anonim Şirketi koç finansman - kocfinans.com.tr · (convenience translation of financial...

(Convenience translation of financial statements and auditor’s reportoriginaliy issued in Turkish — See Section three Note 2>

Koç FinansmanAnonim ŞirketiFinancial statements together with independent auditor’s reportfor the year ended December 31, 2015

(Convenience translation of financial statements and auditor’s report originaliy Issued in Turkish —

See Section three Note 2>

Koç Finansman A.Ş.

Table of contents

Section one

1. Independent auditors report

Section two

Financial statements1. Balance sheet (statement of financial position)2. Statement of oft-balance sheet accounts3. Statement of income4. Statement of income and expenses accounted under equity5. Statement of changes in shareholders’ equity6. Statement of cash flows7. Profit distribution table

Section three

Accounting pdnciples1. Organization and nature of operations of the Company2. Basis of presentation of financial statements2.1 Explanations on basis of presentation2.2 Changes in accounting policies2.3 Summary of significant accounting policies2.4 Significant accounting judgements, estimates and assumptions2.5 Changes in accounting estimates and errors

Section four

Explanations and notes on the financial statements1. Explanations and notes reJated to assets2. Explanations and notes related to Iiabilities3. Explanations and notes related to off-balance sheet accounts4. Explanations and notes related ta statement of income5. ReJated party disclosures5. Subsequent events

Section five

Information on financial structure

E‘y11’ Güney Bağımsız 0eneim ve Te :4902123153000SMMM AŞ Fax: +902122308291Eski Büyükdere Cad, ey.comOrjin Maslak No:27 Ticaret Sicil No: 479920-427502

Buıldınq a better Maslak, Sarıyer 34398workıng world Istanbur - Turkey

(Convenience translation of auditor’s report originaliy issued in Turkish)

lndependent auditor’s report for the period January 1 - December 31, 2015

To the floard of Directors ofKoç Finansman Anonim Şirketi

Report regarding the Financial Statements

We have audited the aceompanying balance sheet of Koç Finansman Anonim Şirketi <the Company)as of December 31, 2015 and the related statements of income, income and expenses and othercomprehensive income, cash flows and changes in shareholders’ equity for the year then ended, anda summary of significant accounting policies and explanatory notes.

The Responsibility of the Company’s Board of Directors to Financial Statements:

Company management 15 responsible for the preparation and fair presentation of the unconsohdatedfinancial statement in accordance with “Communiqu on Uniform Chart of Accounts, Disclosures andForm and Nature of Financial Statements to be Issued by Leasing, Factoring and Consumer FinanceCompanies” published in the Offlcial Gazette no. 28861 dated December 24, 2013 and otherregulaüons on accounting records published by Banking Regulation and Supervision Agency (BRSA),circulars, interpretations published by BRSA and the provisions of Turkish Accounting Standards forthe matters which am not regulated by these regulation: UBRSA Accounting and Repoding Legislation”and for such internal control as management determines is necessary to enable the preparation of thefinancial statement that is free from material misstatement, whether due to fraud or error.

The Independent Auditor’s Responsbility:

Our responsibility is to express an opinion on the unconsolidated financial statements based on ouraudit. We conducted our audit in accordance with with the lndependent Auditing Standards which is apart of Turkish Auditing Standards promulgated by the Public Oversight Accounting and AuditingStandards Authority (“POA”). Those standards require that we compiy with ethicat requirements andplan and perform the audit to obtain reasonable assurance as to whether the financial statements arefree of material misstatement.

An independent audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the unconsolidated financial statements. The procedures selected depend on theindependent auditor’s professional judgment, including the assessment of hsks of materialmisstatement of the unconsolidated financial statements, whether due to fraud or error. in makingthose risk assessments, the independent auditor considers the internal control relevant to Company’spreparation and fair presentation of the unconsolidated financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the Company’s internal control. An independent audit also includes evaluatingthe appropriateness of accounting policies used by the reasonableness of accounting estimates madeby the management as weli as evaluating the overali presentation of the unconsolidated financialstatements.

We believe that the audit evidence we have obtained is sutflcient and appropriate to provide a başisfor our audit opinion.

A mrmberfirmofırnsı Young Gr0bı ı,mııed

üBuilding a betterworking world

Independent auditor’s opinion:

in our opinion the accompanying unconsolidated financial statements presents fairiy, in ali materialrespects, the flnancial position of Koç Finansman Anonim Şirketi as at December 31, 2015 and theresults of ita operations and its cash flows for the year then ended in accordance with the prevailingaccounting principles and standards set out as in accordance with BRSA Accounting and ReportingLegislation.

Reports on arising from other regulatory requirements:

in accordance with Article 402 paragraph four of the Turkish Commercial Code (“TCC”); no signifıcantmatter has come to our attention that causes us to believe that the Companys bookkeeping activitiesfor the period January 1 — December 31, 2015 are not in compliance with the code and provisions ofthe Company’s articles of association in relation to financial reporting.

in accordance with Article 402 paragraph four of the TCC; the Board of Directors submitted to us thenecessary explanations and provided required documents within the context of audit.

Additional paragraph for convenience translation to Engiish:

As explained in detail in Note 1. of Section Three, accounting principles and standards set out byregulations in conformity with BRSA Accounting and Reporting Legislation, accounting principlesgeneraliy accepted in countries in which the accompanying unconsolidated financial statements are tobe distributed and international Financial Reporting Standards (“IFRS”) have not been quantifled in theaccompanying unconsolidated fınancial statements. Accordingiy, the accompanying unconsolidatedfınancial statements are not intended to present the financial position, results of operations andchanges in financial position and cash flows in accordance with the accounting principles generaliyaccepted in such countries and IFRS.

Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim ŞirketiA member firm of Ernst 8. Young Global Limited

Istanbul, Turkey

<2)

A member fırm ol Erno! A Younş GrabüI Limite

(Convenience translation of financial statements originaliy issued in Turkish — see Section 3 Note 2>

Section two

Financial statements

Balance sheet (statement of financial position)

ii. Statement of off-balance sheet accounts

ili. Statement of income

IV. Statement of income and expenses and other comprehensive income

V. Statement of changes in sharehoiders’ equity

Vi. Statement of cash flows

Vii. Profıt distribution table

(Convenience translation of financial statements originaliy issued in Turkish - see Section 3, Note 2)

KOÇ FİNANSMAN A.Ş.

Balance sheets

as of December 31, 2015 and 2014

(Currency — Turkish Lira (Thousand TL> unless otherwise stated>

Asseta 1 Audltad - Decembar 31,2015 Audlted . Dacember 31, 2014Notes

(Section 4) TL FC Total TL FC Tatil1. Castı, cash oqulvalents and Central Oank (1.1> 16.857 40.394 57.251 15.036 20.232 36.2682. Flnancial asseta al <air velue thraugh profit and asa (net) (1-2> 406 - 4062.1 F(nancai asseta - heid for trading — . .2 2 Financial assets af <air valuo througb prtflt and bas - . .2,3 Derivailve financiar assaf, - heid for trading 406 4063. Banka (1-3) 48.459 26.314 74.533 5.960 1.784 7.7444. Receivablas <rom ravane repo tranşactlane (14) . . - . . -5. Availabba lar seti financial nasl, (net) (1-5) - . - -8. Flnancing oan, (1-6) 2.818.880 - 1815.050 2.300.794 - 1300.79461 Ccnsumer financing oan, 1 318.256 - 1.316 266 1.139.087 - 1 139 087C2credifcard, . . - - -

63 Commercial nslaliment oan, 1 500.594 - 1.500 594 1 161 707 - 1 161 707lothar Receivabias (1-7) 12.299 . 12.299 1.294 - 1.2948. Nan-parfomüng ban, (1-8) 45.892 45.692 36.855 36.8588 1 Non-performing financing oan, (1-8) 87 476 - 67.476 59 250 - 59 25062 Şpecfic provısıons <-) (1-8) <41.784) - <41 784) (22 392) - <22 392)9. Derbvaliva flnanciai asasta for hsdgtng purposas (1-9) - 36.050 36.050 - 7.414 7.4749.1 Fair vaiue hedge - - -S2Cashfoehedge - 36050 36050 - 7474 73749 3 Hodge of net ınvestment in foreign operatona . - - . -

10. He)d la matudty Invastj,mnts (net) 1.10) . . .11. Invealmenl, bn aubaidJagbos net> 1-11) . . .il inve,lnwnta in associale, net) 1-1 2) 13 - 13 13 . 1313. Jonl veoture, (not) (1.13) . - -14. Tangibis saasta (nal) (1.14) 475 - 475 615 . 61515. Inlangible aaaels (ne?) (1.15) 414 - 414 291 . 29115.1 Good*ıii . - - . -15201ha 4’4 . 414 291 . 29116.Pre.PaId Ezponsea 0-16) 939 - 939 1-430 . 1.43017.Curron? Isı ana? 1-17) - . .18. Defan-ad Isa ana? 1-18) . - - 993 . 99319.OthsrAnet (1-19) 198 - 198 68 86Sub Total 2.944.632 101818 3.047.450 3.370.350 29.490 2.399.84020. AnaSı <said for aale and dla;onllnued oparatlons net) (1-20) 141 - 141 181 . 161211 Hak for sak 141 - 41 161 . 16120 2 Dısc,nflıtğ opOret.on, - . - - - -Talat asaata [ 3.944.773 101818 3.047.591 1370.511 29.490 3.400.001

The accompanying notes are integral part of these financial statements.

(1)

(Convonience translatian of tinancial statements originaliy issued in Turkish - sec Section 3, Nato 2)


Balance sheets

as of December 31, 2015 and 2014

(Currency — Turkish Lira (Thousand TL) unless otheıwise stated)

U.bilItJes and flrohaldars’ equlty Audltad Dcceı,,bw 31. 2015 Auditad - Decenber 31. 2014Nato.

(SectIon4) TL FC Tabi TL FC Total1. Oadvative Unançlal Ilobllitlos . held for traöng - - . . -

2. Funda bormw.d (0-1) 1.857.526 420.085 2.257.611 1.334.060 237,494 1.571.574[ 3. Leo,. payable, (0.2) .

3 1 Finaice lease payables. .

3 2 Ooeral:ng ease caya: es . . - -

330l1rnr . . . -

34 Deforred <nan:e lanse espenses (-1 . . -

4. Marketable secısltloa Issuad (net) (11-3) 434644 . 434.944 571,468 - 571.4084.1 BılIs . - . . -

4.2 Assel backed secunl,es - - . . -

4 3 Bond, 434 944 - 434 944 571 408 - 571 4085. Mlscellanoous payoblas 114) 20.789 . 20.789 10.134 . 10.1346. Other IlabIlitles 11.5) 3.562 . 3.562 2.956 . 2.9567. Dedvative finançlal IlabliltI., for hedging purpases 11.6) - 344 3447 1 Fair valuo hedge

. - .

l2Cashflowhodge- 344 344 . -

7 3 Hedge of net investment in foreign aperations . . . -

8. Tasos and dutles payablo (11.7) 7.807 . 7.807 6,480 5.4809. Provlslan, (11.8) 38.516 . 36,518 48.261 - 48.2819.1 Pestwcturing provıtıon . . . . - -

92 Reserve for employeo rrghts 2 515 . 2 515 2 225 . 2 22593 Olher provısions 34 001 - 34 001 46 036 . 46 03610. Doforrod Incom. (11-9) 57.298 . 57.298 30.282 . 30.282I1.OurTonI Toz UablIItlea <1.17) 3589 . 3.589 1.062 . 1,062IlDeforrod Tas UaNIlIIos (1.18) 4.058 . 4.058 . . -

13.Subordlnoled Loans (1.12) - - - . -

Sub Total . 1436.089 420,420 1856.516 2.004,663 237.494 124115714. UabIIItIes for the asseis [said far sNa and dlscontinued

operatlons (net) (11-13) - - . . . -

141 HdforsaIe - . -

: 142 DlsccntnLed ,peat:ois - - - -

15. Sharoholdo,ş’ equlty (11-14) 191.073 - 191.073 157.844 . 157.84415.1 Pad-incaoaa: (11.14.1) 100000 - 100.0)0 100.000 - 100000152C.,alre,ervo, - . .

152 1 Prom1ras on sa e of rare Cenitsalo, - . .

15 2 2 Share cancoltatıon piot’ds . . .

15 2 3 Other capıtal reservet - . . . . -

15.3 Items hat cr11 not be recrassifıedtoprofitarla,, 52 — 62 <115) - 1115)

15.4 (tona that may be reclas,ifped aubsequentty ta protıt or los, (11-14.3) 3 005 - 3.005 674 - 87415.SProfitreserves 33185 - 33.185 40617 - 4001715.5.1 Legal re,ervo, le 926 - 16.926 16 676 - 16 67615.5.2 Statutoıy reserve,

. . . . - -

15.5.3 Eatraardinary reserves 14 259 - 14.259 24.141 - 24 14115.5.4 Other profit reserve, - . -

156 Profıt or baş 54 621 - 54 821 16.268 - 16 26815.6.1 Pnar year ncome t (loss) 3 900 - 3.900 1 265 - 1 26515.62 Current year rncome 1 <los,) 50.021 - 50.921 15 003 - 15 003Total IlabIlitle, and egulty 2.827,182 420.429 3.047.591 2.161507 237.494 2.400.001

The accompanyng notes are integral pan of these flnancial statements.

