Vestel Elektronik Touching the · PDF fileElektronik, have been trading on the BİST under the...

2015 ANNUAL REPORT

Vestel Elektronik

Touching the Future

CONTENTS

2 SUMMARY FINANCIAL AND OPERATIONAL INDICATORS 4 RATINGS, SHAREHOLDER STRUCTURE AND VESTEL

SHARES8 HIGHLIGHTS OF 2015 14 AWARDS RECEIVED IN 201518 PARTICIPATION IN FAIRS IN 201520 CHAIRMAN’S MESSAGE24 BOARD OF DIRECTORS 26 INTERVIEW WITH THE CHIEF EXECUTIVE OFFICER34 EXECUTIVE COMMITTEE38 VESTEL IN BRIEF40 VESTEL’S MAIN STRENGTHS 41 VESTEL’S MANUFACTURING POWER: VESTEL CITY44 VESTEL’S STRATEGY AND REALIZATIONS IN 201546 ZORLU GROUP50 VESTEL R&D: LEADING TECHNOLOGIES FOR

TOMORROW’S WORLD58 OFFERING A UNIQUE CUSTOMER EXPERIENCE IN SALES

AND AFTER-SALES SERVICES 64 VESTEL LED LIGHTING65 VESTEL SAVUNMA66 VESTEL VENTURES68 SUSTAINABILITY AND VESTEL: TODAY, TOMORROW,

FOREVER74 FINANCIAL INFORMATION AND REPORTS76 RISKS AND ASSESSMENT OF THE BOARD OF DIRECTORS79 INTERNAL AUDIT DEPARTMENT AND ITS ACTIVITIES 80 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE

REPORT99 BOARD OF DIRECTORS’ EVALUATION REGARDING THE

BOARD COMMITTEES100 AGENDA FOR THE 2015 ORDINARY GENERAL ASSEMBLY

MEETING104 DIVIDEND DISTRIBUTION POLICY105 CONCLUSION SECTION OF THE AFFILIATION REPORT 106 STATEMENT OF THE INDEPENDENCE BY THE

INDEPENDENT BOARD MEMBER CANDIDATES 108 STATEMENT OF RESPONSIBILITY109 CONSOLIDATED FINANCIAL STATEMENTS AND

AUDITOR’S REPORT168 INVESTOR INFORMATION

Vestel: A global manufacturerOne of the top 3 television manufacturers and one of the top 10 white goods manufacturers in Europe, the leader in the Turkish TV market and one of the

top 3 manufacturers of white goods in Turkey

Vestelcontinues to bring the future to consumers around the world with its ability to

transform leading-edge technologies into products with its preeminence in R&D and design.

EBITDA grew by 21% to reach an all-time high of TL 880 million.

2012 2013 2014 2015

115

1.6

394

6.3

9.39.5

724

880

EBITDA and EBITDA Margin

EBITDA* (TL Million) EBITDA Margin (%)

*Excluding other income and expenses from operating activities

2012

7,029

2013

6,218

2014

7,767

2015

9,250

Net Sales(TL Million)

2012

11.9

2013

17.4

2014

20.2

2015

21.2

Gross Profit Margin(%)

Vestel demonstrated a successful performance despite a challenging year in 2015, registering TL 9,250 mn of sales revenues and TL 69 mn of net profit.

The Company’s gross profit rose by 25% to reach TL 1,958 million, and gross profit margin increased from 20.2% to 21.2%.

SUMMARY FINANCIAL AND OPERATIONAL INDICATORS

VESTEL ELEKTRONİK 2015 ANNUAL REPORT

2

Summary Income Statements (Million USD) 2012 2013 2014 2015Net Sales 3,921 3,270 3,550 3,401Exports/Sales 75% 73% 71% 65%Gross Profit 468 570 718 720Gross Profit Margin 11.9% 17.4% 20.2% 21.2%Operating Profit/(Loss)* (41) 82 207 215Operating Profit Margin (1.0%) 2.5% 5.8% 6.3%EBITDA* 64 207 331 323EBITDA Margin 1.6% 6.3% 9.3% 9.5%Net Profit/(Loss) (69) (49) 48 25Net Profit Margin (1.8%) (1.5%) 1.3% 0.7%*Excluding other income and expenses from operating activities

