappropriate. The amendments are effective for annual periods beginning on after 1 January 2016, and are to be applied prospectively. Early adoption is permitted. The Company does not expect that these amendments will have significant impact on the financial position or performance of the Company. Disclosure Initiative (Amendments to TAS 1) The narrow-focus amendments to TAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing TAS 1 requirements. In most cases the amendments respond to overly prescriptive interpretations of the wording in TAS 1. The amendments relate to the following: materiality, order of the notes, subtotals, accounting policies and disaggregation. The amendments apply for annual periods beginning on or after 1 January Early adoption is permitted. The Company does not expect that these amendments will have significant impact on the financial position or performance of the Company. 10

14 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.1 Basis of Presentation (continued) New standards and interpretations adopted as at 30 June 2015 (continued) Improvements to TFRSs The IASB issued Annual Improvements to IFRSs Cycle. The amendments are effective as of 1 January Earlier application is permitted. The Company does not expect that these amendments will have significant impact on the financial position or performance of the Company. Annual Improvements to TFRSs Cycle TFRS 5 Non-current Assets Held for Sale and Discontinued Operations The amendments clarify the requirements of TFRS 5 when an entity changes the method of disposal of an asset (or disposal Company) and no longer meets the criteria to be classified as held-for-distribution. TFRS 7 Financial Instruments: Disclosures TFRS 7 is amended to clarify when servicing arrangement are in the scope of its disclosure requirements on continuing involvement in transferred financial assets in cases when they are derecognized in their entirety. TFRS 7 is also amended to clarify that the additional disclosures required by Disclosures: Offsetting Financial Assets and Financial Liabilities (Amendments to TFRS 7). TAS 19 Employee Benefits TAS 19 has been amended to clarify that high-quality corporate bonds or government bonds used in determining the discount rate should be issued in the same currency in which the benefits are to be paid. TAS 34 Interim Financial Reporting TAS 34 has been amended to clarify that certain disclosure, if they are not included in the notes to interim financial statements, may be disclosed elsewhere in the interim financial report i.e. incorporated by cross-reference from the interim financial statements to another part of the interim financial report (e.g. management commentary or risk report). The 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 financial statements. However, these standards, interpretations and amendments to existing IFRS standards are not yet adapted/issued to TFRS by the POA, thus they do not constitute part of TFRS. Such standards, interpretations and amendments that are issued by the IASB but not yet issued by the POA are referred to as IFRS or IAS. The Company will make the necessary changes to its financial statements after the new standards and interpretations are issued and become effective under TFRS. IFRS 9 Financial Instruments Hedge Accounting and amendments to TFRS 9, TFRS 7 and TAS 39 - (2013) In November 2013, the IASB issued a new version of IFRS 9, which includes the new hedge accounting requirements and some related amendments to IAS 39 and IFRS 7. Entities may make an accounting policy choice to continue to apply the hedge accounting requirements of IAS 39 for all of their hedging transactions. This standard is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. 11

15 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.1 Basis of Presentation (continued) New standards and interpretations adopted as at 30 June 2015 (continued) IFRS 9 Financial Instruments (2014) IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and de-recognition of financial instruments from TMS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company. 2.2 Summary of significant accounting policies Offsetting Financial assets and liabilities are offset and net amount is reported in the balance sheet when there is legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously Interest Income and Expenses Total interest income / expense arising from financial loans measured at fair value through profit or loss are accounted on interest income from financing loans. Other income and expenses are accounted on an accrual basis by using the effective interest rate method Fee and commissions income and expenses Fees and commissions received and paid, and other fees and commissions paid to financial institutions are calculated according to either on an accrual basis of accounting or by using effective interest rate method depending on nature of fees and commissions, incomes derived from agreements and asset purchases from third parties are recognized as income when realized. 12

