CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2015 TOGETHER WITH INDEPENDENT AUDITOR S REPORT

Transcription

1 CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITOR S REPORT

2 CONVENIENCE TRANSLATION INTO ENGLISH OF INDEPENDENT AUDITOR S REPORT ORIGINALLY ISSUED IN TURKISH INDEPENDENT AUDITOR S REPORT To the Board of Directors of MCT Danışmanlık Anonim Şirketi; Report on the Consolidated Financial Statements 1. We have audited the accompanying consolidated financial statements of MCT Danışmanlık A.Ş. (the Company ) and its Subsidiary (collectively referred to as the Group ), which comprise the consolidated balance sheet as at 31 December 2015 and the consolidated statement of profit or loss, consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the period then ended and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Consolidated Financial Statements 2. The Group s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Turkish Accounting Standards and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Independent Auditor s Responsibility 3. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Our audit was conducted in accordance with standards on auditing issued by the Capital Markets Board of Turkey and Independent Auditing Standards that part of Turkish Standards on Auditing issued by the Public Oversight Accounting and Auditing Standards Authority. Those standards require that ethical requirements are complied with and that the audit is planned and performed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An independent audit involves performing procedures to obtain evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on independent auditor s professional judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to error or fraud. In making those risk assessments, the independent auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An independent audit includes also evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the independent audit evidence we have obtained during our audit is sufficient and appropriate to provide a basis for our audit opinion. Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. a member of PricewaterhouseCoopers BJK Plaza, Süleyman Seba Caddesi No:48 B Blok Kat 9 Akaretler Beşiktaş İstanbul-Turkey Telephone: +90 (212) Facsimile: +90 (212)

3 Opinion 4. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of MCT Danışmanlık A.Ş. and its Subsidiary as at 31 December 2015 and their financial performance and cash flows for the period then ended in accordance with Turkish Accounting Standards. Other Responsibilities Arising From Regulatory Requirements 5. In accordance with subparagraph 4 of Article 398 of the Turkish Commercial Code ( TCC ) No: 6102; auditor s report on the early risk identification system and committee has been submitted to the Company s Board of Directors on 9 March In accordance with subparagraph 4 of Article 402 of the TCC; no significant matter has come to our attention that causes us to believe that the Company s bookkeeping activities for the period 1 January - 31 December 2015 is not in compliance with the code and provisions of the Company s articles of association in relation to financial reporting. 7. In accordance with subparagraph 4 of Article 402 of the TCC; the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit. Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. a member of PricewaterhouseCoopers ORIGINALLY ISSUED IN TURKISH Beste Gücümen, SMMM Partner Istanbul, 9 March 2016

4 CONTENTS TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTENTS PAGE CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF INCOME... 3 CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME... 4 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY... 5 CONSOLIDATED STATEMENTS OF CASH FLOWS

5 CONSOLIDATED BALANCE SHEETS AND 2014 (Amounts expressed in Turkish Lira ( TRY ), unless otherwise indicated.) ASSETS Audited Audited Notes Current assets: Cash and cash equivalents 3 3,931,230 3,478,355 Trade receivables - Trade receivables 4 3,361,320 3,563,773 Other receivables - Due from related parties 5 287, ,486 - Other receivables 6 20,882 21,872 Inventories 8 110,500 87,500 Prepaid expenses 9 252, ,111 Total current assets 7,964,685 8,019,097 Non-current assets: Financial assets 7 107,105 - Other receivables - Due from related parties 5 1,234,527 - Property, plant and equipment , ,610 Intangible assets - Other intangible assets 14 1,980,393 2,053,020 - Goodwill , ,744 Total non-current assets 4,347,615 3,118,374 Total assets 12,312,300 11,137,471 Consolidated financial statements for the period 1 January - 31 December 2015 have been approved for issue by the Board of Directors on 9 March Related consolidated financial statements will be certan with the approval on General assembly meeting. The accompanying notes form an integral part of these consolidated financial statements. 1