Summary Balance Sheets (Million USD) 2012 2013 2014 2015Cash and Cash Equivalents 187 164 267 250Trade Receivables 824 763 833 952Inventories 565 594 743 758Current Assets 1,722 1,645 2,099 2,149Property, Plant and Equipment 711 645 589 526Total Assets 2,758 2,641 3,157 3,211Short-Term Liabilities 1,693 1,722 1,973 2,015Long-Term Liabilities 312 289 593 655Shareholders’ Equity 753 630 591 541Net Financial Debt 372 304 445 596 Summary Consolidated Statements of Cash Flow (Million USD)

2012 2013 2014 2015

Net Cash Flows from Operating Activities 55 229 264 44Net Cash Flows from Investing Activities (212) (180) (199) (123)Net Cash Flows from Financing Activities 74 (65) 59 129

34%White Goods

66%Television and Electronic Devices

Breakdown of Revenues by Business Segment (2015)Geographical Breakdown of Sales (2015)

The share of domestic sales increased to 35% while international sales accounted for 65% of total revenues.

6%Other

59%Europe

35% Turkey

66% of the total consolidated turnover came from the sale of televisions and electronic devices and 34% from the sale of white goods.


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Credit RatingsCredit Rating The credit rating agency, Standard & Poor’s, revised the Company’s credit rating outlook to “Stable” on 17 September 2015 in view of the Company’s higher than expected reliance on short-term financing, and confirmed the Company’s long-term credit rating as B-.

S&P B-/Stable

Corporate Governance RatingSub-Categories Weight Rating (2015) Rating (2014)Shareholders 0.25 9.49 9.33Public Disclosure and Transparency 0.25 9.14 8.94Stakeholders 0.15 8.91 9.09Board of Directors 0.35 8.95 8.86Total 1.00 9.12 9.03

The Company’s Corporate Governance Rating was raised from 9.03 (90.39%) to 9.12 (91.24%) as of February 23, 2015 in line with the improvement in corporate governance practices.

Shareholding StructureShareholders Nominal Value of Shares (TL) Share in Capital (%)Zorlu Holding AŞ 216,053,592 64.41Zorlu Holding AŞ (free float) 44,047,711 13.13Other Shareholders (free float) 75,354,971 22.46Total 335,456,275 100.00

The shares of Vestel Elektronik Sanayi ve Ticaret AŞ (“Vestel”, “Vestel Elektronik” or the “Company”) have been trading on Borsa Istanbul (BİST) under the VESTL ticker since 1990.

In addition, Vestel Global Depositary Receipts, which have been trading on the London Stock Exchange since 2000, commenced trading on the London Over-the-Counter market (OTC market) as of January 3, 2011. The shares of Vestel Beyaz Eşya Sanayi ve Ticaret AŞ (“Vestel Beyaz Eşya”), a subsidiary of Vestel Elektronik, have been trading on the BİST under the VESBE ticker since 2006.

As a result of the assessments carried out by Borsa Istanbul during 2015, Vestel Elektronik has been included in the BIST Sustainability Index from 2 November 2015. The Index consists of the shares of the listed companies on the BIST, which have a high corporate sustainability performance.

RATINGS, SHAREHOLDER STRUCTURE AND VESTEL SHARES

Vestel Shares

Vestel Elektronik’s Market Capitalisation

TL 1.7 billion

As of the end of 2015, Vestel Elektronik, which trades on the BIST STARS MARKET, was included in the BIST 50, BIST 100, BIST 100-30, BIST ALL, BIST STARS, BIST CORPORATE GOVERNANCE, BIST METAL PRODUCTS MACHINERY, BIST INDUSTRIAL and BIST SUSTAINABILITY indices.


4

Vestel Elektronik - Share Price Performance

Daily Trading Volume (TL Million)Share Price (TL)

31/1

2/20

14

The increase in trading volume seen in 2014 also continued in 2015, and Vestel’s average daily trading volume more than doubled from the TL 27.3 million recorded in 2014 to TL 56.7 million in 2015. The Company’s market capitalization stood at TL 1,714 million as of the end of 2015.