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(Convenience translation of tinancial statements originaliy issued in Turklsh - see Section 3, Note 2)


Statements of incomefor the years ended December 31, 2015 and 2014(Currency — Turkish Lira (Thousand TL) unless otherwise stated)

Statement of Income January 1 January 1Notes December 31, December 31,

(ŞecUon4) 2015 20141. Gmss operaüng Ineome W.1 ) 375.337 2835341.1 )nterestcncomeonloans 339,574 242.1081.2 Fees and commissıon income received from loans 35,763 41426Il. Flnanclal expenses (-) (272.326) <190.154)2.1 Interest on funds bOrrowed (205.612) (121 519)2.2 Interest on factohng payables . -

2.3 Finance lease expense - -

2.4 Interest on secuhties issued (47.483) <49.192)2.5 Other interest epenses (2) <6)2.5 Fees and commişsions giyen (19 229) <19 157)ili. Gross ProIW(Loşş) (1+11> 103.011 93.350IV. Operaung expenses (.) (ıV-2) (x.sse) 61632)4.1 Personne) expenses (19 884) 117 182)42 Provısion expenşe for ernp)oyrnent terrninat’on benefi)s 490) (259)4.3 Researciı and development expenşes -4.4 General adrninisuaüon expenses

21 191) (18450)4.5 Other operating expenses 10569 <26.741>V. Gross Operating PrnflU(Loss) (111+1V) 71015 30.718Vi. Other operating Income )IV.3) 35.988 15.0266,1 )nterest received frorn banks 6.354 22256,2 )nterest received bern reverse repo agreements

-

6 3 )nterest received bern rnarketab)e secuhties portfotio6.3.1 he)d for trading nanciai assetsS.32 Financial aşsetş at bir va)ue üırough proft and (loss) . -6 3 3 Avaflab)e-for-sa)e fınanoa) assets . -

6.3.4 Heid ta matuhty investrnents . -6 4 Dividend incorne -6 STradng gains 42376.5.1 Denvatve fnancia) transaons 4237 96.5 2 Other . -6.6 Foreign exchange gains 24.552 120226.7 Other operating income 645 770V)l. Specilic provislons for non-performing Loans (.) (1V4) (19.398) (9.145)V)Il. Other operating expenses (.) (IV.5 ) (27,899) <11.577)8,1 Marketab)e secudties impairrnent8.1 .1 Financia) assets at <air va)ue Uıraugh profit and ()osş) irnpairrnent

-

8.1.2 Avai)ab)e-for-sa)e fınancia) assets8.1.3 Heid ta rnatunty ınvesnents - -8 2 Fıxed assets irnpairment -82.1 Tangib)e assets irnpaırrnent . -82.2 Non-currentMsets he1d for sa)e and dıscon’Jnued opemtons impairrnent6.2.3 Goodwfl) impainllent5.2,4 Other inlangible asseis irnpahment . -5.2.5 Irnpaırment of aşsociates, subsidiades and joinl ventures8.3 Derivative flnanciai transaction (osses (307) (791)8.4 Foreign exchange (osses (27 592) 10.756)8.5 Other . -

IX. Net operatlng profit 1 (Ioss) (V+..+VIlI) 60.706 25.022X. Ezcess arnount recorded as Income after mergerXI. Proflt t (Ioss) on net monetary posldonMI. Pmfltiloss.before taxes from continulng.operauons 4IX+X+XJ) 60705 25.022XIII. Provislon for tazes on profıt for cont)nutng operaflons (±) (9.785) (10.019)13 1 Current tax pmvısion (1.17) <5311) 12 654)13 2 Deferred tax expense effec (+) <4 474) -

13 3 Deferred bx incorne efteci (-) . 2 635XIV. Net profıt 1 Ioss for conllnulng operadons (XIftXI)l) 50.921 15.063XV. Income from dlsconünued operations . -15.1 Incorne frorn Nen-curren) assets he)d for sale -15.2 Prof) frorn sa)es of associates, subsidiaries and joint ventures1 5 3 Other incorne bern discontinued operationsXVI. xpenses from discontinued operatlons () . -16.1 Expenses for non-current assets he)d for sa)e16.2 Loss frorn sa)es of associates, subsidiaries and joint ventures

- -

15.3 Other expenses frarn discanUnued opemtions-

XVII. Profit! Ioss before taıes fmm dlscontinued operatlons (XV-XVI)XVHI. Provislon for tazes on Income for dlscondnued operauons (±)181 Curmnttax prevision

-

l8 2 Deferred tax expense eftecl (+)-183 Deferred tax ircorne efted (+)

XIX. Net prof))! Ioss fmm discontlnued operatlons (XVII±XVII)-

XX. Net profıt t Ioss (XIV+XIX) 50.921 15.a03Earningsl (osses per share

______________ ___________________

—

The accompanying notes are integral pal of these financial slatements.

(4)

(Convenience translation of financial statements originaliy lssued in Turkish - see Section 3, Note 2)


Statements of income and expenses and other comprehensive incomefor the years ended December 31, 2015 and 2014(Currency — Turkish Lira (Thousand TL) unless otherwise stated)

Audlted- AuditedDecember 31, Decemberal,

2015 2014

1. Proflulass for the period 50.921 15.003Il. Other comprehensive Income 2.308 (134)2.1 Items that wili not be reciassifled ta profit Dr tass 177 (85)2.1.1 Tangible assets revaluation increaseldecrease2.1.2 tntangible assets revaluation increase/decrease - -

2.1.3 Gains / losses from remeasurement of defined pension benerıt plans 221 <106)2.1,4 Other comprehensive income components that wiil not be reclassifıed ta profıt or tass2.1.5 Taxes on Items that wili not be reclassifıed ta profı( oT Ioss (44) 212.1.5.1 Current tax income t expense -

2.1.5.2 Deferred tax İncome / expense (44) 212.2 Items that may be rectassifled subsequently ta prafit Dr Iass 2.131 (49)2.2.1 Foreign exchange difterences for foreign currency transactfons2.2.2 Gains t losses from reciassifıcation and revaluation of available for sale fınancial assets -

2.2.3 Gains / lasses from hedge for cash flow risk 2 664 <61)Gains / (osses from derivative financiat instruments for hedge of net investment in foreign

2.2.4 operations -

2.2.5 Other comprehensive income components that may be rec(assified 10 profıt or (0552.2.6 Taxes on Jtems that may be rectassified to profit or tass <533) 122.2.6.1 Current tax income / expense2.2.6.2 Deferred tax ncome / expense <533( 12ili. Total camprehenslve Incame for the pertod (1±11) 53.229 14.869


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(6)

(Convenience translation of financial statements odginally issued in Turkish - see Seçtion 3, Note 2>


Statements ot cash flowsfor the years ended December 31, 2015 and 2014(Currency — Turkish Lira (Thousand TL) unlese otherwise stated)

Notes December 31, December 31,(Secflon4) 2015 2014

A. Cash flows from operations

1.1 Operatlng profit before changes in operating assets and liabIlihes 88.750 74010

1.1.1 (nterests receivednease income 331 552 243 3411.1.2 Interests paid/lease income (185.815) (121.031)1,1.3 Leaseexpenses

_ -

1.1.4 Dividend received- -

1.1.5 Fees and commissions received 35.763 41.4261.1.6 Otherincome

-

1.1.7 Coltections <tom previausly written oft bana 58,220 56.7991.1.8 Payments to personnel and seMce suppliers (19,884) (17.182>1.1.9 Taxes paid (2.784) (12.496)1.1.10 Others (127.602) (116.847)

1.2 Changes in operating assets and biabflbuga 126.271 (17.055>1.2.1 Net (ir.aase) deaease in factohng receivables

-

1.2.1 Net (inaease) deaease in tnar,dng oans (532 236) (582.802)1.2.1 Net increase (decrease) in lease receivables

-

1.2.2 Net (increase) decrease in ouıer assets (25.605) (3799)1.23 Net increase (decrease) in faclorir.g biab:Iities1.2.3 Net inaease (decrease) in bease biabibties1.2.4 Net rnaease (decrease) in funds bon-owed 646 520 547 0431.2.5 Net increa5e (decrease) in due payables1.2.6 Net increase (decrease) in other habilities 37.595 22.502

Net cash provided 1mm operations 215.021 56.954

B. Cash flows 1mm investlng acttvttles

2.1 Cash paid for purchase of subsidiaries, associates and joint ventures2.2 Cash obtained from sale af subsidiaries, associates and joint ventures . -

2.3 Fixed assets purchases (1-13,14) (506) (315)2.4 Fiyed assets sates 55 22 5 Cash paid for purcbase ot avaibabte Sor sabe [manda> assets - -

26 Cash received Irom sabe of availabte for sale financial asseis2.7 Cash paid for purchase of held to maturıty finandal assets -

2.8 Cash received from sate of held to maturity financiat assets -

2.9 Other

Il. Net cash provided 1mm Investtng activitles (421) (313)

C. Cash flows trom flnanclng activitles

3.1 Cash obtained from funds borrowed and secu,ities issued 120.000 305.0003.2 Cash used for repayment ol funds borrowed and securities issued (255.000) (334.833)3.3 Securities issued3,4 Divfdends paid (tt-14) (20.000) (30.000).5 Payments.for.tlnance laases3.6 Other

-

ili. Net cash provided tram financing activltles (155.000)

IV. Eflect of change in foreign ezchange rate on cash and cashequivalents 7.389 566

V. Net increase 1 (decrease) in cash and cash equivalents 67.088 (2.626)

Vi. Cash and cash equivalents at the begtnntng of the year (1-3> 7.744 10.370

Vib. Cash and cash equivalents at the end of the yaar (1-3) 74.833 7.744


<7)

(Convenlence translatlon of financial statements odglnally issued in Turkish - see Seçtion 3, Note 2)


Profit distribution tablefor the years ended December 31, 2015 and 2014(Currency — Turkish Lira (Thousand TL) unless otherwise stated)

December 31, December 31,

______________

2015, 2014

Distdbuüon af current year incomo

1.1 Current year profit () 50.707 25.3221.2 Taxes and funds payabte(-) <O.ieS> (10 019)1.2.1 Corporale tax (Income tax) (5.311> (12.654)1.2.2 Income withholding tax . -1.2.3 Other taxes and dutiess (“) (4.474) 2653

A. Net incomo for the year <1.1-1.2) 50.921 15.003

1.3 Prior year loşses(-)1.4 First legal reşeives (-) 7501.5 Other statutory reseıves(-)

B. Net proftt avaitable for distiibullon ((a-(1.3+1.4+1.5)j 50,921 14.253

1,6 First dividend ta shareholders (.) - 20.000

1.6.1 Ta owners of ordinary shares . 20.000

1.5.2 To owners of preferred shares -1.6.3 Ta awnerş of prelerred shares (pre-emptive rights)1.6.4 Ta profıt shafing bonds - -1.6.5 To holders of profit and Ioss sharing cerl)ficates1.7 D)vidends to personnel (-) . -1.8 D)vidends ta board of directors (-) . -1.9 Second d)v)dend ta shareholders (-) . -1.9.1 To awners of ordinary shares1.9.2 To owners of preferred shares -1.9.3 To owners of preferred shares (pre-emphve rights) -1.9.4 To profıt sharing bonds -1.9.5 Ta holders of prafit and tass shadng certifıcates1.10 Second legal reserves (-) 1500

1.11 Slatutory reserves (-) . -1.12 Extraordinary reserves . 9.5621.13 Other reseıveş -1.14 Speclalfundş

Il. Dlstribudon ot reserves -

2.1 Distributed reserves -2.2 Second legal reseıves(-) . -2.3 Dividends ta shareholders (-) . -2.3.1 To owners of ordinary shares . -2.3.2 To owners of preferred shares2.3.3 To owners ofpreferredshares(pre-emptivedghts) - —2.3.4 T6öflfhing bonds -2.3.5 Ta hotders of profıt and tass sharing cert)fıcates - -2.4 D)vidends ta personnel (-) -2.5 Dividends ta board of directors (-)

20000

ili. Earnings per share ..

0.0320

3.1 Ta owners of ord)nary shares3.2 To owners of ordinaiy shares ( % ) 00015

3.3 To ovmerş of preferred shares3.4 Ta ownerş of preferred shares (01c )IV. Dlvidend porshare4.1 Ta owners of ordinary shares 200004.2 Ta owners of ordinary shares (% ) 0,00204.3 Ta owners of preferred shares4.4 Ta owners of preferred shares ( %) -

(‘) General Assembiy is the responsible body ot the Company related ta the distributian of current period income. There is naGeneral Assembty meeling held as of the reporting date.

Ç) Deferred tax income iş presented in other taxes and duties line and are not subject ta prafıt distdbution and kept underextraordinary reserveş.


(8)

(Convenience translaüon of tinancial sWtements originaliy Issued in Turkish - see SecUon 3, Note 2)


Notes to financial statements as of December 31, 2015(Currency — Turkish Lira (Thousand TL> unless otheıwise stated)

Section three

Accounting principles

1. Organization and nature of operations of the Company

Koç Finansman A.Ş (“Company”), which is a member of Koç Şirketler Topluluğu <Koç Group)established on January 3, 2015 under Koç Tüketici Finansmanı AŞ title and took the first “FinanceCompany Activity Certificate” from Prime Ministry Undersecretariat of Treasury on March 30, 1995.Finance companies are subject to regulating and auditing authorization of Banking Regulation andSupervision Agency following the publication of Banking Law in Offlcial Gazette dated November 1,2005 and numbered 25893 while they had been subjected to regulating and auditing authorization ofPrime Ministry Undersecretariat of Treasury until the aforementioned date. The activity certificate ofthe company was renewed by Banking Regulation and Supervision Agency on November 22, 2007.

The Company has begun insurance intermediary operations for credited products on January, 2008and mortgage loans on December 2008, in line with permission from Banking Regulation andSupervision Agency (BRSA).

The Company has changed its legal name as Koç Finansman A.Ş.’ on the trade registry Gazettedated March 22, 2013 dated 8284.

The Company is a member of Financial leasing, Factoring and Financing Companies Association.

As of December 31, 2015, there are 123 personnel working at the Company. (December 31, 2014:124). The Company iş registered in Turkey and the address of the registered office is as follows as ofdate of preparation of these flnancial statements:

Koç Finansman A.Ş.Trade Registration Number 323299Mersis Number: 6126891297565186Ünalan Mahallesi Ayazma CaddesiKoç Çamlıca iş Merkezi A Blok34700 Üsküdar- Istanbul

As of December 81, -2015, the principal shareholders of the Company and thelr respctiVeshareholdings in the Company are as follows:

Arçelik A.Ş. 47,00Koç Holding A.Ş. 44,50Other shareholders 8,50

Total paid-in-capital 100,00

The financial statements as of and for the year ended December 31,2015 were approved by the Boardof Directors on Febmary 12, 2016 and signed by board member and general manager Yeşim PınarKitapci and Nevzat Tüfekcioglu member of Board responsible from financial reporting . GeneralAssembly and certain regulatory bodies have the authority to amend the statutory financial statementsafter issue.

(9)

(Convenience translation of financial statements odginaiiy issued in Turkish - see Şeçtian 3, Note 2)


Notes to financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL) unless otherwise stated)

2. Basis of presentation of financial statements

2.1 Explanation on basis of preparation

2.1.1 Accounting standards

The Campany maintains its books of account and prepares its fjnancial statements in Turkish lira<-TL”) in accordance with the “Communiqu on Uniform Chart of Accounts, Disclosures and Form andNature of Financiat Statements to be Issued by Leasing, Factoring and Consumer FinanceCompanies” (“Financial Statement Communiqu”) issued by the Banking Regulation and SupervisionAgenoy (‘BRSA”) in the Official Gazette dated December 24, 2013, numbered 28861; and inaccordance with Turkish Accounting Standards Trurkish Financial Reporting Standards (“TAS/TFRS”)issued by the Turkish Accounting Standards Board (“TASB”) and their additions and interpretaUonsand with the “CommuniquĞ on Rules and Regulations Regarding Provision for Receivables ofFinancial Leasing, Factohng and Financing Companies” issued by BRSA in the Official Gazettenumbered 28861 on December 24, 2013.

Table formats have changed accordance to “CommuniquĞ on Uniform Chart of Accounts, Disclosuresand Form and Nature of Financial Statements to be issued by Leasing, Factoring and ConsumerFinance Companies” (“Financial Statement Communiqu6’) in the Otficial Gazette dated December 24,2013, numbered 28861, These changes have revised mutual for December 31, 2015 and December31, 2014 financial statements.

Financial statements have been prepared based on historical cost convention except for the fair valuemeasurement of derivative financial instruments.

2.1.2 Offsetting

Financial assets and Iiabilities are oftset and the net amount is reported in the balance sheet when thereis a egaliy enforceable right to offtet the recognised amounts and there is an intention to settle on a netbasis or realize the asset and settle the Iiability simultaneously.

2.2 Changes in accounting policies

2.2.1 Comparatives and revisions in previous period’s financial statements

in order to enable the determination of the flnanciai position and performance trends, the Company’sfinanciaJ statements have been presented compgJveiy with th_Q prior period. The Cornpanyüitd the balance sheet as of December 31, 2014 comparativeiy with the balance sheet as ofDecember 31, 2015 and presented the statement of income, statement of income and expensesaccounted under equity, statement of cash flows and statement of changes in shareholders equity forthe year ended December 31, 2015 comparativeiy with the year ended December 31, 2014.