6 CONSOLIDATED BALANCE SHEETS AND 2014 (Amounts expressed in Turkish Lira ( TRY ), unless otherwise indicated.) LIABILITIES AND EQUITY Audited Audited Notes Current liabilities: Trade payables - Trade payables 4 656, ,184 Other payables - Due to related parties 5 25,000 8,920 - Other payables 6 1, ,555 Deferred income , ,597 Current income tax liabilities , ,998 Other current liabilities 11 1,399, ,265 Total current liabilities 2,797,866 2,365,519 Non-current liabilities: Long-term provisions Provision for employment termination benefits , ,381 Deferred tax liabilities , ,764 Total non-current liabilities 475, ,145 Total liabilities 3,273,168 2,784,664 EQUITY Equity attributable to owners of the parent 16 9,029, Paid-in share capital 5,141,000 5,141,000 Share premium 1,919,845 1,919,845 Other comprehensive loss not to be reclassified to profit or loss - Actuarial gain / (losses) regarding benefits to employees 3,228 (2,770) Treasury shares (-) (1,075,321) (704,896) Restricted reserves 462, ,498 Retained earnings 1,211, ,229 Net profit for the year 1,366, ,464 Non-controlling interests 10,008 15,437 Total equity 9,039,132 8,352,807 Total liabilities and equity 12,312,300 11,137,471 The accompanying notes form an integral part of these consolidated financial statements. 2

7 CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014 (Amounts expressed in Turkish Lira ( TRY ), unless otherwise indicated.) Audited Audited Notes Revenue 18 17,652,289 15,242,213 Cost of sales (-) 18 (11,837,237) (8,832,958) Gross profit 5,815,052 6,409,255 General and administration expenses (-) 19 (4,080,694) (4,667,817) Marketing expenses (-) 19 (721,108) (690,577) Other operating income 20 1,076, ,151 Other operating expenses (-) 20 (423,156) (268,615) Operating profit 1,666,796 1,158,397 Income from investing activities 21 62,722 73,491 Operating profit before taxes 1,729,518 1,231,888 Tax expense for the period 22 (363,028) (267,719) Taxes on income (309,160) (331,200) Deferred tax expense / (income) (53,868) 63,481 Net profit for the year 1,366, ,169 Attributable to Non-controlling interests 144 3,705 Equity holders of the parent 1,366, ,464 Earnings per share The accompanying notes form an integral part of these consolidated financial statements. 3

8 CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014 (Amounts expressed in Turkish Lira ( TRY ), unless otherwise indicated.) Audited Audited Notes Net profit for the year 1,366, ,169 Other comprehensive income not be reclassified to profit or loss Actuarial gain regarding benefits to employees 15 5,998 4,391 Other comprehensive income 5,998 4,391 Total comprehensive income 1,372, ,560 Attributable to Non-controlling interest 144 3,705 Equity holders of the parent 1,372, ,855 The accompanying notes form an integral part of these consolidated financial statements. 4

9 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014 (Amounts expressed in Turkish Lira ( TRY ), unless otherwise indicated.) Net profit Non- Paid-in Share Treasury Restricted Actuarial Retained for the controlling Total share capital premium shares reserves gain/losses earnings year Total interests equity Balances at 1 January ,141,000 1,919,845 (344,993) 462,498 (7,161) (156,952) 1,079,621 8,093,858 16,203 8,110,061 Transfers ,079,621 (1,079,621) Dividends paid (361,440) - (361,440) (4,471) (365,911) Total comprehensive income , , ,855 3, ,560 Treasury shares (Not 16) - - (359,903) (359,903) - (359,903) Balances at 31 December ,141,000 1,919,845 (704,896) 462,498 (2,770) 561, ,464 8,337,370 15,437 8,352,807 Balances at 1 January ,141,000 1,919,845 (704,896) 462,498 (2,770) 561, ,464 8,337,370 15,437 8,352,807 Transfers ,464 (960,464) Dividend paid (310,165) - (310,165) (5,573) (315,738) Total comprehensive income ,998-1,366,346 1,372, ,372,488 Treasury shares (Not 16) - - (370,425) (370,425) - (370,425) Balances at 31 December ,141,000 1,919,845 (1,075,321) 462,498 3,228 1,211,528 1,366,346 9,029,124 10,008 9,039,132 The accompanying notes form an integral part of these consolidated financial statements. 5