160

140

120

100

80

60

40

20

0

2015 Share Price Summary (TL)Number of Shares 33,545,627,500Free-float 11,940,208,256Yearly High 8.16Yearly Low 3.51Year-End Price 5.11Market Capitalization* 1,714,181,565

*As of 31.12.2015

Vestel Elektronik - Relative Performance

BIST 100VESTL

31/1

2/20

14

30/0

1/20

15

01/0

3/20

15

31/0

3/20

15

30/0

4/20

15

30/0

5/20

15

29/0

6/20

15

29/0

7/20

15

28/0

8/20

15

27/0

9/20

15

27/1

0/20

15

26/1

1/20

15

30/0

1/20

15

01/0

3/20

15

31/0

3/20

15

30/0

4/20

15

30/0

5/20

15

29/0

6/20

15

29/0

7/20

15

28/0

8/20

15

27/0

9/20

15

27/1

0/20

15

26/1

1/20

15

26/1

2/20

15

500

450

400

350

300

250

200

150

100

50

0

9

8

7

6

5

4

3

2

1

0

TL M

illio

n

TL

Vestel Elektronik’s share price dropped by 20% in 2015 in line with the performance of the BIST 100 index.


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VENUS V3 SERIES

IN 2015, VESTEL LAUNCHED THE NEW V3

SERIES OF ITS VENUS SMARTPHONE, WHICH STANDS OUT WITH ITS

DESIGN AND SUPERIOR TECHNICAL FEATURES.


6


7

HIGHLIGHTS OF 2015

The Venus V3 series was released in three new models.

The Venus V3 series was released in three new models; the 5570, 5070 and the 5040. The 5570 model, which is targeted at the upper segment, is designed to provide a superior smart phone experience with the QuickCharge 2.0 feature which shortens the charging time by 75%, has a 13MP rear and an 8MP front camera, a 5.5’’ Full HD IPS display, an 8-core 64 bit Qualcomm processor, 2GB of RAM and 32GB of internal storage capacity. The Venus V3 seriesis expected to be the first choice of Turkish consumers with its compatibility with the next generation mobile communication technology 4.5G network.

Vestel launched the new V3 series of its Venus smartphone in 2015, which stands out with its thin and lightweight metal body developed by using a special diamond-cutting technique, as well as its superior technical features and camera experience.


8

Vestel introduced Turkey’s first domestically produced Curved TV Turkey’s first domestically manufactured Curved TV, which incorporates 4K Ultra HD and 3D features, was brought to the market by Vestel for consumers seeking the best viewing performance. While Vestel’s latest technology television provides a more realistic picture with both 4K and 3D features, it also promises viewers an excellent picture quality with the same contrast ratio from every vantage point by removing angle restrictions with its curved screen. In addition, it enhances the customer experience with its Bluetooth, 1000 HZ contrast and embedded terrestrial digital receiver features.

Smart Built-in Cooker Set and Smart Built-in Oven from Vestel Vestel introduced its “Smart Built-In Cooker Set”, which comprises a Smart Extraction Hood, Smart Oven and a Smart Hob, offering consumers a combination of technology and style.

Vestel Smart Built-In Oven can be controlled with Android or IOS supported tablets and smartphones. Users can view the temperature, active program or timer information and stop the cooking function through a mobile app, called “The mind of the house”, which they can download to their tablets and smartphones.

Android TV from Vestel In another step forward in the field of innovation, Vestel began the production of UHD televisions and satellite receivers that support the Android TV™* platform in 2015.

Android TV was developed to offer consumers a more enjoyable viewing experience as well as easy access to a rich content. Vestel Android TVTM products have a built-in broadband tuner (Full Band Capture Tuner) which allows viewers to watch multiple channels simultaneously by transferring the broadcasts to other Android compatible TV devices. The broadcasts can also be stored either in the hard disk or the storage devices on the network.

*Android and Android TV are the trademarks of Google Inc. Company.


9

HIGHLIGHTS OF 2015

Business Management Certificate Program for Vestel’s Authorized Service Centers from Yaşar University Following the graduation of 96 students in the first term of the Authorized Service Center Business Management Certificate Program, which was launched by Vestel in cooperation with the Yaşar University Continuing Education Center (YÜSEM), a total of 115 Vestel authorized service center owners and managers received their certificates by successfully completing the program in the second term.

This training program, which is the sector’s only program of its kind covering service management in after-sales services, aims to improve the quality of service, which will then be reflected to customer satisfaction and finally, to Vestel’s brand value.

