MENKA MENKUL DEĞERLER TİCARETİ ANONİM ŞİRKETİ INDEPENDENT AUDIT REPORT FOR THE YEAR ENDED 31 DECEMBER 2005

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1 Report N o : SYMM/116/ MENKA MENKUL DEĞERLER TİCARETİ ANONİM ŞİRKETİ INDEPENDENT AUDIT REPORT FOR THE YEAR ENDED 31 DECEMBER We have audited the accompanying balance sheet of Menka Menkul Değerler Ticareti A.S. (the Company ) as of, the related statements of income, shareholders equity and the statement of cash flows for the year then ended, prepared in accordance with accounting standards announced by the Capital Market Board ( CMB ). Our audit is conducted in accordance with generally accepted auditing standards and therefore includes the control of accounting records related with balances and transactions and other auditing techniques and other auditing methodology. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audit. In our opinion, based on audit performed, the financial statements referred to above present fairly, in all material aspects, the financial position of the Company as of, and the results of its operations and its cash flows for the year ended, in accordance with accounting standards announced by Capital Market Board (XI/25). Since the financial statements for were prepared for the first time as defined in Announcement numbered XI/25 of Capital Market Board, no comparison with the previous year was given. SAYGIN YEMİNLİ MALİ MÜŞAVİRLİK VE DENETİM A.Ş. A member of Hayati Ecer Partner, Chief Auditor Istanbul, 17 March 2006

2 MENKA MENKUL DEĞERLER TİCARET ANONİM ŞİRKETİ BALANCE SHEET AS OF 31 DECEMBER Footnote References ASSETS Current Assets Cash and Cash Equivalents Marketable Securities (net) Trade Receivables (net) Due from Related Parties (net) Other Receivables (net) Other Current Assets Fixed Assets Financial Assets Fixed (net) Total Assets LIABILITIES Short Term Liabilities Short Term Portions of Long Term Borrowings (net) Finance Lease Payables (net) Trade Payables (net) Due to Related Parties (net) Deferred Tax Liabilities (net) Other Liabilities (net) Long Term Liabilities Finance Lease Payables (net) Provisions Shareholders Equity Capital Capital Reserves Revaluation Fund on Financial Assets Inflation Adjustment of Shareholders Equity Profit Reserves Legal Reserves Extraordinary Reserves Net Profit/(Loss) for the period (68.984) - Previous Years Profits/(Losses) 28 ( ) ( ) Total Shareholders Equity and Liabilities (The accompanying notes form an integral part of these financial statements)

3 MENKA MENKUL DEĞERLER TİCARETİ ANONİM ŞİRKETİ INCOME STATEMENT FOR THE PERIOD OF 01 JANUARY 31 DECEMBER Footnote References 01 January 01 October Operating Income Sales Revenues (net) Cost of Sales (-) 36 ( ) ( ) Service Income (net) Other Operating Income (net) Gross Profit/(Loss) Operating Expenses (-) 37 ( ) ( ) Net Operating Profit/(Loss) ( ) (20.587) Other Income and Profit Other Expenses and Losses (-) 38 (6.342) (4.125) Finance Expenses (-) Profit/(Loss) before monetary gain (loss) and Taxes (73.591) (16.314) Net Monetary Gain/(Loss) 40 - Pre Tax Profit/(Loss) (73.591) (16.314) Taxes Current Deferred Tax income/(provision) Net Profit/(Loss) for the Period (68.984) (15.261) Revenue per share (The accompanying notes form an integral part of these financial statements) 3

4 MENKA MENKUL DEĞERLER TİCARETİ ANONİM ŞİRKETİ CASH FLOW STATEMENT FOR THE PERIOD OF 01 JANUARY 31 DECEMBER Footnote References Net Profit/(Loss) (68.984) Depreciation and Amortization Rediscount on Government Bonds and Bills (53.350) Rediscount on Investment Fund (1) Participation Certificates Provisions Provisions for Deferred Tax Liability (4.607) Provisions for Employee Termination Benefits Provisions for Employee Termination (2) Benefits Rediscount on Currency translation (1.660) Loss on Sales of Tangible Assets (7.263) Net profit from generated cash Net Cash before Changes in Operating assets and liabilities (57.245) Increase in Marketable Securities (net) ( ) Increase in Trade Receivables (net) ( ) Increase in Trade Payables (net) Increase in Due From Related Parties Increase in Other Current Assets (net) (2.180) Increase in Other Receivables and Payables (net) (993) Net cash provided by Operating Activities ( ) Purchase of Tangible Assets and Advances ( ) Sale of Tangible Assets Decrease in Financial Assets (net) Net cash from Investing Activities ( ) Decrease in Bank Loans (26.819) Increase in Financial Leasing Closing Capital Undertakings Net Cash from Financing Activities Net Increase in Cash Cash at the beginning of the year Cash at the end of the year (The accompanying notes form an integral part of these financial statements) 4