10 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2015 AND 2014 (Amounts expressed in Turkish Lira ( TRY ), unless otherwise indicated.) Cash flows from operating activities Audited Audited Notes Net income for the year 1,366, ,169 Adjustments Depreciation and amortization 13, , ,576 Provision for employment termination benefits Taxes on income , ,028 70, ,719 Interest income 21 (62,722) (73,491) Operating profit before changes in operating assets and liabilities 2,147,191 1,596,529 Trade receivables 202,453 (300,851) Inventories Other receivables and other assets (23,000) 243,633 (7,000) (358,228) Prepaid expenses 244,201 (150,182) Other payables and other liabilities 331, ,036 Trade payables 202,907 55,667 Deferred income (11,686) 222,745 Due to personnel 15 (68,476) (50,725) Taxes paid (399,384) (8,408) Net cash flows from operating activities 2,869,189 1,324,583 Investing activities: Purchases of property, plant and equipment 13 (176,936) (543,002) Purchases of intangible assets 14 (114,305) (103,758) Payments to related party 5 (1,394,527) - Purchases of financial investments (107,105) - Interest received 62,722 73,491 Net cash flows from investing activities (1,730,151) (573,269) Financing activities: Dividends paid (315,738) (365,911) Purchase of treasury shares (370,425) (359,903) Net cash out flows from financing activities (686,163) (725,814) Net change in cash and cash equivalents 452,875 25,500 Cash and cash equivalents at the beginning of the year 3 3,478,355 3,452,855 Cash and cash equivalents at the end of the year 3 3,931,230 3,478,355 The accompanying notes form an integral part of these consolidated financial statements. 6

11 NOT 1 - ORGANIZATION AND NATURE OF BUSINESS MCT Danışmanlık A.Ş. ( the Company or the Parent ) was established in 18 March 1998 under the name of MCT Müşavirlik Danışmanlık ve Dış Ticaret Limited Şirketi. The Company changed its commercial title as MCT Müşavirlik Danışmanlık ve Dış Ticaret Anonim Şirketi in 10 June 2005, and in 30 December 2011 the Company has been entitled as MCT Danışmanlık A.Ş. The Company was established in order to serve to private and public industry and their top management, personnel of those by increasing effectiveness in their operations and provide rational modern way of doing business, fisibility, investment, management, consulting, quality, production, marketing, promotion, administrative, legal, financial, economic and technical subjects related to import and export trade. The Group has been registered with the Turkish Capital Market Board ( CMB ) and quated on the Borsa Istanbul Turkey ( BIST ) since May, Issued share capital of the Group is TRY 5,141,000 and represented below. The value of each issued share is 1 TRY and consists of 5,141,000 shares. 3,900,225 of issued share is A Group nominative shares, 1,240,775 of issued share is B Group bearer shares. Group A shares have fifteen voting rights for each share and Group B shares have one voting right for each share. Share Share Share Share Name (TRY) (%) (TRY) (%) MCT Yatırım Holding A.Ş. 3,900, Publicly traded 771, , Tanyer Sönmezer 218, , Labeed Sami Hamid 207, H. Alper Utku 43, Middle East Management Centre Sprl - - 3,900, Other , Total share 5,141, ,141, As of 31 December 2015 and 2014, consolidated financial statements of the Group, consist the Company and Eventus Organizasyon Fuarcılık ve Ticaret A.Ş ( Eventus or the Subsidiary ). Information about the subsidiary is represented below: Subsidiary Share (%) Nature of Business Location Eventus Organizasyon Organazation and Fuarcılık ve Ticaret A.Ş exhibition İstanbul The average number of personnel of the Group is 29 as of 31 December 2015 (2014: 40). Headquarter of the Group is located in Abbasağa Mahallesi, Yıldız Caddesi, Sungurlar İş Merkezi No: 45/5 Yıldız Beşiktaş / İstanbul, Türkiye. 7