Vestel, which won the tenders for both phases of the smart board project held within the scope of the FATIH (Movement of Enhancing Opportunities and Improving Technology) Project, completed the delivery of the smart boards in the first phase in 2012. As for the second phase, Vestel completed the installation of the majority of the smart boards in this phase, with the remainder planned to be delivered in 2016.

The project, which sets an example for the Middle East and Europe, represents an important step in the field of global educational technologies.

Deliveries in FATIH Project smart board tender nearing completion


10

Vestel obtained CIPS, the world’s most prestigious Certificate in Procurement and SupplyVestel obtained CIPS (Chartered Institute of Procurement and Supply), a corporate procurement certificate held by only 127 companies in the world.

Vestel’s purchasing teams were assessed by CIPS on the basis of 110 different criteria under 5 main headings that include “Leadership and Organization”, “Strategy”, “People”, “Processes and Systems” and “Performance Management” during a six-month evaluation process. With the CIPS certificate, Vestel has certified that it has achieved international standards in its procurement practices and manages its purchases in a consistent, transparent and effective manner.

Vestel Elektronik and its white goods subsidiary, Vestel Beyaz Eşya authored yet another first by simultaneously qualifying for the CIPS Corporate Certification.

Collaboration between TRT, Türksat and Vestel in 4K and hybrid broadcastingTRT, Türksat and Vestel collaborated to carry out Turkey’s first 4K broadcasting project, which is also the third of its kind in the world. TRT assumed responsibility for broadcasting in the project, while Türksat will be responsible for satellite transmission. Vestel assumed the responsibility for the production of the high-tech television and set-top boxes that would transmit 4K and hybrid broadcasting to consumers. Under the project, the first broadcasts are planned to be carried out in 2016.

At least 30% of the television audience is expected to start using TVs which are 4K-compatible over the next 2 years. Vestel, which is involved in this project by virtue of its strength in R&D and development of local technology, manufactured 4K set-top boxes for the first time for this project in addition to Ultra HD 4K TV models. As part of this collaboration with TRT, Vestel also plans to implement the Audio Description Project aimed at the visually impaired audience and the Video Description Project aimed at the hearing impaired, in addition to 4K and hybrid broadcasting.

A leading player in the conversion of street lighting to LED Vestel, the leader of Turkey’s LED lighting market, presses ahead in converting conventional street lighting to LED lighting through pilot projects carried out in Eskişehir and Kayseri. Additionally, in 2015 Vestel-Çeliksan consortium won the tender to convert street lights to LED in Nicosia, which was held by the Cyprus Turkish Electricity Authority (CTEA) as the first stage of the LED Lighting conversion project.

Within the scope of the project, street lights will be converted to LED lighting. Upon completion, the project will save 19 million kWh of electricity per year, amounting to monetary savings of TL 8.5 million per year in the Turkish Republic of Northern Cyprus (TRNC).

Vestel aims to realize the conversion of street lighting to LED lighting in the TRNC with its record holder street lighting product, which has an efficiency of 145 lm/W and operates with just 13W of power.


11

Vestel is one of the foremost players in consumer electronics, white goods and digital productsin Turkey and international markets. Making new additions to its

roster of successes through the systematic efforts in research, project development, production and marketing processes which reflect its vision

and innovativeness, Vestel is the recipient of numerous national and international awards and citations.


12

AWARDS AND HONOURS

IN 2015

VESTEL WON A TOTAL OF 48 AWARDS IN

DESIGN COMPETITIONS DURING 2015.


13

AWARDS RECEIVED IN 2015

Turkey’s Leading Exporter in its sector in 2014

Vestel won the top prize at the Stars of Exports Award ceremony organized by IMMEA (Istanbul Minerals and Metals Exporters’ Association) for making the highest contribution to Turkey’s exports in 2014. Vestel maintained its 18 year run as Turkey’s leading exporter in the electronics sector. It won a total of six “Star of Exports” Awards, as the first in the “Electrical and Electronics Nationwide”, “TV Receivers” and “Other Electrical and Electronic Production and Distribution Equipment” categories, and second prize in the “Iron and Steel Products” category and third in the “White Goods” category. Vestel won the highest number of the first prizes in all categories and the most awards in total at the ceremony.

While Vestel ranked the 4th in the top 1,000 exporters ranking prepared by the Turkish Exporters Assembly based on total exports in 2014, it ranked the 1st in the Electrical, Electronics and Services Sector category.