Ciassjfjcations

The Groups current consolidated financiai statements are prepared in comprarison with the previousperiod to aliow the determination of the financial position and performance trends. The comperativeinformations are restated or cJassified when necessary in terms of ensuring compiiance with thepresentation of current period consolidated profit or tass and other compherensive income statements.

(10)

(Convenjence translation of financial statements originaliy issued in Turklsh - see Sectlon 3, Note 2>


Notes ta financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thausand TL) uniess otherwise stated)

2. Basis of presentation of financial statements (continued)

2.2.2 Changes in accounting policy and disclosures

The new standards, amendments and interpretaüons

The accounting poiicies adopted in preparation of the financial statements as at December 31, 2015are consistent with those of the previous fınancial year, except for the adoption of new and amendedTFRS and TFRIC interpretations effective as of January 1, 2015. The effects of these standards andinterpretations on the Company’s financial position and performance have been disciosed in therelated paragraphs.

The new standards, amendments and interpretations which are effective as atI January 2015are as follows:

TAS 19 Defıned Benefit Pians: Employee Contributions (Amendment)

TAS 19 requires an entity ta consider contributions from employees or third partles when accountingfor defıned benefit plans. The amendments ciarify that, if the amount of the contributions isindependent of the number of years of service, an entity is permitted to recognise such contributionsas a reduction in the seMce cost in the period in which the service is rendered, instead of ailocatingthe contributions to the periods of service. The amendment did not have a signifıcant impact on thefınancial statements of the Company.

Annual Improvements to TASFFFRSs

in September 2014, POA issued the beiow amendments to the standards in relation to “AnnualImprovements - 2010—2012 Cycie” and ‘Annual Improvements -201 1—2013 Cycle. The amendmentsare effective for annual periods beginning after Juiy 1, 2014.

Annual !mprovements - 2010—2012 Cycle

TFRS 2 Share-based Payment:

Definitions relating to performance and service conditions which are vesting conditions are clarifıed.The amendment is effective prospectiveiy.

TFRS 3 Business Combinations

The amendment cladfles that ali contingent consideration arrangements ciassifıed as iiabiiities (OFassets) arising from a business combination should be subsequently measured at fair vaiue throughprofit or Ioss whether or not they fail within the scope of IAS 39 (or IFRS 9, as appiicabie). Theamendment is effective for business combinations prospectively.

TFRS 8 Operating Segments

The changes are as foiiows: i) An entity must disclose the judgements made by management inapplying the aggregation criteria in IFRS 8, including a bdef description of operating segments thathave been aggregated and the economic characteristics (e.g,, sales and gross margins) used toassess whether the segments are ‘similar’. ii) The reconcihation of segment assets to total assets 5oniy required to be disclosed if the reconciliation is reported to the chief operating decision maker. Theamendments are effective retrospectively,

(11)

(Convenience translation af fınancial statements odginally issued in Turkish - see Section 3, Note 2)




2.2.2 Changes in standards and interpretations

TAS 16 Propefly, Plant and Equipment and TAS 38 Jntangible Assets

The amendment to TAS 16.35(a) and TAS 38.80(a) clarifies that revaluatian can be performed, asfollows:) Adjust the gross carrying amount of the asset ta market vaiue or ü) determine the market value ofthe carrying amount and adjust the gross carrying amount proportionateiy sa that the resulting carryingamount equais the market value. The amendment is effective retrospectively.

TAS 24 Related Party Disclosures

The amendment ciarifles that a management entity — an entity that provides key managementpersonnel services — is a related party subject to the related party disclosures. . in addition, an entitythat uses a management entity is required to disclase the expenses incurred for managementservices. The amendment is effective retrospectively.

Annual Improvements — 2011—2013 Cycle

TFRS 3 Business Combinations

The amendment ciarifles that: i) Joint arrangements ara outside the scope of TFRS 3, not just jointventures ii) The scope exception appiies oniy ta the accounting in the financial statements of the jointarrangement itseif. The amendment is effective prospectively.

TPRS 13 Fair Value Measurement

The portfoiio ezception in TFRS 13 can be appiied to fınancial assets. financial Iiabilities and othercontracts within the scope of IAS 39 (or IFRS 9, as applicable). The amendment is effectiveprospectively.

TAS 40 !nvestment Property

The amendment ciarifles the interrelationship af TFRS 3 and TAS 40 in determining whether thetransaction is the purchase of an asset or business combination. The amendment is effectiveprospectively. The amendments did not have a signİflcant impact on the consolidated financialstatements of the Company.

ii) Standards issued but not yet effective and not early adopted

Standards, interpretations and amendments to existing standards that are issued but not yet effectiveup to the date of issuance of the financial statements are as follows. The Company wiil make thenecessary changes if not indicated otherwise, which wili be affecting the financial statements anddisclasures, when the new standards and interpretations become effective.

TFRS 9 Financial lnstruments — Classiflcation and measurement

As amended in December 2012 and February 2015, the new standard is eftedüve for annual pedodsbeginning on or after January 1, 2018, with early adoption permitted. Phase 1 of this new TFRSintroduces new requirements for classifying and measuring financial instruments. The amendmentsmade to TFRS 9 wiil mainiy affect the ciassification and measurement of financial assets andmeasurement of fair vaiue optian (FVO) Iiabilities and requires that the change in fair value of a FVOfınancial iiability attributable ta credit risk is presented under other comprehensive income. TheCompany wili quantify the eftect in conjunction with the other phases, when the fınal standardincluding ali phases is adopted by POA.

(12)

(Convenience translallon of fınancial statements originaliy issued in Turkish - see Section 3, Note 2>

KOÇ FiNANSMAN A.Ş.




TFRS 11 Acquisition of an Interest in a Joint Operation (Amendment)

TFRS 11 iş amended ta provide guidance on the accounting for acquisitions of interests in jointoperations in which the activity constitutes a busineşs. This amendment requires the acquirer of aninterest in a joint operation in which the activity constitutes a business, as defined in TFRS 3 BusinessCombinations, to apply ali of the principies on business combinations accounting in TFRS 3 and otherTFRSs except for those principles that confiict with the guidance in this TFRS. in addition, the acquirershail disclose the information required by TFRS 3 and other TFRSs for business combinations. Theseamendments are to be appiied prospectiveiy for annual periods beginning on or after January 1, 2016.Earlier appiication is permitted. The amendments wili not have an impact on the financial position orperformance of the Company.

TAS 16 and TAS 38 - Ciarification of Acceptable Methods of Depreciation and Amortisation(Amendments to TAS 16 and TAS 38)

The amendments to TAS 16 and TAS 38, have prohibited the use of revenue-based depreciation forproperty, plant and equipment and signifıcantly limiting the use of revenue-based amortisation forintangible assets. The amendments are effective prospectiveJy for annual periods beginning on or afterJanuary 1, 2016. Earlier application is permitted. The amendments wiIJ not have an impact on thefınancia$ position or performance of the Company.

TAS 16 Property, Plant and Equipment and TAS 41 Agriculture (Amendment) — Bearer Piants

TAS 16 is amended to provide guidance that bearer plants, such as grape vines, rubber trees and oilpalms should be accounted for in the same way as property, plant and equipment in TAS 16. Once abearer plant is mature, apart from bearing produce, its biological transformation is no longer signiflcantin generating future economic benefits. The onJy şignificant future economic beneflts it generatescome from the agricultural produce that it creates. Because their operation is similar ta that ofmanufacturing, either the cost model or revaluation model should be applied. The produce growing onbearer plants wili remain within the scope of TAS 41, measured at fair value less costs to seli. Entitiesare required to appiy the amendments for annual periods beginning on or after January 1, 2016.Earlier appiication is permitted. The amendment iş not appiicable for the Company and wiJi not havean impact on the financial position or performance of the Company.

TAS 27 Equity Method in Separate Financial Statements (Amendments to TAS 27)

in April 2015, Pubiic Oversight Accounting and Auditing Standards Authority (POA) of Turkey issuedan amendment to TAS 27 to restore the option to use the equity method to account for investments insubsidiaries and aşşociates in an entity’s separate financial statements. Therefore, an entity mustaccount for these investments either:• At cost

in accordance with IFRS 9.Or• Using the equity method defined in TAS 28

The entity must apply the same accounting for each category of investments. The amendment iseftective for annual periods beginning on or after January 1, 2016. The amendments must be apphedretrospectively. Early apphcation is permitted and must be disciosed. The amendment is not appiicabiefor the Company and wiili not have an impact on the financial position or performance of the Company.

(13)

(Convenience translatian of financial statements odginafly issued in Turkish - see Section 3, Note 2)


Notes ta financial statements as of December 31, 2015 (continued)(Curreney —Turkish Lira (Thousand TL) unless otherwise stated)



TFRS 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate orJoint Venture (Amendments)

in February 2015, amendments issued ta TFRS 10 and TAS 28, ta address the acknawledgedinconsistency between the requirements in TFRS 10 and TAS 28 in dealing with the loss of control ofa subsidiary that is contributed to an assaciate or a jaint venture, to ciarify that an investor recagnisesa fiili gam or Ioss an the sale or cantribution of assets that constitute a busmness, as defined in TFRS 3,between an investar and its associate or joint venture. The gam or Ioss resulting from the remeasurement at fair value of an investment retained in a former subsidiary shouid be recognised oniyto the extent of unreJated investors’ interests in that former subsidiary. An entity shall appiy thoseamendments prospectiveiy ta transactions accurring in annual periads beginning on or after January 1,2016. EarJier applicatian is permitted. The amendment is not applicabie for the Company and wili nothave an impact on the fınancial position or perfarmance af the Company.

TFRS 10, TFRS 12 and TAS 28: lnvestment Entitias: Applying the Consolidation Exception(Amendments to IFRS 10 and IAS 28)

in February 2015, amendments issued ta TFRS 10, TFRS 12 and TAS 28, ta address the issues thathave adsen in applying the investment entities exception under TFRS 10 Cansalidated FinancialStatements. The amendments are applicable for annual periads begmnning an ar after January 1, 2016.Earlier application is permitted. The amendment is not applicable for the Campany and wili not havean impact an the financial pasitian ar performance af the Company.

TAS 1: Disclosure Initiative (Amendments to TAS 1)

in February 2015, amendments issued ta TAS 1. Thase amendments include narraw-focusimprovements in the fallowing fıve areas: Materiality, Disaggregatian and subtotals, Notes structure,Disclasure af accaunting palicies, Presentatian of items of other comprehensive income (OCI) arisingfram equity accaunted investments. The amendments are applicable for annual periads beginning anar after January 1, 2016. Earlier application is permitted. These amendments are not expected havesignifıcant impact an the notes ta the fınancial statements af the Campany.

Annual Improvements to TFRSs - 2012-2014 Cycle

in February 2015, POA issued, Annual lmpravements to TFRSs 2012-2014 Cycle. The dacument setsout five amendments ta four standards, excluding thase standards that are cansequentially amended,and the related Basis far Conclusians. The standards affected and the subjects af the amendmentsare:- IFRS 5 Nan-current Assets Heid far Sale and Discontinued Operations — clarifies that changes in

methads of disposal (through sale ar distributian ta awners) wauld nat be considered a new planof disposal, rather it is a cantinuatian af the ariginal plan

- IFRS 7 Financiai instmments: Disclasures — ciarifles that i) the assessment af servicing cantractsthat inciudes a fee for the cantinuing invaivement of flnanciai assets in accardance with IFRS 7; ii)the affsetting disclasure requirements da not appiy ta candensed intehm fınanciai statements,uniess such disclosures provide a signiflcant update ta the infarmation reparted in the mast recentannuai report

- IAS 19 Empioyee Benefits — clarifıes that market depth of high quality corporate bands isassessed based on the currency in which the obligatian is denaminated, rather than the cauntrywhere the abhgation is iacated

- IAS 34 interim Financial Reparting —ciarifles that the required interim discJasures must either be inthe interim financial statements ar incarparated by crass-reference between the interim fınancialstatements and wherever they are inciuded within the interim financial report

<14)

(Convenience translation of fınancial statements ariginally issued in Turkish - see Sedilon 3, Note 2)





The amendments are effective for annual periods beginning on or after January 1, 2016, with earlierapplication permifted. The Company iş in the process of assessing the impact of the amendments onfinancial position or performance of the Company.

The new standards, amendments and interpretations that are issued by the internationalAccounting Standards Board (IASB) but not issued by Public Oversight Authority (POA)

The following standards, interpretations and amendments ta existing IFRS standards are issued by theIASB but not yet effective up to the date of issuance of the financial statements. However, thesestandards, interpretations and amendments ta existing IFRS standards are not yet adapted/issued bythe POA, thus they do not constitute pad of TFRS. The Company wili make the necessary changes taits financial statements after the new standards and interpretations are issued and become effectiveunder TFRS.

Annual Improvements — 2010—2012 Cycle

İFRS 13 Fair Value Measurement

As cJarified in the Basis for Conclusions short-term receivables and payables with no stated interestrates can be heid at invoice amounts when the eftect of discounting 35 immaterial. The amendment iseffecUve immediateiy.

Annual Improvements — 2011—2013 Cyc!e

TFRS 14: Regulatory Deferral Accounts

TFRS 14 permits first-time adopter rate regulated entities to continue to recognise amounts related torate regulation in accordance with their previous GAAP requirements when they adopt TFRS. ExistingTFRS preparers are prohibited from adopting this Standard. The Standard wiil be applied on a fuliretrospective basis and iş effective for annual periods beginning on or after January 1, 2016. Earlierapplication is permitted. The Standard is not applicable for the Company and wilI not have an impacton the financial position or performance of the Company.

IFRS 15 Revenuelrom Contractswith Customers

in May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. The new five-stepmodel in the standard provides the recognition and measurement requirements of revenue. Thestandard applies ta revenue from contracts with customers and provides a model for the sale of somenon-fınancial assets that are not an output of the entity’s ordinary acüvities (e.g., the sale of property,plant and equipment or intangibles). IFRS 15 original eftective date was January 1, 2017. However, inSeptember 2015, IASB decided ta defer the effective date ta reporting periods beginning on or afterJanuary 1, 2018, with early adoption permitted. Entities wili transition ta the new standard followingeither a fuli retrospective approach or a modifled retrospective approach. The modifıed retrospectiveapproach would allow the standard ta be applied beginning with the current period, with narestatement of the comparative periods, but additional disclosures are required. The Company 5 in theprocess of assessing the impact of the standard on fınancial position or performance of the Company.

(15)

(Convenience translation ot financial statements odginally issued in Turklsh - see Secüon 3, Note 2)




IFRS 9 Financial lnstruments - Final standard (2014)

in July 2014 the IASB published the final version of IFRS 9 Financial lnstruments. The fınal version ofIFRS 9 brings together the classiflcation and measurement, impairment and hedge accounting phasesof the IASB’s project to replace IAS 39 Financial lnstruments; Recognition and Measurement. IFRS 9is built on a logical, singie ciassification and measurement approach for financial assets that reflectsthe business model in which they are managed and their cash flow characteristics. Built upon this is aforward-looking expected credit loss model that wilI result in more timeiy recognition of ban losses andiş a single model that is applicable to alI financial instruments subject to impairment accounting. inaddition, IFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gainsthrough profit or loss as a result of the value of their own debt falling due to a decrease in creditworthiness when they have elected to measure that debt at fair value. The Standard also includes animproved hedge accounting model to better link the economics of risk management with its accountingtreatment. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. However, theStandard is available for early application. in addition, the own credit changes can be eariy applied insolation without otherwise changing the accounting for financial instruments. The Company is in theprocess of assessing the impact of the standard on financial position or performance of the Company.

