annual report 2016 - index bilgisayar annual report eng 2016.pdf · 2016 anna reort i t sour ce of...

INDEKS BİLGİSAYAR SİSTEMLERİ MÜHENDİSLİK SAN. ve TİC. A.Ș

2016

ANNUALREPORT

I T S o u r c e o f T u r k e y

2016 ANNUAL REPORTI T S o u r c e o f Tu r k e y


CONTENTSPRESIDENT’S MESSAGE FROM THE BOARD OF DIRECTORS

COMPANY

1.1 Brief and Historical Background of the Company1.2 Capital and Shareholding Structure 1.3 Board of Directors

SECTOR OF OPERATION2.1 IT Sector2.2 PC Market2.3 Turkish IT Consumables Market

OPERATION

3.1 Structure of Product Supply and Distribution3.2 Logistic3.3 Invoicing and Collection3.4 Technical Support and Customer Service3.5 Marketing and Sales

INDEPENDENT AUDIT REPORT

SUBSIDIARIES

FINANCIAL TABLES AND NOTES

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6-19

20-24

30-33

34-35

26-29

36-97

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2

4

5

3

6

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Distinguished Investors, Our Business Partners and Employees,

Our year 2016 is a very difficult year for our country. After a year of government change, which we hoped would start by focusing on economic reforms after 2015, which was completed with elections, a treacherous coup attempt followed by a constitutional amendment and a political amendment that came on the agenda was a year in the forefront. Despite these conditions, the relatively good start-up economy shrank 1.8% in the third quarter after growing 4.5% in the first half.

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In the fourth quarter of the year, growth was 3.2%, closing the year with 2.9% growth. The unemployment rate was 10.9 percent in 2016, up 0.6 percentage points from the previous year. The number of unemployed has increased by 273 thousand to 3 million 330 thousand compared to the previous year. Unemployment rate has seen its highest level since 2010. As for the inflation figures; Last year at TÜFE was 8.53 percent. The annual increase in the UFE was 9.94 percent.

Unfortunately, the rate of growth continues to remain low as the world economy enters a new turn. According to the OECD, growth rate of 2.9% in 2016 is expected to rise to 3.3% in 2017.

According to the IMF figures, growth in 2017 is expected to rise to 3.4%. Looking at these rates, it is still below the growth rate of 4-4.5% before the global crisis. The acceleration of growth in some developed countries, particularly in the US, has positively affected growth expectancies.

In short, I would like to inform you about our company’s activities in the year 2016.

At the beginning of 2016, we changed our software and technology infrastructure and increased our net sales and net profits by contributing to investments in information technology, telecom and logistics sectors. Despite the difficult year in terms of the sector, we continued our growth targets by taking the power of the computer, mobile and peripheral product groups behind us.

• According to the end-2016 results, we increased net sales revenues by 12% from 3 billion 385 million TL to 3 billion 794 million TL.

• We increased our gross profit from TL 153 million to TL 156 million by 2015.

• The ratio of operating expenses to net sales was 1.81% in 2015 and 1.68% in 2016.

• In 2015, we increased our net profit to TL 52 million by increasing our net profit by 16% to TL 44.9 million.

In 2017, we will also accelerate the in-group digital conversion projects this year in order to further strengthen our leadership in the sector.

For this purpose, we have determined the steps to be taken in the Index Group, the teams to be established and the processes to be carried out.

With this digital transformation that we have launched within the company, we will not only strengthen our leadership position in Turkey with new business models that we will pass through this year in communication, business unit and human resources, digital business processes, e-sales and e-marketing fields. We will build the base.

I would like to thank our stakeholders, our business partners, managers and employees, who have been able to sustain our achievements with this opportunity and who have been carrying us forward and forwards for years. 2017/05/24

Best regards,

EROL BİLECİK

Chairman of the Board

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PANY

2016 ANNUAL REPORT

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1.1 Highlights:

• İndeksBilgisayarSistemleriMühendislikSanayiveTicaretA.Ş.,whichwasfoundedin1989tooperateinthecomputerfield,hasbecameacompanydistributingabout200worldwidebrandsandcooperatingwithover7.500businesspartners,holdingtheleadershippositionofthesectorforalongtime.ItispubliclytradingatIstanbulStockExchangesince2004.

• İndeks acting as a holding company has 6 affiliates and subsidiaries, each of whichoperatesindifferentfieldsoftechnologyproducts.Thefollowingcompaniesareincludedintheconsolidatedfinancialstatementsofİndeks.Theproductgroupsofsuchcompaniesareshowninthefollowingtable:

Majordistributorshipsundertakenbymainproductgroupsareshownbelow:

Product Groups by CompanyINDEKS DATAGATE ARTIM TEKLOS Indeks FZE Datagate FZE

PC Smart Phone Computer Logistic and Transportation

PC Telecom

Notebooks Sim Card Software NotebooksPrinters GSM Line Computer Spare

PartsServers

Servers TabletPeripherals AccessoriesSoftware Physical TL Credit (For

prepaid phones)

Major distributorships by main product groups

PC OEMPrinters &

PeripheralsSoftware Smart Devices

Storage & Medium Size

SystemsAcer WD APC Adobe Airties HPApple AOC Canon IBM Apple IBMAsus Asus Epson Microsoft Canon WDDell Intel Fujitsu Oracle LG SeagateFujitsu Kingstone HP Symantec ViewsonicHP LG IBM SamsungIBM Seagate Oki SonyLenovo

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Changes in the Share Price throughout the Year:

İNDEKSinISE:HavingheldanIPOinJune2004,ourcompany’ssharesaretradedinIstanbulStockExchange(ISE)nationalmarketunderthecodeof“INDES”.TheISE-100indexopenedat71.727in2016,closedat78.139on31.12.2016withtheincreaseof9%.

TheUSD/TRLexchangerateopenedat2,9181atthebeginningoftheyear,hadsomefluc-tuationsduringtheyearandclosedtheyearat3,52USDapprecitedby21%withintheyear.

Theyear-endvalueof1sharewasTRL8,28,whereasitsvaluewas5,73atthebeginningoftheyear.Accordingtotheclosingvalueonthelasttransactiondayoftheyear,thevalueofourCompanyisTRL463.680.000.

1.2. Capital and Shareholding Structure:

ShareholdingstructureofourCompanyisasfollows:

TheupperlimitofauthorizedcapitalofourCompanywasdeterminedasTRL75.000.000anditssharecapitalissuedasof31.12.2009isTRL56.000.000.Coveringtheallmaximumaut-horizedcapital,i.e.TRL75.000.000,fromtheprofitof2006,anapplicationismadetoCapitalMarketsBoard(CBM)ofTurkeyforissuingshareswithnominalvalueofTRL1.000.000forthecapitalincreasefromTRL55.000.000toTRL56.000.000andtheapplicationwasapprovedwiththeresolutionofCBMwithno.25/699of28.06.2007.Thecapitalincreasewasregisteredon10.07.2007andannouncedontheTurkishTradeRegisterGazettewithno.6852of16July2007.Ourcompany’scapitalofTRL56.000.000iscomposedofGroupAregisteredsharesinvalueofTRL318,18andGroupBbearersharesTRL55.999.681,82.GroupAshareholdersareauthorisedtodeterminehalfplusoneoftheboardmembersandtoreceive5%ofthere-maining profit after the first issue reserve funds and first dividend

Data on Financial Structure:

Shareholder's Name Country Shares %Number of

SharesAmount of

SharesNevres Erol Bilecik Turkey 36,26% 20.306.266 20.306.266Alfanor 13131 AS Norvey 26,08% 14.604.887 14.604.887Halka Açık Turkey 35,29% 19.761.392 19.761.392Other Turkey 2,37 % 1.327.455 1.327.455TOTAL 56.000.000 56.000.000

Liquidity Ratios 31.12.2016 31.12.2015Current Ratio 1,14 1,13Liquidty Ratio 0,99 0,95

Operating Ratios (*) 31.12.2016 31.12.2015Receivebles Turnover 58 62Payables Turnover 62 67Inventory Turnover 18 21

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1.3 Board of Directors, Auditing Board, Auditing Committee and Corporate Governance Committee

Board Members

IntheGeneralAssemblyheldon16.05.2016,MembersoftheBoardofDirectorswereelectedfor duration of three years, and their duties andpowerswere determinedpursuant to theCompany’s Articles of Association and the relevant provisions of the Turkish CommercialCode. Resolutions of theGeneral Assemblywere published in the Turkish Trade RegisterGazettewithno.9087of01June2016.

Members of the Auditing Committee

Corporate Governance Committee

(*) The figures in quarterly financial accounts have been taken into consideration in the calculation of the averages

Profitability Ratios 31.12.2016 31.12.2015Gross Profit Margin 4,1% 4,5%Operating Profit Margin 2,1% 2,7%Net Profit Margin 1,4% 1,3%Profit Before Tax Margin 2% 2,0%

Financial Structure Ratios 31.12.2016 31.12.2015Shareholders’ Equity/Total Liabilities& Shareholders’ Equity 16% 15%Short Term Liabilities/Total Liabilities& Shareholders’ Equity 84% 80%Long Term Liabilities/Total Liabilities& Shareholders’ Equity 0% 5%Financial Debts/Total Liabilities 16% 27%

Name & Surname Title Term of OfficeNevres Erol Bilecik Chairman 3 YearsSalih Baş Vice Chairman 3 YearsAtilla Kayalıoğlu Board Member 3 YearsAyşe İnci Bilecik Board Member 3 YearsHalil Duman Board Member 3 YearsTomasz Janusz Czechowicz Board Member 3 YearsUlrich Kottmann Board Member 3 YearsBerrin Önder Independent Board Member 3 YearsSedat Sami Ömeroğlu Independent Board Member 3 Years

Name & Surname TitleBerrin Önder Chairman of the CommitteeSedat Sami Ömeroğlu Committee Member

Name & Surname TitleBerrin Önder Chairman of the CommitteeUlrich Kottmann Committee MemberNaim Saraç Committee MemberTuba Bilecik Committee Member

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Early Risk Detection Committee

1.5. Board of DirectorsThe Board of Directors of the company consists of five members. Curriculum Vitae of the Board Members are given below.

Nevres Erol Bilecik, Chairman of the Board of Directors: Erol Bilecik was born in 1962 and graduated from Istanbul Technical University, Department of Computer Engineering. Erol Bilecik, who established İndeks A.Ş. in 1989, acts as the chairman of the following subsidiaries of Index, besides our company: Despec Bilgisayar Pazarlama ve Ticaret A.Ş., Datagate Bilgisayar Malzemeleri Ticaret A.Ş., Neteks İletişim Ürünleri Dağıtım A.Ş., Neotech Teknolojik Ürünler Dağıtım A.Ş., Desbil Teknolojik Ürünler Ticaret AŞ., Homend Elektrikli Cihazlar San. Ve Ticaret AŞ., İnfin Bilgisayar Ticaret A.Ş. and Teklos Teknoloji Lojistik Hizmetleri AŞ. Moreover, between the years 2002 and 2005, he presided TUBISAD (Turkish Informatics Industry Association) established in 1974, the oldest civil society organisation in the ICT sector, members of which are companies realising 95% of the total transaction volume of the Turkish ICT sector. Erol Bilecik is married with two children and speaks English.

Salih Baş, Deputy Chairman: Salih Baş was born in 1965, and graduated from Anadolu

University, Department of Business Administration. He has been working for Index Group since 1990. In 2003, while he was acting as the Assistant General Manager - Finance & Accounting for İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.Ş., he was appointed as the General Manager and Vice Chairman of the Board of Directors of Datagate Bilgisayar Malzemeleri Ticaret A.Ş.. He curren acts as the Deputy Chairman for the companies, İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret AŞ., Teklos Teknoloji Lojistik Hizmetleri AŞ., Homend Elektrikli Cihazlar San. Ve Ticaret AŞ., İnfin Bilgisayar Ticaret A.Ş. and Desbil Teknolojik Ürünler Ticaret A.Ş., and as one of the members of the Board of Directors for the companies Despec Bilgisayar Pazarlama ve Ticaret AŞ., Neotech Teknolojik Ürünler Dağıtım A.Ş. and Neteks İletişim Ürünleri Dağıtım A.Ş. Salih Baş is married with one child and speaks English.

Atilla Kayalıoğlu, General Manager, Board Member: Atilla Kayalıoğlu was born in 1952, and graduated from Boğaziçi University, Department of Mechanical Engineering in 1974; following that he received a masters degree from Syracuse University, Department of Industrial Engineering. He carried out several duties in IBM Turk between the years 1980-1999; and in 1999, when he was the Global Services Manager he left IBM Turk and joined Index. Kayalıoğlu acts as a Board Member and General Manager of İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.Ş.; he also acts as a Board Member of the companies of Neteks İletişim Ürünleri Dağıtım A.Ş., Datagate Bilgisayar Malzemeleri Ticaret AŞ., İnfin Bilgisayar Ticaret A.Ş. and Teklos Teknoloji Lojistik Hizmetleri AŞ.. Atilla Kayalıoğlu is married with two children and speaks English.

Ayşe İnci Bilecik, Board Member, Computer Engineer: Ayşe İnci Bilecik was born in 1964 and

Name & Surname GöreviBerrin Önder Chairman of the Committee (Independent Member)Salih Baş MemberUlrich Kottmann Member

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graduated from Istanbul Technical University, Department of Computer Engineering. She also acts as a Board Member of Desbil Teknolojik Ürünler Ticaret A.Ş., being a subsidiary of Index.

Being one of the founding partners of İndeks Bilgisayar founded in 1989, Ayşe İnci Bilecik used to work as an engineer specialized in software in the ICT sector for long years. Ayşe İnci Bilecik is married with two children and speaks English.

Halil Duman, Board Member: Halil Duman was born in 1965, and graduated from Marmara University, Department of Business Administration. He carried out several duties in Yücelen İnşaat A.Ş. between the years 1987 and 2000; and in 2000, when he was the Manager of Finance, he left Yücelen İnşaat and joined Index as Finance Director. Duman acts as a member of the Board of Directors of İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.Ş., and also acts as a Board Member of Datagate Bilgisayar Malzemeleri Ticaret AŞ., Neteks İletişim Ürünleri Dağıtım AŞ., Teklos Teknoloji Lojistik Hizmetleri AŞ., Neotech Teknolojik Ürünler Dağıtım AŞ., Despec Bilgisayar Pazarlama ve Ticaret AŞ., Desbil Teknolojik Ürünler Ticaret A.Ş. Homend Elektrikli Cihazlar San. ve Ticaret AŞ., İnfin Bilgisayar Ticaret A.Ş. ve Alkım Bilgisayar AŞ, and acts as Assistant General Manager - Finance of İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.Ş. Halil Duman is married with two children.

Berrin Önder, She was born in Kayseri, in 1967. After graduation from Kayseri Collage, she graduated from Middle East Technical University, Industrial Engineering Department. She has done her MBA in State University of West Georgia. She started her Professional career in Türkpetrol Holding A.Ş.. Later, she worked for Garanti Investment Bank in Corporate Finance Department, as country manager for Caspian Investment Bank, as General Manager for Raymond James Yatırım Mnekul Değerler A.Ş. and Ak Yatırım Menkul Değerler A.Ş., as country manager for Clairmont Gobal Turkey. Since 2010, she is acting as shareholder and Board Member for Logos Asset Management. She was specialised in fund development, Investment Banking and Real Estate development. She holds 3rd level Capital Market Board License. She is member of High Advisory Committee in Daruşşafaka Union. She is also Board Member in Kayseri Charity Union. Since 2015, she is our Independent Board Member.

Sedat Sami Ömeroğlu, He was born in İstanbul, in 1956. He graduated from Yıldız Technical University in 1982, Department of Electric Engineering. As Electric-Electronic Engineer, he became one of the first engineers who dealth with Computer since 1980. After graduation, he worked for two technology companies as technical service engineer and executive manager. In 1995, he established his own company namely Endüstriyel ve Bilimsel Test Teknolojileri, Ar-Ge ve İleri Otomasyon Mühendisliği San. ve Tic. A.Ş. (shortly E3TAM) that operate in artificial vision and forward automation engineering in the basic of computer based test and control systems. E3TAM as the pilot in usage of computers in the industry for control purposes, has the title of the first SME company that conducts research in artificial vision, robot vision technologies besides execution of many industrial and scientific projects in both domestically and internationally. He was one of the founders in Industrial Automation Industrialists Association – ENOSAD that conducts practices in Industrial Automation field in 2004. Sedat Sami Ömeroğlu is the 4th term president of ENOSAD since May 2011. He is married and has a daughter.

Tomasz Janusz Gzechowicz, Board Member: A graduate of Wroclaw University of Technology, Warsaw School of Economics and Executive MBA at the University of Minnesota. In the years 1990-1998 Co-founder and CEO of JTT Computer SA, which he build into a leading Central European PC-assembly and distribution operations with USD 100M+ revenue. From May 1998 Founder and Managing Partner of MCI Group. After acquisition of funding throw IPO on the Warsaw Stock Exchange in 2001 the value of MCI’s investment portfolio grew from USD 8M to more than USD 350M. MCI Group specializes in alternative assets management with a focus

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on private equity investments across Central Eastern Europe, DACH countries, CIS countries and Turkey in following sectors: TMT, e-commerce, fintech, big data, IT/consumer electronics, financial Services. Tomasz Czechowicz is a laureate of numerous prestigious awards: The TOP Manager of the Year 2007 prize for Mr. Tomasz

Czechowicz is unexceptionable proof that his successfully accomplished strategy within the MCI Group makes him one of the most effective managers of innovative economy in the region of New Europe. Already in 2001, his exceptional feeling for the market, pofessionalism, vision and business efficacy caused the World Economic Forum to award Mr. Tomasz Czechowicz with the title of Global Leader for Tomorrow. In 2000 chosen one of the TOP-10 most influential people in the European Internet by European Edition of Business Week.

Ulrich Kottmann, graduated in a combined study in “Engineering and Business Administration” from the University of Applied Sciences Esslingen, Germany in 1983. He started his professional career 1983 – 1986 in the Finance department of Computervision Produktion GmbH. From 1986 to 1996 at Compaq Computer EMEA HQ in Munich in various management functions in Finance, Controlling and Strategic Planning for a geographic region with revenues of approx. 500 Mio US$. Management member of the Business Development Group of Compaq and actively involved in pioneering various market entries, the roll-out of over 15 subsidiaries in Europe, Africa and the Middle East and managing fast and high growth business expansion. From the early 90’s Management member of the Group to develop the business in Central Eastern Europe. From 1996 to 2000 freelance consultant mainly working on Business Development and Strategy projects for various international IT vendors in Central Eastern Europe. In 2000 foundation of Process4E S.A. (together with MCI Management S.A.) in Warsaw and managing the company until March 2008. In 2005 the company was successfully sold to update software AG (Located in Vienna and listed on Frankfurt Stock Exchange). Activities included various high profile strategy projects within the IT industry, project management for over 100 countries during the Post Merger Integration Phase of two NASDAQ listed Global IT companies, development of consulting services related to business process management and implementation of enterprise class CRM software. Since March 2009 a member and since Jan 2010 Chairman of the Supervisory Board of ABC Data S.A. (listed on Warsaw Stock Exchange) a leading Distributor of IT and Consumer Electronics in Poland and Central Eastern Europe.

1.5 Historical Background İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.Ş. was founded on 10.07.1989 to operate in the computer sector. The Company was transformed into a joint stock company in April 2000. The headquarters of the Company, in which Greece-based Pouliadis Group participated in August 2000, is in Istanbul. The Company operates in the Information Technologies (“IT”) sector and deals with the purchase, sales, technical and software support of computers, computer supplies and data transmission equipment.

The Company made a distributorship agreement with 3M, being an American company operating in Turkey, for 3M magnetic medium products in 1989. The Company increased its market share in the 3M magnetic products market from 1,2% to 55% in one year. It achieved a turnover of 875 thousand USD with only a staff of 6 in 1989. In the next year, in 1990, it made a turnover of 1.380 thousand USD with a staff of 19. It ranked 82nd among the Turkish IT companies in 1990.

In 1991 it made a contract with the Italian company named Olivetti to act as the “Authorised Seller” of Olivetti PC products. In the same year, it increased the number of staff to 36 and

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made a turnover of 2.188 thousand USD in 1991. It ranked 45th, rising 37 steps in the ranking of the Turkish IT companies.

The Company set up Ankara branch as its first branch in 1992 and started more permanent activities in the Central Anatolia Region. In 1992 the number of its staff increased to 49 and its turnover to 3.7 million USD. It ranked 30th, rising 15 steps in the ranking of the Turkish IT companies, in 1992.

It climbed to the rank of 20th among the Turkish IT companies with its turnover of 9.2 million USD and staff of 56 in 1993.

In 1994, it has become the Turkish Distributor of HP consumables, APC Uninterrupted Power Supplies and Siemens Nixdorf PC products. Then, it became the 19th biggest IT company of the Turkish market. In 1994 it achieved a turnover of 11.3 million USD with its staff of 61.

It founded its İzmir branch in April 1995 and signed “Business Partner” contract with IBM in May. Just in the second half of the same year, i.e. at the end of 1995, it was granted “IBM PC Business Partner Award” by IBM due to its achievements as a business partner. With its significant ‘channel’ activities in the same year, İndeks won “The Most Active Distributor Award” of INTERPRO, which is considered valuable by the sector. It achieved a turnover of 15.9 million USD with its staff of 62 in 1995. Thereafter, it has become the 16th biggest IT Company in the sector.

In 1989 IBM changed the distribution model in PC sales organization and adopted the “distributorship” model. Thus, İNDEKS has become the first Turkish company that made a distributorship contract with IBM. It made 4.127 units of IBM PC in 8 days in April of the same year, which was first in the market. By the end of year, İndeks reached the turnover of 38.7 million USD with a staff of 70 and ranked 9th by climbing 7 steps more in the ranking of the Turkish IT companies. It was deserved to receive the tiTRLe of “The Most Active Computer Company” once more in 1996, just like in 1995

In 1991 it made a contract with the Italian company named Olivetti to act as the “Authorised Seller” of Olivetti PC products. In the same year, it increased the number of staff to 36 and made a turnover of 2.188 thousand USD in 1991. It ranked 45th, rising 37 steps in the ranking of the Turkish IT companies.

The Company set up Ankara branch as its first branch in 1992 and started more permanent activities in the Central Anatolia Region. In 1992 the number of its staff increased to 49 and its turnover to 3.7 million USD. It ranked 30th, rising 15 steps in the ranking of the Turkish IT companies, in 1992.

It climbed to the rank of 20th among the Turkish IT companies with its turnover of 9.2 million USD and staff of 56 in 1993.

1994 In 1994, it has become the Turkish Distributor of HP consumables, APC Uninterrupted Power Supplies and Siemens Nixdorf PC products. Then, it became the 19th biggest IT company of the Turkish market. In 1994 it achieved a turnover of 11.3 million USD with its staff of 61.

It founded its İzmir branch in April 1995 and signed “Business Partner” contract with IBM in May. Just in the second half of the same year, i.e. at the end of 1995, it was granted “IBM PC Business Partner Award” by IBM due to its achievements as a business partner. With its significant ‘channel’ activities in the same year, İndeks won “The Most Active Distributor Award” of INTERPRO, which is considered valuable by the sector. It achieved a turnover of 15.9 million USD with its staff of 62 in 1995. Thereafter, it has become the 16th biggest IT Company in the sector.

In 1996, IBM changed the distribution model in PC sales organization and adopted the “distributorship” model. Thus, İNDEKS has become the first Turkish company that made a distributorship contract with IBM. It made 4.127 units of IBM PC in 8 days in April of the same year, which was first in the market.

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By the end of year, İndeks reached the turnover of 38.7 million USD with a staff of 70 and ranked 9th by climbing 7 steps more in the ranking of the Turkish IT companies. It was deserved to receive the tiTRLe of “The Most Active Computer Company” once more in 1996, just like in 1995.

In 1997, İndeks has become the 8th biggest IT Company in Turkey, with a turnover of 58.6 million USD and a staff of 75.

The Company made a distributorship agreement for Lotus & IBM Software products, thereby starting distribution of software in 1998. In the same year, it made a distributorship agreement with HP A.Ş. for distribution of hardware products. In the same year, it made a new agreement with IBM and became the distributor of AS/400, being one of the most important value-added products of Turkey. Towards the end of that year, İndeks made a distributorship agreement with Kingston. In 1998, the Company won “The Most Active IT Company Award” again after 1995 and 1996 and became the only IT company that achieved to win the same award third times. In November 1998, the “Supplies Department” of İndeks Bilgisayar was reorganised as an independent company and became “DESPEC Türkiye” with a joint investment with Von Dorp Despec Group, which was the “Number 1” in its field in Europe. With its turnover of 89.4 million USD with a staff of 131 in 1998, İndeks climbed another 2 steps in the ranking of Turkish IT ranking and became the 6th Biggest Turkish IT Company.

In 1999, İndeks made distributorship agreements with many significant products such as Cisco, Microsoft, Xerox, IBM Pos and Escort; and its “logistics centre” started operations in June of the same year. “İndeks Logistics Centre”, which is situated on an area of 2,500 sqm and equipped with highly functional technology, was one of the most important investments of İndeks in canal. The Company reached the turnover of 111 million USD with a staff of 155 in 1999.

On 12 April 2000, the company transformed from a Limited Liability Company into a Joint Stock Company. In August 2000, Pouliadis and Associate Societe Anonyme Industrial and Commercial of High Technology Systems S.A. (‘Pouliadis S.A.’) acquired 50% of İNDEKS Bilgisayar which thereby became a company with foreign shareholder. In the same year, İndeks made an agreement for distributorship of Epson products and added Epson products to its increasingly growing range of products. İndeks Bilgisayar achieved a turnover of 163 million USD by the end of 2000.

In 2001, the Company made a distributorship agreement with COMPAQ. With this agreement, İNDEKS blazed a trail being the only distributor dealing with IBM, HP and COMPAQ PC products. In the same year, İndeks also made distributorship agreements for Novel, Sony and Microsoft OEM products. The Company continued its investments in spite of the economic crisis in 2001 and in March of the same year, it acquired 50.5% of Datagate Bilgisayar Malzemeleri Ticaret AŞ. (DATAGATE), which is a leading company in Computer parts/OEM sector, thereby boosting the morale of the sector. In the same period, it acquired 70% of Neteks İletişim Ürünleri Dağıtım A.Ş. (NETEKS) , which is one of the highly experienced distribution companies in network, and continued its growth in spite of the crisis. In the Turkey Top 500 ICT Companies Ranking performed by Interpro Medya A.Ş. in 2001, our company ranked 1st in the category of “IT Hardware Incomes”, 2nd in the category of “Turkish IT Companies” and 11th in the general ranging of the ICT Sector.

