Şeker Finansman Anonim Şirketi (Formerly title Şeker Mortgage Finansman Anonim Şirketi)

Transcription

1 Şeker Finansman Anonim Şirketi (Formerly title Şeker Mortgage Finansman Anonim Şirketi) Financial Statements As At and For the Year Ended 31 December 2017 With Independent Auditor s Report

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6 INDEX: Statement of Financial Position (Balance Sheet) 1-2 Statement of Off-Balance Sheet Items 3 Statement of Profit or Loss 4 Statement of Profit or Loss and Other Comprehensive Income 5 Statement of Changes in Equity 6 Statement of Cash Flows Statement of Profit Distribution Note 1 Organization and Nature of Operations 9 Note 2 Basis of Presentation of the Financial Statements Note 3 Cash and Cash Equivalents and Central Bank 22 Note 4 Financial Assets And Liabilities At Fair Value Through Profit Or Loss 23 Note 5 Banks 24 Note 6 Financing Loans 24 Note 7 Receivables at Follow-up 25 Note 8 Tangible Assets 26 Note 9 Intangible Assets 27 Note 10 Deferred Tax Asset/ Liability 28 Note 11 Prepaid Expenses and Other Receivables 29 Note 12 Derivative Financial Liabilities Held for Trading 29 Note 13 Borrowing and Subordinated Liabilities 30 Note 14 Other Payables 30 Note 15 Deferred Income 31 Note 16 Tax Liabilities 31 Note 17 Provisions 32 Note 18 Shareholders Equity 33 Note 19 Operating Income 34 Note 20 Operating Expenses 34 Note 21 Other Operating Income 35 Note 22 Other Operating Expense 35 Note 23 Taxes Note 24 Earnings / (Losses) Per Share 37 Note 25 Related Party Disclosures Note 26 Contingent Assets and Liabilities Note 27 Financial Risk Management Note 28 Financial Instruments Note 29 Events After the Reporting Period 50

7 ŞEKER FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2017 (BALANCE SHEET) Audited Audited ASSETS Notes Current period (31 December 2017) Prior period (31 December 2016) TL FC Total TL FC Total I. CASH AND BALANCES WITH THE CENTRAL BANK ,257 12, ,355 13,356 II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (Net) 4 306, , ,723 8, , Held for trading financial assets Financial assets at fair value through profit and loss 266, , , , Derivative Financial Assets Held for Training 39,616 2,306 41,922 94,024 8, ,407 III. BANKS 5 23, , ,485 86, , ,240 IV. RECEIVABLES FROM REVERSE REPO V. FINANCIAL ASSETS AVAILABLE FOR SALE (Net) VI. FACTORING RECEIVABLES Discounted Factoring Receivables Domestic Foreign Unearned Revenue (-) Other Factoring Receivables Domestic Foreign VII. FINANCING LOANS 6 77,828-77,828 43,062-43, Consumer Loans 31,160-31,160 39,534-39, Credit Cards Installment Commercial Loans 46,668-46,668 3,528-3,528 VIII. LEASING Receivables from Leasing Receivables from Financial Leasing Receivables from Operational Leasing Unearned Revenue (-) Investments Subjected to Leasing Advances Given for Leasing IX. OTHER RECEIVABLES 11 2,490 38,485 40,975 2,604 26,752 29,356 X. RECEIVABLES AT FOLLOW-UP ,198-1, Faktoring Receivables at Follow-Up Financing Loans at Follow-Up 1,111-1,111 1,567-1, Leasing Receivables at Follow-Up Provisions (-) XI. DERIVATIVE FINANCIAL ASSETS FOR HEDGING PURPOSES Fair value hedge Cash flow hedge Hedge of net investment risks in foreign operations XII. INVESTMENTS HELD UNTIL MATURITY (Net) XIII. SUBSIDIARIES XIV. AFFILIATES XV. JOINT VENTURES XVI. TANGIBLE ASSETS (Net) XVII. INTANGIBLE ASSETS (Net) Goodwill Other XVIII. PREPAID EXPENSES ,334 1, ,326 1,452 XIX. CURRENT TAX ASSETS 2,282-2, XX. DEFERRED TAX ASSETS , XXI. OTHER ASSETS SUB TOTAL 416, , , , , ,077 XXII. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) Held for sale Discontinued operations TOTAL ASSETS 416, , , , , ,077 The accompanying notes form an integral part of these financial statements 1

