our strength is our customers - boyner · 2014-10-20 · our strength is our customers boyner...

Our Strength iS Our CuStOmerS

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ANNUAL REPORT 2013

BOYNER BÜYÜK MAĞAZACILIK A.Ş.

CONTENTS01

Independent Audit Report on the Annual Report

BOYNER BÜYÜK MAĞAZACILIK AT A GLANCE02

Boyner Büyük Mağazacılık in Brief

04Key Financial and Operational Indicators

07Share Price Information

07Shareholding Structure

08Acquisition of Financial Fixed Assets

09Milestones

MANAGEMENT10

Letter from the Chairman

11Board of Directors

12Executive Managers

OPERATIONS14

Turkish Garment Retail Industry

16An Assessment of 2013

20Store Formats

22Sales & Marketing

24Loyalty Programs & Customer Feedback Management

26Investments

28Human Resources

31Legal Issues

CORPORATE32

Agenda of the Ordinary General Assembly

32 Dividend Distribution

32Amendments to the Articles of Association

37Company Policies to be Submitted to the General Assembly

37Donations and Grants in 2013

38Corporate Governance Principles Compliance Report

52 Independent Board Members and Their Independence Statements

55 Annual Report Statement of Responsibility

FINANCIAL STATEMENTS56

Audit Firm

56Financial Statements and Audit Report for 2013

57Consolidated Financial Statements and Independent Audit Report

3

Boyner Büyük Mağazacılık A.Ş. Annual Report 2013

To the Board of Directors of Boyner Büyük Mağazacılık Anonim Şirketi

1. As part of our independent audit, we have analyzed whether the consolidated financial statements and the evaluations and explanations of the Board of Directors included in the annual report of Boyner Büyük Mağazacılık Anonim Şirketi (Boyner) and its subsidiaries (Group) as of December 31, 2013, are in accordance with the independently audited consolidated financial statements covering the same period.

2. The Group management is in charge of preparing the annual report in line with the Regulation on the Minimum Content of Corporate Annual Reports.

3. Our responsibility as the independent audit firm is to express an opinion on whether the consolidated financial information presented in the annual report accurately correspond with the consolidated financial statements analyzed in the independent audit report dated February 28, 2014.

Our assessments have been carried out in compliance with the methods and principles outlined in Turkish Commercial Code numbered 6102 as regards the content and publication of annual reports. According to the legislation, auditors must present reasonable assurance that the consolidated financial information presented in the annual report is in accordance with the information obtained by independent auditors.

We believe that our assessments have provided a sufficient and reasonable basis for presenting an objective opinion.

4. In our opinion, the consolidated financial information and the assessments and explanations of the Board of Directors presented in the enclosed annual report are in line with the independently audited consolidated financial statements of Boyner Büyük Mağazacılık Anonim Şirketi dated December 31, 2013.

Başaran Nas Bağımsız Denetim veSerbest Muhasebeci Mali Müşavirlik A.Ş.A member of PricewaterhouseCoopers

Gökhan Yüksel, SMMMAuditor

Istanbul, March 5, 2014

INDEPENDENT AUDIT REPORT ON THE ANNUAL REPORT

BOYNER BÜYÜK MAĞAZACILIK AT A GLANCE

4


BOYNER BÜYÜK MAĞAZACILIK IN BRIEF

As of year-end 2013, Boyner Büyük Mağazacılık operates 78 Boyner stores and 61 YKM stores in 37 Turkish provinces. The Company’s 5,200 employees welcomed around 97 million customers in a total sales area of 277,218 m2.

BOYNER AND YKM STORES BY PROvINCE

Boyner and YKM Stores

Boyner Stores

YKM Stores


5


Boyner Büyük Mağazacılık A.Ş. (Boyner) started operations in 1981 as a member of Boyner Holding, one of Turkey’s leading groups in non-food retail. The first Boyner store was opened as “Çarşı” in the Istanbul district of Bakırköy.

After acquiring a 63% stake in the leading domestic retail brand, YKM, in 2012, Boyner purchased the remaining 37% in 2013 and came to control all the outstanding shares of YKM Giyim ve İhtiyaç Maddeleri Ticaret ve Sanayi A.Ş. ve YKM Pazarlama A.Ş. This acquisition considerably strengthened the market position of Boyner, which aims to create brand and customer differentiation in the multi-storey retail sector.

In 2013, Boyner Büyük Mağazacılık’s shareholding structure was modified. In May 2013, Altınyıldız Mensucat ve Konfeksiyon Fabrikalar A.Ş. (Altınyıldız) repurchased a 30.05% stake in Boyner Büyük Mağazacılık, previously sold to the Citigroup Venture Capital International (CVCI) subsidiary Fennella S.a.r.l. After which, Altınyıldız called back the 38.5% free-floating shares in BBM for a buyback scheme. As a result of this buyback plan announced in September 2013, Altınyıldız brought its stake up to 96.43%. As of December 31, 2013, the Company’s shareholding stood at 96.55%.

Following Boyner Holding’s retail-focused reorganization under the Altınyıldız umbrella and the added synergy from YKM, Boyner plans to further enhance its achievements in the retail industry and take the Company’s corporate objectives to a higher level.


6


KEY FINANCIAL AND OPERATIONAL INDICATORS

Income Statement (*) 2013 2012 2011 2010 2009

Net Sales 1,415,659,238 935,090,980 660,147,222 552,834,229 482,663,339

Gross Profit 540,115,059 348,777,344 251,122,525 204,178,632 176,329,729

Operating Profit (**) 48,856,028 35,236,449 40,116,388 33,511,081 23,091,849

Profit before Tax 12,394,731 13,840,940 30,312,316 20,777,550 7,605,171

Net Profit 3,205,495 7,622,467 23,854,239 17,278,434 7,275,419

Amortization and Depreciation 36,398,230 24,069,509 16,023,475 14,147,379 12,198,309

(*) No actuarial profit and loss accounting prior to 2011.(**) In order to ensure the comparability of operational profitability, earning and loses due to commercial rediscounts, due date differences and foreign currency exchange rate changes prior to 2011 are reclassed, in line with the latest Capital Markets Board communiqué on financial reporting.

Balance Sheet 2013 2012 2011 2010 2009

Current Assets 690,370,913 504,961,776 284,853,716 242,030,686 193,246,797

Fixed Assets 382,567,647 356,238,342 88,169,358 80,061,657 76,530,658

Short-term Liabilities 660,575,362 515,074,925 268,046,575 204,189,383 207,492,746

Long-term Liabilities 354,225,320 216,867,623 4,959,397 41,822,802 4,102,779

Shareholder's Equity 58,137,878 129,257,570 100,017,102 76,080,158 58,181,930

Investments 2013 2012 2011 2010 2009

Capex Investment Expenditure 38,998,256 45,950,261 24,593,906 17,699,445 40,696,569

Sales Area, Year-end 277,218 271,105 131,696 110,836 99,830

Employee Statistics (average) 2013 2012(***) 2011 2010 2009

Number of Employees 5,219 4,865 2,595 2,328 2,204

(***) For 2012, the annual average number of YKM employees was used.

Share Price (TL) 2013 2012 2011 2010 2009

Maximum Share Price in Year 10.40 4.41 4.62 4.34 1.46

Minimum Share Price in Year 4.40 2.17 2.20 1.28 0.43

Share Price (Year-end) 7.22 4.31 2.33 4.15 1.41

Market Capitalization, Year-end 664,745,400 396,821,700 214,523,100 382,090,500 129,818,700

Price-Earnings Ratio 0.00045 0.00083 0.00259 0.00188 0.00079

KEY INDICATORS


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Profit Margin 2013 2012 2011 2010 2009

Gross Profit Margin 38.2% 37.3% 38.0% 36.9% 36.5%

EBITDA Margin 6.0% 6.3% 8.5% 8.6% 7.3%

Operational Profit Margin 3.5% 3.8% 6.1% 6.1% 4.8%

Net Profit Margin 0.2% 0.8% 3.6% 3.1% 1.5%

Liquidity Ratios 2013 2012 2011

A. Current Ratio 1.05 0.98 1.06

B. Liquidity Ratio 0.35 0.41 0.45

C. Cash Flow Ratio 0.32 0.27 0.33

Financial Structure Ratios 2013 2012 2011

A. Total Debt/ Equity 17.46 5.66 2.73

B. Short-term Debt/Total Assets 0.62 0.60 0.72

C. Long-term Debt/Total Assets 0.33 0.25 0.01

Profitability Ratios 2013 2012 2011

A. Net Profit for the Period/Total Assets 0.3% 0.9% 6.4%

B. Net Profit for the Period/Shareholders' Equity 5.5% 5.9% 23.9%

Per Share Values 2013 2012 2011

A. Number of Shares 9,207,000,000 9,207,000,000 9,207,000,000

B. Net Sales per Share (TL) 0.154 0.102 0.072

C. Net Profit per Share (TL) 0.00035 0.00083 0.00259

D. Gross Profit per Share (TL) 0.059 0.038 0.027

E. Book Value of a Single Share 0.006 0.012 0.011

Growth Rates 2013 2012 2011

A. Net Sales 51.4% 41.6% 19.4%

B. Total Assets 24.6% 130.9% 15.8%

C. Gross Profit from Sales 54.9% 38.9% 23.0%


8


Number of Stores 31.12.2013 31.12.2012

Boyner 78 79

YKM 61 66

Total 139 145

Total Sales Area (m2) 31.12.2013 31.12.2012

Boyner 155,544 148,145

YKM 121,674 122,960

Total 277,218 271,105

Sales Volume (TL Million) 31.12.2013 31.12.2012(*)

Boyner & YKM 1,415.7 935.1

(*) Includes sales by YKM after its acquisition on September 7, 2012.

Annual Number of Visitors 31.12.2013 31.12.2012

Boyner 50,466,687 46,400,000

YKM 46,483,143 46,300,000

Total 96,949,830 92,700,000

Number of Employees (Year-end) 31.12.2013 31.12.2012

Boyner 3,593 3,257

YKM 1,819 1,829

Total 5,412 5,086

KEY OPERATIONAL INDICATORS

KEY FINANCIAL AND OPERATIONAL INDICATORS


9


SHAREHOLDING STRUCTURE

SHARE PRICE INFORMATION

Shareholder's Trade Name/Full Name Share in Capital (TL) Share in Capital (%)

Altınyıldız Mensucat ve Konfeksiyon Fab. A.Ş. 88,896,289.44 96.55

Other Shareholders and Free-float 3,173,710.56 3.45

Total 92,070,000.00 100.00

Boyner Büyük Mağazacılık Anonim Şirketi was established on February 13, 1992 and registered in Istanbul. The address of the Company head office is Büyükdere Cad. USO Center Binası No: 245 A K: B01-Z02 Maslak, Şişli/Istanbul. Some 15% of Company shares were offered to the public in 1996, another 15% in 1998, and a further 9.9% in 2006, totaling 39.9%. On May 31, 2013, Altınyıldız Mensucat ve Konfeksiyon Fabrikalar A.Ş. repurchased the Company’s shares previously sold to Fennella S.a.r.l. and completed a share buyback transaction in September 2013. As a result, only 3.45% of Boyner shares are currently listed on the stock exchange Borsa Istanbul (BIST).

The shares traded on the BIST with a nominal value of TL 1 averaged a market price of TL 6.43 in the year 2013.

The Company’s registered capital ceiling is TL 100,000,000 and it has issued capital of TL 92,070,000.

In the Company’s capital, there are no privileged shares regarding the earning share and voting rights.

Altınyıldız Mensucat ve Konfeksiyon Fab. A.Ş.96.55%

Other Shareholders and Free-float 3.45%


10


ACqUISITION OF FINANCIAL FIxED ASSETS

On September 7, 2012, Boyner acquired a 63% stake in the retail company Yeni Karamürsel Giyim ve İhtiyaç Maddeleri Ticaret ve Sanayi A.Ş. (YKM A.Ş.) and 20.62% of Yeni Karamürsel Giyim ve İhtiyaç Maddeleri Pazarlama A.Ş. (YKM Pazarlama A.Ş.), in which YKM A.Ş. holds a 56.25% stake. The Company paid TL 166,652,295 in the transaction.

On October 22, 2013, the Company purchased the remaining minority shares of YKM A.Ş. and YKM Pazarlama A.Ş. and the rest of the brand in return for TL 100,000,000. The referenced sum will be paid in installments between January 2014 and April 2017.

Information on Boyner’s subsidiaries, their activities, country of location, and the Company’s active share ratio therein as of December 31, 2013 and December 31, 2012 follows below.

December 31, 2013 December 31, 2012

Trade Name Field of Activity CountryCompany's Active

Share RatioCompany's Active

Share Ratio

Yeni Karamürsel Giyim ve İhtiyaç Maddeleri Ticaret ve Sanayi A.Ş. (YKM A.Ş.)

Retail merchandizing Turkey 100.00% 63.00%

Yeni Karamürsel Giyim ve İhtiyaç Maddeleri Pazarlama A.Ş. (YKM Pazarlama A.Ş.)

Marketing and retail merchandizing Turkey 100.00% 56.06%


11


MILESTONES

1981 The first Çarşı store was opened in Bakırköy, Istanbul.

1989 Çarşı Credit Card was rolled out.

1990 The first multi-storey department store was launched in Maslak, Istanbul.

1992 Upon the establishment of Karat Mağazacılık A.Ş., Çarşı Mağazaları became a separate legal entity.

1996 Karat Mağazacılık A.Ş. was transformed into Çarşı Büyük Mağazacılık A.Ş., and 15% of its shares were offered to the public.

1998 A second public offering of a 15% shareholding was carried out. Growth and expansion continued with the opening of four new stores.

2004 The Transformation Program launched to transition from Çarşı to Boyner.

2007 Fennella S.a.r.l (a subsidiary of Citi Venture Capital International, CVCI) acquired a 30.05% stake and became a partner.

2010 Annual net sales reached TL 500 Million.

2011 Çarşı Mağazaları was relaunched.

2012 The Group acquired majority stakes in YKM A.Ş. and YKM Pazarlama A.Ş.

2013

The Group acquired the remaining minority stakes in YKM A.Ş. and YKM Pazarlama A.Ş. The Company’s 30.5% shareholding controlled by CVCI was repurchased. After a share buyback announced in September, Altınyıldız brought its overall stake to 96.43%. As of December 31, 2013, Altınyıldız’s total shareholding stood at 96.55%.

MANAGEMENT

12


The year 2013 was a period in which Boyner Büyük Mağazacılık expanded on ambitious steps the Company initially took in 2012. We consummated the union between Boyner & YKM, by acquiring the remaining 37% of YKM, after we had purchased a 63% stake in 2012. Following this important move, Altınyıldız has become Turkey’s biggest publicly traded, multi-brand retail company outside the food and consumer electronics segments.

As of end-2013, our operations included a total sales area of 277,218 m2 at 78 Boyner and 61 YKM stores in 37 Turkish provinces, and throughout the year our more than 5,000 employees welcomed some 97 million visitors. Our business is our customers: we have been able to undertake such ambitious investments due to our deep trust in our customer base. In line with our principle of Unconditional Customer Satisfaction and our objective of employee satisfaction, we also made important strides to transform our head office building into a green office in 2013. To this end, we started to monitor the entire life cycle of the products we offer our customers, and began to cooperate with our suppliers not only on quality but also on social compliance. The sustainable growth projects implemented together with our employees allowed us to come up with new answers to the question, “What would our customers prefer?”

In 2014, too, we plan to continue carrying out activities that will add value to all of our stakeholders, thanks to the courage and trust that our customers inspire in us.

The coming year is expected to be a period of productivity increases in existing stores, rapid growth through new store openings, and numerous

groundbreaking innovations to excite our customers. In order to increase the productivity in our current stores, we will launch five new initiatives designed on the basis of findings from customer surveys completed in 2013. The pilot projects will be expanded across the Company according to the their results in terms of productivity and customer satisfaction.

In 2014, we will open new stores with a total sales area of 20,000 m2. At these new stores, we plan to implement pilot schemes based on the findings of our customer surveys, and differentiate various elements of our services by making use of cutting edge technologies. The pilot projects in these stores will allow us to better know every single customer and present them personalized offers and product management solutions. We will also strategically position the newest and most attractive products in our stores and enhance the appeal of our special brands.

In order to make each of our 78 Boyner and 61 YKM stores into a center of attraction, our 5,000 employees have embarked upon efforts specific to the location and customer expectations of each store.

In 2014, we plan to continue implementing projects that will add value to all of our stakeholders with the trust and courage that our customers inspire in us.

Best regards,

MESSAGE FROM THE CHAIRMAN

CEM BOYNERChairman

The main principle underlying our business is “Unconditional Customer

Satisfaction,” which requires us to constantly ask ourselves, “What would my customer prefer?” and “How would my customer feel?”

before making any decision. Thanks to our customers, we have been able grow continuously, make

ambitious investment decisions, think outside the box, and introduce

groundbreaking innovations. We trust our customers completely.

MANAGEMENT

13


BOARD OF DIRECTORS

Chairman Hasan Cem Boyner

Board Member Ümit N. Boyner

Board Member Serdar Sunay

Board Member Nur Mehmet İnal

Independent Board Member Vittorio Radice

Independent Board Member Fethi Pekin The Company’s Board Members were elected at the Ordinary General Assembly on March 28, 2013 for a term of three years.

No administrative or judiciary sanction was imposed upon the Company or Board Members for violation of applicable legislation.

HASAN CEM BOYNER Chairman/non-exeCutiveCem Boyner graduated from Boğaziçi University, Department of Business Administration in 1978, and began his career at the family company Altınyıldız in the same year. He took office as President of the Executive Committee at Boyner Holding from 1982 to 1994. He also served as Chairman of the Turkish Industry and Business Association (TÜSİAD) from 1989 to 1990, and was appointed Executive Director of Boyner Holding in 1996. After Osman Boyner became the Honorary Chairman of the Holding in 2010, Cem Boyner replaced him as Chairman.

ÜMİT N. BOYNER member/non-exeCutiveAfter graduating from the University of Rochester (USA), Department of Economics, Ümit Boyner completed programs in Financial Management and Management Training at Columba University. She went on to work as Credit Marketing Manager at Chemical Mitsui Bank, Finance Manager at Türk Petrol Holding A.Ş. and Finance and Treasury Manager at Turcas Petrolcülük A.Ş. From 1996 until 2002, she served as Finance Director at Boyner Holding, overseeing the restructuring of the financial departments of Group companies, and the establishment of a central treasury system. Since 2002, as a Board Member at Boyner Holding A.Ş., she has focused on the Group’s new investment and finance related projects. She is a co-founder of the women entrepreneurs’ association KAGİDER, a member of the Board of Trustees of the foundations TEGV and Tohum Otizm Vakfı, a member of Carnegie Endowment For International Peace Advisory Board, and a board member at ÖSGD. Boyner held the position of chairman of TÜSİAD from 2010 until 2013.

SERDAR SUNAY member/non-exeCutiveA graduate of Boğaziçi University, Serdar Sunay went on to work in the Audit Department at Arthur Andersen and in the Corporate Planning Department of Koç Holding. Subsequently, he served as Business Development Manager at Boyner Holding, Restructuring Project Leader at Boyner Group in collaboration with McKinsey & Co. Turkey Group, General Manager of Benetton Licensing Operations in Turkey and Central Asia, Vice Chairman-Retail Operations at Boyner Holding A.Ş., and Chairman at Benetton Turkey (pursuant to the equal shareholding agreement between Benetton Group SPA Italy and Boyner Holding A.Ş.). Mr. Sunay has served as Board Member at Altınyıldız Mensucat ve Konf. Fab. A.Ş. since 2009.

NUR MEHMET İNAL member/non-exeCutiveHaving graduated from Galatasaray High School in 1973 and Boğaziçi University, Department of Business Administration in 1977, Nur Mehmet İnal commenced his professional career in 1977 at Arthur Andersen. From 1981 onwards, he served as System and Audit Coordinator at the Altınyıldız Group of Companies, and was appointed Finance Coordinator in 1983. Between 1992 and 1996, Mr. İnal sat on the Board of Directors at the Altınyıldız Group of Companies. Since 1996, Nur Mehmet İnal has held the position of Vice Chairman at Boyner Holding.

vITTORIO RADICE independent member/non-exeCutiveVittorio Radice started his business career in 1980 as a store manager in Italy. He restructured Habitat UK from 1990 until 1996 and sold it to IKEA, and subsequently worked to transform Selfridges in the UK into an innovative department store from 1996 until 2003, at which time he sold it to the Weston family. In 2003, Mr. Radice took office at Marks & Spencer, where he shaped the retailer’s home decor concept. Since 2005, he has served in senior positions at Italy’s La Rinascente department stores with a special focus on brand positioning. Additionally, Mr. Radice sits on the boards of numerous companies including Arthur Glen Designer Outlets, Boyner Büyük Mağazacılık A.Ş., Beymen Mağazacılık A.Ş., TSUM Moscow, and Ishaan Indian Real Estate Fund.

FETHİ PEKİN independent member/non-exeCutiveFethi Pekin graduated from Boston University, Faculty of Political Science and University of Buckingham, School of Law. He is a Managing Partner at Pekin & Pekin law firm and has served as Independent Board Member at Altınyıldız since 2008.

MANAGEMENT

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General Manager R. Aslı Karadeniz

Deputy General Manager-Corporate Development and Human Resources Arzu Güneşli

Deputy General Manager-Financial Affairs S. Arzu Sönmez

Deputy General Manager-Clothing Procurement Bora Alyanak

Deputy General Manager-Non-Clothing Procurement Mert Sağdam

Deputy General Manager-Private Labels İbrahim Yücel

Deputy General Manager-Operations Murat Akgün

Deputy General Manager-Marketing Mehtap Alp

Deputy General Manager-Sales/Boyner İlker Gözütok

Deputy General Manager – Sales/YKM Kerem Ak

ExECUTIvE MANAGERS

S.ARZU SÖNMEZ deputy General manaGer-FinanCial aFFairs/boyner & yKmA graduate of Boğaziçi University, Department of Business Administration, Arzu Sönmez worked for four years as Auditor before joining the Boyner Group in 1991. At Altınyıldız Mensucat ve Konfeksiyon Fabrikaları A.Ş., she held the positions of Accounting Manager and Deputy General Director-Financial Affairs. Since 2002, Ms. Sönmez has served as Deputy General Manager-Financial Affairs/Boyner & YKM.

BORA ALYANAK deputy General manaGer-ClothinG proCurement/boyner & yKmBora Alyanak graduated from Istanbul Technical University’s Department of Geological Engineering in 2000. In 1996, he joined the Boyner Büyük Mağazacılık family. Since July 2013, Mr. Alyanak has served as Deputy General Manager-Clothing Procurement/Boyner & YKM.

R. ASLI KARADENİZ General manaGer R. Aslı Karadeniz graduated from Robert College in 1982 and Boğaziçi University, Department of Business Administration, Marketing & Finance in 1986. She commenced her professional career in 1986 at Arthur Andersen Istanbul. Following a four-year stint at Arthur Andersen, she worked at Citibank for five years. In April 1995, Ms. Karadeniz joined Boyner Holding Group. She served as Finance Manager at Benetton from 1995 until 1999, at which time she was appointed General Manager, a position she held until 2002. Since December 2002, Ms. Karadeniz has served as General Manager of Boyner Büyük Mağazacılık A.Ş.

ARZU GÜNEŞLİ deputy General manaGer-Corporate development and human resourCes/boyner & yKmAfter graduating from Boğaziçi University, Department of Business Administration, Arzu Güneşli received a Master’s degree in Marketing from Boğaziçi University. Subsequently, she worked in the marketing departments of various textile, aluminum and insurance companies. In 1991, Ms. Güneşli joined Boyner Büyük Mağazacılık A.Ş. where she currently holds the position of Deputy General Manager-Corporate Development and Human Resources/Boyner & YKM.

MANAGEMENT

15


MERT SAĞDAM deputy General manaGer-non-ClothinG proCurement/boyner & yKmAfter graduating from Boğaziçi University, Department of Chemical Engineering, Mert Sağdam started his professional career at L’Oreal. Having joined Boyner Büyük Mağazacılık in 2002, he has held the position of Deputy General Manager-Non-Clothing Procurement at Boyner & YKM since July 2013.

İBRAHİM YÜCEL deputy General manaGer – private labels/boyner & yKmİbrahim Yücel graduated from Anadolu University, Faculty of Business Administration in 1995 and commenced his career at Printemps. He joined Boyner Büyük Mağazacılık in 1995, and has been Deputy General Manager-Private Labels/Boyner & YKM since July 2013.

MURAT AKGÜN deputy General manaGer-operations/boyner & yKmIn 1989, Murat Akgün completed his Bachelor’s degree at Istanbul University, Faculty of Economics, Department of International Relations. In 2007, he received a Master’s degree from Boğaziçi University. Mr. Akgün commenced his professional career at Yapı Kredi Bankası in 1990 before joining Garanti Bank in 1992. At Garanti Bank, he worked as a Manager in Internal Audit, Project Design and Implementation, Training, Human Resources and Call Center. In 2007, he joined YKM, where he assumed the position of Human Resources and Business Development Coordinator. Since 2012, Mr. Akgün has served as Deputy General Manager-Operations/Boyner & YKM at Boyner Büyük Mağazacılık.

MEHTAP ALP deputy General manaGer-marKetinG/boyner & yKmIn 1997, Mehtap Alp graduated from Istanbul Technical University’s Department of Business and then went on to complete the Engineering Management Master’s program at the same institution. She commenced her professional career at Aygaz. In 2002, she joined Boyner Büyük Mağazacılık. Since 2011, she has held the position of Deputy General Manager-Marketing at Boyner Büyük Mağazacılık.

İLKER GÖZÜTOK deputy General manaGer-sales/boynerA graduate of Trakya University, Department of Food Engineering, İlker Gözütok served as store manager for retail companies under the umbrella of EGS and Doğuş Holding from 1996 until 2001. He joined Boyner Group in 2001. Until 2008, Mr. Gözütok worked at Boyner Büyük Mağazacılık’s Antalya branch as store manager. From 2008 until 2011, he held the position of Sales Manager at Boyner Büyük Mağazacılık. Since August 2011, Mr. Gözütok has served as Deputy General Manager-Sales/Boyner.

KEREM AK deputy General manaGer-sales/yKmIn 1996, Kerem Ak graduated from Istanbul University, Department of Econometrics and went on to receive an MBA from London’s Brunel University. Subsequently, she commenced her professional career at Puma. In 2002, Ms. Ak joined Boyner Büyük Mağazacılık and has worked as Deputy General Manager-Sales/YKM since July 2013.

OPERATIONS

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TURKISH RETAIL INDUSTRY According to Economist Intelligence Unit (EIU) data, the total sales volume of the Turkish retail industry amounted to USD 300 billion in 2012. Food accounted for 52% of the market, while non-food retail made up the remaining 48%.

Turkey’s retail market volume is expected to expand by an annual average of 10% until 2017 and reach USD 467 Billion by that time.

NON-FOOD RETAIL MARKETClothing constitutes the second largest segment in the non-food retail market, accounting for around 18% of the total.

Home design products top the list with a share of 33% in the non-food retail market.

RISE IN THE NUMBER OF SHOPPING MALLSAs the industry shifts towards organized retailing, the number of shopping malls in Turkey has soared.

The number of shopping malls in the country rose from 92 in 2005 to 336 in the first half of 2013.

In terms of leasable space per capita, Turkey lags far behind the European market, and therefore has huge growth potential.

TURKISH GARMENT RETAIL INDUSTRY

Retail Market (USD Billion)

2007

2009

2011

2013T

2015T

2008

2010

2012

2014T

2016T

2017T

121141

153

131

152

152

155 145

165 159

175 173

188 191

207 216

226 241

140

136

115

133

Source: EIU Kaynak: Jones Lang La Salle 2013

Food Non-Food

Leasable Space Per (1000) Person (Retail)

City 2011 1H2013 2016F

Istanbul 232 243 318

Ankara 236 245 277

Isparta 49 62 208

Bursa 143 142 186

Karabük 179 215 206

Kırıkkale 37 99 199

Bolu 148 182 173

Muğla 76 148 160

Gaziantep 108 90 140

Antalya 124 140 148

Turkey 103 118 150

In terms of leasable space per capita, Turkey lags far behind the European market, and therefore has huge

growth potential.

OPERATIONS

17


Modern retailing continues to expand faster than population growth, due to the soaring number of urban retail stores and

the country’s rapid urbanization drive.

MOvING TOwARDS ORGANIZED RETAILING Turkey’s garment and fashion retailers operate in a fragmented market dominated by traditional players. The fragmented and unorganized structure of the industry presents huge growth potential to retailers.

Modern retailing continues to expand faster than population growth, due to the soaring number of urban retail stores and the country’s rapid urbanization drive.

INCREASING USE OF CREDIT CARDS Due to the strong and well-organized profile of the Turkish banking sector, the number of credit cards issued has risen from 16 million in 2002 to 56.7 million as of October 2013, corresponding to average annual growth of 12.2%.

Interbank Card Center (BKM) data reveals that the country’s credit card transaction volume expanded by an annual average of 17.6% from 2008 onwards and totaled USD 157 billion in third quarter 2013.

According to a McKinsey report, the share of credit card payments in total consumer spending stands at 19.7% in the USA, 21.8% in Turkey, and only 3.8% in France.

INCOME AND CONSUMPTION RISEThe huge Turkish urban population aged 20 to 44, ongoing economic growth, and the rise in disposable income result in a high consumption potential.

The industry expected to benefit most from such an increase in consumption is retail, which accounts for 35% of all consumer spending.

2005 2006 2007 2008 2009 2010

Source: DTZ Pamir & Soyuer

Town Malls City Center Malls Outlet Stores

Gross Leasable Area in Shopping Malls

0

km2

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

OPERATIONS

18


In 2013, we put our signature on many firsts in the business. First, we changed our shareholding structure: in May, Altınyıldız repurchased a 30% stake previously sold to CVCI. In parallel, we called back our free-floating shares (40%), and repurchased a 36.5% stake. Meanwhile, after acquiring a 63% stake in YKM in 2012, the Company bought the remaining 37% in October 2013, thus turning YKM into a wholly owned subsidiary of Boyner Büyük Mağazacılık A.Ş.