In 2002, Oki printers and Toshiba notebook and server products were included in the İndeks range of products.

In July 2002, all companies of the group relocated to its current three-storey building with an indoor area of 10.000 sqm in the address of Cendere Yolu, No: 23 Kağıthane. The turnover of the Company in 2002 was 189 million USD.

Products with Fujitsu Siemens and Nec brands were added to the product portfolio of the Company in 2003. Further, the share of İndeks in DATAGATE, of which 50.5% shares were acquired by İndeks in

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2001, thereby being an affiliate of the Company, was increased to 85%. The consolidated turnover of the Company was realized as 323 million USD as of the end of 2003.

15.34% of the İndeks Bilgisayar shares was offered to public on ISE via a capital increase through rights issue after restricting the execution of pre-emptive rights of existing shareholders, on 24.06.2004. The Company made distributorship contracts with Kingmax and Asus for memory and barebone products, respectively, in 2004 and started to distribute such products. In the same year, İndeks Bilgisayar A.Ş. was awarded ISO 9001:2000 certificate.

On 02.02.2005, in accordance with the resolution of the Board of Directors dated 02.02.2005, İndeks acquired 80% of Neotech Teknolojik Ürünler Dağıtım Anonim Şirketi for wholesale trade of consumer electronics and communication products as a new field of operation of the Company. In March 2005, the Registered Capital System was adopted, and its maximum registered capital was approved as TRL 75.000.000. In May 2005, the issued capital of İndeks was increased from TRL 17.600.000 to 45.000.000. In September 2005, the Company made an exclusive distributorship agreement with TPV Technology Limited, which manufactures 19,5% of the monitors in the global market and has realised a turnover of 4 billion USD in 2004, for distribution of AOC branded LCD, CRT Monitor, Plasma Monitor and LCD TV products in Turkey. According to the Top 500 Turkish ICT Companies report issued by Interpro on 27.05.2005 for 2004, our Company ranked 1st in the categories of Notebooks, Desktop PCs, Print Systems, Servers, Data Backup and Storage Units, Office Software and OEM and 8th in the turnover-based general ranking of Turkey, in which Turk Telekom ranked 1st. With these results, İndeks Bilgisayar achieved to be the only local computer company in the Top Ten.

In February 2006, 30.30% of the shares of the second biggest company of the group and a subsidiary of İndeks Bilgisayar, namely Datagate Bilgisayar Malzemeleri Ticaret A.Ş., was offered to public in February 2006. of was offered to public on ISE via a capital increase through rights issue after restricting the execution of pre-emptive rights of existing shareholders. Began to be traded on ISE on 10.02.2006 Thus, 2 companies of the group have been offered to public and begun to be traded on ISE. Partnership share of İndeks Bilgisayar decreased from 85% to 59.2% with the public offering of Datagate. The issued capital of İndeks Bilgisayar was increased from TRL 45.000.000 to TRL 55.000.000 in May 2006. TRL 8.718.703 out of the amount of increase, i.e. TRL 10.000.000, is covered from the profit of the period of 2005 and the remaining TRL 1.281.297 from extraordinary reserves. İndeks has executed one of the most important and greatest investments in ICT sector by purchasing Karadeniz Orme A.S., which is founded on a 39.761 m2 land and having 18.969 m2 indoor area, in order to be used as a logistics centre. The trade name of Karadeniz Orme AS has been changed into Teklos Teknoloji Lojistik Hizmetler A.Ş. and its field of activity has been customized to be able to work on the logistics services. The head office of the company moved to its new location on 26.10.2006. EVOS (Effective Efficient Operational Result-Oriented) ERP System developed by İndeks A.Ş. in 2006 was started to be used by İndeks Group Companies on 01.01.2007. EVOS Project was developed by the Software Engineers Group of İndeks A.Ş. within a period of 9 months. Our Company and its subsidiaries included in the consolidated financial statements made distributorship agreements with Canon for printer, fax and scanner products, with Western Digital Corporation for hard disk products, with Panasonic for consumer electronics, with Viewsonic for monitor products and with Sony Vaio for notebook products. According to the 2005 Turkey Top 500 ICT Companies report issued Interpro in 2006, İndeks Bilgisayar, with its turnover of 758.634 (thousand TRL), again ranked 1st in the category of companies selling only computers, like in 2004. With this result, the Company kept its special place as the only local computer company in the Top Ten. Moreover, it was ranked the biggest company in the category of markets with respect to the incomes from Server, Print Systems, OEM, Operating System, Office Software and E-Trade sales.

16


İndeks Bilgisayar and its subsidiaries made distributorship contracts with Philips for monitors and PC peripherals, Asus for notebook products, Apple IMC for Apple brand products, Trend Micro for software products for internet security and viruses, Nokia for E-series products, LG Electronics for notebook products in 2007. The issued capital of the Company was increased from TRL 55.000.000 to TRL 56.000.000 in July 2007. The amount of increase, i.e. TRL 1.000.000, is covered from the profit of the period of 2006.

On 24.07.2007, İndeks Bilgisayar and its subsidiary Datagate Bilgisayar A.Ş sold 50% of their shares in Neteks İletişim Ürünleri Dağıtım A.Ş., an affiliate of İndeks Bilgisayar, to Westcon Group Eurepean Operation Limited, one of the leading global companies in its field. Of the 50% shares sold, 26% and 24% were provided by İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret A.Ş and Datagate Bilgisayar Malzemeleri Ticaret A.Ş., respectively. Following such sale, Neteks become a JV of which shares are held by İndeks Bilgisayar A.Ş. and Westcon Group on 50%-50% basis. It was the first time that with this agreement, Westcon Group made an investment in Turkey under a partnership; until then, it was operating only with its fully owned subsidiaries in 19 countries around the world.

According to the 2007 Turkey Top 500 ICT Companies Ranking performed by Interpro Medya A.Ş., our company ranked seventh, one step higher than the previous year, in the general ranking based on turnover achieved in 2006 among the companies including telephone operators and mobile phone sellers. On the other hand, it ranked first with its sales income of 901.778 (thousand TRL), like the previous years, in the category of companies selling only computers. Further, it ranked first in nine ICT categories. The categories in which İndeks Bilgisayar ranked first are the Portable computer wholesale trader and distributor, Data backup and storage hardware, Server, Print systems wholesale trader and distributor, Data communication hardware, OEM products, Operating system, Office software wholesale trader and distributor and E-trade.

In 2008, İndeks Bilgisayar made a distributorship agreement with LG, which is one of the most valuable brands of the world, for notebooks, consumer products and monitors and with Asustek for Asus branded server products. In the same year, Neotech, being a subsidiary of İndeks Bilgisayar, and Datagate were appointed as the distributors of Wacom and Belkin products, respectively. Our Company ranked sixth, one step higher than the previous year, in the general ranking based on sales made in 2007 among the first 500 ICT companies including telephone operators and mobile phone sellers in Turkey. On the other hand, our Company ranked 1st with a sales revenue of TRL 1.022.919 thousand TRL, like the previous years, in the category of companies selling only computers. Further, it ranked first in eight ICT categories.

In 2009, İndeks Bilgisayar made distributorship agreements with Iomega and Dell and a supply contract with Best Buy. The contracts made by Neotech A.Ş., a subsidiary of İndeks Bilgisayar, for Apple and Airties products were transferred to İndeks Bilgisayar as a result of the segment adjustments in this year. In the same period, Neteks, a 50% affiliate of İndeks Bilgisayar, made distributorship agreements with Juniper, IBM ISS and Avaya. On the other hand, Datagate A.Ş. made a distributorship agreement with Fujitsu Siemens. İndeks Bilgisayar ranked 7th among the Turkey Top 500 ICT Companies with its sales income of 927.893 thousand TRL in the turnover-based general ranking as determined by Interpromedya A.Ş. In the analysis of the general ranking results, İndeks Bilgisayar ranked 1st, as the previous years, among the companies dealing with computer trade only. Further, it ranked first in six ICT categories. Further, Datagate Bilgisayar Malzemeleri Tic. A.Ş., which is a 59% subsidiary of İndeks Bilgisayar, ranked first in the category of “OEM (computer parts)” incomes and Neteks İletişim Dağıtım Ürünleri A.Ş., which is a 50% subsidiary of İndeks Bilgisayar, ranked first in the category of “Data Communication Hardware”.

In 2010, our logistic company called Teklos A.Ş. achieved the contract of Turkish Telecom for storage and distribution of the products which will be provided to the customers of Turkish Telecom. İndeks

17


Bilgisayar ranked 7th among the Turkey Top 500 ICT Companies with its sales income of TRL 1.087.422 in the turnover-based general ranking as determined by Interpromedya A.Ş. In the analysis of the general ranking results, İndeks Bilgisayar ranked 1st, as the previous years, among the companies dealing with computer trade only. Further, it ranked first in six different ICT categories. These are Personal computer, Mobile, Printing systems, data back up and storage, monitor, operating systems and B2B E-Trade. Further, Datagate Bilgisayar Malzemeleri Tic. A.Ş., which is a 59% subsidiary of İndeks Bilgisayar, ranked first in the category of “OEM (computer parts)” incomes and Neteks İletişim Dağıtım Ürünleri A.Ş., which is a 50% subsidiary of İndeks Bilgisayar, ranked first in the category of “Data Communication Hardware”. Furthermore, Indeks has started negotiations with Canon Eurasia Ltd for the distribution of cameras, video camcorders products and their accessories in Turkey as Canon is one of the biggest producer of these types of products in the world. Our subsidiary, Neteks A.Ş achieved the distributor of the year award organized by Cisco Systems in 2009. Indeks achieved the most efficient business partner award which was organized by Lenovo in China in 2009. In addition, Indeks has been awarded the distributor of the year organized by IBM Turk Ltd in Istanbul.

In 2011, in parallel to our business plans and targets, our company acquired % 51 of Artım Bilişim Çözüm ve Dağıtım A.Ş. that provides distribution of value added solutions and supplies spare parts in IT sector. For this transaction, 780.000 USD was invested.

Our subsidiary Neotech Teknolojik Ürünler Dağıtım A.Ş. signed an agreement with Canon Eurasia Ltd to distribute Canon branded cameras & video cameras and accessories in Turkey.

In the meeting (business partners of the year) held on 02.02.2011 and organized by IBM, the year of 2010 was reviewed. Our company has been awarded as the “Distributor of 2010”.

In the meeting organized by Hewlett Packard Turkey in Istanbul, our company has been awarded as having the biggest business volume in PSG (personal systems group) product group in Distributor Category between 4 distributors by considering parameters such as revenue made in this product group, superior logistic services given, creating success in the sales of all HP branded products in Turkey.

İndeks Bilgisayar ranked 7th among the Turkey Top 500 ICT Companies in the turnover-based general ranking as determined by Interpromedya A.Ş. Prize was given to our company on 27.06.2011, Monday evening in İstanbul Technical University’s Maslak Campus.

Our subsidiary Neotech Teknolojik Ürünler Dağıtım A.Ş. signed an agreement with HTC Corporation to distribute HTC branded smart phones, Tablet PC and accessories in Turkey.

Our company was appointed as the only distributor of Office 365 products by Microsoft Turkey and Europe together. These products include specifications of e-mail, Microsoft Office, combined messaging and file sharing…etc.

In 2012, Our company established a company called Indeks International FZE in Sharjah Airport Internaonal Free Zone in UAE to operate mainly in Middle East and Africa in IT. Our company in is %100 owner of Indeks International FZE with paid up capital amount of 150.000 AED. The procedure regarding the establishment was completed on 09.05.2012.

Our company purchased %55 of Alkım Bilgisayar Sanayi ve Ticaret A.Ş that provides after sales services for leading IT brands of the World in the accordance with our long term strategic targets and business plans regarding increase of profitability. 3.000.000 USD was paid for this transaction. As it was established in 1996, it provides value added service, maintenance, fixing services of many brands firstly Hewlett Packard. The company provides guarantee included and excluded solutions with the service points located in Istanbul, Ankara, İzmir.

18


İndeks Bilgisayar ranked 8th among the Turkey Top 500 ICT Companies with its sales income of 1.513.546 (000 TRL) in the turnover-based general ranking in 2011 as determined by Interpromedya A.Ş. In the analysis of the general ranking results, İndeks Bilgisayar ranked 1st, as the previous years, among the companies dealing with computer trade only. Besides, it was ranked 1st company in software and hardware distributor. Further, it ranked first in six different ICT categories. These are data back up and storage, server, Tablet and mobile pc, Tablet and mobile pc distribution and B2B E-Trade. Further, Neteks İletişim Dağıtım Ürünleri A.Ş., which is a 50% subsidiary of İndeks Bilgisayar, ranked first in the category of “Network and Data Communication Hardware”.

İndeks Bilgisayar Sistemleri Mühendislik ve Ticaret A.Ş signed a contract with Apple Europe Ltd to distribute iPad, Mac, iPod and its accessories in Turkey. We predict that Apple Brand will be very strategic value for our company’s future as this brand made revolution in IT and Telecom World with its designed, produced technology and products particularly in end user line. Our company targets to distribute Apple Products in 81 cities in Turkey with more than 8000 dealer channels. By adding these high consumer demanded products to our product portfolio, it will make huge contribution to our growth. The amount of the revenue will be approximately 250 million TRL in our company’s revenue. Apple Inc. and its subsidiaries design, produce and market mobile communication and media appliances, personal computer and mobile digital music player. Besides, for those products, it produces and sales software, service, peripherals, network solutions, digital contents and application belonges third parties. Its products and services includes iPhone, iPad, Mac, iPod, Apple TV, consumer and professional software applications portfolio, ios, Mac OS X operating systems, , iCloud and many accessories, services and support solutions. Besides, the company sales digital contents and applications with channel of iTunes Store, App Store, iBookstore and Mac App Store. Apple was established in 1977 and its headoffice is in California, USA.

Indeks has been awarded on 20.12.2012 the distributor of the year regarding Finish Goods licence category organized by Microsoft Turkey in Istanbul. This award was given in revenue, growth, number of dealers made purchasing from the distributor, efficiency categories.

Our Chairman Nevres Erol Bilecik was authorized by our Directors’ Board to conduct issues such the sales, revenue or construction area sharing base agreements with construction companies or land development, construction licence for the land at the address of Şişli province Ayazağa Mah. Cendere yolu No: 9 that is owned by our 99,99 % our subsidiary Teklos Teknoloji Lojistik Hizmetleri A.Ş and where Teklos Teknoloji Lojistik Hizmetleri A.Ş manages inventory and logistic facilities for Index Group. In addition, as our company’s head office located in this area and its inventory and logistic management is done in this location, making plans to move, for this aim, purchasing new real estates, developing projects on these real estates, licence and construction operations.

Our company’s 55 % subsidiary Alkım Bilgisayar Sanayi ve Ticaret A.Ş was sold and transfered as whole with purchasing amount of 3.000.000 USD to Feridun Sabah whom our company used to purchase from previosly.

In 2013, Our company signed a distribution contract with Canon which is one of the biggest photocopy and printer producers. Our company signed final agreement with Seba construction company to develop the land which was previously announced to stock market. According to this agreement, our company expects 88,5 million USD including VAT from the sale of the project which will be developed on our land by Seba construction company. Our company signed an agreement with Euler Hermes Insurance Company to insure its receivables on April 2013. This is valid for 2 years. İndeks Bilgisayar ranked 9th among the Turkey Top 500 ICT Companies with its sales income of 1.412.201

(000 TRL) in the turnover-based general ranking in 2012 as determined by Interpromedya A.Ş. In the analysis of the general ranking results, İndeks Bilgisayar ranked 1st, as the previous years, among

19


the companies dealing with computer trade only. Besides, it was ranked 1st company in software and hardware distributor. Further, it ranked first in four different ICT categories. Our company signed an agreement with Apple for the distribution of Apple iphone products which will make significant contribution to our growth.

In 2014, Our subsidiary Neteks achieved Cisco Award for its superior performance in distribution in 2013.

In addition, our subsidiary Datagate signed distribution agreement with AVEA GSM Operator to distirbute Telecom products to southern region of Turkey.

Our company Indeks signed an agreement with Lenovo to distribute Lenevo Smart Phones to non Telco channel in Turkey. Our yearly sales expectartion is 100 mio TRL from this dsitribution contract.

İndeks Bilgisayar Sistemleri Mühendislik ve Ticaret A.Ş signed a contract with ACER, AOC and Fujitsu to distribute desktop, laptop, monitör, server, data storage and peripherals in Turkey

In 2015, Our subsidiary Neteks achieved Cisco Award for its superior performance in distribution in 2015. Also, Our company signed distribution agreement with Apple to distirbute Apple Watch products in Turkey. Indeks achieved award of the best distribütör by largest volume.

In 2016, Our subsidiary Neteks has been awarded as the Distributor of the Year in 2016. Our Subsidiary Artım Bilişim A.Ş. achieved Sun Oracle Central Asia Distribution Contract.

02 -

SEC

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2016 ANNUAL REPORT

21


2.1 IT Sector

2.1.1 Turkish IT SectorTheusageofcomputersinTurkeystartedintheendofthe1980’s.Althoughtherewasaveryrapiddevelopmentinthesectorbetweentheyearsof1990and1995,usageofcomputerswerelimitedtomostlyfinancialsector,governmentalunits,bigbusinessesanduniversities.Inthesecondhalfofthe1990’s,theincreaseintheusageofcomputersmadetheITsectoroneofthemostrapidlygrowingsectorsinTurkey.

On theother hand, if the share of the end-users in themarket ismonitored in theperiodbetween1995and2009,itwouldbeclearlyseenthatthemarketstructurehaschangedcon-siderably

Changes in the Market Share of End Users

It is estimated that the rate of the number of PC in operating status to the total population has increasedfrom8%to27%intheperiodbetween1995andendof2010,andthattherateoftheinternetuserstothetotalpopulationhasincreasedfrom10%to37%inthesameperiod.ThisindicatesthatPCownershipandinternetusageratesincreasedover3timesinthelast15years.PCownershipandinternetusagerateshaveincreasedby67%and40%,respectivelyinthelast5years.ComparingtothecountrydatapublishedbyITUabove,itisclearthatTurkeyisfarbelowthedevelopedcountrieswithrespecttothePCownershipandinternetusersrateand that there is a long distance to be covered in this field. The PC and internet penetration in Turkeybetween2005and2018Fhasdevelopedasshowninthefollowinggraphics.

2014

16%

9%

12%

15%

48%

2015

16%

8%

11%

15%

50%

2016

15%

8%

11%

16%

50%

2017 T

18%

7%

9%

15%

51%

2013

18%

9%

13%

14%

46%

1995

38%

30%

20%

5%

7%

2012

17%

11%

14%

14%

44%

2011

18%

11%

15%

14%

42%

2010

17%

13%

16%

14%

40%

2009

18%

14%

16%

14%

38%

2000

25%

35%

23%

7%

10%

2005

22%

25%

25%

10%

18%

Public Sector

Finance Sector

Private Sector (Corporate)

SMEs

Individual User

1995

2000

2005

2009

2010

2011

2012

2013

2014 16% 9% 12% 15% 48%

2015

2016 T

2017 T

16%

17%

7%

7%

10%

10%

15%

16%

50%

50%

18% 7% 9% 15% 51%

18% 9% 14% 46%

17%

7%

7%

11% 14% 14% 44%

18% 11% 15% 14% 42%

17% 13% 16% 14% 40%

18% 14% 16% 14% 38%

38% 30% 20% 5%

22%

25% 35% 23%

25% 25% 10%

10%

18%

13%

Source:IndexGroup2016

22


Trends in Internet & PC Penetrations

According to the results of “Households IT UsageResearch” published by the TurkishStatisticalInstitute(TÜİK)inApril2017statedwithbelowchart.

Theagegroupinwhichtherateofcomputerandinternetusageishighestis16-24.Theseratesarehigherinmenthanwomeninallagegroups.Byeducationallevel,thepopulationwhousethecomputerandinternetmostaregraduatesoffirstdegreeandhighereducationlevels.

According to the report results,PCusage rateshavenot increasedand internetusageincreasedby4%,respectivelyintheperiodbetween2015and2016.

Comparison of computer and internet usage (%) (2015-2016)

80%

70%

60%

50%

40%

30%

20%

10%

0%

25%

2005 2011 2012 2013 2014 2015 2016 T 2017 T

44%

52%58% 60%

65%68%

75%

2005 2011 2012 2013 2014 2015 2016 T 2017 T

15%

34%40%

46%50%

53%57%

60%70%

60%

50%

40%

30%

20%

10%

0%

Internet Penetration PC / Tablet Penetration

Source:IndexGroup

ComputerUsage Rate Change

InternetUsage Rate Change

2015 2016 % 2015 2016 %

Computer and Internet Users Türkiye54,8 54,9 0% 55,9 61,2 9%

In the last tree months(January-March 2012)

Türkiye 46,5 44,8 -4% 51,6 58,3 13%

Between three months and one year Türkiye3,4 3,4 -1% 2,1 1,1 -48%

Over one year Türkiye4,9 6,7 38% 2,2 1,7 -22%

Never used Türkiye45,2 45,1 0% 44,1 44,1 -12%

Source:TUIK2015,2016

2005-2017Fhasdevelopedasshowninthefollowinggraphics.

23


Computer and internet usage

2.2.1.1 PC Market:

The hardware sub-group consisting of Desktop PCs, portable PCs (“Laptop PCs”,“Notebooks”),ServersandPeripheralsismonitoredviathesalesdatainPCmarketwhichrepresentaverysignificantportionof the totalsales.Accordingly, totalsalesof thePCmarketwererealizedas2,823,121in2014,whereassuchtotalnumber(bothnotebookanddesktop)decreasedto1.836.747unitswithanshrinkageof35%in2015.Totalnumberofbothnotebookanddesktopsoldwas1.971.384unitsby%6increase.

However,whenthesalesinthePCmarketareconsideredbyquantityexcludingtheservermarket,itisnoticedthatportablePCshavegainedmajorityinthismarketforthefirsttimein2009.Beginningfromtheyear2004,supplyingportablePCswithhighperformance,increased mobility possibility with their lighter structure and affordable prices to theconsumershasenabledsignificant increases intheirsales,andfinally,salesofportablePCshavesurpassedthoseofdesktopPCsin2009.

ThedevelopmentsatPCmarketarecloselyrelatedwiththeongoingprojectsinpublicandeducationalsectors.Thestablegrowthindemandoftheconsumersisalsoconsideredasanothersignificantfactoronthisissue.Thegrowingretailchainsandfinancialopportunitiesoffered to the consumers by these chains have been the most important driving forces for the PC sales. Besides, noticing the benefits of mobile computing systems by thecorporatecompanies isseenasanother important reason for thegrowth.At thispoint,one may clearly see from then market sales figures that the demand by the small and large enterprises seeking productivity for portable PCs as an important part of mobile data systems has increased.

Computer Usage Rate İnternet Usage Rate

56,0

58,0

60,0

62,0

50,0

52,5

54,0

2015 2016

24


Besidestheproducerswhichhaveinternationalbrands,aconsiderablepartofhardwareproductionbothinsideandoutsidethecountryisperformedwiththemaincomponentsthatareobtainedfromtheglobalcomputerpartssuppliersbybigandsmall-sizedcompanies.Overtime,thesefactorshavetransformedthehardwareproductmarketandtheespeciallyPCmarketintoalowaddedvaluestructureinwhichthecompetitionishighlysensitivetothe price.

Important Events in the IT Sector in 2016:

ImportanteventsthatoccurredintheTurkishITSectorin2016arelistedbelow:

1.Inparticular,widespreadofTabletsandSmartPhonesaffectedthesalesofmobileanddesktop PCs. 2. Robot terms.3.Cloudimplementations(GoogleDrive,Mega,Dropbox)4. 3D Printing systems5.Smartwhitegoods6.Wearabletechnologies7.Socialmediaincommunication8.IOT(InternetofThings)

Desktop

927,382552,732

Mobil PC

1,895,7391,300,685

Total

1,811,8611,853,417

20142015

689,865 1,281,519 1,971,384201525% -1% 6%Growth

Mobile PC

Desktop■ 2014 ■ 2015 ■ 2016

33%33% 30% 35%

67% 70% 65%

Ana Formlar İtibari ile Türkiye PC Pazarı 2014-2015-2016 Turkish IT Market on Main Form Based 2014 – 2015 - 2016

25


03 -

SUB

SIDI

ARIE

S

2016 ANNUAL REPORT

27


3. Subsidiaries

ThefinancialstatementsofDatagateBilgisayarMalzemeleriA.Ş.,ArtımBilişimÇözümveDaği-tımA.Ş.andTeklosTeknolojiLojistikHizmetleriA.Ş.areconsolidatedbyfullconsolidationmet-hodandthoseofNeteksİletişimÜrünleriDağıtımA.Ş.byproportionalconsolidationmethod.ThefinancialstatementsofİnfinBilgisayarTicaretA.Ş.andNeteksDışTicaretLtdŞtiarenotincluded intheconsolidationbecausetheir lowvolumesofoperationarenot likely tobeofsignificance for the financial statements.

3.1. Datagate Bilgisayar Malzemeleri Tic. A. Ş.

• DatagatebecameadistributorofAVEAGSMOperator.Inthiscontex,itdistributessmartphoneofInternationalandlocalphoneproducers,tablet,simcards,physicalTLcredit(forprepaid phones) and accessories.

• Thepartnershipstartedwiththeacquisitionof50.5%sharesofDatagateBilgisayarMalze-meleriA.ŞbyİndeksBilgisayarA.Ş.in2001reached85.00%withanadditionalacquisitionof34.5%bythesamecompanyinNovember2003.PartnershipshareofİndeksBilgisayardecreasedto59.24%withthepublicofferingofDatagateinFebruary2006.