8 ŞEKER FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2017 (BALANCE SHEET) Audited Audited LIABILITIES Notes Current period (31 December 2017) Prior period (31 December 2016) TL FC Total TL FC Total I. DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING II. BORROWINGS 13 29, , , , ,770 III. FACTORING LIABILITIES IV. LEASING LIABILITIES A) Financial Leasing Liabilities B) Operational Leasing Liabilities C) Other D) Deferred Financial Leasing Expenses (-) V. BONDS ISSUED Bonds Asset - backed security Bills VI. OTHER DEBTS ,128 45, , ,359 VII. OTHER LIABILITIES VIII. DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING PURPOSES Fair value hedge Cash flow hedge Foreign investment hedge IX. TAXES AND OTHER GOVERNMENTAL LIABILITIES X. PROVISIONS 17 1,131-1,131 1,474-1, Restructing provisions Employee benefit provisions Other Provisions ,267-1,267 XI. DEFERRED INCOME XII. CURRENT TAX LIABILITIES XIII. DEFERRED TAX LIABILITIES XIV. SUBORDINATED LOAN 13 23,717-23,717 23,597-23,597 XV. SUBTOTAL 57, , ,903 25, , ,885 LIABILITIES FROM ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Sales purposes Discontinued operations XVI. SHAREHOLDERS EQUITY 12,856-12,856 22,192-22, Paid-in capital ,000-26,000 26,000-26, Capital reserves Share premium Share premium of cancelled shares Other share capital reserves Other Comprehensive income unclassified in P/L (45) - (45) (10) - (10) 16.4 Other Comprehensive income reclassified in P/L Profit reserves 18.2 (3,798) - (3,798) (1,769) - (1,769) a) Legal reserves b) Statutory reserves c) Extraordinary reserves (4,412) - (4,412) (2,383) - (2,383) d) Other reserves Profit or Loss (9,301) - (9,301) (2,029) - (2,029) a) Retained earnings b) Net income (9,301) - (9,301) (2,029) - (2,029) LIABILITIES 70, , ,759 47, , ,077 The accompanying notes form an integral part of these financial statements 2

9 ŞEKER FİNANSMAN ANONİM ŞİRKETİ OFF-BALANCE SHEET ACCOUNTS AS OF 31 DECEMBER 2017 Audited Audited OFF-BALANCE SHEET ACCOUNTS Notes Current period (31 December 2017) Prior period (31 December 2016) TL FC Total TL FC Total I. FACTORING TRANSACTIONS WITH RISK II. FACTORING TRANSACTIONS III. GUARANTEES RECEIVED , ,525 1,058, ,346 52, ,134 IV. GUARANTEES GIVEN ,915 38, , ,354 26, ,991 V. COMMITMENTS Irrevocible commitments Revocible commitments Leasing comminments Financial leasing commitments Operational leasing commitments Other revocible commitments VI. DERIVATIVE FINANCIAL INSTRUMENTS , ,477 1,127, , , , Hedging purposes Fair value hedge Cash flow hedge Foreign investment hedge Trading 548, ,477 1,127, , , , Forwards Swap transactions 548, ,477 1,127, , , , Call / Put Options Futures Other VII. CUSTODY ASSETS TOTAL OFF BALANCE SHEET ACCOUNTS 1,535, ,364 2,486,905 1,510, ,444 2,103,467 The accompanying notes form an integral part of these financial statements 3

10 ŞEKER FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF INCOME AS OF 31 DECEMBER 2017 INCOME STATEMENT I. OPERATING INCOME 31,544 52, FACTORING INCOME A.) Interest received from factoring receivables a.) Discounted b.) Other B.) Fees and commissions received from factoring receivables a.) Discounted b.) Other INCOME FROM FINANCING LOANS 19 31,544 52, A.) Interest received from financing loans 30,786 51, B.) Fees and commissions received from financing loans 758 1, LEASING INCOME A.) Financial leasing icome B.) Operational leasing income C.) Fees and commissions received from leasing transactions - - II. FINANCE EXPENSES (-) 19,891 (15,005) 2.1 Interest given for loans used 10,297 (6,390) 2.2 Interest given for factoring transactions Financial leasing expenses Interest given for bonds issued Other interest expenses Fees and commissions given 9,594) (8,615 III. GROSS PROFIT (I+II) 11,653 37,556 IV. OPERATING EXPENSE (-) 20 (4,665) (7,202) 4.1 Personel expenses (2,331) (3,865) 4.2 Employee termination provision Research and Development expenses General Administration expenses (2,334) (3,337) 4.5 Other - - V. GROSS OPERATING PROFIT(III+IV) 6,988 30,354 VI. OTHER OPERATING INCOME , , Interest from banks 11,137 5, Interest from reverse repo Interest from marketable securities Financial assets held for trading Financial assets at fair value through P/L From financial assets held for sale From investments held till maturity Dividend income Capital market transactions profit or loss 103, , Derivative financial transactions profit or loss 103, , Other Foreign exchange gain/loss 79,480 44, Other VII. SPECIFIC PROVISION RECEIVABLES UNDER FOLLOW-UP (-) 22 (1,679) (2,315) VIII. OTHER OPERATING EXPENSE (-) (211,834) (245,091) 8.1 Impairment of marketable securities Financial assets at fair value through P/L From financial assets available for sale Held to maturity investments Impairment expense on fixed assets Impairements on tangible assets Impairements on financial assets held for sale and discontinued operations Impairements on Goodwill Impairements on other intangible assets Impairments on subsidiaries, joint ventures and partnerships Loss on Derivative Financial Transactions (105,317) (108,972) 8.4 Loss on FX Transactions (106,514) (136,119) 8.5 Other (3) - IX. NET OPERATING INCOME (I+ +IV) (11,643) (1,707) X. SURPLUS REVENUE AFTER MERGER - - XI. NET FINANCIAL POSITION P/L - - XII. EARNINGS FROM CONTINUED OPERATIONS BEFORE TAX (VII+VIII+IX) (11,643) (1,707) XIII. TAX PROVISION FOR CONTINUED OPERATIONS 23 2,342 (322) 13.1 Current tax provision Deferred tax asset effect (+) (14,229) (17,327) 13.3 Deferred tax liability effect (-) 16,571 17,005 XIV. NET INCOME FROM CONTINUED OPERATIONS (9,301) (2,029) XV. INCOME FROM DISCONTINUED OPERATIONS Income from financial assets held for sale Profit on sale of subsidiaries, joint ventures and partnerships Other discontinued operation income - - XVI. NET EXPENSES FROM DISCONTINUED OPERATIONS Expense from financial assets held for sale Loss on sale of subsidiaries, joint ventures and partnerships Other discontinued operation expense - - XVII. EARNINGS FROM DISCONTINUED OPERATIONS BEFORE TAX - - XVIII. TAX PROVISION FOR DISCONTINUED OPERATIONS Current tax provision Deferred tax asset effect (+) Deferred tax liability effect (-) - - XIX. NET PROFIT / LOSS FROM DISCONTINUED OPERATIONS - - XX. NET PROFIT FOR THE PERIOD (9,301) (2,029) The accompanying notes form an integral part of these financial statements 4 4 Notes Audited Current Period ( ) Audited Prior Period ( )