On the operations side, the Company focused on its budget targets while successfully completing the integration of Boyner and YKM. Additionally, we laid out a brand positioning road map to determine how these two brands will continue their respective journeys.

As for store investments in 2013, we opened Boyner Brandium and YKM Maltepe Park in Istanbul, Boyner Forum Gaziantep in Gaziantep, YKM Erasta in Antalya, Boyner Samsun Shopping Mall in Samsun, and Çarşı stores in Denizli and Samsun. We also undertook key capital investment initiatives in store renovation and technology use; during the year, we renovated a total of 51,000 m2 in store area, especially at YKM stores.

Boyner Büyük Mağazacılık capped the year 2013 with turnover up 51.4%, net turnover totaling TL 1.4 billion, and its total net sales area climbing to 277,218 m2 in 139 stores. These accomplishments have made us an even stronger player in non-food retail.

2013 RESULTS

SalesIn 2013, Boyner’s net consolidated sales grew 51.4% year-on-year. If we exclude YKM sales from the calculation in both years, as they include only September-December 2012, the year-over-year increase amounts to 16%.

Sales performance in different channels fared as follows:

Sales Increase at Boyner Stores 13.4%

Sales Increase at Boyner Bayi Stores 22.2%

Sales Increase at Boyner Outlet Stores 7.1%

Sales Increase at Çarşı Stores Stores 65.8%

Sales Increase via Boyner Internet 127.6%

Sales Increase at YKM Stores (2012-2013) 7.6%

Sales Increase at YKM Dealer Stores (2012-2013) 7.5%

YKM Outlet Stores (2012-2013) 12.6%

In 2013, net sales area rose by 2.3%, from 271,105 m2 to 277,218 m2. In 2013, we opened Boyner Brandium and YKM Maltepe Park in Istanbul, Boyner Forum Gaziantep in Gaziantep, YKM Erasta in Antalya, Boyner Samsun Shopping Mall in Samsun, and Çarşı stores in Denizli and Samsun.

ASSESSMENT OF THE YEAR 2013

Boyner Büyük Mağazacılık capped the year 2013 with turnover up 51.4%, net turnover totaling TL 1.4 Billion, and its total net sales area climbing to 277,218 m2 in 139 stores.

OPERATIONS

19


Stores Opened Location Date of Opening Net Sales Area

Boyner Istanbul, Brandium Mall March 13 3,540 m2

Boyner (dealer) Samsun, Samsun Mall March 13 3,091 m2

Boyner Gaziantep,

Forum Gaziantep Mall October 13 2,483 m2

Çarşı (dealer) Çarşamba October 13 1,182 m2

Çarşı (dealer) Denizli November 13 1,170 m2

YKM Antalya, Erasta Mall March 13 2,190 m2

YKMIstanbul,

Maltepe Park Mall September 13 2,764 m2

TOTAL 16,420 m2

Hangar Outlet in Istanbul, Boyner Beauté Bodrum, Boyner Beauté Marmaris, Boyner Beauté İzmir Egepark and Boyner Beauté İzmir Carrefour stores were closed down since these locations did not yield the expected productivity. The Denizli Outlet dealer store was closed down and replaced with the Çarşı Denizli dealer store.

Other stores closed down for insufficient productivity included the Istanbul YKM Sapphire Store, YKM Ankara Forum Sport Outlet Store and the YKM dealer stores of Yalova, Zonguldak Karadeniz Ereğli, Mardin Movapark, Iraq Erbil and Trabzon Outlet.

Stores Closed Location Date of Closure Net Sales Area

Boyner Beauté (dealer) Beauté Bodrum January 13 35 m2

Boyner Beauté (dealer) Beauté Marmaris January 13 41 m2

Boyner Beauté (dealer) Beauté Egepark January 13 142 m2

Boyner Beauté (dealer) Beauté Carrefour January 13 88 m2

Boyner Outlet (dealer) Denizli September 13 1,170 m2

Boyner Outlet Istanbul, Hangar Outlet October 13 3,040 m2

YKM (dealer) Yalova Desa January 13 988 m2

YKM (dealer) Mardin, Mardin Movapark March 13 478 m2

YKM (dealer) Irak, Erbil Familyfun Darin March 13 1,759 m2

YKM (dealer) Zonguldak, Karadeniz Ereğli April 13 862 m2

YKM Istanbul, Sapphire September 13 1,622 m2

YKM Outlet (dealer) Trabzon September 13 630 m2

YKM Outlet Ankara, Ankara Forum Sport September 13 110 m2

TOTAL 10,965 m2

The total number of visitors to Boyner Stores rose from 46.4 million in 2012 to 50.4 million in 2013. YKM Stores, meanwhile, attracted 46.5 million visitors for the year. The number of units sold increased 47.9% over the prior year, climbing to 28.9 million in 2013.

The total number of visitors to Boyner stores rose from 46.4 million in 2012 to 50.4 million in 2013. YKM stores,

meanwhile, attracted 46.5 million visitors during the year. The Company’s number of units sold increased 47.9% over

the prior year, climbing to 28.9 million in 2013.

OPERATIONS

20


Gross ProfitThe Company’s net sales increased 51.4%, while gross profit rose 54.9%. The profit margin went up 0.9 percentage points, from 37.3% in 2012 to 38.2% in 2013. Reasons underlying this uptick in profitability included the increased negotiation power vis-à-vis suppliers following the YKM purchase, and the rising share of the Company’s private labels in overall sales.

Operating Profit before Financial Expenses/IncomeIn 2013, operating expenses increased 56.7% over the previous year. The expense/turnover ratio ticked up from 33.5% in 2012 to 34.7% in 2013. This rise in operating expenses is due to one-off expenses and service purchases due to the YKM integration process.

Financial Expenses Net financial expenses rose 70.4% in absolute value over the previous year. The ratio of net financial expenses to turnover increased from 2.3% in 2012 to 2.6% in 2013. The underlying reason for this rise was the aggregate interest cost of the TL 130 Million loan taken out for the YKM acquisition in the second half of 2012, as well as the interest cost of the TL 100 Million in bonds issued to the public. Furthermore, an additional TL 100 Million in three-year bonds issued to the public to finance the acquisition of the remaining 37% of YKM in the last quarter of 2013.

Profit before Taxes The Company’s profit before taxes for 2013 fell 10.4% to TL 12,394,730 due to one-off costs related to the YKM integration process and financial expenses stemming from the acquisition.

Objectives for 2014 The Company closed the year 2013 with favorable results. Although 2014 is expected to be a challenging period due to economic volatility across the world and in Turkey, and the possible negative repercussions of the upcoming local and presidential elections, the retail industry, which outpaces GDP growth every year, will continue to expand domestically in the coming year.

In 2013, we placed a special emphasis on introducing new approaches to our operations, departments and stores, in many different ways. In 2014, we plan to gear up these efforts and achieve strong results.

For the coming year, our focus will again be on generating new approaches, and accordingly setting new strategies and objectives. Our biggest goal in 2014 will be to put groundbreaking policies into practice in a decisive and rapid fashion, and boost productivity. We believe that the key criterion for success is continuing to hone our competitive advantages in the increasingly competitive business environment.

Aslı KaradenizGeneral Manager

ASSESSMENT OF THE YEAR 2013

The Company closed the year 2013 with favorable results. Although 2014 is expected to be a challenging period

due to economic volatility across the world and in Turkey, and the possible negative repercussions of the upcoming local and presidential elections, the retail industry, which outpaces GDP growth every year, will continue to expand

domestically in the coming year.


21


OPERATIONS

22


As the leading department store chain in Turkey, Boyner Büyük Mağazacılık operates 78 Boyner and 61 YKM stores in 37 Turkish provinces, with a total sales area of 277,218 m2 as of year-end 2013. Boyner and YKM stores offer a wide array of domestic and international brands in women’s, men’s and children’s wear, youth wear & sportswear, shoes, accessories, cosmetics and home design products. “Special Boyner-YKM brands” include Asymmetry, Cotton Bar, Limon Company, Mama Ramma, PI, Altimod Man, T-Box, Caramel, Agenda, Bruno Ferrini, Loox, MIA, Men Club and Volt in women’s, men’s and children’s wear, sportswear and shoes, as well as the private labels Boyner Evde and YKM Home in home design products. In addition, Boyner Büyük Mağazacılık also owns the brands Beymen Club, Beymen Business, B Beymen and Beymen Studio. Boyner Stores blend product diversity with quality, reliability and attractive prices.

Having opened its first store in 1981, Boyner entered a reorganization phase from 2006 onwards, and started opening “concept” stores focused on a single product category and providing special customer services via a team of experts. Boyner Büyük Mağazacılık now serves customers at multi-storey Boyner stores, concept stores specialized in a single product category (such as Boyner Evde and Boyner Sports), Boyner Outlet stores, BSSD/ stores, Çarşı stores and YKM stores.

In 42 multi-storey stores in 30 Turkish provinces, Boyner stores offer customers a wide range of domestic and international brands in the categories of women’s, men’s, children’s apparel, youth wear & sportswear, shoes, accessories, cosmetics and home design.

Established in 2007, Boyner Evde offers everything from home textiles to furniture, kitchen and bathroom accessories to home design products and small household appliances. Boyner Sports is a specialty store chain marketing sports accessories and casual clothing from over 65 international brands. As an outlet chain offering discount products, Boyner Outlet operates stores in five Turkish cities. In 2009, Boyner established another “concept” store, BSSD. Boyner’s 4 BSSD stores in Istanbul and Ankara offer customers end-of-line products from world-renowned brands.

Launched in 2003, the Boyner online marketing web site reached a higher than expected sales volume in 2013, thanks to its soaring sales potential and constant improvements to the operational infrastructure.

STORE FORMATS

Boyner Büyük Mağazacılık serves its customers with multi-storey Boyner stores, concept stores specialized in a single category (Boyner Evde and Boyner Sports stores), Boyner Outlet Stores, BSSD Stores, Çarşı Stores and YKM Stores.

Total Number of Stores Company Stores Dealer Stores

Boyner Stores 42 36 6

Boyner Concept Stores 13 9 4

Boyner Evde 7 7 -

Boyner Sports 6 2 4

Boyner Outlet Stores 5 4 1

BSSD Stores 4 4 -

Çarşı Stores 14 11 3

OPERATIONS

23


In response to requests from customers and from shopping mall investors for mid-range consumer segments in large cities, we relaunched Çarşı Mağazaları in 2011. Çarşı retail stores perfectly respond to these particular customers’ brand, quality and price expectations with products that offer an attractive combination of price and brand. Çarşı stores are based on a flexible model where each store can decide its own brand positioning according to its respective position in the marketplace, and market its private brands according to customers’ needs. Today, there are 14 Çarşı stores in eight Turkish provinces.

Total Number of

Stores Company

Stores Dealer Stores

YKM Stores 46 25 21

YKM Outlet 11 11 -

YKM Sports 4 3 1

Established in 1950 in Istanbul’s Sultanhamam district as a small shop selling fabrics, YKM is currently active as a department store chain under the umbrella of Boyner Büyük Mağazacılık, with 61 stores (46 multi-storey stores, 11 YKM Outlet stores and 4 YKM Sports stores) in 30 provinces. YKM boasts more than 1,800 employees, over 1,000 business partners, around 300 thousand different products, and an annual visitor population of 46.5 million.

In addition to being Turkey’s first multi-floor store, YKM has introduced numerous innovations to the industry including the first payment installment system, the first store credit card, the first dealership system, the first SAP application and the first chip credit card.

At YKM, consumers can find a wide range of goods to meet their needs in clothing, cosmetics, footwear, accessories, sportswear and home design. After a brief interruption in 2013 due to necessary process improvements, YKM’s web site will re-enable sales transaction functionality in 2014.

YKM will continue to pursue its mission as a pioneer in the sector with its operations under Boyner Büyük Mağazacılık.

OPERATIONS

24


Sales Volume (TL Million) 31.12.2013 31.12.2012

Boyner & YKM 1,415.7 935.1

The sales and marketing strategies of Boyner and YKM stores are built on the principle of “Unconditional Customer Satisfaction.” The objective is to offer customers a satisfactory shopping experience in all stages, from the identification of need until after-sales service, and to inspire in them the feeling of security. Boyner and YKM differentiate themselves from rivals by placing the customer at the center through a service-focused approach. Leading the sector in

SALES & MARKETING

terms of service approach and after-sales services, the Boyner and YKM brands extend the Unconditional Customer Satisfaction principle to all their suppliers. Boyner and YKM carry out meticulous research studies to encourage supplier firms to comply with Boyner and YKM standards in their service approach and after-sales services, and thus ensure complete customer satisfaction.

In all store formats, visitors are directed to different shopping categories and are provided with services in diverse product categories on a single visit. Various sales scenarios are planned and implemented to turn the Boyner and YKM brands into one-stop shopping destinations where customers can meet all their needs.

SALES

OPERATIONS

25


In 2012, Boyner Group completed its brand positioning research that commenced with the acquisition of YKM’s majority shares; in addition, the Group initiated further studies to facilitate the growth of the Boyner and YKM brands using different positioning strategies. In all marketing activities, the objective is to protect the unique images of the Boyner and YKM brands created through the years, and meet the expectations of their brand fans.

Boyner has been conceptualized in such a way as to allow customers to meet all their needs in different shopping categories under a single roof; additionally, Boyner’s communication language and strategy has been renewed to live up to the brand claim of keeping abreast of the latest trends. According to this new concept, which features Ece Sükan as Boyner’s brand ambassador, customers are proposed different product categories that match diverse styles. At the “outfit matching corners” located in stores, customers are offered not only the garment they have in mind, but also products in other categories that match the target garment.

Boyner, which counts 78 stores in its portfolio as of end-2013, also reached a higher-than-anticipated sales volume through the web site. The Company supported its brand presence in digital channels with social media messaging and apps. Boyner.com.tr boasts 50,000 unique daily visitors, while Boyner is in contact with nearly 300,000 followers on social media every day.

At Boyner stores, 15 different activities were carried out in 2013 to increase interaction with customers. Due to positive customer feedback stemming from the in-store initiatives, more such activities are planned for the coming year. Boyner stores remained a customer favorite in gift shopping with their varied store concepts, eight different shopping categories, wide range of gift cards and packaging, as well as the Boyner Evde (Home) range of products.

Boyner continued to implement marketing concepts supportive of shopping in different categories in order to reinforce current customer loyalty; the Company also entered into partnerships with

different brands, and organized activities on college campuses to attract new customers. In 2013, YKM executed promotional campaigns to strengthen its traditional and budget-friendly brand image that had been formulated in previous years, while pursuing a marketing strategy to reinforce its multi-storey department store image. YKM underpinned this strategy with a visual campaign underlining that every need from clothing to cosmetics, footwear to accessories, sportswear to home design can be met under its roof. Additionally, a special emphasis was placed on the active sportswear category to appeal to young consumers, who account for a large proportion of YKM’s customer portfolio. This strategy was implemented through all communication channels, and deployed in store windows and interiors, as well as in shopping malls. Throughout the year, YKM posted daily messages on those social media channels most closely followed by young customers; the Company also carried out activities in universities to reinforce this relationship with younger consumers. Following renovation work at YKM stores, the renewal process and the new brands introduced to the store were communicated to customers through campaigns customized for each store; in addition, former customers were invited back to the stores once again. New partnerships with various shopping malls also allowed YKM to speed up the new customer acquisition process. To support gift shopping at YKM stores, the Company carried out technical improvements and upgraded its gift packaging, gift card and gift check designs. Furthermore, the launch of YKM Home was completed in 2013 in order to reinforce the Company’s image as an ideal gift shopping location. At Çarşı stores, communication and marketing activities were planned for each store individually through due consideration of its unique location. Throughout the year, location-specific announcements were made related to the budget-friendly, high quality products and special offer campaigns.

In 2013, the Company opened 3 Boyner, 2 YKM and 2 Çarşı multi-storey stores. Unproductive stores whose lease

contracts had expired were closed down. In 2013, we carried out key renovations in our current stores, especially in the

YKM store portfolio.

MARKETING

OPERATIONS

26


Boyner, YKM and Çarşı stores each have their own loyalty programs managed individually and separately in line with the expectations and shopping habits of the respective brand customers. These programs are key in acquiring new customers, orienting current customers towards different categories, and reinforcing communication with customers.

At the stores, process improvement efforts are regularly carried out based on data collected from loyalty programs, which also cover all store promotional campaigns including brand campaigns. Loyalty programs are used efficiently, particularly during store openings, and in partnerships with supplier brands.

The number of customers registered in the Boyner Anahtar (Key) Program had surpassed the 5.6 million mark as of end-2013, and Boyner Anahtar is used in 83% of all purchases at Boyner stores. YKM Card holders numbered 3.7 million at the end of 2013 and 72% of all store purchases are made with this card.

Furthermore, as part of efforts to ensure unconditional customer satisfaction, the Group keeps track of keywords related to its brands in various social media channels, and customer feedback and information from stores and all the other channels are closely monitored.

LOYALTY PROGRAMS & CUSTOMER FEEDBACK MANAGEMENT

The number of customers registered in the Boyner Anahtar (Key) Program had surpassed the 5.6 million

mark as of end-2013, and Boyner Anahtar is used in 83% of all purchases at Boyner stores. YKM Card holders numbered 3.7 million at the end of 2013 and 72% of all store purchases are made with this card.

OPERATIONS

27


OPERATIONS

28


In 2013, the Company opened 3 Boyner, 2 YKM and 2 Çarşı multi-storey stores. Unproductive stores whose lease contracts had expired were closed down. In 2013, we carried out key renovations in our current stores, especially in the YKM store portfolio.

Store Openings in 2013

Store Location Opening Date Net Sales Area Boyner Istanbul, Brandium Mall March 13 3,540 m2

Boyner (dealer) Samsun, Samsun Mall March 13 3,091 m2

Boyner Gaziantep, Forum Gaziantep Mall October 13 2,483 m2

Çarşı (dealer) Samsun, Çarşamba October 13 1,182 m2

Çarşı (dealer) Denizli November 13 1,170 m2

YKM Antalya, Erasta Mall March 13 2,190 m2

YKM Istanbul, Maltepe Park Mall September 13 2,764 m2

TOTAL 16,420 m2

Store Closures in 2013

Store Location Closure Date Net Sales Area Boyner Beaute (dealer) Beaute Bodrum January 13 35 m2

Boyner Beaute (dealer) Beaute Marmaris January 13 41 m2

Boyner Beaute (dealer) Beaute Egs January 13 142 m2

Boyner Beaute (dealer) Beaute Carrefour January 13 88 m2

Boyner Outlet Istanbul, Hangar Outlet October 13 3,040 m2

Boyner Outlet Denizli September 13 1,170 m2

YKM (dealer) Yalova Desa January 13 988 m2

YKM (dealer) Mardin, Mardin Movapark March 13 478 m2

YKM (dealer) Iraq, Erbil Familyfun Darin March 13 1,759 m2

YKM (dealer) Zonguldak, Karadeniz Ereğli April 13 862 m2

YKM Istanbul, Sapphire September 13 1,622 m2

YKM Outlet (dealer) Trabzon September 13 630 m2

YKM Outlet Ankara, Ankara Forum Sport September 13 110 m2

TOTAL 10,965 m2

In 2013, despite a fall in the overall number of stores, the Company’s total sales area increased to 277,218 m2 due to the openings of new multi-storey Boyner and Çarşı stores. The total number of visitors in all stores climbed to 97 million during the year.

Breakdown of Investments in 2013

(TL) 2013Store Openings and Renovations 16,926,196Equipment 12,890,624Rights 8,032,926Software, Hardware, et al 1,148,510Total Investment 38,998,256

INvESTMENTS

In 2013; despite a fall in the overall number of stores, the total sales area increased to 277,218 m2 due to the

openings of new multi-storey Boyner and Çarşı stores. The total number of visitors in all stores reached 97 million.

OPERATIONS

29


OPERATIONS

30


In 2013, Boyner implemented a number of projects in performance and career management. Following the YKM-Boyner integration, each company’s best practices in this area were taken into consideration and their systems were fully integrated.

Career ExamsOn the basis of its career maps, the Group administers function-specific exams in due consideration of the competence and information level required for each level. Employees willing to do so took the exam, and those with successful scores were invited to career interviews. Employees who passed the interview stage were included in a pool of candidates ready for promotion to a higher level. Employees were also offered transitions and promotions between Boyner and YKM stores.

Boyner YKM

2013 Number and Percentage of Promoted Employees (general, including all positions) 179/5.3% 45/2.27%

2013 Number and Percentage of Promoted Female Employees (general, including all positions) 76/4.5% 25/1.27%

Human Resources Regional Organization In order to run human resources processes in a more efficient manner, the Human Resources Regional Organization was put into practice across Boyner stores. Later on, this scheme was revised after the integration of YKM and expanded to include this entity as well. As a result, standardized human resources practices are being implemented at all Boyner and YKM stores in coordination with the central Human Resources Department. Head office employees from all levels were placed in a special performance potential matrix and development activities were planned for specific groups.

Changes in the Head Office Organization There are nine Assistant General Managers dependent on the General Manager in the Company. The Assistant General Managers are responsible from such areas; Corporate Development and Human Resources, Financial Affairs, Clothing Supply, Out of Clothing Supply, Private Brands, Operations, Marketing, Boyner Sales and YKM Sales.

In 2013, in line with the strategies of Group companies, Supply Operations were organized under the three main categories of Clothing, Non-Clothing and Special Brands. The E-commerce Department, which previously had reported to Supply Operations, was restructured and placed under the Marketing function instead. The Company overhauled the YKM Sales Operations in line with the regional organization. Corporate Sales Operations, which previously had reported to the Sales Operations Department, was restructured and placed under the Marketing function. The

HUMAN RESOURCES

As of December 31, 2013, Boyner Büyük Mağazacılık employed a total of 5,412 personnel in which 3,593 of them Boyner and 1,819 are YKM employees. The

four new stores opened in 2013 created employment opportunities for 300 more persons.

OPERATIONS

31


departments of Advertising and Public Relations, and Visual Presentation were positioned in such a way as to provide differentiated services to Boyner and YKM brands, to suit their respective strategies.

In the wake of the integration effort, the Internal Audit Department was restructured to meet the increasing needs for the organization. After all these organizational changes, the job definitions for the head office were revised.

Occupational Health and Safety Our Occupational Health and Safety efforts are expended with a comprehensive view to provide a healthy and safe work environment for our employees and to promote their mental, physical, spiritual and emotional development. In 2013, 5,476 employees (3,584 Boyner and 1,892 YKM) received Occupational Health and Safety training. In addition, Occupational Health and Safety Councils and risk analysis teams started work to create more healthy and secure work environments, and to ensure employee participation in all these processes. Together with Boyner Group, we published our Occupational Health and Safety Handbook specific to our industry’s needs, and shared it with the entire workforce.

Employee Number and ProfileAs of December 31, 2013, Boyner Büyük Mağazacılık employed a total of 5,412 personnel in which 3,593 of them Boyner and 1,819 are YKM employees. The 4 new Boyner and YKM stores opened in 2013 created employment opportunities for 300 more people.

Boyner boasts a rather youthful and dynamic workforce. The age average of store employees is 29, while that of head office personnel stands at 34. Some 68.5% of employees hold a high school degree or higher, and 30% have earned a Bachelor’s or postgraduate degree. Additionally, 80% of head office personnel hold a Bachelor’s degree or higher.

Personal and vocational Training Seminars Training programs are organized on the basis of annual operational objectives, individual projects, and the relevant personal and vocational development needs of store and head office personnel. In 2013, some 8,075 employees across Boyner and YKM joined training programs. In parallel with the employee profile, women accounted for 52.15%, that is, over half of all participants (4,211 out of total). All recently hired employees participate in orientation programs. In order to boost the service quality of store personnel, and in response to store requirements, Internal Trainers regularly organize technical seminars. In order to complete the integration process, technical training seminars and acquaintance, cohesion and motivation programs were held at the head office and stores during the year.

In 2014, in accordance with strategic targets, we planned training programs to increase multi-category sales and units purchased per receipt.

OPERATIONS

32


Employee SatisfactionIn order to enhance employee motivation and productivity, and ensure the satisfaction of personnel in the work place, we organized employee-centered events throughout 2013. In a first for the Turkish retail industry, all Boyner Group companies celebrated December 12th as “Retail Employees Day” to recognize the diligent work of our store personnel. In addition, “the best practices” in each store were rewarded and shared with other stores to be implemented across the organization.

Following these diligent efforts, Boyner Group was featured in the “Great Place to Work Turkey 2013” list. This honor was based on employee responses to the Trust Index© survey prepared by Great Place to Work® Institute, which is active in 49 countries

across the world, and the Culture Audit© work place culture surveys, which relates to HR policies and practices and responded to by HR managers. In all countries where it operates, the Institute is considered a highly respected pioneer in identifying the best employers by using sophisticated research methods. A Great Place to Work® is defined as an exceptional work place, where employees trust their managers, are proud of their work, and are happy to collaborate with their colleagues.

Additionally, at the Great Place to Work Turkey 2013 competition and Benchmarking study, Boyner Group received the Special Award for “Equal Opportunity and Supporting Women” due to its groundbreaking HR practices and policies.

HUMAN RESOURCES

OPERATIONS

33


There are several ongoing lawsuits filed by or against the Group. Most of these cases concern commercial issues. At the end of each period, Company management evaluates the possible outcome and financial impact of each lawsuit, and sets aside the necessary reserves to cover possible liabilities and gains. As of December 31, 2013, the Company’s total reserves for such ongoing lawsuits amounted to TL 2,294,362 (December 31, 2012-TL 1,395,440).

With regard to the acquisition of YKM A.Ş. on September 7, 2012, minority shareholders had filed a lawsuit to prevent the transfer of the brand and its registration, to determine and prevent an alleged misuse of the brand, to determine the pre-redemption right of Company shares, to annul the share transfer and to enable their reemployment. As a result of the share transfer contract reached on October 22, 2013, these minority shareholders withdrew the lawsuit.

LEGAL ISSUES

CORPORATE

34


ORDINARY GENERAL ASSEMBLY AGENDA

PROFIT DISTRIBUTION PROPOSALRelated with the 2013 profit of our Company;

While determining the profit distribution amount, investment and financing policies, profitability and cash position of the Company were taken into account and in order to strengthen the company’s financial structure, it was decided to submit the following issues to the approval of the General Assembly;• not to distribute the profit for 2013, and • to retain the profit in the partnership.

The amendments to the Articles n. 4, 18 and 21 of the Company’s Articles of Association, which were approved in the Ordinary General Assembly meeting, dated March 28, 2013 were completed after being published in the Turkish Trade Registry Gazette N.8305, dated April 22, 2014.

In the Ordinary General Assembly meeting that will be held on March 27, 2014, the amendments to the Articles n. 6, 8, 29, 30 and 31 of the Company’s Articles of Association will be submitted for the approval of the General Assembly in case the necessary permissions are obtained.

AMENDMENT TO THE ARTICLES OF ASSOCIATION

Agenda of the 2013 Ordinary General Assembly – of our Company, Boyner Büyük Mağazacılık A.Ş., that will be held on the 27th of March 2014.

1) Opening and Election of the Chairmanship Committee;2) Authorizing the Chairmanship Committee to sign the General Assembly Meeting Minutes in the name of the

Shareholders;3) Reading, discussing and approving the financial statements, Board of Directors’ Activity Report, and the

summary of the Independent Audit Report related to the 2013 accounting period; 4) Discussing and resolving the “Profit Distribution Policy” which was revised within the scope of the Dividend

communiqué N. (II.19.1) of the Capital Markets Board, and the proposal of the Board of Directors regarding the distribution of the profit;

5) The approval of the changes made on the membership of the Board of Directors within the year according to the Article 363 of Turkish Code of Commerce;

6) Discussing the acquittal of the members of the Board of Directors due to their activities, actions and accounts carried out in 2013 fiscal year;

7) Informing Shareholders about the “Remuneration Policy” for the Members of the Board of Directors and for the managers with administrative responsibilities, and about the payments made within the scope of this policy;

8) Election of the members of the Board of Directors and determining their term of position;9) Determining remuneration and daily allowances of the Members of the Board of Directors;10) Acceptance, acceptance upon amendment or rejection of the Board of Directors’ proposal for the amendment

of the Articles 6,8,29 and for the cancellation of the Articles 30,31 of the Articles of Association on condition that the legal permissions were obtained from the Capital Markets Board and Ministry of Customs and Trade;

11) Discussing and approving the election of the Independent Audit Firm by the Board of Directors and the decision taken on its term of position upon the proposal of the Audit Committee in accordance with the Communiqué on the Independent Audit Standards in the Capital Markets Board published by the Turkish Code of Commerce and Capital Markets Board;

12) Authorizing the members of the Board of Directors to perform the mentioned transactions stipulated in the Articles 395 and 396 of the Turkish Code of Commerce, informing the General Assembly about the transactions –specified in this article – of the persons stipulated in the (1.3.6) provision of the Corporate Governance Communiqué (II-17.1) of the Capital Markets Board;

13) In accordance with the regulations of the Capital Markets Board, giving information to the General Assembly about the collaterals, pledges and mortgages given by the Company in favor of third parties and about the income or benefits obtained;

14) Informing General Assembly about the donations and charity made in 2013 and setting upper limit for the donations that will be made in 2014;

15) Wishes and closing.

Meeting location : Büyükdere Caddesi USO Center Binası No:245/A KAT: B01 - Z02 Maslak Şişli Istanbul/TURKEYMeeting date : March 27, 2013Meeting time : 12.00 am

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FORMER vERSION

ISSUED CAPITAL OF THE COMPANY

Article 6:

The Company accepted the Registered Capital System as per the Capital Markets Law n. 2499 and with Capital Markets Board’s permission n. 10/132, dated February 24, 1998. Company’s Registered Capital Upper limit is TL 100,000,000(hundred million). The Company issues shares at a nominal value of Kurus 1,-(one) per share.

Registered Capital Upper limit permission given upon the establishment of Capital Markets Board is valid for 5 years (2009-2013). Although the registered capital upper limit allowed at the end of 2013 was not reached, for the Board of Directors to take capital increase decision after 2013; it is obligatory to get authorization from the General Assembly for the new validity period by getting permission from the Capital Markets Board for the previously allowed upper limit amount or for the new amount. In case the mentioned authorization is not obtained, the Company shall be deemed to have quit from the registered capital system.