İIn February2006, the sharesofDatagateBilgisayarMalzemeleri Tic.A.Ş.wereoffered topublicsuccessfully,restrictingthepreferentialrightsoftheexistingshareholders,andbeguntobetradedintheNewEconomyMarketofIstanbulStockExchange.Itscapital,whichwasTRL1,550,000beforepublicoffering,hasincreasedtoTRL6,600,000followingthepublicoffering.Withthepublicoffering,thecapitalofDatagateBilgisayarMalzemeleriTic.A.Ş.wasincreasedfromTRL6.600.000toTRL10.000.000in2007,coveringTRL1.910.004fromtheprofitoftheperiodin2006andTRL1.489.996fromtheSharePremiums.In2014,registeredcapitalupperlevelwasidentifiedas40.000.000TL.In2016,paidcapitalincreasedfrom10.000.000TLto30.000.000TL.20.000.000TLcapitalsourcedfromextraordinaryreseerves(previousyears’profits).Datagateninanaürüngruplarıvemarkalarıaşağıdalistelenmektedir:

TheproductgroupsdistributedbyDatagatearebelow:

Name of SubsidiaryPercentage of

Share Issued Capital

Datagate Bilgisayar Malzemeleri A.Ş % 59,24 10.000.000 TL Neteks İletişim Ürünleri Dağ. A.Ş. % 50,00 1.100.000 TL Neteks Dış Ticaret Ltd. Şti. (*) %49,50 5.000 TLArtım Bilişim Çözüm ve Dağitım A.Ş. % 100,00 1.210.000 TLİnfin Bilgisayar Ticaret A.Ş. % 99,80 50.000 TL Teklos Teknoloji Lojistik A.Ş % 99,99 5.000.000 TL(*) Neteks Dış Ticaret Ltd. Şti is a 99% owned subsidiary of Neteks İletişim Ürünleri Dağıtım A.Ş.

DATAGATE Product GroupMobile Devices Credit (Virtual and Pyhsical TL) for prepaid phonesSim Card Tablet

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3.2. Neteks İletişim Ürünleri Dağıtım A.Ş.Netekswasestablishedtoprovidenetworkandcommunicationproductstothemarketth-roughitsretailersandbusinesspartnersasadistributorcompanyin1996.Netekshastriedtoprovidecompletenetworksolutionstobusinesspartnersbyaccommodatingthemostexpe-riencednamesintheirfieldsinTurkey.Besidesthecorporatenetworkssystemsanditscom-ponentsofthecompaniessuchasCisco,NortelNetworks,3Com,HP,JuniperandAvocent,NeteksA.S. also distributes corporate telephone switchboard systemsofNortelNetworksandAvaya,structuralcableproductsofHSC,Corning,PanduitandGünko,networksecuritysolutionsofCheckPoint,TrendMicroandIBMISS.

ThemainproductgroupsandbrandsdistributedbyNeteksarelistedbelow:

70%and24%oftheshareofNetekswereacquiredbyİndeksandDatagateA.Ş.,respecti-vely,in2001.In2007,6%ofNeteksA.Ş.’sshareswhichareheldbyothershareholderswereacquiredby IndeksA.Ş.atUS$374.000. Ourcompanykept50%ofshares for itselfandsold26%toWestconGroupEuropeanOperationLimitedatUS$1.820.000.Accordingtotheagreementsignedbetweentheparties,24%ofthesharesofNeteksİletişimÜrünleriDağıtımA.Ş.heldbyDatagateBilgisayarA.Ş,asa59,24%affiliateofİndeksBilgisayarA.Ş.andlistedinIstanbulStockExchange,weresoldtoWestconGroupEuropeanOperationLimitedatUS$1.680.000.

Ofthe50%sharessold,26%and24%wereprovidedby İndeksBilgisayarSistemleriMü-hendislikSanayiveTicaretA.ŞandDatagateBilgisayarMalzemeleriTicaretA.Ş.,respectively.İndeksBilgisayarA.Ş.andWestconGrouphavehad50-50%ofthesharesofNeteksA.Şafterthe sale of shares.

3.3. Artım Bilişim Çözüm ve Dağitım A.Ş ArtımBilişimA.Şwasestablishedin2003inIstanbultobevalueaddeddistributorforchannelbusiness partners. It intends to be the leader firm in the category that it operates for products andservices.ItcontinuesprovidingneedsofITworldwithits2branchesinAnkaraandİzmir.Since2011,itwillcontinuedeliveringitsallsolutionstoitscustomerundertheexcellenceofIndexGroup.

Product Group BrandsCorporate Network Systems Cisco System, Nortel Networks, 3Com, HP, AvocentCorporate Telephone Switchboard Systems

Nortel Networks, Avaya

Structured Cabling Solutions Corning, HCS, Panduit, GünkoNetwork Security Solutions Check Point, Trend Micro, F5, IBM ISS

29


Product Group BrandsOracle Solutions OracleSecurity & Printing Solutions Sentinel, Pcounter, Safecom Follow Me, Troy

Document Management Solutions

Form Port, Smart Printer, Welp, XPress, Nuance Smart Office Scan, Nuance Scan Flow Store, Nuance eCopy PDF Pro Office

Special SolutionsTowerTray, Stick and go, P2M, Winsert, Cluster Que, Bardimm, Fax Manager, Troy

Service Spare Parts Solutions

Hp, Sun Oracle, Dell, Fujitsu, Lenovo

OTVT Solutions Intermec

3.4. İnfin Bilgisayar Ticaret A.Ş.İnfinBilgisayarTicaretAnonimŞirketiwasestablishedin2001tohelptheretailerswiththeirsalesandexportoperationswithin the frameworkof investmentoperationsunder incentivecertificates.

Duetothefactthatitsbiggestpartofpurchaseandsalesofthecompanywasarisenoutofthecompaniesincludedinthefinancialstatements,anditsbusinessvolumewassolowthatdoesnotmakeany impactonthefinancialstatements,thiscompany is leftoutof thesaidstatements

3.5. Teklos Teknoloji Lojistik A. Ş Thiscompanywas foundedunder thenameofKaradenizÖrmeSanayiA.Ş. tooperate intextilesectoron03.01.1973.InMarch2006,İndekshasexecutedanimportantandgreatestinvestmentinITsectorbypurchasingKaradenizOrmeA.S.,whichisfoundedona39,761squaremeterslandandhaving18,969squaremetersindoorarea,inordertobeusedasalogisticsheadquarters.ThetradenameofKaradenizOrmeAShasbeenchangedintoTeklosTeknolojiLojistikHizmetlerA.Ş.anditsfieldofactivityhasbeenchangedtoaslogisticsser-vices.TeklossignedarevenuesharingagreementwithSebaConstructiontodevelopluxuryofficesontheland.Accordingtotheagreement,%40,5incomefromthesaleofdevelopedofficesprojectbelongtoTeklosandthiswillberealiseduntilmay2017.Tekloscontinueitsoperationson23.500metersquareclosedareainTuzla/Şekerpınar(Anatolianside).

TeklosTeknolojiLojistikHizmetlerA.Ş.isprovidinglogisticservicestothecompaniesopera-ting in the IT sector.

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4. OperationThe supply and distribution structure of Indeks Bilgisayar A.Ş. is shown as follows:

1. Structure of Product Supply and Distribution:

Indeks operates as a main distributor (“broadline distributor”) in IT industry. It buys IT products from suppliers at certain prices and maturity periods and subsequently sells the products to the sales channels that will sell them to the end user. The company does not plan to develop a sales structure that will include direct sales to the end user in the near future.

1.1 Suppliers:

The hardware and software suppliers of the company are grouped into two categories.

• Global brands that operate in Turkey: (APPLE, IBM, HP, LENOVO, INTEL, SEAGATE, CANON, OKI, SYMANTEC, MICROSOFT, APC, FUJITSU SIEMENS, EPSON, TOSHIBA, SONY, ASUS). As this is the nature of the busi-ness, these global companies prefer working with distributors which are less in numbers instead of handling distribution,

• Global brands that do not operate in Turkey: (KINGSTON, NEC, VIEWSONIC, WESTERN DIGITAL) These com-panies have not set up offices in Turkey yet. However, these companies conduct their imports, sales and marketing activities through the dealership of distributors.

1.2 Distribution Channel:

As a distribution company, Indeks buys the products from suppliers. Furthermore, it resells them to the sales channels which sell to the end user. The structure of distribution channels which Indeks sells to and which sell IT products to the end user in Turkey is summarised below:

1.2.1. Solution Provider Dealers Channel (System Integrators)

With respect to the number of people they employ, companies in this channel have at least 100 employees. They are among the relatively old companies in the industry. The end user these companies target is solely the big corporate customers. They have experience in the industry and have especially high service, sales and product recognition capabilities.

Supplier Supplier Supplier Supplier Supplier Supplier

İNDEKS BİLGİSAYAR A.Ş.

Regular Dealers RetailChannel

RetailChannel

RegularShops E-Commerce

END USER

Value Addes DealersChannel

SystemIntegrators

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The main target of the companies in this channel is to adapt new technologies to corporate customers.

The numbers of these companies are not more than 100 all over Turkey at the moment.

1.2.2. Value Added Dealers:

With respect to the number of people they employ, companies in this channel have 25-100 employees. These companies are more limited with respect to capital but thanks to their young and dynamic structures, they are able to make quick decisions and operate on low margins by keeping costs down. Their target group is multinational companies and corporate customers with generally one location.

Distributors support these companies with respect to finance, logistics, and product information. These companies do not have an intensive relationship with the manufacturers. The numbers of these companies are more than 500 all over Turkey.

1.2.3. Regular Dealers (Classic):

These are pretty small companies with a staff of 5 to 25. They do not have their own unique solutions. Their target is SMEs and the home market. They number at least 4.000 to 5.000 and are the biggest group in the IT industry.

These companies carry out their operations fully with distributor company resources. Their sales are more directed towards OEM products and peripherals than branded products.

1.2.4. Retail Channel

In the recent years, Retail Chains diversified and reached huge transaction volume with the reason of investments made by local chains shops and the investment also made by international chains in this category. Furthermore, Food Chain Shops and Dowry Shops increased their business volume. Majority of home market needs is provided by above mentioned chain shops in Turkey. For Indeks, there are 3 types of retail groups:

• Retail Chains: The retail chains are big groups having more than one store under the same brand such as Teknosa, Bimeks, Vatan, Media Markt, Yalçınlar, Evkur, Metro, Migros, Real, Carrefour, Tesco/ Kipa. The main function of some groups of this category is computer, while some of them such food markets and dowry shops are chains dealing with computer as a secondary business.

• Regular Computer Stores (Classic): These stores are small companies where the owner of the store and a few sales representatives work and they operate with limited resources. They are totally focused on computers.

• E-Retail: This channel is based on virtual markets which open virtual stores and operate in the internet me-dium. Due to the widespread usage of the internet in the recent years, the number of the companies operating in this channel is increasingly growing. The companies such as Hepsiburada, e-store are the examples of this type of channel.

2. Logistic

Indeks makes sales and distribution via its 323 employees and more than 7000 dealers with companies included into consolidation in its financial statements to 81 provinces of Turkey from its logistic centres in Istanbul, Ankara and Izmir.

The branch offices in Ankara and İzmir established in 1992 and 1995, respectively, operate as “district offices”. Having their own logistic, sales, accounting, finance, current accounts and customer services departments, they are responsible for sales to the dealers and development of the sales channels in their cities. Ankara office is responsible for the district Ankara, Central Anatolia and Eastern Anatolia Regions, İzmir Office for the District Izmir, Western Anatolia and Aegean Regions. The areas not included the foregoing shall be under the responsibility of the

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headquarters in Istanbul.

Indeks has executed one of the most important and greatest investments in IT sector by purchasing Karadeniz Orme A.Ş., which is founded on a 39,761 square meters land and having 18,969 square meters closed area, in order to be used as a logistics headquarters. The trade name of Karadeniz Orme A.Ş. has been changed into Teklos Tekn oloji Lojistik Hizmetler A.Ş. and its field of activity has been customized to be able to work on the logistics services. Teklos Teknoloji Lojistik Hizmetler A.Ş. is providing logistic services to the group companies and other companies in IT sector as well. The head office of the company moved to its new location on 26.10.2006.

Teklos signed a revenue sharing agreement with Seba Construction to develop luxury offices on the land. Accor-ding to the agreement, %40,5 income from the sale of developed offices project belong to Teklos and this will be realised until may 2017. Teklos continue its operations on 23.500 meter square closed area in Tuzla / Şekerpınar (Anatolian side).

Indeks has also district warehouses in Ankara and Izmir.

3. Invoicing and Collection

Indeks makes sales to almost all companies dealing with computer and IT products. This kind of dealers, which are estimated as number about 5,000 in total in Turkey, are considered Regular Dealer (Classic Dealers).

Credit Committee: Credit claims of the dealers are submitted to the Credit committee that does meetings every week on a regular basis for this purpose. These meeting are organized with headed of CFO (Assistant General Ma-nager responsible for Financial and Operational Affairs), Assistant CFO, Finance Manager, Credit & Risk Manager and Sales Managers of related customers.

4. Technical Support and Customer Service

The Company does not provide after sale service. Instead, it directs its customers to the companies of each product authorised to provide service. It is because the suppliers prefer their own solution partner to provide service to the end user.

5. Marketing and Sales

Due to the structure of the IT industry, the technologies and prices of the products that Indeks distributes are sub-ject to frequent changes and improvements. Therefore, an efficient and effective inventory management and rate of inventory turnover may make significant impact on the operational performance of companies.

Considering the dynamic structure of the industry, Indeks assigns one product manager for each group of product. The product managers have the mission of understanding the requirements of the sales groups with differing tar-gets and objectives are comprehended better and therefore, the Company provides better service to such groups, following up the market and technology trends, executing the marketing activites.

Exchange of information with customers are provided via web, e-mail and fax

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INDEPENDENT AUDIT REPORT

To The Board of Directors of İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Anonim Şirketi

Report on the Consolitated Financial Statements

We have audited the accompanying consolidated financial statements of İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Anonim Şirketi, its subsidiaries (together with “Group”) which comprise the consolidated balance sheets at December 31, 2016 and the consolidated income statement, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Consolitated Financial Statements

The Group’s management is responsible for the preparation and fair presentation of these consolidated fınancial statements in accordance with the Turkish Accounting Standards (“TAS”) published by the Public Oversight Accounting and Auditing Standards Authority (“POA”) and for such internal controls as management determines is necessary to enable the preparation of consolidated fînancial statements that are free from material misstatement, whether due to error and/or fraud.

Auditor’s Responsibility for the Consolitated Financial Statements

Our responsibility is to express an opinion on these consolitated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

Our audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolitated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolitated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolitated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying consolidated fınancial statements present fairly the fınancial position of İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Anonim Şirketi and its subsidiaries as of 31 December 2016 and its consolitated fınancial performance and consolitated cash flows for the year then ended in accordance with the Turkish Accounting / Financial Reporting Standards (“IAS / IFRS”) framework.

Other Responsibilities Arising From Regulatory Requirements

In accordance with subparagraph 4 of Article 398 of the Turkish Commercial Code (“TCC”) No:6102; auditor’s report on the early risk identification system and comitee has been submitted to the company’s Board of Directors on March 9, 2017.

In accordance with subparagraph 4 of Article 398 of the “TCC”; no significiant matter has come to our attention that causes us to believe that the Group’s bookkeeping activities for the period January 1 – December 31, 2016 is not in compliance with the code and provisions of the Group’s articles of association in relation financial reporting.

In accordance with subparagraph 4 of Article 398 of the “TCC”; the board of directors provided us the necessary explanations and submitted required documents within the contex of audit.

GÜRELİ YEMİNLİ MALİ MÜŞAVİRLİK VE BAĞIMSIZ DENETİM HİZMETLERİ A.Ş.

An Independent Member of BAKER TILLY INTERNATIONAL

Dr. Hakkı DEDECertified Public AccountantIstanbul, March 9, 2017

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İNDEKS BİLGİSAYAR SİSTEMLERİ MÜHENDİSLİK SANAYİ VE TİCARET A.Ş. CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016

BALANCE SHEET (TL)

The accompanying notes are integral parts of the financial statements.

ASSETS NotesAudited

31 December 2016Audited

31 December 2015Current Assets 1.357.649.740 1.257.203.521 Cash and Cash Equivalents 6 249.757.802 136.763.531

Financial Investments 7 - -

Trade Receivables 10 894.894.469 881.469.750

- Receivables from Related Parties 10-37 961.867 2.410.177

- Receivables from Non-related Parties 10 893.932.602 879.059.573

Other Receivables 11 500.274 682.586

- Receivables from Related Parties 11-37 56.924 346.748

- Receivables from Non-related Parties 11 443.350 335.838

Derivative Financial Instruments 12 97.733 -

Inventories 13 180.642.904 206.642.916

Prepaid Expenses 15 11.475.327 8.502.277

Assets Relating to Current Period Tax 25 - -

Other Current Assets 26 20.281.231 23.142.461

Non-Current Assets 65.008.920 129.511.471 Financial Investments 7 63.605 63.605

Trade Receivables 10 1.770.872 67.085.142

- Receivables from Related Parties 10-37 - -

- Receivables from Non-related Parties 10 1.770.872 67.085.142

Other Receivables 11 51.685 51.685

- Receivables from Related Parties 11-37 - -

- Receivables from Non-related Parties 11 51.685 51.685

Investments Evaluated by Equity Method 16 9.363.466 10.193.899

Investment Properties 17 30.423.035 30.571.138

Tangible Fixed Assets 18 5.996.417 6.840.916

Intangible Fixed Assets 19 5.260.068 5.233.861

- Goodwill 19 1.897.699 1.897.699

-Other 19 3.362.369 3.336.162

Deferred Tax Assets 35 12.079.772 9.471.225

TOTAL ASSETS 1.422.658.660 1.386.714.992

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BALANCE SHEET (TL)


LIABILITIES NotesAudited

31 December 2016Audited

31 December 2015Short-Term Liabilities 1.193.153.515 1.108.294.894 Short-Term Borrowings 8 119.641.000 58.684.728

Short-Term Portion of Long-Term Borrowing 8 74.988.612 196.577.011

Other Financial Liabilities 9 - -

Trade Payables 10 792.734.843 719.866.860

-Trade Payables to Related Parties 10-37 105.349 162.404

-Trade Payables to Non-Related Parties 10 792.629.494 719.704.456

Liabilities in the Scope of Employee Benefits 20 968.987 485.108

Other Payables 11 9.596.957 6.811.278

-Other Payables to Related Parties 11-37 - -

-Other Payables to Non-Related Parties 11 9.596.957 6.811.278

Derivative Financial Instruments 12 - 165.962

Deferred Earnings 15 145.816.022 81.772.126

Current Period Profit Tax Liability 35 7.107.091 5.598.029

Short-Term Provisions 22 42.300.003 38.333.792

-Other Short-Term Provisions 22 42.300.003 38.333.792

Other Short-Term Liabilities 26 - -

Long-Term Liabilities 6.057.481 70.580.673 Long-Term Borrowings 8 2.066.828 67.160.341

Long-Term Provisions Regarding Employee Benefits 24 3.900.772 3.293.817

Deferred Tax Liabilities 35 89.881 126.515

SHAREHOLDER’S EQUITY 223.447.664 207.839.425

Shareholders’ Equity Related to Parent Company 27 193.129.613 178.642.621

Paid-in Capital 56.000.000 56.000.000

Share Capital Adjustments 1.064.323 1.064.323

Withdrawn Shares (-) (798.565) (634.290)

Non-Reclassification to profit or loss Accumulated Other

Comprehensive Income or Expenses (592.468) (374.350)

- Defined Benefit Plans and Measurement Revaluation Gains /

Losses

Reclassification to profit or loss Accumulated Other

Comprehensive Income or Expenses

(592.468) (374.350)

- Foreign Currency Translation Differences 13.098.437 11.404.396

Restricted Reserves Assorted from Profit 17.763.662 12.605.752

Previous Years’ Profit/(Loss) 54.591.980 53.656.587

Net Profit/(Loss) for the Period 52.002.244 44.920.203

Non-Controlling Interests 30.318.051 29.196.804

TOTAL LIABILITIES 27 1.422.658.660 1.386.714.992

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COMPREHENSIVE INCOME STATEMENT (TL)


CONTINUED OPERATIONS NotesAudited

1 January 201631 December 2016

Audited1 January 2015

31 December 2015Sales 28 3.793.602.651 3.384.690.880

Cost of Sales (-) 28 (3.637.624.310) (3.231.879.393)

GROSS PROFIT 155.978.341 152.811.487

General Administrative Expenses (-) 29 (32.929.558) (30.868.074)

Marketing, Sales and Distribution Expenses(-) 29 (30.882.518) (30.272.070)

Other Operating Income 31 101.670.212 97.669.633

Other Operating Expenses (-) 31 (112.421.353) (98.408.039)

OPERATING PROFIT 81.415.124 90.932.937

Income from Investing Operations 322.268 49.929

Expenses from Investing Operations (-) 32 - -

Share in Profit / (Loss) of Investments Evaluated According to Equity Method 32 (2.305.118) (975.527)

OPERATING PROFIT/(LOSS) BEFORE FINANCIAL EXPENSES 79.432.274 90.007.339

Financial Income 33 19.685.014 17.584.771

Financial Expenses (-) 33 (24.287.314) (38.260.479)

CONTINUED OPERATIONS PROFIT BEFORE TAXATION 74.829.974 69.331.631

Continued Operations Tax Income / (Expense) (15.448.368) (14.182.218)

- Tax Income / (Expense) for the Period 35 (18.043.378) (20.447.333)

- Deferred Tax Income / (Expense) 35 2.595.010 6.265.115

Distribution of Profit / (Loss) of the Period 59.381.606 55.149.413Non-Controlling Interest 7.379.362 10.229.210Parent Company Share 52.002.244 44.920.203Earnings / (Loss) Per Share 36 0,92861150 0,80214648

OTHER COMPREHENSIVE INCOME: 1.210.904 2.005.840

Items Not To Be Reclassified in Profit / Loss (200.682) (180.375)Actuarial Gains and Losses from Retirement Plans (200.682) (180.375)

Items To Be Reclassified in Profit / Loss 1.411.586 2.186.215

Foreign Currency Exchange Differences 1.411.586 2.186.215

Distribution of Other Comprehensive Income 60.592.510 57.155.253Non-Controlling Interest 7.114.343 10.071.933

Parent Company Share 53.478.167 47.083.320

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Notes

Audited Current Period

Januray 1,2016- December31,2016

Reviewed AuditedPrevious PeriodJanuray 1,2015-

December 31,2015

CASH FLOW PROVIDED FROM OPERATIONS 295.270.839 (118.723.145)

Period Profit/(Loss) 59.381.606 55.149.413

Adjustments to reconcile net profit to net cash provided by

operating activities: 28.679.231 77.150.412

Adjustments for depreciation and amortisation expense 18-19 2.899.354 2.559.592

Adjustments for Impairment Loss (Reversal of Impairment Loss) (733.931) 3.925.033

Adjustments for Provision (Reversal of Provision) of Receivables 10 468.636 1.828.827

Adjustments for Impairment Loss (Reversal of Impairment Loss) of

Inventories13 (1.202.567) 2.096.206

Adjustments for provisions 5.215.841 11.652.160

Adjustments for (Reversal of) Provisions Related with Employee

Benefits24 1.249.630 1.120.870

Adjustments for (Reversal of) Lawsuit and/or Penalty Provisions 22 28.397 (1.002.138)

Adjustments for (Reversal of) Other Provisions 22 3.937.814 11.533.428

Adjustments for Interest (Income) Expenses 3.310.637 32.897.707

Adjustments for Interest Income 31-33 (42.753.717) (50.875.174)

Adjustments for Interest Expense 31-33 59.753.462 71.062.558

Deferred Financial Expense from Credit Purchases 10 2.477.275 (3.721.260)

Unearned Financial Income from Credit Sales 10 (16.166.383) 16.431.583

Adjustments for Tax (Income) Expenses 35 15.448.368 14.182.218

Adjustments for losses (gains) on disposal of non-current assets 32 (322.268) (49.929)

Other adjustments to reconcile profit (loss) 26 2.861.230 11.983.631

Changes in Working Capital 168.148.576 (281.951.425)

Adjustments for decrease (increase) in trade accounts receivable 10 67.587.298 (286.502.364)

Adjustments for Decrease (Increase) in Other Receivables Related with

Operations11 182.312 177.886

Adjustments for decrease (increase) in inventories 13 27.202.579 (38.454.065)

Adjustments for increase (decrease) in trade accounts payable 10 70.390.708 39.985.047

Adjustments for increase (decrease) in other operating payables 11 2.785.679 2.842.071

Increase (Decrease) in Other Payables Related with Operations 256.209.413 (149.651.600)

Payments for (Reversal of) Provisions Related with Employee Benefits 24 (893.528) (835.644)

Income taxes paid (refund), classified as operating activities 35 (16.534.316) (20.468.509)

Other inflows (outflows) of cash, classified as operating activities 56.489.270 52.232.608

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES (1.610.692) (3.811.388)

Proceeds from sales of property, plant, equipment and intangible assets 18-19 714.859 80.567

Proceeds from sales of property, plant and equipment 465.559 80.567

Proceeds from sales of intangible assets 249.300 -

Purchase of tangible and intangible assets 18-19 (2.325.551) (3.891.955)

Purchase of property, plant and equipment (1.218.749) (711.735)

Purchase of intangible assets (1.106.802) (3.180.220)

Investment Property (-) 17 - -

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (180.673.171) 147.329.173

Proceeds from borrowings 8 (125.725.640) 189.015.678

Proceeds from Loans 8 (125.725.640) 189.015.678

Dividends Paid (36.940.150) (21.239.126)

Interest Paid 32-33 (18.007.381) (20.447.379)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

BEFORE EFFECT OF EXCHANGE RATE CHANGES 112.986.976 24.794.640

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 112.986.976 24.794.640

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6 136.753.233 111.958.593

CASH AND CASH EQUIVALENTS AT END OF PERIOD 6 249.740.209 136.753.233

STATEMENT OF CASHFLOWS (TL)


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STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (TL)

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42


1. ORGANIZATION AND BUSINESS SEGMENT

İndeks Bilgisayar Sistemleri Mühendislik Sanayi ve Ticaret Anonim Şirketi was establishedin 1989and the activities of theGroupare comprisedof tradeof all kindsof “InformationTechnology”productsforthepurposeofwholesaletrading.TheCompanyisregisteredtotheCapitalMarketsBoardofTurkeysinceJune2004and15,34%oftheCompany’ssharesaretraded on Istanbul Stock Exchange.

DetailsregardingtoGroup’ssubsidiaries,whicharesubjecttoconsolidation,areasfollows:(*)(AsofDecember31,2015ThecapitalofDatagateA.Ş.isTL10.000.000andithasbeenincreasedtoTL30.000.000byinternalsourcesin2016.)

*AsofJuly29,2016,49%sharesofArtımBilişimÇözümleriAnonimŞirketiwaspurchasedanditssubsidiaryrateisincreasedfrom%51to100%.