IFRS 16 Leases

in January 2016, the iASB has published a new standard, IFRS 16 ‘Leases’ The new standard bringsmost leases on-balance sheet for lessees under a single model, eliminating the distinction betweenoperating and fınance leases. Lessor accounting however remains largeiy unchanged and thedistinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 ‘Leases’ andrelated interpretations and is effective for pedods beginning on or after January 1, 2019, with eadieradopUon permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has aiso been appiied. TheCompany is in the process of assessing the impact of the standard on financial position orperformance of the Company.

IAS 12 income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses(Amendments)

in January 2016, the IASB issued amendments to AS 12 Income Taxes, The amendments clarify howto account for deferred tax assets related to debt instruments measured at fair value. Theamendments ciarify the requirements on recognition of deferred tax assets for unrealised iosses, toaddress diversity in pmctice. -These 8mendments are to be retrospectiveiy applled for annual pai6dsbeginning on or after January 1, 2017 with eadier application permitted. However, on nihai appHcationof the amendment, the change in the opening equity of the earliest comparative period may berecognised in opening retained earnings (or in another component of equity, as appropriate), withoutallocating the change between opening retained earnings and other components of equity. if theCompany applies this rellef, it shali disclose that fact. The Company is in the process of assessing theimpact of the amendments on financial position or performance of the Company,

IAS 7 ‘Statement of Cash Fiows (Amendments)

in January 2016, the IASB issued amendments to IAS 7 ‘Statement of Cash Flows’, The amendmentsare intended to clarify IAS 7 to improve information provided to users of flnanciai statements about anentity’s financing activities. The improvements to disciosures require companies to provide informationabout changes in their financing liabiiities. These amendments are to be applied for annuai periodsbeginning on or after January 1, 2017 with earher appbcation permitted. When the Company/Groupfirst appbes those amendments, it is not required to provide comparative information for precedingperiods. The amendment are not applicabie for the Company and wiili not have an impact on theflnanciai position or performance of the Company.

<16)

(Convenience translatlon of fbıanclal statements originaliy issued in Turkish - sea Section 3, Nota 2>


Notes to financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL> unless otherwise stated)


Preparation of financial statements and related disclosures and notes in accordance with theTurkish Accounting Standards and Regulation on the Procedures and Principles forAccounting Practices and Retention of Documents by Banks:

in aceordance with article 37 of the Banking Law 5411, banks are required ta apply unifarmaccounting systems; recognize ali transaction accarding to their real natures and prepare theirfınancial reports in a form and content which meet the need to acquire infarmation and in acamprehensible, reliable and comparable way favorable for auditing, analyzing and interpreting an atimeiy and accurate basis in accardance with the pracedures and principles ta be determined by theBanking Regulatian and Supervisian Agency based on te international standards; alsa conferring thePublic Oversight, Accounting and Auditing Standards Authority and institutional unions.

2.3 Summary of significant accounting policies

The signifıcant accounting policies while using in preparatian process of financial statements aresummarized below:

2.3.1 Cash and cash equivalents

The cash and cash equivalents are carriad in the balance sheet at cost. For the purposes of the cashilaw statement. cash and cash equivalents consist af cash an hand. depasits at banks and highly liquidinvestments with original maturity pehods of less than three months.

2.3.2 Loans and advances tü consumers and provision for ban impairment

Laans and advances to consumers are carried at amortized cost Iess pravision for impairment.

lmpairment on laans and advances are incurred if there is abjective evidence of impairment as a resultof ane ar mare events that occurred. The amount af the pravisian for the individualiy impaired loans isthe difference between the carrying amount and recaverable amount, being the present value afexpected cash flows, including the amount recoverable from guarantees and collateral, discountedbased on the original effective interest rate af laans. Specifıc and general aHowances for oanimpairment is established ta pravide for management’s estimate af credit lasses as saon as the recoveryaf an exposure is identifled as daubtful cansidedng the “CommuniquĞ on Unifarm Chart of Accaunts,Disclasures and Farm and Nature of Financial Statements to be issued by Leasing, Factoring andCansumer Finance Companies” which was issued by the BRSA in the Offlcial Gazette dated December24, 2013, mTmberd 28861 ğpt! “ ommunıque amendöğ böüf Communıque Öİ UüİföiWi Chtt öfAccounts, Disclosures and Farm and Nature of Financial Statements ta be issued by Leasing,Factaring and Financing Companies° Febmary 7, 2014, numbered 28906.

Financial companies has started ta make provisians at a ratia af %1 of credit amaunt far cansumercredits except for martgage credits and at a ratio of %2 of credit amount for credits having delays morethan 30 days but less than 90 days in Iheir capital or interest coflection as of March, June andSeptember periads with the amendment made in sixth subparagraph of Article 6 of Regulation onFinancial Leasing, Factoring and Accounting Practices af Finance Companies, pubhshed in OfflcialGazette dated 24/12/2013 and numbered 28861, on June, 26, 2015. Additionally, financialcampanies, having a ratio more than 8% in cansumer credits, except for mortgage credits, classifıedunder “Liquidated Receivables” and “Receivables in Loss status”, shall apply general reserve ratio as4% during their maturity periods for consumer credits except for mortgage credits and as 8% duringtheir maturity periods for consumer credits except far martgage credits having delays mare than 30days but less than 90 days in their capital or interest callection. The mavement in pravisian is chargedagainst the income for the periad. When a pravisianed oan is subsequently callected, it is deducted fromthe related provisian for impairment. General pravisian is accaunted under ‘Operating income-Other’ andPravisions and Expense Accruals-liabibty.

Laans are written off after alI necessary legal praceedings have been campleted.(17)

(Convenience translation of financial statements originaliy issued in Turklsh - see Setfion 3, Note 2)




2.3.3 Related parties

a) A person or that person’s immediate farniiy member iş related to the Company in the followingconditions:

The person in question,

(i) Control orjoint control over the cornpany(ii) Has significant influence over the cornpany(bi) The Cornpany’s or a parent of a member of the key rnanagement personnel.

b) If it is exist any of the following conditions Firrn iş related with The Company:

(1) Firm and The Cornpany are group cornpanies.(ii) Event of the Firrn iş subsidiary or partner of other fırm (or a group member of other fırm.)(iii) Both firms have sarne third party business affiliate.(iv) The Firm of one of the joint venture of a third entity and the other entity is a subsidiary of

this third party.(v) 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 itselfsuch a plan, the sponsoring employers are also related to the reporting entity.

(vi) If the company is managed by a person mention about Ça)(vii) If a person in (a)-Q) has big influence on firrn or this person iş in key rnanagement

personnel.

For the purpose of these financial staternents, shareholders, subsidiaries of Koç Group withdirect/indirect capital relation, key rnanagement personnel and board members, in each case togetherwith their families and companies controlled by or aWıliated with thern are considered and referred to as“related parties”

2.3.4 Derivative financial instruments and hedge accounting

The Company has entered into swap and foıward transactions in order to rninimize its foreign currencyrisk and interest rate risk and manage its liquidity in foreign currency. Swap and forward transactions areinitialiy recognized at fair value on the date which a derivaüve contract is entered into and subsequentlyremeasured at fair value. Derivatives are carded as assets when the fair value iş positive and asliabilities when the fair value is negative. Swap and -forward transacüons that are designated S hdğ1Pğinstruments for cash lIow hedges are accounted for in accordance with hedge accounting policies.

The Company funds its long term fixed interest rate TL ban portfolio with long term foreign currencyfunds obtained from international markets. The Company changes the foreign currency liquidityobtained from the international markets to TL liquidity with long term swap transactions. Thereforethese long terrn fixed interest rate oan portfolio become effectively funded by TL and mitigated frorninterest and foreign exchange rate risks.

The Cornpany documents formally, at the inception of the transaction, the relationship betweenhedging instrurnents and hedged iterns, as welI as its risk management objective and strategy forundertaking vadous hedge transactions. This docurnentation includes the identification of descriptionof hedging instruments, hedged item, the nature of the risk being hedged and how the Cornpany wilIassess the hedging instrurnent’s effectiveness in offsetting the exposure to changes in the hedgeditem’s cash flows attributable to the hedged risk. The installment and principal repayment terrns of thehedging instrurnents are in line with the installment and principal repayrnents of hedged items.

The hedge eftecbveness is assessed on an ongoing basis and determined actually to have been highlyeftective throughout the financial reporting periods for which the hedge was designated.

(18)

(Convenience translatlon of financial statements originaliy issued in Turkish - see Section 3, Nate 2>


Notes to financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL) unless otherwise stated>


The Company values these swap and forward transactions designated as cash 110w hedginginstrument by using the recent market rates or discounted cash flow methods based on market ratesof similar instruments and the gam or Ioss on the effective portion of the hedging instrument isrecognized directly in “Hedging Revaluation Reserves” in equity, while any ineffective portion isrecognized immediateiy in profit or Ioss. Amounts taken ta equity are transferred to profıt or Ioss whenthe hedged transaction affects profit or Ioss, such as when the hedged fınancial income or fınancialexpense is recognized. The foreign currency gam and losses arising from the foreign currency andfloating interest rate borrowings which are subject to hedge transactions are accounted under theforeign exchange gain/Ioss account and the valuation gam and Ioss arising from the derivatives thatare subject ta hedge transaction are accounted under the profitlloss on derivative financial mnstrumentsaccount. The aforementioned amounts classifıed under those accounts represent the financialexpense of the Company.

2.3.5 Leasing — as iessee

Finance leases

Assets acquired under finance lease agreements are capitalized at the mnception of the lease at the Iowerof the fair value of the leased property or the present value of the minimum lease payment Leasedassets are included in the tangible assets. Liabilities arising from the leasing transactions are included in‘Fmnance Lease Payables” on the face of the balance sheet.

Fmnance lease Iiabilities ara initialiy recorded at the fınanciaJ statements with the purchase cost of therelated asset. The interest component of the finance cost is charged to the income statement over thelease period.

Operating leases

Operating leases are recorded the income statement in as expense when they occur. Operating leasepayments are recognized as an expense on a straight lmne basis over the lease term.

2.3.6 Tangible assets

Tangible assets are carried at cost Iess accumulated depreciation. Depreciation is calculated on astraight-Iine basis and accelerated basis over the estimated useful lives of tangible assets.

Useful Life:

omce equipment 3-10 yearsFurniture and fixture 5 yearsMotor vehicles 5 yearsOther 2-15 years

Gains and losses on disposais of tangibie assets ara recognised under other operating income andexpense, in the statement of income.

2.3.7 Intangible assets

Intangible assets mainiy comprise of rights and ara carried at cost Iess accumulated amortization.Amortization is calculated on a straight-Iine basis over the estimated useful lives of intangible assets.

(19)

(Convenience translation ot fınancial statemenis originaliy issued in Turkish - see Section 3, Note 2)




Useful Life:

Rights 3-10 years

in the case of impairment, the carrying amount of the intangible asset 5 reduced to its recoverablevalue.

2.3.8 Borrowing costs

it an asset needs ta be ciassifled as construction-in-progress for a signiflcant time, in order ta beavailable for saie or available to use. borrowing costs related ta the purchase and additionalconstruction expenses are capitalized within the cost of asset. If there iş an investment income relatedto the unconsumed part of the Ioans, it wili be deducted from the capitalized interest expense.

Ali other finance expenses wili be expensed during the period incurred.

2.3.9 Securitles issued and Borrowings

Securities issued by the Company are classified as Financial Liabilities and accounted with theamortized cost using the effective interest rate method.

2.3.10 Deferred tax

Deferred income tax is provided, using the iiability method, for ali temporary differences arisingbetween the tax bases of assets and iiabilities and their carrying values for financial reportingpurposes. Currentiy enacted tax rates are used to determine deferred income tax.

Deferred tax iiabiiities are recognised for ali taxable temporary differences, where deferred tax assetsresulting from deductible temporary differences are recognised ta the extent that it iş probable thatfuture taxable profit wilI be available against which the deductible temporary difference can be utilized.

2.3.11 Revenue and expense recognition

a) Interest income and expenses

Interest income and expense for ali interest-bearing financial instruments are recognized in thestatement of income on an accrual basis for alI instruments measured at amortized cost using theeffective interest method. tnterest income iş written off by the management’s decision regarding theuncollectible Ioans and advances giyen to customers; the accmals booked tili the decision day arecancelled and not recognized as income until the cofleofion is performed. Interest income is presentedunder “interest on Ioans” interest expense iş presented in “interest expense” lines.

b) Subvention income

The Company receives subvention from the companies in order ta partiaily compensate the lossincurred by appiying relativeiy iower interest rates on ioans granted during the campaigns of thosecompanies. Such subventions received are an integral part of generating invoivement with the ioansand advances to consumers and therefore, they are deferred and recognized as an adjustment of theeftective interest rate of ioans.

e) Income from ban inquiries and other income

income from oan inquiries consists of the fees charged ta the consumers for the bana at inceplion andrecognized as income when ali the recognition criteria are met.

(20>

(Convenience translation of financial statements originaliy issued in Turkish - see Section 3, Nate 2>




2.3.12 Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a resultof past events, when it is probable that an outflow of resources wili be required to settle the obOgation,and when a reliable estimate of the amount can be made.

2.3.13 Provision for employee benefits

The company recognizes retirement pay liability and vocation pay liability for “Turkish AccountingStandard about Employee Benefit” (TMS 19) and in balance sheet classifled under “Provisions foremployee benefits” account.

Provision for employment termination benefits represent the present value of the estimated totalreserve of the future probable obligation of the Company arising in case of the retirement, terminationof employment without due cause, cali up for military service or dearth of the employees upon thecompletion of minimum one year service calculated in accordance with the Turkish Labor Law.

The Company has to pay confribution to Social Security lnstitution (lnstitution) for its employees at thecontribution rates specifled by the law. The Company does not have other liabilities to its employees orto the lnstitution other than the contribution for its employees. Those contributions are expensed onthe date of accrual.

2.3.14 Foreign currency transactions

Transactions in foreign currencies dudng the period have been translated at the exchange ratesprevailing at the dates of the transactions. Monetary assets and Iiabilities denominated in foreigncurrencies hava been translated into Turkish lira at the exchange rates of Central Bank of Republic ofTurkey prevaihng at the balance sheet dates. Foreign exchange gains or losses arising from thesettlement of such transactions and from the translation of monetary assets and liabilities arerecognised in the statement of income.

2.3.15 Contingent assets and liabilities

Contingent assets or obligations that arise from past events and whose existence will be confırmedoniy by the occurrence or non-occurrence of one or more uncertain future events, not wholly within thecontrol of the Company, are not included in the fınancial statements and are treated as contingentasseta or liabilities.

2.3.16 Assets heid for sale

Non-current assets are classifled as assets heid for sale when their carrying amount is to be recoveredprincipally through a sale transaction and a sale is considered highly probable. They are stated at thelower of carrying amount and fair value less costs to selI if their carrying amount is ta be recoveredprincipally through a sale transaction rather than through continuing use.