5 MENKA MENKUL DEĞERLER TİCARETİ ANONİM ŞİRKETİ STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY AS OF DECEMBER Capital Revaluation Fund on Financial Assets Shareholders Equity Inflation Differences Legal Reserves Extraordinary Reserves Previous Years Profit/ (Loss) Term Profit Total Shareholders Equity Balance as at 31 December ( ) Changes: Restatement effect Capital undertakings Net loss for the (68.984) (68.984) Period, Arrears ( ) (68.984) (The accompanying notes form an integral part of these financial statements) 5

6 MENKA MENKUL DEĞERLER TİCARETİ ANONİM ŞİRKETİ EXPLANATIONS FOR FINANCIAL STATEMENTS DATES 31 DECEMBER NOTE 1 ORGANIZATION AND OPERATIONS OF THE COMPANY (the Company) is engaged in securities exchange activities, sale and purchase of the capital market tools, short sale, lend and borrow marketable securities, in accordance with the provisions of Capital Market Law and relevant legislations. The Company has the following authorization certificates given by the Capital Market Board (CMB) in order to carry out the above mentioned activities in compliance with the relevant legislations. Authorization Certificate Date given Intermediation for trading 13 October 1992 Short selling and margin trading 16 February 2001 The Company has 16 employees as of ( 2004: 16). These employees consist of 1 general manager, 1 compliance manager, 1 accounting manager, 1 legal consultant, 1 portfolio and exchange responsible, 1 safe and cash responsible, 2 accounting personnel, 2 stock exchange representatives, 1 dealer, 2 customer representatives and 3 other positions. The company owns the 0,1073% shares of Bank of Custody and Clearance, Takasbank Anonim Şirketi. The company registered address to Trade Registry is Bağdat Caddesi No: 128/6 Feneryolu Kadıköy, Istanbul. NOTE 2 BASIS OF PRESENTATION OF FINANCIAL STATEMENTS Capital Market Board has published the Principles of preparing financial statements and reports in Capital Market on 15 November 2003 with Communiqué XI No: 25 which is in force since 1 January. The accompanying financial statements were prepared in accordance with International Financial Reporting Standards (IFRS). The following principles were used in the preparation of financial tables: 6

7 The company keeps the accounting records and prepares the financial statements in compliance with the provisions of Capital Market Board, Turkish Commercial Code and tax legislations. Financial tables are based on the legal reports of the Company and represented in New Turkish Liras (YTL) and some classifications and corrections were made in order to be in compliance with IFRS. These corrections in general stem from accounting and reevaluation of the financial tools, tangible and intangible assets and amortizations and redundancy indemnification provisions in compliance with IFRS. Adjustments made in order to eliminate the inflation effect International Accounting Standard 29 (IAS 29), proposes that in Financial Reporting in hyperinflationary Economies, the financial statements based on a currency that belongs to an economy subject to a high inflation rate should be prepared on the basis of the purchasing power unit as of the balance sheet issuance date and the financial statements for the previous terms should also be rearranged on the basis of the same criteria for comparison purposes. The basic factors that make the IAS 29 application compulsory are; most of the population invest on non monetary assets and keep their monetary assets in foreign currency, which more powerful, rather than the national currency; the application of maturity difference for purchases with a maturity even if the maturity period is short; the dependence of the interest rates, salaries and prices on price index and three-year compound interest rates near 100% or above 100%. Rearrangement was made on the basis of the correction coefficient obtained from Wholesale Price Index (WPI) declared by State Statistics Institute (SSI) and valid for the whole country. The indexes and conversion factors employed for the rearrangement of the financial statements as of 2004 are given below: Date Index Conversion Factor , , , The details about the above mentioned conversion transaction is given below: Current term financial statements prepared on the basis of a currency used in an economy subject to a high inflation rate are represented by the purchasing power unit as of the balance sheet date, and the amounts for the previous terms are also represented by the purchasing power unit as of the balance sheet date after correction. Monetary assets and liabilities are not corrected since they are represented as the current purchase power as of the balance sheet date. 7

8 Non monetary assets and liabilities and the equity items that are not represented by the purchase power as of the balance sheet date, were corrected by using the relevant conversion factors (annual, annual average, year end). All the items included in the income table are reflected after the application of relevant monthly conversion factors. Comparative financial statements are prepared on the basis of the monetary purchase power as of the latest balance sheet. The effect of inflation on the Company s monetary liability position was reflected as net monetary position saving at the income table. As of 2004, the cumulative inflation rate in Turkey for the last three years was 69,7% on the basis of the WPI declared by SSI. Pursuant to the CMB Decision dated 18 March and numbered B.02.1.SPK.0.17/154 the correction of financial tables on the basis of inflation was ended in. On the other hand, since the financial statements as of 2004 were prepared on the basis of inflation in order to make the financial statements comparable with the previous terms, the financial statements for the financial period ending on and the notes annexed to them are represented on the basis of the purchase power as of New Turkish Lira Law numbered 5083 on the Monetary Unit used by Turkish Republic was published to be in force as of 01 January. In this law the monetary unit of Turkish Republic is YTL. The sub unit of YTL is Ykr (1 YTL = 100 Ykr) and any references made to Turkish Lira or Lira in the law or legislation shall be deemed to be made to YTL (as TL=1 YTL). In the announcement of the Capital Market Board on New Turkish Lira in relation with the Financial Statements and Reports to be announced by the Capital Market Institutions and Companies subject to the regulations of the Board it was said that the financial tables to be announced to the public in and related to the any term ending on 2004 or any previous date, together with the financial statements for the previous years to be employed for the comparison purposes are to be declared in YTL. Accordingly, financial statements as of 2004 were prepared and declared in YTL 8