16 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of significant accounting policies (continued) Tangible Assets Tangible assets are carried at acquisition cost less accumulated depreciation and impairment losses. Subsequent expenditure Expenditure incurred to replace a component of an item of tangible assets that is accounted for separately, including major inspection and maintenance and repair costs, are capitalized. Other subsequent expenditures are capitalized only when it increases the future economic benefits embodied in the item of tangible assets. All other expenditures are recognized in the statement of profit or loss as an expense as incurred. Depreciation Tangible assets are depreciated over the estimated useful lives of the related assets from the date of acquisition or the date of installation, on a straight-line basis over the cost. Leasehold improvements are depreciated over the lower of the periods of the respective leases and useful lives, on a straight-line basis. The estimated useful lives of tangible assets are as follows: (Years) Furniture and Fixtures 4-10 Leasehold improvements 5 Expenditure incurred to replace a component of an item of tangible assets is capitalized and depreciated over the remaining life of related assets. Gain or loss on disposal of tangible assets is recorded as other income or other expenses, respectively Intangible assets Intangible assets comprise software and rights. Intangible assets are carried at acquisition cost less accumulated amortization and impairment losses. Amortization rate used for licenses is 7% and for software products is 33%, annually Borrowing Costs All borrowing costs are recognized in the statement of profit or loss in the period they occur Financial Instruments Financial instruments are composed of cash and cash equivalents, financing loans and borrowings. Cash and equivalents Cash and cash equivalents comprise cash and balances with banks with an original maturity of three months or less. Cash and cash equivalents are short term and highly liquid assets which can easily be converted into cash, with an original maturity of maximum three months and without carrying an insignificant risk of impairment. Balances with banks are recognized at their acquisition costs and measured at their amortized cost by using effective interest rate method. 13

17 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of significant accounting policies (continued) Financial Instruments (continued) Financial Assets at Fair Value Through Profit and Loss (Financing Loans) The Company is funding its growing long term and fixed interest rate loan portfolio through long term floating interest rate foreign currency resources provided from international markets. The Company transforms the foreign currency liquidity which is created by funds provided from international markets to TL liquidity through long term swap contracts, as a result of this situation the Company can both provide TL fund for the long term fixed rate loans and provide protection against interest rate risk. The Company reflects swaps, used through funding long term and fixed interest rate TL loan portfolio, with fair value in the financial statements. The Company has initially classified these long terms and fixed interest rate TL loan portfolio funded through swaps as financial assets at fair value through profit and loss and measures them at fair value in the financial statements. 348,750 TL of the mortgage loans amounts are classified under the account of financial asset at fair value through profit and loss (31 December 2014: 326,484 TL). Financing Loans The financing loans given to customers are classified as consumer loans and recognized initially at their fair value less transaction costs. Subsequent to initial recognition financing loans are measured at their amortized cost by using effective interest rate method less impairment losses, if any. Borrowings Borrowings are recognized at their acquisition cost less transaction costs. Subsequent to initial recognition, borrowings are measured at their amortized cost by using effective interest rate method. The difference between the amortized amount and the cost less transaction costs is recorded as financial expense in the statement of profit or loss during the borrowing period. Impairment of financial assets The Company evaluates whether there exists objective evidence of impairment on a financial asset or on a group of financial assets in each reporting period. If there exists such an indicator, the Company determines the amount of the impairment. Financial assets or group of financial assets are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such indication exists, the Company estimates the amount of impairment. Impairment loss incurs if, and only if, there is objective evidence that the expected future cash flows of financial asset or group of financial assets are adversely affected by an event(s) ( loss event(s) ) incurred subsequent to recognition. The losses expected to incur due to future events are not recognized even if the probability of loss is high. 14