2.3.17 Subsequent events

Post-period-end events that provide additional information about the Companys position as of thebalance sheet date (adjusfing events), are refiected in the fınanciat statements, Post-period-endevents that are not adjusting events are disclosed in the notes when material.

(21)

(Convenience translation of financial statements originaliy issued in Turkish - sea Section 3, Note 2>


Notes to fınancial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL) unless otherwise stated)


2.3.18 Additional paragraph for convenience translation to English:

The eftects of differences between the accounting principles and standards set out by regulations,communiques, interpretations and circulars published by the BRSA, and accounting principlesgenerally accepted in the countries in which the accompanying financial statements are to bedistributed and IFRS have not been quantified in the accompanying financial statements. Accordingly,the accompanying financial statements are not intended to present the financial position, results ofoperations and changes in financial position and cash flows in accordance with the accountingprinciples generaliy accepted in such countries and IFRS.

2.4 Signiflcant accounting judgments, estimates and assumptions

The preparation of financial statements requires the Company management to make estimates andassumptions that affect reported amounts of assets and liabilities and disciosure of contingent assetsand iiabilities as of the date of the fınancial statements and the reported amounts of revenues andexpenses during the reporting period. Actuai results couid differ from those estimates. Theseestimates are reviewed pedodicaliy and as adjustments become necessary, they are reported ineamings in the periods in which they become known.

Signiflcant judgments and estimates used in the preparation of financial statements as of December31, 2015 is presented beiow:

e The Company’s provision policy, through management assessment and estimations case ofuncollectabiiity or doubtabie of any of the loans and receivables or for uncoliectible loans andother receivables “Communiqu on Uniform Chart of Accounts. Disciosures and Form andNature of Financial Statements to be issued by Leasing, Factoring and Consumer FinanceCompanies” which was issued by the BRSA in the Owıcial Gazette dated December 24, 2013,numbered 28861 and “Communiqu amending about Communique on Uniform Chart ofAccounts, Disciosures and Form and Nature of Financial Statements to be issued by Leasing,Factoring and Consumer Finance Companies” February 7, 2014, numbered 28906. Thecompany takes notice of these regulations and opinion make specifıc and general provision, Thegeneral provisions in the period are deducted from revenue and recognize credit OperatingExpenses / Other in profit 8 Ioss and in Iiabilities part we recognize debit in Provision for debtsExpenses / Other. When a provisioned receivable is collected, it is deduct from lmpairmentprovision for loans and other receivables. Avoid differences between estimated and actuallosses, method used in provision caiculation and estimations are revised regulariy. BankingRüIti fid SUiiö?i Ağİ1 H 6HJğd provislon rafes on fligulaflon aboutAccounting Poiicies and Financial Statements of Financial Leasing, Factoring an FinancingCompanies, detailed notes of “Financing loans and provision for osses on June,28 2015.

The management reserves provision for the doubtful receivables based on their evaluations ofthe consumer ioans portfolio. Provision amount is determined per the Company’s credit riskpolicy, existing credit portfolio structure, financial structure of customers and economicconjuncture, and by taking fair values of the guarantees into account if applicabie. impairmentand uncollectibiiity risks are caiculated separateiy for each individual oan and also for ali banaincbuding the individual Ioans for which no specific impairment is observed on a collective basis.As of December 31, 2015 the Company accounted for portfoiio reserve amounfing to TL 32.026(TL 43.995 December 31, 2014> and specific reserve amounting to TL 41.784 as of December31, 2015 (December3l, 2014-TL 22.392).

(22)

(Convenience translation of financial statements ariginaliy issued in Turkish - see Section 3, Nato 2>


Notes to financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL> unless otherwise stated>


2.5 Changes in accounting estimates and errors

The effect of changes in accounting estimates affecting the current period is recognized in the currentperiod; the effect of changes in accounting estimates affecting current and future periods is recognizedin the current and future periods. The accounting estimates have not changed for the January 1 —

December 31, 2015 period. Signiflcant changes in accounting policies or material errors are correated,retrospectively; by restating the prior period financial statements.

As disclosed in Note 11-9 and 11-3, the Company has provided general oan Ioss calculation for itsconsumer and commercial loans.

2.6 Additional paragraph for convenience translation to English:

The eftects of differences between the accounting principles and standards set out by regulations,communiques, interpretations and circulars published by the BRSA, and accounting principlesgenerally accepted in the countries in which the accompanying financial statements are to bedistributed and IFRS have not been quantifıed in the accompanying financial statements. Accordingly,the accompanying fınancial statements are not intended to present the financial position, results ofoperations and changes in financial position and cash flows in accordance with the accountingprinciples generally accepted in such countries and IFRS.

(23)

(Convenlence translation of financial statements odyinaliy issued in Turkish - sea Section 3, Nota 2>



Section fourExplanations and notes on the financial statements

Explanations and notes related to assets:

1. Cash and cash equivaients

December3i, 2015 December3l, 2014

Cash and cash equivalents- -

Central Bank of Turkish Republic (CBTR) 57.251 36.268-TRY 16.692 16.018-Euro 12.618 3.414-USD 27.776 16.818-Income Accrual 165 18

Total Cash Amount 57.251 36.268

Finance companies have been subject to the “2005/1 - Communiqu on Reserve Recuirement”published in the Offlcial Gazette dated October 4, 20131 numbered 2781. Required reserve Iiabilities offinance companies are foreign borrowings issued securities and subordinated debts which are notrecognized under equity. As of December 31, 2015, reserve ratios vary between 5% to 11, 5%depending on the terms of their liabilities in Turkish Lira and in a range of 6% to 20% for foreigncurrency liabilities.In accordance with the announcement of CBRT numbered 2014-72 and datedOciober 21, 2014, interest payment on TL reserve balances (including the average balance) hasstarted on quarterly basis from November 2014. it has also started to pay interest on required reservesheld on USD on quarterly basis from May 2015.

2. Financial assets at fair value through profit and ioss (net)

Possitive difterences related to trading derivative financial assets:

December 31, 2015 December 31, 2014Contrat Fair Contrat FairAmount Value Amount Value

Foreign currency derivativefinancial instruments-Assets

FoiWSrd thange 36.628 - -

Total 36.628 406 - -

3. Banks

December 31, 2015 December 31, 2014Domestic banks

- Demand deposit 23777 6.265-Timedeposit 51.056 1.478

Foreign banks- Demand deposit

- 1- Time deposit - -

74.833 7.744

Time deposit nterest accruals - -

Total banks 74.833 7.744

(24)

(Convenience translation of financial statements originaliy issued in Turkish - see Secüan 3, Note 2)



3. Banks (continued)

The details of TL equivalent of foreign currency time deposits as of December 31, 2015 and 2014 are asfollows:

December3l, 2015 December3l, 2014USD Euro USD Euro

Domestic banks- Demand deposit 136 181 276 30-Time deposit

- 26.057 - 1.478Foreign banks

- Demand deposit - - - -

- Time deposit- - - -

136 26.238 276 1.508

Time deposit interest accrual - - - -

Total 136 26.238 276 1.508

As of December 31, 2015 the remaining pedod ta the ohginal matuhty of time deposits are Iess than 3month and their eftective interest rate is 0,26% for Euro and USD,

As of December 31, 2014 the remaining period to the original maturity of time deposits are Iess than 3month and their effective interest rate is 0,37% for Euro and USD,

For the years ended December 31 2015 and 2014, the cash and cash equivalents for cash llowpurposes is as foflows:

December 31, December 31,2015 2014

Banks 74.833 7.744Less: time deposit interest accruals

- -

Cash and cash eguivaients for cash 1 Iow purposes 74.833 L7AL

4. Receivables from reverse repo transactions

As of December 31, 2015 there are no receivables from reverse repo transactions (December 31,2014: None).

5. Available for sale financial assets (net)

As of December 31, 2015 there are na available for sale financial assets (December 31, 2014: None).

(25)

(Convenlence translatlon of financial statements originaliy issued in Turkisb - see Section 3, Note 2>



6. Financing Ioans

December 31, 2015 December 31, 2014

TLdenominated bana 2.706.074 2.216733Foreign currenoy indexed bana 88.277 64.571

2.794.351 2.281.304

Accrued interest on TL denominated bana 24.319 19.353Accrued interest on foreign currency indexed bana 210 137

Total of fınancing (oan 2.818.880 2.300.794

As of December 31, 20151 the average interest rates of Ioans varied between 0% () and 1.98 % for TLdenominated boans,0% and 0.59% for Euro denominated oans and 0.51% and 0.52% for USDdenominated Ioans. (December 311 2014: for TL 0% and 2.00%, for Euro 0 % and 0.65% and for USD0.58% and 0.65%).

() Represents bana with subvention,

As of December 31, 2015 and 2014, maturities of boans are shown bebow;


Upto 1 year 1.531.895 1.150.1571-2 years 817.006 683.9002-3 years 366.392 336.8823 and more years 103.587 129.855

Total of financing Joan 2.818.880 2.300.794

As of December 31, 2015 and 2014, the carrying amount of colbaterabs received for the Ioans giyen areshown below:

December 31, 2015 December3l ,20it

Vehicle Pledge 2.840.468 2.286.283Guarantee cheques and notes 562.697 335.735Mortgages received 135.553 118.870Personal guaranteas 1.295.696 838.880Letters of guarantee 6.140 4.056Cash collateral (11-4) 547 545Assignment

43.259Total 4.884.360 3.584.369

As of December 31. 2015, the fair vabue of the (oan poftfoho is calcubated as TL 2.717.136 (December31, 2014: TL 2.254.156) for automotive bana, TL 72.542 (December 31, 2014: TL 13.211 TL) fordurable consumption goods Ioans and TL 40.970 (December 31, 2014; TL 34.609) for mortgage boans.

(26)

(Convenjence transIaton of financial statements originaliy issued in Turkish - see Section 3, Nato 2>


Notes ta fınancial statements as af December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL> uniess otherwise stated>

7. Other Receivables


Other receivables from related parties (V-1 .2) 7.337 4.596Followed by procuration receivables 1.485 1.496Other 3.477 1.202

Other Receivables 12.299 7.294

8. Non-performing ioans

Receivables underfollow-up: December3l, 2015 December3l, 2014

Loans under foliow-up 87.476 59.250Less: specific pravisians <41.784) <22.392)

Total non performing ioans 45.692 36.858

Aging table of non-performing laans is as follow:

December3l, 2015 December3l, 2014

3 ta 6 months 20.437 170766 tal2 months 20.849 158541 year and more 46.190 26320

Non-performing Ioans 87.476 59.250

Mavements in the specific provisions for ban bosses which are under follaw up for the years endedDecember 31, 2015 and 2014 are as fallows:


January 1 22.392 25.570

Charge during the year 27.344 12.891Recaveries (7.946) (3.746)Loans said ta asset management company - (12.306)Wdtten aff (6) (17)

December3l 41.784 22.392

(27)

(Convenience translation of financial statements originaliy issued in Turkish - see SecUon 3, Note 2>



9. Derivative financial assets for hedging purposes

Cash flow hedge

The Company funds its long term fıxed interest rate TL consumer financing ban portfolio with longterm variable interest bearing foreign currency funds obtained from international markets. TheCompany changes the foreign currency liquidity obtained from the international markets ta TL iquiditywith long term swap transactions. Therefore these bong term fıxed interest rate consumer fınancingloans become effectively funded by TL and mitigated from interest and foreign exchange rate risks.

The Company hedged its cash flow risk arising from interest rate and foreign exchange rate volatility ofthe loans amounting to USD 48.000 thousand USD (December 31, 2014: thousand USD 63.000) and41.000 thousand EURO (December 31, 2014- None) by cross currency interest rate swaps andforward contracts for each interest payment and capital payments at the end of the maturity.

The critical terms of the swap contracts such as the pricing, installments and phncipal repaymentdates are the same with the terms of the hedged items which are the foreign currency borrowings. Thefair value of the related swap and forward transactions amounts to TL 36.050 asset (December 31,2014: TL 7.474) and 344 TL (December 31, 2014- None) Iiabiht is accounted under the fınancialstatements as “Derivative fınancial assets for hedging purposes — Cash Fbow Hedge” and “Derivativefinancial liabilities for hedging purposes — Cash Fbow Hedge” respectively.

The unrealized profıt accounted by the Company under equity within the period regarding to swapsdesignated as cash flow hedging instruments is TL 2,664 (December 31. 2014: TL 61 loss), netamount after deduction of deferred tax is TL 2.131 (December 31, 2014: TL 49 Ioss). As at December31, 2015 and December 31, 2014, the company’s derivative fınancial instruments are classifled as thesecond level in the fair value hierarchy table.

10. Held to maturity investments (net)

As of December 31, 2015, there are na investments heid to maturity (December 31, 2014- None).

11. Subsidiaries <net>

As of December 31, 2015, there are na subsidiaries (December 31, 2014- None>.

12. Associates <net)

31 Aralık 2015 31 Aralık 2014Shareholding (%) Amount Shareholding (%) Amount

Associates:Koç Kültür Sanal ve Tanıtım Hizmetleri AŞ. 4,9 13 4,9 13

Koç Kültür Sanat ve Tanıtım Hizmetleri A.Ş. is carried at its cost value at these fınancial statements.

13. Joint ventures (net)

As of December 31, 2015, there are no joint ventures (December 31, 2014: None).

(28)

(Canvenience translatlon of financial statements originaliy issued in Turkish - see Section 3, Nde 2>


Notes to fınancial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL> unless otheıwise stated)

14. Tangible assets

The movement of tangible assets as of December 31, 2015 is as follows:

January 1, 2015 Additions Disposais December3l, 2015

Cost:Offlce equipments 10.173 192 (650) 9.715Furniture and fixture 1.244 - (4) 1.240Motor vehicles 369 - (369) -

Other 495 - (6) 489

12.281 192 (1.029) 11.444

Accumulated depreciation:Offlce equipments 9.775 211 (649) 9.337Furniture and fıxture 1.131 26 (4) 1.153Motor vehicles 279 6 (285) -

Other 481 4 (6) 479

11.666 247 (944) 10.969

Net book vaiue 615 475

The movement of tangible assets as of December 31, 2014 is as follows:

January 1, December3l,2014 Additions Disposais 2014

Cost:Offlce equipments 11.593 83 (1.503) 10.173Furniture and fixture 1.232 123 (111) 1.244Motor vehicles 369 - - 369Other 533 - (38) 495

13.727 206 <1.652) 12.281

Accumulated depreciation:Offlce equipments 10.980 296 (1.501) 9.775Furniture and fixture 1.227 15 (111) 1.131Motor vehioles 218 61 279Other 516 3 (38) 481

12.941 375 <1.650) 11.666

Net book value 786 615

Ali depreciation charges are included in other item under operating expenses for the years endedDecember 31, 2015 and 2014 (Note iV-2).