Details regarding to Company’s joint ventures, which are subject to consolidation, are asfollows:

ThefinancialstatementsofDatagateBilgisayarMalzemeleriA.Ş.,NeotechTeknolojikÜrünlerDağ.A.Ş., Teklos Teknoloji Lojistik Hizmetleri A.Ş., Artım Bilişim Çözüm ve Dağıtım A.Ş. and İndeksInternational FZE are consolidated according to “the full consolidation method”. The financialstatementsofNeteksİletişimÜrünleriDağıtımA.Ş.isconsolidatedaccordingto“theproportionateconsolidationmethod”.

Company NameField Of

OperationsCapital

% of Direct Ownership

% of Indirect

Ownership

Datagate Bilgisayar Malzemeleri A.Ş. (Datagate )

Purchasing and Selling of Computer and Equipment

30.000.000 59,24 59,24

Neotech Teknolojik Ürünler Dağ. A.Ş. (Neotech)

Purchasing and Selling of Home Electronic Products

1.000.000 80,00 80,00

Teklos Teknoloji Lojistik Hizmetleri A.Ş. (Teklos)

Logistics 5.000.000 99,99 99,99

Artım Bilişim Çözüm ve Dağıtım A.Ş.(Artım)*

Purchasing and Selling of Spare Parts of IT Products

1.210.000 51,00 51,00

İndeks International FZE (Indeks FZE)Purchasing and Selling of Computer and Equipment

150.000 BAEDirhemi

100 100

Datagate International FZE (Datagate FZE)

Purchasing and Selling of Computer and Equipment

150.000 BAEDirhemi

- 59,24

Company NameField Of

OperationsCapital

% of Direct Ownership

% of Indirect

Ownership

Neteks İletişim Ürünleri Dağıtım A.Ş. (Neteks)

Purchasing and Selling Network

Products1.100.000 50,00 50,00

43


ThemainshareholdersoftheCompanyareNevresErolBilecik(%36,26).Theaveragenumberofemployeesfortheyear2016is325.(2015:325).Allofthepersonnelcarryoutadministrativeduties.

TheCompany’sofficialaddressregistered inTradeRegistry isMerkezMahallesiErsevenSokakNo:8/1Kağıthane,İstanbul.TheCompany’sheadofficeisinIstanbulandithasbranchesinAnkara,İzmir, Diyarbakır. The Group’s logistical operations are conducted by Teklos Teknoloji LojistikHizmetleriA.Ş.intheadressofCumhuriyetMahallesiYahyakaptanCaddesiNo:10AD:2Çayırova/KOCAELİ.

2. BASIS OF PRESENTATION

2.01 Basis of Presentation

TheGroupmaintainsitsbooksofaccountsandstatutoryfinancialstatementsinaccordancewithTurkishCommercialCodeandaccountingprinciplesdeterminedintaxlegislations.SerialII-14.1 “Communiqué On The Principles Of Financial Reporting In Capital Markets”, whichwaspublishedinOfficialGazettedated13June2013andnumbered28676,supersededtheCapitalMarketsBoard (“CMB”) “CommuniquéOnThePrinciplesOfFinancialReporting InCapitalMarkets”

TheGroup’sfinancialpositionandoperationresultsareexpressedinTurkishLira.TheinterimfinancialstatementsarepreparedinaccordancewithTurkishAccountingStandards/TurkishFinancial ReportingStandards (“TAS / TFRS”) issuedbyPublicOversight AccountingAndAuditingStandardsAuthority(“POA”)

TheGroup’sconsolidilatedfinancialstatementsbetweenthedatesof1January-31December2016areapprovedbytheboardofthedirectorsonthedateof9March2017.TheGeneralassembly and the relevant legal entities have the authority to change these consolitated financial statements

The Group’s financial statements are presented with environment in which the Group itsfunctionalcurrency that is thecurrencyof theprimaryeconomicoperates.Accordingly theGroup’sfinancialpositionandoperationresultsareexpressedinTurkishLira.

Asthedateof31December2015,thecurrencyofnon-monetaryitemsinpreparedfinancialstatementsareacceptedasUSDuntil30June2013.Thetransactionsafterthisdateaccountedas TL due to change in functional currency USD to TL.

2.02 Dealing with the Inflation Effects in Hyper-Inflationary Periods

Accordingtothedecision,datedMarch17,2005withNo:11/367,madebytheCapitalMarketBoard,theinflationaccountinghasbeennolongereffectiveasof2005andtheaccompanyingconsolidatedfinancialstatementshasnotbeenadjustedsinceJanuary1,2005.Nonmonetaryvalues,whichareintheaccompanyingconsolidatedfinancialstatements,existwithvaluedas ofDecember 31, 2004 in accordancewith International AccountingStandardsNo. 29“FinancialReportingonHyper-InflationistEconomies”.

2.03 Consolidation Principles

Subsidiariesare thecompanies,whosesharesareheldby theGroupdirectlyor indirectlythrough shares of other companies. As a result, theGroup with orwithout over 50% ofvotingright,hasthepowerandauthoritytodirectandcontrolthemanagementandpoliciesofthesubsidiarycompanieswhetherthroughtheownershipofvotingsecurities,bycontractorotherwise.

44


Balance Sheet and Income statements of the subsidiaries are consolidated according to “full consolidationmethod” and book value and capital of theGroup’s subsidiary are adjustedaccordingly.TransactionsandbalancesbetweentheGroupandSubsidiariesareeliminatedduring consolidation.

Minorityinterestsshowminorityshareholders’shareinthesubsidiaries’assetsandresultofoperations for the related period. These details are to be expressed separately in consolidated Balance Sheet and Income Statement.

If losses related to minority interest are over benefits from shares of a subsidiary and if there is noboundingliabilitytotheminorities,ingeneral,theselossesrelatedwiththeminoritiesresultagainst to benefits of the minorities.

CompaniesundercommoncontroloftheGrouparedescribedasJointManagingCompanies.TheGrouphassignificantimpactonfinancialandoperatingpoliciesofthesecompanies.

Thecurrentsharesinthesubsidiariesareasfollows:(*)(AsofDecember31,2015ThecapitalofDatagateA.Ş. isTL10.000.000and ithasbeen increased toTL30.000.000by internal

sourcesin2016)

Details regarding to Group’s joint ventures, which are subject to consolidation by equitymethod,areasfollows:

Acquisitions of businesses are accounted for using the equitymethod. The consideration

Company Name Field Of Operations Capital% of Direct Ownership

% of Indirect Ownership

Datagate Bilgisayar Malzemeleri A.Ş.Purchasing and Selling

of Computer and Equipment

30.000.000 59,24 59,24

Neotech Teknolojik Ürünler Dağ. A.Ş. Purchasing and Selling

of Home Electronic Products

1.000.000 80,00 80,00

Teklos Teknoloji Lojistik Hizmetleri A.Ş. Logistics 5.000.000 99,99 99,99

İnfin Bilgisayar Ticaret A.Ş.Purchasing and Selling


50.000 99,80 99,80

Artım Bilişim Çözüm ve Dağıtım A.Ş.Purchasing and Selling of Spare Parts of IT

Products 1.210.000 51,00 51,00

İndeks International FZE (Indeks FZE)Purchasing and Selling


150.000 BAEDirhemi

100 100

Datagate International FZE (Datagate FZE)

Purchasing and Selling of Computer and

Equipment

150.000 BAEDirhemi

- 59,24

Company Name Field Of Operations Capital% of Direct Ownership

% of Indirect Ownership

Neteks İletişim ürünleri Dağıtım A.Ş.Purchasing and Selling

Network Products1.100.000 50,00 50,00

45


transferredinabusinesscombinationismeasuredatfairvalue,whichiscalculatedasthesumoftheacquisition-datefairvaluesoftheassetstransferredbytheGroup,liabilitiesincurredbytheGrouptotheformerownersoftheacquireeandtheequityinterestsissuedbytheGroupinexchangeforcontroloftheacquiree.Acquisition-relatedcostsaregenerallyrecognizedinprofit or loss as incurred.

If theGroup’s losswhich is coming fromsubsidiaries’ loss is greater thanor equal to thegroup’stotalshareonsubsidiaries,bookvalueonsubsidiariesarezeroized(therebyincludeslong term investments) and if there is not any commitment or any payment instead of the subsidiary,insuchcases,extralossesarenotaccountedanymore.

Goodwillistheexcessofpurchasepriceoverthefairmarketvalueofacompany’sidentifiableassetsand liabilities. Goodwill is included in investment’s book value and be examined intermsofimpairmentasapartoftheinvestment.Ifdefinableassets,liabilitiesandcontingentliabilities’fairvalueisoverthepurchaseorsaleprice,theexcessisaccountedasprofitorlossfor the period directly.

ThefinancialstatementsofDatagateBilgisayarMalzemeleriA.Ş.,NeotechTeknolojikÜrünlerDağ.A.Ş.,TeklosTeknolojiLojistikHizmetleriA.Ş.,ArtımBilişimÇözümveDağıtımA.Ş.andİndeksInternationalFZEareconsolidatedforusingdirectconsolidationmethod,thefinancialstatementsofNeteksİletişimÜrünleriDağıtımA.Ş.isconsolidatedbyusingpartialconsolidationmethod

Affiliate companies’ balance sheets and income statment are consolidated by using fullconsolidatemethodandthebookvalueandtheshareholdersequityoftheaffiliatecompaniesownedbytheGroupismutuallyclarified.LikewiseinsidegrouptransactionsandtheirbalancesoftheGroupandsubsidiariesduringtheconsolidationwereeliminatedmutually.

Minority interests showminority shareholders’ equity in the subsidiaries’ assets and resultof operations for the related period. These details are expressed separately in consolidated balance sheet and Profit/Loss Statement. If losses related to minority interest are over benefits fromsharesofasubsidiaryandif there isnobounding liabilitytotheminorities, ingeneral,theselossesrelatedwiththeminoritiescanresultagainsttobenefitsofthemainshareholders.

Financial Information of Companies which are not Consolidated

Parentandsubsidiarycompanieswhicharenotsubjectedtoconsolidationandthesubsidiaryrelatedwithmanagement,auditing,andcapitalareasfollows:

İnfinBilgisayarTicaretA.Ş.andNeteksDışTicaretLimitedŞirketiwerenotconsolidatedtothefactthattheyarebothinsignificantanddonothavematerialeffectontheGroup’sconsolidated

SubsidiaryParticipation Rate

%Opening

ÇevrimFarkı

31.12.2014

İnfin Bilgisayar Ticaret A.Ş. 99,8 63.605 - 63.605Total 63.605 - 63.605

46


financial statements. These subsidiaries are classified as financial assets available for sale in consolidated financial statements. The summary financial information of mentioned companies isdisclosesinNote:7.

Comparison between financial outcomes of companies which are not subjected toconsolidationandfinancialoutcomesofconsolidatedfinancialstatementsasofDecember31,2016isasfollows;

Significantpartofitems,whicharelocatedintotalassetandsales,areeliminatedduringtheconsolidation even though these companies are subjected to consolidation. Considered other matterswhenmentionedcompaniesareexcludedfromtheconsolidation,areasfollows;

Thesecompanieshavenotgotsignificantassetsandliabilitieswhichareoutofbalancesheet.Moreover these companies have not got significant assets such as fixed assets etc.

Onthelightsofabovegivendataallthesecompanieswerenotsubjectedtoconsolidationduetoallquantitativeandqualitativeevaluationsandonthelightsofabovegivendataindicatethatthese companies do not effect to financial outcomes significantly.

2.04 Comparative Information and Adjustment of the Previous Period Financial Statements

The comparative financial statements have been presented to enable to perform the financial positionandtheperformancetrendanalysis.Allnecessaryadjustmentsaremadeinpreviousfinancialstatementstopresentconsistentandcomparativefinancialstatements,ifrequired.

2.05 Offsetting

The financial assets and liabilities in the financial statements are offset and the net amount reportedinthebalancesheet,wherethereisalegallyenforceablerighttooffsettherecognizedamounts,andthereisanintentiontosettleonanetbasisorrealizetheassetandsettletheliability simultaneously.

2.06 Changes in Accounting Policies

The changes to the current accounting policies can be performed if it is necessary or the changeswillprovidemoreappropriateandreliablepresentationofthetransactionsandeventsrelatedtothefinancialposition,performanceandthecashflowoftheGroupthataffectthefinancialstatementsoftheGroup.Ifthechangesinaccountingpoliciesaffectsthepriorperiods,policy is applied to the prior period financial statements as if it is applied before.

2.07 Changes in Accounting Estimates and Errors

Accountingestimatesaremadebasedonreliableinformationandusingappropriateestimationmethods.However,ifneworadditionalinformationbecomesavailableorthecircumstances,whichtheinitialestimatesbasedon,change,thentheestimatesarereviewedandrevised,ifnecessary.Ifthechangeintheaccountingestimatesisonlyrelatedtoasoleperiod,thenonly

Financial Outcomes of 2016 Total Asset Total Equity Net SalesPeriod Income

Companies which are not subjected to consolidation

812.425 424.033 5.767.123 8.822

Consolidated Financial Statements 1.422.658.660 223.447.664 3.793.602.651 52.002.244% 0,06% 0,19% 0,15% 0,02%

47


thatperiod’s financial statementsareadjusted.On theotherhand, if theamendmentsarerelatedtothecurrentaswellastheforthcomingperiods,thenbothcurrentandforthcomingperiods’financialstatementsareadjusted.

In instanceswhere the accountingestimates affectboth current and forthcomingperiods,then description and monetary value of the estimate is disclosed in the notes to the financial statements.However;iftheeffectoftheaccountingestimatetothefinancialstatementcannotbedetermined,thenitisnotdisclosedinthenotestothefinancialstatements.TheGroupisapplyingtheaccountingestimatestodeterminethedoubtfulreceivables,thevaluedecreaseinfixedassetsandinventory,theusefullivesofthefixedassets,contingentliabilities,actuarialassumptions for thetermination indemnities,etc.Theexplanationregardingthechanges inaccounting estimates applied in the current are disclosed in the related parts of the notes to the financial statements.

IAS21TheEffectsofChangesinForeignExchangeRatesStandarddefinesthatfunctionalcurrencyisthecurrencyoftheprimaryeconomicenvironmentinwhichtheentityoperates.Theprimaryeconomicenvironmentinwhichanentityoperatesisnormallytheoneinwhichitprimarilygeneratesandexpendscash.Anentityconsidersthefollowingfactorsindeterminingitsfunctionalcurrency:thecurrencythatmainlyinfluencessalespricesforgoodsandservices(thiswilloftenbethecurrencyinwhichsalespricesforitsgoodsandservicesaredenominatedandsettled);andofthecountrywhosecompetitiveforcesandregulationsmainlydeterminethesalespricesofitsgoodsandservicesandthecurrencythatmainlyinfluenceslabor,materialandothercostsofprovidinggoodsorservices(thiswilloftenbethecurrencyinwhichsuchcostsaredenominatedandsettled).TheGroupmanagementreviewsaccountingestimationsaboutfunctionalcurrencyandaccountingpoliciesineveryperiod.Accordingtotheevaluationmade in this context the current period realizations and future realizations theGroup haschangeditsfunctionalcurrencytotheTLasofJuly1,2013.

2.08 Summary of Significant Accounting Policies

2.08.01 Income

TheGrouprecognizes incomeaccording to theaccrualbasis,whentheGroupreasonablydetermines the incomeandeconomicbenefit isprobable.Group’s incomemainlyconsistsof salesof computer andcomputer equipmentsasPC, laptop, electronichomeproducts,networkingproducts,etc.Allthesalesareoperatedviadealersandtherearenotanydirectsalestoendcustomers.Netsalesarecalculatedbydeductingsalesreturnandsalesdiscountsfrom total sales.

Revenuefromthesaleofgoodsisrecognizedwhenallthefollowingconditionsaregratified:

• The significant risks and the ownership of the goods are transferred to the buyer;• The Group refrains the managerial control over the goods and the effective control over the

goods sold;• The revenue can be measured reasonably;• It is probable that the the economic benefits related to transaction will flow to the entitiy;• The costs incurred or will be incurred in conjuction with the transaction can be measured

reliably.

ThemostoftheproductssoldbytheGrouphasforeignorigin.Thepurchasesaremadefromforeigncompanies,officesofforeigncompaniesinTurkeyordomesticcompaniesinTurkey.Dependingupontherealizationofthetargetsgivenbythedomesticorforeigncompanies;asetofpaymentsarereceivedoroffsettingtheaccountsunderthenameof“rebate”,“risturn”,“sellout”,or“bonus”.Thementionedamountsarerecognisedascreditnoteincomeaccruals

48


in the balance sheet depending upon the realization of the targets and conditions given by the sellers. The documents prepared by sellers under the nameof “rebate”, “risturn”, “sellout”,“bonus”,and“creditnote”(orInvoicespreparedbytheGroup)iscollectedoroffsetted.Credit notes obtained from inventories are discounted from cost of inventories. The remaining balanceisrecognisedas“OtherSales”inthesalesoftheGroup.

Interestrevenueisaccuredonatimebasis,byreferencetotheprincipaloutstandingandattheeffectiveinterestrateapplicaple,whichistheratethatdiscountstheestimatedfuturecashreceiptsthroughtheexpectedlifeofthefinancialassettothatasset’snetcarryingamount.

Whenthere issignificantamountofcostof financing included inthesales, the fairvalue isdeterminedbydiscoutingallprobablefuturecashflowswiththeyieldrate,whichisembeddedinthecostoffinancing.Thedifferencesbetweenthefairvalueandthenominalvalueisrecordedas interest income according to the accrual basis.

2.08.02 Inventories

Inventoriesarestatedeitheratthelowerofacquisitioncostornetrealizablevalue.Group’sinventoriesconsistofcomputerandcomputerequipmentslikePC,laptop,electronicalhomeproducts,networkproducts,etc.

The inventorycostingmethodusedbytheGroupis“First inFirstout (FIFO)”.Netrealizablevalue is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

2.08.03 Maddi Duran Varlıklar

ForAssetsacquiredinandafter2005,thetangibleassetsarereflectedtotheconsolidatedfinancialstatementsbydeductingtheiraccumulateddepreciationfromtheircost.ForassetsthatwereacquiredbeforeJanuary01,2005,thetangiblefixedassetsarepresentedontheconsolidatedfinancialstatementsbasedontheircostvalue,whichisadjustedaccordingtotheinflationaryeffectsasofDecember31,2004.Depreciationiscalculatedusingthestraight-linemethodbasedontheireconomiclives.Thefollowingrates,determinedinaccordancewiththeeconomiclivesofthefixedassets,areusedincalculationofdepreciation.

Lands are not subject to depreciation since they have unlimited useful lives.

Tangiblefixedassetsarereviewedintermsofimpairmentforeachbalancesheetperiod.Ifthecarryingvalueofatangiblefixedassetismorethanitsexpectednetrealizablevalue,thenthecarrying value is reduced to its net realizable value by making the necessary provisions. There is no provision for decrease in value of tangible fixed assets.

The profit and loss arisen from fixed asset sales are determined by comparing the net book valuewiththesalespriceandtheresultisaddedtotheoperatingprofitorloss.

Type December 31, 2016 Rate (%) December 31, 2015 Rate (%)Land Improvements 10 10Buildings 2 2Machinery, Plant and Equipment 10-25 10-25Motor Vehicles 10-25 10-25Furniture and Fixtures 10-33 10-33Leasehold Improvements 10-33 10-33

49


Maintenance and repair expenses are accounted as expense at their realization date. If the maintenance and repair expenses clearly improve the economic value or performance of the related asset then they are capitalized.

2.08.04 Intangible Assets

IntangibleAssetscontainsacquiredassetsbysalessuchascomputer softwareprogramsandcomputersoftwarelicences.Thereisnointangibleassetscreatedwithinthestructureofbusiness.

Intangible assets acquired before January 1, 2005 are carried at historical cost includinginflationaryeffectsasatDecember31,2004,however,purchasesafterJanuary1,2005arecarried at their historical cost less accumulated amortization and impairment.

Intangibleassetsaredepreciatedonastraight-linebasisovertheirexpectedusefullivesinfiveandtenyear’speriod.

Theestimateduseful lifeandamortizationmethodare reviewedat theendofeachannualreportingperiod,withtheeffectofanychangesinestimatebeingaccountedforonaprospectivebasis.Ifthenetvalueofanintangibleassetismorethantherecoverablevalue,thenetvalueof the intangible asset is decreased to recoverable value by making provisions. There is no provision for the value decrease in intangible assets.

2.08.05 Impairment of Assets

Assetssuchasgoodwillwhichhasinfinitelifearenotsubjectedtoamortization.Impairmenttest is applied for these assets for each year. Assets that are subject to amortization arereviewed for impairment whenever events or changes in circumstances indicate that thecarryingamountmaynotberecoverable.Animpairmentlossisrecognizedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiable cash flows. Non-financial assets except goodwill that suffered impairment arereviewedforpossiblereversalofimpairmentateachreportingdate.

According to theGroupManagement’sassessment;There isnosuchasituation thatmaycause impairment for tangible, intangible assets and investment properties. These assets’netbookvaluehasbeenpredictedthatthementionedassets’marketvaluesareovertheirnet book values. The remaining assets except from mentioned assets consist of vehicles and furniture&fixturesforadministrativepurposes.Theseassets’insurancevaluesandreplacementvalues are over their book values.

2.08.06 Research and Development Expenses

None.

2.08.07 Borrowings Costs

Theborrowingcostsarerecognizedasexpensewhentheyareincurred.Borrowingcoststhataredirectlyattributabletotheacquisition,constructionorproductionofaqualifyingassetshallbecapitalizedaspartofthecostofthatasset.Thecapitalizationofborrowingcostsaspartofthecostofaqualifyingassetshallcommence,whenexpendituresandborrowingcostsfortheassetareincurred,continuesuntilthatassetbecomesavailableforsale.Expendituresonaqualifyingassetincludeonlythoseexpendituresthathaveresultedinpaymentsofcash,transfersofotherassetsortheassumptionofinterest-bearingliabilities.Therearenocapitalizedborrowingcostsincurrentperiodrelatedtoqualifyingassets.

50


2.08.08 Financial Instruments

(i) Financial Assets

Investmentsarerecognizedandderecognizedontransactiondatewherethepurchaseandsalesofaninvestmentisunderacontract,termsofwhichrequiredeliveryoftheinvestmentwithinthetimeframeestablishedbythemarketconcernedandare initiallymeasuredat fairvalue,netoftransactioncostsexceptforthosefinancialassetsclassifiedasfairvaluethroughprofitorlosswhichareinitiallymeasuredatfairvalue.

Financialassetsareclassifiedas“financialassets,whosefairvaluedifferencesarereflectedtotheprofitorloss”,“financialassetsheldtothematurity”,“financialassetsavailablefor-sale”and“loansandreceivables.”

Prevailing Interest Method;

Prevailing interest method is the assessment of financial asset with their amortized costand allocation of interest income to the relevant period. Prevailing interest rate is a rate that discountstheestimatedcashflowofthefinancialinstrumentsfortheexpectedlifeorwhereappropriates a shorter period.

Incomerelatedtofinancialassets,exceptthe“financialassets,whosefairvaluedifferencesarereflectedtotheprofitorloss”,iscalculatedbyusingtheprevailinginterestrate.

a) Financial Assets Whose Fair Value Differences Are Reflected to the Profit or Loss

“Financialassetswhosefairvaluedifferencesarereflectedtotheprofitorloss”,arethefinancialassetsthatareheldfortradingpurposes.Ifafinancialassetisacquiredfortradingpurposes,itisclassifiedinthiscategory.Also,derivativeinstruments,whicharenotexemptfromfinancialrisk,arealsoclassifiedas“Financialassetswhosefairvaluedifferencesarereflectedtotheprofitorloss”.Thesefinancialassetsareclassifiedascurrentassets.

b) Financial Assets Which Will Be Held to the Maturity

Debtinstruments,whichtheGrouphastheintentionandcapabilitytoholdtomaturity,and/orhavefixedordeterminablepaymentarrangement,areclassifiedas“InvestmentsHeldtotheMaturity”.Financialassetthatwillbeheldtothematurity,arerecordedafterdeductingtheimpairmentfromthecostbasis,whichhasbeenamortizedwithprevailinginterestmethod.Allrelevant income is calculated using the prevailing interest method.

c) Financial Assets Available-For-Sale

Financialassets,whichare“Available-for-Sale”,areeither financialassets,whichwillnotbeheldtomaturityorfinancialassets,whicharenotheldfortradingpurposes.FinancialassetsAvailable-for-Salearerecordedwiththeirfairvalueiftheirfairvaluecanbedeterminedreliably.Marketable securities are shown at their cost basis unless their fair value can be reliablymeasured or have an active trading market. Profit or loss pertaining to the financial assets Available-for-Sale isnotrecordedonthe incomestatement.Thefluctuation inthefairvalueof theseassets isshown inthestatementofshareholders’equity.Wherethe investment isdisposedoforisdeterminedtobeimpaired,thecumulativegainorlosspreviouslyrecognizedis included in profit or loss for the period. Provisions recorded in the income statement pertainingtotheimpairmentoffinancialassetAvailable-for-Salecannotbereversedfromtheincome statement in future periods.

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Exceptequityinstrumentsclassifiedasavailable-for-sale,ifimpairmentlossdecreasesinnextperiod and if therein decreasing can be related to an event occurred after the accounting of impairmentloss,impairmentlossaccountedbeforecanbecancelledinincomestatement.

d) Loans and Receivables

Trade receivables, other receivables, and loans are initially recognized at their fair value.Subsequently, receivables and loans are measured at amortized cost using the effectiveinterestmethod.Inthecaseofinterestonloansandreceivablesnegligible,registeredvalueofloan and receivables is accepted as fair value.

Impairment of financial assets

Financialassets,otherthanthoseatfairvaluethroughprofitorloss,areassessedforindicationofimpairmentateachbalancesheetdate.Financialassetsareimpaired,wherethereisobjectiveevidencethat,asaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionofthe financialasset, theestimated futurecashflowsof the investmenthavebeen impacted.Forfinancialassetscarriedatamortizedcost,theamountoftheimpairmentisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows,discounted at the original effective interest rate.

Thecarryingamountofthefinancialassetisreducedwiththeimpairmentlossdirectlyforallfinancialassetswiththeexceptionoftradereceivables,wherethecarryingamountisreducedthroughtheuseofanallowanceaccount.Whenatradereceivableisuncollectible,itiswrittenoffagainsttheallowanceaccount.Subsequentrecoveriesofamountspreviouslywrittenoffarereversedagainsttheallowanceaccount.Changesinthecarryingamountoftheallowanceaccount are recognized in profit or loss.