9 NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies employed for the preparation of financial tables are summarized below: a) Cash and cash equivalents Cash and cash equivalents were shown in the balance sheet with their acquisition costs and total accrued interests. Those values in foreign currency are subject to evaluation on the basis of the foreign currency rate as of the balance sheet date, and reflected with the current market value. Cash and cash equivalents are the existing bank deposits and the short term investments with a high liquidity and an insignificant risk of value change and having a maturity period of 3 months or less. b) Trade Receivables and revaluation provisions Trade Receivables are represented deducting the possible doubtful receivables provision from the net realizable values discounted by efficient interest rate under IFRS 39. The provision for doubtful receivables are separated by taking the amount of the receivables that can not be collected by the Company Management, securities received under the light of the previous experiences and existing economical conditions. The receivables that can not be collected shall be registered as loss for the year in which it is understood that they can not be collected. c) Related parties The Company shareholders and the companies related to these companies, the managers of these and the other groups that are known to be in relation with them are defined as related parties in the annexed financial statements d) Marketable Securities The marketable securities portfolio of the company consists of government bonds, treasury bills and securities. Marketable Securities are registered with their transaction prices or their current value determined by their market value. The cost of the marketable securities in foreign currency is calculated on the basis of term end foreign currency rate. If the registered value of the marketable securities is less than the estimated acquisition price, there is a decrease in value. The Company shall make an evaluation for existence of neutral data for the value decrease in each balance sheet period. If there is no data for value decrease, the Company shall estimate the possible acquisition price of the asset or asset group and reflect the possible acquisition value to the term net profit / loss. 9

10 The interests obtained from marketable securities shall be accounted under interest incomes. Capital market profit or losses stem from marketable securities for trade or investment purposes shall be reflected to the term net profit / Loss. The company classifies its marketable securities in compliance with IAS 39 as follows. Marketable Securities to be held until maturity Marketable Securities to be held until maturity are the values having certain maturity and containing some payments at certain amounts and for which the Company has an intention and power to keep them till their maturity date. Marketable securities to be held until maturity are evaluated on the basis of their discounted values based on efficient interest rates. Marketable securities available for sale Marketable securities available for sale consists of the values that are not to be kept till their maturity date or can not be kept for trade purposes. The marketable securities kept for trade purposes after registration are evaluated with their current values provided that they are measurable in a reliable way. The marketable securities whose current values cannot be measured in a reliable way are reflected with their discounted values. Profit or losses for the Marketable securities available for sale are written under the term net profit or loss. The share certificate investments that do not have a stock exchange price in an active market and whose current value cannot be measured with other methods in a reliable manner are shown with their cost values. The marketable securities, which do not have certain maturity, are shown with their cost values. e) Financial assets The financial tools that can be sold to cover the liquidity needs or due to the changes on interest rates and those are kept for an undetermined period are classified as financial assets available for sale. These are included in fixed assets unless the management has to keep the financial tool for a period less than12 months after the balance sheet date or there is a need to sell to increase the operation capital (in such cases they shall be included in current assets) The company management classify these financial tools as of their purchase date and reviews such classification on regular basis. All financial assets are shown on their purchase cost that is the reasonable value including the purchase costs related with the investment for the first time. Financial tools that are classified as financial assets available for sale after reflecting the financial statements are evaluated on the basis of their reasonable value as long as their reasonable value can be calculated in a reliable manner. 10

11 If the financial assets for which the Company has a capital share less than 20% has no reasonable value registered to the stock exchange or reasonable value can not be made since the other methods employed for the calculation of the reasonable value is not suitable or can not be used, the registered value of the financial asset is calculated on the basis of the acquisitions cost corrected by purchase power as of the balance sheet date after value decrease provision if exists. f) Fixed assets Fixed assets are shown on the basis of their value corrected by the current purchase power of money as of balance sheet date after deducting accumulated amortizations. Amortization is separated on the basis of corrected values of tangible fixed assets with linear amortization method calculated by considering their estimated disposal life. The beneficial disposal life for the subject assets are given below: Those Acquired by Financial Leasing 5 years Machinery Plant and Equipment 5 years Vehicle tools and equipment 5 years Furniture and Inventory 5 years If the registered value of a tangible fixed asset is greater than its estimated recovery value, the registered value shall be decreased to its recovery value. Any profit or loss stem from the sale of tangible fixed assets is determined by comparing corrected amounts with collected amounts and reflected to the relevant income and expenditure calculation in the current term. g) Intangible assets Intangible assets are reflected after deducting redemption and amortization shares. Redemption and amortization shares are calculated on the basis of normal amortization for the periods no more than five years. The company has no intangible fixed assets as of. h) Financial Leasing Fixed asset that have been obtained by financial leasing and for which all the significant risks and benefits of the ownership shall pass to the Company at the end of the actual leasing period are reflected to the balance sheet on the basis of their current value as of the leasing start date or the current value of the minimum leasing payments as of the balance sheet date if it is less. In order to obtain a fixed interest rate on the arrears, the liability stem from financial leasing is separated as the capital and interest payments. 11