12 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS 2.1 Basis of Presentation: Basis of preparation and presentation of the consolidated financial statements The accompanying consolidated financial statements are prepared in accordance with Communiqué Serial II, No: 14.1, Principles of Financial Reporting in Capital Markets ( the Communiqué ) published in the Official Gazette numbered on 13 June According to Article 5 of the Communiqué, consolidated financial statements are prepared in accordance with the Turkish Accounting Standards issued by Public Oversight Accounting and Auditing Standards Authority ( POAASA ). TAS contains Turkish Accounting Standards, Turkish Financial Reporting Standards ( TFRS ). The consolidated financial statements of the Group are prepared as per the CMB announcement of 7 June 2013 relating to financial statements presentations. Comparative figures are reclassified, where necessary, to conform to changes in the presentation of the current year s consolidated financial statements. In accordance with the CMB resolution issued on 17 March 2005, listed companies operating in Turkey are not subject to inflation accounting effective from 1 January Therefore, the financial statements of the consolidated financial statements of the Group have been prepared accordingly The Company (and its subsidiary) maintains its accounting records and prepares its statutory financial statements in accordance with the Turkish Commercial Code (the TCC ), tax legislation and the uniform chart of accounts issued by the Ministry of Finance. The consolidated financial statements, except for the financial asset and liabilities presented with their fair values, are maintained under historical cost conversion in TRY. These consolidated financial statements are based on the statutory records, which are maintained under historical cost conversion, with the required adjustments and reclassifications reflected for the purpose of fair presentation in accordance with the TAS/TFRS. Functional and Reporting Currency The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in TRY, which is the functional and presentation currency of the Group. As of 31 December 2015 exchange rates declared by Central Bank of the Republic of Turkey; 1 Euro = TRY, 1 USD= TRY. (2014: 1 Euro= TRY, 1 USD= ). In the period of 1 January- 31 December 2015 average of exchange rates declared by Central Bank of the Republic of Turkey; 1 Euro= TRY, 1 USD= TRY. (2014: 1 Euro= TRY, 1 USD= TRY). 8

13 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.2 Basis of Consolidation: Subsidiaries are the companies that parent company has control over. Control of parent company, provides to be exposed and have right to variable returns and lead those rights. Subsidiaries are included in the scope of consolidation starting from the date the control on their activity passed to the parent company and are no longer consolidated firm from the date that control ceases. Intercompany transactions, balances and unrealised gains/losses on transactions between group companies are eliminated on consolidation. The Group combines individual income and expenses, assets and liabilities and cash flows of subsidiaries on a line-by-line basis with similar items in the consolidated financial statements. 2.3 Offsetting Financial assets and liabilities are offset and the net amount are reported in the consolidated financial statements when there is a legally enforceable right to set-off the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liabilities simultaneously. 2.4 Significant changes in the Accounting Policies Accounting policy changes are applied retrospectively and the previous year financial statements are arranged. In order to comply with the presentation of consolidated financial statements the current period when deemed necessary, comparative information is classified, and describes important differences. Where necessary, comparative figures have been reclassified to conform to the changes in presentation in the current period and for future periods. 2.5 Comparatives and restatement of prior periods financial statements In order to allow for the determination of the financial situation and performance trends the Group s consolidated financial statements have been presented comparatively with the previous year.. In order to comply with the presentation of consolidated financial statements the current period when deemed necessary, comparative information is classified, and describes important differences. The Group has implemented restatements on prior periods to comply the consolidated financial statements. 2.6 Amendments in International Financial Reporting Standards The Group has implemented the new and revised standards and interpretations effective from 1 January 2015 which are related to its main operations. (a) Standards, Amendments and IFRICs applicable to 31 December 2015 year ends - TAS 19, "Employee Benefits", effective from annual periods beginning on or after 1 July These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. 9

14 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.6 Amendments in International Financial Reporting Standards (Continued) - Annual improvements , effective from annual periods beginning on or after 1 July These amendments include changes from the cycle of the annual improvements project, that affect 7 standards: - TFRS 2, "Share-Based Payments" - TFRS 3, "Business Combinations" - TFRS 8, "Operating Segments" - TFRS 13, "Fair Value Measurement" - TAS 16, "Property, Plant and Equipment" and TAS 38, "Intangible Assets" - TFRS 9, "Financial Instruments", TAS 37, "Provisions, Contingent Liabilities and Contingent Assets" - TAS 39, "Financial Instruments - Recognition and Measurement". - Annual improvements , effective from annual periods beginning on or after 1 July The amendments include changes from the cycles of the annual improvements project, that affect 4 standards: - TFRS 1, "First Time Adoption" - TFRS 3, "Business Combinations" - TFRS 13, "Fair Value Measurement" - TAS 40, "Investment Property". (b) New TFRS standards, amendments and IFRICs effective after 31 December TFRS 11, "Joint Arrangements", effective from annual periods beginning on or after 1 January It is about acquisition of an interest in a joint operation. This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions. - TAS 16, "Property, Plant and Equipment", and TAS 41, "Agriculture", effective from annual periods beginning on or after 1 January These amendments change the financial reporting for bearer plants, such as grape vines, rubber trees and oil palms. It has been decided that bearer plants should be accounted for in the same way as property, plant and equipment because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of TAS 16, instead of TAS 41. The products growing on bearer plants will remain within the scope of TAS TAS 16, "Property, Plant and Equipment" and TAS 38,"Intangible Assets", effective from annual periods beginning on or after 1 January In this amendment has clarified that the use of revenue based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The amendment has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. 10