With the exception of available for sale equity instruments, if, in a subsequent period, theamount of the impairment loss decreases and the decrease can be related objectively to an eventoccurringaftertheimpairmentwasrecognized,thepreviouslyrecognizedimpairmentloss is reversed through profit or loss to the extent that the carrying amount of the investment atthedatetheimpairmentisreverseddoesnotexceedwhattheamortizedcostwouldhavebeen had the impairment not been recognized.

Withrespecttoavailable-for-saleequitysecurities,anyincreaseinfairvaluesubsequenttoanimpairmentlossisrecognizeddirectlyinequity.

Cash and Cash Equivalents

Cash and cash equivalents are cash, demand deposit and other short-term highly liquidinvestments,whichtheirmaturitiesarethreemonthsorlessfromthedateasofacquisition,thatarereadilyconvertibletoaknownamountofcashandaresubjecttoaninsignificantriskof changes in value.

(ii) Financial Liabilities

Financial liabilities and equity instruments are classified according to the contractualagreementsenteredintoandthedefinitionoffinancialliabilityandequityinstrument.AnequityinstrumentisanycontractthatevidencesaresidualinterestintheassetsoftheGroupafterdeductingalltheliabilities.Accountingpoliciesdeterminedforthefinancial liabilitiesandthefinancialinstrumentsbasedonequityareexplainedbelow.Financialliabilitiesareclassifiedaseither“financialliabilitieswhosefairvaluedifferencesarereflectedtotheprofit/loss”orotherfinancial liabilities.

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a) Financial Liabilities Whose Fair Value Differences Are Reflected to the Profit /Loss

“Financialliabilitieswhosefairvaluedifferencesarereflectedtotheprofit/loss”arerecordedwiththeirfairvalueandarere-evaluatedattheendofeachbalancesheetdate.Changesinfairvaluesarerecordedontheincomestatement.Netearningsand/orlossesrecordedontheincome statement also include interest payments made for this financial liability.

b) Other Financial Liabilities

Otherfinancialliabilitiesareinitiallyrecognisedwiththeirfairvaluesfreefromtransactioncosts.

Otherfinancialliabilitiesarerecognisedovertheiramortizedcostsusingtheeffectiveinterestmethodandwithinterestcostscalculatedovereffectiveinterestrateinsubsequentperiods.The effective interest method is the calculation of the amortized costs of the financial liabilities and the distribution of the related interest expenses to related periods.

(iii) Derivative Financial Instruments

TheGrouphasagreementinforeigncurrencyfuturesmarkets.Derivativefinancialinstrumentsarerecognisedwithitsmarketvalueonthedateofderivativecontractssignedandre-assessedwithitsmarketvalue.

The differences between the acquisition costs and fair values of forward agreements arerecordedinequityand/orincomestatementinaccordancewiththepracticesofIAS39hedgeaccounting as of period ends.

The gain or loss realized from the increase or decrease in the fair value of the derivative instrumentswhichdonotmeettheconditionsforhedgeaccountingisrecognisedinprofitorloss.

Thefairvalueisdeterminedbytheappropriateoneofpossiblevalidmarketvalues,otherwisediscounted cash flows and option pricing models. The derivatives with positive fair valueis recognisedasanassetandwithnegative fairvalue is recognisedasa liabilityunder thebalance sheet. (Note: 12)

2.08.09 Effects of Currency Fluctuations

All transactions,denominated in foreigncurrencies,areconverted intoTLby theexchangerate ruling at the transaction date. All foreign currency denominatedmonetary assets andliabilities stated at the balance sheet are converted into TL by the exchange rate ruling at thebalancesheetdate.Foreignexchangegainsand/orlossesasaresultoftheconversionsarerecordedintheincomestatement.Groupusessameforeigncurrencyintheirsalesandpurchasetransaction.ThereforeGroupdoesnotcontainimportantcurrencyrisk.

2.08.10 Earnings per Share

Earnings per share in the income statement are calculated by dividing net income by the weightedaveragenumberofcommonsharesoutstandingfortheperiod.InTurkey,companiesareallowedtoincreasetheirsharecapitalbydistributing“bonusshares”fromretainedearnings.Thesebonussharesaredeemedasissuedshareswhilecalculatingthenetearningspershare.Accordingly,theretrospectiveeffectforthosesharedistributionsistakenintoconsiderationindeterminingtheweighted-averagenumberofsharesoutstandingusedinthiscomputation.

2.08.11 Subsequent Events

Subsequent events cover all events that occur between the balance sheet date and thepublicationdateofthefinancialstatements.Ifthereissubstantialevidencethatthesubsequenteventsexistedorariseafterthebalancesheetdate,theseeventsaredisclosedandexplainedin the notes to the financial statements.

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2.08.12 Provisions, Contingent Liabilities and Assets

Aprovision is recognizedwhenanentityhasapresentobligation (legalorconstructive)asa result of a past event; it is probable that an outflowof resources embodying economicbenefitswill be required to settle theobligation; and reliable estimate canbemadeof theamountoftheobligationWheretheeffectofthetimevalueofmoneyismaterial,theamountofaprovisionisthepresentvalueoftheexpendituresexpectedtoberequiredtosettletheobligation.Thediscountrate(orrates)isapre-taxrate(orrates)thatreflect(s)currentmarketassessments of the time value of money and the risks specific to the liability. The increase in provisions arisen from time differences is recorded as interest expense in case of discounting. Futureeventsthatmayaffecttheamountrequiredtosettleanobligationshallbereflectedintheamountofaprovisionwherethereissufficientobjectiveevidencethattheywilloccur.Theamountrecognizedasaprovisionisthebestestimateoftheconsiderationrequiredtosettlethepresentobligationatthebalancesheetdate,takingintoaccounttherisksanduncertaintiessurrounding the obligation.

Contingent liabilities and assets are not reflected to consolidated financial statements butdisclosed in the notes to the consolidated financial statements. The entity recognizes a provisionforthepartoftheobligation,forwhichanoutflowofresourcesembodyingeconomicbenefits isprobable,except intheextremelyrarecircumstanceswherenoreliableestimatecan be made

2.08.13 Leasing Operations

The Group as Lessee

Financial Leases

Financialleasesaredescribedwhichthelessorretainsalltherisksandbenefitspertainingtothegoods.Financial leasesaretaken intotheaccountsaccordingto lowercurrentmarketvalue or minimum lease payments.

The liability arising from a financial leasing transaction is separated into interest payable and principal debt in order to determine a fixed interest rate on the remaining balance. The costs andexpensesincurredattheinitialacquisitionofthefixedassetsubjecttofinancial leasingare added to the cost. The fixed assets obtained through financial leasing are subject to depreciation over their estimated useful lives.

InformationofnetbookvalueofGroup’sassets,whicharesubjecttolease,statedonNote:18. InformationrelatedwithGroup’sfinancialleasingdebtstatedonNote: 8.

Operating Leases

Leaseagreements inwhichthe lessorretainsall therisksandbenefitsrelatingtothegoodare described as operational leasing. Lease payments made for an operational leasing are recorded as expense according to normal method throughout the lease term.

The Group as Lessor

Operating Leases

TheGrouppresentsassetssubjecttooperatingleasesintheirbalancesheetaccordingtothenature of the asset. Lease income from operating leases is recognized as income according tothenormalmethod.Theinitialdirectcostsincurredduringoperationalleasingarereflectedto income statement as expense.Group’s Lease agreements as a lessor, are relatedwithleasingtosmallpartofthemainbuildingwhereGroup’soperating,toothernon-consolidatedcompaniesandtoanothercompanywhichisnotincludetheGroup,asaofficeandstore.

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2.08.14 Related Party Disclosures

The partners’ of the Company, Company’s Board of Directors, Company’s managementpersonnel,Company’sotherdirectors,closefamilymembersinthechargeoftheCompany,and other companies directly or indirectly controlled by the Company are considered as related parties.ThetransactionswithrelatedpartiesaredisclosedintheNote:37.

2.08.15 Government Grants and Assistance

None.

2.08.16 Investment Property

Investment properties are recognised according to the followingprinciple as ofDecember31,2016andDecember31,2015.

Real Estates held to earn rent income are classified as Investment Properties and they are recognised at their cost value less accumulated depreciation and accumulated impairments. The cost arising from the change or improvement of a part of real estate is added to cost ofthatrealestateifthegenerallyacceptedconditionsaremet.However,dailymaintenanceexpenses are not added to mentioned cost of the real estate.

Intangibleassetsaredepreciatedonastraight-linebasisovertheirexpectedusefullivesandthedepreciationrateis%2perannum.

Iftheinvestmentpropertyisoutofuseorsold,theyareremovedfromthebalancesheetandthe gain or loss from sale of investment property is recognised under the income statement.

2.08.17 Taxation and Deferred Tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable ordeductible.TheGroup’sliabilityforcurrenttaxiscalculatedusingtaxratesthathavebeenenacted or substantively enacted by the balance sheet date.

Deferred tax

Deferredtaxisrecognizedondifferencesbetweenthecarryingamountsofassetsandliabilitiesinthefinancialstatementsandthecorrespondingtaxbaseswhichisusedinthecomputationoftaxableprofit,andisaccountedforusingthebalancesheetliabilitymethod.Deferredtaxliabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxableprofitswillbeavailableagainstwhichthosedeductibletemporarydifferencescanbeutilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwillorfromtheinitialrecognition(otherthaninabusinesscombination)ofotherassetsand liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated withinvestmentsinsubsidiariesandassociates,andinterestsinjointventures,exceptwheretheGroup isabletocontrol thereversalofthetemporarydifferenceand it isprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.Deferredtaxassetsarisingfrom

55


deductible temporary differences associatedwith such investments and interests are onlyrecognizedtotheextentthatitisprobablethattherewillbesufficienttaxableprofitsagainstwhichtoutilizethebenefitsofthetemporarydifferencesandtheyareexpectedtoreverseinthe foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date andreducedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitswillbeavailabletoallowallorpartoftheassettoberecovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in theperiodinwhichtheliabilityissettledortheassetrealized,basedontaxrates(andtaxlaws)that have been enacted or substantively enacted by the balance sheet date. The measurement ofdeferredtaxliabilitiesandassetsreflectsthetaxconsequencesthatwouldfollowfromthemanner inwhichtheGroupexpects,atthereportingdate,torecoverorsettlethecarryingamount of its assets and liabilities.

DeferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandwhentheyrelatetoincometaxesleviedbythesametaxationauthorityandtheGroupintendstosettleitscurrenttaxassetsandliabilitieson a net basis.

Current and deferred tax for the period

Currentanddeferredtaxarerecognizedasanexpenseorincometotheincomestatement,exceptwhentheyrelatetoitemscreditedordebiteddirectlytoequity,inwhichcasethetaxisalsorecognizeddirectly intheequity,orwheretheyarisefromtheinitialaccountingforabusinesscombination. In thecaseof abusinesscombination, the taxeffect is taken intoaccountincalculatinggoodwillordeterminingtheexcessoftheacquirer’sinterestinthenetfairvalueoftheacquirer’sidentifiableassets,liabilitiesandcontingentliabilitiesovercost.

Taxes stated in financial statements include the current tax and deferred taxes for the period. TheGroupcalculatescurrentperiodtaxanddeferredtaxovertheperiodresults.

Offsetting Tax Income and Liabilities

Corporatetaxpayablesareoffsetwithprepaidquarterlyadvancecorporatetaxpaymentsdueto the fact that these payments are in fact corporate tax payments. Deferred tax assets and liabilities are also offset.

2.08.18 Çalışanlara Sağlanan Faydalar/Kıdem Tazminatları

According to Turkish Labor Law, employee termination benefit is reflected in the financialstatements,whentheterminationindemnitiesaredeserved.SuchpaymentsareconsideredasbeingpartofdefinedretirementbenefitplanasperIASNo.19“EmployeeBenefits”.

Terminationindemnityliabilityisreflectedtothefinancialstatementswiththeamountcalculatedforvalueatbalancesheetdateoflumppensioninthenextyearsbydiscountingbyadequateinterestrate.Interestcostaddedtothelumppensionexpenseisshownasinterestexpensein the results of operations.

2.08.19 Statement of Cash Flow

Cashandcashequivalentsarestatedattheirfairvaluesinthebalancesheet.Thecashandcashequivalentscomprisescashinhand,bankdepositsandhighlyliquidinvestments.

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Oncashflowstatement,theGroupclassifiesperiod’scashflowsasinvestmentandfinancingactivities.CashinflowprovidedfromoperatingactivitiesdenotescashinflowprovidedfrommainactivitiesoftheGroup.

Cash flow concerned with investment activities shows cash used and provided frominvestment activities (asset investments and financial investments).

Cashflowconcernedwithfinancialactivitiesrepresentssourcesusedfromfinancialactivitiesandpay-backofthesefunds.

2.08.20 Income Accruals

Themostof theproductssoldbytheGrouphasforeignorigin.Thepurchasesaremadefrom foreign companies, offices of foreign companies in Turkey or domestic companiesin Turkey. Depending upon the realization of the targets given by the domestic or foreign companies;asetofpaymentsarereceivedoroffsettingtheaccountsunderthenameof“rebate”,“risturn”,“sellout”,or“bonus”.Thementionedamountsarerecognisedascreditnote income accruals in the balance sheet depending upon the realization of the targets and conditions given by the sellers. The documents prepared by sellers under the name of “rebate”,“risturn”,“sellout”,“bonus”,and“creditnote”(orInvoicespreparedbytheGroup)is collected or offset.

2.08.21 Provisions for Warranty

TheGroupisadistributorof informationtechnologyproductsinTurkey.Thewarrantiesofthe products sold are provided by the companies assigned by the producers. The products submittedtoCompanyforwarrantyarereceivedfromdealersandtheseproductsaresentto producers or companies assigned by the producers for repairment and maintenance. After the repair andmaintenance, if there is aneed tochangeorgiveanewproduct tocustomerswithin the scopeof thewarranty, the amountof theproducts are invoiced toproducercompanies.TheGrouphasnoliabilityofprovisionsforwarranty.

2.09 New and Revised Turkish Financial Reporting Standards

TheaccountingpoliciesadoptedinfinancialtablesoftheperiodendingasofDecember31,2016hasbeenappliedasofJanuary1,2016coherentlywiththenewandrevisedeffectivestandardsandthecommentsused inpreviousyearsexcept theonesbyTFRYK(TurkishFinancialReportingBoard).EffectsofthesestandardsandcommentsonfinancialsituationandperformanceofGroupareexplainedinrelatedsections.

i) New effective standards, revisions and comments as of January 1, 2016 are below:

• Agriculture:Bearerplants(IAS16andIAS41Revisions) :The bearer plants have been extractedfromIAS41“AgriculturalOperations”standardandincludedtoIAS16“FinancialTangibleAssets”standardforthemeasurementandexplanationnecessitiesofthebearerplants. Therefore, a companymaymeasure the bearer plants as its cost. However, thegoods on bearer plants shall be continued to be measured by extracting sales costs from theirfairvalue.Earlyapplicationofthestandardispermitted.Noeffectsbytherevisionsonthe financial tables are expected.

• EquityCapitalManagementinIndividualFinancialTables(IAS27-Revisions):The revisions permitsthattheequitycapitalmanagementisusedinindividualfinancialtables.Noeffectsby the revisions on the financial tables are expected.

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• Sales or contributions of assets between an investor and its associate or joint venture (IFRS 10, IAS 28- Revisions): The revisions are about the relationships of consolidation and equitycapitalmethodapplications.Noeffectsby therevisionson the financial tablesareexpected.

• Investmententities:ApplicationofConsolidationExemption(IFRS10,IFRS12andIAS28–Revisions): Asaresultoftherevision,itispermittedthatinterferenceinvestmententitiesareconsolidated.Noeffectsbytherevisionsonthefinancialtablesareexpected.

• IFRS11ObtainingSharesinJointActivities(Revision):It has been revised to be a guide for share obtaining accounting in joint activities whose operation constitutes a businessasitisspecifiedinIFRS3“BusinessCombinations”.Therevisionshallhavenoeffectsonfinancial tables.

• Presentation of Financial Statements (IAS 1- Revisions): It clarifies the requirementsprovidedinIAS1.Noeffectsbytherevisionsonthefinancialtablesareexpected.

• IAS 16 and IAS 38 Acceptable Depreciation and Clarification of Depreciation Methods(Revision): The revisions has forbidden the depreciation accounting for financial tangible propertiesandlimitedtheuseofdepreciationaccountingbasedonrevenuefornon-financialtangible significantly. The revision shall have no effects on financial tables.

İİ)AnnualImprovements–2012-2014Period

• IFRS5“Non-currentAssetsHeldforSaleandDiscontinuedOperations”(Revision):It gives annotations regarding the caseswhere tangible assets held for sale are classified as anasset held for distribution to owners or the other way around and the caseswhere theassetsarestoppedbeingheldfordistributiontoowners.Therevisionshallhavenoeffectson financial tables.

• IFRS7“Financial Instruments:Explanations”(Revision): It gives additional information to clarify if a service agreement is continuation of transferred assets and netting in interim financial reports. The revision shall have no effects on financial tables.

• IAS34“InterimFinancialReporting”(Revisions):It clarifies the explanation ‘in another segment in interim financial reporting. The revision shall have no effects on financial tables.

• IAS19“EmployeeBenefits”(Revision):Itoutlinesthatthemarketdepthofhighqualitycorporate bills shall be evaluated in the currency of the country the debt has been carried to,ratherthancurrencyofthecountrythedebtexists.Therevisionshallhavenoeffectsonfinancial tables.

• IFRS 14RegulatoryDeferral Accounts:According to IFRSDeferment AccountBasedonRegulation,IFRS14RegulatoryDeferralAccountspermitsanentitywhichisafirst-timeadopterofTurkishFinancialReportingStandardstocontinuetorecognize,withsomelimitedchanges,for‘regulatorydeferralaccountbalances’inaccordancewithitspreviousgenerallyacceptedaccountingstandards,bothoninitialadoptionofIFRSandinsubsequentfinancialstatements.IFRS14causedsomechangesinrelatedpartsofIFRS1standards.Noeffectsby the revisions on the financial tables are expected.

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İİİ) Issued but non-effective standards and the standards which are not put into effect earlier

The standards and revisions that have been issued as of the date when the financial tables were confirmed but haven’t been put into effect yet for the current reporting period and have not been put into effect earlier by Group are below. Unless indicated otherwise, after the new standards and comments are put into effect, Group is going to make the necessary revisions in a way that will affect its financial tables and footnotes.

• IFRS 9 Financial Instruments (Classification and Explanation): Its effect has been postponed until January 1, 2018. The revision shall affect the classification and measurements of financial assets, and the measurements of financial commitments which is measured by reflecting the fair value on the profit or loss. Earlier application is permitted. The possible effects on financial tables are being evaluated.

• IFRS15“RevenuefromContractswithCustomers”: The standard has been published in September, 201. The new five-step model in the standard explains the necessities related to revenue recognition and measurement. The standard constitutes a model for recognition and measurement of the sales of some non-financial assets (for example financial tangible asset outlet) which shall be applied to revenue from customers and which are not related to usual operations of a company. IFRS 15 shall be applied to the annual accounting periods which come after January 1, 2018. Early application shall be possible. Its possible effects on financial tables are being evaluated.

• IFRS 9 “Financial Instruments” (Final Standard): This standard, published in January 2017, is a replacement of IAS 39 standard which was about classification and measurement of assets and obligations. IFRS 9 presents two models related to depreciated value and fair value. While all of the equity instruments are measured by its fair value, debt instruments are measured by depreciated value if the contractual cash revenue is collected by the Company and this cash revenue includes the interest and the capital. For the liabilities, the standard maintains many applications including depreciated cost management and disintegration of embedded derivatives in IAS 39. It shall be applied on January 1, 2018. Its possible effects on financial tables are being evaluated.

Summary of the new and corrected standards, revisions and comments issued by International AccountingStandardsInstitution(“UMSK”)buthavenotbeenissuedbyPublicOversightAccountingandAuditingStandardsAuthority(“KGK”):

• IFRS16“Leases”: IAS 17, IFRS Comment 4, IAS Comment 15 and IAS Comment 27 shall be abolished with the standard issued in January, 2016 being put into effect. IFRS 16 shall be applied to the accounting periods starting on January 1, 2019 and the accounting periods coming after this date. Early application is permitted. The company choosing the early application have to apply IFRS 15 standard early, too. Its possible effects on financial tables are being evaluated.

• IFRSHC22“ForeignCurrencyTransactionsandAdvances: The interpretation clarifies that transaction date for assets or liabilities which are in foreign currency and recognized for non-monetary prepaid expenses or advances received will be the first recognition date of asset related to pre-payment or liability related to deferred revenue. It shall be applied on the annual accounting periods which come after January 1, 2018. Earlier application is permitted. The

59


possible effects on financial tables are being evaluated.

• IAS12“IncomeTaxes”(Revisions): The revisions have been published in January 2016. The aim of the publication of revisions is removing the distinctions in implementation regarding tax assets recognition for unrealized losses. It shall be retrospectively applied on January 1, 2017 or to the annual accounting periods which come after January 1, 2017. Its possible effects on financial tables are being evaluated.

• IAS7“CashFlowStatements”(Revisions): The revisions have been published in January 2016. The aim of the revisions is enhancing the information for financial statement users about Company’s financial operations. It shall be applied on January 1, 2017 or to the annual accounting periods which come after January 1, 2017. Its possible effects on financial tables are being evaluated.

• IFRS2“ClassificationandMeasurementofShare-basedPayment”(Revision): The revisions have been published in January 2016. It shall be applied on January 1, 2018 or to the annual accounting periods which come after January 1, 2018. It explains the measurement bases of cash settled share based payment transaction and the way of recognition of changes which turn a rewarding from cash settled to equity settled. Its possible effects on financial tables are being evaluated.

• IAS 40 “Transfer of Investment Property”: Changes in IAS 40 Investment Property Standard has been made by IASC for disambiguating the events which are admitted as evidence for the transfer of investment properties to other assets and transfer of other assets to investment properties. It shall be applied on the annual accounting periods which come after January 1, 2018. Earlier application is permitted. The possible effects on financial tables are being evaluated.

İv)Annual Improvements - 2014-2016 Period

Revisions will be applied from January 1, 2018. The possible effects on financial tables are being evaluated.

• IFRS1“FirstApplicationofInternationalFinancialReportingStandards”

• UFRS12“ExplanationforInvestmentsinOtherEnterprises”

• IAS28“InvestmentsinSubsidiariesandJointVentures”

3. BUSINESS COMBINATIONS

Current Year

None.

Previous Period

None.

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4. BUSINESS PARTNERSHIPSTheCompany’sjointmanagingcompanyNeteksİletişimÜrünleriDağıtımA.Ş.isrecognisedaccordingtotheequityconsolidationmethod.Thesummaryfinancialinformationofmentionedcompanyisasfollows.

5. REPORTING FINANCIAL INFORMATION BY SEGMENTS AND GEOGRAPHIC AREASGroup has reported its financial information by information technologies and logistics.InformationtechnologiesconsistofsaleofcomputeranditscomponentssuchasPC,notebook,electronicalhomeproducts,networkingproducts,etc.Thegrossprofit/ lossinformationofoperationsasofperiod’sendsareasfollows;

January 1-December 31, 2016

January 1-December 31, 2015

Financial Statement Item December 31, 2016 December 31, 2015

Current Assets 147.444.669 147.492.938

Non-current Assets 1.356.213 469.809

Total Assets 148.800.882 147.962.747 Short-term Liabilities 131.203.010 128.707.827

Long-term Liabilities 104.492 100.673

Shareholders’ Equity 17.493.380 19.154.247

Total Shareholders’ Equity 148.800.882 147.962.747

Financial Statement ItemJanuary 1, 2016

December 31, 2016

January 1, 2015

December 31, 2015

Sales 270.691.314 320.926.487

Gross Profit 12.107.364 15.671.665

Operating Profit 5.066.999 11.013.474

Net Profit (4.610.236) (1.951.051)

Income StatementsInformation

TechnologiesTelecom Logistics Total Elimination Consolidated

Non Interdepartmental Revenue

2.576.195.411 1.214.420.509 2.986.731 3.793.602.651 - 3.793.602.651

Interdepartmental Revenue

- - 20.391.401 20.391.401 (20.391.401) -

Sales Revenue 2.576.195.411 1.214.420.509 23.378.132 3.813.994.052 (20.391.401) 3.793.602.651

Cost of Sales (-) (2.457.809.274) (1.179.815.036) - (3.637.624.310) - (3.637.624.310)

Gross Profit / Loss 118.386.137 34.605.473 23.378.132 176.369.742 (20.391.401) 155.978.341

Income StatementsInformation

TechnologiesTelecom Logistics Total Elimination Consolidated

Non Interdepartmental Revenue

2.302.154.024 1.077.380.498 5.156.358 3.384.690.880 - 3.384.690.880

Interdepartmental Revenue

- - 23.142.790 23.142.790 (23.142.790) -

Sales Revenue 2.302.154.024 1.077.380.498 28.299.148 3.407.833.670 (23.142.790) 3.384.690.880

Cost of Sales (-) (2.191.468.395) (1.040.009.690) (401.308) (3.231.879.393) - (3.231.879.393)

Gross Profit / Loss 110.685.630 37.370.808 27.897.839 175.954.277 (23.142.790) 152.811.487

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6. CASH AND CASH EQUIVALENTSCashandCashEquivalentsareasfollows:

Maturities of credit card slips are 1 or 3 days for the current and prior period.

Maturityofreverserepotransactionswere1dayandinterestincomeof17.593TLwasaccrued.ReverserepotransactioncurrencywasmadeinTL,andUSDandinterestrateofreverserepotransactionsforUSDwere%0,35-0,90andforTLis%6,75–8,25asofDecember31,2016.

Maturity of reverse repo transactions were 1 day and interest income of 10.298 TL wasaccrued.Reverserepotransactioncurrencywasmade inTL,USDandEUROand interestrateofreverserepotransactionsforUSDwere%0,21-0,72,forTLis%4,25–8,93andforEUROis%0,60asofDecember31,2015.

TherearenoliensandblockedamountsoncashandcashequivalentsasofDecember31,2016(December31,2015:None.)

CashandcashequivalentshavebeenindicatedasaccruedinterestincomedeductedfromcashandequivalentsinGroup’scashflowstatements.