11 ŞEKER FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF OTHER COMPREHENSIVEINCOME AS OF 31 DECEMBER 2017 OTHER COMPREHENSIVE INCOME Audited Current Period Audited Prior Period Notes ( ) ( ) I. NET INCOME FOR THE PERIOD (9,301) (2,029) II. OTHER COMPREHENSIVE INCOME (35) (43) 2.1 Unclassified through P/L (35) (43) Increase/decrease of revaluation on tangible assets Increase/decrease of revaluation on intangible assets Gain/Loss on revaluation of defined benefit pension plan (44) (54) Other comprehensive income not classified through P/L Taxes on other comprehensive income not classified through P/L Tax asset/liability for the period Deferred tax asset/liability for the period Reclassified Through P/L Foreign Exchange Differences Income/expense on revaluation or reclassification of financial assets held for sale Income/expense on cash flow hedge Income/expense on foreign investment hedge Other comprehensive income classified through P/L Taxes on other comprehensive income classified through P/L Current tax asset /liability Deferred tax asset /liability - - III. OTHER COMPREHENSIVE INCOME (9,336) (2,072) The accompanying notes form an integral part of these financial statements 5 4

12 ŞEKER FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF CHANGES IN EQUITY AS OF 31 DECEMBER 2017 Changes in Equity Other Comprehensive Income and Other Comprehensive Income and Expense Unclassified Through P/L Expense Reclassified Through P/L Share Premium of Canceled Shares Other Reserves Profit Reserves Legal Reserves Statutory Reserves Extraordinary Reserves Other Reserves Profit or Loss Retained Earnings Net Profit or Loss Non-Controlling Interest Paid-in Capital Capital Reserves Bonds Issued Total Equity Prior Period ( ) I. Beginning Balance 26, , ,096 - (8,479) - (8,479) - 24,264 II. Amendments according to TAS Effects of the amendments Effects of the changes in accounting policies III. New Balance (I+II) 26, , ,096 - (8,479) - (8,479) - 24,264 IV. Total Comprehensive Income (43) (43) V. Capital Increase in cash VI. Capital Increase through internal sources VII. Paid-in Capital inflation adjustment difference VIII. Stocks convertible to shares IX. Subordinated Loan X. Increase/decrease related with other adjustments XI. Net Profit or Loss (2,029) - (2,029) - (2,029) XII. Profit Distribution (8,479) - - (8,479) - 8,479-8, Dividends paid Reserves (8,479) - - (8,479) - 8,479-8, Other Ending Balance (31 December 2016) 26, (10) (1,769) (2,383) - (2,029) - (2,029) 22,192 Current Period ( ) I. Prior Period Ending Balance 26, (10) (1,769) (2,383) - (2,029) ,192 II. Amendments according to TAS Effects of the amendments Effects of the changes in accounting policies III. New Balance (I+II) 26, (10) (1,769) (2,383) - (2,029) ,192 IV. Total Comprehensive Income (35) (35) V. Capital Increase in cash VI. Capital Increase through internal sources VII. Paid-in Capital inflation adjustment difference VIII. Stocks convertible to shares IX. Subordinated Loan X. Increase/decrease related with impairments XI. Net Profit or Loss (9,301) - (9,301) - (9,301) XII. Profit Distribution (2,029) - - (2,029) - 2, Dividends paid Reserves (2,029) - - (2,029) - 2, Other Ending Balance ( ) 26, (45) (3,798) (4,412) - (9,301) - (9,301) 12,856 1, Increase/decrease on revaluation on fixed assets, 2, Gain / Loss on revaluation of defined benefit pension plans, 3,Other (investments valued by equity method that not classified through P/L) comprehensive income 4, Foreign exchange differences 5, Gain/Loss on revaluation of financial assets held for sale, 6, Other (Cash flow hedge, investments valued by equity classified through P/Land other Profit and loss). The accompanying notes form an integral part of these financial statements 6 4