15 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.6 Amendments in International Financial Reporting Standards (Continued) - TFRS 14, "Regulatory Deferral Accounts", effective from annual periods beginning on or after 1 January This standard permits first-time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt TFRS. However, to enhance comparability with entities that already apply TFRS and do not recognise such amounts, the standard requires that the effect of rate regulation must be presented separately from other items. - TAS 27, "Separate Financial Statements", effective from annual periods beginning on or after 1 January These amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. - TFRS 10, "Consolidated Financial Statements" and TAS 28, "Investments in Associates and Joint Ventures", effective from annual periods beginning on or after 1 January These amendments address an inconsistency between the requirements in TFRS 10 and those in TAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. - Annual improvements 2014, effective from annual periods beginning on or after 1 January These set of amendments impacts 4 standards: - TFRS 5, "Non-Current Assets Held for Sale and Discontinued Operations" regarding methods of disposal. - TFRS 7, "Financial Instruments: Disclosures", (with consequential amendments to TFRS 1) regarding servicing contracts. - TAS 19, "Employee Benefits" regarding discount rates. - TAS 34, "Interim Financial Reporting" regarding disclosure of information. - TAS 1, "Presentation of Financial Statements", effective from annual periods beginning on or after 1 January These amendments are aim to improve presentation and disclosure in financial reports. - TFRS 10, "Consolidated Financial Statements" and TAS 28 "Investments in Associates and Joint Ventures", effective from annual periods beginning on or after 1 January These amendments clarify the application of the consolidation exception for investment entities and their subsidiaries. - TFRS 15, "Revenue from Contracts with Customers", effective from annual periods beginning on or after - 1 January This standard is a converged standard from the IASB and FASB on revenue recognition which will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. - TFRS 9, "Financial Instruments", effective from annual periods beginning on or after 1 January This standard replaces the guidance in TAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. 11

16 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.6 Amendments in International Financial Reporting Standards (Continued) The Group will be evaluate the given amendments and interpretations effects to their own operations and will be practice from expiry date. 2.7 Summary of Significant Accounting Policies Revenue Revenue is recognized on accrual basis over the amount obtained or the current value of the amount to be obtained when the delivery is realized, the income can be reliably determined and the inflow of the economic benefits related with the transaction to the Group is reasonably assured. Net sales represent the invoiced value of services given, less sales discounts and rebates. Sales discounts are calculated on predefined discount rate on sales invoices. Sales discounts vary by the services given. Interest Income Interest income is recognized by using the effective interest rate method. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is thereafter recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. That is the discount in the carrying amount is unwound. This would be the original effective rate for fixed rate instruments carried at amortised cost and current interest rate for floating rate instruments. Dividend Income Dividends on common shares are recognized in equity on consolidated financial statements in the period in which they are approved and declared. Rent Income Rent income acquired from real estates is recorded throughout the related rental agreement period, in accordance with linear method. Property, plant and equipment Property, plant and equipment are carried at cost less accumulated depreciation and any impairment in value. Costs of property plant and equipment are included in the asset s carrying amount or recognized as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.. Değiştirilen parçaların kayıtlı değeri konsolide bilançodan çıkarılır. All other repairs and maintenance are charged to the statements of income during the financial period in which they were incurred. 12