7. FINANCIAL ASSETS & INVESTMENTS

Short- Term Financial Assets & Investments

None.

Long–TermFinancialAssets&Investments

AlllongtermfinancialinvestmentsareconsistofFinancialAssetsReadyforSale.

DetailsofFinancialAssetsAvailableforSaleareasfollows:

Account Name December 31, 2016 December 31, 2015Cash 77.077 170.304Bank (Demand Deposits) 24.312.560 12.467.815Financial Assets held until Maturity (Reverse Repo) 224.313.634 123.616.698Credit card slips 1.054.531 508.714Total 249.757.802 136.763.531

Account Name December 31, 2016 December 31, 2015Cash and Equivalents 249.757.802 136.763.531Accrued Interest Income (-) (17.593) (10.298)Total 249.740.209 136.753.233

December 31, 2016 December 31, 2015Shares 63.605 - Quoted Companies’ Shares - - -Unlisted Companies’ Shares 63.605 63.605Total 63.605 63.605

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Unlistedshareinvestmentsareasfollows;

Summaryoffinancialinformationrelatedtounlistedshareinvestments;

December 31, 2016

December 31, 2015

8. KISA VE UZUN VADELİ BORÇLANMALAR VE UZUN VADELİ BORÇLANMALARIN KISA VADELİ KISIMLARIShort-Termfinancialliabilitiesareasfollows:

Theshort-termportionoflong-termliabilitiesasoftheendofperiodisasfollows:

OurassociatedpartnerDatagateBilgisayarMalzemeleriTicaretA.Ş.’s74.988.612TLfromtheirshorttermpartoftheirlongtermcreditshavebeenusedfor12,24and36monthscontractcampaigncellphones’ financing.All thesecreditsareunder theguaranteeofAvea İletişimHizmetleriA.Ş.AtthesametimeAveaİletişimHizmetleriA.Şcollectsreceivablesofdevicesfromtheirsubscribers.Ourcompanyusecredit forassignthereceivableswhichariseasaresultofourdevicesalestofinancialcorporations.Requiredbytheassignment,capitalandamountofinterestofthecredithavebeenpaidbyAveaİletişimHizmetleriA.Şatit’smaturity.

December 31, 2016 December 31, 2015Company Name Share Amount Rate (%) Company Name Share Amount

İnfin A.Ş. (%) 99,80 63.605 99,80Total 63.605 63.605

Company Name

Total AssetTotal

LiabilitiesTotal Equity Net Sales

İnfin A.Ş. 812.425 388.393 424.033 5.767.123Total 812.425 388.393 424.033 5.767.123

Company Name

Total Asset Total Liabilities Total Equity Net Sales

İnfin A.Ş. 2.161.269 1.746.058 415.211 11.727.331Total 2.161.269 1.746.058 415.211 11.727.331

Account Name December 31, 2016 December 31, 2015Bank Loans 119.275.119 57.637.870Financial Lease Payables 392.870 1.140.059Interest Payables Of Deffered Lease Cost (-) (26.989) (93.201)Total 119.641.000 58.684.728

Account Name December 31, 2016 December 31, 2015Short.Por.Long-Term Liab. 74.988.612 196.577.011Total 74.988.612 196.577.011

63


ThetransferredreceivableswhicharecollectedbyAveaİletişimHizmetleriarereceivedthroughthedispositionandtheirrevocabletothefactoringfirmsasfromOctober2015.Accordingtothedispositionconditions,theamountofloan’sandfactoring’sprincipalandinterestsarepaidbyAveaİletişimHizmetleriattheirmaturity.

ThedetailsoftheLongTermBankLoansfortheyearsendedareasfollows:

OurassociatedpartnerDatagateBilgisayarMalzemeleri TicaretA.Ş’s all long termcreditshavebeenusedfor12,24and36monthscontractcampaigncellphones’financing.AllthesecreditsareundertheguaranteeofAveaİletişimHizmetleriA.Ş.AtthesametimeAveaİletişimHizmetleriA.Şcollectsreceivablesofdevicesfromtheirsubscribers.Ourcompanyusecreditforassignthereceivableswhichariseasaresultofourdevicesalestofinancialcorporations.Requiredbytheassignment,capitalandamountofinteresthavebeenpaidbyAveaİletişimHizmetleriA.Şatit’smaturity.

ThedetailsoftheShortTermBankLoansareasfollows:

December 31, 2016

December 31, 2015

Account Name December 31, 2016 December 31, 2015

Bank Loans 1.770.872 67.085.140Financial Lease Payables 307.016 76.331 Interest Payables Of Deffered Lease Cost (-) (11.060) (1.130)Total 2.066.828 67.160.341

TypeForeign Currency

AmountAmount in TL

Annual Interest Rate (%)

Short Term LoansTL Loans 45.577.053 11,41 – 11,52TL Financial Lease Payables 86.431 16EUR Financial Lease Payables 75.325 279.450 5USD Loans 20.941.710 73.698.066 1,5Total Loans 119.641.000


AmountAmount

in TLAnnual Interest Rate

(%)Short Term LoansTL Loans 15.081.961 Faizsiz -11,32-16,01TL Financial Lease Payables 975.114 15,10-15,11EUR Financial Lease Payables 22.578 71.744 5,87USD Loans 14.636.095 42.555.909 1,6-8,10Total Loans 58.684.728

64


Detailsoftheshort-termportionoflong-termliabilitiesasoftheendofperiodisasfollows:

December 31, 2016

December 31, 2015

ThedetailsoftheLongTermBankLoansareasfollows:

December 31, 2016

December 31, 2015

Maturity Information of Bank Loans Liabilities is as follows;

9. DİĞER FİNANSAL YÜKÜMLÜLÜKLERNone.


AmountAmount


(%)TL Loans 74.988.612 11,54-16,44Total Loans 74.988.612


AmountAmount


(%)TL Loans 196.577.011 11,48-16,44Total Loans 196.577.011


AmountAmount


(%)TL Loans 1.770.872 11,48-16,44TL Lease Payables 79.775 295.956 5Total Loans 2.066.828


AmountAmount


(%)TL Loans 67.085.141 11,55-16,19TL Lease Payables 75.200 15,11Total Loans 67.160.341

31 December 2016 31 December 20150-12 ay 194.629.612 255.261.73912-60 ay 2.066.828 67.160.341Total 196.696.440 322.422.080

65


10. TİCARİ ALACAK VE BORÇLARDönemsonlarıitibariylekısavadeliticarialacaklarındetayıaşağıdasunulmuştur:

Our associated partner Datagate Bilgisyar Malzemeleri Ticaret A.Ş.’s 96.429.991 TL’ (31December2015215.611.566TL) fromtheirshort termpartof theassignedreceivablesareusedforsales12,24and36monthsforwardcommitmentcampaignsthroughthesubsidiariesofAveaİletişimHizmetleriA.ŞandthesemobiledevicesreceivablesareundertheguaranteeofAveaİletişimHizmetleriA.Ş.AtthesametimeAveaİletişimHizmetleriA.Şcollectsreceivablesof devices from their subscribers. Our company use 74.988.612 TL (31 December 2015196581.051TL)partofcreditforassignthereceivableswhichariseasaresultofourdevicesales to financialcorporations.Requiredby theassignment,capitalandamountof interesthavebeenpaidbyAveaİletişimHizmetleriA.Şatit’smaturity.


Short-termassignedreceivablesmaturitiesareasfollows:

Long-Termtradereceivablesareasfollows:

Our associated partner Datagate Bilgisyar Malzemeleri Ticaret A.Ş.’s 2.077.902 TL (31December2015 79.655.935TL) from their long termpartof theassigned receivablesareusedforsales12,24and36monthsforwardcommitmentcampaignsthroughthesubsidiariesofAveaİletişimHizmetleriA.ŞandthesemobiledevicesreceivablesareundertheguaranteeofAveaİletişimHizmetleriA.Ş.

Account Name December 31, 2016 December 31, 2015Trade Receivables 669.739.482 696.331.515 Due from Related Parties (Note:37) 961.867 2.410.177 Other Receivables 668.777.615 693.921.338 -Other Receivables 572.347.624 478.309.772 -Assigned Receivables 96.429.991 215.611.566 Notes Receivables 241.058.899 204.944.767 Rediscount on Receivables (-) (15.903.912) (19.806.532) Doubtful Receivables 11.687.302 11.218.666 Provision for Doubtful Receivables (-) (11.687.302) (11.218.666) Total 894.894.469 881.469.750

Assigned Receivables December 31, 2016 December 31, 20150-3 year 38.892.682 54.181.9633-12 year 57.537.309 161.429.603Total 96.429.991 215.611.566

Account Name December 31, 2016 December 31, 2015Trade Receivables 2.077.902 79.655.935 Due from Related Parties - - Other Receivables 2.077.902 79.655.935Rediscount on Assigned Receivables (-) (307.030) (12.570.793)Total 1.770.872 67.085.142

66


Ourcompanyusecreditforassignthereceivableswhichariseasaresultofourdevicesalestofinancialcorporations.Requiredbytheassignment,capitalandamountofinteresthavebeenpaidbyAveaİletişimHizmetleriA.Şatit’smaturity.


Termstructureoftheshorttermdispositionsareasfollows;

Asthedateof31December2016,98.507.893 TLamount,aspointoutaboveisthepartof 894.894.469 TL short term and 1.770.872 TL long term on the brink of total amount of 896.665.341 TLreceivables, isundertheguaranteeofAveaİletişimHizmetleriA.Şandtheassurancewastakenfromcustomersofthegroupfor79.444.445 TLreceivables.230.015.185TL of the remaining 718.713.003 TL receivables are under assurance of Euler Hermes.

Asthedateof31December2015,295.267.501 TL amount,aspointoutaboveisthepartof 881.469.750 TL short term and 67.085.142 TL long term on the brink of total amount of 948.554.892 TLreceivables, isundertheguaranteeofAveaİletişimHizmetleriA.Şandtheassurancewastakenfromcustomersofthegroupfor46.524.462 TL receivables. 340.782.598 TL of the remaining 606.762.929 TL receivables are under assurance of Euler Hermes.

Company and Euler Hermes company have agreed to insurance upon Company’s tradereceivableswithinthebordersofTurkey.Thedetailsareherinbelow;

- Policyisbetween01April2016-31March2017,anditispreparedannually.

- AllthedamagessubjecttopolicyareshowninUSD.

- Warrantratioisdeterminedby%90ofthecreditlimitdemandedtradereceivables.

The movement of Doubtful Receivables is as follows:

Maturityanalysisoftradereceivableoverduethatisnotassessedforimpairmentisasfollows;

Assigned Receivables 31 December 2016 31 December 2015 12-36 year 2.077.902 79.655.935Total 2.077.902 79.655.935

January 1, 2016December 31, 2016


Opening Balance (11.218.666) (9.389.839)Collections in current period (+) 44.104 61.657Exchange Difference - -Period Expenses (-) (512.740) (1.890.484)Period-end Balance (11.687.302) (11.218.666)

December 31, 2016 December 31, 2015

Up to 3 Months 2.607.397 3.347.413 Between 3- 12 Months 438.487 36.821 Total 3.045.884 3.384.234

67


Explanations concerning the nature risk and level of risk of trade receivables are disclosed in Note:38

DetailsofTradepayablesfortheyearendedareasfollows:

Therearenotanylong-termtradepayablesfortheyearsendedDecember31,2016andDecember31,2015.

Average Maturity of Trade receivables and payables are under three months. The tradereceivablesandpayablesinTLwerediscountedusingthecompoundinterestratespecifiedinGovernmentBonds.ReceivablesandpayablesinUSDandEUROarediscountedusingLiborandEuroLiborratesrespectivelyTL%10USD%1,68567andEURO%(0,08629).(December31,2015RatesTL%11,USD%1,1789,EURO%0,05929)

11. OTHER RECEIVABLES AND PAYABLESShort-termotherreceivablesareasfollows:

Long-termotherreceivablesareasfollows:

Explanations concerning the nature risk and level of risk of trade receivables are disclosed in Note: 38

Short-termotherpayablesfortheyearsendedareasfollows:

Account Name December 31, 2016 December 31, 2015Suppliers 797.245.921 644.547.088 Other Suppliers 797.140.572 644.384.684 Due to Related Suppliers (Note:37) 105.349 162.404Notes Payable 2.233.315 84.541.440Rediscount on Payable (-) (6.744.393) (9.221.668)Total 792.734.843 719.866.860

Account Name December 31, 2016 December 31, 2015Deposits and Guarantees Given 14.105 14.105Other Receivables 82.496 100.728Due From Personnel 346.749 221.005Non-commercial Receivables Due From Related Parties (Note:37)

56.924 346.748

Total 500.274 682.586

Account Name December 31, 2016 December 31, 2015Deposits and Guarantees Given 51.685 51.685Total 51.685 51.685

Account Name December 31, 2016 December 31, 2015Taxes, Duties Payable and Other Fiscal Liabilities 9.588.400 6.799.671Non-commercial Payables Due to Related Parties (Note:37)

- -

Other 8.557 11.607Total 9.596.957 6.811.278

68


12. FINANCIAL INSTRUMENTSFinancialInstrumentsfoundinCurrentAssets

TheGroupasofDecember31,2016hasmadea6.394.855USDforeigncurrencypurchaseagreement.Alloftheamount’smaturityis0-3months.ThefairvalueoftheseagreementsasofDecember31,2016is22.407.041TLandthevaluationdifferenceof97.733TLhasbeenwrittenasincome.

DerivativeFinancialInstrumentsfoundinShort-TermLiabilities;

TheGroupasofDecember31,2015hasmadea11.115.416USDforeigncurrencypurchaseagreement.Alloftheamount’smaturityis0-3months.ThefairvalueoftheseagreementsasofDecember31,2015is32.485.146TLandthevaluationdifferenceof165.962TLhasbeenwrittenasexpense.

13. INVENTORIES Inventoriesfortheperiodsendedareasfollows:

Inventories whose invoices are received at an earlier date than their physical entry in thewarehousesareclassifiedundertheaccount“GoodsinTransit”

The Movements in Provision for Decrease in Value of Inventories

Theprovisionfordecreaseinvalueofstocksiscalculatedwithincreasingpercentagesforthegoodswaitingintheinventorymorethan3monthsdependinguponincreaseintheinventoryturnover rate.

Account Name December 31, 2016 December 31, 2015Derivative Financial Instruments Receivables 97.733 -Total 97.733 -

Account Name December 31, 2016 December 31, 2015Derivative Financial Instruments Payables - 165.962 Total - 165.962

Account Name December 31, 2016 December 31, 2015Commercial Goods 148.680.625 131.061.055Goods in Transportation 24.808.688 18.448.518Decrease in Value of Inventory (-) (3.204.256) (2.826.065)Total 170.285.057 146.683.508



Opening Balance (-) (5.300.462) (3.204.256)Translation Differences - -

Provision for the Period(-) - -Period-End Balance 1.202.567 (2.096.206)Dönem sonu bakiyesi (4.097.895) (5.300.462)

69


AsofDecember31,2016,13.989.077TLoftheinventoriesispresentedwiththeirnetrealizablevalueandtheremainingbalanceispresentedwiththeircostinthefinancialstatements.(AsofDecember31,2015,17.232.190TLoftheinventoriesispresentedwiththeirnetrealizablevalueandtheremainingbalanceispresentedwiththeircostinthefinancialstatements)

There is no inventory given as a guarantee for a liability.

TotalAmountof InsurancesonAssets isdisclosed inNote: 22. The information related to inventories recognised as expense in the current period is disclosed in Note: 28.

14. BIOLOGICAL ASSETSNone.

15. PREPAID EXPENSES AND DEFERRED INCOMEShort-Term :

PrepaidExpensesasofDecember31,2016andDecember31,2015areasfollows:

DeferredIncomeareasfollows:

Asthedateof31December2016,117.450.394TLamountoftheadvancesoriginatedfrompropertysalesadvancesofTeklosTeknolojiLojistikHizmetleriA.Ş.Theamountof2.053.136TL is also originated from received advances for unit sales of Datagate Bilgisayar Malzemeleri A.Ş.

Asthedateof31December2015,58.585.837TLamountoftheadvancesoriginatedfrompropertysalesadvancesofTeklosTeknolojiLojistikHizmetleriA.Ş.Theamountof5.299.995TL is also originated from received advances for unit sales of Datagate Bilgisayar Malzemeleri A.Ş.

Amounts thathavebeen invoicedhowevernotdeliveredare recorded in the“income fromfollowingmonths”account.ThisisbecausetheIAS18requirements(delivery,transferofrisk,etc) have not been fulfilled.

Explanation December 31, 2016 December 31, 2015Cost 18.086.972 22.532.652 Provision for Decrease in value of Inventories (4.097.895) (5.300.462) Net Realizable Value (a) 13.989.077 17.232.190 Inventory presented with its cost value (b) 166.653.827 189.410.726 Total Inventories (a+b) 180.642.904 206.642.916

Account Name December 31, 2016 December 31, 2015Prepaid Expenses for Following Mon. 2.874.376 3.965.920Work Advances Given 8.600.951 4.536.357Total 11.475.327 8.502.277

Account Name December 31, 2016 December 31, 2015Work Advances Received 127.465.450 68.714.203Income Relating to Future Mon. 18.350.572 13.057.923Total 145.816.022 81.772.126

70


16. INVESTMENTS EVALUATED BY EQUITY METHOD

InvestmentsaccountedforusingtheEquityMethodhavebeenshownbelowthroughtheFairValueMovementScheduleasfollows:

AsofDecember31,2016andDecember31,2015thegroup’s investmentsvaluedbyequitymethodincluded616.776TLgoodwill.

InformationregardingInvestmentsaccountedforusingtheEquityMethodcanbefoundinNote: 4.

17. INVESTMENT PROPERTIES

December 31, 2016

Cost

Accumulated Depreciation

TeklosA.Ş,3landownersandcontractorfirmSebaİnşaatA.Şhaveagreedonrevenuesharingproportions%40,5,%6and%53,5respectively.

• Time of completion has determined 36 months as from permit date and the deadline is 19.01.2018.

Company Name Participation Rate December 31, 2016 December 31, 2015Neteks 50 9.363.466 10.193.899Total 9.363.466 10.193.899

December 31, 2016 December 31, 2015January 1 Opening 10.193.899 9.053.260Share from Period Profit (2.305.118) (975.527)Foreign Currency Translation Differences 1.474.685 2.116.166December 31 Closing 9.363.466 10.193.899

Account NameJanuary 1,

2016Purchases Disposals Transfer(*)

December 31, 2016

Land 19.434.414 - - - 19.434.414 Land Improvements 44.297 - - - 44.297 Buildings 16.196.105 - (128.713) - 16.067.392Total 35.674.816 - (128.713) - 35.546.103


2016 Purchases Disposals Transfer(*)

December 31, 2016

Yer Altı Yer Üstü (44.297) - - - (44.297)Binalar (5.059.381) (23.895) 4.505 - (5.078.771)Toplam (5.103.678) (23.895) 4.505 - (5.123.068)

Net Değer 30.571.138 30.423.035

71


• Project is all about workplace; construct on 24.651 m2 land, total construction area is 106.330 m2, sellable land area is 62.362 m2 and the project is made up of 204 indepen-dent parts in total.

• With receiving the building license, our associated partner Teklos A.Ş’s estimated gain (inclu-des VAT) is calculated over 90 millions USD approximately.

• “Building license’’ has taken from Sarıyer Municipality on the date of 19.01.2015.

Byyear31December2016,thispropertyisstartedtobeclassifiedasinvestmentpropertywithresignationdesolatelytotheconstructionfirmforthepurposeofconstruction.Previously,this property is classified as tangible assets because it is used for company activities. It is in financial statementwithpropertyamountand thebookvalue is27.757.030TL.The rest2.666.005TLofpropertieswithbookvaluearecomposedofacquisitionofpropertiesfromreceivablesonthepartofsubsidiariesinİstanbulandTekirdağ.TheGroupassumesthattheresidualcostofbuildingsinTekirdağisclosetotheirmarketvalue.

The informations about redemption and depreciation expenses’ accounted accompts areplaced in Note: 30-31. The informations of the investment properties’ depreciation ratiosandtheirmethodsareplacedinNote:2.08.16.Rentalincomeoftheinvestmentpropertiesincurrentperiod isnon-available.Theexpensesof investmentpropertiesareaccountedfromwithinoperationalexpenses.(Note:31)Everymortgage,limitationsandexegesiscanbefoundin Note:22.Apartformthatthereisnolimitationovertheliquidityofpropertiesandusageofcashwhichcomefromrevenues.AssurancesonassetvalueareplacedinNote:22.

December 31, 2015

Cost



2015Purchases Disposals Transfer(*)

December 31, 2015

Land 19.434.414 - - - 19.434.414 Land Improvements 44.297 - - - 44.297 Buildings 16.196.105 - - - 16.196.105 Total 35.674.816 - - - 35.674.816


2015Amortization Disposals Transfer

December 31, 2015

Land Improvements (44.297) - - - (44.297)Buildings (5.032.910) (26.471) - - (5.059.381)Total (5.077.207) (26.471) - - (5.103.678)

Net Value 30.597.609 30.571.138

72


18. MADDİ DURAN VARLIKLARTheFixedAssetsdetailsfortheyearsendedareasfollows

December 31, 2016

Cost Value


December 31, 2015

Cost Value


2016Additions Disposals (-) Transfer

December 31, 2016

Machinery, Plants&Equipments

4.056.644 - - - 4.056.644

Motor Vehicles 2.734.411 224.035 (267.798) - 2.690.648 Furniture & Fixtures 7.232.796 879.005 (229.006) 595.170 8.477.965 Leasehold improvements

5.078.215 115.709 - - 5.193.924

Total 19.102.066 1.218.749 (496.804) 595.170 20.419.181



December 31, 2016


(2.386.845) (479.372) - - (2.866.217)

Motor Vehicles (2.283.904) (302.771) 252.202 - (2.334.473)Furniture & Fixtures (5.789.393) (872.614) 225.518 - (6.436.489)Leasehold improvements

(1.801.008) (984.577) - - (2.785.585)

Total (12.261.150) (2.639.334) 477.720 - (14.422.764)

Net Value 6.840.916 5.996.417



December 31, 2015


4.056.644 - - - 4.056.644

Motor Vehicles 2.804.223 31.340 (101.152) - 2.734.411Furniture & Fixtures 6.662.058 584.341 (13.603) - 7.232.796Leasehold improvements

4.812.108 267.807 (1.700) - 5.078.215

Total 18.335.033 883.488 (116.455) - 19.102.066

73



Other Information

The depreciation and amortization expenses are recognised under the operational expenses

AmountofInsurancesonAssetsisdisclosedinNote: 22.

19. INTANGIBLE FIXED ASSETSDecember 31, 2016

Cost Value


Otherintangibleassetsconsistofartobjects.Theyarenotsubjecttodepreciationduetotheirindefinite useful life.



December 31, 2015


(1.905.934) (480.911) - - (2.386.845)

Motor Vehicles (2.013.650) (354.516) 84.262 - (2.283.904)Furniture & Fixtures (5.098.134) (692.757) 1.498 - (5.789.393)Leasehold improvements

(845.158) (955.907) 57 - (1.801.008)

Total (9.862.876) (2.484.091) 85.817 - (12.261.150)

Net Value 8.472.157 6.840.916


2016Additions Disposals (-) Taransfer

December 31, 2016

Rights 3.924.874 1.106.802 (249.300) (595.170) 4.187.206Other Intangible Fıxed Assets

130.810 - - 130.810

Total 4.055.684 1.106.802 (249.300) (595.170) 4.318.016


2016Amortization

Disposals (-)

Transfer December 31, 2016

Rights (719.522) (236.125) - - (955.647)Total (719.522) (236.125) - - (955.647)

Net Value 3.336.162 3.362.369

74


December 31, 2015

Cost Value


Otherintangibleassetsconsistofartobjects.Theyarenotsubjecttodepreciationduetotheirindefinite useful life.

The depreciation and amortization expenses are recognised under the operational expenses.

Thegoodwill amount,which is also the openingbalance, is related toDatagateBilgisayarA.Ş.,oneoftheparticipationsoftheCompany.Thegoodwillamountisreviewedatleastonceannually.ThelastevaluationofDatagatewasmadeonDecember31,2015andnoimpairmentwasdetermined.Therewasnotany impairment forthegoodwillasofDecember31,2016.Thegoodwillamountforthiscompanyisreviewedateachbalancesheetdate.Duringreviewofgoodwill, thepresent valueof thecashamounts,whichareobtainedby thementionedcompany,iscalculated.

20. LIABILITIES IN THE SCOPE OF EMPLOYEE BENEFITSTheLiabilitiesintheScopeofEmployeeBenefitsfortheperiodsendedDecember31,2016andDecember31,2015areasfollows:Borçlaraşağıdaaçıklanmıştır.


2015Additions Disposals (-)

December 31, 2015

Rights 916.407 3.008.467 - 3.924.874Other Intangible Fıxed Assets 130.810 - - 130.810 Total 1.047.217 3.008.467 - 4.055.684


2015Amortization

Disposals (-)

December 31, 2015

Rights (670.492) (49.030) - (719.522)Total (670.492) (49.030) - (719.522)

Net Value 376.725 3.336.162

Goodwill December 31, 2016 December 31, 2015

Opening Balance 1.897.699 1.897.699Additions - -Disposals/ Sales - -Translation Difference - -Closing balance 1.897.699 1.897.699

Account Name December 31, 2016 December 31, 2015Payables to Employees 2.209 248SGK Payable 966.778 484.860Total 968.987 485.108

75


21. GOVERNMENT GRANT AND ASSISTANCENone.

22. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

Price difference invoices are taken from customers for the products sold in different prices from previous period and provisions aremade for them. Also targets have been given tocustomersinordertoincreasethesalesandturnoverpremium,creditnote,pricedifference,etc. invoices are taken from customers in the event of targets achieved by the customers and provisions are made for them.

ii) Contingent Assets and Liabilities;

December 31, 2016

AsofDecember31,2015,forthelawsuitsinitiatedagainstGroup,provisionamountTL 920.254 is reflected to the financial statements.Almostallof theprovisions for litigationsconsistofcustomlawsuits.

December 31, 2015

AsofDecember31,2015,forthelawsuitsinitiatedagainstGroup,provisionamountTL891.857is reflected to the financial statements.Almostallof theprovisions for litigationsconsistofcustomlawsuits.