13 ŞEKER FİNANSMAN ANONİM ŞİRKETİ STATEMENT OF CASH FLOWS AS OF 31 DECEMBER 2017 STATEMENT OF CASH FLOW A. CASH FLOW FROM OPERATING ACTIVITIES Notes Audited Current Period ( ) Audited Prior Period ( ) 1.1 Operational Income Subjected Before Asset and Liability Changes 105,128 69, Interest received/leasing income 49,548 49, Interest expenses (Operational) (15) (80) Dividends received Fees and Commissions received 758 1, Other gains Collections on receivables at follow up that recognized as loss Cash payments to personnel (4,650) (7,121) Paid taxes (1,331) (323) Other 60,057 25, Change in Operating Assets and Liabilies (60,869) 22, Increase / decrease on financing loans 19,806 54, Net increase/decrease on other assets (12,038) (24,587) Net increase/decrease on borrowings (7,075) (29,822) Net increase/decrease on payments due Net increase/decrease on other debts (61,562) 22,521 I. Net Cash Flow from Operations 44,259 92,223 B. CASH FLOW FROM INVESTING ACTIVITIES, 2.1 Cash Paid for Purchase Of Associates, Subsidiaries and Joint-ventures Cash Obtained From Sale of Associates, Subsidiaries and Joint-Ventures Purchases of Tangible and Intangible Assets 8 (8) (12) 2.4 Proceeds From Sale of Tangible and Intangible Assets Cash Paid for Purchase of Financial Assets Available for Sale Proceeds From Sale of Financial Assets Available for Sale Cash Paid for Purchase of Held-to-Maturity Investment Securities Proceeds from Sale of Held-to-Maturity Investment Securities Other 9 (43) (124) II. Net Cash Flow from Investing Activities (51) (136) C. CASH FLOW FROM FINANCING ACTIVITIES Cash inflow from loans and bond issued Cash outflow from loans and bond issued Capital instruments issued Dividend payments Financial leasing payments Other - - III. Net Cash Flow from Financing Activities - - IV. Effect of Foreign Exchange Differences (5,952) 3,041 V. Net Increase/Decrease on Cash and cash Equivalents 38,256 95,128 VI. Cash and Cash Equivalents at the beginning of the period 213, ,499 VII. Cash and Cash Equivalents at the end of the period , ,627 The accompanying notes form an integral part of these financial statements 7

14 STATEMENT OF PROFIT DISTRUBITION AS OF 31 DECEMBER 2017 ŞEKER FİNANSAL KİRALAMA A.Ş. PROFIT DISTRIBUTION TABLE I. DISTRIBUTION OF CURRENT PERIOD PROFIT (*) Current Period 31 December 2017 Prior Period 31 December CURRENT PERIOD PROFIT (11,643) (1,707) 1.2 TAXES AND LEGAL DUTIES PAYABLE (-) 2,342 (322) Corporate Tax (Income Tax) Withholding Tax Other taxes and dues (**) 2,342 (322) A. NET PROFIT FOR THE PERIOD ( ) (9,301) (2,029) 1.3 ACCUMULATED LOSSES (-) (***) FIRST LEGAL RESERVE (-) OTHER STATUTORY RESERVES NEEDED TO BE KEPT IN THE COMPANY (-) - - B NET PROFIT AVAILABLE FOR DISTRIBUTION [(A )] FIRST DIVIDEND TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Preferred Stocks To Owners of Preferred Stocks (Preemptive Rights) To Profit Sharing Bonds To Owners of the profit /loss Sharing Certificates DIVIDEND TO PERSONNEL (-) DIVIDEND TO BOARD OF DIRECTORS (-) SECOND DIVIDEND TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Preferred Stocks To Owners of Preferred Stocks (Preemptive Rights) To Profit Sharing Bonds To Owners of the profit /loss Sharing Certificates SECOND LEGAL RESERVE (-) STATUS RESERVES (-) EXTRAORDINARY RESERVES OTHER RESERVES SPECIAL FUNDS - - II. DISTRIBUTION FROM RESERVES DISTRIBUTED RESERVES SECOND LEGAL RESERVES (-) SHARE TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Preferred Stocks To Owners of Preferred Stocks To Profit Sharing Bonds To Owners of the profit /loss Sharing Certificates SHARE TO PERSONNEL (-) SHARE TO BOARD OF DIRECTORS (-) - - III. EARNINGS PER SHARE TO OWNERS OF STOCKS (TRY) (0.078) 3.2 TO OWNERS OF STOCKS ( % ) (7.803) 3.3 TO OWNERS OF PREFERRED STOCKS (TRY) TO OWNERS OF PREFERRED STOCKS ( % ) - - IV. DIVIDEND PER SHARE 4.1 TO OWNERS OF STOCKS (TRY) TO OWNERS OF STOCKS ( % ) TO OWNERS OF PREFERRED STOCKS (TRY) TO OWNERS OF PREFERRED STOCKS ( % ) - - (*) Decision regarding to the 2017 profit distribution will be held at General Assembly meeting The accompanying notes form an integral part of these financial statements 8