12 The costs incurred at the first acquisition stage of the fixed asset subject to financial leasing transaction, are included in the cost and the fixed assets acquired by financial leasing are subject to amortization on the basis of their estimated economical lives. ı) Impairment of Assets. All assets other than deferred tax assets and marketable securities are examined in compliance with IAS 36 (Asset Value Loss). According to IAS 36, if the registered value of an asset is bigger than its estimated recovery value, there is a need for impairment. Recovery value shall be deemed as the bigger of net sale value or the disposal value of the asset. Disposal value is the current value of the total of estimated cash entries as a result of continuous use of the asset and the sale value at the end of disposal life. i) Borrowing costs. All borrowing costs are recorded in the income statement in the period in which they incurred. j) Taxes and deferred taxes. The income taxes stated in financial tables include both the current taxes and the change in deferred taxes. The company calculates the current and deferred taxes in compliance with IAS 12 (rearranged). In the financial statements prepared, a provision is allocated for the Incorporation Tax liability of the Company on the basis of the term end results of the Company. After correcting the Incorporation Tax liability, year end result is calculated on the basis of the amount found after making the corrections by considering the expenditures and deductions that can not be acceptable by law. Deferred tax assets and liabilities are calculated on the basis of liability method on the basis of the timing differences that shall appear due to different evaluation of some income and expenditures items on accounting and tax aspects. Deferred tax liability is calculated for all taxable timing differences occurred but the deferred tax asset is registered only when this asset can be amortized, a taxable profit expected to occur in the future. The incorporation tax amounts to be paid netted since they are related to the prepaid incorporation tax amounts. The deferred tax assets and liabilities also netted due to the same reason. 12

13 k) Redundancy indemnification provision Pursuant to the provisions of labor law being in force in Turkey, the company is liable to make a payment at a determined amount to the personnel who left the company due to retirement or resignation or whose job contracts terminated due to bad behaviors. Redundancy indemnification provision is calculated on the basis of a specific formula by taking the redundancy indemnification threshold into consideration and reflected to the financial statements. Redundancy indemnification provision is calculated as if all the personnel are subject to such a payment as of the balance sheet date. l) Provisions Provisions are allocated when the Company, due to the past events, has a legal or compulsory liability and there exist a future possibility of fund outflow in order to perform such a liability and furthermore the amount to be paid can be estimated in a reliable manner. m) Foreign currency transactions The transactions realized in foreign currency are converted to New Turkish Liras on the basis of the currency rate valid as of the transaction date and the monetary assets and liabilities in foreign currency are converted to New Turkish Liras as of the term end on the basis of Turkish Republic Central Bank foreign currency rates. The incomes and expenditures occurred as a result of the conversion of the items in foreign currency is in the financial income and expenditure items in the income tables of the relevant years. n) Share capital and dividends Ordinary shares are classified as equity. The dividends distributed for ordinary shares are registered by collecting from the profit accumulated with the declaration year. The dividends to be received are registered as income for the declared terms. o) Revenue recognition Revenues are accounted on the basis of recognition when an income is occurred. ö) Financial tools and financial risk management The Company is subject to certain financial risks due to its activities, changes on the prices of debt and capital market tools, foreign currency and interest rates. The whole risk management program of the Company is focused on unforeseen ability of the financial markets and aims to minimize the potential negative effects on the financial performance of the Company. 13

14 Interest rate risk The Company is subject to an interest rate risk due to the effects of interest rate changes on interest bearing asset and liabilities. Subject interest rate risk is managed by ordinary precautions to balance the asset and liabilities sensitivity. Funding risk The funding risk for existing and future possible debt requirements is managed by having a continuous accessibility to sufficient number of high quality creditors. Credit risk Dealing with financial tools has a risk to nonperformance of the liabilities by third parties. The Company management covers third part risks through collaterals. Exchange rate risk The Company can be subject to foreign currency risks stem from the conversion rate of the payables and receivables in foreign currency to New Turkish Liras. Subject foreign currency risk is limited by analyzing the foreign currency position. Fair value of financial assets and liabilities A financial asset or financial liability is valued with its acquisition cost in balance sheet for the first time. This cost is the fair value of price given or acquired. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists. The Company has determined the estimated fair values of financial assets and liabilities on the basis of existing market information by using suitable evaluation methods. Briefly the estimations presented herein might not be an indicator for the values that can be obtained from a current market transaction by the Company. Following methods and assumptions were employed for the fair value of the financial asset and liabilities whose fair value is estimated. 14