While the nominal value of the shares was TL 1.000,- (thousand) , within the scope of the Law on making amendment to the Turkish Code of Commerce n. 5274, it was amended to Kurus 1,- (one). Due to this amendment, the total number of the shares decreased and for each 10 (ten) shares at TL 1.000,- (thousand) per share nominal value, will be given 1,-(one) share at Kurus 1,- (one) per share nominal value. Related with this amendment, the rights of the partners arising from the shares owned are reserved. The shares representing the capital are monitored in dematerialized form within the frame of the dematerialization principles. Decision was taken to remove the “New” expression from the New Turkish Lira and New Kurus as of 1st of January 2009, pursuant to the Law n. 5083 on the “Currency Unit of Republic of Turkey” published on the Official Gazette dated January 31, 2004 and with the Cabinet Decree n. 2007/11963 dated April 4, 2007 published on the Official Gazette dated May 5, 2007, “Turkish Lira” expressions in this Articles of Association are the expressions amended pursuant to the Cabinet Decree, stated above.

NEw vERSION

CAPITAL

Article 6:

Company accepted the registered capital system as per the provisions of the abolished Law n.2499 and moved into the registered capital system with the Capital Markets Board’s permission n. 10/132, dated February 24, 1998. Company’s Registered Capital Upper limit of TL 250,000,000 (two hundred and fifty million) is divided into 25.000.000.000 (twenty five billion) bearer shares with a nominal value of Kurus 1,-(one) per share.

Registered Capital Upper limit permission given by Capital Markets Board is valid for 5 years (2014-2018). Unless the allowed registered capital upper limit is not reached in 2018, for the Board of Directors in order to be able to take a capital increase decision after 2018; getting authorization from the General Assembly for the new validity period not exceeding 5 years is mandatory by means of getting permission from the Capital Markets Board for the previously allowed upper limit or for the new upper limit. The allowed validity period can be extended for a period of 5 years with the decision of General Assembly. In case the mentioned authorization is not obtained, capital increase cannot be made with the decision of the Board of Directors.

The issued capital of the Company, which was totally paid without collusion, is TL 92,070,000 (ninetytwo millionseventythousand).

The shares representing the capital are monitored in dematerialized form within the frame of the dematerialization principles. In case it is required, the capital of the Company can be increased or decreased within the frame of the provisions of the Turkish Code of Commerce and of the Capital Market Legislation.

When considered necessary, Board of Directors is authorized to increase the issued capital by issuing new shares till the registered capital upper limit in compliance with provisions of the Capital Markets Law.

Board of Directors is authorized to take decisions on the issues of limiting the right of the shareholders to buy new shares by issuing shares above or below the nominal values. The authorization of


AMENDMENTS TO THE ARTICLES N. 6, 8, 29, 30 AND 31 OF BOYNER BÜYÜK MAĞAZACILIK ANONİM ŞİRKETİ’S ARTICLES OF ASSOCIATION

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Company’s issued capital is TL 92,070,000 (ninety two million seventy thousand). The Company’s capital divided into 9.207.000.000 shares at a nominal value of Kurus 1,- (one). All the shares are bearer shares. Within the frame of the communiqués of the Capital Markets Board, Board of Directors is authorized to increase the issued capital by issuing bearer shares until reaching the upper limit of the Registered Capital between the years 2009 and 2013. Moreover, the Board of Directors is authorized to issue shares above the par value. Share amounts corresponding to the subscribed capital are paid upfront in cash. Within the frame of the Article 13 of the Capital Markets Board, the Company can issue bonds and other debt securities included in the capital market instruments, with the decision of the Board of Directors. The Board of Directors is authorized to limit the shareholders’ right for purchasing new shares.

BOARD OF DIRECTORS

Article 8: Board of Directors of the Company is composed of executive and non-executive members.

The business of the Company will be managed by the Board of Directors, which is composed of six (6) members, including two (2) independent members.

The majority of the members of the Board of Directors will be composed of the persons who are non-executives and who do not have any other administrative duties in the Company except Board of Directors’ membership. Among the non-executive members of the Board of Directors, there will be independent members who have the qualifications listed in the Corporate Governance Principles of the Capital Markets Board. In case a position of a member in the Board of Directors becomes vacant, elections are made in compliance with the relevant provisions of the Turkish Code of Commerce and the Corporate Governance Principles of the Capital Markets Board provided that the decisions regarding the issues considered significant as per the Corporate Governance Principles of the Turkish Code of Commerce and the Capital Markets Board shall remain reserved. The member elected in this manner shall hold the position until the first General Assembly and the member elected by the General Assembly shall perform his/her duties with the term of position equal to the remaining term of position of the former member. In case, related shareholders representing a juridical person report a board

the Board of Directors for limiting the rights of the shareholders to buy new shares cannot be used in a way that will cause inequality among the shareholders.

BOARD OF DIRECTORS

Article 8: Board of Directors of the Company is composed of executive and non-executive members.

The businesses of the Company will be managed by the Board of Directors, which is composed of seven (7) members, including two (2) independent members.

The majority of the members of the Board of Directors will be composed of the persons who are non-executives and who do not have any other administrative duties in the Company except Board of Directors’ membership. Among the non-executive members of the Board of Directors, there will be independent members who have the qualifications listed in the Corporate Governance Principles of the Capital Markets Board. In case a position of a member in the Board of Directors becomes vacant, elections are made in compliance with the relevant provisions of the Turkish Code of Commerce and the Corporate Governance Principles of the Capital Markets Board provided that the decisions regarding the issues considered significant as per the Corporate Governance Principles of the Turkish Code of Commerce and the Capital Markets Board shall remain reserved. The member elected in this manner shall hold the position until the first General Assembly and the member elected by the General Assembly shall perform his/her duties with the term of position equal to the remaining term of position of the former member. In case, related shareholders representing a juridical person report a board


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member to the Board of Directors, on the issue that he/she does not represent the juridical person anymore, he/she shall be considered resigned. In this situation, related shareholders representing the juridical person will nominate a new member and the Board of Directors will appoint this new member to the Board of Directors.

DISTRIBUTION OF PROFIT Article 29: The amounts such as general expenses and various depreciations that must be paid or set aside by the Company and taxes that must be paid by the Company’s juridical personality, are deducted from the revenues ascertained at the end of the accounting year, and the remaining net profit shown on the annual balance sheet is distributed after the deduction of the previous year’s losses (if any) in the order shown below:

Primary Legal Reserve:

a) 5% of net profit is set aside for the legal reserves First Dividend: b) From the remaining, first dividend is reserved at a

ratio and in an amount stipulated by the Capital Markets Board.

Second Dividend:c) General Assembly is authorized to partially

or fully distribute the remaining balance (the amount reached after deducting the amounts specified in the sub-paragraphs a, and b from the net profit) as second dividend or to set aside as extraordinary legal reserve.

Secondary Legal Reserve: d) One-tenth (1/10) of the amount remaining after

deducting the dividend equal to the 5% of the paid-in capital from the amount decided to be distributed to the shareholders and to the other persons participated in the profit, is set aside as secondary legal reserve in accordance with the 2nd paragraph and 3rd sub-paragraph of the Article 466 of Turkish Code of Commerce.

e) Unless the reserve funds required to be set aside in accordance with the statutory provisions, and the first dividend stipulated in the Articles of Association for the shareholders are duly reserved, no decision can be taken to set aside other reserve funds, or to transfer the profit to the following year, and unless the first dividend is paid in cash and/or in the form of share certificates, no decision can be taken, to make donations to, or to distribute dividend

member to the Board of Directors, on the issue that he/she does not represent the juridical person anymore, he/she shall be considered resigned. In this situation, related shareholders representing the juridical person will nominate a new member and the Board of Directors will appoint this new member to the Board of Directors.

PROFIT DISTRIBUTION:

Article 29:

The amounts such as general expenses and various depreciations that must be paid or set aside by the Company and taxes that must be paid by the Company’s juridical personality, are deducted from the revenues ascertained at the end of the operating period, and the remaining profit of the period shown on the annual balance sheet is distributed after the deduction of the previous year’s losses (if any) in the order shown below:

General Legal Reserve

a) 5% of the period profit is set aside for the legal reserves

First Dividend: b) In compliance with the Turkish Code of

Commerce and Capital Markets Legislation, first dividend is set aside over the amount calculated by adding, if any, the amount of the donations made within the year, on the remaining amount, within the frame of the profit distribution policy that will be determined by the General Assembly.

c) After the deductions stated above were made, General Assembly has the right to decide on distributing the dividend to the Members of the Board of Directors together with the employees, janitors and workers, to the charitable institutions established with various purposes and to the entities with similar characteristics.

Second Dividend: d) General Assembly is authorized to partially

or fully distribute the remaining balance (the amount reached after deducting the amounts specified in the sub-paragraphs (a), (b) and (c) from the net period profit) as second dividend or to set aside as legal reserve at own request as per the Article 521 of Turkish Code of Commerce.

General Legal Reserve:e) One-tenth of the amount, remaining after

deducting the dividend equal to the 5% of the paid-in capital from the amount decided to be distributed to the shareholders and to the other persons participated in the profit, is added on the

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to the Members of the Board of Directors of the Company and its employees, holders of “jouissance shares”/“founders’ holding jouissance shares”, privileged shareholders, charitable institutions established for various purposes, and entities with similar characteristics.

PROFIT DISTRIBUTION DATE Article 30: Payment schedule and method of the yearly profit to the shareholders are decided by the General Assembly upon the proposal of the Board of Directors in compliance with the Capital Markets Law and the related provisions of the legislation. Distributed profit in accordance with the Articles of Association is not withdrawn.

LEGAL RESERvE Article 31: Legal reserve is set aside until reaching the 20% of the Company’s issued capital amount. If the amount of the legal reserve which depends on the 20% of the capital decreases for any reason, Company continues to set aside legal reserve until reaching this amount (%20 of the issued capital). The provision of Article 467 of Turkish Code of Commerce is reserved.

general legal reserve as per the 2nd paragraph of the Article 519 of Turkish Code of Commerce.

Unless the reserve funds required to be set aside in accordance with the statutory provisions, and the first dividend stipulated in the Articles of Association for the shareholders are duly reserved, no decision can be taken to set aside other reserve funds, or to transfer the profit to the following year, and unless the first dividend is paid in cash and/or in the form of share certificates, no decision can be taken, to make donations to, or to distribute dividend to the Members of the Board of Directors of the Company and its employees, holders of “jouissance shares”/“founders’ holding jouissance shares”, privileged shareholders, charitable institutions established for various purposes, and entities with similar characteristics.

f) Dividend is paid to all the existing shares equally as of the distribution date, without taking into account their issue and acquisition dates.

g) General Assembly decides on the method and time of the profit distribution upon the proposal of the Board of Directors on this issue.

Profit distribution decision of General Assembly pursuant to the provisions of the Articles of Association cannot be withdrawn. Article 512 of Turkish Code of Commerce is reserved.

Withdrawn.


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Profit Distribution Policy Our Company makes profit distribution within the frame of the Turkish Code of Commerce provisions, Capital Markets Regulations, Tax Regulations and other relevant regulations and relevant article of the Articles of Association regarding profit distribution. In profit distribution, in accordance with the Corporate Governance Principles, a balanced and consistent policy is pursued between the shareholders and Company benefits; and moreover, long term strategies, investment and financing policies, profitability and cash position of the Company are taken into account in determining the profit distribution amount.

As a principle, taking the above issues into consideration, minimum 20% of the distributable period profit calculated within the frame of the Capital Markets Regulations and other relevant legislations, are distributed in cash and/or in the form of scrip issue.

The aim is to make the profit distribution within 3 months, at the latest, upon the General Assembly meeting. Final profit distribution schedule is decided by the General Assembly. General Assembly or in case the authorization is granted, the Board of Directors may decide on making the payment of the dividend with installments.

On the other hand, advance dividend payment will not be made.

Remuneration Policy for the Members of the Board of Directors and Senior Executive Managers This policy document determines the remuneration system and its practices used for the members of the Board of Directors and senior executive managers who have administrative responsibilities within the scope of the Capital Markets Board regulations.

We adopt fair approach in all our Human Resources policies and in their practices such as recruitment, promotion, transfer, rotation, waging and we find making discrimination for reasons such as; language, race, color, gender, political opinion, belief, religion, sect, age, physical disability etc., absolutely unacceptable. The same principle covers also the Senior Executive Managers. While determining the wages, market conditions are considered in order to be competitive at the positions in the sectors which the Company carries out its activities and in the related functions. This information is obtained via independent remuneration surveys.

Every year, in the Ordinary General Assembly meeting, fixed remuneration is determined that is valid only for the independent Members of the Board of Directors. Payments to the Executive Members of the Board of Directors are made within the scope of the policy determined for the senior executive managers.

Expenses incurred by the Members of the Board of Directors due to their contributions to the Company (transportation, phone calls, insurance etc.) can be met by the Company.

Remunerations of the Senior Executive Managers are composed of the payments as monetary and non-monetary based on the fixed payments and performance related payments. Senior Executive Manager fixed remunerations which are determined based on their responsibility areas in the Company; are determined also taking into account the macro economic data, remuneration levels valid in the market, size of the Company and long term objectives, in compliance with the international standards and legal obligations.

Premiums of the Senior Executive Managers; are calculated based on the Company performance and individual performance. Information regarding the criteria is summarized below:

Company Performance: is obtained by measuring the results of the financial and operational (market share, export, foreign operations, productivity etc.) targets given to the Company at the beginning of each year, at the end of the period. Continuity of the success, enhancements compared to the past years are the significant principles taken into account while setting the Company targets.

Individual Performance: While determining the individual performance, together with the Company targets, also the targets related with the employees, customers, processes, technology and long term strategies are taken into account. In the measurement of the individual performance, in parallel to the Company performance, long term sustainable enhancement principle is also pursued in the areas out of financial areas.

Total amounts, determined based on the principles specified above and paid to the Senior Executive Managers and the Members of the Board of Directors within the year, are submitted to the information of the partners in the next General Assembly meeting in accordance with the legislation.

COMPANY POLICIES THAT wILL BE SUBMITTED TO THE APPROvAL OF GENERAL ASSEMBLY

DONATIONS AND ASSISTANCE IN 2013

The amount of Donations and Assistance in 2013 which were carried out by the Company totaled TL 415,566.30.

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1. Corporate Governance Principles Compliance Statement With respect to the “Corporate Governance Principles”, an issue with an increasing importance in the world recently, the Capital Markets Board (CMB) published on the 30th of December 2011 a “Communiqué (Serial IV, n. 56) on “Determination and Implementation of the Corporate Governance Principles”. By this Communiqué, some of the Corporate Governance Principles have become mandatory for the companies traded in Borsa Istanbul (BIST). We, as Boyner Büyük Mağazacılık A.Ş., believe that this important step taken forward by CMB will provide great benefits for the development of national and international capital markets.

Within the scope of the “Communiqué (Serial IV, n. 56) on “Determination and Implementation of the Corporate Governance Principles, which was in force in 2013, while complying with the compulsory principles entirely, the Company ensured compliance with most of the noncompulsory principles as well. Since our Company is in the 3rd Group, it is sufficient to have two independent members in the Board of Directors. Established Board of Directors Committees continue to perform their activities. Company website and activity report were reviewed and required revisions for compliance with the principles were made. In the upcoming period, for compliance with the principles, necessary tasks will be performed by taking into account the developments and the implementations in the legislation.

Even though the Company aims to ensure full compliance with the noncompulsory Corporate Governance Principles due to fact that the Company faced with some difficulties while implementing some of the principles and some of the principles do not entirely match with the current structure of the market and the Company, full compliance has not been ensured yet. Aforesaid principles and the reasons for noncompliance with these principles are briefly specified below:

- The use of the request for appointing a private auditor as an individual right: In the Articles of Association, the request for appointing a private auditor was not regulated separately as a private right and considered that Turkish Code of Commerce provisions will be applied.

- Participation in the Company management of stakeholders having relations with the Company: Even if it is not yet specified in the Articles of Association, the aim is to obtain the benefits expected from the stakeholders’ participation in the Company Management through exchanging ideas with the various interest groups and information disclosures (website, e-mail, phone calls, press etc.)

In addition to some Corporate Governance Practices which were made mandatory through legal regulations, our Company attaches great importance also to measurement and rating services that will be provided by the independent firms with the purpose of the continuous enhancement and development of these practices in the Company. To this end, the first rating agreement was signed with SAHA Kurumsal Yönetim ve Kredi Derecelendirme Hizmetleri A.Ş., in 2012. As a result of the rating made in 2013, our Corporate Governance rating was revised and determined as 8.61. Detailed rating report is published on our Company’s official website.

Our conclusions regarding the level of compliance of our Company with the Corporate Governance Principles were presented to the Board of Directors, and after adopted by the Board of Directors, they were submitted to the General Assembly.

Please find below our Corporate Governance Principles Compliance Report prepared for 2013 activity period, and composed of four main topics; Shareholders, Public Disclosure and Transparency, Stakeholders and Board of Directors, including the applicable and non-applicable aspects of the aforesaid principles.

CORPORATE GOvERNANCE COMMITTEE

Fethi Pekin Nur Mehmet İnal Member of the Board of Directors Member of the Board of Directors

CORPORATE GOvERNANCE PRINCIPLES COMPLIANCE REPORT

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PART I – SHAREHOLDERS

2. Shareholders Relations Unit In accordance with the Corporate Governance Principles, there is a Shareholders Relations Unit at our Company. This unit was structured under the supervision of the Corporate Governance Committee’s Chairman who is an independent member of the Board of Directors.

Mr. Ali Adana performs his duties in the Shareholders Relations Unit. Contact information of our employee working in this unit is given below:

Name Surname Phone E-mail

Ali Adana 0 212 335 75 05 [email protected]

Mr. Ali Adana has (CMB) Capital Market Activities Advanced Level License and (CMB) Corporate Governance License.

This unit provides communication between the shareholders and Board of Directors by reporting to the Corporate Governance Committee.

The Shareholders Relations Unit has been founded in accordance with the legislation and mainly in order to;

• Ensure healthy, safety and updated pursuit of the records related with the shareholders;

• Reply the written information requests of shareholders with regard to the Company, excluding the information related with the Company, in the characteristics of undisclosed, confidential, and/or trade secrets;

• Ensure that the General Assembly meetings are held in compliance with the legislation in force, Articles of Association and other internal regulations;

• Prepare documents that can be used by shareholders in the General Assembly meetings;

• Ensure that voting results are duly recorded, and reports related with the results are prepared;

• Oversee and monitor all kinds of issues regarding public disclosure, including the legislation and the Company’s disclosure policy. Also the compulsory issues of the Corporate Governance Principles and issues stipulated in the Articles of Association will be applied separately.

3. Use of Shareholders’ Rights to Information All of the information requests of our shareholders presented to the Shareholders Relations Unit during the period were completely answered, except the ones in the characteristics of undisclosed, confidential, and/or trade secrets.

Our Company were taken all actions that would be necessary on the issue that the received information requests were answered as soon as possible, completely, accurately after being assessed carefully by Shareholders Relations Unit, and Deputy General Manager and the General Manager related with the issue.

Explanations regarding the issues needed frequently by our shareholders, and information about the developments that may positively affect the use of their rights are published on our website at the URL of http://kurumsal.boyner.com.tr.

All information necessary for healthy utilization of shareholding rights were submitted to the information and utilization of our shareholders through our website, yearly activity report, disclosure of material matters, and answering of individual requests.

4. General Assembly Meetings General Assembly meeting – in which 2012 results were discussed – was held on the March 28, 2013 at 15:00 pm, at the address of Altınyıldız Mensucat ve Konfeksiyon Fabrikaları A.Ş., Yenibosna, Merkez Mahallesi, 29 Ekim Caddesi No: 22 Bahçelievler/Istanbul.

Call for the meeting was published in Cumhuriyet and Dünya newspapers, in Turkish Trade Registry Gazette dated March 12, 2013 and in Borsa Istanbul (BIST) Public Disclosure Platform (KAP) on March 6, 2013.

Ordinary General Assembly Meeting was held with the participation of our shareholders representing 81.11% of our paid-in capital of TL 92,07 million or in other words, the portion of TL 74,674,117.00.

Stakeholders and media representatives participated in the Ordinary General Assembly Meeting. Questions of some shareholders related with the issues on the agenda were replied during the meeting.

In the General Assembly “Internal Directive on the Working Procedures and Principles” was approved.

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Provisions of Articles of Association regarding General Assembly can be summarized as follows:

Our Company’s General Assembly convenes in ordinary or extraordinary modes in compliance with our Company’s Articles of Association.

Ordinary General Assembly convenes once in a year within three months starting from the end of the Company’s accounting period. In this meeting, written issues in the Article of the Turkish Commercial Code regarding the meeting agenda are analyzed and required decisions are taken.

Extraordinary General Assemblies convenes in accordance with the provisions written in the laws and the Articles of Association whenever the Company affairs require and subsequently, necessary decisions are taken.

In the Ordinary General Assembly meetings, the Company informs its partners about the guarantees, pledges and mortgages given in favor of third parties and about the revenues or benefits obtained from these transactions. This issue is specified as a separate item in the agenda of the Ordinary General Assembly meeting.

Attending Electronic General Assembly meetings: The right-holders who have the right to attend the General Assembly meetings can also attend these meetings via electronic platform as per the Article 1527 of the Turkish Code of Commerce. In accordance with the provisions of the “Regulation on Electronic General Assembly meetings in the Incorporated Companies”, the Company may decide to establish the Electronic General Assembly System (EGAS) or to purchase services from these systems established for this purpose, to ensure that the right-holders attend the Electronic General Assembly meetings, express their opinions, make suggestions, and cast votes. In all General Assembly meetings that will be held, the Company ensures that the right-holders and their representatives use their rights stipulated in the provisions of the aforementioned Regulation over the system installed in accordance with this provision of the Articles of Association.

General Assembly convenes at the Company headquarters or at a convenient location of the city of the headquarters.

In both ordinary and extraordinary General Assembly meetings, it is mandatory that the commissary of the Turkish Ministry of Customs and Trade is present and signs the meeting minutes together with the related persons. Decisions that will be taken in the General Assembly meetings held in the absence of the commissary and the meeting minutes which do not include the signature of the commissary are null and void.

The calls for the General Assembly meetings are made by means of a newspaper published in the city

where the headquarters of the Company is located. If no local newspaper is published, the calls are published in a newspaper of the closest location.It is mandatory that the provisions of the new Turkish Commercial Code are applied in the 2014 General Assembly meeting that will be held to review and discuss the 2013 accounts and transactions. The provisions of this legislation is applied, in the announcements and calls that must be made as per the Capital Markets Law and the provisions of the relevant legislation

The announcement regarding the General Assembly meeting call including the meeting location, date, time and the sample power of attorney, is published in the Turkish Trade Registry Gazette, in two nationwide newspapers and in the Borsa Istanbul (BIST) Public Disclosure Platform (KAP).

It is mandatory for the Company to get permission from the Capital Markets Board and the Ministry of Customs and Trade in order to be able to discuss the amendments that will made be to the Articles of Association in the General Assembly.

On the other hand:

All our shareholders –in order for ensuring their direct access – can find the information about the meetings held in 2013 on our Company website at URL of http://kurumsal.boyner.com.tr.

All financial statements and reports, including the yearly activity report, profit distribution proposal, prepared (if needed) disclosure documents related with the General Assembly meeting agenda items, last version of the Articles of Association, if the Articles of Association will be amended, text of amendments and its justification are open to our shareholders for their inspection at the headquarters and specified branch offices of our Company since the date of the announcement of the call for the General Assembly meeting.

Aforesaid information and documents can be found on our website at URL of http://kurumsal.boyner.com.tr.

In order to facilitate the attendance to the General Assembly, ultimate attention is paid to comply with the issues stipulated in the legislation. Our Shareholders do not face with any difficulty to attend our General Assembly meetings. Moreover, no complaint or notice has been received so far from our shareholders on this issue.

Minutes of the General Assembly are given to the shareholders at the end of the meeting and with the aim of informing the shareholders who could not attend the meeting, they are also open to the electronic access being published on our Company website at the URL of http://kurumsal.boyner.com.tr

In case the question asked in the General Assembly is not related with the meeting agenda or is comprehensive that cannot be replied

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immediately, this question is replied in writing by the Shareholders Relations Unit within 30 working days at the latest.

5. Right to vote and Minority Rights General Assembly meetings and the decision quorum in the meetings are subject to the provisions of the Turkish Code of Commerce. Shareholders or their proxies who are present in the Ordinary and Extraordinary General Assembly meetings have one right to vote per share.

The Company does not have a mutual subsidiary relationship with any shareholder.

“Show of Hands” voting method is used in the General Assembly meetings. It is possible use “secret ballot” voting method upon the request of the shareholders in possession of one-tenth (1/10) of the capital represented by the shareholders present in the Ordinary General Assembly meetings.

A shareholder cannot cast a vote in the meetings related with the lawsuit or a personal matter between the shareholder himself or his/her spouse or his/her ascendants/ descendants and the Company.

In the General Assembly meetings, the shareholders may be represented by a proxy to be appointed from among other shareholders or from outside within the frame of the regulations of the Capital Markets Board regarding proxy voting. Proxies who are also the shareholders of the Company are authorized to use not only their votes but also the votes of other shareholder(s) they represent. Format of the powers of attorney is determined and announced by the Board of Directors within the frame of the regulations of the Capital Markets Board.

6. Dividend Right Profit distribution policy of the Company is as follows:

As per the legislation in force on the issue date of this report, The amounts such as general expenses and various depreciations that must be paid or set aside by the Company and taxes that must be paid by the Company’s juridical personality, are deducted from the revenues ascertained at the end of the accounting year, and the remaining net profit shown on the annual balance sheet is distributed after the deduction of the previous year’s losses (if any) in the order shown below: Primary Legal Reserve: a) 5% of net profit is set aside for Legal reserve.

First Dividend: b) From the remainder, first dividend is set aside

in a ratio and amount stipulated by the Capital Markets Board.

Second Dividend: c) General Assembly is authorized to partially or

fully distribute the remaining amount – after deducting the amounts specified in the sub-paragraphs a) and b) from the net profit – as second dividend or to set it aside as extraordinary legal reserve.

Secondary Legal Reserve: d) one-tenth of the amount remaining after

deducting the dividend equal to the 5% of the paid-in capital from the amount decided to be distributed to the shareholders and to other persons who participated in the profit, is set aside as secondary legal reserve in accordance with the 2nd paragraph and 3rd sub-paragraph of the Article 466 of the Turkish Code of Commerce.

e) Unless the reserve funds required to be set aside in accordance with the statutory provisions, and the first dividend stipulated in the Articles of Association for the shareholders are duly reserved, no decision can be taken to set aside other reserve funds, or to transfer the profit to the following year, and unless the first dividend is paid in cash and/or in the form of share certificates, no decision can be taken, to make donations to, or to distribute dividend to the Members of the Board of Directors of the Company and its employees, holders of “jouissance shares”/“founders’ holding jouissance shares”, privileged shareholders, charitable institutions established for various purposes, and entities with similar characteristics.

General Assembly decides on the date and the method of the profit distribution upon the proposal of the Board of Directors in compliance with the Capital Markets Law and relevant provisions of the legislation.

The profit distribution proposals submitted to the approval of the General Assembly by the Board of Directors, are determined in accordance with the ratios stipulated by the Turkish Code of Commerce and Capital Markets Board, and taking into account the profitability of our Company, the expectations of the Shareholders, the economic situation of the Country and the growth strategies of our Company.

Distributed profit pursuant to the provisions of the Articles of Association cannot be withdrawn.

At our Company there aren’t any privileged shares on the issues of “getting share from the profit” and “determining the management”.

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Regarding 2013 profit of our Company, it was decided to submit the issue of not making profit distribution for 2013 and retaining the profit within the partnership, to the approval of the General Assembly.

Profit Distribution Date General Assembly decides on the date and the method of distribution of annual profit to the shareholders upon the proposal of the Board of Directors in compliance with the Capital Markets Law and relevant provisions of the legislation.

7. Transfer of Shares

Our Company’s Articles of Association does not contain any provisions restricting the transfer of shares.

PART II – PUBLIC DISCLOSURE AND TRANSPARENCY

8. Company Disclosure Policy Company Disclosure Policy formulated by the Board of Directors within the frame of the CMB Corporate Governance Principles is published on the Company website (http: //kurumsal.boyner.com.tr).

Main purpose of the Company disclosure policy is to ensure that all required information and statements, except trade secrets, are received by the shareholders, investors, employees, customers and other relevant parties in a timely, accurate, complete, comprehensible, easy manner with low cost and under equal conditions. With this aim, within the frame of the generally accepted accounting principles and the provisions of the Capital Markets Legislation; the Company adopted as principle to equivalently share the results of the implemented strategic plans, completely, fairly, accurately, timely and comprehensibly, with the shareholders, investors and capital markets environment.

Periodic financial statements, and footnotes of the financial statements are prepared within the frame

of the legislation in force, in a manner that will show the real financial situation of our Company. The first-half (till the end of June) financial statements after being independently inspected and the year-end financial statements after being independently audited are publicly disclosed.

Our activity report is prepared in sufficient details in order to ensure that the public gets proper information regarding the activities of the Company.

The information that will be publicly disclosed is published in the “Public Disclosure Platform” (www.kap.gov.tr) and on the Company website (http://kurumsal.boyner.com.tr) in a timely, accurate, complete, comprehensible, interpretable and with low cost easily accessible manner in order to help the entities that will benefit from the disclosure take their decisions. Furthermore, “e-YÖNET: Corporate Governance and Investor Relations Portal” of the Central Registry Agency can also be used for informing the Company partners directly and effectively.

Disclosure of Material Matters Within 2013, in accordance with the CMB regulations, 24 Disclosure of Material Matters were made by our Company. These announcements are also accessible via the links included in our website (http://kurumsal.boyner.com.tr).

Our Company stocks are not quoted in foreign stock markets.

Announcement of the Natural Person Ultimate Controlling Shareholder(s) Our Company’s partners (shareholders) who are natural persons are also the shareholders of our biggest partner, Altınyıldız Mensucat ve Konfeksiyon Fabrikaları A.Ş.