17 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.7 Summary of Significant Accounting Policies (Continued) There is no depreciation allocated for lands due to indefinite useful lives. Cost amounts of property, plant and equipment assets excluding land and construction in progress are subject to amortization by using the straight-line method in accordance with their expected useful life. Expected useful life, residual value and amortisation method are evaluated every year for the probable effects of changes arising in the expectations and are accounted for prospectively. Gain or losses on disposal of property, plant and equipment are included in the Income/Expense from Investing Activities and are determined as the difference between the carrying value and amounts received. Treasury shares If an entity reacquires its own equity instruments, those instruments treasury shares shall be deducted from equity. No gain or loss shall be recognised in profit or loss on the purchase, sale, issue or cancellation of an entity's own equity instruments. Such treasury shares may be acquired and held by the entity or by other members of the consolidated group. Consideration paid or received shall be recognised directly in equity. Intangible assets Intangible assets acquired separately are carried at cost, less accumulated amortization and any accumulated impairment losses. Amortization is charged on a straight-line basis over their estimated useful lives. Estimated useful life and amortization method are reviewed at the end of each year and the effect of any change in the estimate is accounted for on a prospective basis. Financial assets Classification The group classifies its financial assets in the following categories: loans and receivables, available-for-sale financial assets and held to maturity financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss acquired for are available-for-sale financial assets. They are included in current assets if those assets planned to sell in short term.financial assets at fair value through profit or loss initially recognized at cost and are subsequently premeasured at fair value based on quoted bid prices. All related gains and losses are included in the income statement 13

18 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.7 Summary of Significant Accounting Policies (Continued) b) Borrowings and Receivables Receivables and borrowings are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the statement of financial position date. Those with maturities greater than 12 months are classified as non-current assets. The Group s receivables are classified as trade and other receivables and cash and cash equivalents in the statement of financial position c) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the related investments within 12 months of the statement of financial position date. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Profit and loss from fair value changes of the financial assets related to income statement will be presented as other net - (loss) / profit. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income. Dividends on available-for sale equity instruments are recognized in the statement of income as part of financial income when the Group s right to receive payments is established. 14

19 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.7 Summary of Significant Accounting Policies (Continued) Cash and Cash Equivalents Cash and cash equivalents comprise cash in hand, bank deposits and short-term investments, which can easily be converted into cash for a certain amount, has high liquidity with original maturities of 3 months or less. Foreign Currency Transactions In preparing the consolidated financial statements, transactions in foreign currencies are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities denominated in foreign currencies are retranslated in TRY at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Foreign currency exchange differences are recorded as profit or loss in the period they occured except that circumtances indicated below: Exchange differences which are associated with assets under construction for future use, regarded as an adjustment to interest costs that are recorded as foreign currency amounts, and incorporated into asset costs, Exchange differences due to maintain hedging against risks that are generated from foreign currency. Exchange differences that constitute a part of net investment in the foreign operations, accounted in the translation reserves and associated with the profit or loss in the sale of net investment, and arose from the receivables and payables resulted from foreign operations and expected to be unpaid. Earnings per Share Earnings per share disclosed in the accompanying consolidated statement of income is determined by dividing net income by the weighted average number of shares circulating during the year concerned. In Turkey, companies can raise their share capital by distributing Bonus Shares to shareholders from retained earnings. In computing earnings per share, such Bonus Share distributions are assessed as issued shares. Accordingly, the retrospective effect for those share distributions is taken into consideration in determining the weighted-average number of shares outstanding used in this computation. 15

20 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.7 Summary of Significant Accounting Policies (Continued) Events after the Reporting Date In the case of the occurrence of subsequent events after the date of the balance sheet which require the balance sheet to be adjusted, the Group corrects its consolidated financial statements in consideration of the new events The Group adjusts the amounts recognized in its financial statements to reflect adjusting events occurring after the reporting date. If non-adjusting events after the reporting date have material influence on the economic decisions of users of the financial statements, they are disclosed in the notes to the consolidated financial statements. Provisions, Contingent Assets and Liabilities Provisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date considering the risks and uncertainties surrounding the obligation. Contingent Assets and Liabilities Contingent liabilities are not recognized in the financial statements, but are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognized in the financial statements, but disclosed when an inflow of economic benefits is probable. Related Parties: A related party is a person or entity that is related to the entity that is preparing its financial statements (in this Standard referred to as the reporting entity ). (a) A person or a close member of that person s family is related to a reporting entity if that person: (i) (ii) (iii) has control or joint control of the reporting entity, has significant influence over the reporting entity; or, is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. (b) An entity is related to a reporting entity if any of the following conditions applies: (i) (ii) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). 16