15 ŞEKER FİNANSMAN ANONİM ŞİRKETİ 1 ORGANIZATION AND NATURE OF THE OPERATION Şeker Finansman A.Ş. ( the Company ) was established on 9 January 2008 under the title of İstanbul Finansman Anonim Şirketi after obtaining establishment license from Banking Regulation and Supervision Agency ( BRSA ) in November 2007 with the related Decree No: 90 Regulation on Lending Transactions on 30 September 1983, and within the framework of other Laws, Decrees and Regulations related to Banking Law No: 5411 in order to operate as a consumer finance company. It is deemed appropriate for the Banking Regulation and Supervision Agency to carry out financing activities in accordance with the Official Gazette dated April 24, 2013 and numbered and Article 7 of the Regulation on the Establishment and Operation Principles of the Company's Financial Leasing, Factoring and Financing Companies. The principal activity of the Company is to finance its purchases of all kinds of goods and services through the lending of consumers within the framework of the legislative provisions. The Company changed its title as İstanbul Mortgage Finansman A.Ş. in the General Assembly on 31 July Title change was registered by İstanbul Trade Registry Office on 8 August 2008 and published on the Trade Registry Gazette with numbered 7138 on 29 August The Company converted its title to Şeker Mortgage Finansman A.Ş. in the General Assembly on 14 October Title change was registered by İstanbul Trade Registry Office on 20 October 2008 and published on the Trade Registry Gazette with numbered 7677 on 26 October The Company changed its title as Şeker Finansman A.Ş. in the General Assembly on 31 March Title change was registered by İstanbul Trade Registry Office on 21 April 2016 and published on the Trade Registry Gazette with numbered 9063 on 27 April Share transfer negotiations between the Company s main shareholder Ipotek Financing S.A (domiciled in Luxembourg) and Şekerbank T.A.Ş. approved by BRSA with the letter numbered on 22 September 2010, was resulted on 21 December Şekerbank T.A.Ş. has taken over units of stocks which makes up 51% of the Company s shares belonging to Ipotek Financing S.A. with the transfer share agreement. The Company s marketing, sales, financing and lending activities began on 20 April 2011 with the campaign carried out with the Şekerbank T.A.Ş. by the permission which given to Şekerbank T.A.Ş. based on the BRSA s decision no: 3993 on 31 December 2010 and published on the Official Gazette numbered (5.Repeating) and relation to introduction of the Company s products through branches and alternative distribution channels. The Company s primary objective is to operate in the field of housing finance. The Company registered at the following address: Barbaros Bulvarı No: 149 Kat: 7 Balmumcu, İstanbul/Türkiye. The shareholder structure of the Company is as follows: 31 December December 2016 Share (%) Share (%) Şekerbank T.A.Ş Ipotek Financing S.A Şeker Yatırım Menkul Değerler A.Ş. <1 <1 Şeker Finansal Kiralama A.Ş. <1 <1 Şeker Faktoring A.Ş. <1 <1 Total The number of personnel of the Company is 15 as at 31 December 2017 (31 December 2016: 20). 9

16 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS 2.1 Basis of Presentation Accounting Principles The Company prepared the accompanying financial statements in accordance with the Regulation on Accounting Practices and Financial Statements of Financial Leasing, Factoring and Financing Companies and the Communiqué on Uniform Chart of Accounts and Prospectus to be implemented by Financial Leasing, Factoring and Financing Companies and on Financial Statements to be announced to Public published in the Official Gazette dated 24 December 2013 and numbered and Turkish Accounting Standards and Turkish Financial Reporting Standards published by Public Oversight Accounting and Auditing Standards Institute (POA) and other regulations, communiqués, and circulars (all of them referred to Reporting Standards ) announced by BRSA in respect of accounting and financial reporting. The financial statements of the Company as of December 31, 2017 have been approved by the Company Management to be presented to the Board of Directors on 6 March The General Assembly has the power to amend the financial statements after their issue Functional and presentation currency The presentation and functional currency of the Company is TL Change in accounting policies Changes in accounting policies are applied retrospectively and the prior year financial statements are restated. There is no change in the accounting policies Accounting Estimates The preparation of financial statements in conformity with Reporting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Accounting estimates mainly used are presented in the following note: Note 4 - Note 10 - Financial Assets at Fair Value Through Profit or Loss Deferred Tax Assets and Liabilities Note Useful Life of Fixed Assets Note 7 - Note 17 - Note 17- Provisions for Receivables under Follow-Up Benefits provided to employees Provisions and Expense Provisions 10

17 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.1 Basis of Presentation (continued) New and Revised Accounting Standards Turkey a) The standards and interpretations adopted in 2017 TAS 12 (Changes) Recognition of Deferred Tax Assets for Unrealized Losses 1 TAS 7 (Changes) Statements 1 Related Annual Improvements of TFRS Period 1 Effective from the fiscal periods beginning after January 1, TAS 12 (Changes) Recognition of Deferred Tax Assets for Unrealized Losses The amendment clarifies the deferred tax accounting for debt instruments measured at fair value. The amendments to TAS 12 do not have any effect on the Group's consolidated financial statements. TAS 7 (Changes) Statements This amendment clarifies that users of the financial statements should provide explanations for the changes in liabilities arising from financing activities. The Group's liabilities arising from its financing activities include loans and certain other financial liabilities. In accordance with the transition provisions of the amendments, the Group did not present the comparative information on the prior period in the relevant note. Related Annual Improvements of Period TFRS 12: This improvement clarifies that the entity does not need to disclose summary financial information for its shares in subsidiaries, associates or joint ventures classified as held for sale in accordance with TFRS 5, Non-current Assets Held for Sale and Discontinued Operations. b) Standards and interpretations not yet issued and changes on current standards The Group has not yet implemented the following amendments and interpretations to existing standards that are not yet effective: 11