Our Company’s partnership structure as of 31st of December 2013 is as follows:

Shareholder’s Trade Name/Name Surname Share Amount (TL) Share Percentage (%)

Altınyıldız Mensucat ve Konfeksiyon Fab. A.Ş. 88,896,289.44 96.55

Other Partners and Publicly Traded Portion 3,173,710.56 3.45

Total 92,070,000.00 100.00

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Indirect partners (shareholders) of our Company – who are natural persons – are given below;

Natural Person Partners Share Amount (TL) Share Percentage (%)

Hasan Cem Boyner 16,554,456 18.00

Neylan Dinler 15,812,433 17.20

Zahide Leman Halulu 11,001,837 11.90

Lerzan Boyner 10,844,377 11.80

Latife Boyner 10.820.711 11.80

Ali Osman Boyner 3,944,868 4.30

Emine Ayten Boyner 1,431,520 1.60

Semih Dinler 203.100 0.20

Defne Dinler 134.046 0.10

Deniz Dinler 134.046 0.10

Total 70,881,394 77.00

Public Disclosure of the Persons who can get Insider Information Necessary measures in order to prevent the use of the insider information were taken. Moreover, our Company’s Managers and other entities that the Company gets service from who are in a position to be able to reach the information that may affect the values of the capital markets instruments are kept up-to-date.

9. Company website and its Content Boyner Büyük Mağazacılık A.Ş. website at the URL of http://kurumsal.boyner.com.tr is actively utilized for public disclosure as recommended by the Corporate Governance Principles of CMB stipulated also in the new Turkish Code of Commercial. All public disclosures of Boyner Büyük Mağazacılık A.Ş. are accessible via the Company web site. Web site has been structured and segmented accordingly. Information regarding the last 5 years of the Company can be found on the website. While the website was designed in Turkish with the content and format stipulated by the Corporate Governance Principles of CMB, the most part of the Turkish information is also published on the website in English by considering the foreign investors.

Important topics that can be found on the website are listed below:

• Information about Corporate Identity•Members of the Board of Directors•Recent Partnership Structure•Dates and numbers of the Turkish Trade

Registry Gazette in which the amendments were published and the latest version of the Articles of Association

•Trade Registry Information

•Financial Reports•Activity Reports (annual and periodical)• Information on the Bonds Issued•Links related with the CMB Disclosure of Material

Matters (links to KAP and Borsa Istanbul (BIST) websites)

•General Assembly Meeting Date and the Agenda •General Assembly Meeting Minutes and List of

Attendants •Sample Form of Proxy Voting•Corporate Governance Compliance Report •Disclosure Policy•Profit Distribution Policy•Employee Reimbursement Policy•Code of Ethics•Remuneration Policy•Frequently Asked Questions Section•Communication data

URL of our website is written on the letterhead of our Company.

10. Activity ReportThe activity report was prepared in detail so that a wide range information on the activities of the Company can be obtained by public. In the annual activity report, a statement signed by the general manager is included regarding the issue that the periodical financial statements accurately reflect the financial situation of the company and that the company does fully comply with the legislation.

On the hand, in the activity report there is no statement of the Board of Directors on the issue whether the internal control system functions properly or not.

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Annual activity report; consists of the field of activity, financial situation, capital, ownership and governance structure of the Company, the résumés of the Members of the Board of Directors and executive senior managers, the policy for the distribution of profits and the Corporate Governance Compliance Report.

Events after the issue date of the Balance SheetAccording to the Board of Directors decision taken by Boyner Büyük Mağazacılık A.Ş. on the 27th of January 2014, it was determined;

• torenewthepermitfortheacceptedregisteredcapital system due to the fact that it is the 5th and the last year of the accepted registered capital system with the upper limit of the Registered Capital,

• toincreasetheupperlimitoftheRegisteredCapital from TL 100 Million to TL 250 Million,

• andthatthisupperlimitshallbevalidfortheperiod between 2014 and 2018, and that this issue shall be submitted to the General Assembly.

SECTION III – STAKE HOLDERS

11. Information Disclosure to Stakeholders We pay attention to making disclosures in writing – to the extent possible – on the issues concerning the stakeholders related with our Company including our shareholders, employees, creditors, customers, suppliers and potential investors, as we give importance to coordinating our relations with our stakeholders by making contracts in writing – to the extent possible – with them when necessary.

In cases where the Stakeholders’ rights are not specified within the legislations and agreements (contracts), stakeholders’ benefits are protected within the framework of good faith and the capacity of the Company surely safeguarding the reputation of the Company.

12. Stakeholders’ Participation in the Management Within the Articles of Association of the Company, there are no provisions regulating the stakeholders’ participation in the Company Management. However, the independent members of the Board of Directors, in a sense help representing all stakeholders besides the company and the shareholders in the management.

Our company maintains constant communication with all its stakeholders. The feedback coming from them is submitted for the top management assessment after going through specific phases based on the internal procedures within the company, and consequently solutions and policies are produced.

Practices performed within the scope of quality, efficiency and institutionalization carry great importance for our Company.

13. Human Resources Policy The collective aim of the Group our Company belongs in, “Unconditional Customer Satisfaction” and “Respect for People” is one of the main objectives of our Company’s human resources policy. Our main principle, on the other hand; is to precisely abide by the laws and regulations and to work within the code of ethics. All employees of the Human Resources Department adopt clear and close communication with the other employees in order to create sustainable trust within the staff.

We believe that employees are our most precious resource. For this reason, trainings are planned within the framework of in-class, on-the-job training models – targeting the capabilities, knowhow and practices that will be actualized in line with the requirements and priorities of that period – in order to support the progress of the employees.

New employees joining our Company are given the support to adapt to the corporate culture with programs carried out on or outside the job. The importance given to team work is one of the primary goals of our corporation. Within this scope, programs are organized, when necessary, to ensure employees’ progress by utilizing resources in and out of the company besides getting professional support. In consequence, sustainability and effectiveness of close communication is provided through feedback and guidance.

The progress of our employees is monitored via “Performance Evaluation System” consistently upgraded in line with the practices of the sector and the company. With this system the aim is to;

• show the ways to our employees to make a career within the corporation, to

•help them make their career plans, •provide them with the convenient environments in

which they can show their capabilities and achieve their targets,

• support their progress in line with their targets and corporate needs.

Moreover, “Career Management System” is implemented within the framework of the career maps prepared. Our main principle is to structure the senior staff with the employees fostered within the Company.

We provide equal opportunity throughout the processes of recruitment, professional relations, participation, promotion, pension, and under all employment conditions. Our Company, supports our employees in taking initiatives parallel to their responsibilities.

For us, discrimination based on race, color, gender, religion, marital status, sexual orientation, political ideas or status, ethnicity, health situation, responsibilities in the family, participation in unions, physical disabilities or age is absolutely unacceptable.


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With the profile study made specific to our company for the selection and placement process, selection and placement is carried out within the framework of the criteria specified for each position title.

Within this scope, all employees are given the support to participate in various social, cultural and academic activities and to present their opinions and suggestions.

All employees are required to abide by the laws and company procedures and guidelines. Employees cannot propagandize their religious and political beliefs at work, and cannot put their beliefs forward while making their decisions.

There were no complaints made by the employees about any issues of discrimination.

Employees can benefit from various health services. Within this scope, Health Insurance and Health Information Services are provided.

For all positions at the Company job definitions and performance criteria were prepared and provided to the employees.

The aim of the communication activities (social activities and communication platforms) carried out within the corporation with the participation of all employees is to increase the motivation and loyalty of the employees.

Employees are notified about the working conditions and all changes that will influence their daily work life via promptly made announcements.

Equal Opportunity and Equal Treatment: Discrimination based on gender is absolutely unacceptable at any stage of recruitment and within the scope of professional relations in our Company. Equal Opportunity and Equal Treatment is reflected on our ethic codes and human resources policies and practices.

51.3% of our employees, 23.7%* of our managers and 42% of our staff members who got promoted in 2013 (except transfers) are women.

In 2013, we focused on the rights of disabled individuals within the scope of our efforts for equal opportunity. Our aim was;

• to make needs analysis in the retail sector for the access rights of disabled citizens,

• to detect and analyze the level of disabled employees benefiting from our equal opportunity practices at work,

• to analyze their special needs, •and subsequently to turn all these analyses into

practice.

We completed the access feasibility studies on our headquarters and stores in accordance with the various disabilities. We trained Boyner stores employees in displaying the right attitude towards disabled clients and fostered internal training staff who would give lectures on this issue within our Company.

The process of Recruitment, Career Planning and Promotion:We do not make any discrimination based on gender in our recruitment process including our job postings. Gender is not a parameter at our job postings and definitions. In 2013, 51% of the employees recruited in Boyner Büyük Mağazacılık A.Ş. were women while 49% were men. (These figures include the employees in the disabled category as 13 disabled women employees were recruited.)

Our professional staff goes through performance evaluation process independent of gender.

Within the framework of Equality principle “Career Management System” is implemented. Successful staff members as a result of the career tests and career consulting interviews get promotion.

Equal wage:In our Companies “HAY Job matching methodology” is utilized. Within this system gender in not included in the criteria.

At our stores sales consultants/sales consulting specialists’ salaries are determined on the basis of job position. The waging system specifies the same salaries when employees are recruited for these positions without making any discrimination against men and women. Individual differences deserve bonuses in line with the sales performances.

Our Company’s reimbursement policy for the employees, created in accordance with the Labor Law Act n.4857, is given on our website.

Sexual Harassment and Mobbing:In our Company, Human Resources Departments are responsible; to take measures and precautions against the issues like gender inequality, mobbing and sexual harassment at work, and to start the necessary process against the persons who show these behaviors. Moreover, our employees can directly contact with our store managers, department managers and assistant general managers and general manager on these issues.

Our Responsibility for the Environment: According to our Company, Corporate Responsibility is considered as a management policy covering all our internal and external stakeholders, in the process of structuring our business strategies.

*Department Manager and above positions.

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Sustainability arising from our economic, environmental and social performances is our priority. Work health and safety, occupational training and development of our employees, equal opportunity and diversity in our employment policies, freedom of association, product responsibility, customer health and safety, legal compliance and our social investment programs exist under our social performances that are considered together with our economic and environmental performances.

Our Company is sensitive for the social projects that are supported and pioneered for the benefit of public, environment, and locality.

We pay attention to financing projects that comply with the relevant regulations on environment and public health.

Until today, neither any accusations/sanctions nor any cases have been filed against our Company on the issue of environment protection.

Our Company has implemented recycling projects for the paper used. Our plastic bags have been re-designed in recyclable material. At the end of June 2009, our plastic bags were converted to biodegradable bags to enable faster recycling in nature. Until today, neither any accusations/sanctions nor any cases have been filed against our Company on the issue of environment protection.

In 2012, we launched our Green Office Project in collaboration with WWF in order to of show our environmental performance, to utilize environmental practices, to fight against climate change. Within this scope, modified and rearranged our new building in line with the “green purchasing” regulations. Our aim is; to minimize the negative impacts of our operations on the environment, to carry out necessary projects in order to become a green office within this scope and to increase our employees’ awareness for the success of our practices and to cause a shift in consumption behavior. We will make enhancements at out headquarters on the following issues:

•Paper Consumption•Energy Consumption•Water Consumption•Solid Waste Consumption

In addition, Boyner Büyük Mağazacılık A.Ş. participated in the survey carried out by Carbon Disclosure Project in 2013.

14. Code of Ethics and Social Responsibility

Code of EthicsBoyner Holding’s code of ethics are practices that have become traditional being implemented in daily life for long years besides being been adopted by our Company.

Social ResponsibilityOur attitude towards social responsibility projects includes providing financial support for the solution of the social problem, and playing an active role as a part change and transformation in the solution process. We give importance to the management and implementation of the social responsibility projects. Actualization of the Boyner corporate volunteering program is defined as a component of responsible citizenship approach. The program aims to improve the employees’ awareness of being a responsible citizen and to strengthen and expand the efforts made for the benefit of the public.

“Our Pomegranate Arils”: Powerful young women happy tomorrow” Project actualized in collaboration with our Group Companies for the period between 2009-2015, will be carried out in the children’s homes of the General Directorate of Children Services (ÇHGM) in the pilot cities and between 2013-2015.

Our aim is to give support to the children fostered in the children’s homes of ÇHGM on these issues;•Self-awareness,• Individual and psychological development,•Socializing and being accepted into society,•Developing values •Continuing education and achieving academic

success,•Capability of taking responsibility and process of

being an individual,•Choice of higher education in line with their skills

and interests,•Preparation for the professional life via internship

opportunities,•Getting consulting for choice of occupation,•Accessing correct information, resources and role

models.

Our activities within this scope; Support given to the staff members of the Children’s Institution

- Caretakers- Professionals- Group and Home Supervisors- Directors

In 2013; need analysis study was made in 7 provinces (Bursa, Samsun, Sivas, Ankara, İzmir, Diyarbakır, Konya) determined by the General Directorate of Children Services with the aim of conveying the experience amassed in 4 years into corporate culture and on-the-job training programs, trainings structured within the framework of the needs found out in this study were carried out in 4 cities (Sivas, Bursa, Diyarbakır, Samsun) for Caretakers, Professionals, Group and Home Supervisors and Directors.


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Training Topics:Training Topics for DirectorsLeadership Skills The Importance of the Leader within the InstitutionLeadership Styles and New Leadership ApproachAwareness of DiversitiesProblem Solving/Goal SettingMentorship as a Learning Model

Mentorship Program Trainings for Caretakers and ProfessionalsMentorship SkillsCoaching Problem Solving ModelOur Diversities (Learning Styles/Behaviors /Values)Individual Development; Perception, Belief, Restrictive Beliefs

Trainings for Caretakers and Professionals given by Family Planning Association of TurkeyAdolescence ProblemsSelf-CareChild Development and Child PsychologyAdult – Adult Communication and Anger ManagementEating HabitsSocial Gender

Employees’ volunteering:In 2013, as Boyner Group Volunteers (BGG), 348 employees created public benefit working in voluntary projects for 1.386,5 hours regarding the education and socio-cultural development of children and youngsters, employment of young people and women, social issues of disadvantaged groups. Our Projects for 2013:

“Different Colors Different Projects”Through our project we carried out in collaboration with the “Association of Solidarity with Refugees and Immigrants” and “Yeldeğirmeni Youth Center”, we give social inclusion support for children under 18 coming from different countries – via legal or illegal ways – to Turkey due to poverty, war, human rights violations. In 2013, six of employees worked voluntarily for 32 hours and supported the group in the project.

April 23rd ActivitiesOn the week of April 23rd, 98 of our employees worked voluntarily within 5 activities for 240 hours for disadvantaged children.

Pomegranate ArilsIn 2009, one of our volunteers mentored for 78 hours in the process of preparing young women for life and employment in the social inclusion project we developed within the scope of the corporate social responsibility project of our group.

Blood Donation Campaign-Bursa20 of our employees participated in the Blood Donation Campaign within the scope of volunteering for 43 hours at our Korupark Store.

Mother’s Day ActivitiesIn the Mother’s Day 21 staff members of our Trabzon Store visited nursing homes for 73 hours while 15 staff members of our Korupark Store designed aprons for mothers working voluntarily for 46 hours.

Youth Party with Youngsters with Hearing Impairment11 volunteers from our Trabzon Forum Store formed a band gave a concert using sign language meeting with youngsters with hearing impairment within the scope of volunteering for 55 hours.

visit to Children with Leukemia 19 volunteers from our Marmara Park Store paid visited Cerrahpaşa Clinic for Children with leukemia within the scope of volunteering for 66 hours.

On the morning of Bairam, children with leukemia were visited by 17 volunteers from our Kayseri Store within the scope of volunteering for 51 hours and 7 volunteers from our YKM Erasta Store within the scope of volunteering for 11 hours.

visits to Children’s HomesChildren’s homes were visited and parties were made by 4 volunteers from our Trabzon Forum Store within the scope of volunteering for 24 hours, 41 volunteers from our Marmara Park Store within the scope of volunteering for 75 hours, 5 volunteers from our Çiğli Store within the scope of volunteering for 10 hours. visits to Nursing Homes 20 volunteers from our Marmara Park Store visited Nursing Homes within the scope of volunteering for 69 hours.

Father’s Day ActivitiesOn the father’s day 5 volunteers from our Isparta Store 5 visited fathers of our martyrs within the scope of volunteering for 30 hours while 12 volunteers from our Trabzon Stores visited Nursing Homes within the scope of volunteering for 39 hours and celebrated the Father’s Day.

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Charity CampaignsCharity was made to•Toprakdere Primary School by 12 volunteers

from our Malatya Park Store within the scope of volunteering for 48 hours to,

•Havza Primary School by 50 volunteers from our Brandium Store within the scope of “Kardeş Okul project volunteering for 158 hours,

•City of Van by 9 volunteers from our Korupark Store within the scope of volunteering for 148 hours.

Book Donation Campaign51 volunteering staff members both in our Stores and in the Headquarters donated books and wrote letters in order to give support to the campaign within the scope of volunteering for 69 hours.

visits to SheltersVolunteers from the Headquarters and Stores participated in the visits made to Shelters within the scope of volunteering for 7,5 hours.

Blue Cap CampaignWithin the scope of the blue cap collecting project “No stopping keep going” carried out with Sardunya Catering Company we provided 7 families with wheelchairs while volunteers from our Erzurum Store delivered the wheelchairs within the scope of volunteering for 14 hours. SECTION Iv – BOARD OF DIRECTORS

15. Structure and Composition of the Board of Directors

Our Board of Directors is entirely composed of non- executive members.

Different persons assume the duties of Chairman of the Board of Directors and The General Manager.

Members of the Board of Directors, including the independent members, are elected among the persons who do have the qualifications stipulated in the legislation.

Company affairs are represented and conducted by the Board of Directors – composed of 6 members, 2 of which will be independent – that will be elected by the Shareholders’ General Assembly to hold the office for minimum one maximum three years.

As per the legislation; the members of the Board of Directors are elected for minimum one maximum three years. The Board Member whose term of position is completed can be reelected. The General Assembly, if deemed necessary, can always change the Members of the Board of Directors.

On the 11th of March 2013, the Board of Directors of our Company decided to submit Mr. Fethi Pekin and Mr. Vittorio Radice as independent member candidates for the Board of Directors to the Ordinary General Assembly.

The Board of Directors convenes whenever the Company affairs and transactions require.

The company is managed and represented by the Board of Directors. All documents signed by the Company and all agreements made by the Company will be valid on condition that they are signed by the persons authorized to represent and bind the company and that the signatures are written under the Company stamp or print.

The Board of Directors is authorized to take decisions only on all issues outside the authority of the General Assembly and to implement these decisions Turkish Code of Commerce and Capital Market Law and the provisions of the relevant legislation.

As per the Article n.319 of the Turkish Code of Commerce, the Board of Directors’ tasks of conducting and representing are either distributed among its members, or handed over to an executive committee that will be established among its members, or to the executive member or members, or to the manager or managers who are or are not holders of share.


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Information about our members of the Board of Directors and our General Manager is given below.

Name Surname Title Executive/Independent Corporation

H. Cem Boyner Chairman Non-executive Boyner Holding A.Ş.

Nazlı Ümit Boyner Member Non-executive Boyner Holding A.Ş.

Serdar Sunay Member Non-executive Boyner Holding A.Ş.

N. Mehmet İnal Member Non-executive Boyner Holding A.Ş.

Vittorio Radice Member Non-executive/Independent La Rinascente Srl.

Fethi Pekin Member Non-executive/Independent Pekin & Pekin Avukatlık Bürosu

The members of the Board of Directors were elected for three years upon the decision taken in the General Assembly Meeting made on the 28th of 2103.

Name Surname Title

R. Aslı Karadeniz * General Manager

*According to the announcement made on the 3rd of October 2013 by our Company in the Public Disclosure Platform (KAP); it was decided; • to appoint Ms. Deran Taşkıran as our Company’s new General Manager as of the 1st of May 2013, •and to submit the issue of appointing Ms. Remziye Aslı Karadeniz – who left her position – as a member of the

Board of Directors of our Company, for the approval of the General Assembly in the first meeting to be held •and to appoint Ms. Remziye Aslı Karadeniz as a Board member upon the date of approval of the General

Assembly.

qualifications of the members of the Board of Directors Qualifications stipulated in the relevant legislation and in the Corporate Governance Principles are taken into consideration in Board of Directors member elections. The Board of Directors is established with persons possessing these qualifications in order to provide the highest level of authority and effectiveness.

Specific attention is paid that the persons to be appointed as the members of the Board of Directors have, in addition to these qualifications, basic knowledge about the transactions & procedures involved in the company’s field of activity and about the related legal regulations.

Highly competent and effective persons who will provide the shareholders and stakeholders of the Company with utmost contentment through the activities of the company are elected among the shareholders and stakeholders for the Board of Directors. Transactions with the Company and Prohibition of Competition Prohibition of competition and transactions – that may result in conflict of interest with the Company – for the shareholders who control the management, the members of the Board of Directors, the executive managers and their spouses and first and second degree relatives by blood or by marriage, is evaluated within the framework of the Articles n. 395 and n.396 of the Turkish Code of Commerce by our General Assembly in the Ordinary General Assembly meetings held every year, and thus necessary permissions are granted.

16. Principles for the Activities of the Board of Directors The draft Agenda for the Board of Directors meetings is prepared by the General Manager, and is given the last form in the light of the suggestions of the Chairman and members of the Board of Directors.

Except unpredicted situations, Board of Directors meetings are held with the participation of all members. Board of Directors meeting quorum is constituted with at least 5 (five) members of the Board of Directors.

Our Board of Directors convenes within the framework of Turkish Code of Commerce and the principles specified in the Articles of Association of the Company and takes decisions with the affirmative votes of at least 5 (five) members of the Board of Directors.

Meeting calls are made via phone and e-mail. Our Board of Directors took 47 decisions in 2013. All decisions were taken with the participation of the majority of the members.

The members of the Board of Directors do not have any privileged right to vote and/or to veto.

In 2013, there were no members of the Board of Directors voting against the Board of Directors decisions.

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The secretarial office established under the Board of Directors, informs the members of the Board of Directors about the Company’s internal services and enables communications.

17. The Number, Structure, and Independency of the Committees established in the Board of Directors The committees within our Company are: the Audit Committee, the Corporate Governance Committee and the Early Risk Detection Committee. The Corporate Governance Committee also carries out the tasks of the Nomination and the Remuneration Committees.

Working Principles of the Committees were approved by the Board of Directors and published on our website.

Committee chairmen are non-executive members of the Board of Directors.

Information about the members of the Audit Committee is given below.

Name Surname Title in the Committee EducationTitle in the

Board of Directors

Fethi Pekin Chairman Law Independent Member

Vittorio Radice Member Business Administration Independent Member

Information about the members of the Corporate Governance Committee is given below.


Board of Directors


N. Mehmet İnal Member Business Administration Member

Information about the members of the Early Risk Detection Committee is given below.


Board of Directors


Serdar Sunay Member Business Administration Member


Early Risk Detection Committee, composed of two members, was established on the 26th of June 2013. Between its date of establishment and the date of the Report, the Committee convened four times – and submitted the reports it prepared to the Board of Directors – in order to early diagnose the reasons that endanger the existence and progress of the Company, and to take necessary measures and implement necessary solutions.

18. Risk Management and Internal Control Mechanism Internal Control Mechanism in the Boyner Büyük Mağazacılık A.Ş., is designed as a consulting service, to add value to the activities of the organization and to provide an independent and objective assurance for improving these activities. With a proactive inspection approach, the aim is to contribute to the achieving corporate and economic targets of Company by enabling risk management, control system, corporate governance and providing necessary expertise to develop and sustain compliance practices within the Company.

In Boyner Büyük Mağazacılık A.Ş. risk is perceived as a concept involving opportunities as well as threats and thus risk management and internal control activities are implemented as a continuous and systematic process in order to manage risks in the most effective manner.

At our organization, within the framework of restructuring process, a corporate risk inventory has been created by the Internal Audit Department while risks detected in the process based auditing are matched with conclusions. Financial, operational and Information Technology risks are monitored both at the Headquarters and in the process at our stores.

Information Technology controls and IT safety are actualized within the framework of ISO 27001 (International Information Safety Management Systems).

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All financial risks especially liquidity, loans, FX and stock management are regularly monitored and the Board of Directors is informed on the relevant results.

Internal controls are assessed in the processes included within the scope of audit regarding the establishment of an effective internal controls environment; the Company management is regularly informed about the remaining risks while ameliorating and preventive action plans are made regarding these risks.

Moreover, within the scope of the compliance management, risks regarding the possible loss of reputation and legal and financial losses of the company, – that might occur in case of conducting activities that do not comply with the laws and regulations in force besides the code of ethics and internal policies and guidelines – are monitored and regularly reported to the Company management.

19. Strategic Targets of the CompanyOur Company’s strategic targets are determined by our company management by taking the economic parameters and competition and market conditions, our company’s short/long term targets into consideration and then submitted to the Board of Directors of the Company.

These strategies and targets are reviewed and evaluated by our Board of Directors.

Actualization of the target and strategies after being approved by the Board of Directors, is discussed in the Board of Directors meetings, held regularly at intervals in line with the legislation.

The annual budget approved in the Board of Directors meetings and the level of actualization are evaluated by taking the company’s sector, position in the sector, performance within the period, financial situation, and performance in previous periods into consideration.

Our Company’s mission and vision, strategies of growth and expansion are revised every year during the budget meetings.

20. Financial Rights of the Board of DirectorsThe members of the Board of Directors can receive an allowance, monthly, annually or for each meeting on condition that a decision is taken by the General Assembly. The amount of the allowance is resolved in the General Assembly.

The members of the Board of Directors of the Company do not have any relations of debt or credit with the Company.

The total amount of the salaries and benefits of the top management staff members; As of the 31st of December 2013, the amount salaries and bonuses paid to the top management staff members such as the general manager and the assistant general managers is TL 6.642.905 (December 31, 2012: TL 4.595.194), premiums paid to the Social Security Institution: TL 131.165 (December 31, 2012: TL 9.494)’dir. Severance payment was not made to the top management staff as of the 31st of December 2013 and the 31st of December 2012.

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• Fethi PekinAfter completing his higher education at the Boston University (USA), Department of Political Science and at the University of Buckingham, Law School (England), Fethi Pekin, began his professional career in Pekin&Pekin Law Firm as a Managing Partner. Since 2008, he is also an independent member of the Board of Directors of Altınyıldız Mensucat ve Konfeksiyon Fabrikaları A.Ş..

INDEPENDENCE STATEMENT

I do declare that; • I have not been a member of the Board of Directors for more than 6 years in total within the last decade,•within the last five years, no employment, capital or important commercial relations have been established

directly or indirectly between myself, my spouse, my third degree relatives by blood or by marriage and the Company, related parties of the Company, juridical persons who have relations in terms of management and capital with shareholders who directly or indirectly have more than 5% in the Company capital,

•within the last five years, I have not worked or been a member of the Board of Directors particularly in the companies that provide audit, rating and consulting services for the Company, and in the companies that carry out partially or completely the company’s activities and organization within the framework of the agreements signed,

•within the last five years, I have not been an employee, a partner or a member of the Board of Directors in any of the companies that provide a significant amount of products and services for the Company,

•due to the fact that I am an independent member of the Board of Directors my shares are less than 1% and are not privileged if I am a shareholder

• I do have the professional training, knowledge, and experience that will help me properly carry out the tasks and duties I will assume as a result of my independent membership in the Board of Directors,

• I am not working fulltime in public institutions and organizations as of the date of nomination and throughout the term of position in case I am elected,

• I am considered a resident in Turkey according to Income Tax Law,• I do have the strong ethic standards, professional standing and experience that will help me positively

contribute to the activities of the Company, remain neutral in conflicts of interests between the company’s shareholders, and that will help me make a decision taking the rights of the stakeholders into consideration;

in Boyner Büyük Mağazacılık A.Ş. and thus I will perform my membership in the Board of Directors of the Company as an independent member.

Fethi Pekin

INDEPENDENT CANDIDATES AND THEIR INDEPENDENCE STATEMENTS

CORPORATE

55


• Vittorio RadiceBeginning his professional career in 1980 as a store manager in Italy, Vittorio Radice restored the Habitat UK Company between 1990- 1996 and sold it IKEA, then between 1996- 2003 he converted Selfgridges Store into an innovative department store sold it to Weston Family. In 2003, he started working for Mark and Spencer. He created the concept of Home Decoration. Since 2005, having worked in senior executive positions on brand positioning for La Rinascente Department Store in Italy Vittorio Radice assumes various duties also in the Board of Directors of the companies; Arthur Glen Designer Outlets, Boyner Büyük Mağazacılık A.Ş., Beymen Mağazacılık A.Ş., TSUM Moscow, Ishaan Indian Real Estate Fund.

INDEPENDENCE STATEMENT

I do declare that; • I have not been a member of the Board of Directors for more than 6 years in total within the last decade,•within the last five years, no employment, capital or important commercial relations have been established

directly or indirectly between myself, my spouse, my third degree relatives by blood or by marriage and the Company, related parties of the Company, juridical persons who have relations in terms of management and capital with shareholders who directly or indirectly have more than 5% in the Company capital,

•within the last five years, I have not worked or been a member of the Board of Directors particularly in the companies that provide audit, rating and consulting services for the Company, and in the companies that carry out partially or completely the company’s activities and organization within the framework of the agreements signed,

•within the last five years, I have not been an employee, a partner or a member of the Board of Directors in any of the companies that provide a significant amount of products and services for the Company,

•due to the fact that I am an independent member of the Board of Directors my shares are less than 1% and are not privileged if I am a shareholder

• I do have the professional training, knowledge, and experience that will help me properly carry out the tasks and duties I will assume as a result of my independent membership in the Board of Directors,

• I am not working fulltime in public institutions and organizations as of the date of nomination and throughout the term of position in case I am elected,

• I do have the strong ethic standards, professional standing and experience that will help me positively contribute to the activities of the Company, remain neutral in conflicts of interests between the company’s shareholders, and that will help me make a decision taking the rights of the stakeholders into consideration;

in Boyner Büyük Mağazacılık A.Ş. and thus I will perform my membership in the Board of Directors of the Company as an independent member.