As of December 31, 2015 and 2014, the tangible assets leased under fınance leases and theirrespective accumulated depreciafion ara as follows:


Cost-capitalised finance leases 4.556 4.873

Accumulated depreciation (4.556) <4.873)

(29>

(Convenience transiation ot financial statements originaliy issued in Turkish - see Section 3, Note 2)


Notes to financiai statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL) uniess otherwise stated)

15. intangibles assets

The movement of intangibie assets and reiated accumuiated amortization as of December 31, 2015and 2014 are as foliows:

Januaış 1, 2015 Additions Disposais December3l, 2015Cost:Rights 9.611 314 - 9925

Accumuiated amortization:Rights (9320) (191) - (9.511)


January 1, 2014 Additions Disposais December 31, 2014Cost:Rights 9.502 109 9.611

Accumulated amortization:Rights (9.052) (268) - (9.320)


Ali amodization expenses are included in other item under operaUng expenses for the years endedDecember 31, 2015 and 2014 (Note iV-2).

16. Pre-paid expenses


Transaction costs related to issuance of debt 768 1.207Other 171 223

939 1.430

17. Tax assets 1 Iiabiiities

—

Corporate taxation


Corporate taxes payable 5.311 12.654Less: prepaid taxes (1.722) (11.592)

Taxes payabie 1 (Prepaid corporate taxes), net 3.589 1.062

Corporate Tax Law has been aitered by Law No: 5520 on June 13, 2006. Although the new CorporateTax Law No: 5520, has become effective on June 21, 2006, many of its articles have become effectiveretrospectively starting from January 1, 2006. Accordingly, the corporation tax rate of the fıscal year 2015is2O% (2014: 20%).

(30)

(Convenience translation of financial statements originaliy issued in Turkish - see Sectlon 3, Nato 2)


Notes to financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL) uniess otherwise stated)

17. Tax assets (continued)

Corporation tax is payable on the total income of the Company after adjusting for certain disallowableexpenses, corporate income tax exemptions (participation exemption, investment allowance, etc) andcorporate income tax deductions (like research and development expenditures deduction). No further taxis payable unless the profit is distributed (except withholding tax at the rate of 198% on the investmentincentive allowance utilized within the scope of the Income Tax Law Transitional Article 61).

Dividends paid to non-resident corporations, which have a place of business in Turkey, or residentcorporations are not subject to withholding tax. Otherwise, dividends paid are subject to withholding taxat the rate of 15%. An increase in capital is not considered asa profit distribution.

Corporations are required to pay advance corporation tax quarterly at the rate of 20% on their corporateincome. Advance tax deciaration is made by the l4th day of the following month and payable by the l7thday of the second month following each calendar quarter end by companies. Advance tax paid bycorporations is credited against the annual corporation tax Iiability. Advance tax paid by corporations iscredited against the annual corporation tax iability. If, despite offsetting, there remains a paid advancetax amount, it may be refunded or offset against other liabilities to the government.

in Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies illetheir tax returns within the 25th of the fourth month following the ciose of the financial year to which theyrelate.

Tax returns are open for 5 years from the beginning of the year that follows the date of fihing during whichtime the tax authorities have the right to audit tax returns, and the related accounting records on whichthey are based, and may issue re-assessments based on their flndings.

Under the Turkish taxation system, tax losses can be carried forward to offset against future taxableincome for up to 5 years. Tax losses cannot be carried back to offset profıts from previous periods.

There are numerous exemptions in Corporate Tax Law concerning corporations. Those related to theCompany are as follows:

Dividend income from participation in shares of capital of another fuli fledged taxpayer corporation(except for dividends from investment funds participation certifıcates and investment padnershipsshares) are exempt from corporate tax.

A 75% portion of the gains derived from the sale of preferential rights usufruct shares and foundingshares from investment equity and real property which has remained in assets for more than two fuliyears are exempt from corporate tax. To be entitled to the exemption, the relevant gam is required to beheid in a fund account in shareholders’ equity and must not be withdrawn for a period of 5 years. Thesales proceeds should be collected within 2 years after the date of sale.

in addition to exemptions expiained above, tax deductions specifled in Corporation Tax Law articies 8, 9,10, and income Tax Law article 40, are aiso considered in the assessment of the corporation tax base.

Taxation on income for the nine month periods ended December 31 2015 and 2014 are as foilows:


______ _______

2015 2014

Currenttaxation on expense (5.311) (12.654)Deferred tax income / (expense) (4.474) 2.635

Total tax expense (9.785) (10.019)

<31)

(Convenience transiation of financial statements originaliy issued in Turkish - see Section 3, Note 2)


Notes ta financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL) unless otherwise stated)

17. Tax assets <continued>

The reconciliation between the expected and the actual taxation charge are as follows:

December 31,2015

December 31,

______________

2014

Profit before taxesTax charge at the enacted tax rate (20%)Non-deductible income / expenses, net

Total tax expense

18. Deferred tax assets

Deferred taxation

(9185) (10.019)

The breakdown of temporary differences and the resulting deferred taxDecember 31, 2015 and 2014, using the effective tax rates were as follows:

assets and liabilities as of

Cumulative temporaryd iffere n ces

Deferred taxAssets / (liabilitles)


Deferred tax Iiabilities are recognized for ali taxabie temporary differences whereas deferred taxassets are recognized to the extent that it is probable that future taxable profit wili be available.

60.706(12.141)

25.022(5.005)

2.356 (5.014)


Deferred tax assets:Provision for oan impairment 15.405 11.399 3.081 2.280Provision for empioyment termination benefıts 2.156 1.887 431 377Provision for dealer incentives 1.604 954 321 191Accrued interest income accrual difference for

Ioans 494 380 99 76Provision for unused vacation 214 193 43 39Other 4.394 2.391 879 478

4.854 3.441

Deferred tax Iiabilities:Fair value gains/losses of derivative fınancial

enstmments (36:456) (-7:474) (7v291) <-1:495)Deferred fınancial expenses (net) (7.772) (4.564) (1.554) <913)Differences between tax base and the carrying

value of tangible and intangible assets (327> (200) (65) (40)Other (10) . (2> -

(8.912> (2.448)

Deferred tax asset 1 (liability), net (4.058> 993

(32)

(Convenience translation of tinancial sbtements originafly issued in Turkish - see Section 3 Nato 2)



18. Deferred Tax assets (continued)

Movement af deferred tax is as follows:

- December 31, December 31,

___________________

2015 2014

Januaryl 993 (1.676)Current year deferred tax incorne / (expense) (4474) 2.635Deferred tax incorne / ( loss) in other cornprehensive income (577) 34

December 31 (4.058) 993

19. Other assets

December 31 December 31,2015 2014

Other receivables frorn related parties - 4Other 198 62

Total other short-term receivables 198 66

20. Assets heid for sale and discontinued operations assets (net)

Assets heid for sale


Assets held for sale 141 161

141 161

The Company has acquired vehicles and real estates subject to Ioans from enforcernent oftice and seflsthern through arrapged distılbutors to tflird paçues in order to increase the collection frorn legal followruploans. Assets held for sale balance consists of vehicles and real estates acquired from enforcementofflce and have not been sold to third parties yet as of December 31 2015.

Movement table of heid for sale assets


________________________________

2015 2014

January 1 161 671Current period addition 661 2817Current period disposal (681) (3327)

December3l 141 161

(33)

(Convenience translation of financial statements odginally issued in Turkish - see Sectlon 3, Note 2>


Notes ta financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL) unless otherwise stated)

Explanation and notes related to liabilitles

1. Funds borrowed

December 31, 2015 December 31, 2014Sbort term bank borrowings:Short-term bank borrowings 164.501 117.058Short-term portion of long term borrowings 1.185.299 656.657Accrued interest payable 148.383 80.330

Tatal short-term bank borrowings 1.498.183 854.045

Long-term bank borrowings:Long-term bank borrowings 789.428 717.529

Total bank borrowings 2.287.611 1.571.574

The currency details of bank borrowings as of December 31, 2015 and 2014 are as follows:

December3l, 2015 December3l, 2014Original Original TL Original TL

Currency Amount Equivalent Amount Equivalent

. Borrowings from domestic banks TL 1.379.750 1.379.750 971.750 971.750USD 49.000 142,472 74.000 171.598EUR 50.600 160.787 11.100 31,310

- Borrowings from foreign banks TL - -

USD 6.150 17.882 - -

EUR 27.800 88.337 11.000 31.028. Borrowings from related party TL 350.000 350.000 285.558 285,558

USD .

EUR . . -

2.139.228 1.491.244

Accrued interest payable TL 137.776 76.772USD 5.488 2.325

— EUR 5.119 1.233

Total Bank Borrowings 2.287.611 1.571.574

(34)

(Convenience translation of financial statements ariginaliy issued in Turkish - see Section 3, Note 2>



1. Funds borrowed (continued)

The repayment schedule of borrowings according to their remaining contraatual maturity dates as ofDecember 31 2015 and 2014 are as follows:

December 311 2015Upto Over

lmonth 1-imonths 6—l2months- —

Borrowings from related partles 60.000 95.000 40.000 155.000 350.000Borrowings from domesüc banks 157.605 408.382 504.837 612.185 1.683.008Borrowings from foreign banks 22.648 61.328 22243 106.219

217.605 526.030 606.165 789.428 2.139.228

December3l, 2014Upto Over

1 monm i4mans — 12 mons 1 year_ ToMI

Borrowings from related parties 55.558 50.000 180.000 285.558Borrowings from domestic banks 34.437 182,462 441.386 516.374 1.174.658Borrongs from foreign banks . 7.052 2.821 21.155 31.028

89.995 239.514 444.207 717.529 1.491.244

As of December 31, 2015 the effective interest rates of the borrowings are between 9,01% and 12,36%for TL; between 2,68% and 3,98% for USD and between 2,06% and 3,33% for EUR. (31 December2014: TL, USD and EUR Rates between %5,80 and %13,79, %2,75 and %4,60, %2,15 and %4,50respectively)

As of December 31, 2015 and 2014, the carrying amount and fair values of borrowings are as follows:

December 31, 2015 December 31, 2014Carrying Amaunt Fair Value Carrylng Amount Fair Value

TL borrowings 1.867.526 1.896.360 1.334.080 1.337.645USO borrowings 165.842 168.502 173.923 174.363Euro borrowings 254.243 255.130 63.571 63.514

2.287.611 2.319.992 1.571.574 1.575.522

2. Leasa payables

As of December 31 2015, the Company has no lease payables (December 31, 2014— None>.

(35>

(Convenience translation of financial statements originaliy issued in Turkish - see Seotion 3, Note 2)



Il. Explanation and notes related to Iiabilities

3. Marl<etable securitles issued

As of December 31, 2015 and 2014 the Company has no issued bonds.


Short terrn portion of leng term bonds issued 305.000 305.000Leng term bonds issued 120.000 255.000Accrued interest payable 9.944 11.408

Total bonds issued 434.944 571.408

As of 31 December 2015, total issued bonds amount are TL 120,000 and the TL 255.000 amount ofthern are redeerned.

4. Miscellaneous payables


Liabiiities to related partles <1-vj 2.287 4.307Payables ta personnei 1.730 1.739Cash guarantees i- vi) 547 545Incentives payable 576 551Otherfl 15.649 2.992

20389 10.134

(*) The othe?s amount consists of the Joan customers prepayment er over ban payments and otherprovisions.

5. Other Liability


Laans ta be transferred (*) 3.562 2.956

Tobb other liabilifles 3.562 2.956

( The Company disdoses, ioans for which the contracts were signedr butfund transferswibi be performed inthe foflowing year in the baiance sheet. The principal amount of such ioans is recorded as financing ioansta consumers’ in and as ‘other biabihties’

6. Derivative financial Iiabilities for hedging purposes

Details are expbained in note 1-9.

7. Taxes and duties payable

Taxes and duties payable:December3l, 2015 December3l, 2014

Resource utibzation support fund payable 3.512 2.792Banking insurance transaction tax payable 2.596 2.072bncometaxpayabie 1.265 1.210Other 434 406

Total taxes and duties payable 7.807 6.480

Il. Explanation and notes related to Iiabilities

(36)

(Convenjence translafion ot tinancial statements originaliy issued in Turkish - see Sectlon 3, Note 2>



8. Provisions:

Provisions consist of reserve for employment termination benefits and other provisions.

Provisions:


Generol oan loss provision for loans to consumers(*) 32.026 43.995Provision for employment termination benefits 2.301 2.032Incentive expenses accrual 1.975 2.040Provision for unused vacation 214 193

36.516 48.260

(lIt is adjudicated to apply general reserves ratios, which is applied as 4%-8% according to their delaytime for consumer credits except for mortgage credits, as 1 %-2% if the non-performing credits rate inthe aforementioned credits are realized under %8 with Regulation on making amendments onRegulation on Accounting Practices and Financial Statements of Financial Leasing, Factohng andFinance Companies published in Offlcial Gazette dated 26/06/2015 and numbered 29398.Published in the Offlcial Gazette dated June 26, 2016 Nr. 29398 Regulation on principles forestablishment and operations of financial leasing, factoring and financing companies and 1,25% ofgeneral provisions for loans accepted as equity element. Accordingly to this regulation generalprovions for loans added to equity.

Movements of General oan loss provision for loans to consumers during the year are as follows:


January 1 43.995 18.955Provision cancelled (1.532) (5)Provision set during the year (10.437) 25.045

December 31 32.026 43.995

The Company allocates general oan provision for consumer and commercial financing loans as statedin the notifıcation.

Reserve for employee rights


Provision for employment termination benefıts 2,301 2.032Provision for unused vacation 214 193

2.515 2.225

Provision for employment termination benefits is calculated by considering the following explanations;

Under Turkish Labor Law, the Company is required to pay termination benefits to each employee whohas completed one year of seMce and whose employment is terminated without due cause, is calledup for military service, dies or who retires after completing 25 years of seMce (20 years for women)and achieves the retirement age (58 for women and 60 for men).

(37)

(Convenience translation of financial statements originaliy issued in Turkish - see Sectlon 3, Note 2)



Explanation and notes related to Iiabilities

8. Provisions (continued)

The Iiability iş not funded, as there iş no funding requirement.

The provision has been calculated by estimating the present value of the future probable obligation ofthe Company arising from the retirement of the employees.

TAS 19, requires that actuarial valuation methods be developed to estimate the employee terminationbenefıt provision. The following actuarial assumptions have been used in the calculation of the totalprovision:


Net discount rate (%) 4,60 3,50kate for possible retirement (%) 94 94

The principal assumption is that the maximum Iiability of employee termination benefıts for each yearof service wiil increase in line with infiation. Thus, the discount rate applied represents the expectedreal rate after adjusting for the anticipated effects of future infiation. As the maximum Iiability is revisedsemi-annualiy, the employee termination benefıt ceiling amount of TL 3.828,37, which is effective fromJuIy 1, 2015, has been taken into consideration in calculating the provision for employment terminationbenefıts of the Company.

The movement in the provision for employment terminaüon benefıts during the year is as follows:


January 1 2,032 1.668Current year service cost 644 404Interest cost (77) 144Actuarial gain/(Ioss) <221) 106Payments during the year (77) (290)

31 Aralık 2.301 2.032

9. Deferred Incöme

Deferred subvention income:


Short-term deferred subvention income 43.944 22.871Long-term deferred subvention income 13.354 7.411

57.298 30.282

Deferred subvention income represents the deferred portion of the subvention income received fromdistributors during the campaign periods in order to partialiy compensate the Ioss incurred by applyingrelativeiy Iower interest rates on Ioans granted during the campaigns of those companies.