Account Name December 31, 2016 December 31, 2015Provisions for Price Differences 41.379.749 37.441.935Provision for Litigations 920.254 891.857Total 42.300.003 38.333.792

December 31, 2016Provision for Litigations

Price Differences

Provisions for TT Net Campaign

Total

As of January 1 891.857 37.441.935 - 38.333.792 Additions 28.397 41.379.749 - 41.408.146Payments / Offsetting - (37.441.935) - (37.441.935)As of December 31, 2016 920.254 41.379.749 - 42.300.003

December 31, 2016Provision for Litigations

Price Differences

Provisions for TT Net Campaign

Total

As of January 1 1.893.995 25.566.310 342.197 27.802.502Additions (24.386) 37.441.935 - 37.417.549Payments / Offsetting - (25.566.310) (342.197) (25.908.507)Terminated Provisions (977.752) - - (977.752)As of December 31, 2015 891.857 37.441.935 - 38.333.792

76


iii) Contingent Liabilities and Commitments:

December 31, 2016

December 31, 2015

Guarantee lettersaregiven tosomepublic institutions,domesticand foreignsellerswhichGrouppurchasefrom.Theyaretheguaranteeofliabilitiesobtainedfrompurchaseofgoods.Thereisnocashout-flowrelatedwiththeguaranteelettersduetotheliabilitiesarepaidontheir maturity.

iv) Total Insurance Coverage on Assets;

December 31, 2016

AdditionalinformationsrelatedtradereceivablesinsuranceareenclosedinNote:10.

December 31, 2015

TL USD EUROBailment Given 125.187.876 10.050.000 -Guarantee Letters given 138.067.038 17.470.000 -Total 263.254.914 27.520.000 -

TL USD EUROBailment Given 149.349.126 7.550.000 -

Guarantee Letters given 128.635.400

9.265.000 1.400.000

Total 277.984.526 16.815.000 1.400.000

Type of Insured Assets USD TL Trade goods 98.500.000 -Vehicles - 2.451.560 Plants machinery and equipment 2.480.704 3.392.541 Total 100.980.704 5.844.101

Type of Insured Assets USD TL Trade goods 111.291.962 -Vehicles - 2.481.342 Plants machinery and equipment 6.480.874 -Total 117.772.836 2.481.342

77


v ) The ratio of Mortgages and Guarantees Given to Shareholders’ Equity is as follows;

AmountsstatedintheabovetablearetheamountsinTLattheendoftheperiod.

TheratioofMortgagesandGuaranteesGiventoShareholders’Equity is0%. (0%asofDecember31,2015)

23. COMMITMENTSNone.

24. EMPLOYEE BENEFITS

UndertheTurkishLaborLaw,theGroupisrequiredtopayemployeeterminationbenefitstoeachemployee,whohasentitledtoreceiveprovisionsforemployeeterminationbenefitsinaccordancewiththeeffectivelaws.AdditionallytheCompanyisrequiredtopayemployee

whohastherightofseverancewithterminationindemnity.

Mortgages & Guarantees Given by the Group

December 31, 2016

December 31, 2016

December 31, 2015

December 31, 2015

Foreign Currency

AmountTL Amount

Foreign Currency

AmountTL Amount

A. Total amount of M&G Given on behalf of the Group - 199.547.462 - 160.022.954

Guarantee Letter (USD) 17.470.000 61.480.424 9.265.000 26.938.914

Guarantee Letter (EURO) - - 1.400.000 4.448.640

Guarantee Letter (TL) 138.067.038 138.067.038 128.635.400 128.635.400

Guarantee notes and cheques(TL)

Lien

Mortgage(USD)

B. Total amount of M&G Given on behalf of the

Subsidiaries and Affiliated Companies subject to full

consolidation

- 160.555.836 - 171.301.506

Bailment (USD) 10.050.000 35.367.960 7.550.000 21.952.380

Bailment (EURO)

Bailment (TL) 125.187.876 125.187.876 149.349.126 149.349.126

C. Total Amount of M&G Given on behalf of the

third person liability in order to sustain usual business

activities.

- - - -

D. Total Amount of other M&G Given - - - -

i. Total Amount of M&G Given on behalf of main

shareholder- - - -

ii. Total Amount of M&G Given on behalf of other

affiliated companies which cannot be classified under

section B and C.

- - - -

iii. Total Amount of M&G Given on behalf of the third

person that cannot be classified under section C.- - - -

Total - 360.103.298 - 331.324.460

Account Name December 31, 2016 December 31, 2015Provision for Employment Termination 3.900.772 3.293.817Total 3.900.772 3.293.817

78


ThemaximumemployeeterminationbenefitpayableasofJanuary1,2017isTL4.426,16(December31,2015:TL4.092,53)andtaken intoconsideration inthecalculationsoftheGroup’sprovisionforterminationindemnities.

Termination indemnity payable is calculated by forecasting the present value of currently working employee’s possible future liabilities. IAS 19 (“Employee Termination Benefits”)predicts tobuildupGroup’s liabilitieswithusingactuarial valuation techniques incontextof defined benefit plans. According to these predictions, actuarial assumptions used incalculationoftotalliabilitiesareasfollows.

Theprincipalassumptionisthatthemaximumliabilityforeachyearofservicewillincreasein linewiththe inflation.Therefore,thediscountrateappliedrepresentstheexpectedrealrateafteradjustingfortheanticipatedeffectsoffutureinflation.Consequently,inthefinancialstatementsdatedasofDecember31,2016,theprovisionwascalculatedbyestimatingthepresentvalueofthefutureprobableobligationoftheGrouparisingfromtheretirementoftheemployees. The provisions at the balance sheet dates have been calculated assuming an annualinflationrateof6,75%andadiscountrateof10,5%.Withthattherealdiscountrateof3,51%(December31,2015:3,76%)wasusedinthecomputation.Theseexpectationsarereviewedeverybalancesheetperiodandrevisedifrequired.

Asthedate31December2016,Theprobabilityofmakenotprovisioninrelationtobenefit

obligationisapproximately%97,97.(31December2014:%97,22)

Provision expense for termination indemnities is recognised under the operational expenses.

AccordingtotheregulationunderIAS19releasedonJanuary1,2013actuariallossesandgainsaretoberecordedunderothercomprehensiveincomeinShareholder’sEquity.

TheactuarialgainsexpensedinthecurrentperiodareTL250.853Theportionofdeferredtaxincome that relates to this expense has also been recorded similarly in other comprehensive income,asaresult,othercomprehensiveexpenseisTL200.682.

Previous term, the amount of 225.468 TL is accounted as actuarial gain. As a result ofdeferredtaxincomewhichisrelatedtothisamountisaccountedasthesameasactuarialgainandthenewcomprehensiveincomebecame180.375TLbecauseofthistransaction.



January 1 3.293.817 2.783.123Service Cost 464.847 391.527Actuarial Profit 250.853 225.468Interest Cost 329.382 278.312Nullifed Provisions 455.401 -Difference Between Previous Period Provision and Current Period Termination Indemnity Paid

451.031

Payments (-) (893.528) (835.644)Closing Balance 3.900.772 3.293.817

79


The recorded accounts for the current period Termination Indemnity Provision Expenses (Income)areasfollows:

25. ASSETS AND LIABILITIES RELATED TO CURRENT PERIOD TAXNone.

26. OTHER ASSETS AND LIABILITIESOtherCurrentAssetsfortheyearsended,areasfollows:

CreditNoteIncomeAccrualtransactionsareasfollows:



General and Administrative Expenses (1.249.630) (1.120.870)Other Real Operating Expenses - - Income/ (Expense) Recorded in Profit and Loss (1.249.630) (1.120.870)Actuarial Losses (*) Recorded in Other Comprehensive Income (250.853) (225.468)Total Period Expense/ (Income) (1.500.483) (1.346.338)



Actuarial Losses Recorded in Other Comprehensive Income (250.853) (225.468)Tax Effect % 20 50.171 45.093Amount (200.682) (180.375)Minority Actuarial Gain (17.436) 4.791Net Amount (218.118) (175.584)

Account Name December 31, 2016 December 31, 2015Credit Note Income Accrual 18.441.708 22.931.348Deferred VAT 1.453.551 119.514Advances Given For Purchases 385.972 91.599Total 20.281.231 23.142.461

Account NameJanuary 1, 2016

December 31, 2016January 1, 2016

December 31, 2016Opening 22.931.348 28.922.641 Current period accrual 311.973.164 266.720.495 Collection / Current account transfer (316.462.804) (272.711.788) Balance at the end of year 18.441.708 22.931.348

80


27. SHAREHOLDERS’ EQUITYi) Minority Shares / Minority Shares Profit / (Loss)

Increase (decrease) through treasury share transactions, equity

ii) Capital / Share Capital / Elimination Adjustments

The share capital of the Company is 56.000.000 TL and the share capital consist of56.000.000per-shareswhicheachof1nominalvalue.ThepaidincapitaloftheCompany,whichis56.000.000TL,consistsofAGroupsharesissuedtothenameaspaid-incapitalis318,18TL,BGroupsharesissuedtothebearaspaid-incapitalis55.999.681,82TL.AGroupof shareholders have the rights to appoint one more of the half member of the Executive Board.Aftertheinitialdividendisgivenfromthedistributionofprofit,AgroupShareholdershasalsotherightstoget%5oftheremainingpart.

TheCompanyacceptstheRegisteredSharecapitalSystemwiththeJanuary20,2014datedpermission of Capital Market Board and determined the Registered Share Capital ceiling raise from 75.000.000 TL to TL 150.000.000. The decision accepted at Regular MeetingShareholdersoftheGroupdatedMay9,2014.ThepermissionoftheRegisteredShareCapitalceilingbelongstobetween2014-2018years.

ThesharecapitalshownintheconsolidatedbalancesheetisthesharecapitaloftheCompany.The amounts of share capital of the subsidiaries and the subsidiary account are eliminated mutually.

TheultimatecontrollingpartyoftheGroupisNevresErolBilecikandhisfamilymembers.

Account Name December 31, 2016 December 31, 2015Minority Shares 30.318.051 29.196.804Total 30.318.051 29.196.804



December 31, 2016Opening 29.196.804 19.124.871Minority Shares Profit - (Loss) 7.379.362 10.229.210Foreign Exchange Translation Differences (282.455) (152.486)Transfer from Artım A.Ş. (3.842.066) -Increase (decrease) through treasury share transactions, equity

(113.029) -

Actuarial Gains/Losses from Retirement Plans 17.436 (4.791)The minitory shares of subsidiary’s dividend payment (2.038.001) -Total 30.318.051 29.196.804


Shareholder Share Percentage % Share AmountShare Percentage

%Share Amount

Nevres Erol Bilecik % 36,26 20.306.266 % 35,93 20.120.551Alfanor 13131 AS % 26,08 14.604.887 % 20,00 11.200.000Public Shares % 35,29 19.761.392 % 41,70 23.351.994Other % 2,37 1.327.455 % 2,37 1.327.455Total % 100 56.000.000 % 100 56.000.000

81


iii) Capital Reserves

None.

iv) Accumulated Other Comprehensive Income or (Expense) not to be Reclassified in

Profit or Loss

TheanalysisAccumulatedOtherComprehensiveIncomeor(Expense)nottobeReclassifiedinProfitorLossareasfollows:

v) Accumulated Other Comprehensive Income or (Expense) to be Reclassified in

Profit or Loss

TheForeignCurrencyExchangeDifferencesMovementScheduleisasfollows:

vi) Restricted Reserves from Profit

Restricted reserves from profits consist of legal reserves.

The legal reserves consist of first and second legal reserves, appropriated in accordancewith theTurkishCommercialCode (TCC).TheTCCstipulates that the first legal reserve isappropriatedoutofhistoricalstatutoryprofitsattherateof5%perannum,untilthetotalreservereaches20%oftheCompany’shistoricalpaid-insharecapital.Thesecondlegalreserve isappropriatedat the rateof10%perannumofallcashdistributions inexcessof5%of thehistoricalpaid-insharecapital.UnderTCC,thelegalreservesarenotavailablefordistributionunlesstheyexceed50%ofthehistoricalpaid-insharecapitalbutmaybeusedtooffsetlossesin the event that historical general reserve is exhausted.

vii) Previous Years’ Profits / (Losses)

Profitsofpreviousyearsconsistofextraordinaryreserves,miscellaneousinflationdifferencesandprofitsofotherpreviousyears.InaccordancewiththeCMB’sdecisionnumbered7/242datedonFebruary25,2005; if theamountofnetdistributableprofitbasedon theCMB’srequirementontheminimumprofitdistributionarrangements,whichiscomputedoverthenet

Account Name December 31, 2016 December 31, 2015January 1 Opening (374.350) (198.766)Actuarial Gains and (Losses) (Note:24) (250.853) (225.468)Tax Effect (Note:24, Note:35) 50.171 45.093Minority Share Actuarial Gains (17.436) 4.791Actuarial Gains and Losses (Net) (592.468) (374.350)Revaluation Gains and Losses (592.468) (374.350)Other Gains and Losses - -Accumulated Other Comprehensive Income or (Expense) not to be Reclassified in Profit or Loss

(592.468) (374.350)

Account Name December 31, 2016 December 31, 2015January 1 Opening 11.404.396 9.065.695Additions/Disposals 1.694.041 2.338.701End of Period Balance 13.098.437 11.404.396

82


profitdeterminedbasedontheCMB’sregulations,doesnotexceedthenetdistributableprofitinthestatutoryaccounts,thewholeamountshouldbedistributed,otherwise;alldistributableamountinthestatutoryaccountsaredistributed.However,noprofitdistributionwouldbemadeifanyfinancialstatementspreparedinaccordancewiththeCMBoranystatutoryaccountscarrying net loss for the period.

Shareholders’Equityasofperiodsendedisasfollows:

Exceptdividenddistributionandallocationoflegalreserves,Companiespreviousyears’profithasbeenoffsetwiththeamountofTL3.924.751duetoincreaseofthesubsidiaryownershipfrom%51to%100.

Thenumberofwithdrawnsharesare162.402andthiswithrawntransactionoccuredin2013.Incurrentperiod61.961amountofDatagateA.Ş.’sshareshavebeentakenback.

In the financial statements prepared according to the standards of theCMB, theGroup’scurrent period profit was 53.749.278 TL. The Company’s distributable profit in statutoryfinancial statements for current period is 3.756.159 TL Company’s distributable dividend(includescurrentperiodprofit/loss) frompreviousperiodprofits is limitedwith thisamount.Inflationadjustmentsonsharecapitalandrealestate’ssalesprofits,whichareheld in fundtobeaddedtothesharecapital,werenottakenintoconsiderationduringcalculationoftotaldistributable profit.

Account Name December 31, 2016 December 31, 2015Share capital 56.000.000 56.000.000Capital Conversion Differences 1.064.323 1.064.323Withdrawn Shares (-) (798.565) (634.290)Other Comprehensive Income/Expense not to be Reclassified in Profit/Loss

(592.468) (374.350)

- Revaluation Gains/Losses (592.468) (374.350)Other Comprehensive Income/Expense to be Reclassified in Profit/Loss

13.098.437 11.404.396

- Hedging (Not:9) - - - Foreign Currency Translation Differences 13.098.437 11.404.396Restricted Reserves From Profit 17.763.662 12.605.752-Legal Reserves 16.616.612 11.458.702 - Profit from sale of affiliates except from Corporate Tax 1.147.050 1.147.050Previous Years’ Profits 54.591.980 53.656.587Net Period Loss/ Profit 52.002.244 44.920.203Parent Company Shareholders' Equity 193.129.613 178.642.621Minority Shares 30.318.051 29.196.804Total Shareholders’ Equity 223.447.664 207.839.425

Account Name December 31, 2016Purchase from Artım A.Ş 7.759.100Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control

(3.842.066)

Openning Balance of Artım A.Ş ‘s minitory shares 7.717Total 3.924.751

83


28. SALES AND COST OF SALESSales and cost of sales details which belong twelve months accounting period of the Group are as follows:

29. EXPENSES RELATED TO THEIR NATUREExpenses Related to Their Nature of the Group as are as follows:

Depreciation and amortisation expenses and personnel expenses are recognised in operational expenses.



December 31, 2015Domestic Sales 3.834.431.170 3.436.720.003 Foreign Sales 36.858.003 8.358.011 Other Sales 37.722.607 57.707.854Sales Returns (-) (104.496.607) (82.607.468)Sales Discounts (-) (4.719.666) (30.217.362)Other Discounts (-) (6.192.856) (5.270.158)Net Sales 3.793.602.651 3.384.690.880Cost of Sales (-) (3.637.624.310) (3.231.879.393)Gross Profit / (Loss) 155.978.341 152.811.487



December 31, 2015

Marketing, Selling and Distribution Expenses and General Administrative Expenses(-)

(63.812.076) (61.140.144)

- Personnel Expenses (35.143.060) (32.716.923) - Logistic and storage expenses (4.558.278) (4.839.609) - Depreciation expenses (2.899.354) (2.559.107) - Rental Expense (6.657.854) (5.766.651) - Communication Expense (379.568) (324.769) - Travelling Expenses (396.445) (546.643)- Transportation Expenses (1.109.264) (1.064.368) - Sale and Foreign Trade Expenses (1.040.822) (828.911) - Consultancy and Audit Expenses (613.039) (560.516) - Insurance Expenses (5.130.051) (4.989.863) - Advertisement Expense (594.752) (597.260)- Taxes, Duties, Charges Expenses (156.176) (352.826)- Provisions for termination indemnities expenses (1.249.630) (1.120.869) - Other Expenses (3.883.783) (4.871.829)Total Operating Expenses (63.812.076) (61.140.144) - Satış ve Dış Ticaret Gid. (655.215) (574.159) - Diğer Giderler (2.752.340) (2.568.111)Toplam Faaliyet Giderleri (48.576.073) (43.850.884)

84


30. RESEARCH AND DEVELOPMENT, MARKETING, SALES & DISTRIBUTION EXPENSESOtheroperatingexpenseswhichbelongtwelvemonthsaccountingperiodoftheGroupareasfollows:

31. OTHER OPERATING INCOME / EXPENSEOtheroperating Income/Expensewhichbelong twelvemonthsaccountingperiod,of theGroupareasfollows:

32. INCOME/EXPENSES FROM INVESTMENT OPERATIONSFinancialincomefortheperiodsendedisasfollows:



December 31, 2015General Administrative Expenses (-) (32.929.558) (30.868.074)Marketing, Selling and Distribution Expenses (-) 30.882.518) (30.272.070)Total Operating Expenses (63.812.076) (61.140.144)



December 31, 2015Other Income from Operations 101.670.212 97.669.633 Nullified Doubtful Receivables Provisions - 1.041.156 Insurance Claim Income - 203.757 Eliminated Interest from Sales 41.069.304 46.931.289 Current Period Accrued Income 14.420.231 13.553.424 Foreign exchange differences Income (trade receivables and payables)

46.155.744 35.290.885

Other Income and Profits 24.933 649.122Operating from the Other Expenses (-) (112.421.353) (98.408.039) Interest Eliminated from Purchases (37.497.018) (40.641.027) Current Period Rediscount Expenses (18.302.853) (13.175.663) Foreign currency exchange losses (trade receivables and payables)

(56.209.022) (43.911.360)

Other Expenses and Losses (-) (412.460) (679.989)Other Income/Expense (net) (10.751.141) (738.406)



December 31, 2015Inome from Investment Operatiıns 322.268 49.929Profit from Fixed Asset Sales 322.268 49.929Investment Operatiıns Expense (-) - -Other Income/Expense (Net) 322.268 49.929



December 31, 2015Profit / (Loss) of Investments evaluated for Equity Method (2.305.118) (975.527)Other Income/Expense (Net) (2.305.118) (975.527)

85


33. FINANCIAL INCOME/ EXPENSESFinancialIncomesandexpensesoftheGroupareasfollows:

There are no capitalized financial expenses of Company for current period.

34. FIXED ASSETS HELD FOR SALE PURPOSES AND DISCONTINUED OPERATIONSNone.

35. TAX ASSETS AND LIABILITIES The Company’s tax income / (expense) are composed of current period’s corporate taxexpense and deferred tax income / (expense).

ThetaxassetsandliabilitiesoftheCompanyareasfollows:

i) Provision for Current Period Tax

Companies calculate their temporary taxes on their quarterly financial profits in Turkey.Corporate income as of the temporary tax periods, temporary tax rate of 20% over thecorporateincomewascalculatedandprepaidtaxesdeductedfromtaxationonincome.

AccordingtoTurkishCorporateTaxLaw, lossescanbecarriedforwardtooffsetthefuturetaxableincomeforamaximumperiodof5years.Ontheotherhand,suchlossescannotbecarriedbacktooffsetprioyears’profits.



December 31, 2015Interest Income 1.684.413 3.943.885Foreign Exchange Translation Income 18.000.601 13.640.886Total Financial Income 19.685.014 17.584.771



December 31, 2015Bank and Interest Expenses (22.256.444) (30.421.531)Foreign Exchange Translation Expense (2.030.870) (7.838.948)Total Financial Expenses (24.287.314) (38.260.479)

Account Name December 31, 2016 December 31, 2015Provision for Current Period Tax 18.043.378 20.447.333Prepaid Taxes (-) (10.936.287) (14.849.304)Total Net Tax Payable 7.107.091 5.598.029



December 31, 2015Provision for Current Period Tax (18.043.378) (20.447.333)Deferred Tax Income / (Expense) 2.595.010 6.265.115Total Tax Income / (Expense) (15.448.368) (14.182.218)

86


AccordingtoCorporateTaxLaw’sArticle:24,thecorporatetaxisimposedbythetaxpayer’stax returns. There is no prosedure for a final and definitive agreement on tax assessments. Annualcorporatetaxreturnsaresubmitteduntilthe25thofAprilfollowingtheclosingoftheaccountingyear.Moreover,thetaxauthoritieshavetherighttoexaminethetaxreturnsandtherelatedaccountingrecordswithinfiveyears.

Income Withholding Tax:

In addition to corporate tax, Group should also calculate income withholding tax on anydividendsandincomedistributed,exceptforresidentcompaniesinTurkeyreceivingdividendsfrom resident companies in Turkey and Turkish branches of foreign companies. The rate of withholding tax has been increased from 10% to 15% upon the Cabinet decision No:2006/10731,whichwaspublishedinOfficialGazetteonJuly23,2006.

ii) Deferred Tax

Thedeferred taxassetand tax liability isbasedon the temporarydifferences,whicharisebetween the financial statementspreparedaccording toCMB’saccountingstandardsandstatutory tax financial statements. These differences usually due to the recognition of revenue and expenses in different reporting periods for the CMB standards and tax purposes.

Account Name

Dec. 31, 2016Accumulated

Temporary Differences

Dec. 31, 2016Deferred

Tax Assets / (Liabilities)

Dec. 31, 2015Accumulated

Temporary Differences

Dec. 31, 2015Deferred

Tax Assets / (Liabilities)

Fixed Assets (2.297.581) (459.516) (1.881.615) (376.323)Rediscount Expense 61.343.464 12.268.693 46.383.306 9.276.661Provision for Termination Indemnity

3.900.772 780.154 3.293.817 658.763

Provision for Value Decrease in Inventories

4.097.895 819.579 5.300.462 1.060.092

Rediscount Income (6.388.751) (1.277.750) (8.092.708) (1.618.542)Derivatives (97.733) (19.547) 165.962 33.192Other (608.610) (121.722) 1.554.326 310.867Deferred Tax Asset / Liability

11.989.891 9.344.710


Deferred Tax Asset / Liability at the beginning of the period9.344.710 3.034.502

Actuarial Gains and Losses 50.171 43.895Minority Actuarial Gains and Losses - 1.198Foreign Currency Translation Differences - -Deferred Tax Income / (Expense) 2.595.010 6.265.115 Hedging Fund - -Deferred Tax Asset / Liability at the end of the period 11.989.891 9.344.710

Account Name December 31, 2016 December 31, 2015Deferred Tax Receivables 12.079.772 9.471.225Deferred Tax Payables (-) (89.881) (126.515)Deferred Tax Recei./Payable. 11.989.891 9.344.710

87


36. NET EARNINGS PER SHAREEarnings per share in the income statement are calculated by dividing net income by the weightedaveragenumberofcommonsharesoutstandingfortheperiod.Company’searningspersharearecalculatedfortheperiodsareasfollows:

37. EXPLANATIONS OF RELATED PARTIES

a) Receivables and Payables of Related Parties:

January 1, 2016– December 31, 2016

January1,2015–December31,2015

There are no guarantees or mortgages for the related party receivables or payables. There is noprovisionmadefordoubtfulreceivablesfortherelatedpartyreceivables.İnfinA.Ş.isthesubsidiarywhich isnot included in theconsolidation,NeteksDışTicaretA.Ş. is theaffiliateevaluatedbyequitymethod,Desbil,DespecandHomendareotherrelatedparties.



Net Profit For The Period / (Loss) 52.002.244 44.920.203Weighted Average Number of Common Shares Outstanding 56.000.000 56.000.000Earnings / (Loss) per Share 0,92861150 0,80214648 Corresponding to the Preference Shares Gain 8.171,83 7.058,93The earnings attributable to Common Shares 0,882186 0,762043

December 31, 2016Receivables Liabilities

Commercial Non-Commercial Commercial Non-Commercial Şahıs Ortaklar - - - -Neteks A.Ş. 525.269 - 2.543 -Homend A.Ş. - 56.216 5.042 -Desbil A.Ş. - 708 - -İnfin A.Ş. 17.386 - 76.064 -Neteks Dış Tic. 257 - - -Despec A.Ş. 418.955 - 21.700 -Total 961.867 56.924 105.349 -

December 31, 2015Receivables Liabilities

Commercial Non-Commercial Commercial Non-Commercial Şahıs Ortaklar - - - -Neteks A.Ş. 731.992 - 9.822 -Homend A.Ş. 8.007 1.927 209 -Desbil A.Ş. 49.368 344.821 - -İnfin A.Ş. 1.109.903 - 152.373 -Neteks Dış Tic. 265 - - -Despec A.Ş. 510.642 - - -Total 2.410.177 346.748 162.404 -

88


The related party balances generally consist from trade transactions. But in some conditions there are cash usages between the related parties. The balances consist from non-tradetransactionsareclassifiedasnon-tradereceivablesorpayables inthefinancialstatements.Interest iscalculatedforthebalancesandinvoicedquarterly.AsofDecember31,2016theinterestrateforUSDis%3,5EURis%3,5andTLis%14.(December31,2015USDis%3,5

EURis%3,5andTLis%14)

b) Purchases from Related Parties and Purchases from Related Parties:


Sales to Related PartiesGoods and

Service SalesCost

AllocationInterest and Foreign

Exchange IncomeTotal Expense/

PurchasesDesbil A.Ş. - 7.100 3.872 10.972 Despec A.Ş. 2.178.894 1.200.602 228.445 3.607.941 Homend A.Ş. 26.624 23.245 - 49.869 İnfin A.Ş. 4.217.660 42.129 1.039.601 5.299.390 Neteks A.Ş. 86.131 4.612.556 720.237 5.418.924 Total 6.509.309 5.885.632 1.992.155 14.387.096

Purchases From Related Parties

Goods and Service Sales

CostAllocation

Interest and Foreign Exchange Income

Total Expense/ Purchases

Desbil A.Ş. - - 6.304 6.304 Despec A.Ş. 546.334 434 84.869 631.637 Homeend A.Ş. - - - -

İnfin A.Ş.