18 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of significant accounting policies (continued) Financial Instruments (continued) Provision for financial loans are recognized as an expense and written off against the profit for the year. Provision for non-performing receivables is allocated assessing the Company s loan portfolio, quality and risk and considering the economic conditions and other factors including the related legislation against the potential losses that may be resulted from the current financial loans. In accordance with the Regulation on Accounting Practices and Financial Statements of Financial Leasing, Factoring and Financing Companies published in the Official Gazette dated 24 December 2013 and numbered and the Communiqué on Procedures and Principles for the Provisions to be set aside by Financial Leasing, Factoring and Financing Companies for their Receivables published in the Official Gazette dated 20 July 2007 and numbered by BRSA, the Group s specific provision rate allocated for the below finance lease receivables considering their collaterals as at 1 January 2008 are as follows: 20%, at a minimum, for finance lease receivables overdue more than 90 days not exceeding 180 days, 50%, at a minimum, for finance lease receivables overdue more than 180 days not exceeding 365 days; and 100%, at a minimum, for finance lease receivables overdue more than 1 year. Recognition and Derecognition The financial assets and liabilities are recognized in the balance sheet when the Company becomes a contractual party of a contract. A financial asset is fully or partially derecognized when the control over the contractual rights that comprise that asset is lost. A financial liability is derecognized when it is redeemed, cancelled or expired Forwards, options and other derivative transactions Derivative transactions are classified as forward foreign currency purchases/sales, swaps, options and futures are classified trading purposes in accordance with the Turkish Accounting Standard 39 ( TAS 39 ) Financial Instruments: Recognition and Measurement. Derivatives are initially recognized at their purchase costs including the transaction costs. Subsequently, the derivative transactions are measured at their fair values and recorded on the balance sheet under derivative financial assets held for trading or derivative financial liabilities held for trading, respectively. Subsequent fair value changes for trading derivatives are recorded under statement of profit or loss. Additionally, contractual value of derivatives are recorded to off balance sheet accounts Foreign Currency Transactions Income and expenses from transactions in foreign currencies have been translated into Turkish Lira ( TL ) at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated into TL at the exchange rates prevailing at the balance sheet date. Exchange gains or losses arising from conversion of foreign currency items have been included in the statement of profit or loss. The foreign exchange rates used by the Company at 30 June 2015 and 31 December 2014 are as follows: US Dollar Euro Great Britain Pound

19 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) Earnings/Loss per share Earnings/Loss per share is calculated by dividing net income/loss for the period by the weighted average number of shares of the Company during the period. Weighted average number of shares, is the sum of the number of ordinary shares at the beginning of the period and number of shares recalled or issued during the period, multiplied by a time-weight factor Events after the reporting period Events after the reporting period are those events, favorable and unfavorable, that occur between the end of the reporting period and the date when the financial statements are authorized for issue. In accordance with Turkish Accounting Standard 10, Events after the Reporting Period (TAS 10), if there occur events that provide evidence of conditions that existed at the end of the reporting period, they are adjusted in the financial statements. If the events are indicative of conditions that arose after the reporting period, they are disclosed in the notes to the financial statements Provisions, commitments and contingencies In accordance with the Turkish Accounting Standard 37 ( TAS 37 ), Provisions, Contingent Liabilities and Contingent Assets, a provision is recognized when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the specified criteria are not met, the Company discloses the related issues in the accompanying notes. Contingent assets are disclosed in the notes and not recognized unless it is realized Changes in Accounting Estimates and Errors Changes in accounting estimates and errors are presented regarding to Turkish Accounting Standard 8 Accounting Policies, Changes in Accounting Estimates and Errors ( TAS 8 ). If the changes in accounting estimates relate to a specific period, they are applied in the period they relate to whereas if the changes are related to future periods, they are applied both in the period the change is made and prospectively in the future periods. There has not been any significant change in the accounting estimates of the Company in the current year Leasing Transactions Finance Lease Finance lease is the transfer of the all risks and benefits related to the ownership of the assets to the lessee in accordance with a finance lease agreement. Leased assets are presented by the lower of present value of the minimum lease payables as of the balance sheet date and the fair value of the assets less accumulated depreciation and impairment costs in the financial statements. The lease payables decrease by the payments of the principal and the interest payments are recorded in the statement of profit or loss as an expense. Operational Lease Operational lease transactions are recognized in the statement of profit or loss in the accrual basis they incur Related Parties In accordance with the Turkish Accounting Standard ( TAS 24 ) Related Party Disclosures shareholders, key management and board members, in each case together with companies controlled by or affiliated with them, and associated companies are considered and referred to as related parties. Related party transactions consist of the transfer of the assets and liabilities between related parties by a price or free of charge. 16