<38)

(Convenience translatlon of financial statements originaliy issued in Turklsh - see Sectlon 3, Note 2>


Notes ta financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL> unless otherwise stated)

Explanation and notes related to liabilities (devamı)

10. Currentyeartax Iiability

Details are explained in note 1-17.

11. Deferred tax Iiability

Details are explained in note 1-18.

12. Subordinated loans

As of December 31, 2015 there are na subardinated loans (December 31, 2014- None).

13. Liabilitles for the assets heid for sale and discontinued operations (net):

As af December 31, 2015 there are no assets held for sale and discontinued operations (December31, 2014- Nane).

14. Shareholder’s equity

14.1 Share capital

The Company’s authorized and issued capital cansists of 10.000.000.000 units (2014: 10.000.000.000units) to the bearer shares of Kr 1(2014: Kr 1) each. The shareholders of the Company and theirshareholding rates as of December 31, 2015 and 2014 are as follows:

December 31 Shareholding December 31, Shareholding2015 Rate (%> 2014 Rate (%>

Arçelik A.Ş. 47.000 47,0 47.000 47,0Koç Holding A.Ş. 44.500 44.5 44.500 44,5Other shareholder 8.500 8.5 8.500 8,5

Total paid-in capital 100.000 100 100.000 100

The Company is subject ta the registered capital system. The Company’s registered capital is TL150.000, issued capital is TL 100.000. Furthermore there is na privilege granted ta the common stocksrepresenting the share capital.

14.2 Profit reserves and retained earnings:

Retained earnings as per the statutory financial statements, other than legal reserve requirements, areavailable for distributian subject ta the legal reserve requirement referred ta below.

Net profit achieved from the campany’s financial ştatements prepared in accordance with the TurkishCommercial Cade, and it the carrying amount after the deductian of losses from previous years;

a) The TCC stipulates that the first legal reserve is appropriated out of statutory prafits at the rateof 5% per annum, until the tatal reserve reaches 20% of the Companys paid-in share capital,

b) The TCC stipulates that the first legal reserve is apprapriated out of statutary profıts at the rateof 5% per annum,

c) Balance amaunt is distributed as determined by the General Assembly or added asextraardinary reserves ta the retained earnings.

d) In accardance with the clause 519 article af c of TCC, 10% of the distributable amaunt is addedta legal reserves after 5% profit distributian. Legal reserve is not a apprapriated if undistributedprafit in the balance sheet or/and the profit share is distributed through capital increase.

(39)

(Canvenience translation of financial statements originaliy issued in Turklsh - sec Section 3, Note 23



Il. Explanation and notes related to Iiabilities (continued)

If the total of legal reserve exceeds the issued capital, General Assembiy wili set the decision of howto use that which is the legal reserve exceed of half of the issued capital.

In 2015, company distributed dividends in amount of TL 20.000. (December 31, 2014: TL 30.000)

14.3 ltems that may be reclassified subsequently to profit or loss

As disclosed in 1-9, the Company has accounted the gam amounting to TL 3.005 (December 31, 2014:874 TL loss) arising from the swap used in cash flow hedges under equity under “Hedge Revaluationreserve (effective porüon)” account as of December 31, 2015.

<40)

(Convenience translation of financlal statements originaliy lssued in Turkish - see Section 3, Note 2)


Notes to financial statements as of December 31, 2015 (continued>(Currency —Turkish Lira (Thousand TL> unless otherwise stated)

ili. Explanation and notes related to off-balance sheet accounts:

1. Guarantees received

As of December 31, 2015, the guarantees received by Campany which are booked in their ariginalcurrencies amaunts to TL 4.782.683> thousand EUR 30.096 covered ta 95.633 TL and thousand USD2.079 cavered ta 6.044 TL (December 31> 2014 —TL 3.525.917, thausand EUR 19.206thousand USD1.845).

2. Guarantees giyen

2.1 Letters of guarantee

The letters of guarantee giyen by Campany ta legal autharities, tax autharities and banks forborrowings amounts ta TL 49. (December 31, 2014— TL 49).

Litigations against the Company

As of December 31, 2015, there is na litigation (December 31, 2014: None).

3. Commitments

As af December 31, 2015 revacable commitments af the Campany which carrying values are originalcurrencies are amaunt ta TL 991.755, thousand Eura 118.119 cavered ta 375.335 TL and thausandUSD 75.496 covered to 219.511 TL (31 Aralık 2014 TL 3.296.600, thausand EUR 45.632, thousandUSD 39,887).

As af December 31, 2015 there are na irrevocable commitments of the Campany (December 31,2014: Nane)

4. Derivative financial instruments

4.1 Cash flow hedge

The Company hedged its cash flaw risk arising fram interest rate and fareign exchange rate valatility afthe funds borrowed by using swap transactions.

As of December- 31 20-15 iarward exchange and swap transactians of the Company with originalcurrencies amount to thousand USD 50.797 covered ta TL 147.698 TL and thausand EUR 42.494covered ta 135.030 TL — tatal lacal currency la TL 282.728 - purchase and TL 265.738 sales.(December 31, 2014: thausand USD 66.060 cavered ta TL 153.186 purchase, TL 160.6g1 sales)

4.2 Heid for trading transactions

As af December 31, 2015, derivative instruments heid for trading transactions of Campany withariginal currencies thausand USD 6.222 cavered ta TL 18.091 sales and TL 18.537 purchase.(December 31, 2014: Nane).

5. Items heid in custody

As of December 31. 2015, items heid in custady of Campany with ariginal currencies amount ta TL2.139, thousand USD 257 covered to 748 TL and thousand EUR 32 cavered to 103 TL. (December31, 2014: TL 5,955, thausand USD 383, thousand EUR 65).

(41)

(Convenience translation af financial statements ariginaliy issued n Turkish - ses Section 3, Note 2)


Notes to financial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL> unless otherwise stated>

IV. Explanation and notes related to statement of income

1. Operating Income


Interest income from oans giyen to consumers 295.032 228.285Subvention income 44.542 13.823

Interest income on Ioans 339.574 242.108

Fees and commissions income from Ioans 24.279 31815Commissions income from subventions 97 75Insurance brokerage 10.892 9.032Pledge removal 495 504

Fees and commissions income received from loans 35.763 41.426

Gross operating income 375.337 283.534

2. Operating Expenses

The disthbution of gross operating expenses according to their nature for the years ended December 31,2015 and 2014 are as follows:

2.1 Personnel Expenses


Wages and salahes 11.048 10.196Bonuses 6.127 5.256Other benefits 2.709 1.730

Total- 19.884 1L182_

2.2. General administration expenses:


Legal expenses 2.419 1.823Informalion technologies and repair and maintenance expenses 1.910 1.487Administrative Expenses 2.423 993Service procurement expenses 2.263 4.020Other 12.176 10.127

Total general administration expenses 21.191 18.450

(42)

(Convenience translation of fınancial statements originally issuad in Turkish - sea Section 3, Nota 2)


Notes to fjnancial statements as of December 31, 2015 (continued)(Currency —Turkish Lira (Thousand TL> unless otherwise stated)

Provision expensesDepreciation and amortization expenses (*) (1-14) (1-15)Taxes and dutiesUnused unused vacation 22 30

Total other operating expenses (10.569) 26.742

(k) The amount also includes depreciation of leasehold improvements amounüng to TL 26 which isaccounted under other assets in the flnancials. (December 31, 2014: TL 24)

3. Other Operating Income

Other operating income for the years ended December 31, 2015 and 2014 are as foilows:

3.1 Interest received from banka

December 31,

_________ _______ _________ _____ _________

2015

Interest income from banks 6.354

3.2 Gains on derivative financial instruments


Gains on derivative financial instruments 4.237 9

3.3 Foreign exchange gains

December 31, December 31,— 2015 2014

Foreign exchange gains 24.552 12.022

3.4 Other Operating Income


Income from bana under legal follow-up through attorney 405 309No longer required other provision incomes 22 -

Other 418 461

Total other operating income 845 770

IV. Explanation and notes related to statement of income (continued)

2.3 Other operating expenses:

December 31,2015

(11.969)464914

December 31,2014

25.040667

1.005

December 31,2014

2.225

(43)

(Convenience translation of financial statements originaliy issued in Turklsh - see Section 3, Note 2)



Allowance for doubtful receivables 9.145

5. Other operating expenses

5.1. Derivative financial transaction losses


Loss on derjvaljve fınancial instruments 307 791

5.2. Foreign exchange losses


Foreign exchange osses 27.592 10.786

IV. Explanation and notes related to statement of income (continued)

4. Specific provisions for non-performing loans

December 31,2015

19.398

December 31,2014

(44)

(Convenience translation of fınancial statements ohginally ıssued in Turkish - see Section 3, Note 2)



V. Related party disclosures

1. Balances with related parties

a. Deposits heid with Related Parties


Yapı ve Kredi Bankası A.Ş. (“Yapı Kredi Bankası”) 71,169 4.680

Total deposits heid with Related Parties 71.169 4.680

b. Other Receivables from Related Parties:


Ford Otomotiv Sanayi A.Ş. (“Ford Otosan’) 7.945 4.016Otokoç Otomotiv Ticaret ve Sanayi A.Ş. (“Otokoç”) 110 -

Total other receivables from related parties 8.055 4.016

c. Borrowings from Related Parties:


Yapı ve Kredi Bankası A.Ş.(”Yapı ve Kredi Bankası”) 350.000 285.558

Total borrowings from related parties 350.000 285.558

d. Due to Related Partles


- Parent Companies:Koç Holding A.Ş.Ç’Koç Holding”) i:i 3.320

155 206- Other Related Parties:Otokoç Otomotiv Ticaret ve Sanayi A.Ş. (“Otokoç”)) 314 676Ford Otomotiv Sanayi A.Ş. (“Ford Otosan”) 718 580Koç Sistem Bilgi ve Iletişim Hizm. A.Ş. (“Koç Sistem”) 126 82OpetPetrolcülükA.Ş. (“OpetPetrolcülük”) 7 7Setur Servis Turistik A.Ş. (“Setur”) 60 15Other 13 50

Total due to related parties 2.549 4.936

(‘) 264 TL is related to (oan incentive bonus. (December 31, 2014: TL 638)

(45)

<Convenience translatton of fınancial statements originaliy Issued in Turklsh - see Section 3, Note 2)



V. Transactions with related parties (continued)

e. Payments made ta board of directors and key management personnel:


Payments made to board of directorsand key management personnel 2.900 2.450

t. Puchase of tangible and intangible assets from related parties:


- Other Related Parties:Koç Sistem Bilgi ve Iletişim Hizm. A.Ş. (“Koç Sistem”) 202 103

Total purchase of tangible and intangible as5etsfrom related parties 202 103

g. Subventions received from related parties:


Ford Otomotiv Sanayi AŞ.Ç ord Otosan”) 60.773 31.439Otokoç Otomotiv Ticaret ve Sanayi A.Ş. (“Otokoç”) 1.080 392Koç Universiiy 71 76Other

- 4961.924 31.956

Total subventions received from related parties

Subventions received trom related parties represent the subvention income collected during the pehodwith regards to the Ioans opened in that period. The subvention income is deferred and recognised asan adjustment of the effective interest rate of Ioans

h. Interest income 1 expenses, derivative and foreign exchange gains 1 losses with relatedparties (net>


_____ _____

2015 2014- Other Related Paflies:Yapı Kredi Bank Nederland NV (“Yapı Kredi Netherland”) 1.816Yapı ve Kredi Bankası A.Ş. (“Yapı Kredi Bankası”) 29.563 23.017

Total interest incomelexpenses and foreignexchange gains I(losses) with retated parties (net> 29.563 24.833

(46)

(Convenlence translatlon of financial statements originaliy 55usd in Turkish . see Sectıon 3, Note 2)




1. Other Purchases from Related Parties


_____________

2015 2014- ParentCompanies:Koç Holding A.Ş. (KoçHoldingfl)(*) 2.271 4020Zer Merkezi Hizmetler ve Ticaret A.Ş. (“Zer Ticaret”) 937 921- Other Related Parties:Otokoç Otomotiv Ticaret ve Sanayi A.Ş. (“Otokoç”) 2.159 2.558Koç Sistem Bilgi ve iletişim Hizm. A.Ş. (‘Koç Sistem”) 1.388 1.138Vehbi Koç Vakfı 250 300Yapı Kredi Sigorta A.Ş. (“Yapı Kredi Sigorta”)

- 370Setur Servis Turistik A.Ş. (“Setur”) 750 263OpetPetrolcülükA.Ş. (“OpetFetrolcülük”) 157 184Eltek Elektrik Enerjisi ithalat ihracat ve Toptan Ticaret A.Ş.

(“Eltek”) 73 131Tanı Pazarlama ve iletişim Hizmetleri A.Ş. (“Tanı”)

-

Other- other related party 178 143

Total other purchases from related parties 8.163 10.028(*) st includes remuneration of expenses, occurred related to companies provided services in care ofKoç Holding A.Ş. including personnel and senior management expenses in acknowledgement ofservices such as finance, law, tax and senior management giyen to companies in the companystructure of our main partner Koç Holding AŞ, which are billed to our Company as a result of itsdistribution in the framework of “1 1-lntra-group SeMces” of General Communique numbered 1 onDistribution of Hidden Income through Transfer Pricing.

j. Bank and Commision Expenses to Related Parties:


Yapı ve Kredi Bankası A.Ş. (“Yapı Kredi Bankası”) 5 34Ford Otomotiv Sanayi A.Ş. 3.616 2.181

Total bank and commission expenses to related parties 3.621 2.215

k. Derivative (income)/expense of related parties:


Yapı ve Kredi Bankası A.Ş. (“Yapı Kredi Bankası”) 3490 -

Total derivative (income)/expense of related parties 3.490 -

(47)

(Convenience translatlon of financial statements originaliy issued in Turklsh - see Section 3, Note 2>




1. Rent expense to related partles:

Vi. Subsequent events

None.

December 31, becember 31,2015 2014

1.405 1.342Koç FamlIyTemel Ticaret ve Yatırım A.Ş. 40 -

Total Rent expense to related parties 1.445 1.342

m. Brokerage services obtained from related parties


Yapı Kredi Yatırım Menkul Değerler A.Ş.Ç’Yapı Kredi Menkul”> 441 331

Total Brokerage services obtained from related parties 441 331

(48)

(Convenience translation of financial statements originaliy issued in Turkish - see Section 3, Note 2>



Section Five

Information on financial structure

1. Nature and level of risks arising from financial instruments

The Company’s activities expose it ta a variety of financial risks and those activities involve the analysis,evaluation, acceptance and management of some degree of risks or combination of risks. TheCompany’s objective of asset and liability management and use of financial instruments is therefore toachieve an appropriate balance between risk and return and to limit the Company’s exposure ta Iiquidityrisk, interest rate risk and foreign exchange risk, while ensuring that the Company is using its capital tamaximise net interest income,

Campany risk management is carried out with the policies approved by the Board of Directors. TheBoard provides written principles for overali risk management, as welI as written policies coveringspecific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative fınancialinstruments.

1.1 Credit Risk

Financial instruments contain an element of risk that the counterparties may be unable to meet theterms of the agreements. The Company’s exposure to credit risk is concentrated in Turkey. This risk ismonitored by reference to evaluation of credit risk ratings of consumers and managed by limiting theaggregate risk to any individual counterparty. The Company has in place certain credit evaluation,disbursement and monitoring procedures, and those control procedures are supported by seniormanagement. The credit risk is generally diversified due to the large number of individuals comprisingthe consumer bases. A total provisian of TL 73.810 (December 31, 2014: TL 66387) was accountedagainst uncollectibility of loans giyen.