15 Monetary assets It is estimated that the fair values of balances in foreign currency are close to their registered values. It is assumed that the registered values of some financial assets shown at costs including cash and cash values reflect their fair values due to their Short Term nature. It is estimated that the registered value for Trade Receivables reflect their fair value together with their impairment provisions. Monetary liabilities It is foreseen that registered values of Trade Payables reflect their fair values. Since the credits and other monetary liabilities are short term in their nature, their Fair values are deemed to be close to their registered value. p) Netting off Financial asset and liabilities can be shown as net if there exist a legal right, an intention for net evaluation for the subject assets and liabilities or the asset acquisition is realized simultaneously with the realization of the liability. r) Accounting assumptions During the preparation of financial statements in compliance with International Financial Reporting Standards, the Management has to make estimations and assumptions that might effect the balance sheet values of assets and liabilities stated in the financial statements as of the balance sheet date, explanations on out of balance liabilities, and the amounts of the incomes and expenditures that might occur within the term. Real results might be different than those estimations and assumptions. NOTE 4 CASH AND CASH EQUIVALENTS 2004 Cash Banks demand deposit time deposit - - Total , the foreign currency amount in the company safe is USD (Applied Exchange Rate: 1,3418). 15

16 NOTE 5 MARKETABLE SECURITIES, NET As of 2004 and ; marketable securities available for sale are: 2004 Bond and bills Investment fund participation certificate Total Nominal Value Cost Value Market Value Bonds and bills Investment fund participation certificate Total Nominal Value Cost Value Market Value Bonds and bills Investment fund participation certificate Total NOTE 6 FINANCIAL LOANS, NET Information on Financial loans as of 2004 and : Original Amount Conversion Rate YTL Equivalent Short Term Financial Leasing, net ,48 USD 1, Long Term Financial Leasing, net ,69 USD 1, Original Amount Conversion Rate YTL Equivalent Vehicle credit 4.937,54 Euro 1,

17 NOTE 7 TRADE RECEIVABLES AND PAYABLES, NET Trade Receivables: 2004 Receivables from stock exchange money market Receivables from credited customers Receivables from customers Total Trade Payables: 2004 Customer receivables valued at BPP Payables to Customers Payables to Seller Other Total NOTE 8 FINANCIAL LEASING RECEIVABLES AND PAYABLES The assets obtained by the Company via Financial Leasing is 1 (one) vehicle, and the Financial Leasing agreement term is 4 years. The information on payables of the Company stem from Financial Leasing transaction was given in Note-8. NOTE 9 DUE FROM AND TO RELATED PARTIES (NET) a) Year end balances of the related parties: 2004 Due from related parties Due to related parties - - b) The amounts received and paid to related parties: 01 January Commission from brokerage transactions Work premises lease fee payment gross (36.000) c) Benefits for the senior management Total salary and other similar benefits for senior management personnel (1 person) for 01 January term is YTL. 17

18 NOTE 10 OTHER RECEIVABLES, NET 2004 Advances and other Total NOTE 11 LIVE ASSETS There are no live assets in the business scope of the Company. NOTE 12 STOCKS There are no stocks of the company due to the business scope of the company. NOTE 13 PENDING CONSTRUCTION AGREEMENT RECEIVABLES AND ALLOWANCES The Company has no receivables or allowances from the pending construction agreements. NOTE 14 DEFERRED TAX ASSET AND LIABILITIES, NET Deferred taxes The Company calculates the deferred tax assets and liabilities by taking the temporary difference effects that occur during evaluation of the balance sheet items for International Financial Reporting Standards and legal financial statements. Subject temporary differences in general stem from the accounting of the incomes and expenditures according to the IFRS and tax laws in different reporting periods. The rate to be applied for the deferred tax receivables and liabilities to be calculated on the basis of liability method on the temporary differences to be realized shall be 30%. Accumulated temporary differences and the deferred tax assets and liabilities on the basis of the current tax rates as of the balance sheet date are as follows: 18

19 Temporary Differences 2004 Accumulated amortization Tangible assets Redundancy indemnification Marketable Securities revaluation Provisions set aside (2.000) - Previous Years Losses carried forward (94.821) (94.821) Other Temporary Differences Total Deferred tax asset /(liability) for the Temporary Differences is as follows Accumulated amortization Tangible assets (4.573) (15.815) Redundancy indemnification (21.985) (19.187) Marketable Securities revaluation (83) - Provisions set aside Previous Years Losses carried forward Other Temporary Differences (11.730) (7.376) Total deferred tax asset (liability) (9.324) (13.931) NOTE 15 OTHER CURRENT/ NON CURRENT ASSETS AND SHORT/LONG TERM LIABILITIES Other Current Assets: 2004 Prepaid tax and other liabilities Prepared expenditures Total Other Liabilities: 2004 Tax, duty and other liabilities to be paid Other - - Total