20 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of significant accounting policies (continued) Taxes on income Corporate tax Taxes on income comprise current tax and the change in the deferred taxes. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years. Deferred Taxes Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. According to the Turkish Accounting Standard 12 ( TAS 12 ) Income Taxes, deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted on substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to extend that it is no longer probable that the related tax benefit will be realized Employee Benefits In accordance with the existing social legislation in Turkey, the Company is required to make lump-sum payments to employees whose employment is terminated due to retirement or for reasons other than resignation or misconduct. Those payments are calculated with basis of taking the upper limit of severance payment at the balance sheet date. Turkish Ministry of Labor and Social Security has announced the upper limit of severance payment as full TL 3, for the related period (31 December 2014: full TL 3,438.22). Reserve for Severance Payments In accordance with the Turkish Accounting Standard 19 ( TAS 19 ) Employee Benefits, the Company calculated the severance pay liability incurred due to retirement of its employees by discounting the future liabilities to their present values, by using a statistical method and reflected to the financial statements. The main assumptions used are as follows: Net Discount Rate 8,10% 8,10% Interest Rate 5,0% 5,0% Expected Severance Payment Rate 100% 100% Retirement Plan The Company does not have any retirement plans. Short-term employment benefits According to TAS 19, the liabilities in accordance with the services in an accounting period, reflected to the financial statements without discount Segment Reporting Since the Company does not have reportable segments whose performance is monitored separately by the Company s decision maker, segment information is not considered necessary. 17

21 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of Significant Accounting Policies (continued) Statement of Cash Flows The Company prepares statement of cash flows to inform users of financial statements about changes in net assets and ability to direct financial structure, amounts and timing of cash flows according to changing situations. In the statement of cash flows, current period cash flows are grouped according to operating, financing, and investing activities. Operating cash flows are cash flows resulting from activities in scope of Company s main operating scope. Cash flows related to investing activities are cash flows resulting from investing activities (fixed investments and financial investments) of the Company. Cash flows related to financing activities comprise of funds used in financing activities of the Company and their repayments. Cash and cash equivalents that are basis for the statement of cash flows for the periods ended 30 June 2015 and 31 December 2014 are as follows; Cash at Banks (less than three months) 131,009 99,869 Accrued Interest Restricted Cash (13,799) (11,794) Total 117,351 88,141 (*) As at 30 June 2015, the Company s accounts at U.S Bank and Istanbul Takas and Saklama Bankası A.Ş. ( Takasbank ) compromised asset side of loans which were borrowed from Overseas Private Investment Corporation ( OPIC ). TL 1,285 of time deposits have been restricted until the borrowed amount will be appreciated as Mortgage Loans under the borrowing agreement (31 December 2014: 1,110). TL 12,081 has been established in the Central Bank reserves (31 December 2014: 10,684). TL 433 of time deposits have been restricted at Şekerbank T.A.Ş. accounts for derivative transactions (31 December 2014: None). 3 CASH AND CASH EQUIVALENTS As at 30 June 2015 and 31 December 2014, the details of the cash and cash equivalents are as follows. TL FC TL FC Central Bank of Turkey 1 12, ,826 Total 1 12, ,826 Required Reserve Ratios: Finance companies used after 4 October 2013 over the amount of the liability for loans is calculated according to the original term foreign currency TL 12,081 from the account balance is all about. (31 December 2014: 10,684) a) Liabilities denominated in Turkish Lira 1) up to 1 year (1 year included) is 11,5% 2) up to 3 years (3 year included) is 8% 3) longer than 3 years is 5% b) Liabilities denominated in Foreign Currency 1) up to 1 year (1 year included) is 20% 2) up to 2 year (2 year included) is 14% 3) up to 3 years (3 year included) is 8% 4) up to 5 years (5 year included) is 7% 5) longer than 5 years is 6% 18