Vittorio Radice

CORPORATE

56


INDEPENDENT CANDIDATES AND THEIR INDEPENDENCE STATEMENTS

2013 Independent Candidate to be submitted for approval of the General Assembly

Tayfun BAYAZIT

After having B.Sc. degree in Mechanical Engineering, Bayazıt got a master’s degree at Columbia University, Finance and International Relations Department and began his banking career at Citibank. Afterwards, he worked in senior executive positions; as the Chief Assistant General Manager and a member of the Executive Board for 13 years at Yapı Kredi Bank within the Çukurova Group, and as the General Manager at Interbank and as the President & CEO of Banque de Commerce et de Placements SA Switzerland. In 1999, Bayazıt was appointed as the Deputy Chairman of the Board of Directors of Doğan Holding and as an Executive member in Dışbank. In 2001, he became the CEO of Dışbank. In 2005, after Fortis buying Dışbank’s majority shares, Bayazıt was appointed as the CEO of Fortis Türkiye and Global Management Committee. After the 2006 General Assembly, Bayazıt was appointed as the Chairman of the Board of Directors of Fortis Türkiye. In April 2007 he returned to Yapı Kredi Bank as an Executive Member and General Manager and subsequently at the beginning of 2009 he was appointed as the Chairman of the Board of Directors of Koç Holding Banking and Insurance Group and of Yapı Kredi. In August 2011, Bayazıt quit his job at Yapı Kredi to establish “Bayazıt Consulting Services”. In September 2012, he was appointed as the Chairman of the Board of Directors of Marsh&McLennan Group Turkey and in October 2013 he was appointed as the Chairman of the Board of Directors of MB Advisory, subsidiary firm of Mediobanca SpA. Bayazıt is currently Vice Chairman of the Board of Directors of Turkish Industrialists’ and Businessmen’s Association (TÜSİAD) and an active member in various non-governmental organizations.

CORPORATE

57


STATEMENT OF RESPONSIBILITY FOR THE ANNUAL ACTIvITY REPORT


BOARD OF DIRECTORS’ STATEMENT OF RESPONSIBILITY; PURSUANT TO THE BOARD OF DIRECTORS’ DECISION REGARDING THE ACCEPTANCE OF THE ANNUAL ACTIvITY REPORTS, withDATE OF DECISION: 05/03/2014DECISION NO: 13

THE CAPITAL MARKETS BOARDAS PER THE 9TH ARTICLE OF THE SECOND SECTION OF THE COMMUNIQUé SERIAL: II, NO: 14.1

a) The activity report regarding our Company’s accounting period ending at the date of 12/31/2013 of this was reviewed by our Committee,

b) Within the framework of the information we obtained in the scope of our tasks and responsibilities at the Company, the annual activity report does not include any misleading announcements on important issues or deficiencies that may cause misconception on the announcements as of the date they were made,

c) Within the framework of the information we obtained in the scope of our tasks and responsibilities at the Company, we do declare that the annual activity report honestly reflects the progress and the performance of the business, the financial situation of the Company together with the important risks and uncertainties.

Kindly submitted for your information.

03 .05.2014

S.Arzu Sönmez R. Aslı Karadeniz Fethi Pekin Assistant General Manager General Manager Board of Directors Member

FINANCIAL STATEMENTS

58


In the Ordinary General Assembly meeting held on the 28th March of 2013, the assignment of Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A. Ş. (a member firm of PricewaterhouseCoopers’) dating from 2013 as an external auditor of our Company was accepted.

Contact InformationSüleyman Seba Cad. BJK Plaza N0:48 B Blok Kat:9, Akaretler-Beşiktaş, 34357 Istanbul

Our Company’s consolidated financial statements and footnotes prepared and issued as per the “Communiqué II-14.1., for the period that ended on the 31st of December 2013 and the Independent Audit review on this repot were published on the BİST (İstanbul Stock Exchange) Public Disclosure Platform (KAP) on the 28th of February 2014. It is possible to reach these reports via our corporate website (corporate.boyner.com.tr)

Consolidated financial reports dated December 31, 2103 and the independent audit report are submitted below for your information.

AUDIT COMPANY

FINANCIAL STATEMENTS AND AUDIT REPORT FOR 2013

BOYNER BÜYÜK MAĞAZACILIK ANONİM ŞİRKETİ

CONVENIENCE TRANSLATION INTO ENGLISH OF

CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED AT 31 DECEMBER 2013TOGETHER WITH

INDEPENDENTAUDITOR’S REPORT (ORIGINALLY ISSUED IN TURKISH)

CONVENIENCE TRANSLATION INTO ENGLISH OFINDEPENDENT AUDITOR’S REPORT

ORIGINALLY ISSUED IN TURKISH

To the Board of Directors of Boyner Büyük Mağazacılık Anonim Şirketi

1. We have audited the accompanying consolidated balance sheet of Boyner Büyük Mağazacılık Anonim Şirketi (“Boyner”) and its Subsidiaries (collectively referred to as the ‘’Group’’) as at 31 December 2013 and the related consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and explanatory notes.

Management's responsibility for the financial statements

2. The Group’s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Turkish Accounting Standards 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 financial statements that are free from material misstatement, whether due to error and/or fraud.

Independent auditor’s responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. Our audit was conducted in accordance with standards on auditing issued by the Capital Markets Board of Turkey. Those standards require that ethical requirements are complied with and that the audit is planned and performed to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our professional judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to error and/or fraud. In making those risk assessments; the Company’s internal control system is taken into consideration. Our purpose, however, is not to express an opinion on the effectiveness of internal control system, but to design procedures that are appropriate for the circumstances in order to identify the relation between the financial statements prepared by the Company and its internal control system. An audit includes also evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Company’s management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

4. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Boyner and its Subsidiaries as at 31 December 2013 and their financial performance and cash flows for the year then ended in accordance with the Turkish Accounting Standards (Note 2).

Reports on independent auditor’s responsibilities arising from other regulatory requirements

5. In accordance with Article 402 of the Turkish Commercial Code (“TCC”); the Board of Directors submitted to us the necessary explanations and provided the required documents within the context of audit, additionally, no significant matter has come to our attention that causes us to believe that the Group’s bookkeeping activities for the year ended at 31 December 2013 is not in compliance with the code and provisions of the Company’s articles of association in relation to financial reporting.

6. Pursuant to Article 378 of Turkish Commercial Code no. 6102, Board of Directors of publicly traded companies are required to form an expert committee, and to run and to develop the necessary system for the purposes of: early identification of causes that jeopardize the existence, development and continuity of the company; applying the necessary measures and remedies in this regard; and, managing the related risks. According to subparagraph 4, Article 398 of the code, the auditor is required to prepare a separate report explaining whether the Board of Directors has established the system and authorized committee stipulated under Article 378 to identify risks that threaten or may threaten the company and to provide risk management, and, if such a system exists, the report, the principles of which shall be announced by the POA, shall describe the structure of the system and the practices of the committee. This report shall be submitted to the Board of Directors along with the auditor’s report. Our audit does not include evaluating the operational efficiency and adequacy of the operations carried out by the management of the Group in order to manage these risks. As of the balance sheet date, POA has not announced the principles of this report yet so no separate report has been drawn up relating to it. On the other hand, the Group formed the mentioned committee on 26 June 2013 and it is comprised of two members. The committee has met four times since its formation to the reporting date for the purposes of early identification of risks that jeopardize the existence of Boyner and its development, applying the necessary measures and remedies in this regard, and managing the risks, and has submitted the relevant reports to the Board of Directors.

Other Matter

7. The consolidated financial statements of the Group for the year ended 31 December 2012 were audited by another audit firm who expressed a qualified opinion in its report dated 5 March 2013. The basis of the qualified opinion was due to the fact that the purchase price of the Group regarding the business combination and the fair values that were the basis for the goodwill calculation could be changed and the impact of this change on the impairment of inventories at 31 December 2012 was uncertain.

Başaran Nas Bağımsız Denetim veSerbest Muhasebeci Mali Müşavirlik A.Ş.a member ofPricewaterhouseCoopers

Gökhan Yüksel, SMMMPartner

İstanbul, 28 February 2014


61


CONTENTS Index

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 62-63

CONSOLIDATED STATEMENT OF INCOME AND STATEMENT OF COMPREHENSIVE INCOME 64-65

CONSOLIDATED STATEMENT OF CHANGE IN EQUITY 66

CONSOLIDATED STATEMENT OF CASH FLOWS 67

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 68-121

1. ORGANIZATION AND NATURE OF OPERATIONS OF THE GROUP 68-692. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS 69-883. BUSINESS COMBINATIONS 89-904. INTEREST IN OTHER ENTITIES 905. SEGMENT REPORTING 906. CASH AND CASH EQUIVALENTS 917. FINANCIAL ASSETS 918. FINANCIAL LIABILITIES 92-939. OTHER FINANCIAL LIABILITIES 9410. TRADE RECEIVABLES AND PAYABLES 94-9511. OTHER RECEIVABLES AND PAYABLES 9512. DERIVATIVE INSTRUMENTS 9513. INVENTORIES 9614. PREPAID EXPENSES AND DEFERRED REVENUE 96-9715. CONSTRUCTION CONTRACTS 9716. INVESTMENTS ACCOUNTED FOR EQUITY METHOD 9717. INVESTMENT PROPERTIES 9718. PROPERTY, PLANT AND EQUIPMENT 97-9819. INTANGIBLE ASSETS 9920. GOODWILL 9921. GOVERNMENT GRANTS 10022. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES 100-10123. COMMITMENTS 10124. EMPLOYEE BENEFITS 102-10325. IMPAIRMENT OF ASSETS 10326. OTHER ASSETS AND LIABILITIES 10427. EQUITY 104-10628. REVENUE AND COST OF SALES 10629. GENERAL ADMINISTRATIVE AND MARKETING EXPENSES 106-10730. OPERATING EXPENSES BY NATURE 10731. OTHER OPERATING INCOME/(EXPENSES) 107-10832. INCOME AND EXPENSE FROM INVESTING ACTIVITIES 10833. FINANCIAL INCOME AND EXPENSES 10834. ASSET OR LIABILITY HELD FOR SALE AND DISCONTINUED OPERATIONS 10935. INCOME TAX ASSETS AND LIABILITIES 109-11136. EARNINGS PER SHARE 11137. RELATED PARTY DISCLOSURES 112-11438. NATURE AND LEVEL OF RISK ARISING FROM FINANCIAL INSTRUMENTS 114-12039. FINANCIAL INSTRUMENTS ( FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES) 12140. EVENTS AFTER THE REPORTING PERIOD 12141. OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE FINANCIAL STATEMENTS OROTHER ISSUES REQUIRED FOR THE BETTER UNDERSTANDING OF FINANCIAL STATEMENTS 121

CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH

BOYNER BÜYÜK MAĞAZACILIK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2013


62


The accompanying notes form an integral part of these consolidated financial statements.


BOYNER BÜYÜK MAĞAZACILIK ANONİM ŞİRKETİ CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

FOR THE YEARS ENDED AT 31 DECEMBER 2013 AND 2012 (AMOUNTS ExPRESSED IN TURKISH LIRA (“TRY”) UNLESS OTHERWISE INDICATED.)

ASSETS Notes 31 December 2013

Restated note 2.1

31 December2012

Current Assets 690.370.913 504.961.776

Cash and cash equivalents 6 213.093.722 141.044.983

Trade receivables 18.171.908 71.166.831

- Trade receivables from related parties 10, 37 6.155.149 4.092.541

- Trade receivables from third parties 10 12.016.759 67.074.290

Other receivables 11 50.295.259 5.234.567

- Other receivables from related parties 11, 37 49.855.322 -

- Other receivables from third parties 11 439.937 5.234.567

Inventories 13 362.464.429 259.371.487

Prepaid expenses 14 7.173.822 11.823.855

Other current assets 26 39.171.773 16.320.053

Non-current Assets 382.567.647 356.238.342

Other receivables 11 26.371.681 567.185

- Other receivables from related parties 11, 37 25.263.158 -

- Other receivables from third parties 11 1.108.523 567.185

Property, plant and equipment 18 126.506.931 124.060.960

Intangible assets 222.189.791 225.614.381

- Goodwill 20 106.041.968 106.041.968

- Other intangible assets 19 116.147.823 119.572.413

Deferred income tax assets 35 7.147.344 5.631.359

Prepaid expenses 14 351.900 364.457

TOTAL ASSETS 1.072.938.560 861.200.118


63




BOYNER BÜYÜK MAĞAZACILIK ANONİM ŞİRKETİ CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


LIABILITIES Notes 31 December 2013Restated note 2.1

31 December 2012

Current Liabilities 660.575.362 515.074.925

Short term financial liabilities 8 3.412.269 30.099.310Current portion of long term financial liabilities 8 96.645.079 42.457.545Trade payables 502.518.785 405.572.225 - Trade payables to related parties 37 40.174.568 20.206.185 - Trade payables to third parties 10 462.344.217 385.366.040Payables related to employee benefits 24 9.444.068 8.730.786Other payables 19.885.180 3.916 - Other payables to related parties 11, 37 - - - Other payables to third parties 11 19.885.180 3.916Deferred revenue 14 18.434.439 17.068.849 Current income tax liabilities 35 3.027.894 1.894.112Short term provisions 3.664.925 5.580.203 - Provisions for employee benefits 24 1.370.563 3.911.524 - Other short term provisions 22 2.294.362 1.668.679Other short term liabilities 26 3.542.723 3.667.979

Non-current Liabilities 354.225.320 216.867.623

Long term financial liabilities 8 267.177.156 190.347.027 Other payables 60.018.270 - - Other payables to related parties 11,37 - - - Other payables to third parties 11 60.018.270 -Long term provisions 5.845.788 4.878.799 - Provisions for employee benefits 24 5.845.788 4.878.799Deferred income tax liabilities 35 21.184.106 21.231.291 Deferred revenue 14 - 410.506

EQUITY 58.137.878 129.257.570

Shareholders’ Equity Paid-in share capital 27 92.070.000 92.070.000Share premium 27 227.203 227.203Other comprehensive income/expense not to be reclassified to profit or loss - Actuarial losses 27 (3.918.162) (1.642.251)Restricted reserves 27 232.884 232.884Impact of business combinations of entities under common control 3 (56.878.535) -Retained earnings 15.522.311 7.945.219Net profit for the year 10.882.177 7.577.092

Non-controlling interests - 22.847.423

TOTAL LIABILITIES AND EQUITY 1.072.938.560 861.200.118


64




BOYNER BÜYÜK MAĞAZACILIK ANONİM ŞİRKETİ CONSOLIDATED STATEMENTS OF INCOME


Notes31 December

2013Restated note 2.1

31 December 2012

Revenue 5, 28 1.415.659.238 935.090.980Cost of sales (-) 5, 28 (875.544.179) (586.313.636)

Gross profit from trading activities 540.115.059 348.777.344

General administrative expenses (-) 29 (83.203.981) (58.803.460)Marketing expenses (-) 29 (415.047.965) (260.863.430)Other operating income 31 52.908.674 48.394.497Other operating expense (-) 31 (44.786.655) (40.060.468)

Operating profit 49.985.132 37.444.483

Income from investing activities 32 653.125 -Expense from investing activities (-) 32 (1.782.229) (2.208.034)

Operating profit before financial income and expense 48.856.028 35.236.449

Financial income 33 2.775.668 129.023Financial expenses (-) 33 (39.236.965) (21.524.532)

Profit from continuing operations before tax 12.394.731 13.840.940

Tax income/expense from continued operations- Taxes on income 35 (10.183.428) (6.115.187)- Deferred tax income/(loss) 35 994.192 (103.286)

Profit for the year 3.205.495 7.622.467

Attributable to: Non-controlling interest (7.676.682) 45.375Equity holders of the parent 10.882.177 7.577.092

Earnings per shareEarnings per shares from continued operations 36 0,00118 0,00082Earnings per shares from discontinued operations - -


65




BOYNER BÜYÜK MAĞAZACILIK ANONİM ŞİRKETİ CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME

FOR THE YEARS ENDED 31 DECEMBER 2013 AND 2012 (AMOUNTS ExPRESSED IN TURKISH LIRA (“TRY”) UNLESS OTHERWISE INDICATED.)

Notes31 December

2013Restated note 2.1

31 December 2012

Other comprehensive income

Items not to be reclassified to profit or loss (2.275.911) (1.219.302)

Actuarial losses arising from employee benefits 24 (2.844.889) (1.524.128)Taxes not to be reclassified to profit or loss

- Taxes on income - -- Deferred tax gain/loss 568.978 304.826

Items to be reclassified to profit or loss - 35.255

Gain or loss on cash flow hedges - 44.069Taxes to be reclassified to profit or loss

- Taxes on income - -- Deferred tax gain/loss - (8.814)

Other comprehensive income/loss (2.275.911) (1.184.047)

Total comprehensive income/loss 929.584 6.438.420

Attributable to:Non-controlling interest (7.022.108) 45.375Equity holders of the parent 7.951.692 6.393.045


66


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.137.

878

-58

.137.

878


67


Notes 31 December 2013 31 December 2012

A. Cash flows from operating activities 65.356.678 90.982.987

Profit from continuing operations before tax 12.394.731 13.840.940

Adjustments to reconcile net profit for the year 88.854.951 52.023.00330 36.398.230 24.069.509

Depreciation and amortization 30 36.398.230 24.069.509Provision for unused vacation 24 707.797 1.536.222Provision for employment termination benefits 24 1.201.124 1.485.764Provision for doubtful receivables 10 838.745 673.395Interest expense 31, 33 62.658.767 31.905.774Interest income 31, 33 (17.691.060) (10.086.764)Loss/gain on sale of tangible assets, net 32 1.129.104 2.208.034Provision for impairment of inventories 13 1.082.092 -Written off trade receivables 10 1.413.730 -Provision for lawsuits 22 1.116.422 187.000Unrealized portion of derivative instruments - 44.069

Changes in net working capital (35.893.004) 25.119.044- 1.381.719

Financial assets - 1.381.719Trade and other receivables (excluding related parties) 10 56.292.724 19.489.402Trade receivables from related parties 10 (27.325.766) (941.203)Other receivables from related parties 37 (49.855.322) -Inventories 13 (104.175.034) (44.995.519)Other current assets 26 (18.201.687) (4.874.984)Prepaid expenses 14 12.557 -Other non-current assets - (337.901)Trade and other payables (excluding related parties) 10 76.978.177 60.717.243Trade and other payables to related parties 10 19.968.383 (11.668.608)Other liabilities 26 177.522 2.857.752Payments for employment termination benefits 24 (6.384.381) (2.050.893)Taxes paid 35 (9.049.644) (4.221.075)Interest received (maturity difference income) 31 16.653.625 9.957.741Doubtful receivables collected 10 765.624 212.420Payments for unused vacation 24 (474.892) (398.564)Payments for sales return and rebates 22 (273.239) (8.486)Payments for personnel cases 22 (217.500) -Deferred revenue 14 1.365.588 -The impact of share purchase from non-controlling interest 37 7.850.261 -

B. Cash flows from investment activities (35.511.281) (206.685.075)

Purchases of tangible assets 18 (29.816.820) (35.253.682)Purchases of intangible assets 19 (9.181.436) (10.696.579)Proceeds from sale of tangible assets 2.449.540 72.515Non - controlling interest fromacquisition of a subsidiary - (160.936.352)Other interest and commissions received 1.037.435 129.023

C. Cash flows from financing activities 42.203.342 167.391.803121.374.208 203.662.073

Interest paid (51.313.722) (28.233.270)Proceeds from bank borrowings 121.374.208 203.662.073Repayment of bond and bank borrowings (27.857.144) (8.037.000)

Net increase in cash and cash equivalents (A+B+C) 72.048.739 51.689.715

D. Cash and cash equivalents at beginning of period (D) 141.044.983 89.355.268

Cash and cash equivalents at end of period (A+B+C+D) 213.093.722 141.044.983



BOYNER BÜYÜK MAĞAZACILIK ANONİM ŞİRKETİ CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED 31 DECEMBER 2013 AND 2012 (AMOUNTS ExPRESSED IN TURKISH LIRA (“TRY”) UNLESS OTHERWISE INDICATED.)


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FOR THE YEAR ENDED 31 DECEMBER 2013 (AMOuNTS ExpRESSED IN TuRkISH LIRA (“TRY”) uNLESS OTHERwISE INDICATED.)

1. ORGANIZATION AND NATURE OF OPERATIONS OF THE GROUP

General

Boyner Büyük Mağazacılık Anonim Şirketi (“Boyner” or the “Company”) is a joint-stock company founded on 13 February 1992 and officially registered in Istanbul. The address of the headquarters of the Company is Büyükdere Caddesi USO Center Binası No: 245 A K: B01-Z02 Maslak/Istanbul. 15% of the Company’s share in 1996, 15% of the shares in 1998 and 9,9 % of the shares in 2006 have been listed (in total 39,9 %). In the year 2013, subsequent to the mandatory call of the listed shares after the acquisition of Company shares from Fenella S.A.R.L, a subsidiary of Citi Venture Capital International, by Altınyıldız Mensucat ve Konfeksiyon Fabrikaları A.Ş. (“Altınyıldız A.Ş.”), 3,45 % of the Company shares are quoted in Borsa Istanbul.

On 7 September 2012, Boyner acquired 63% of the shares of Yeni Karamürsel Giyim ve İhtiyaç Maddeleri Ticaret ve Sanayi A.Ş. (“YKM A.Ş.”), a company operating in the retail sector, and 20,62% of the shares of Yeni Karamürsel Giyim ve İhtiyaç Maddeleri Pazarlama A.Ş. (YKM Pazarlama A.Ş.) which is the subsidiary of YKM A.Ş. with 56,25 % (Note 3).

The Group acquired 37% of the shares of YKM A.Ş. and 23,13% of the shares of YKM Pazarlama A.Ş. from the non- controlling interests for a consideration of TRY 70.324.333 and TRY 21.652.862, respectively. Furthermore, the remaining part of the brand of which 50% has already been acquired, is acquired for a consideration of TRY 8.022.805. The Group provided notes payables of TRY 100.000.000 in total for these transactions which have maturity terms between January 2014 – April 2017. As a result of these transactions, the negative difference of TRY 56.878.535 between the acquisition cost of the shares and the cost of assets at the rate of the acquired share of the Group has been recognised within the equity under transactions with non-controlling interests (Note 3).

As of 31 December 2013 and 31 December 2012, names of the subsidiaries, their principle activities, the countries of incorporation, effective ownership percentages of the Company are summarized as follows:

Name of subsidiariesPrinciple

ActivitiesCountry of

Incorporation

31 December 2013 Company’s effective

ownership percentage

31 December 2012 Company’s effective

ownership percentage

Yeni Karamürsel Giyim ve İhtiyaç Maddeleri Ticaret ve Sanayi A.Ş. (YKM A.Ş.) Retail Sector Turkey 100,00% 63,00%

Yeni Karamürsel Giyim ve İhtiyaç Maddeleri Pazarlama A.Ş.

Marketing (YKM and Retail Sector

Pazarlama A.Ş.) Turkey 100,00% 56,06%

Boyner and its subsidiaries will be referred to as “Group”.

Group’s financial statements as of 31 December 2013, prepared in accordance with the Capital Market Board (CMB) Communiqué No: XI-29 “Communiqué on Financial Reporting Standards in Capital Markets” (Communiqué) (will be referred to as “CMB Accounting Standards”) were authorized for issue on 28 February 2014 by the Company’s Board of Directors. The General Assembly and certain regulatory bodies have the power to amend the statutory financial statements after issue.

Nature of activities

Group is mainly engaged in retailing business and maintains its activities in 139 stores across the country (31 December 2012 - 145 stores). As of 31 December 2013 and 31 December 2012, the average number of employees within the Group is 5.219 and 4.865 respectively.


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1. ORGANIZATION AND NATURE OF OPERATIONS OF THE GROUP (Continued)

Shareholder structure

As of 31 December 2013 and 31 December 2012, the Company’s shareholder structure and ownership percentages are summarized as follows;

31 December 2013 31 December 2012Shareholders Paid-in capital % Paid-in capital %

Altınyıldız Mensucat ve Konfeksiyon Fabrikaları A.Ş. (“Altınyıldız A.Ş.) 88.896.289 96,55 27.600.185 29,98Fenella S.a.r.l - - 27.667.035 30,05Publicly Listed and Other 3.173.711 3,45 36.802.780 39,97

92.070.000 100,00 92.070.000 100,00

As stated in the Public Disclosure Platform (PDP), a platform in which the listed companies announces significant events to the public, on 13 March 2013 by Altınyıldız A.Ş., one of the Company’s shareholders, the Board of Directors of Altınyıldız A.Ş. signed a non-binding preliminary agreement on 13 March 2013 for the purpose of acquiring 30,05% of Boyner’s shares (27.667.037 shares) from Fennella Sarl, a subsidiary of Citi Venture Capital International, for a consideration of USD89.087.853. The related transaction was completed on 31 May 2013. Following the sign off of the share transfer agreement, a call was placed for the publicly listed Boyner shares in accordance with the relevant legislation. The unit purchase price for these shares was determined to be TRY7,0835 as announced on the PDP on 6 September 2013 and the call commenced on 9 September 2013. Subsequently, the ownership rate of Altınyıldız A.Ş. in Boyner became 96,43%. At 31 December 2013 the ownership rate increased to 96,55%.

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

2.1 Basis of preparation

The accompanying consolidated financial statements are prepared in accordance with Communiqué Serial II, No:14.1, “Principles of Financial Reporting in Capital Markets” (“the Communiqué”) published in the Official Gazette numbered 28676 on 13 June 2013. According to Article 5 of the Communiqué, consolidated financial statements are prepared in accordance with the Turkish Accounting Standards issued by Public Oversight Accounting and Auditing Standards Authority (“POAASA”). TAS contains Turkish Accounting Standards, Turkish Financial Reporting Standards (“TFRS”) and its addendum and interpretations (“IFRIC”).

The consolidated financial statements of the Group are prepared as per the CMB announcement of 7 June 2013 relating to financial statements presentations. Comparative figures are reclassified, where necessary, to conform to changes in the presentation of the current year’s consolidated financial statements.

In accordance with the CMB resolution issued on 17 March 2005, listed companies operating in Turkey are not subject to inflation accounting effective from 1 January 2005. Therefore, the consolidated financial statements of the Group have been prepared accordingly.

The Company and its Turkish subsidiaries maintain their books of accounts and prepare their statutory financial statements in accordance with the Turkish Commercial Code (“TCC”), tax legislation, the Uniform Chart of Accounts issued by the Ministry of Finance and principles issued by CMB. These consolidated financial statements have been prepared under historical cost conventions except for financial assets and financial liabilities measured at fair value. The consolidated financial statements are based on the statutory records, which are maintained under historical cost conventions, with the required adjustments and reclassifications reflected for the purpose of fair presentation in accordance with TAS.


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2. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.1 Basis of preparation (Continued)

Presentation and functional currency

As of 31 December 2013, the Company and its subsidiaries’ functional and reporting currencies are TRY and prior year comparative balances are presented in TRY.

Preparation of financial statements in hyperinflationary periods

In accordance with the CMB’s resolution No: 11/367 issued on 17 March 2005, companies operating in Turkey which prepare their financial statements in accordance with the CMB Accounting Standards (including the application of IFRS) are not subject to inflation accounting effective from 1 January 2005. Therefore, as of 1 January 2005, IAS 29 “Financial Reporting in Hyperinflationary Economies” is not applied in the accompanying consolidated financial statements.

Going concern

The consolidated financial statements including the accounts of the parent company and its subsidiaries have been prepared assuming that the Group will continue as a going concern on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business.

Comparatives and restatement of prior periods’ financial statements

The consolidated financial statements of the Group include comparative financial information to enable the assessment of the trends regarding the financial position and performance. Comparative figures are reclassified, where necessary, to conform to changes in presentation in the current year consolidated financial statements.

In accordance with the decision taken in the CMB meeting numbered 20/670 held on 7 June 2013, and in compliant with the announcement related to the format of financial statements and its accompanying notes, comparative figures have been reclassified to conform to the changes in presentation in the current period.

The Group restated its prior periods’ consolidated financial statements in accordance with the amendments in IAS 19 “Employee Benefits” which is effective from 1 January 2013.

The Impact of Amendment in IAS 19 “Employee Benefits”

In accordance with the amendment in the standard, which is effective from 1 January 2013, the actuarial gains/losses related to employee benefits are required to be accounted for under other comprehensive income. The Company accounted for the actuarial gains/ (losses) related to employee benefits under the income statement until 31 December 2012. The Company applied the amendment in the standard respectively in accordance with the related changes in the accounting policies and the actuarial gains/ (losses) disclosed in the related disclosures have been reversed from the consolidated income statement and accounted for under other comprehensive income.