4.087.468 114.769 463.658 4.665.895

Neteks A.Ş. 79.685 486 206.155 286.326 Total 4.713.487 115.689 760.986 5.590.162

Sales to Related PartiesGoods and

Service SalesCost

AllocationInterest and Foreign

Exchange IncomeTotal Expense/

PurchasesDesbil A.Ş. - - 116.626 116.626 Despec A.Ş. 3.029.824 1.359.166 91.275 4.480.265

Homend A.Ş. 26.354 20.337 1.026

47.717 İnfin A.Ş. 7.444.487 - 400.627 7.845.114 Neteks Dış Ltd.Şti. - 254 - 254 Neteks A.Ş. 238.661 4.985.073 422.060 5.645.794 Total 10.739.326 6.364.830 1.031.614 18.135.770

Purchases From Related Parties

Goods and Service Sales

CostAllocation

Interest and Foreign Exchange Income

Total Expense/ Purchases

Desbil A.Ş. - - 18.591 18.591 Despec A.Ş. 892.764 123.860 39.837 1.056.461

Homend A.Ş. 50.294

62.065 1.562

113.921

İnfin A.Ş. 272.072 414.899 1.122.052 1.809.023

Neteks A.Ş.

503.268 57.094 375.039

935.401

TOPLAM 1.718.398 657.918 1.557.081 3.933.397

89



c) Benefits and wages provided to Management Staff

Benefits and wages provided to Management Staff contain wages of general manager and vice general managers.

38. NATURE AND LEVEL OF RISKS ARISING OUT OF FINANCIAL INSTRUMENTS

(a) Capital Risk Management

TheGroup,whiletryingtomaintainthecontinuityof itsactivities incapitalmanagementononehand,aimstoincreaseitsprofitabilitybyusingthebalancebetweendebtsandresourcesontheotherhand.ThecapitalstructureoftheGroupconsistsofdebtscontainingthecreditsexplained in note 8, cash and cash equivalents explained in note 6 and resource itemscontainingrespectivelyissuedcapital,capitalreserves,profitreservesandprofitsofpreviousyearsexplainedinnote27.

Risks,associatedwitheachcapitalclass,and thecapitalcostareevaluatedby theseniormanagement.Itisaimedthatthecapitalstructurewillbestabilizedbymeansofnewborrowingsorrepayingtheexistingdebtsaswellasdividendpaymentsandnewshareissuancesbasedon the senior management evaluations.

TheGroupfollowsthecapitalbyusingdebt/totalcapitalrate.Thisrate isfoundbydividingthe net debt by total capital. The net debt is calculated by excluding the cash and cash equivalent amounts from the total debt amount (includingcredits, leasingandcommercialdebts as indicated in the balance sheet). Total capital is calculated as resources plus net debt as indicated in the balance sheet.

GeneralstrategyoftheGroupbasedonresourcesisnotdifferentfromthepreviousyears.

(b) Important Accounting Policies

TheCompany’simportantaccountingpoliciesrelatingtofinancialinstrumentsarepresentedintheNote2.



December 31, 2015Short term benefits provided to employees 6.275.856 5.703.696Employment Termination Benefits - -Other long term benefits - -Total 6.275.856 5.703.696

December 31, 2016 December 31, 2015Total Debt 1.199.210.996 1.178.875.567Minus (-) Cash and Equivalent (249.757.802) (136.763.531)Net Debt 949.453.194 1.042.112.036Total Shareholder’s Equity 223.447.664 207.839.425Total Share capital 1.172.900.858 1.249.951.461 Rate % (Net Debt / Total Share Capital) 80,95% 83,37%

90


(c) Risks Exposed

Becauseofitsoperations,theGroupisexposedtofinancialrisksrelatedtoexchangeratesandinterestrates.TheGroupasitholdsthefinancialinstrumentsalsocarrytheriskofotherpartynotmeetingtherequirementsoftheagreement.MarketrisksseenatthelevelofGrouparemeasured according to the sensitivity analysis principle. Market risks faced by the Company in current period or the process of undertaking the faced risks or the process of the measure offacedriskswasnotchangedaccordingtopreviousyear.

(c1) Foreign currency risk management

TransactionsinforeigncurrenciesexposetheGrouptoforeigncurrencyrisk.ThisriskmainlyarisesfromfluctuationofforeigncurrencyusedinconversionofforeignassetsandliabilitiesintoTurkishLira.Foreigncurrencyriskarisesasaresultoftradingtransactionsinthefutureandthedifferencebetweentheassetsandliabilitiesrecognized.

TheCompany ismainlyexposed to foreigncurrency riskdue todeposits, receivablesandpayables.

91


Tabl

e of

For

eign

Exc

hang

e Po

sitio

nCu

rren

t Per

iod

Prev

ious

Per

iod

TL V

alue

USD

AVRO

TL V

alue

USD

AVRO

1. T

rade

Rec

eiva

bles

3

97.9

54.1

69

1

09.5

99.2

66

3

.302

.631

3

06.5

44.3

33

1

04.3

64.9

76

973

.290

2a. M

onet

ary

Fina

ncia

l Ass

ets

2

00.6

36.4

77

5

6.26

7.79

2

7

05.9

12

86.

892.

421

2

9.69

6.57

6

1

72.0

34

2b. N

on-M

onet

ary

Fina

ncia

l Ass

ets

-

-

-

-

-

-

3. O

ther

3

3.37

4.97

9

9

.053

.603

4

07.9

73

9

.827

.807

3

.378

.152

1.7

29

4. C

urre

nt A

sset

s To

tal (

1+2+

3)

631

.965

.625

174

.920

.661

4.4

16.5

16

403

.264

.560

137

.439

.704

1.1

47.0

53

5. T

rade

Rec

eiva

bles

-

-

-

-

-

-

6a. M

onet

ary

Fina

ncia

l Ass

ets

-

-

-

-

-

-

6b. N

on-M

onet

ary

Fina

ncia

l Ass

ets

-

-

-

-

-

-

7. O

ther

-

-

-

-

-

-

8. F

ixed

Ass

ets

Tota

l (5+

6+7)

-

-

-

-

-

-

9. T

otal

Ass

ets

(4+

8)

631

.965

.625

174

.920

.661

4.4

16.5

16

403

.264

.560

137

.439

.704

1.1

47.0

53

10. T

rade

Pay

able

s

(470

.728

.956

)

(132

.533

.447

)

(1.1

63.7

11)

(276

.351

.083

)

(93.

225.

015)

(1

.664

.788

)

11. F

inan

cial

Lia

bilit

ies

(7

3.97

7.51

5)

(20.

941.

710)

(75

.325

)

(4

2.62

7.65

4)

(14.

636.

095)

(22.

578)

12a.

Oth

er M

onet

ary

Liab

ilitie

s

(69.

530.

133)

(1

8.74

3.90

8)

(9

61.3

66)

(11.

965.

028)

(4.1

14.4

47)

(586

)

12b.

Oth

er N

on-M

onet

ary

Liab

ilitie

s

-

-

-

-

-

-

13. T

otal

Sho

rt T

erm

Lia

bilit

ies

(10+

11+1

2)

(614

.236

.604

)

(172

.219

.065

)

(2.2

00.4

02)

(330

.943

.764

)

(111

.975

.556

)

(1.6

87.9

52)

14. T

rade

Pay

able

s

-

-

-

-

-

-

15. F

inan

cial

Lia

bilit

ies

(2

95.9

56)

-

(

79.7

75)

--

-

16a.

Oth

er M

onet

ary

Liab

ilitie

s

-

-

-

-

-

-

16b.

Oth

er N

on-M

onet

ary

Liab

ilitie

s

-

-

-

-

-

-

17. T

otal

Lon

g Te

rm L

iabi

litie

s (1

4+15

+16)

(2

95.9

56)

-

(

79.7

75)

--

-

18. T

otal

Lia

bilit

ies

(13+

17)

(6

14.5

32.5

60)

(1

72.2

19.0

65)

(2

.280

.177

)

(3

30.9

43.7

64)

(1

11.9

75.5

56)

(1

.687

.952

)

19. N

et A

sset

/ (Li

abili

ty) P

ositi

on o

f Der

ivat

ive

Inst

rum

ents

off

the

Bala

nce

Shee

t (19

a-19

b)

(22.

504.

774)

(6.3

94.8

55)

-

(3

2.31

9.18

3)

(11.

115.

416)

-

19a.

Tot

al A

mou

nt o

f Hed

ged

Asse

ts

-

-

-

-

-

-

19b.

Tot

al A

mou

nt o

f Hed

ged

Liab

ilitie

s

22.

504.

774

6.3

94.8

55

-

3

2.31

9.18

3

11.

115.

416

-

20. N

et F

orei

gn E

xcha

nge

Asse

t / (L

iabi

lity)

Pos

ition

(9-1

8+19

)

(5

.071

.709

)

(3

.693

.258

)

2.1

36.3

40

40.

001.

613

1

4.34

8.73

2

(5

40.8

99)

21. M

onet

ary

Item

s N

et F

orei

gn E

xcha

nge

Asse

t / (l

iabi

lity)

pos

ition

(1+

2a+

5+6a

-10-

11-1

2a-1

4-15

-16a

)

17.

433.

065

2.7

01.5

97

2

.136

.340

7

2.32

0.79

6

25.

464.

148

(540

.899

)

22. T

otal

Fai

r Val

ue o

f Fin

anci

al In

stru

men

ts U

sed

for t

he F

orei

gn E

xcha

nge

Hedg

e

23. T

he A

mou

nt o

f Hed

ged

part

of F

orei

gn E

xcha

nge

Asse

ts

(22.

407.

041)

(6.3

94.8

55)

-

(3

2.48

5.14

5)

(11.

172.

495)

-

23. T

he A

mou

nt o

f Hed

ged

part

of F

orei

gn E

xcha

nge

Liab

ilitie

s

-

-

-

-

-

-

23. E

xpor

t

36.

858.

003

-

-

8.3

58.0

11

-

-

24. I

mpo

rt

393

.751

.795

-

-

382

.027

.316

-

-

92


(*) D

urin

g th

e as

sess

men

t, th

e el

emen

ts s

uch

as g

uara

ntee

s re

ceiv

ed w

hich

can

incr

ease

the

cre

dib

ility

are

not

take

n in

to c

onsi

der

atio

n.

CRED

IT T

YPES

INCU

RRED

IN R

ESPE

CT O

FFIN

ANCI

AL IN

STRU

MEN

T TY

PES

CURR

ENT

PERI

OD

Rece

ivab

les

Foot

Not

e

Bank

Dep

osits

and

Re

pos

Foot

Not

eTr

ade

Rece

ivab

les

Othe

r Rec

eiva

bles

Rela

ted

Part

yOt

her

Rela

ted

Part

yOt

her

Max

imum

cre

dit r

isk

incu

rred

as

of th

e da

te o

f rep

ortin

g96

1.86

789

3.93

2.60

256

.924

495.

035

248.

626.

194

(A+

B+C+

D+E)

(*)

-40

7.96

7.52

2-

-

-

The

part

of m

axim

um ri

sk s

ecur

ed b

y gu

aran

tee

etc.

961.

867

890.

886.

715

56.9

2449

5.03

510

-11

248.

626.

194

6

A. N

et b

ook

valu

e of

fina

ncia

l ass

ets

whi

ch a

re u

ndue

or w

hich

did

not

de

clin

e in

val

ue (2

)-

3.04

5.88

4-

B. N

et b

ook

valu

e of

ass

ets,

ove

rdue

but

did

not

dec

line

in v

alue

. (6)

-10

-11

-6

- T

he p

art s

ecur

ed b

y gu

aran

tee

etc.

--

--

-

C. N

et b

ook

valu

es o

f ass

ets

decl

ined

in v

alue

(4)

-11

.687

.302

--

10-1

1

-

6

- O

verd

ue (g

ross

boo

k va

lue)

(1

1.68

7.30

2)10

-11

-6

-

Decl

ine

in v

alue

(-)

--

10-1

1-

6

-

The

part

of n

et v

alue

sec

ured

by

guar

ante

e et

c.

-

-

-

-

10-1

1

-

6

- U

ndue

(gro

ss b

ook

valu

e)10

-11

-6

-

Decl

ine

in v

alue

(-)

10-1

1-

6

-

The

par

t of n

et v

alue

sec

ured

by

guar

ante

e et

c.

D. E

lem

ents

con

tain

ing

cred

it ri

sk o

ff th

e ba

lanc

e sh

eet (

5)

PREV

IOUS

PER

IOD

Rece

ivab

les

Foot

Not

e

Bank

Dep

osits

and

Re

pos

Foot

Not

eTr

ade

Rece

ivab

les

Othe

r Rec

eiva

bles

Rela

ted

Part

yOt

her

Rela

ted

Part

yOt

her

Max

imum

cre

dit r

isk

incu

rred

as

of th

e da

te o

f rep

ortin

g2.

410.

177

879.

059.

573

346.

748

67.4

72.6

6513

6.08

4.51

3

(A+

B+C+

D+E)

(*)

-68

2.57

4.56

1-

-

- T

he p

art o

f max

imum

risk

sec

ured

by

guar

ante

e et

c.2.

410.

177

875.

675.

339

346.

748

67.4

72.6

6510

-11

136.

084.

513

6

A. N

et b

ook

valu

e of

fina

ncia

l ass

ets

whi

ch a

re u

ndue

or w

hich

did

not

de

clin

e in

val

ue (2

)-

3.38

4.23

4 -

B. N

et b

ook

valu

e of

ass

ets,

ove

rdue

but

did

not

dec

line

in v

alue

. (6)

-10

-11

-6

- T

he p

art s

ecur

ed b

y gu

aran

tee

etc.

--

--

-

C. N

et b

ook

valu

es o

f ass

ets

decl

ined

in v

alue

(4)

-11

.218

.666

--

10-1

1

-

6

- O

verd

ue (g

ross

boo

k va

lue)

(1

1.21

8.66

6)10

-11

-6

-

Decl

ine

in v

alue

(-)

--

10-1

1-

6

-

The

par

t of n

et v

alue

sec

ured

by

guar

ante

e et

c.

-

-

-

-

10-1

1

-

6

- U

ndue

(gro

ss b

ook

valu

e)10

-11

-6

-

Decl

ine

in v

alue

(-)

10-1

1-

6

-

The

part

of n

et v

alue

sec

ured

by

guar

ante

e et

c.

D. E

lem

ents

con

tain

ing

cred

it ri

sk o

ff th

e ba

lanc

e sh

eet (

5)

c2 )

Cre

dit

Ris

k an

d M

anag

emen

t

93


Grup’un önemli tutarlarda az sayıdamüşteri yerine, çok sayıdamüşteriden alacaklı olmasınedeniyleönemlibir ticarialacakriskibulunmamaktadır.Ticarialacaklar,Grupyönetimincegeçmiş tecrübelerGuarantees receivedandother elements,which increase thecredibility,mortgagesreceived,billsuretiesandguaranteelettersaretakenintoconsideration.

The Group’s credit risk management exposed from trade receivables. Trade receivablesmostly consist from receivables from dealers. The Group has set up an effective controlsystemoveritsdealersandtheriskismonitorizedbycreditriskmanagementteamandGroupManagement.TheGrouphasset limits foreverydealerand these limitsare revised if it isnecessary. The taking adequate guarantees fromdealers are anothermethod for the riskmanagement.ThereisnosignificanttradereceivableriskfortheGroup,becausetheGrouphasreceivablesfromawiderangeofcustomers insteadofasmallnumbercustomersandsignificantamounts.TradereceivablesareevaluatedbytakingintoconsiderationofGroup’spast experienceandcurrent economic situationand these receivablesarepresentedwiththeir net values in the balance sheet after the proper provisions for doubtful receivables are made.Thelowprofitmarginbyforceofthesectoralconditionsmakescollectionandcreditriskmanagement policies important and theGroupmanagement show sensivity in thesesituations. The detailed information about the collection and risk management policies are as follows;

TheGroupstartsexecutiveproceedingsand/orlitigateforthereceivablesoverdueforafewmonths.TheGroupcanconfiguretermsfordealersindifficultsituations.Thelowprofitmarginby effects of the sectoral conditions makes collection of receivables important. There is a risk management team to minimize the risk of collections and the sales are realized by making credibilityevaluations.Thesalestoneworriskydealersaremadeincash.

TheGroupissellingproductstoawiderangeofinstitutionswhicharesellingorbuyingcomputeranditsequipments.Thecapitalstructureofthedealersclassifiedas“classicdealers”inthedistributionchannelislow.Itisestimatedthatthereareabout5.000dealersinthisgroupinTurkey and in terms of risk management to minimize the receivable risk of Datagate by taking stepsandestablishingitsownorganisationandworkingsystem.ThemeasurestakenbytheGroupisasfollows;

Thesalestonewcustomerswhichhavenoexperiencemorethan1year:Thesalestonewcustomerswhichhavenoexperiencemorethan1yeararemadeincash.

The information team involved in receivable and risk management department is monitoring the dealers continuously.

Current Period (December 31, 2016)Receivables

Trade Receivables Other Receivables1-30 Days Overdue 1.536.963 -1-3 Months Overdue 1.070.433 -More than 3 Months Overdue 438.487 -The part of net value secured by guarantee etc. 731.347 -

Previous Period (December 31, 2015)Receivables

Trade Receivables Trade Receivables1-30 Days Overdue 3.059.701 -1-3 Months Overdue 287.712 -More than 3 Months Overdue 36.821 -The part of net value secured by guarantee etc. 1.256.501 -

94


Credit Committee: The information about the customerswhich has experiencemore than1year in thesectorand thecustomerswhicharedemandingan increase for thecredit limitarepreparedbytheinformationteamandpresentedtocreditcommitteeeveryweek.CreditcommitteeconsistofSeniorVicePresidentofFinance,FinanceManager,AccountingManager,information team staff and the Sale Manager of related Customer. Credit Committee establish credit limits to related customers by taking into consideration the information gained from the informationteam,pastpaymentsandsaleperformances.TheCreditCommitteedeterminestheconditionsandifitisneededtheydemandforguarantees,mortgages,etc.

GroupsalesarewidespreadonTurkey,thereforeitreducestheconcentrationrisk.

TradereceivablesareevaluatedbytakingintoconsiderationtheGrouppoliciesandproceduresand the trade receivables are shownwith their net value after the provisions for doubtfulreceivables are made in the financial statements. (Note:10)

(c3) Management of interest rate risk

Group’sfixedinterestfinancialinstrumentsliabilitiesarestatedinNote:8.Group’sfixedinterestassets (deposit etc.) are stated in Not: 6.

Ifthereisa%1increaseonTLinterestrateandothervariablesarefixedasofDecember31,2016,profitbeforetaxwillbelesswiththeamountof276.172TL.(December31,2015:TL1.988.054)ImportantpartofGroup’sfinancialassetsandliabilitieswithfixedinterestrateareshort-term.Consequentlythefinancialassetsandliabilitieswithfixedinterestratearetakenintoconsideration.Thereisnointerestrateriskifonlyfinancialassetsandliabilitieswithfloatingrate are taken into consideration.

(c4) Liquidity risk management

TheGrouptriestomanagetheliquidityriskbymaintainingthecontinuationofsufficientfundsand loan reserves by means of matching the financial instruments and terms of liabilities by followingthecashflowregularly.

Liquidity Risk Tables

Prudent liquidity risk management signifies maintaining sufficient cash, the utility of fundsources by sufficient credit transactions and the ability to close out market positions.

Riskofexistingorfuturepossibledebtrequirementsbeingfundableismanagedbymaintainingthecontinuationofavailabilityofsufficientnumbersandhighqualitycreditproviders.

Thetablebelowindicatesthetermdivisionsofderivativeandnon-derivativefinancialliabilitiesoftheGroupinTLcurrency.

Table of Interest Position Current Period Previous PeriodFixed Interest Financial InstrumentsFinancial Assets 224.313.634 123.616.698Financial Liabilities 196.696.440 322.422.080Floating Rate Financial InstrumentsFinancial Assets - -Financial Liabilities - -

95


December 31, 2016

(*)Theamountofforwardtransactionsconsistsof6.394.855USDtoTL.Inliabilitycalculation,derivativecashoutflowiscalculatedusingexchangeratesvalidattheendofterm.DerivativecashinflowiscalculatedusingtheexchangeratevalidonDecember31,2016.Actualprofitorlosswillariseattheendofterm

December 31, 2015

Contract Terms Book Value

Cash Outflows Total As Per the

Agreement

Less than 3 Months

3-12 Months 1-5 YearsMore than 5

Years

Non-derivative Financial Liabilities

999.028.240 1.008.975.098 966.058.565 40.542.675 2.373.857 -

Bank Loans 196.034.603 199.199.019 156.818.447 40.237.416 2.143.156 -

Debt Instrument Issue - - - - - -

Financial Lease Liabilities 661.837 699.886 163.925 305.259 230.701 -

Trade Payables 792.734.843 799.479.236 799.479.236 - - -

Other Payables 9.596.957 9.596.957 9.596.957 - - -

Other - - - - - -



Agreement

Less than 3 Months


Years

Derivative Financial Liabilities

97.733 (69.969) (69.969) - - -

Derivative Cash Inflows 22.504.774 22.504.774 22.504.774 - - -Derivative Cash Outflows (22.407.041) (22.574.743) (22.574.743) - - -



Agreement

Less than 3 Months


Years

Non-derivative Financial Liabilities

1.049.100.217 1.083.194.702 847.085.152 156.365.994 79.743.556 -

Bank Loans 321.300.021 346.134.428 110.900.185 155.578.308 79.655.935 -

Debt Instrument Issue - - - - - -

Financial Lease Liabilities 1.122.059 1.160.469 285.162 787.686 87.621 -

Trade Payables 719.866.859 729.088.527 729.088.527 -

Other Payables 6.811.278 6.811.278 6.811.278 -

Other - - - - - -

Contract Terms Book ValueCash Outflows

Total As Per the Agreement

Less than 3 Months


Years

Derivative Financial Liabilities

(165.962) (440.675) (440.675) - - -

Derivative Cash Inflows 32.319.184 32.319.184 32.319.184 - - -Derivative Cash Outflows (32.485.146) (32.759.859) (32.759.859) - - -

96


(c5) Analyses of other Risks

Risks Related to Financial Instruments, Stocks Etc.

Grouphasnostocksor similarmarketablesecuritiesevaluatedby fair value in thecurrentperiod.

39. FINANCIAL INSTRUMENTS (DECLARATIONS WITHIN THE CONTEXT OF FAIR VALUE AND HEDGING)

Aims at financial risk management

The financedepartmentof theGroup is responsible formaintaining theaccess to financialmarketsregularlyandobservingandmanagingthefinancialrisksincurredinrelationwiththeactivitiesoftheGroup.Thesaidrisksincludemarketrisk(includingforeignexchangerisk,fairinterestrateriskandpricerisk),creditrisk,liquidityriskandcashreceivingrisk.

Fair Value of Financial Instruments

Fairvalueistheamountforwhichafinancialinstrumentcouldbeexchangedexceptcompulsorysaleorliquidationprocessbetweenwillingpartiesanditisdeterminedwithitsmarketvalueifthereisaquotedprice.

The Group has determined the estimated values of financial instruments by taking intoconsideration the present market information and proper valuation methods. But determination of market information and estimation of fair value require interpretation and discernment.Consequentlytheestimationspresentedarenotalwaystheindicatorsofthevaluescouldberealized from a current market transaction.

The methods and assumptions used for the determination of the fair value of the financial instrumentsareasfollows;

Monetary Assets

Balances denominated in foreign currencies are converted into Turkish Lira by the exchange rate ruling at the balance sheet date. It is predicted that these balances are considered to approximate to their net book value.

Financialinstrumentsinwhichcashandcashequivalentsareincludedarecarriedbytheircostvalue and it is predicted that their net book value are considered to approximate to their fair valuesduetotheirshort-termmaturity.

Itispredictedthatthenetbookvalueoftradereceivableswithprovisionsmadefordoubtfulreceivables present their fair values.

Monetary Liabilities

Balances denominated in foreign currencies are converted into Turkish Lira by the exchange rate ruling at the balance sheet date. It is predicted that these balances are considered to approximate to their net book value.

It is predicted that net book value of bank loans and other monetary liabilities are considered toapproximatetheirfairvaluesduetotheirshort-termmaturity.

97


It is predicted that the net book value of trade payables present their fair values due to their short-termmaturity.

Fair Value Assessment:

The Group has applied the amendments in IFRS 7 related with the financial instrumentsevaluatedbyfairvalueinthebalancesheeteffectivefromthedateofJanuary1,2009.Theamendmentinfairvaluecalculationsisdisclosedinaccordancewiththestepsofhierarchyforfairvaluementionedbelow;

Level1:Quotedpricesinactivemarketsforidenticalassetsandliabilities.

Level2: Inputsotherthanquotedprices includedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly(i.e.asprices)orindirectly(i.e.derivedfromprices).

Level3:Inputsfortheassetorliabilitythatisnotbasedonobservablemarketdata.

ItispredictedthatnetbookvalueofforeigncurrencybalanceswhichareconvertedtoTLatthe end of the year are considered to approximate to their fair values.

TheGrouppresentsitsfinancialinvestmentswiththeirfairvaluesinthefinancialstatementsasofDecember31,2016andDecember31,2015.(Level2)(Note:7)

It is accepted that the discounted net book value of financial assets such as cash and cash equivalentspresenttheirfairvaluesduetotheirshort-termmaturity.

Trade receivables and payables are measured at their discounted cost using the effective interest method and it is accepted that the net book value of these balances are considered to approximate their fair values.

40. SUBSEQUENT EVENTSNone.

41. OTHER ISSUESNone.

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