18 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.1 Basis of Presentation (continued) Standards and interpretations not yet issued and changes on current standards TFRS 9 Financial Instruments 1 TFRS 15 Revenue from Customer Agreements 1 TFRS 10 and TAS 28 (Changes) Asset Sales or Equity Participation Between Investor and Affiliate or Joint Venture TFRS 2 (Changes) Classification and Measurement of Share Based Payment Transactions 1 TFRS Interpretion 22 Foreign Currency Transactions and Advance Value 1 TAS 40 (Changes) Investment Property Transfer 1 Related Annual Improvements of Period TFRS 1 1, TAS 28 1 TAS 28 (Changes) Long-term Shares in Affiliates and Joint Ventures 2 1 Effective from the fiscal periods beginning after January 1, Effective from the fiscal periods beginning after January 1, TFRS 9 - Financial Instruments Classification and measurement TFRS 9 introduces new requirements for classifying and measuring financial assets and liabilities. Basic provisions of TFRS 9: All financial assets within the scope of TFRS 9 are required to be recognized at initial recognition, at amortized cost or at fair value. In particular, borrowing instruments held in a business model intended to collect contractual cash flows and borrowing instruments with contractual cash flows that include interest payments solely on principal and principal balance are generally measured at amortized cost subsequent to recognition. The overall fair value change in the borrowing instruments held in a business model for both collecting cash flows from contracts and selling financial assets and the borrowing instruments leading to cash flows involving only interest payments in principal and principal amounts on certain dates. All other borrowing instruments and equity instruments are measured at fair value at the end of subsequent periods. In addition, pursuant to TFRS 9, entities may have a preference that can not be reversed regarding the presentation of changes in fair value of an investment in an equity instrument that is not held for trading purposes in other comprehensive income. Dividends from such investments are clearly included in the financial statements as profit or loss unless they represent a part of the cost of the investment. In accordance with TFRS 9, the measurement of a financial liability that is designated as a fair value change in profit or loss is reflected in the other comprehensive income if changes in the credit risk associated with the financial liability do not create accounting inconsistency in profit or loss or increase the accounting inconsistency in profit or loss. Changes in the fair value of a financial liability attributable to a credit risk can not be reclassified to profit or loss in subsequent periods. In accordance with TAS 39, any change in the fair value difference of the financial liability at fair value through profit or loss is shown in profit or loss. Regarding the impairment of financial assets, TFRS 9 requires expected credit loss model, contrary to realized credit loss model in accordance with TAS 39. Expected credit loss model requires an entity to account for expected credit losses and any changes in expected credit losses at each reporting date to reflect changes in credit risk from initial recognition. In other words, according to the new arrangement, it is not necessary for a credit loss to be realized before the credit losses are recognized. 12

19 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.1 Basis of Presentation (continued) Standards and interpretations not yet issued and changes on current standards (continued) The new general hedge accounting provisions retain three types of hedge accounting mechanisms that exist in TAS 39. Under TFRS 9, much more flexibility has been introduced in the types of transactions that may be appropriate for hedge accounting, particularly the types of risk components that are appropriate for the hedge accounting of vehicle types and non-financial items that are referred to as hedging instruments. In addition, the efficacy test was passed on and replaced by the "economic relationship" principle. In addition, it is no longer necessary to retrospectively assess the effectiveness of conservation. In addition, the note liabilities for the risk management activities of the transactions have been increased. TFRS 15 Revenue from Contracts with Customers TFRS 15 introduces a single comprehensive model for use in accounting for revenue generated from contracts with customers. When TFRS 15 enters into force, TAS 18 "Revenue", TAS 11 "Construction Contracts" and related Comments, which provide guidance for the receipt of revenue at present, will be invalidated. The basic principle of TFRS 15 is that the entity reflects the amount of the goods or services that the customer has committed to the customer over the amount that he / she expects to qualify for the transfer in the financial statements. In particular, this standard introduces a five-step approach to income recognition in financial statements: Step 1: Define customer contracts Step 2: Define the act responsibilities in the contracts Step 3: Determination of transaction price Step 4: Distribution of the transaction price in the contracts to the fulfillment obligations Step 5: Acquisition of financial statements when the entity fulfills its performance requirements The effective date of TFRS 15 is annual accounting periods beginning on or after 1 January Early implementation is allowed. Two alternative applications are presented for transition to TFRS 15; full retroactive application or modified retroactive application. If modified retroactive application is preferred, prior periods will not be restated but comparative quantitative information will be provided in the notes of the financial statements. TFRS 10 and TAS 28 (Changes) Asset Sales or Equity Participation Between Investor and Affiliate or Joint Venture With this amendment, it has been clarified that the sale of assets between an investor and an affiliate or a business partnership or the entire gain or loss arising from contributions to the same capital must be accounted for by the investor. TFRS 2 (Changes) Classification and Measurement of Share Based Payment Transactions This amendment clarifies the accounting for share-based payment transactions based on cash-generating contingent consideration, the classification of share-based payment transactions with a net payment feature, and the recognition of a change in a share-based payment transaction that translates into a share- based payment based on equity. 13