71





2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.1 Basis of preparation (Continued)


The reconciliation of the statement of financial position as of 31 December 2012 and statement of profit and loss for the year ended at 31 December 2012, which were restated as of 31 December 2013, are as follows:

ASSETSPreviously Reported

31 December 2012CMB Format

Change Effect

Final fair value

adjustments

IAS - 19 Amendment

change effect

Restated 31 December

2012

Current assets 499.182.966 - 5.778.812 - 504.961.776

Cash and cash equivalents 141.044.983 - - - 141.044.983Trade receivables 71.277.965 - (111.134) - 71.166.831

- Trade receivable from related parties 4.092.541 - - - 4.092.541 - Trade receivables from third parties 67.185.424 - (111.134) - 67.074.290

Other receivables 746.237 (220.747) 4.709.077 - 5.234.567 - Other receivables from related parties - - - - - - Other receivables from third parties 746.237 (220.747) 4.709.077 - 5.234.567

Inventories 258.190.618 - 1.180.869 - 259.371.487Prepaid expenses - 11.823.855 - - 11.823.855Other current assets 27.923.163 (11.603.110) - - 16.320.053

Non-current assets 359.084.861 - (2.846.519) - 356.238.342

Other receivables 567.185 - - - 567.185Property, plant and equipments 118.984.966 - 5.075.993 - 124.060.959Intangible assets 233.778.032 - (8.163.651) - 225.614.381

- Goodwill 113.918.677 - (7.876.709) - 106.041.968- Other intangible assets 119.859.355 - (286.942) - 119.572.413

Other non-current assets 364.457 (364.457) - - -Prepaid expenses - 364.457 - - 364.457Deferred income tax assets 5.390.221 - 241.138 - 5.631.359

Total Assets 858.267.827 - 2.932.293 - 861.200.118


72







LIABILITIESPreviously Reported

31 December 2012CMB Format

Change Effect

Changes after fair value

adjustments

IAS - 19 Amendment

change effectRestated

31 December 2012

Current liabilities 515.074.924 - - 515.074.925

Short-term financial liabilities 72.556.855 (42.457.545) - - 30.099.310Current portion of long term financial liabilities - 42.457.545 - - 42.457.545Trade payables 403.607.706 1.964.519 - - 405.572.225

- Trade payables to related parties 20.206.185 - - - 20.206.185 - Trade payables to third parties 383.401.521 1.964.519 - - 385.366.040

Payables related to employee benefits - 8.730.786 - - 8.730.786Other payables 16.505.391 (16.501.475) - - 3.916

- Other payables to related parties - - - - - - Other payables to third parties 16.505.391 (16.501.475) - - 3.916

Deferred revenue - 17.068.849 - - 17.068.849Current income tax liabilities - 1.894.112 - - 1.894.112Short term provisions 3.911.524 1.668.679 - - 5.580.203

- Provisions for employee benefits 3.911.524 - - - 3.911.524 - Other short term provisions - 1.668.679 - - 1.668.679

Provision for liabilities and charges 1.668.679 (1.668.679) - - -Other current liabilities 16.824.769 (13.156.790) - - 3.667.979

Non-current liabilities 215.454.740 - 1.412.883 - 216.867.623

Long term financial liabilities 190.347.027 - - - 190.347.027Long term provisions 4.878.799 - - - 4.878.799Provision for employee benefits 4.878.799 - - - 4.878.799Deferred income tax liabilities 19.818.408 - 1.412.883 - 21.231.291Deferred revenue - 410.506 - - 410.506Other long term liabilities 410.506 (410.506) - - -

Equity 127.738.163 - 1.519.407 - 129.257.570

Paid-in share capital 92.070.000 - - - 92.070.000Share premium 227.203 - - - 227.203Other comprehensive income/expense not to be reclassified to profit or loss

- Actuarial losses - - - (1.642.251) (1.642.251)Restricted reserves 232.884 - - - 232.884Retained earnings 7.522.270 - - 422.949 7.945.219Net profit for the year 6.868.185 - (510.395) 1.219.302 7.577.092Non-controlling interests 20.817.621 - 2.029.802 - 22.847.423

Total liabilities and equity 858.267.827 - 2.932.291 - 861.200.118


73






Previously Reported

1 January - 31 December 2012

CMB Format Change Effect

IFRS 3 Amendment

change effect

IAS - 19 Amendment

change effect

Restated 1 January 31

December 2012

Revenue 935.090.980 - - - 935.090.980Cost of sales (-) (586.357.522) 43.886 - - (586.313.636)

Gross profit 348.733.458 43.886 - - 348.777.344

Marketing expenses (-) (262.620.861) (634.023) (179.178) 2.570.632 (260.863.430)General administrative expenses (-) (58.803.460) - - - (58.803.460)Other operating income 26.544.533 21.849.964 - - 48.394.497Other operating expense (-) (19.065.968) (20.652.880) (341.620) - (40.060.468)

Operating profit 34.787.702 606.947 (520.798) 2.570.632 37.444.483

Expense from investing activities - (2.208.034) - - (2.208.034)

Operating profit before financial income and expense 34.787.702 (1.601.087) (520.798) 2.570.632 35.236.449

Financial incomes 21.978.986 (21.849.963) - - 129.023Financial expenses (-) (44.083.415) 23.605.387 - (1.046.504) (21.524.532)

Profit from continuing operations before tax 12.683.273 154.337 (520.798) 1.524.128 13.840.940Tax income/expense from continued operations (6.115.187) - - - (6.115.187)Deferred tax income/ (loss) 128.247 (30.867) 104.160 (304.826) (103.286)

Profit for the year 6.696.333 123.470 (416.638) 1.219.302 7.622.467

Other comprehensive income

Items not be reclassified to profit or loss

Actuarial losses - - - (1.524.128) (1.524.128)Taxes not to be reclassified to profit or loss

- Tax income/expense from continued operations - - - - -- Deferred tax income/expense - - - 304.826 304.826

Items to be reclassified to profit or loss

Cash flow risk avoiding gain/loss 44.069 - - - 44.069Taxes to be reclassified to profit or loss

- Taxes on income - - - - - - Deferred tax gain/loss (8.814) - - - (8.814)

Total comprehensive income 6.731.588 6.438.420


74






Consolidation principles

The consolidated financial statements include the Group’s accounts prepared in accordance with principles set out in sections below. The financial statements of the companies included in the scope of consolidation have been prepared as of the date of the consolidated financial statements and have been prepared in accordance with CMB Financial Reporting Standards applying uniform accounting policies and presentation. The results of subsidiaries are included or excluded from their effective dates of acquisition or disposal respectively.

Subsidiaries

Control is obtained by controlling over the activities of an entity’s financial and operating policies in order to benefit from those activities.

Subsidiaries are companies over which the parent company controls the financial and operating policies for the benefit of the parent company, either (a) through the power to exercise more than 50% of the voting rights relating to shares in the companies owned directly and indirectly by itself; or (b) although not having the power to exercise more than 50% of the voting rights, otherwise having the power to exercise control over the financial and operating policies.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity.

Note 1 sets out all subsidiaries included in the scope of consolidation and shows their ownership and effective interests (%) as of 31 December 2013 and 31 December 2012.

Subsidiaries are consolidated from the date on which the control is transferred to the Group and are no longer consolidated from the date that control ceases. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

The result of operations of subsidiaries are included or excluded in consolidated comprehensive income subsequent to the date of acquisition or date of sale respectively.

The balance sheets and statements of income of the subsidiaries are consolidated on a line-by-line basis and the carrying value of the investment held by the Company and its subsidiaries is eliminated against the related equity Intercompany transactions and balances between the Company and its subsidiaries are eliminated during the consolidation. The cost of, and the dividends arising from, shares held by the Company in its subsidiaries are eliminated from equity and income for the period, respectively.

The non-controlling shareholders’ share in the net assets and results of Subsidiaries for the period are separately classified as non-controlling interest in the consolidated balance sheets and statements of income. The non-controlling interests consist of shares from the initial business combinations and the non-controlling shares from the changes in equity after the business combinations date. When the losses applicable to the non-controlling portion exceed the non-controlling interest in the equity of the subsidiary, the excess loss and the further losses applicable to the non-controlling are charged against the non-controlling interest (Note 2.5).

2.2 Significant changes in the accounting policies

Material changes in accounting policies are corrected, retrospectively; by restating the prior periods’ consolidated financial statements. The accounting policies used in the preparation of these consolidated financial statements for the period of 31 December 2013 are consistent with those used in the preparation of financial statements for the period of 31 December 2012.

The Group restated its prior periods’ consolidated financial statements in accordance with the amendments in IAS 19 “Employee Benefits” in accordance with IAS 8 “Accounting policies, changes in accounting estimates and errors”. The impact of the restatements were disclosed in Note 2.4.


75






2.3 Change in accounting estimates

The effect of changes in accounting estimates affecting the current period is recognized in the current period; the effect of changes in accounting estimates affecting current and future periods is recognized in the current and future periods. The accounting estimates used in the preparation of these consolidated financial statements for the period of 31 December 2013 are consistent with those used in the preparation of financial statements for the period of 31 December 2012.

Material changes in accounting policies or material errors are corrected, retrospectively by restating the prior period consolidated financial statements.

2.4 New and updated amendments in International Financial Reporting Standards

The Group has applied new standards, amendments and interpretations to existing standards published by IASB and IFRIC that are effective as at 1 January 2013 and are relevant to the Group’s operations. The effect of amendments on Group’ s financial statements are explained related section.

a. Standards, changes and amendments for reporting term which begins as of 31 January 2013

- Amendment to IAS 1, ‘Financial statement presentation’, regarding other comprehensive income; is effective for annual periods beginning on or after 1 July 2012. The main change resulting from these amendments is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI.

- Amendment to IAS 19, ‘Employee benefits’; is effective for annual periods beginning on or after 1 January 2013. These amendments eliminate the corridor approach and calculate finance costs on a net

funding basis.

- Amendment to IFRS 1, ‘First time adoption’, on government loans; ; is effective for annual periods beginning on or after 1 January 2013. This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008.

- Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset and liability offsetting¸; is effective for annual periods beginning on or after 1 January 2013. This amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP.

- Amendment to IFRSs 10, 11 and 12 on transition guidance¸; is effective for annual periods beginning on or after 1 January 2013. These amendments provide additional transition relief to IFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before IFRS 12 is first applied.

- Annual improvements 2011; is effective for annual periods beginning on or after 1 January 2013. These annual improvements, address six issues in the 2009-2011 reporting cycle. These improvements are:


76






2.4 New and updated amendments in International Financial Reporting Standards (Continued)

• TFRS/UFRS1,‘Firsttimeadoption’• TMS/UMS1,‘Financialstatementpresentation’• TMS/UMS16,‘Propertyplantandequipment’• TMS/UMS32,‘Financialinstruments;Presentation’• TMS/UMS34,‘Interimfinancialreporting’

- IFRS 10, ‘Consolidated financial statements’; is effective for annual periods beginning on or after 1 January 2013. The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entity (an entity that controls one or more other entities) to present consolidated financial statements. It defines the principle of control, and establishes controls as the basis for consolidation. It sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. It also sets out the accounting requirements for the preparation of consolidated financial statements.

- IFRS 11, ‘Joint arrangements’; is effective for annual periods beginning on or after 1 January 2013. IFRS 11 is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.

- IFRS 12, ‘Disclosures of interests in other entities’; is effective for annual periods beginning on or after 1 January 2013. IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

- IFRS 13, ‘Fair value measurement’ ; is effective for annual periods beginning on or after 1 January 2013. IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP.

- IAS 27 (revised 2011), ‘Separate financial statements’; is effective for annual periods beginning on or after 1 January 2013. IAS 27 (revised 2011) includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10.

- IAS 28 (revised 2011), ‘Associates and joint ventures’; is effective for annual periods beginning on or after 1 January 2013. IAS 28 (revised 2011) includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11.

- IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ is effective for annual periods beginning on or after 1 January 2013. This interpretation sets out the accounting for overburden waste removal (stripping) costs in the production phase of a mine. The interpretation may require mining entities reporting under IFRS to write off existing stripping assets to opening retained earnings if the assets cannot be attributed to an identifiable component of an ore body.


77







b. New IFRS standards, amendments and IFRICs not effective as of 31 December 2013

- Amendment to IAS 32, ‘Financial instruments: Presentation’, on asset and liability offsetting is effective for annual periods beginning on or after 1 January 2014.These amendments are to the application guidance in IAS 32, ‘Financial instruments: Presentation’, and clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.

- Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities is effective for annual periods beginning on or after 1 January 2014. These amendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead, they will measure them at fair value through profit or loss. The amendments give an exception to entities that meet an ‘investment entity’ definition and which display particular characteristics. Changes have also been made IFRS 12 to introduce disclosures that an investment entity needs to make.

- Amendment to IAS 36, ‘Impairment of assets’ on recoverable amount disclosures is effective for annual periods beginning on or after 1 January 2014. This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

- Amendment to IAS 39 ‘Financial Instruments: Recognition and Measurement’ - ‘Novation of derivatives is effective for annual periods beginning on or after 1 January 2014. This amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument to a central counterparty meets specified criteria.

- IFRIC 21, ‘Levies’ is effective for annual periods beginning on or after 1 January 2014. This is an interpretation of IAS 37, ‘Provisions, contingent liabilities and contingent assets’. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

- IFRS 9 ‘Financial instruments’ - classification and measurement; is effective for annual periods beginning on or after 1 January 2015. This standard on classification and measurement of financial assets and financial liabilities will replace IAS 39, ‘Financial instruments: Recognition and measurement’. IFRS 9 has two measurement categories: amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the IAS 39 requirements. These include amortised-cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. This change will mainly affect financial institutions.

When financial liabilities are accounted fair value, the main change is the part of arising from credit risk of the Company changes in fair value is reflected to the comprehensive income instead of income statement. This change especially effect the financial entities.


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c. Standards which published from IASB (International Accounting Standards Board) but not published from AASA (Accounting and Auditing Standards Authority-Public Oversight)

- Amendments to IFRS 9,‘Financial instruments’, regarding general hedge. These amendments to IFRS 9, ‘Financial instruments’, bring into effect a substantial overhaul of hedge accounting that will allow entities to better reflect their risk management activities in the financial statements.

- Amendment to IAS 19 regarding defined benefit plans; ; is effective for annual periods beginning on or after 1 July 2014. These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary.

- Annual improvements 2012; is effective for annual periods beginning on or after 1 July 2014. These amendments include changes from the 2010-12 cycle of the annual improvements project that affect 7 standards:

• IFRS2,‘Share-basedpayment’• IFRS3,‘BusinessCombinations’• IFRS8,‘Operatingsegments’• IAS16,‘Property,plantandequipment’andIAS38,‘Intangibleassets’• ConsequentialamendmentstoIFRS9,‘Financialinstruments’,IAS37,‘Provisions,contingentliabilitiesand

contingent assets’, and• IAS39,Financialinstruments–Recognitionandmeasurement’.

- Annual improvements 2013; is effective for annual periods beginning on or after 1 July 2014. The amendments include changes from the 2011-2-13 cycle of the annual improvements project that affect 4 standards:

• IFRS1,‘Firsttimeadoption’• IFRS3,‘Businesscombinations’• IFRS13,‘Fairvaluemeasurement’and• IAS40,‘Investmentproperty’.

The Group will evaluate the effect of the aforementioned changes within its operations and apply changes starting from effective date. It is expected that the application of the standards and the interpretations will not have a significant effect on the consolidated financial statements of the Group.

2.5 Summary of significant accounting policies

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquirer. The consideration transferred is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, the liabilities incurred by the Group to former owners of the entity and the equity interests issued by the Group. When the agreement with the seller includes a clause that the consideration transferred could be adjusted for future events, the acquisition-date fair value of this contingent consideration is included in the cost of the acquisition. All transaction costs incurred by the Group have been recognized in other operating income account.

For each business combination, the Group elects whether it measures the non-controlling interest in the acquirer either at fair value or current equity instruments’ proportionate share of the acquirer’s identifiable net assets. The amount of non-controlling interest of YKM A.Ş. and YKM Pazarlama A.Ş. measured at the proportionate share of the acquired identifiable net assets.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquirer.


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2.5 Summary of significant accounting policies (Continued)

Acquisition method requires allocation of the acquisition cost to the assets acquired, liabilities and contingent liabilities assumed at their fair values on the date of acquisition. Accordingly, acquired assets and liabilities and contingent liabilities assumed are recognized at IFRS 3 fair values on the date of acquisition. Acquired company is consolidated starting from the date of acquisition.

If the fair values of the acquired identifiable assets, liabilities and contingent liabilities or cost of the acquisition are based on provisional assessment as at the balance sheet date, the Group made provisional accounting. The additions and corrections of fair values of the acquired identifiable assets, liabilities and contingent liabilities are limited with 12 months from the date of acquisition.

Legal mergers arising between companies controlled by the Group are not considered within the scope ofIFRS 3. Consequently, no goodwill is recognized in these transactions. Similarly, the effects of all transactions between the legally merged companies, whether occurring before or after the legal merge, are corrected in the preparation of the consolidated financial statements.

Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the aggregate of the consideration transferred measured at fair value at the date of acquisition and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed at fair value in accordance with IFRS 3 on the date of acquisition. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Whenever the carrying amount exceeds the recoverable amount, an impairment loss is recognized in the consolidated income statement.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the acquisition, irrespective of whether other assets or liabilities are assigned to these units or groups of units. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amounts of the net assets assigned to the cash-generating unit, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

Transactions with non-controlling interests

The Group applies a policy of treating transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is deducted from equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. For disposals to non-controlling interests, differences between any proceeds received and the relevant share of non-controlling interests are also recorded in equity.

Inventories

Inventories are valued at the lower of cost or net realizable value. Moving-weighted average method is used for the inventory valuation method. Net realizable value is the estimated selling price in the ordinary course of business, less marketing, selling and other various expenses to be incurred in order to realize sale.

Unearned interest on initial cost value of the inventory with term payments is applied by considering the interest rates of government bonds in stock exchanges or in other markets in line with the maturity of the liabilities. The difference between total payment amount and cash price is recorded as term difference expense within financial expenses throughout the related period.


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Property, plant and equipment

All property, plant and equipment are initially stated at cost except for the items till 2004 year-end which are carried at restated cost until 31 December 2004 with the index of the related purchase date. Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value.

The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Depreciation is calculated on a straight-line method on pro-rata basis over the estimated useful life of related asset. The depreciation terms are as follows:

Useful Lives

Buildings 16 - 50Machinery and Equipment 4 - 8Vehicles 4 - 5Furniture and fixtures 3 - 16Leasehold improvements 3 - 12

The useful life and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property, plant and equipment.

Fixed assets that are acquired through financial leasing are reflected at the statement through deducting the accumulated depreciation and impairment from the lowest version of the beginning of the lease discounted value of minimum lease payments at balance sheet date and the fair value of the goods subject to lease.

Gain or losses on disposal of property, plant and equipment are included in the related income or expense from investing activities line item and are determined as the difference between the carrying value and amounts received.

Intangible assets

Intangible assets consist of software licenses, use rights like brand name and rights (primarily Beymen Club, Beymen Business, B- Beymen, Beymen Studio, YKM and YKM Outlet). Intangible assets are initially stated at cost except for items which are carried at restated cost restated until 31 December 2004 with the index of the related purchase date. Acquired rights by the acquisition of subsidiaries, favorable rent contracts and franchise network are initially recorded at their fair value.

Intangible assets are recognized if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and the cost of the asset can be measured reliably. In this context, expenses on startup activities except for training, advertising and promotion, partially or totally re-organization related ones and the ones that can be included in the cost of intangible assets are recorded as expense when they are incurred.

The carrying amounts of intangible assets are reviewed in case of changes in conditions to test whether there is any indication of impairment.

Intangible assets are stated at cost less accumulated depreciation and accumulated impairment loss. Intangible assets are amortized on a straight line basis over the best estimate of their useful lives, which were determined as 5-15 years for rights, 3-7 years for computer software. The estimated economic life of the favorable rent contracts and franchise network are 10 and 15 years respectively.


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Impairment of assets

The carrying values of assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized in the consolidated statement of income. The recoverable amount is the greater of net selling price and value in use. The value in use is the present value of estimated future cash flows from the continuing use of an asset or its disposal at the end of its useful life, the net sale price is the amount obtainable from the sale of an asset less the costs of disposal. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit. Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses recognized for the asset no longer exist or has decreased. The reversal is recorded in the consolidated statement of income.

Foreign currency transactions

Transactions in foreign currencies are recorded as TRY, at the rate ruling at the date of transaction. Balance sheet items denominated in foreign currencies have been translated at the rates of exchange prevailing at the balance sheet dates. As of 31 December 2013 and 31 December 2012, assets and liabilities denominated in foreign currencies have been translated with the buying exchange rates declared by Central Bank of the Republic of Turkey (TCMB). Exchange gains or losses arising on settlement and translation of foreign currency items into Turkish Lira have been included in the consolidated income statement.

As of 31 December 2013 and 31 December 2012 Central Bank buying exchange rates were as follows:

31 December 2013 31 December 2012

US Dollar 2,0134 1,7826Euro 2,9365 2,3517GBP 3,511 2,8708

Offsetting

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liabilities simultaneously.

Borrowing costs

Borrowings are recognized initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost using the effective yield method; any difference between proceeds, net of transaction costs, and the redemption value is recognized in the statement of income over the period of the borrowings (Note 8 and 33).

In case of foreign exchange income in the financing activities, the related income is deducted from the total of capitalized financial expenses.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset in the period in which the asset is prepared for its intended use or sale. All other borrowing costs are recognized in the profit or loss in the period in which they are incurred. Foreign exchange differences relating to borrowings, to the extent that they are regarded as an adjustment to interest costs, are also capitalised. The gains and losses that are an adjustment to interest costs include the interest rate differential between borrowing costs that would be incurred if the entity borrowed funds in its functional currency, and borrowing costs actually incurred on foreign currency borrowings.


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Income taxes

Income tax is the aggregate amount included in the determination of net profit or loss for the period in respect of current and deferred tax.

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognized for all taxable temporary differences.

Deferred income tax assets are recognized for all deductible temporary differences, and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and unused tax losses can be utilized.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred taxes of income and expenses booked in equity have been also carried in equity.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Provision for employee benefits

Defined benefit plans:

Group is required to make lump-sum termination indemnities to each employee who has completed over one year of service with Group and whose employment is terminated due to retirement or for reasons other than resignation or misconduct.

In the accompanying financial statements, Group has reflected a provision calculated by using “Projected Unit Credit Method” and based upon the factors derived using the Group’s experience of historical statistics of being eligible to receive benefits, discounted by using the current market yield at the balance sheet date on government bonds. All actuarial gains and losses calculated are reflected in the consolidated income statement.Obligations which are not used as short term employee benefits and due related with the unused vacations are accrued when they qualify and are not subject to discount.

Defined contribution plans:

The Group pays contributions to the Social Security Institution of Turkey on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as an employee benefit expense when they are due.


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Financial instruments

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. Financial assets:

• cash,• acontractualrighttoreceivecashoranotherfinancialassetfromanotherenterprise,• acontractualrighttoexchangefinancialinstrumentsfromanotherenterpriseunderconditionsthatare

potentially favorable, or,• anequityinstrumentofanotherenterprise

A financial liability that is a contractual obligation:

• todelivercashoranotherfinancialassettoanotherenterprise,or,• toexchangefinancialinstrumentswithanotherenterpriseunderconditionsthatarepotentiallyunfavorable.

When a financial asset or financial liability is recognized initially, it is measured at its cost, which is the fair value of the consideration given (in the case of an asset) or received (in case of a liability) for it. Transaction costs are included in the initial measurement of all financial assets and liabilities.

Financial assets

Financial assets consist of cash and cash equivalents, financial investments, trade receivables, other receivables and due from related parties.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash at banks, checks and short-term deposits and credit card balances having maturity of less than 3 months. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash with original maturity of three months or less and that are not subject to change in value.

Trade receivables

Trade receivables are recognized at original invoice amount less an allowance for any uncollectible amounts and recorded at amortized cost. The amount of imputed interests are calculated by considering the interest rates of government bonds in stock exchanges or in other markets in line with the maturity of the receivables and are accounted as expense within other operating expenses. When the Group will not be able to collect its receivable, the estimation for provision for doubtful receivable is made. Provision is set when doubtful receivables have been identified. When the receivable become uncollectible, it is written-off. The allowance is an estimated amount that management believes to be adequate to absorb possible future losses on existing receivables that may become uncollectible due to current economic conditions and inherent risks in the receivables.


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Impairments in financial assets

Financial asset are assessed at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that had occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. For receivables impairment loss has been incurred the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows.

Except for trade receivables, which is reduced through the use of an allowance account, impairment on all other financial assets are directly written off in the related account. In case trade receivables cannot be collected become definite, the related amount is written off. The change in allowance account is accounted in the consolidated income statement.

Financial liabilities

Financial liabilities include trade payables, borrowings, related party payables and other payables.

Trade payables

Liabilities for trade and other amounts are carried at amortized cost. The financial income included in trade payable is calculated by considering the interest rates of government bonds in stock exchanges or in other markets in line with the maturity of the liabilities and are accounted within other operating income.

Borrowings

All borrowings are initially recognized at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, borrowings are subsequently measured at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Fair value of financial instruments

The fair value of financial instruments except in case there is compulsory sales or at liquidation stage that are actively traded in organized financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models. The methods and assumptions in fair value estimation of the financial instruments of the Group are explained in Note 39.


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Recognition and derecognition of financial assets and liabilities

The Group recognizes a financial asset or financial liability in its balance sheet when and only when it becomes a party to the contractual provisions of the instrument. The Group derecognizes a financial asset or a portion of a financial asset when and only when it loses control of the contractual rights that comprise the financial asset or a portion of a financial asset or become barred. The Group derecognizes a financial liability when and only when a liability is extinguished that is when the obligation specified in the contract is discharged, cancelled and expires.

All regular way purchases and sales of financial assets are recognized on the trade date i.e. the date that the Group commits to purchase or to sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.

The Group documents formally, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This documentation includes the identification of description of hedging instruments, hedged item, and nature of the risk being hedged and how the Group will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s cash flows attributable to the hedged risk. The instalment and principal repayment terms of the hedging instruments which the Group has entered into, are in line with the instalment and principal repayments of hedged items.

The hedge effectiveness is assessed on an ongoing basis at each financial reporting period and the effectiveness of the hedging transaction in the equalization of hedged risk and attributable to cash flow changes demonstrates the consistency with the documented risk management strategy attributable to financial risk hedge relationship. The hedge effectiveness is assessed on an ongoing basis at each financial reporting period and the effectiveness of the hedging transaction in the equalization of hedged risk and attributable to cash flow changes demonstrates the consistency with the documented risk management strategy attributable to financial risk hedge relationship.

Provisions, contingent liabilities and assets

Provisions

Provisions are recognized when the entity has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense.

Contingent liabilities and assets

Contingent liabilities are not recognized in the financial statements. They are disclosed only, unless the possibility of an outflow of resources embodying economic benefits is probable. A contingent asset is not recognized in the financial statements but disclosed when an inflow of economic benefits is probable.

Gift cheques

Gift cheques are recorded as other short term payables at the given date to the client and reflect to consolidated income statement when they are used in stores for sales.


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Leases

Operating leases

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense (after deducting incentives from lessor) in the income statement on a straight-line basis over the lease term.

Related parties

(a) A person or a close member of that person’s family is related to a reporting entity if that person:

(i) has control or joint control over the reporting entity;(ii) has significant influence over the reporting entity;(iii) a member of the key management personnel of the reporting entity or of a parent of the reporting entity

b) An entity is related to a reporting entity if any of the following conditions applies:

(i) The entity and the reporting entity are members of the same group (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).(iii) Both entities are joint ventures of the same third party.(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.(v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity

or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in (a).(vii) (a) person identified in (a) (i) has significant influence over the entity or is a member of the key

management personnel of the entity (or of a parent of the entity).

A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

Revenue recognition

Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably. Revenue is recognized net of discounts and Value Added Tax (VAT). In order to recognize revenue the below criteria should be met.

Sale of goods

Revenue is recognized when the risk and reward of the goods sold have been transferred to the buyer, it is probable that economic benefits associated with the sale will flow to the enterprise and the amount of revenue can be measured reliably. For the retail sales it is accepted that the significant risk and reward related to the ownership have passed to the buyer in case the customer has not been satisfied and complete refund has been guaranteed. For the same transaction, revenue and expenses have been reflected to the financial statements, simultaneously.


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In cases of where cash or cash equivalents are received in return of a sale, revenue equals to the amount of these cash or cash equivalents. However, a large portion of the sales of the Group is realized via credit card and the fair value of the sale is computed by amortizing receivables to their present value. In determination of present value of the receivables, interest rate that amortizes nominal value of sales to cash selling price of the corresponding good or service. The difference between the nominal value of the sales and the computed fair value is reflected as term difference income in other operating income.

Net sales consist of invoiced sales amount less discounts, returns, sales taxes and VAT.

Customer royalty program

Group provides an implementation of Customer Royalty Program named “YKM Card” for its members. The customers with YKM Card collect bonus points upon the shopping they perform and able to use them in the subsequent purchases with the extent of Customer Royalty Program.Each Bonus point equals to TRY 1. Collected bonus points validation is limited with the year end of the collection date of bonus points. Within the framework of the IFRIC13; “Customer Royalty Programs”, liability amount for unused points calculations related with the article is calculated with the usage rates obtained according to the previous years’ statistical data.

Interest

Interest income for the amortized and interest included financial assets is calculated by effective interest method and reflected to financial statements.

Earnings per share

Basic earnings per share (EPS) are calculated by dividing the net profit for the period by the weighted average number of shares that have been outstanding during the period. The weighted average number of shares outstanding during the year has been adjusted in respect of free shares issued without corresponding increase in resources.

Subsequent events

Post year-end events that provide additional information about the Group’s position at the balance sheet date (adjusting events), are reflected in the consolidated financial statements. Post-year-end events that are not adjusting events are disclosed in the notes when material.

Segment reporting

The Group has two business segments determined by the management based on information available for the evaluation of performances and the allocation of resources. The main operation of the Group is retailing and the goods are segmented as clothing and non-clothing These segments are managed separately because they are affected by the economical conditions and geographical positions in terms of risks and returns.

Operating segments are reported in a manner consistent with the reporting provided to the Group’s chief operating decision-maker. The Group’s chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

For an operating segment to be identified as a reportable segment, its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10% or more of the combined revenue, internal and external, of all operating segments; the absolute amount of its profit or loss is 10% or more of the combined profit or loss or its assets are 10% or more of the combined assets of all operating segments.

Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if the management believes that information about the segment would be useful to users of the financial statements.


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2.6 Significant accounting judgments, estimates and assumptions

The preparation of consolidated financial statements in accordance with CMB standards, require the Group’s management to make judgments, estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those judgments, estimates and assumptions. Those judgments, estimates and assumptions are reviewed periodically, and as adjustments become necessary, they are reported in earnings in the periods in which they become known. Significant judgments, estimates and assumptions used in the preparation of these financial statements are presented in the related disclosures:

a) The liability of defined benefit plans is determined using actuarial valuations which involve making assumptions about discount rates, future salary increases and employee turnover. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. Further details about the assumptions used are disclosed in Note 24.

b) The allowance for doubtful receivables is an estimated amount that management believes to be adequate to absorb possible future losses on existing receivables that may become uncollectible due to current economic conditions and inherent risks in the receivables. When evaluating the impairment of the receivables, credibility and prior performance of the other debtors in the market, performance of related assets from the balance sheet date to the report issue date, re-negotiated terms and received pledges and mortgages are also considered. As of related balance sheet date, doubtful receivable allowance is presented in Note 10.

c) Group management has made certain important assumptions based on experiences of their technical personnel in determining the useful economic life of the tangible and intangible assets (Note 18-19).

d) In determination of the provision for inventories, Group analyzes physical condition and the aging of the inventories. In determination of the net realizable value of the inventories, listed sales prices and data of average discount rates during the year are taken into account. (Note 13).

e) Cash flows realized from intangible assets and acquisitions are evaluated and no impairment of intangible assets and goodwill is projected by the Group management.

f) Group management accounts for the gift cheques and return receipt vouchers in income statement when they are used. Cheques and vouchers unused for the last three years (2011 and before), are accounted for as income as the likelihood of their being used is estimated to be very low (Note 14).

g) Deferred income tax assets are recognized for all deductible temporary differences, and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and unused tax losses can be utilized. Significant estimations and assessments are made regarding the future taxable income when the deferred tax assets are accounted for (Note 35).