20 NOTE 16 FINANCIAL ASSETS a) Deposits and guarantees given to regulators As of 2004 and ; marketable securities to be kept until maturity are as follows: Nominal Value Cost Value Market Value Treasury bonds and bills Provisional expenditures (-) (2.000) - (2.000) Total Nominal Value Cost Value Market Value Treasury bonds and bills As of 2004 and, above mentioned marketable securities are given to Capital Market Board and Istanbul Stock Exchange for Capital blockage and Transaction limit related to the company activities. b) Subsidiaries:, the company owns 0,1073% shares of Bank of custody and clearence, Takasbank showed under financial assets, and valued at a fair value of YTL ( 2004: YTL). The total number of shares is The price used in valuation is 4,20 YTL per share ( 2004: 3,92 YTL). The Value increase would be classified under Revaluation Fund on Financial Assets included in Equities. NOTE 17 GOODWILL Not applicable. NOTE 18 REAL ESTATES FOR INVESTMENT PURPOSES The company has no real estates for investment purposes. 20

21 NOTE 19 FIXED ASSETS, NET Inputs Outputs Transportation Vehicles (59.230) Furniture and Inventory Financial Leasing (*) Other fixed assets Advances Cost (59.230) Les: A. Amortization ( ) (63.714) ( ) Net Value (*) Fixed assets bough via Financial Leasing. NOTE 20 INTANGIBLE ASSETS, NET Not applicable. NOTE 21 ADVANCES RECEIVED Not applicable. NOTE 22 RETIREMENT SCHEMES The Company has no liabilities related to the retirement schemes in the balance sheet of the company. NOTE 23 PROVISIONS Tax Provision The incorporation tax rate in Turkey is 30% (In 2004: 33%). This rate is applied on the amount to be calculated by adding the expenditures that are not accepted as deduction pursuant to the provisions of tax law to trade income of the companies and deduction of the exemptions (such as exemptions on subsidiary income) and discounts (such as investment incentives) stated in the tax law. No other tax is payable if no profit is distributed. 21

22 The Law numbered 5024 and published on Official Gazette on 30 December 2003 on Amendments on Tax Method Law, Income Tax Law and Incorporation Law ( Law numbered 5024 ), proposes that the income or incorporation taxpayers who determines their income on the basis of a balance sheet should apply an inflation correction on their financial statements starting from 1 January Furthermore, the taxpayers are obliged to apply inflation correction for their balance sheets dated The tax payers have to declare their balances sheets as of 2003 in compliance with the provisions of Law numbered 5024 and Tax Application Law General Announcement published by the Ministry of Finance on 28 February 2004 with number 328 ( Announcement ); and temporary tax declarations for 2004 in compliance with the provisions of law numbered 5024 and Tax Application Law General Announcement numbered 338 published on the Official Gazette on 13 August 2004 and other relevant legislations. The taxpayers, who are obliged to apply inflation correction pursuant to the provisions of this General Announcement published by the Ministry of Finance have to apply correction only for the balance sheets to be issued after 1 January 2004 if the correction conditions occur. No stoppage is paid for the companies who obtain any income from Turkey via a company or a permanent representative and the profit share paid to the companies located in Turkey (dividends). The dividend payment to be made other than those mentioned above is subject to a stoppage at a rate of 10%. The addition of the profit to the capital is not deemed as a profit distribution and stoppage is applied for this. The companies calculate temporary tax on the basis of their quarterly financial profits at a rate of 30% (for %) and declare this amount before the 10 th day of the month following the relevant term and pay them before 17 th of the same month. The temporary tax to be paid within a year belongs to that year and it is settled from the incorporation tax to be paid in the following years. Temporary tax can be settled from any other financial payables to the state. The profits obtained from the subsidiaries under the dependent partnerships kept for a period no less than two years and from the real estate sales shall be exempted from incorporation tax by 2004 provided that they are added into the company capital in the year in which they are sold. 40% of the investment expenditures of companies for fixed assets over YTL after 24 April 2003 other than some exceptions- can be benefited from investment deduction exemption and exempted from incorporation tax. No stoppage is applied on these exempted amounts. If the company income is not sufficient, the calculated investment deduction shall be transferred to the following years. There is no need to get an Investment Incentive Document in order to benefit from investment deduction exemption. 22

23 If the investment deduction right gained pursuant to the provisions of the legislations in force by 24 April 2003, a stoppage at a rate of 19,8% shall be calculated on the benefited investment deduction exemption amount whether the profit is distributed or not. The financial losses shown on the tax declaration in compliance with Turkish Tax Legislations can be deducted from the term incorporation income provided that it is no more than 5 years. On the other hand, financial losses can not be settled from the previous years' profits. There is no application in Turkey as reaching a consensus with the tax authorities for the taxes to be paid. Incorporation tax declarations are submitted to the tax offices before the end of the 15 th day of the fourth month after the end of the declaration term. Furthermore, the entities authorized to carry out a tax audit shall have the right to examine the accounting records within the following five years and if any false transaction is determined, the tax amount to be paid can be changed. The tax expenditures/(incomes) stated in the Income Statement for the period ending on : 01 January 01 October Current period tax provision - - Deferred tax provisions Total tax income/(expenditure) Current incorporation tax calculation was made as follows: Pre tax profit stated in legal records (58.227) Expenditures not accepted by law Dividend income (-) Other deductions (-) - Incorporation tax amount - Effective tax rate 30% - Less: Prepaid tax and other liabilities paid within the period - Current period tax payment - 23