Exposure ta credit risk is managed through regular anaiysis of the abiüty of borrowers and potentialborrowers to meet interest and capital repayment obligations and by changing these lending limitswhere appropriate. Exposure to credit risk is also managed in part by obtaining collateral andcorporate and persanal guarantees.

The rules and applications to obtain a strong, high quality, productive and sustainably growing creditportfolio forms the Company’s credit policies.

The Company monitors the performance of oan consumers on continuous basis using advanced riskanaiysis tools suah as vihtağ curves, ğŞ5ğ iyi İid EIiöd İoss calculations. Loans past dueare followed up by the Legal Follow-Up Department.

Credit risk is a party’s risk of being subject to a fınancial Ioss due to a counterpary’s inability to fulfıll itsobligation related to financial instruments. The Company is trying ta manage its credit risk throughlimiting transactions to certain parties and through evaluating of reliability of the parties continuously.The Company’s policy 5 that ali the customers are subject to credit screening procedures andnecessary guarantees are obtained, Consumer financing oan balances are monitored on an ongoingbasis in order to ensure that the Company’s exposure ta bad debts is not significant.

lntensity of credit risk occurs if several companies are susceptible to be affected from an economicalor political change in the same way as others due ta fact that they are operating in similar industries orare situated in similar locations. The concentratian of credit risk reveals sensitivity of the Company todevelopments which effects certain industry or geographical area.

The Company does not have any sector-speciflc concentration. The Company guarantees Ioans tareal persons and legal persons which are residents in Turkey.

As of December 31 2015 and 2014, the maximum exposure of the Company ta credit risk is disclosedin Notes 1-3, 1-6, 1-7 and 1-8.

(49)

(Convenience translatlon of financial statements originaliy issued in Turklsh - sea Section 3, Note 2>



1. Nature and level of risks arising from financial instruments (continued).

The details of the loans past due but not impaired which are classified under the performing loans asof December 31, 2015 and 2014 are as follows:

_____

December 31, 2015Durable Mortgate and

Motor Consumption HousingLoans Good Loans Colleteral Loans Total

Loans past due but not impaired 26.532 2.629 261 29.422Fairvalue of collateral 26.532- 261 26.793

__________

December 31, 2014

________

Durable Mortgate andMotor Consumption HousingLoans Good Loans Colleteral Loans Total

Loanspastduebutnotimpaired 8.155 110 156 8.421Fairvalueotcollateral 8.155 3 156 8.314

Bad debt restructuring is not common procedure during the collection and pre legal process howeverthe payment plan can be rescheduled duhng legal follow up considedng the consumer payment ability,under authority of legal follow-up department

Impairment and politics of impairment provision

The total impairment provision for loans is TL 73.810 (December 31. 2014: TL 66.387) of which TL41.784 (December 31, 2014: TL 22.392) represents the specific provision and the remaining amountof TL 32.026 (December 31, 2014: TL 43.995) represents the general reserve.

The Company’s provision policy is based on the provisions of Regulation on the Accounting Practicesand Financial Statements of Financial Leasing, Factoreing and Financing Companies published in theOfflcjal Gazette dated December 24, 2013 and numbered 28861.

The details of the loans impaired which are ciassifled under the non- performing loans are as follows:

December 31, December3l,2015 2014

Impaired loans 87.476 59.250Fairvalueofcollaterai 47.665 32.137

1.2 Market risk:

The Company considers foreign currency risk and interest rate risk as the most important constituentsof market risk. Currency and interest rate risks are analysed both on portfolio and product basis.

(50)

(Convenlence translation of financial statements originaliy issued in Turkish - see Section 3, Note 2)



1. Nature and level of risks arising from financial instruments (continued)

1.3 Foreign currency risk

Foreign exchange exposure is the result of the mismatch of foreign currency denominated assets andbabiflties. This risk is managed by using foreign exchange forwards and foreign exchange deposits.The Company also manages its foreign currency risk by using derivative financial instruments in orderto keep the open foreign exchange exposure at a certain evel.

Foreign currency indexed Ioans are included in the net balance sheet foreign currency positioncalcuation but not presented as foreign currency asset in the frame of the financial statements of theCompany as of December 31, 2015 and 2014.

The tables below summarize the Company’s assets and Jiabilities in original currency amounts and thecorresponding TL value as of December 31, 2015 and 2014:


Assetsr) 155.278 85.977Liabilities (420.085) (237.494)

Net foreign currency posiüon in the balance sheet (264.807) (151.517)

Derivative financial instruments 264,637 153.186

Net foreign currency position (170> 1.669

() Foreign currency indexed assets are induded.

As of December 31, 2015, assets and Iiabilities denominated in foreign currency were translated intoTL using foreign exchange rates of 1 USD = TL 2,9076 and 1 Euro= TL 3,1776 (2014: 1 USD = TL2,31 89 and 1 Euro = TL 2.8207).

December3l, 2015 December3l, 2014USD EUR USD EURAss eta:

- Banks 27.912 38.856 17,095 4.921- Foreign currency indexed Ioans 9.872 78.638 9.305 54.658- Foreign currency indexed Ioans

under folow-up (). -

-

- (2)

__________

37.784 117.494 26.400 59.577Liabilities:- Short-term bank borrowings

- - - -- Short-term portion ofong-term borrowings 145.816 183.984 81.161 30,746

- Accrued interest payable 5.488 5.119 2.325 1.233Long term borrowings 14.538 65.140 90,437 31.592

165.842 254.243 173.923 63.571

Net foreign currency position in thebalancesheet -

.

,. {1ıŞJ t14LŞ410ff balance sheet:- Derivative financial instruments 129.608 135.029 153.166 -

Net foreign currency position 1.550 (1.720> 5.663 (3.993)(*) Foreign currency indexed Ioanş under follow-up are included in the net foreign currency position tableabove, however they are ignored in the caiculation of net income effect of sensitivity since they are notsubject to foreign exchange valuation.

(51)

(Convenlence translation of financial statements originaliy Issued in Turkish - see Sectlon 3, Note 2)


Notes to fınancial statements as of December 31, 2015 (continued>(Currency —Turkish Lira (Thousand TL) unless otherwise stated)


As of December 31, 2015; had TL weakened/strengthened by 16% against USO, with ali othervariables held constant, pre-tax income for the period would have decreased /increased by TL 155(December 31, 2014: wouid have decreased/increased TL 566) as a result of foreign exchangegainsilosses of borrowings, cash and cash equivalents and foreign currency indexed Ioans.

As of December 31, 2015; had TL strengthened / weakened by 10% against Euro, with ali othervariables heid constant, income before tax for the period wouid have decreased Iincreased by TL 172(December 31, 2014: would have decreased/increased TL 393) as a result of foreign exchangegains/losses of borrowings, cash and cash equivaients and foreign currency indexed loans.

1.4 interest rate risk

The Company is exposed to interest rate risk through the impact of rate ohanges on interest-sensitiveassets and iiabilities. in Turkey, the interest rates are volatile. Therefore, interest rate risk is the keycomponent of the Company’s asset and iiability management. Interest rate risk is managed on a portfoliobasis by using natural hedges that arişe from oftsetting interest rate sensitive assets and habilities.Special emphasis is giyen ta providing a balance between the duration of assets and habilities. Durationand gap anaiyses are the main methods used ta manage such risks.

The Company is funding its long term fıxed rate oan portfoho by obtaining long term floating rateforeign currency funds from international markets. With funds obtained from international markets, TheCompany creates long term foreign currency liquidity and converts ta TL liquidity by implementing longterm swap transactions in this way, The company generates funding source for long-term fixed-rate TLioans and hedges interest and currency risks.

The table below summarises ilie eftective average interest rates as % for financial insfruments by majorcurrencies outstanding as of December 31, 2015 and 2014:

December 31, 2015 December 31, 2014USD Euro TL USO Euro TL

AssetsCash and cash equivaients 0,15 0,25 9,52 0,42 0,37 -

Loans and advances giyen to consumers- Automotive loans 5,60 ŞŞŞ 145 5,44 5,88rn 13.32- DÜi5I consü?htiöii ğoods

Loans- - 20,34 - - 17,19

- Mortgage loans. . 13,29 - - 13,43

LiabiiitiesBank borrowings 3,15 263 12,45 3,16 3,42 9,56Securitles issued

- - 9,04 - - 8,53

As of December 31, 2015 the Company has na floating interest rate assets and floating interest ratehabilities are composed of borrowings. The Company hedged most of the borrowings by cr055 currencyswaps.

(52)

(Canvenience translatlon of financial statements originaliy issued in Turklsh - see Sectian 3, Note 2)




1.5 Liquidity risk

Prudent iquidity risk management inoludes maintaining sufficient cash and marketable securities, theavailability of funding from an adequate amount of committed credit facilities and the ability ta olaseout market pasitions. Ta ensure prafessianal cash flaw management, the Company’s Financedepartment regulariy prepares cash flaw statements and carries out cash llaw farecasts.

The follawing table belaw presents the cash flaws payable by the Campany far its on balance sheetIiabilities by remaining cantractual maturities as of the balance sheet date. The amounts disclased inthe table are the contractual undiscounted cash flaws, and the Company manages inherent Iiquidityrisk based on expected undiscounted cash inflaws,

Up ta 14 6-12 OverDecember 31, 2015 1 month months months 1 year Total

Borrowings received 232895 591.381 723.436 961059 2.508.771Bilis and bcnds issued 4.738 192.751 142.987 131.252 471.728

Tatal Liabllities(based on cantractual maturlty dates) 237.633 784.132 866.423 1.092.311 2.980.499

Upto 1-6 6-12 OverDecember3l, 2014 1 manth months months 1 year Total

Borrowings received 102.852 275.615 508.836 844.688 1.731.991Bilis and bonds issued 106.259 69.807 125.657 326974 628.696

Total Liabililles(based an contractual maturity dates) 209.111 345.422 634.493 1.171.662 2.360.687

Derivative instmments

Up ta 1-6 6-12 OverDecember 31, 2015 1 manth months months 1 year Tatal

Derivative instruments — Buying 33.750 120.330 108.193 38.992 301.265Derivative ınstruments -Selling (30.620) <106.735) (99756) (46.718) (283.829)

Tatal Iiabilities(based an contractuai maturiwdates) t130 13595 s.437 (7.726) 17.436

Upta 14 6-12 OverDecember 31, 2014 1 month months ınonths 1 year Total

Derivative instruments — Buying - - 60,343 92.643 153.186Derivative instruments -Selling-

- <61.818> <98.873) (160.691)

Total ilabiiities<based on contractual maturity dates) -

- (1.475) (6.030) (7.505)

Expected re-pricing and maturity dates da not differ fram the contract dates excluding barrowings,therefore na additional table is included which summahse the Companys assets and Iiabilities incarrying amounts classified in terms of periads remaining ta cantractual re-pricing dates.

(53)

(Convenience translatlon of financial statements originaliy issued in Turkish - sea Section 3, Nota 2>




1.6 Capital risk management:

The Company’s objectives when managing capital are ta safeguard the Campany’s ability to cantinueas a gaing concern in order ta provide returns for shareholders and beneflts for other stakehalders andta maintain an optimal capital structure ta reduce the cast of capital.

in order ta maintain or adjust the capital structure, the Campany may adjust the amount of dividendspaid ta shareholders, return capital ta sharehaiders, issue new shares ar seli assets ta reduce debt.

The Company manitars capital an the basis af the gearing ratia. This ratio is caiculated as net debtdivided by totai capital. Net debt is calcuiated as totai barrowings (including barrowings and bandsissued, as shown in the baiance sheet) Iess cash and cash equivaients. Tatai capital is caiculated asequity, as shawn in the baiance sheet. plus net debt.

The gearing ratias as af December 31, 2015 and 2014 are as fallaws:


Tatal liabilities 2.722.555 2.142.983Less: Banks (1-3) (132.084) (44.012)

Net habilities 2.590.471 2.098.971Tatai sharehalders’ equity () 223.099 157843

Liabiiity 1 shareholders’ eguity ratio 11.61 13,30

() Published in the Offlcial Gazette dated June 26, 2016 Nr. 29398 Regulation on principles forestabiishment and aperations af financial leasing, factoring and financingcampanies and 1,25% af general pravisians for laans accepted as equity element. Accardingiyta this regulatian general provions for iaans added ta eguity.

1.7 Fairvaiue of financial instruments

Fair value is the price that wouid be received ta seli an assey or paid ta transfer a iiabiiity in anorderiy transaction between market participants at the measurement date.

The estimated fair values af fınanciai instruments have been determined by the Campany usingavailable market infarmatian and apprapriate valuation methadatogies. However, judgement isnecessariiy required ta interpret market data ta estimate the fair vaiue. Accardingiy, the estimatespresented herein are not necessariiy indicative of the amaunts the Campany cauld reahse in a currentmarket exchange.

The follawing methads and assumptians were used ta estimate the <air value af the financialinstruments.

1.7.1 Financiai assets

Baiances denominated in foreign currencies are translated as af year-end exchange rates. They areconsidered to appraximate their respective carrying values.

The fair vaiues af cedain fınanciai assets carried at cast, inciuding cash and due from banks pius therespective accrued interest and ather fınanciai assets are cansidered ta approximate their respectivecarrying values due ta their shart-term nature.

The <air values af financing bana are explained in Section 4, nate 1-6.

(54)

(Convenience translation of financial statements originaliy issued in Turkish - see Section 3, Nota 2)




1.7.2 Financial Iiabilities

The fair values of bank borrowings are calculated based on discounted cash flows by using theexisting market rates (Seotion 4, note 1-1).

1.8 Fairvalue measurements

The Company ciassifles the fair value measurement of each class of financial instruments according tothe source, using the three-level hierarchy, as follows;

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: lnputs other than quoted prices included within Level 1 that ara observable for theasset or Jiability, either directly (that is, as prices) or indirectly (that is, derived fromprices).

Level 3: lnputs for the asset or liabiJity that is not based on observable market data (that is,unobservable inputs).

December3l, 2015 Level 1 Level 2 Level 3

Cash l1ow hedge 36.112 - 36.112 -

December3l, 2014 Level 1 Level 2 Level 3

Cash flow hedge 7.474 - 7.474

As of December 31, 2015, the Company has not made transfer between second level and first level,and also between third level and other leveis.

2. Disclosure of other matters

2.1 Compatibility with ratio limits

Aöööidihğ tö İ2th arficle oflTeguiaflon on Ehe Estabhshment and Operations of Factoring, Leasingand Consumer Finance Companies” which was published in the Offıcial Gazette dated April 24, 2013and numbered 28627, total volume of Shareholder’s Equity is not allowed to exceed 3% of the totalassets.


Shareholder’s equityfl 223.099 157.843Total Assets 3.047.591 2.400.001

%7,3 %6,6

(*) Published in the Official Gazette dated June 26. 2016 Nt. 29398 Regulation on principles forestablishment and operations of financial leasing, factoring and financingcompanies and 1,25% of general provisions for Ioans accepted as equity element. Accordinglyto this regulation general provions for Ioans added to equity.

As of December 31, 2015, there is no breach in financial statements for the related ratio requirement.

(55)