20 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.1 Basis of Presentation (continued) Standards and interpretations not yet issued and changes on current standards (continued) TFRS Interpretation 22 Foreign Currency Transactions and Advance Value This interpretation refers to cases where the following foreign currency transactions occur: If there is a price that is priced in foreign currency or is dependent on foreign currency; If the entity has made an advance payment or deferred income obligation for this amount in the records of the entity to which it is entitled, If the advance payment or deferred income liability is not a monetary asset The Interpretation Committee had the following conclusion: For the purpose of determining the exchange rate, the date on which the transaction is made is the date on which the non-monetary advance payment or deferred income obligation is received in the initial records. If there is more than one payment or advance purchase, the transaction date is set separately for each purchase or payment. TAS 40 (Changes) Investment Property Transfer Changes to TAS 40: With this amendment, paragraph 57 states, "The transfer of an immovable property to an investment property class or transfer from this class is made only when there is evidence of a change in its use. The change in use occurs when the asset is or is no longer providing the definition of asset as an investment property. The management has changed to include the implication that the intention to use the entity has changed, not the evidence that the purpose of its use has changed. " The list has been changed to include a detailed list of evidence from paragraphs 57 (a) to (d). Annual Improvements for Period TFRS 1: This improvement removes short-term exceptions because of the planned use of the improvement. TAS 28: Improvement; it is clear that it is possible to separately invest the investment in each subsidiary or business partnership after the investment in the subsidiary or joint venture in which the venture capital establishment or another special entity owns the option of measuring the fair value of the investment as profit or loss reflected in the initial entries. TAS 28 (Changes) Long-term Shares in Associates and Joint Ventures This amendment clarifies that an entity applies TFRS 9 to long-term interests in an associate or joint venture that is part of the net investment of an associate or joint venture, but whose equity method is not applied. It assesses the Group's financial position and the likely impact on its performance, except for the effects of TFRS 15 and TFRS 9, which are the standards, amendments and amendments explained above. 14

21 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of significant accounting policies Offsetting Financial assets and liabilities are offset and net amount is reported in the balance sheet when there is legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously Interest income and expenses Income / expense arising from financial loans measured at fair value through profit or loss are accounted on interest income from financing loans. Other income and expenses are accounted on an accrual basis by using the effective interest rate method Fee and commissions income and expenses Fees and commissions received and paid, and other fees and commissions paid to financial institutions are calculated according to either on an accrual basis of accounting or by using effective interest rate method depending on nature of fees and commissions, incomes derived from agreements and asset purchases from third parties are recognized as income when realized Tangible assets Tangible assets are carried at acquisition cost less accumulated depreciation and impairment losses. Subsequent expenditure Expenditure incurred to replace a component of an item of tangible assets that is accounted for separately, including major inspection and maintenance and repair costs, are capitalized. Other subsequent expenditures are capitalized only when it increases the future economic benefits embodied in the item of tangible assets. All other expenditures are recognized in the statement of profit or loss as an expense as incurred. Depreciation Tangible assets are depreciated over the estimated useful lives of the related assets from the date of acquisition or the date of installation, on a straight-line basis over the cost. Leasehold improvements are depreciated over the lower of the periods of the respective leases and useful lives, on a straight-line basis. The estimated useful lives of tangible assets are as follows: Year Furniture and Fixtures 4-10 Special Costs 5 Expenditure incurred to replace a component of an item of tangible assets is capitalized and depreciated over the remaining life of related assets. Gain or loss on disposal of tangible assets is recorded as other income or other expenses. 15

22 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of significant accounting policies (continued) Intangible assets Intangible assets comprise software and rights. Intangible assets are carried at acquisition cost less accumulated amortization and impairment losses. Amortization rate used for licenses is 7% and for software products is 33%, annually Borrowing costs All borrowing costs are recognized in the statement of profit or loss in the period they occur Financial instruments Financial instruments are composed of cash and cash equivalents, financing loans, borrowings and other receivables and payables. Cash and cash equivalents Cash and cash equivalents comprise cash and balances with banks with an original maturity of three months or less. Cash and cash equivalents are short term and highly liquid assets which can easily be converted into cash, with an original maturity of maximum three months and without carrying an insignificant risk of impairment. Balances with banks are recognized at their acquisition costs and measured at their amortized cost by using effective interest rate method. Financial Assets at Fair Value Through Profit and Loss (Financing Loans) The Company is funding its growing long term and fixed interest rate loan portfolio through long term floating interest rate foreign currency resources provided from international markets. The Company transforms the foreign currency liquidity which is created by funds provided from international markets to TL liquidity through long term swap contracts, as a result of this situation the Company can both provide TL fund for the long term fixed rate loans and provide protection against interest rate risk. The Company reflects swaps, used through funding long term and fixed interest rate TL loan portfolio, with fair value in the financial statements. The Company has initially classified these long terms and fixed interest rate TL loan portfolio funded through swaps as financial assets at fair value through profit or loss and measures them at fair value in the financial statements. TL 266,683 of the mortgage loans amounts are classified under the account of financial asset at fair value through profit or loss (31 December 2016: TL 329,249). 16