24 2004 Pre tax profit stated in legal records (67.779) Expenditures not accepted by law Dividend income (-) (20.113) Other deductions (-) - Incorporation tax amount - Effective tax rate 30% - Less: Prepaid tax and other liabilities paid within the period - Current period tax payment - Redundancy indemnification Provision Pursuant to the provisions of Turkish Social Security Law the companies should pay an amount that is equal to 30 days salary for each year of employment in the company provided that the upper limit is to be YTL (as of 2004: YTL) all at once for the employees who are retired resigned or fired for any reason other than misbehaviors. Redundancy indemnification provision is calculated on the basis of the current value estimations of the future liabilities of the company. Pursuant to the provisions of International Accounting Standard numbered 19 the Benefits made available for the Employees, has to be calculated by considering the actuary evaluation methods of the company liability related to the retirement schemes. Accordingly, following actuary assumptions were taken as a base for the calculation of total liability. Rediscount rate % 5,50 ( 2004: % 6,00) Possible Retirement rate % 83,88 ( 2004: % 81,32) The redundancy provision transactions within the period were as follows: Balance the beginning of the period Provision paid or cancelled (2) Provisions set aside within the period Year end balance NOTE 24 MINORITY INTERESTS Since the Company prepares unconsolidated financial tables there is no minority interest. 24

25 NOTE 25 SHARE CAPITAL and 2004, the Company shareholders and their shareholding structures are as follows: Shareholder Amount Share % Sami Haliloğulları % 33,50 Selami Haliloğulları % 33,19 Engin Haliloğulları % 33,16 Other shareholders % 0,15 Total Inflation Differences (*) Total Adjusted Capital : Shareholder Amount Share % Sami Haliloğulları % 33,50 Selami Haliloğulları % 33,19 Engin Haliloğulları % 33,16 Other shareholders % 0,15 Total Less: Capital Undertaking Paid-in capital Inflation Differences (*) Total Adjusted Capital Inflation differences represent the difference between the total amount of the Company capital adjusted for the inflation and the Company capital amount before Inflation Adjustments. The registered capital of the Company is YTL and has a capital undertaking at an amount of YTL In the first financial statements for IFRS, the difference between assets and liabilities adjusted as of 2004 forms the previous years losses. 25

26 NOTE 26 CAPITAL RESERVES Pursuant to the provisions of the Announcement numbered Communiqué: XI, No:25 after the application of the inflation adjustment to the financial assets, the Capital, Legal Reserves, Statue Reserves, Special Reserves and Extraordinary Reserves items included under Equities shall be stated in the balance sheet with their registered values. The adjustment differences on these items shall be stated under Shareholders Euity as Inflation adjustment of Shareholders Equity item. Inflation Adjustment of shareholders Equity can be used only for capital increase via a bonus issue or writeoffs; and the registered values of extraordinary reserves can be used for capital increase again via a bonus issue, cash profit distribution or write-offs. Inflation adjustment of Shareholders Equity item details as of and 2004 is given below: Inflation adjustment of Shareholders Equity Inflation Difference Registered Value Share Capital (*) Legal Reserves Extraordinary Reserves Total (*) Capital undertaking at an amount of YTL was paid within the period. NOTE 27 PROFIT RESERVES Pursuant to the provisions of Turkish Commercial Code, Legal Reserves are separated as first and second group Legal Reserves. Pursuant to the provisions of Turkish Commercial Code, first group Legal Reserves are allocated as 5% of the legal net profit as long as the total reserve amount reaches to 20% of the paid capital of the company. Second group Legal Reserves is the 10% of the distributed profit over 5% of the paid-in capital. Pursuant to the provisions of Turkish Commercial Code, unless the Legal Reserves are over 50% of the paid-in capital, they are used only to write-off losses, and they can not be used for any other purpose. The amount occurred as a result of the balancing transaction for the first financial statements that are applied inflation differences pursuant to the provisions of Announcement numbered Communiqué: XI, No:25 Part 15 Article 399 and followed under Previous Years Losses should be considered as a deduction item for the calculation of the profit amount to be distributed on the basis of the financial statements for which inflation correction is applied under the framework of the CMB regulations on profit distribution. On the other hand, subject amounts included in Previous Years Losses item can be settled from term profit or previous years profits if exists and the loss balances can be settled from extraordinary capital reserves, legal capital reserves, capital reserves stem from the arrangement of the equity items in compliance with inflation accounting. 26