21 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.7 Summary of Significant Accounting Policies (Continued) Related Parties (Continued): (iii) (iv) (v) (vi) Both entities are joint ventures of the same third party. One entity is a joint venture of a third entity and the other entity is an associate of the third entity. The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity. The entity is controlled or jointly controlled by a person identified in (a) (vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognized in the statement of income, except to the extent that it relates to items recognized directly in equity. In such case, the tax is recognized in shareholders equity. Deferred tax liability or asset is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which are used in the computation of taxable profit. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and tax regulations that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. The main temporary differences are from the time differences between carrying amount of tangible assets and their tax base amounts, the available expense accruals that are subject to tax and tax allowances that are not utilized. Deferred tax liabilities are recognized for all taxable temporary differences, where deferred tax assets resulting from deductible temporary differences are recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilized. When the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority and there is a legally enforceable right to set off current tax assets against current tax liabilities, deferred tax assets and deferred tax liabilities are offset accordingly 17

22 NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.7 Summary of Significant Accounting Policies (Continued) Employment Termination Benefits The Group provied its personnel vacation, education, incentive, food, maternity, marriage and death allowances in addition to salaries. Employment termination benefits, as required by the Turkish Labor Law and the laws applicable in the countries where the subsidiaries operate, represent the estimated present value of the total reserve of the future probable obligation of the Group arising in case of the retirement of the employees. According to Turkish Labor Law and other laws applicable in Turkey, the Group is obliged to pay employment termination benefit to all personnel in cases of termination of employment without due cause, call for military service, retirement or death upon the completion of a minimum one year service. The provision which is allocated by using the defined benefit pension s current value is calculated by using the estimated liability method. All actuarial profits and losses are recognized in the consolidated statements of income. Statement of Cash Flows The Group prepares statements of cash flows as an integral part of its of financial statements to enable financial statement analysis about the change in its net assets, financial structure and the ability to direct cash flow amounts and timing according to evolving conditions. Cash flows include those from operating activities, working capital, investing activities and financing activities. Cash flows from operating activities represent the cash flows generated from the Group s activities. Cash flows related to investing activities represent the cash flows that are used in or provided from the investing activities of the Group (fixed investments and financial investments). Cash flows arising from financing activities represent the cash proceeds from the financing activities of the Group and the repayments of these funds. Share Capital and Dividends Ordinary shares are classified as equity. Marginal costs related to the issuance of new shares and options, are demonstrated in equity with a reduction of tax effect. Dividends distributed to shareholders of the Group are reflected as a liability to the consolidated financial statements of the Group by the time they are approved by shareholders of the Group. Decisions, estimations and anticipations that are used for the preparation of consolidated financial statements are regularly evaluated and based on the facts that have reasonable proves by considering the historical knowledge and conditions. Significant accounting estimations The Group has estimations for the future. Accounting estimations have exactly the same results with rarely realized conditions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities for the next reporting period are outlined in the consolidated financial statements. 18

23 NOTE 3 - CASH AND CASH EQUIVALENTS Cash on hand 10,935 1,043 Demand deposits 606,059 1,039,313 Time deposits 3,314,236 2,437,999 The Group does not have any restricted deposit as of 31 December 2015 and ,931,230 3,478,355 The annually weighted average effective interest rate for the bank deposit based on Euro is 1,15% (2014: 1.97%). As of 31 December 2015 and 2014, the maturity date of time deposits are 5 January 2016 and 1 January 2015 by respectively. NOTE 4 - TRADE RECEIVABLES AND PAYABLES Details for trade receivables and payables as of 31 December 2015 and 2014 are as follows: Short term trade receivables Trade receivables 3,380,520 3,580,782 Notes receivable - 9,126 Unearned financial income from credit sales (-) (19,200) (26,135) 3,361,320 3,563,773 Trade receivable and payable maturity days are shorther than a month as of 31 December 2015 and Trade payables Trade payables 656, , , ,184 19

24 NOTE 5 - RELATED PARTY TRANSACTIONS As of 31 December 2015 and 2014, related party transactions are as follows: a) Due from related parties - short term Middle East Management Centre S.P.R.L 160,000 - MCT Yatırım Holding A.Ş. 127, ,843 Alper Utku - 37, , ,486 b) Due from related parties - long term European Leadership University (*) 1,234,527-1,234,527 - (*) Consist the reimbursement chargeout to European Leadership University and establishment cost that Group management has payed. c) Due to related parties Alper Utku 25,000 - Tanyer Sönmezer - 8,920 25,000 8,920 d) Board of Director s and key management remuneration Wage and premium 2,266,392 1,606,057 2,266,392 1,606,057 Provision for employee termination benefits to key management is 100,054 TRY as of 31 December 2015 (2014: 124,363 TRY). Projects reimbursement of those persons has been invoiced and recognised as revenue on 2015 financial statements amounted to TRY 2,146,428 (2014: 1,820,247) 20