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3. BUSINESS COMBINATIONS

On 7 September 2012, Boyner acquired 63% of the shares of YKM A.Ş. , a company operating in the retail sector, and acquired directly 20,62% of shares of YKM Pazarlama A.Ş., a subsidiary of YKM A.Ş., with the rate of 56,25%. The Group paid TRY 166.652.295 for this transaction. Boyner also acquired 50% of 16 brands’ rights, including YKM brand, from Lale Guven Tuglu as part of “Company Purchase Agreement” for a consideration of TRY 10.028.509 which the total value was determined as TRY 20.057.019. Since the concerned brands are registered by individuals and the Group acquired those from the related individuals; these transactions were considered outside the scope of business combination and accounted for as asset acquisition (Note 19). As a result of these transactions, Boyner has paid TRY 176,680,804 in total.

The Group aims to both continue its organic growth in the market and accomplish its strategy of fast growth by delivering service to different customer segments in various locations.

The Group applied acquisition accounting for YKM A.Ş. and YKM Pazarlama A.Ş. as subsidiaries in line with TFRS 3 “Business Combinations” standard. The determination of the fair values of acquired identifiable assets and liabilities were completed in the previously published nine-month interim financial statements as at 30 September 2013 and for the nine months period then ended. These temporary amounts are restated in the accompanying financial statements.

7 September 2012

Consolidated YKM A.Ş. - YKM Pazarlama A.Ş. Restatements (*)

Restated YKM A.Ş. - YKM

Pazarlama A.Ş consolidated

Restatements of final fair

value

YKM A.Ş.-YKM Pazarlama A.Ş.

consolidated final fair value

Cash and cash equivalents 1.006.866 - 1.006.866 - 1.006.866Trade receivables 70.456.412 - 70.456.412 (5.129.256) 65.327.156Other receivables 365.337 - 365.337 - 365.337Inventories 65.793.761 1.134.944 66.928.705 - 66.928.705Other current assets 6.474.636 - 6.474.636 - 6.474.636Tangible assets 28.905.952 - 28.905.952 20.469.773 49.375.725Intangible assets 1.079.345 - 1.079.345 85.912.954 86.992.299Deferred income tax assets 6.413.579 (226.989) 5.916.590 394.833 6.311.423Other non-current assets 2.711 - 2.711 - 2.711Financial liabilities (12.391.037) - (12.391.037) - (12.391.037)Trade payables (158.954.617) - (158.954.617) - (158.954.617)Other liabilities (8.417.520) - (8.417.520) - (8.417.520)Provision for employee Benefits (3.021.986) - (3.021.986) - (3.021.986)Other long-term liabilities (413.073) - (413.073) - (413.073)Deferred income tax liabilities - - - (20.883.327) (20.883.327)

Total net assets (2.969.634) 907.955 (2.061.679) 80.764.977 78.703.298Acquired net assets ( A ) (*) 55.901.250Non-controlling interests net assets (*) 22.802.048Cash part of total cost ( B ) (31.943.218)Payable for acquisition ( C ) (130.000.000)Purchased cash and cash equivalents ( D ) 1.006.866Total paid net cash ( B+C+D) (160.936.352)

Goodwill ( A+B+C) (106.041.968)

(*) Restatements represent adjustments to carrying value of provision for impairment of inventory in balance sheet as of final fair value of YKM A.Ş and YKM Pazarlama A.Ş. at 7 September 2013.

(**) Since YKM Pazarlama A.Ş.’s 20,62 % of shares are purchased directly, the amount of acquired net assets and non-controlling interest cannot be reached by multiplying ownership share and total net assets amount.


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3. BUSINESS COMBINATIONS (Continued)

Although the Group has paid TRY 166.652.295 for the acquisitions of subsidiaries at first place; amount paid for the acquisition changed in favor of the Group with respect to adjustments in post-acquisition period regarding the determination of enterprise value as per “Closing Memorandum” issued as at 7 September 2012. In this context, TRY 4.709.077 has been repaid to the Group. The goodwill amount was recalculated as TRY 106.041.968 as of 31 December 2013 as a result of the adjustments made to the temporary fair values of the tangible fixed assets of YKM A.Ş. and YKM Pazarlama A.Ş. and the payments made to the sellers in accordance with the agreement.

a) Share purchasing for affiliates

The Group acquired 37% of the shares of YKM A.Ş. and 23,13% of the shares of YKM Pazarlama A.Ş. from the non- controlling interests and the remaining shares of the brand of which 50% has already been acquired. The Group provided notes payables of TRY 100.000.000 in total for these transactions which have maturity terms between January 2014 – April 2017. The net present value of the acquisition cost of shares from non-controlling interest is TRY72.049.276. As a result of these transactions, the negative difference of TRY56.878.535 between the acquisition cost of the shares and the cost of assets at the rate of the acquired share of the Group has been recognised within the equity under transactions with non-controlling interests. With this acquisition, Boyner became the owner, directly and indirectly, of all shares of YKM A.Ş. and YKM Pazarlama A.Ş..

Dispersion of change in equity on shareholders 31 December 2013 31 December 2012Value of acquired non- controlling interests 15.170.741 -Amount paid to non-controlling interests (72.049.276) -

Net equity effect (56.878.535) -

4. INTEREST IN OTHER ENTITIES

None (31 December 2012 - None).

5. SEGMENT REPORTING

The main operation of the Group is retail and the goods sold are segmented as clothing and non-clothing. Segmentation cannot be made on geographical basis due to the fact that nearly all of the sales are domestic. Group monitors and manages their performance according to gross profit rates. Gross profit rates of the Group are consistent with the consolidated income statement. Group does not follow its asset and liabilities per segments separately.

Units Net salesCost of

goods sold1 January -

Gross profit31 December 2013

% Profitability

Clothing 22.939.806 1.194.222.557 729.680.752 464.541.805 38,90%Non-Clothing 6.027.251 221.436.681 145.863.427 75.573.254 34,13%

Total 28.967.057 1.415.659.238 875.544.179 540.115.059 38,15%

Units Net salesCost of

goods sold1 January -

Gross profit31 December 2012

% Profitability

Clothing 15.301.297 774.842.882 480.674.559 294.168.323 37,96%Non-Clothing 4.279.196 160.248.098 105.639.077 54.609.021 34,08%

Total 19.580.493 935.090.980 586.313.636 348.777.344 37,30%


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6. CASH AND CASH EQUIVALENTS


Cash on hand 2.767.949 2.275.978Cash at banks

-Time deposits 18.291.920 - -Demand deposits 1.380.108 4.312.634

Credit cards receipts 190.653.745 134.456.371

Total 213.093.722 141.044.983

As of 31 December 2013 time deposits represent overnights with interest rates between 6.90% - 7.00%. Group has no blocked deposits (31 December 2012: None).

As of 31 December 2013, the alienation on credit card receivables is TRY 10.214.571 (31 December 2012: None).

As of 31 December 2013, the total amount of insurance on cash and cash equivalents is TRY 73.457.896 (31 December 2012: TRY 63.000.000).

As of 31 December 2013 maturities of cash and cash equivalents are as follows;


Up to 30 days 137.127.087 50.173.529Between 30 - 90 days 75.966.635 90.871.454

213.093.722 141.044.983

7. FINANCIAL ASSETS

None (31 December 2012: None). 8. FINANCIAL LIABILITIES

a. Short term financial liabilities

Bank loans

CurrencyEffective

interest rate Maturity31 December 2013

Balance

Unsecured bank loans (*) TRY - Rotative 3.412.269

3.412.269

(*) As of 31 December 2013, all of the unsecured bank loans represent interest free loans utilised for SGK payments.

CurrencyEffective

interest rate Maturity31 December 2012

Balance

Unsecured bank loans (**) TRY 8%-10,50% Rotative 30.099.310

30.099.310

(**) As of 31 December 2012, TRY 2,690,200 of unsecured bank loans represent interest free loans used for social security payments.


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8. FINANCIAL LIABILITIES (Continued)

b. Current portion of long term borrowings


Current portion of long term bonds 25.031.199 11.280.256Current portion of long term financial liabilities 71.613.880 31.177.289

96.645.079 42.457.545

As of 31 December 2013 as part of general loan agreement guarantees, collateral and mortgages given for financial liabilities are TRY 72.487.901 (31 December 2012: TRY 61.736.000).

c. Long term financial liabilities

Issued marketable securities

Issued bonds31 December 2013 31 December 2012

Long-term bonds 174.352.310 88.748.566

174.352.310 88.748.566

As of 31 December 2013 Group has issued bonds amounting to TRY 200,000,000. Bonds details are as follows;

(TRSCRSIA1516) Consecutive to registering Capital Market Board, consists of TRY 100,000,000 nominal value on 6 November 2012, with a maturity of 36 months, monthly interest payment, principal payment on the maturity date, benchmark Government Debt Securities + 4,50% interest rate bond. As of 31 December 2013 annual accumulated interest rate is determined as 13,77%.

(TRSCRSIA1615) Consecutive to registering Capital Market Board, consists of TRY 100,000,000 nominal value on 6 November 2012, with a maturity of 36 months, once every three month interest payment, principal payment on the maturity date, benchmark Government Debt Securities + 5% interest rate bond. As of 31 December 2013 annual accumulated interest rate is determined as 14,66%.

Bank loans

Currency Effective interest rate Maturity 31 December 2013

Secured credits (*) TRY 9,59% - 12,06%7 March 2015 -

7 September 2016 92.824.846

92.824.846

Currency Effective interest rate Maturity 31 December 2012

Secured credits TRY 8% - 10,50%7 March 2014 -

7 September 2016 101.598.461

101.598.461

(*) Redemption schedule of long term bank loan related with YKM A.Ş. acquisition was updated in January 2014. Had it been updated in 2013, repayment amount of TRY 30 Million paid by the Group in long term would be reclassified to current portion of long term financials liabilities.


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8. FINANCIAL LIABILITIES (Continued)

As of 31 December 2013 and 31 December 2012, the redemption schedule of the long term financial liabilities is as follows:


2014 - 40.998.8152015 62.637.470 33.489.9972016 30.187.376 27.109.649

92.824.846 101.598.461

There are some conditions of contracts about loans used by the Company amounting to TRY 102.142.857 at 31 December 2013. These conditions related to consolidated financial statements of Boyner (2012: solo) are as follows:

a) Ratio of income before interest, depreciation and amortization and tax to debt service will be calculated as of 30 April 2014. That ratio should be minimum 1,05 for the year 2013, 1,25 for the year 2014 and 1,75 for every and each repayment date at and following 31 December 2014 and,

b) Ratio of net debt to income before interest, tax, depreciation and amortization will not exceed 2,5 for the year 2012 ;2 for the year 2013 and 1,5 for each year at and following 31 December 2013 until the final repayment date. It has been complied with the ratio of 2,0 and 2,5 for the years 2013 and 2012, respectively.

9. OTHER FINANCIAL LIABILITIES

None (31 December 2012: None).

10. TRADE RECEIVABLES AND PAYABLES

Trade receivables31 December 2013 31 December 2012

Trade receivables 12.085.082 66.512.679Due from related parties, net (Not 37) 6.155.149 4.092.541Post-dated cheques and notes receivable 117.370 1.583.044

Doubtful receivables 19.002.924 20.343.533

Provision for doubtful receivables (-) (19.002.924) (20.343.533)Unearned credit finance income (185.693) (1.021.433)

18.171.908 71.166.831

The Group’s average collection period is 54 days (31 December 2012: 56 days). Average collection period calculation includes all credit cards receivables.


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10. TRADE RECEIVABLES AND PAYABLES (Continued)

Group provides reserve for doubtful trade receivables on customer basis. Provisions include the amount of receivable which will not be collected from the customers or the non-realizable portion of guarantees obtained against these receivables. The movement of allowance for doubtful receivables in period is as follows:


Beginning of period 20.343.533 380.642Acquisition - 19.501.916Charge for the period 838.745 673.395Collections in the period (765.624) (212.420)Written off in the period (*) (1.413.730) -

Ending of period 19.002.924 20.343.533

(*) Related to doubtful receivables that will not be collected and which are deleted from the accounts.

Aging of provision for doubtful receivables is as follows:


Up to 6 months 265.389 5.129.255More than 6 months 18.737.535 15.214.278

19.002.924 20.343.533

The Group held the following collaterals for trade receivables:


Notes of guarantees 48.513.290 47.130.669Letters of guarantees 36.790.702 15.365.029Mortgages 12.425.000 12.465.000

97.728.992 74.960.698 Trade payables


Trade payables, net 272.593.646 237.678.943Due to related parties, net (Not 37) 40.174.568 20.206.185Notes payable, net 196.392.243 149.567.834Other trade payables 2.059.970 2.875.052

511.220.427 410.328.014

Unearned credit finance expense (8.701.642) (4.755.789)

502.518.785 405.572.225

As of 31 December 2013, the Group’s average payment period is 176 days (31 December 2012: 167 days).


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11. OTHER RECEIVABLES AND PAYABLES

Other current receivable 31 December 2013 31 December 2012

Due from personnel 53.868 68.624Other receivables 386.069 180.807Due from related parties-other (*) (Not 37) 49.855.322 -Deposits and guarantees given - 276.059Other receivables related to acquisition - 4.709.077

50.295.259 5.234.567

Other non-current receivables 31 December 2013 31 December 2012

Due from related parties-other non-current (*) (Not 37) 25.263.158 -Deposits and guarantees given 1.108.523 567.185

26.371.681 567.185

(*) As of 31 December 2013, other receivables from related parties represent receivables from Altınyıldız A.Ş. with an interest rate of 13,55%. The maturities of short and long term receivables are 29 December 2014 and 28 June 2015, respectively.

Short term other payables31 December 2013 31 December 2012

Other payables (**) 19.880.229 -Deposits and guarantees received 4.951 3.916

19.885.180 3.916

Long term other payables 31 December 2013 31 December 2012

Other payables (**) 60.018.270 -

60.018.270 -

(**) Other payables, represent notes payables regarding acquisition of shares of YKM A.Ş. and YKM Pazarlama A.Ş. on 22 October 2013. The maturity of long term payables is 3 April 2017.

12. DERIVATIVE INSTRUMENTS



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13. INVENTORIES


Trade goods 363.335.780 264.131.421Auxiliary materials 2.612.694 162.313Goods in transit 2.046.347 1.626.840Stocktaking differences (-) (1.484.991) (920.000)Provision for impairment of inventory (-) (4.045.401) (5.629.087)

362.464.429 259.371.487

As of 31 December 2013, the total amount of insurance on inventories is TRY 632.000.000. (31 December 2012: TRY 537.623.534).

The movement of provision for impairment of inventory is as follows:

1 January 2013Provision

for the periodProvision released 31 December 2013

Provision for impairment of inventory (5.629.087) (1.082.092) 2.665.778 (4.045.401)

(5.629.087) (4.045.401)

1 January 2012 AcquisitionProvision

for the period 31 December 2013

Provision for impairment of inventory - (6.094.361) 465.274 (5.629.087)

- (5.629.087)

14. PREPAID EXPENSES AND DEFERRED REVENUE

Prepaid expenses

Current prepaid expenses 31 December 2013 31 December 2012

Advances given for inventories 4.236.274 7.409.483Prepaid other expenses (*) 1.858.692 871.514Prepaid insurance expenses 1.031.723 747.276Prepaid rent expenses 47.133 2.795.582

7.173.822 11.823.855

(*) Prepaid other expenses mainly consist of subscription expenses, gift card discounts and royalty expenses of songs played in the stores.


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14. PREPAID EXPENSES AND DEFERRED REVENUE (contunied)

Non – current prepaid expenses

As of 31 December 2013, the Group has long term prepaid expenses amounting to TRY 351.900 (31 December 2012: TRY 364.457).

Deferred revenue

Short-term deferred revenue31 December 2013 31 December 2012

Gift cards in circulation 11.260.980 10.033.491Goods return certificates 5.875.647 5.889.336Advances received 1.134.474 582.480Other 163.338 563.542

18.434.439 17.068.849

Long-term deferred revenue

As of 31 December 2013, Group has no long term deferred income (31 December 2012: 410.506 TL).

15. CONSTRUCTION CONTRACTS


16. INVESTMENT VALUED WITH EQUITY METHOD


17. INVESTMENT PROPERTIES


18. PROPERTY, PLANT AND EQUIPMENT

1 January 2013 Additions Disposals Transfers 31 December 2013CostLand 62.934 - - - 62.934Buildings 2.186.346 - (2.186.346) - -Machinery and equipment 2.363.126 - - - 2.363.126Furniture and fixture 87.680.498 12.890.624 (1.490.224) 1.297.925 100.378.823Vehicles 434.211 - (93.000) - 341.211Leasehold improvements 128.659.877 14.499.638 (1.610.351) 645.443 142.194.607Construction in progress 181.606 2.426.558 - (1.965.927) 642.237

221.568.598 29.816.820 (5.379.921) (22.559) 245.982.938Accumulated depreciationBuildings 17.775 17.776 (35.551) - -Machinery and equipment 2.363.126 - - - 2.363.126Furniture and fixture 38.230.159 12.719.014 (441.903) - 50.507.270Vehicles 61.531 77.588 (20.733) - 118.386Leasehold improvements 56.835.047 11.034.823 (1.382.645) - 66.487.225

97.507.638 23.849.201 (1.880.832) - 119.476.007

Net book value 124.060.960 126.506.931

As of 31 December 2013 total insurance coverage on property, plant and equipment amounts to TRY 261.025.000.


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18. PROPERTY, PLANT AND EQUIPMENT (Continued)

1 January 2012

Final fair value

adjustment Additions Disposals Transfers31 December

2012

Cost

Land - 62.934 - - - 62.934Buildings - 2.186.346 - - - 2.186.346Machinery and equipment 3.648.175 - - (1.285.049) - 2.363.126Furniture and fixture 52.564.354 21.571.868 12.075.397 (818.609) 2.287.258 87.680.498Vehicles 162.386 224.476 262.736 (215.386) - 434.211Leasehold improvements 89.814.031 25.312.523 19.502.163 (7.743.943) 1.775.103 128.659.877Construction in progress 885.951 17.579 3.413.386 - (4.135.311) 181.606

147.074.897 49.375.725 35.253.682 (10.062.988) (72.949) 221.568.598Accumulated depreciation

Buildings - - 17.775 - 17.775Machinery and equipment 3.648.175 - - (1.285.049) - 2.363.126Furniture and fixture 30.625.724 - 8.085.117 (480.681) - 38.230.159Vehicles 148.853 - 70.857 (158.180) - 61.531Leasehold improvements 53.887.686 - 8.950.920 (6.003.559) - 56.835.047

88.310.438 - 17.124.679 (7.927.469) - 97.507.638

Net book value 58.764.459 124.060.960

As of 31 December 2012 total insurance coverage on property, plant and equipment amounts to TRY 204.389.448.

Allocation of depreciation expense is disclosed in Note 30.

The Company does not have any assets obtained through leasing. (31 December 2012: None). As of 31 December 2013, as part of the commercial pledge given related with the loan received amounting to TRY 130 Million, TRY 58.431.770 of mortgage exists on YKM Pazarlama A.Ş. and YKM A.Ş.’s tangible assets (31 December 2012: 63.652.599).


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19. INTANGIBLE ASSETS

1 January 2013 Additions Disposals Transfers31 December

2013Cost

Rights 48.085.884 8.032.926 (110.708) - 56.008.102Favorable rent contracts 67.109.935 - - - 67.109.935Franchise network 19.218.067 - - - 19.218.067Computer programs 13.406.554 1.148.510 (107.849) 22.559 14.469.774

147.820.440 9.181.436 (218.557) 22.559 156.805.878Accumulated depreciation

Rights 13.125.635 3.833.949 (31.152) - 16.928.432Favorable rent contracts 2.236.998 6.710.993 - - 8.947.991Franchise network 427.068 1.281.204 - - 1.708.272Computer programs 12.458.326 722.883 (107.849) - 13.073.360

28.248.027 12.549.029 (139.001) - 40.658.055

Net book value 119.572.413 116.147.823

1 January 2012

Final fair value

adjustment Additions Disposals Transfers31 December

2012

Cost

Rights 37.173.719 664.297 10.247.868 - - 48.085.884Favorable rent contracts - 67.109.935 - - - 67.109.935Franchise network - 19.218.067 - - - 19.218.067Computer programs 12.884.894 - 448.711 - 72.949 13.406.554

50.058.613 86.992.299 10.696.579 - 72.949 147.820.440Accumulated depreciation

Rights 9.357.462 3.768.173 - - - 13.125.635Favorable rent contracts - 2.236.998 - - - 2.236.998Franchise network - 427.068 - - - 427.068Computer programs 11.945.735 512.591 - - - 12.458.326

21.303.197 6.944.830 - - - 28.248.027

Net book value 28.755.416 119.572.413

Allocation of depreciation expense is disclosed in Note 30.


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20. GOODWILL

The Group applied acquisition accounting for YKM A.Ş. and YKM Pazarlama A.Ş. as subsidiaries in line with IFRS 3 “Business Combinations” standard (Note 3). The determination of the fair values of acquired identifiable assets and liabilities is finalized as of 31 December 2013 and temporary fair value amounts are restated in the accompanying financial statements. 21. GOVERNMENT GRANTS


22. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES


Provisions for litigation 2.294.362 1.395.440Provisions for sales returns - 273.239

2.294.362 1.668.679

The movement of short term provisions in period is as follows:

1 December 2013Charge/ (release)

for the periodPayments

in the period31 December

2013

Provisions for litigation 1.395.440 1.116.422 (217.500) 2.294.362Other 273.239 - (273.239) -

1.668.679 1.116.422 (490.739) 2.294.362

1 January 2012 AcquisitionCharge

for the periodPayments

in the period31 December

2012

Provisions for litigation 56.598 1.151.842 187.000 - 1.395.440Other - 281.725 - (8.486) 273.239

56.598 1.433.567 187.000 (8.486) 1.668.679

Letter of guarantees

31 December 2013 31 December 2012Pledges, liens and mortgages given by the Group (PLM)’s

A. Total amount of PLM’s which company gives on behalf of itsown legal entity 81.798.517 84.626.146B. Total amount of PLM’s which Group gives on behalf of associates that are included to full consolidation 697.334 -C. Total amount of PLM’s which Group gives on behalf of third parties to conduct business activities 2.500.000 2.500.000D. Total amount of other PLM’s which are given -i. On behalf of main partner - -ii. Other Group Companies which are not included item B or C

-iii. Third parties which are not covered by item C - -

Total 84.995.851 87.126.146

Percentage of PLM’s given by the Company to the Company’s equities is nill as of 31 December 2013 (nill as of 31 December 2012).


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22. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (Continued)

Legal issues

There are several outstanding lawsuits in favor of or against the Company. Significant portion of these cases are business lawsuits. The Company management evaluates the probable results and financial effects of these cases and accounts for necessary provisions per each reporting period. As of 31 December 2013 the provision amount equals to TRY 2.294.362 (31 December 2012: TRY 1.395.440).

With respect to the acquisition of YKM A.Ş. on 7 September 2012, there were ongoing lawsuits regarding the prevention of the transfer and the registration of the trademark, the determination of the trademark infringement, the determination of the pre-emption rights regarding the shares of the company, the nullity of the share transfer and re-employment, initiated by the minority shareholders. In accordance with share purchase agreement on 22 October 2013, minority shareholders has been transferred shares and waived from legal cases.

Premiums received

According to a protocol signed with a bank, until 1 July 2014, the Company is committed to make the salary payments of the employees through this bank. According to this protocol, if the Company terminates this protocol before the due date, it declares to repay the amount paid by the bank together with the legal interest calculated from the starting date of the protocol until the due date, in cash, as soon as the first written notification from the bank is received.

23. COMMITMENTS

Operational lease commitments

As of 31 December 2013 and 2012, yearly lease liabilities related with stores, which are non-cancellable over one year maturity and not included in the Group’s consolidated financial statements, are as follows:

Operational leasing of stores commitments


Payable within one year 50.520.888 39.877.286Payable within 1-5 years - 46.423

50.520.888 39.923.709

Operational leasing of offices commitments31 December 2013 31 December 2012

Payable within year 1.169.212 1.680.695

1.169.212 1.680.695

Operational leasing of vehicles commitments

Payable within year 1.250.134 1.346.318

1.250.134 1.346.318


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23. COMMITMENTS (Continued)

Minimum operational lease income in the future

As of 31 December 2013 and 31 December 2012, yearly lease payments liabilities related with stores, which are non-cancellable and not included in the Group’s consolidated financial statements, are as follows:


Within 1 year 7.446.519 6.872.875Between 1-5 years 33.202.799 31.816.952More than 5 years 9.153.985 17.986.351

49.803.303 56.676.178

24. EMPLOYEE BENEFITS

a) Short - term


Payables to personnel 6.066.946 5.806.850Social security premiums 3.377.122 2.923.936

9.444.068 8.730.786

Short term provision for employee benefits 31 December 2013 31 December 2012

Unused vacation liability 1.370.563 1.137.658Provision for employee benefits - 2.773.866

1.370.563 3.911.524

As of 31 December 2013 and 2012 the movement of the unused vacation provision and provision for employment termination benefits are as follow:

1 January 2013Charge

for the period Payments 31 December 2013

Unused vacation liability 1.137.658 707.797 (474.892) 1.370.563Provision for employee benefits 2.773.866 - (2.773.866) -

3.911.524 707.797 (3.248.758) 1.370.563

1 January 2012 Acquisitions Payments 31 December 2012

Unused vacation liability - 1.536.222 (398.564) 1.137.658Provision for employee benefits - 2.773.866 - 2.773.866

- 4.310.088 (398.564) 3.911.524


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24. EMPLOYEE BENEFITS (Continued)

b) Long term


Retirement benefit obligation 5.845.788 4.878.799

5.845.788 4.878.799

In accordance with existing social legislation, Group is required to make lump-sum payments to employees whose employment is terminated due to retirement or for reasons other than resignation or misconduct. Such payments are calculated on the basis of 30 days’ pay and limited to a maximum historical TRY 3.438 (31 December 2012 - TRY 3.033) at 31 December 2013.

In the financial statements, Group management accounted for a liability calculated in accordance with IAS 19 (employee benefits) and based upon factors derived using their experience of personnel terminating their services and being eligible to receive retirement pay and discounted by using the current market yield at the balance sheet date on government bonds. All actuary gain and losses are recognized in consolidated comprehensive income statement.

Accordingly, the principal actuarial assumptions used as of 31 December 2013 and 31 December 2012 are as follows:


Discount rate 9,80% 8,75%Expected rate of salary/limit increases 6,00% 5,00%

The movements of provision for employment termination benefits in the period are as follows:



Beginning of the period 4.878.799 2.873.296Service costs 1.201.124 1.485.764Interest cost 531.491 1.046.504Payments made during the period (3.610.515) (2.050.893)Gain or loss on measurement 2.844.889 1.524.128

Ending of the period 5.845.788 4.878.799

Impact of 1 % change of discount rates used is as follows:

Increase Decrease

Impact for charge for the year 2013 586.308 (707.172)

586.308 (707.172)

Impact of 1 % change of salary increases is as follows:

Increase Decrease

Impact for charge for the year 2013 727.559 (610.618)

727.559 (610.618)


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25. IMPAIRMENT OF ASSETS


Provision for doubtful receivables (19.002.924) (20.343.533)Provision for impairment of inventory (4.045.401) (5.629.087)

(23.048.325) (25.972.620) 26. OTHER ASSETS AND LIABILITIES

The details of the other current assets are as follows:


Recoverable value added taxes 38.490.923 15.664.004Job advances 236.277 220.747Income accruals 131.865 25.506Other miscellaneous current assets 312.708 409.796

39.171.773 16.320.053

The detail of other current liabilities is as below:


Taxes and funds payable 3.403.203 3.651.807Other 139.520 16.172

3.542.723 3.667.979

27. EQUITY

a. Paid-in capital

As of 31 December 2013 and 2012 the share capital of the Group constitutes of 9,207,000,000 unit (lot) shares which is issued and Kr 1 value per each. The detail of shareholder structure of the Group is summarized in Note 1.

b. Shares premium

The Group has share premium in the amount of TRY 227.203 in relation to the share capital increases in the past years.

c. Restricted reserves

As of 31 December 2013 and 2012, the Company has legal reserves amounting to TRY 232.884.

d. Retained earnings

The legal reserves consist of first and second legal reserves, in accordance with the Turkish Commercial Code (TCC). The Turkish Commercial Code (TCC) stipulates that the first legal reserve is appropriated out of net profits at the rate of 5% per annum, until the total reserve reaches %20 of the Company’s historical paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the historical paid-in share capital. According to TCC, the legal reserves are only available to net-off losses unless they exceed 50% of the historical paid-in share capital otherwise they are not allowed to be used for other purposes.


105





27. EQUITY (Continued)

Listed companies are subject to dividend requirements regulated by the CMB as follows:

In accordance with the Capital Market Board Communiqué IV, Nr: 27, article 5th, in the listed companies, the first dividend shall not be below %20 of the distributable profit deducted the accumulated losses Based on their decisions taken in the ordinary general boards, listed joint-stock companies have their right to distribute dividends in cash, in share certificates, in partial distribution within cash or share certificates while retaining a portion in the partnership.

Based on the decision of CMB, distributable profit-calculated upon the regulations of CMB related with the dividend distribution- shall be fully distributed if the amount is adequate to be provided by the distributable profits with respect to the statutory books, otherwise, all of the net distributable amount in the statutory books shall be distributed. No profit distribution shall be made in the case of tax loss is met in either local books or the financial statements prepared in accordance with CMB regulations..

Based on the decision of CMB dated 27 January 2010, it is decided not to determine any minimum dividend payment distribution requirement for publicly held companies.