23 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of significant accounting policies (continued) Financial instruments (continued) Financing Loans The financing loans given to customers other than those recognized under financial assets at fair value through profit or loss category are classified as consumer loans and recognized initially at their fair value less transaction costs. Subsequent to initial recognition financing loans are measured at their amortized cost by using effective interest rate method less impairment losses, if any. Borrowings Borrowings are recognized at their acquisition cost less transaction costs. Subsequent to initial recognition, borrowings are measured at their amortized cost by using effective interest rate method. The difference between the amortized amount and the cost less transaction costs is recorded as financial expense in the statement of profit or loss during the borrowing period. Impairment of financial assets The Company evaluates whether there exists objective evidence of impairment on a financial asset or on a group of financial assets in each reporting period. If there exists such an indicator, the Company determines the amount of the impairment. Financial assets or group of financial assets are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such indication exists, the Company estimates the amount of impairment. Impairment loss incurs if, and only if, there is objective evidence that the expected future cash flows of financial asset or group of financial assets are adversely affected by an event(s) ( loss event(s) ) incurred subsequent to recognition. The losses expected to incur due to future events are not recognized even if the probability of loss is high. Provision for financial loans are recognized as an expense and written off against the profit for the year. Provision for non-performing receivables is allocated assessing the Company s loan portfolio, quality and risk and considering the economic conditions and other factors including the related legislation against the potential losses that may be resulted from the current financing loans. In accordance with the Regulation on Accounting Practices and Financial Statements of Financial Leasing, Factoring and Financing Companies published in the Official Gazette dated 24 December 2013 and numbered 28861, the Company s specific provision rate allocated for the below finance lease receivables considering their collaterals are as follows: 20%, at a minimum, for financing loans overdue more than 90 days not exceeding 180 days, 50%, at a minimum, for financing loans overdue more than 180 days not exceeding 365 days; and 100%, at a minimum, for financing loans overdue more than 1 year. 17

24 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of significant accounting policies (continued) Financial instruments (continued) Recognition and Derecognition The financial assets and liabilities are recognized in the balance sheet when the Company becomes a contractual party of a contract. A financial asset is fully or partially derecognized when the control over the contractual rights that comprise that asset is lost. A financial liability is derecognized when it is redeemed, cancelled or expired Forwards, options and other derivative transactions Derivative transactions are classified as forward foreign currency purchases/sales, swaps, options and futures are classified trading purposes in accordance with the Turkish Accounting Standard 39 ( TAS 39 ) Financial Instruments: Recognition and Measurement. Derivatives are initially recognized at their purchase costs including the transaction costs. Additionally, contractual value of derivatives are recorded to off balance sheet accounts. Subsequently, the derivative transactions are measured at their fair values and recorded on the balance sheet under derivative financial assets held for trading or derivative financial liabilities held for trading, respectively. Subsequent fair value changes for trading derivatives are recorded in the statement of profit or loss Foreign currency transactions Income and expenses from transactions in foreign currencies have been translated into Turkish Lira ( TL ) at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated into TL at the exchange rates prevailing at the balance sheet date. Exchange gains or losses arising from conversion of foreign currency items have been included in the statement of profit or loss. The foreign exchange rates used by the Company at 31 December 2017 and 31 December 2016 are as follows: US Dollar Euro Great Britain Pound Earnings/Loss per share Earnings/Loss per share is calculated by dividing net income/loss for the period by the weighted average number of shares of the Company during the period. Weighted average number of shares, is the sum of the number of ordinary shares at the beginning of the period and number of shares recalled or issued during the period, multiplied by a time-weight factor. 18

25 2 BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS (continued) 2.2 Summary of significant accounting policies (continued) Events after the reporting period Events after the reporting period are those events, favorable and unfavorable, that occur between the end of the reporting period and the date when the financial statements are authorized for issue. In accordance with Turkish Accounting Standard 10, Events after the Reporting Period ( TAS 10 ), if there occur events that provide evidence of conditions that existed at the end of the reporting period, they are adjusted in the financial statements. If the events are indicative of conditions that arose after the reporting period, they are disclosed in the notes to the financial statements Provisions, commitments and contingencies In accordance with the Turkish Accounting Standard 37 ( TAS 37 ), Provisions, Contingent Liabilities and Contingent Assets, a provision is recognized when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the specified criteria are not met, the Company discloses the related issues in the accompanying notes. Contingent assets are disclosed in the notes and not recognized unless they are realized Changes in accounting estimates and errors In accordance with the Turkish Accounting Standard 8 Accounting Policies, Changes in Accounting Estimates and Errors ( TAS 8 ) the changes in accounting estimates relate to a specific period, they are applied in the period they relate to whereas if the changes are related to future periods, they are applied both in the period the change is made and prospectively in the future periods Leasing transactions Finance Lease Finance lease is the transfer of the all risks and benefits related to the ownership of the assets to the lessee in accordance with a finance lease agreement. Leased assets are presented by the lower of present value of the minimum lease payables as of the reporting date and the fair value of the assets less accumulated depreciation and impairment costs in the financial statements. The lease payables decrease by the payments of the principal and the interest payments are recorded in the statement of profit or loss as an expense. Operational Lease Operational lease transactions are recognized in the statement of profit or loss on accrual basis. 19