25 NOTE 6 - OTHER RECEIVABLES AND PAYABLES As of 31 December 2015 and 2014, other receivables are as follows: Short term other receivables Deposits and guarantee given 10,000 10,000 Other receivables 10,882 11,872 20,882 21,872 Short - term other payables Other payables 1,416 - Payable for tangible assets - 109,555 1, ,555 NOTE 7 - FINANCIAL ASSETS As of 31 December 2015 and 2014, details of financial investments are as follows: Dutch Group B.V. (1) 77,105 - European Leadership University (2) 30, ,105 - (1) The Group invested to Dutch Group B.V. amounting to 77,105. Dutch Group B.V. operates in consultancy sector and the Group participant rate is 2%. (2) The Group s participant rate is 10% to European Leadership University in Turkish Republic of Nothern Cyprus as of 31 December The Group has accounted financial assest by acquisition cost and the Group approach is fair value and cost of financial assets are close. NOTE 8 - INVENTORIES As of 31 December 2015 and 2014, details of inventories are as follows: 21 Personality tests 80,500 77,500 Stationery and editions 30,000 30, ,500 87,500

26 NOTE 9 - PREPAID EXPENSES As of 31 December 2015 and 2014, other prepaid expenses are as follows: Advances given 222, ,636 Prepaid expenses 30,445 60, , ,111 NOTE 10 - DEFERRED INCOME Deferred income (*) 525, , , ,597 (*) The Group s deferred income arisen from the management consultancy services concerning months and advances received for consultancy services. NOTE 11 - OTHER CURRENT LIABILITIES Taxes and social security premium payables 520, ,382 Due to personnel 448, ,291 Other 430, ,592 1,399, ,265 NOTE 12 - GOODWILL Goodwill balance is amounting to 378,744 TRY as of 31 December 2015 and The goodwill balance coming from the acquisition of Eventus Organizasyon Fuarcılık ve Ticaret A.Ş. is composed of the difference between the fair value of net assets by 3,066,309 TRY and total acquisition price by TRY 3,445,053. Acquisition is recognized in accordance with the article TFRS 3 Business Combinations and the goodwill calculated after the acquisition is presented to the consolidated financial statements. Goodwill amount of the Group is caused by acquisition of Eventus Organizasyon Fuarcılık ve Ticaret A.Ş. Goodwill balance is caused that the Company will be create synergy and market penetration in the sector and economic benefits while acquiring the Subsidary. The Group management performs goodwill impairment test. 22

27 NOTE 13 - PROPERTY, PLANT AND EQUIPMENT As of 31 December 2015 and 2014, the movements of property, plant and equipment are as follows: 1 January 2015 Additions Disposals 31 December 2015 Cost Vehicles 430, ,634 (45,510) 512,381 Furniture and fixtures 1,155,126 49,302-1,204,428 Leasehold improvements 570, ,556 2,155, ,936 (45,510) 2,287,365 Accumulated depreciation Vehicles (301,836) (59,449) 45,510 (315,775) Furniture and fixtures (1,006,946) (61,085) - (1,068,031) Leasehold improvements (160,547) (96,166) - (256,713) (1,469,329) (216,700) 45,510 (1,640,519) Net book value 686, ,846 1 January 2014 Additions Disposals 31 December 2014 Cost Vehicles 429, ,257 Furniture and fixtures 1,050, ,639-1,155,126 Leasehold improvements 133, , ,556 1,612, ,002-2,155,939 Accumulated depreciation Vehicles (250,591) (51,245) - (301,836) Furniture and fixtures (942,248) (64,698) - (1,006,946) Leasehold improvements (120,120) (40,427) - (160,547) (1,312,959) (156,370) - (1,469,329) Net book value 299, ,610 Tangible assets estimated useful lifes are as follows: Useful Life Vehicles Furniture and fixtures Leasehold improvements 4 years 3-10 years 5 years 23