Inflation adjustments to issued capital and historical amount of extraordinary reserves can be used for in kind capital increase, dividend distribution in cash or the net loss deduction. In case inflation adjustment to issued capital is used as dividend distribution in cash, it is subject to corporation tax..

As of 31 December 2013 and 31 December 2012, reserves, prior year losses and current year gain/ (loss) in the statutory accounts of Boyner are as follows:


Paid in share capital 92.070.000 92.070.000Share premium 227.203 227.203Legal reserve 232.884 232.884Extraordinary reserves 902.007 902.007Accumulated loss, net (5.780.433) (13.783.018)Net profit for the year 37.943.568 8.002.585

e. Other comprehensive income not to be reclassified to profit or loss

Revaluation funds that will not be reclassified to income statement and directly transferred to equity as follows:

Gain/loss on revaluation and reclassification 31 December 2013 31 December 2012

Provision for employment termination benefits - actuarial gain/(loss) (3.918.162) (1.642.251)

(3.918.162) (1.642.251)

The movement of revaluation funds was presented in comprehensive income statement and change in equity statement.

Provision for employment termination benefits actuarial gain / loss fund

The amendment in IAS-19 “Employee Benefits” does not permit the actuarial gain /loss considered in the calculation of provision for employment termination benefits to be accounted for under the statement of income. The gains and losses arising from the changes in the actuarial assumptions have been accounted for by “Gain/loss on Revaluation and Reclassification” under the equity.

The fund of actuarial gains/ (losses) regarding the employment termination benefits is not reclassified under profit and loss.


106





27. EQUITY (Continued)

f. Non-controlling interest

The non-controlling shareholders’ interests are deducted from all equity items including the paid/issued share capital and presented separately in the consolidated balance sheet as non-controlling interests. The non-controlling shareholders’ interests in the profit and loss of the consolidated subsidiaries are separately presented in the statement of income as non-controlling interests after the income for the period.

Transactions with non-controlling interests are disclosed in Note 3.

28. REVENUE AND COST OF SALES

Revenue (net)



Domestic sales 1.558.432.276 1.033.284.611Export sales 204.815 327.827Other sales - 897.148Sales return (-) (130.162.778) (82.676.966)Sales discounts (-) (12.815.075) (16.741.640)

1.415.659.238 935.090.980

The details of the cost of goods sold are as follows:



Trade goods at the beginning of the period (259.371.487) (146.176.081)Purchases in period (981.361.778) (633.518.573)Acquisitions - (66.928.705)Stocktaking difference 2.724.657 938.236Trade goods at the end of the period 362.464.429 259.371.487

(875.544.179) (586.313.636)


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29. GENERAL ADMINISTRATIVE AND MARKETING EXPENSES

a) Marketing expenses



Personnel expenses 115.332.737 73.209.718Rent expenses 98.218.128 66.431.677Selling, commission and premium expenses 80.350.565 42.605.464Outsourced expenses 50.884.806 28.291.944Depreciation and amortization expenses 29.726.083 18.776.213Shopping mall expenses 20.960.286 14.032.220Advertisement expenses 16.217.003 11.951.716Other expenses 3.358.357 5.564.478

415.047.965 260.863.430

b) General and administrative expenses



Personnel expenses 40.440.022 31.405.902Outsourced expenses 11.341.076 7.400.561Rent expenses 10.697.494 5.809.179Parent company service charge 7.572.965 3.344.281Depreciation and amortization expenses 6.672.147 5.293.512Travel expenses 1.749.325 1.058.870Litigation provisions 1.116.422 1.338.842Provision for employment termination benefit 324.032 400.821Other expenses 3.290.498 2.751.492

83.203.981 58.803.460

30. OPERATING EXPENSES BY NATURE

Depreciation and amortization expenses



Selling and marketing expenses 29.726.083 18.776.213General and administrative expenses 6.672.147 5.293.512

36.398.230 24.069.725

Personnel expenses



Selling and marketing expenses 115.332.737 73.209.718General and administrative expenses 40.440.022 31.405.902

155.772.759 104.615.620


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31. OTHER OPERATING INCOME / (EXPENSES)

a) Other operating income



Due date income 16.653.631 9.957.741Rediscount income 14.053.064 11.302.291Brand license income 11.032.969 9.397.791Vendor company participation fees 1.870.787 9.214.469Foreign exchange income 1.723.951 589.931Commission income 1.578.700 842.376Decoration participation income 1.367.700 2.045.547Information technologies service income 803.533 775.110Other 3.824.339 4.269.241

52.908.674 48.394.497

b) Other operating expense



Due date expense 25.550.852 12.760.734Rediscount expense 7.579.355 10.159.438Stocktaking difference 2.724.656 1.258.044Brand license usage rights 1.715.530 683.405Services received related to acquisitions 1.396.287 10.956.910Provision for doubtful receivables 838.745 673.395Foreign exchange losses 360.098 685.216Other 4.621.132 2.883.326

44.786.655 40.060.468

32. INCOME AND EXPENSES FROM INVESTING ACTIVITIES

a) Income from investing activities



Gain on sales of tangible assets 653.125 -

b) Expense from investing activities



Loss on sales of tangible assets 1.782.229 2.208.034


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33. FINANCIAL INCOME AND EXPENSES

a) Financial income



Due date income 1.738.233 -Interest income 1.037.436 129.023

Total 2.775.669 129.023

b) Financial expense



Interest and foreign expense on loans 19.442.064 11.184.508Bond interest expense 11.440.659 4.888.321Commissions 3.428.346 2.505.624Credit card receivables early collection expenses 2.796.843 1.899.575Late charge expense 1.597.560 -Interest cost regarding employment termination benefits 531.493 1.046.504

39.236.965 21.524.532

34. ASSET OR LIABILITY HELD FOR SALE AND DISCONTINUED OPERATIONS

As of 31 December 2013 and 2012, Group does not have any assets or liabilities held for sale and discontinued operations.

35. INCOME TAX ASSETS AND LIABILITIES

The Company and its subsidiaries in Turkey are subject to taxation in accordance with the tax regulations and the legislation effective in the countries in which the Group operates.

In Turkey, the corporation tax rate is 20%. Corporate tax returns are required to be filed by the twenty-fifth day of the fourth month following the balance sheet date and taxes must be paid in one installment by the end of the fourth month. The tax legislation provides for a temporary tax of 20% to be calculated and paid based on earnings generated for each quarter. The amounts thus calculated and paid are offset against the final corporate tax liability for the year.

Tax legislation in Turkey does not allow the companies and their subsidiaries to fill consolidated tax declaration. Thus tax provisions reflected to the financial statement are calculated separately.



Current tax provision 7.389.716 6.115.187Prepaid taxes and funds (-) (4.361.822) (4.221.075)

Tax provision in the balance sheet 3.027.894 1.894.112


110





35. INCOME TAX ASSETS AND LIABILITIES (Continued)

As of 31 December 2013 and 2012 tax expenses in the comprehensive consolidated income statement as follows:



Provision for Corporate tax for current period (10.183.428) (6.115.187)Deferred tax income/expense 766.792 (103.286)

Tax charge in the statement of income (9.416.636) (6.218.473)

Reconciliation of the total tax amount and the pre-tax profit for the period is as follows:



Profit before tax 12.394.731 13.840.940Corporate tax at 20% (2.478.946) (2.768.188)Disallowable expense (2.330.863) (3.328.173)Prior year losses not that deferred tax asset was accounted for (2.406.617) -Other (1.972.810) (122.112)

Total tax expense (9.189.236) (6.218.473)

Deferred tax assets and liabilities

As of 31 December 2013 and 2012, allocation of deferred tax (liability)/asset calculated over temporary differences subject to deferred taxation are summarized below:

31 December 2013 31 December 2012Cumulative temporary

differencesAsset/

(liability)

Cumulative temporary

differencesAsset/

(liability)

Property, plant and equipment (107.437.727) (21.730.034) (108.926.439) (21.955.046) Discounting on trade receivables and payables, net (11.724.997) (2.344.999) (3.272.607) (654.521)Inventories 12.824.543 2.564.909 16.322.268 3.264.454Provision for employee benefits 7.224.395 1.444.879 8.790.322 1.758.064Financial liabilities (259.115) (51.823) (116.914) (23.383)Doubtful receivable provision 3.862.484 772.497 2.565.020 513.004Litigation provisions 1.220.867 244.173 1.338.842 267.768Sales return provisions - - 273.239 54.648Accumulated tax losses 24.447.181 4.889.436 2.411.648 482.330Debt allowances 874.708 174.942 429.695 85.940Unused gift card provisions - - 1.787.832 357.566Sales premiums - - 578.515 115.703Prepaid income/loss, net - - 667.701 133.541Other (3.715) (742) - -

Deferred income tax asset / (liability), net (68.971.376) (14.036.762) (77.150.878) (15.599.932)

Deferred income tax assets 7.147.344 5.631.359Deferred income tax liability (21.184.106) (21.231.291)

(68.971.376) (14.036.762) (77.150.878) (15.599.932)


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35. INCOME TAX ASSETS AND LIABILITIES (Continued)

The movement of deferred income tax liabilities as of 31 December 2013 and 2012 is as follows:


Beginning of the period (15.599.932) (1.220.755)Acquisitions - 5.916.590Tax income / (expense) of period 994.192 (103.286)Amount associated with equity 568.978 304.826Deferred income tax asset/liability net, acquired through merger - (20.488.493)

End of the period (14.036.762) (15.599.932)

Deferred income tax assets and liabilities are offset as legally enforceable right to set off current tax assets against current tax liabilities exists and there is intention of simultaneous recoverability of current tax assets and current tax liabilities.

At each balance sheet date, unrecognized deferred income tax asset is reassessed. Deferred income tax asset which is not recognized on prior year has reflected to financial statements regarding to probability of future taxable profit permits the use of deferred tax assets.

In evaluating the possibility of obtaining taxable profit which will offset unused tax losses;

- Whether or not there are taxable temporary differences which will lead the Company to benefit from unused tax losses,

- Whether or not it is possible to have taxable profit before the unused tax losses expire,- Whether or not it is possible for the company to have tax planning advantages to result in taxable profit during

the period when the unused tax losses can be used has been considered - As of 31 December 2013, the Company accounted for deferred tax asset over the unused tax losses as its

recoverability can be foreseen. YKM A.Ş.’s unused tax losses and expiry dates for deduction are as follows:

Unused tax losses

Deadline for deduction

2013 22.035.533 31 December 20182012 2.352.181 31 December 20172011 59.467 31 December 2016

24.447.181


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36. EARNINGS PER SHARE

Earnings per share are determined by dividing net income by the weighted average number of shares that has been outstanding at the related period. Calculation is as follows:

Net income/(loss) per share



Earnings per ShareAverage number of shares existing during the period (total value) 9.207.000.000 9.207.000.000Net profit for the period attributable to equity holders of the parent 10.882.177 7.577.092

Earnings per share 0,00118 0,00082

37. RELATED PARTY DISCLOSURES

Main shareholders of Boyner are Altınyıldız A.Ş. and Boyner Holding, which is the parent company of Altınyıldız A.Ş.. For consolidated financial statements, the balances of Boyner Holding and their affiliates and subsidiaries along with other Boyner Holding companies are disclosed as separate items and these companies are described as related parties.

The Company’s related party balances are as below:

31 December 2013 31 December 2012Trade

ReceivablesNon-trade

receivablesTrade

ReceivablesNon-trade

receivables

Due from related partiesBeymen(2) 3.936.478 - 2.658.880 -Fırsat Elektronik(2) 2.203.332 - 1.401.535 -Ran Konfeksiyon(2) 14.727 - 32.126 -Boyner Bireysel Ürünler Satış ve Pazarlama A.Ş. (Boyner Bireysel)(2) 612 - - -Altınyıldız A.Ş.(1) - 75.118.480 - -

6.155.149 75.118.480 4.092.541 -

31 December 2013 31 December 2012Trade

PayablesNon-trade

PayablesTrade

PayablesNon-trade

Payables

Due to shareholdersBoyner Holding(1) 915.713 - 1.092.988 -Altınyıldız(1) 278.205 - 181.647 -

Due to related partiesAy Marka Mağazacılık A.Ş. (Ay Marka)(2) 31.871.416 - 15.133.510 -BR Mağazacılık(2) 5.339.645 - 2.600.714 -Alsis Sigorta Acenteliği A.Ş (Alsis)(2) 850.099 - 507.666 -Beymen(2) 684.766 - 117.865 -Altınyıldız Tekstil ve Konfeksiyon A.Ş. (Altınyıldız Tekstil)(2) 234.206 - - -Fırsat Teknoloji A.Ş.(2) 518 - - -Benetton Giyim San. ve Tic. A.Ş (Benetton)(3) - - 436.297 -Sağlık Tekstil(2) - - 94.932 -Bofis(3) - - 35.481 -Boyner Bireysel(2) - - 5.085 -

40.174.568 - 20.206.185 -

(1) Company shareholders (disclosed as summery of short and long term. Note 11)(2) Other related parties(3) As of 1 January 2013, not listed as related party.


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37. RELATED PARTY DISCLOSURES (Continued)

The detail of transactions with related parties is as below:



Service purchasesBoyner Holding(1) (*) 5.921.308 3.120.340Alsis Sigorta(2) 2.789.016 2.132.588Ay Marka(2) 775.160 -BYN Gayrimenkul(2) 432.770 232.902Fırsat Elektronik(2) 371.092 -Altınyıldız Tekstil(2) 367.978 -Citibank N.A(2) 85.739 223.941Boğaziçi Yatçılık(2) 28.200 27.200Boyner Bireysel(2) 1.398 56.099Bofis(3) - 452.749Other (**) - 619.125

Goods purchasesAy Marka(2) 28.041.355 32.402.946Beymen(2) 12.484.529 12.026.931BR Mağazacılık(2) 11.772.282 6.060.914Altınyıldız(1) 522.832 -Boyner Holding(1) 23.160 27.910Fırsat Elektronik(2) 6.032 -Sağlık Tekstil(2) - 354.205Benetton(3) - 20.625

Interest/ other expensesBoyner Holding(1) 1.918.901 295.652Beymen(2) 22.970 144.252Altınyıldız Tekstil 296.951 312.794

(1) Company shareholders(2) Other related parties (3) As of 1 January 2013, not listed as related party.

(*) Represents the consultancy fees charged due to the legal and financial consultancy and resources provided by Boyner Holding.

(**) Rent expenses paid to Neylan Dinler, Latife Boyner, Lerzan Boyner, Z. Leman Halulu.


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37. RELATED PARTY DISCLOSURES (Continued)

1 January- 31 December 2013

1 January- 31 December 2012

Goods salesFırsat Elektronik(2) 3.751.050 2.870.057Beymen(2) 2.258.712 887.441Ran konfeksiyon(2) 504.097 652.462Boyner Holding(1) 139.381 95.638Boyner Bireysel(2) 5.130 16.991Ay Marka 1.140 -

Service salesAltınyıldız A.Ş. 966.911 -

Other revenuesBeymen(2) 7.573.145 6.209.644Ay Marka(2) 3.481.232 8.135.110Boyner Holding(1) 357.776 526.590Fırsat elektronik(2) 100.550 -BR Mağazacılık(2) 39.004 24.756Sağlık Tekstil - 285Benetton(2) - 1.602

(1) Company shareholders(2) Other related parties (3) As of 1 January 2013, not listed as related party

As of 31 December 2013 and 2012, the Group does not have any doubtful receivables due from related parties.

Director’s remuneration and defined contribution/benefit plan

As of 31 December 2013, the total of benefits and salaries provided to the executive members of the Group management are TRY 6.642.905 (31 December 2012: TRY 4.595.194). Related social security premiums paid amount to TRY 131.165 (31 December 2012: 90.494). As of 31 December 2013 and 2012 there has been no employment termination benefits paid to the top management.

38. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

Group’s principal financial instruments comprise of bank borrowings, cash and short-term deposits. The main purpose of these financial instruments is to raise financing for the Group’s operations. Group has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations.

The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. Group management reviews these risks as summarized below. Group also monitors the market price risk arising from all financial instruments.

Foreign currency risk

Foreign currency risk occurs due to the Group liabilities which are denominated in mostly USD and rarely in EURO and GBP.

The Group also has transactional currency exposures. Such exposures arise from sales or purchases or borrowings by the Group in currencies other than the Group’s functional currency.


115





38. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (Continued)

The Group’s net foreign currency position as of 31 December 2013 and 2012 are approximately, TRY 3.810.316 and TRY 2.999.105 long (asset) respectively.

Overall;31 December 2013

(TRY Amount)31 December 2012

(TRY Amount)

A. Foreign currency assets 3.900.727 3.772.240B. Foreign currency liabilities (90.411) (773.135)

Foreign currency position (A+B) 3.810.316 2.999.105

The foreign currency position of the Group is as follows:

Foreign currency statement

31 December 2013TRY equivalent

(Functional currency) US Dollars EURO GBP

1. Trade receivables - - - -2a. Monetary financial assets (cash, bank accounts included) 397.483 133.150 37.639 7902b. Non-monetary financial assets - - - -3. Other 2.719.199 1.137.570 99.194 -4. Current assets (1+2+3) 3.116.682 1.270.720 136.833 7905. Trade Receivables 784.046 - 267.000 -6a. Monetary financial assets - - - -6b. Non-monetary financial assets - - - -7. Other - - - -8. Non-current assets (5+6+7) 784.046 - 267.000 -9. Total assets (4+8) 3.900.728 1.270.720 403.833 79010. Trade payables 90.411 16.214 16.852 1.80011. Financial liabilities - - - -12a. Monetary other liabilities - - - -12b. Non-monetary other liabilities - - - -13. Short term liabilities (10+11+12) 90.411 16.214 16.852 1.80014. Trade payables - - - -15. Financial liabilities - - - -16 a. Monetary other liabilities - - - -16 b. Non-monetary other liabilities - - - -17. Long term liabilities (14+15+16)18. Total liabilities (13+17) 90.411 16.214 16.852 1.80019. Net assets/(liabilities) position of off-balance sheet derivative instruments (19a-19b) - - - -19a. Total hedged asset amount - - - -19b. Total hedged liability amount - - - -20. Net foreign currency asset/ (liability) position (9-18+19) 3.810.316 1.254.506 386.981 (1.010)21. Monetary items net foreign currency asset /(liability) (IFRS 7.B23) (=1+2a+5+6a-10-11-12a-14-15-16a) 1.091.118 116.936 287.787 (1.010)22. Total fair value of financial instruments used for foreign currency hedging (Note 7) 205.828 109.206 - -23. Export 22.141.009 11.219.127 - -


116






Foreign currency statement

31 December 2012TRY equivalent

(Functional currency) US Dollar EURO GBP

1. Trade receivables - - - -2a. Monetary financial assets (cash, bank accounts included) 898.088 471.168 23.325 1.1602b. Non-monetary financial assets - - - -3. Other 2.481.418 890.769 379.952 -4. Current assets (1+2+3) 3.379.506 1.361.937 403.277 1.1605. Trade Receivables 392.734 - 167.000 -6a. Monetary financial assets - - - -6b. Non-monetary financial assets - - - -7. Other - - - -8. Non-current assets (5+6+7) 392.734 - 167.000 -9. Total assets (4+8) 3.772.240 1.361.937 570.277 1.16010. Trade payables 164.669 28.872 43.254 4.00011. Financial liabilities - - - -12a. Monetary other liabilities 608.466 - 258.734 -12b. Non-monetary other liabilities - - - -13. Short term liabilities (10+11+12) 773.135 28.872 301.988 4.00014. Trade payables - - - -15. Financial liabilities - - - -16 a. Monetary other liabilities - - - -16 b. Non-monetary other liabilities - - - -17. Long term liabilities (14+15+16) - - - -18. Total liabilities (13+17) 773.135 28.872 301.988 4.00019. Net assets/(liabilities) position of off-balance sheet derivative instruments (19a-19b) - - - -19a.Total hedged asset amount - - - -19b.Total hedged liability amount - - - -20. Net foreign currency asset/ (liability) position (9-18+19) 2.999.105 1.333.065 268.289 (2.840)21. Monetary items net foreign currency asset /(liability) (IFRS 7.B23) (=1+2a+5+6a-10-11-12a-14-15-16a) 517.687 442.296 (111.663) (2.840)22. Total fair value of financial instruments used for foreign currency hedging (Not 7) - - - -23. Export 326.464 183.535 - -24. Import 11.513.278 6.450.743 - -


117






The following table demonstrates the sensitivity against a change of 10%, on the Company’s income before tax:

Foreign currency sensitivity analysis statement

Gain/loss Appreciation of

foreign currency

31 December 2013 Gain/loss

Depreciation of foreign currency

When 10% appreciation of USD against TRY:

1- USD net assets/ liabilities 267.749 (267.749)2- Amount hedged for USD risk (-)3- USD net effect (1+2) 267.749 (267.749)

When 10% appreciation of Euro against TRY:

4- Euro net assets/ liabilities 113.637 (113.637)5- Amount hedged for Euro risk (-)6- Euro net effect (4+5) 113.637 (113.637)

10% appreciation of the other foreign currency against TRY:

7- Other foreign net assets/ liabilities (355) 3558- Amount hedged for other foreign currency risk (-)9- Net effect of other foreign currency assets (7+8) (355) 355

Total (3+6+9) 381.031 (381.031)

Foreign currency sensitivity analysis statement

Gain/loss Appreciation of

foreign currency

31 December 2012 Gain/loss

Depreciation of foreign currency

When 10% appreciation of USD against TRY:

1- USD net assets/ liabilities 237.632 (237.632)2- Amount hedged for USD risk (-) - -3- USD net effect (1+2) 237.632 (237.632)

When 10% appreciation of Euro against TRY:

4- Euro net assets/ liabilities 63.094 (63.094)5- Amount hedged for Euro risk (-) - -6- Euro net effect (4+5) 63.094 (63.094)

10% appreciation of the other foreign currency against TRY:

7- Other foreign net assets/ liabilities (815) 8158- Amount hedged for other foreign currency risk (-) - -9- Net effect of other foreign currency assets (7+8) (815) 815

Total (3+6+9) 299.911 (299.911)


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Price risk

Price risk is a combination of foreign currency risk, interest rate risk and market risk. Group naturally manages its price risk by comparing the same foreign currency denominated receivable and payables and assets and liabilities bearing interest. Group closely monitors its market risk by analysing the market conditions and using appropriate valuation methods.

Interest rate risk

Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. Group manages interest rate risk by using natural hedges that arise from offsetting interest rate of assets and liabilities and aims to protect against liquidity risk by using derivative financial instruments.

Interest position statement 31 December 2013 31 December 2012

Fixed interest financial instruments

Financial liabilities 3.412.269 30.099.310

Variable interest financial instruments

Financial liabilities 363.822.235 232.804.572

Effect on income before taxInterest increase 31 December 2013 31 December 2012

0,5% 158.852 116.402

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Group attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counterparties, and continually assessing the creditworthiness of the counterparties.

Most of the sales of the Group are realised through credit cards of banks and remaining part is realized through cash and other instruments. The responsibility to collect receivables from final consumers belongs to the banks that issued the credit cards and there is no collection risk for the Group. The respondent of the Group for that card receivables are the related banks. In relation to the sales, other the ones made through credit cards or with cash, Group obtains guarantees if deemed necessary.


119






31 December 2013 ReceivablesTrade receivables Other receivables

Related party

Other party

Related party

Other party

Deposits in bank

Derivative instruments Other

Maximum credit risk exposures of report date (A+B+C+D+E) (1) 6.155.149 12.016.759 75.118.480 439.937 19.672.028 - -- Protected part of maximum credit risk by indemnity,

etc. (2) 851.100 - -

A. Net book value of financial assets which are not

overdue or non impaired 6.155.149 11.970.410 75.118.480 439.937 19.672.028 - -

* The part under guarantee with collateral etc. - 804.751 - - - - -

B. Net book value of financial assets which will be

deemed as overdue or impaired if the conditions are

not renegotiated. - 46.349 - -

* The part under guarantee with collateral etc. - 46.349 - - - - -

C. Net book value of assets which are overdue but not

impaired assets - - - - - - -

- Overdue (gross book value) - - - - - - -

- Net book value’s part under the guarantee with

collateral etc. - - - - - - -

- The part under guarantee with collateral etc. - - - - - -

D. Net book value of impaired assets - - - - - - -

- Overdue (gross book value) - 19.002.924 - - - - -

- Impairment (-) - (19.002.924) - - - - -

- Protected part of maximum credit risk by indemnity,

etc - - - - - - -

- Not overdue (gross book value) - - - - - - -

- Impairment (-) - - - - - - -

- Protected part of net value by indemnity, etc - - - - - - -

E. Factors including off balance sheet credit risk - - - - -

31 December 2012Receivables

Trade receivables Other receivablesRelated

partyOther party

Related party

Other party

Deposits in bank

Derivative instruments Other

Maximum credit risk exposures of report date (A+B+C+D+E) (1) 4.092.541 67.074.290 - 5.234.567 4.312.634 - -- Protected part of maximum credit risk by indemnity,

etc. (2) - 27.571.502 - - - - -A. Net book value of financial assets which are not

overdue or non impaired 4.092.541 67.074.290 - 5.234.567 4.312.634 - -B. Net book value of financial assets which will be

deemed as overdue or impaired if the conditions are

not renegotiated.- - - - - - -

C. Net book value of assets which are overdue but not

impaired assets- Under guarantee - - - - - - -D. Net book value of impaired assets - (20.343.533) - - - - -- Overdue (gross book value) - 20.343.533 - - - - -- Impairment (-) - - - - - - -- Protected part of maximum credit risk by indemnity, - - - - - - -- Not overdue (gross book value) - - - - - - -- Impairment (-) - - - - - - -- Protected part of net value by indemnity, etc - - - - - - -E. Factors including off balance sheet credit risk - - - - - - -

(1) When determining the amount, taken guaranties and factors creating increase in loan reliability are not considered.(2) Guaranties consist of guarantee note, guarantee cheques and Direct Debiting System (DDS) balances taken from clients.


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Collaterals for the trade receivables that are past due but not impaired are as stated below:


1-30 days overdue 46.349 -1-3 months overdue - -3-12 months overdue - -1-5 years overdue - -

Total overdue receivables 46.349 -

The part secured with guarantee (-) 46.349 -

Liquidity risk

Liquidity risk is the risk that an entity will be unable to meet its net funding requirements. The risk is mitigated by matching the cash in and out flow volume supported by committed lending limits from qualified credit institutions.

The breakdown of financial assets and liabilities according to their maturities is disclosed considering the period from balance sheet date to due date period. Financial assets and liabilities that have no certain due date are presented as more than one year. In the liquidity table, breakdown of non- derivative financial liabilities according to their maturities is shown by considering the elapsed time between the balance sheet date and the maturity date defined written and orally in the contract and also contractual undiscounted payments are considered. For the derivative financial liabilities, maturity is used as in the liquidity management of the entity.

31 December 2013

Expected (or maturities in accordance with agreement)maturities Book value

Total cash outflow in

accordance with

agreement (=I+II+III+IV)

Less than 3 months (I)

Between 3-12 months (II)

Between 1-5 years (III)

More than 5 years (IV)

Non derivative financial liabilitiesFinancial liabilities 367.234.504 455.986.649 32.132.839 73.236.883 350.616.928 -Trade payables 502.518.785 511.730.796 371.956.240 138.592.899 1.181.657 -Other liabilities 79.903.450 100.000.000 20.000.000 - 80.000.000 -

31 December 2012

Expected (or maturities in accordance with agreement)maturities Book value

Total cash outflow in

accordance with

agreement (=I+II+III+IV)

Less than 3 months (I)

Between 3-12 months (II)

Between 1-5 years (III)

More than 5 years (IV)

Non derivative financial liabilitiesFinancial liabilities 262.903.882 332.605.007 32.999.776 42.780.376 256.824.855 -Trade payables 403.607.706 408.733.711 408.733.711 - - -


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Capital management

In the capital management, objectives of the Group are maximized shareholder value, providing benefits to stockowners, keeping Group operations ongoing in order to decrease capital cost.

Group follows up the liability-capital rate in the capital management in parallel with other companies in the sector. This rate is calculated by dividing net liability by total capital.


Trade and financial liabilities 869.753.289 668.476.107Less: Cash and cash equivalents (Note 6) (213.093.722) (141.044.983)

Net liability 656.659.567 527.431.124

Total equity 58.137.878 129.257.570

Liability / capital rate 11,29 4,08

39. FINANCIAL INSTRUMENTS (FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES)

Group has determined estimated fair values of financial instruments with the help of existing market information and appropriate evaluating methods. However, evaluating market knowledge and estimating fair values, requires interpretation. In conclusion, these estimations may not be the real indicators of the obtainable amounts that can be provided from current market transaction by the Group.

The fair values of financial assets and liabilities carried at discounted cost calculated with cost at financial statements or efficient interest method:

Financial assets -The fair values of certain financial assets carried at cost are considered to approximate their respective carrying values due to their short-term nature and due to not subject to significant credit risk. The fair values of financial assets carried at cost are considered to approximate their respective carrying values after deducting doubtful receivable allowance.

Financial liabilities - Trade payables and other short term monetary liabilities are considered to approximate their respective carrying values due to their short-term nature. Bank loans are presented with their discounted cost and transaction costs are added to historical cost. Since interest rate of the long term bank loans denominated in USD are updated by considering changing market conditions, these loans are supposed to be carried as fair value. Short term and fixed interest rate loans denominated in TRY are also supposed to be presented as fair value due to short maturity.

As of 31 December 2013 and 31 December 2012, there are no financial instruments valued at fair value.

40. EVENTS AFTER THE REPORTING PERIOD

As per the decision of the Board of Directors of the Company dated 27 January 2014, it has been decided to renew the registered capital due to termination of 5 year period and to increase the registered capital from TRY 100 Million to TRY 250 Million. It has also been decided that the new registered capital will be valid for the years 2014-2018 and will be presented for approval to General Assembly.

41. OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE FINANCIAL STATEMENTS OR OTHER ISSUES REQUIRED FOR THE CLEAR UNDERSTANDING OF FINANCIAL STATEMENTS

None.

Our Strength iS Our CuStOmerS

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ANNUAL REPORT 2013


our strength is our customers - boyner · 2014-10-20 · our strength is our customers boyner...

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