27 NOTE 28 PREVIOUS YEARS PROFIT/LOSSES In the Company balance sheet issued in compliance with IFRS, previous Years Losses under Shareholders Equity is YTL YTL. The difference between assets and liabilities adjusted as of 2004 in the first financial statement prepared for IFRS forms the Previous Years Losses item. NOTE 29 FOREIGN CURRENCY POSITION the foreign currency based assets and liabilities of the Company are as follows. Original Amount YTL Equivalent Foreign currency based assets Cash in hand 3.115, Foreign currency based liabilities Financial Leasing Short Term ,48 USD Financial Leasing Long Term ,69 USD When the foreign currency net position amount is considered, possible changes on foreign currency exchange rates shall have no significant effect on financial statements. NOTE 30 GOVERNMENT INCENTIVES AND GRANTS As of the balance sheet date, there are no government incentives or grants. NOTE 31 PROVISIONS, CINTINGENT ASSETS AND LIABILITIES Not applicable. NOTE 32 MERGERS Not applicable. 27

28 NOTE 33 SEGMENTAL REPORTING The company operates in a single sector and in a single geographical region. The company does not carry out reporting on segmental basis. NOTE 34 SUBSEQUENT EVENTS There is no event having a significant effect on the financial statements and occurred after the balance sheet date. NOTE 35 DISCONTINUED OPERATIONS As of the balance sheet date, the company has no discontinued operations. NOTE 36 OPERATING INCOME a) Sales 01 January 01 October Treasury bonds and bills Investment fund participation certificates Gross sales Less: Cost of sales ( ) ( ) Gross profit b) Service income, net: January 01 October Brokerage commissions Stock Exchange money market Bonds and bills Other Service Income, gross Less: Commission discounts ( ) (82.353) Service income, net

29 c) Other income from operations, net: 01 January 01 October Credit interest received from the customers Default interest received from the customers Other Total interest income received NOTE 37 OPERATING EXPENSES The distribution of operating expenses at an amount of YTL (01 October 31 December : YTL) is as follows: a) Marketing, sales, distribution expenses: 01 January 01 October Authorization certificate duties Software expenses Stock market remote access expenses Other Total b) General expenses: January 01 October Personnel expenses Amortization Rent Food supply and cleaning material Mail expenses Vehicle expenses Redundancy Provisions Representation expenses Insurance

30 01 January 01 October TSPAKB fees Contribution to Investors Protection Fund Transportation Stationary Other Total NOTE 38 OTHER INCOME/EXPENSE AND PROFIT/LOSS a) Income from other activities 01 January Treasury bond rediscount Treasury bond interest income Dividend income from subsidiaries Fixed asset disposal Stock exchange money market interests FX revenues Other Total (01 October : YTL) b) Expenses and Losses from other operations 01 January FX losses Provisions Other 764 Total (01 October : YTL) 30

31 NOTE 39 FINANCE EXPENSES Not applicable. NOTE 40 NET MONETARY GAIN/LOSS Pursuant to the relevant announcement of the Capital Market Board, no inflation accounting application is made after 1 January, no monetary income or loss occurs for. NOTE 41 TAXES The legal taxes and postponed tax provision of the company were explained in Note 14 and Note 23. NOTE 42 EARNINGS PER SHARE Earnings Per Share According to CMB decision, if there is a distributable profit and the net profit stated in the financial statements prepared in compliance with the accounting principles of the Board is less than the net profit in the other statements, the lesser amount shall be subject for the profit distribution. The Company is closed the current period with a net loss. NOTE 43 CASH FLOW TABLE Cash flow table shown together with the financial statements. NOTE 44 OTHER ISSUES The issues that have a significant effect on financial tables or required to be explained in order to make the financial tables clear, understandable and easy to be interpreted: Explanation annexed by the Independent Auditor pursuant to the provisions of CMB Announcement Numbered communiqué V No: 68: 31

32 Company Internal Control Structure Company internal control activities consist of the audits carried out by the auditors assigned by the general assembly, administrative bodies reporting to the general manager and the inspectors. Board of Directors of the Company assigned Sami Haliloğulları as the Board of Directors member responsible for internal audit by the Board of Directors decision date 04 June 2004 and numbered 85 and Audit Regulations and Work Flow Procedures for Internal Control System were started to be applied pursuant to the provisions of Capital Market Board Announcement on Basis for the Internal Audit System to be Applied for the Brokerage Companies (Seri:V No: 68). Administrative Audit Activities All the transactions of the company are controlled by the superiors of the employees carrying out the transactions. The transactions prepared by the lower level personnel are checked by the superior level when they are submitted for approval. The audit realized by administrative levels can be realized by parallel services for the transactions related with several services. Audit to be carried out by Internal Auditors Since the Company is a joint stock company engaged in commercial activities, auditors are assigned by the general assembly in compliance with Turkish Commercial Code (T.T.K.). The duty of the company auditor is to monitor the Board of Directors decisions and general operations of the company and perform the other duties state in T.T.K. and submit a report on the audit results to the general assembly. Inspector The most comprehensive audit activities within the Company are realized by inspectors. Mahmut Sever was assigned as the inspector of the Company as of 06 June. The duties of the inspectors include auditing all the works and transactions, carried out in any of the Company organizations, administrative, financial and technical applications in compliance with the Company policies and principles pursuant to the provisions of relevant legislations, contracts and protocols and authority and duty instructions. 32