R&D Awards

Vestel Elektronik’s R&D Center became the Sector Leader for the 3rd timeAs a result of an assessment carried out by the Ministry of Science, Industry and Technology based on a range of criteria such as employment, expenditure density, project capacity, cooperation and interaction, commercialization and intellectual property competency, Vestel Elektronik won the Industry First Prize for the third time among a total of 204 R&D centers, which were awarded with the R&D Center Certificate in accordance with the Law No. 5746, from 24 sectors.

Two Kaizen Awards for Vestel projects Vestel Elektronik participated in the 18th Quality Circles Sharing Conference organized nationally by Turkish Quality Association (KalDer) for the first time and won 2 Kaizen Awards.

By reducing the mold change time for the existing machines from 94 minutes to less than 10 minutes with the “Setup Hunters” project at the Styrofoam (known as packing foam) factory in October 2014, Vestel Elektronik succeeded in optimizing production efficiency. The Company won the Kaizen Award in recognition of this achievement. Vestel Elektronik’s “High-End Fault Reset” Kaizen Team was awarded with the KalDer Jury Encouragement Award for its project at the LCD TV Final Production Plant. Within the scope of this project, all the details were laid out and actions were identified for non-conforming issues by applying the P-M analysis for finding a radical solution to the problems encountered during production and preventing their repetition. After an approximately three months of work, the “zero defect” target was achieved.

Vestel Elektronik won the Industry First Prize for the third time among a total of 204 R&D centers from 24 sectors.


14

Two Excellence Awards for Vestel City from Japan The Excellence Awards are given each year by the JIPM (Japan Institute of Plant Maintenance) to companies which exhibit the best practices in the area of Total Productive Maintenance (TPM) in the world. In this context, Vestel Elektronik and Vestel Beyaz Eşya won two separate awards with their total of 10 plants at Vestel City.

Vestel Elektronik won the first Award for TPM Excellence in 2012 for reducing the cycling costs by 30% over a period of 3 years. Vestel Elektronik was deemed worthy of the Award for Excellence in Consistent TPM Commitment in 2015 while Vestel Beyaz Eşya won the Award for TPM Excellence.

Vestel Beyaz Eşya won the Award for TPM Excellence as a result of its TPM activities simultaneously carried out at its refrigerator, washing machine, dishwasher, air conditioner and oven plants. Being the first company to win this award for its 5 facilities at the same time in the white goods sector, Vestel Beyaz Eşya achieved a worldwide success.

Design Awards

The first and the only Turkish corporate member to be admitted to the International Council of Societies of Industrial Design, one of the world’s most important associations in the field of industrial design, Vestel deploys its advanced technological prowess and unchallenged design strengths to create products that win awards on national and international platforms and in competitions.

Vestel won a total of 48 awards in the design competitions which it had participated in 2015 with its consumer electronics and white goods products.

Awards won by Vestel Elektronik

Vestel Elektronik won a total of 35 awards in international design competitions which it had participated in 2015.

A Design Award 2015

Gold A Design AwardVenus 3R 5” Smartphone Kahveci Turkish Coffee Machine

Silver A Design AwardVenus Polychrome Smartphone Envo Electric Vehicle Charger

Bronze A Design AwardVenus 3R 5.5” Smartphone

Plus X Award 2015

Plus X Award for Design Envo Electric Vehicle Charger Kahveci Turkish Coffee Machine Lal Turkish Coffee Machine Sade Turkish Coffee Machine

Plus X Award for Design and Ease of UseRepubblica Remote Control RC38100 Remote Control Venus 3R 5” Smartphone Venus 3R 5.5” Smartphone Venus Polychrome Smartphone

Plus X Award for High Quality, Design and Ease of Use55330 Slim Edge Led TV 55360 Slim Art Led TV

The Venus V3 won the “Design and Ease of Use” Award in the Plus X Award Competition, even before it was launched and brought to the market.


15

Plus X 2015-2016 Best Design Brand of the Year Award

Best Design Brand 2015/2016 Award(in Home Entertainment Video Product category)

Vestel won the “Best Design Brand 2015/2016” Award for 3 times in a row as the brand to win the most awards in total with all of its products in the “design” category of the “Home Entertainment Video” product group.

Good Design Award

Good Design Product AwardRC4995 Repubblica TV Remote Control RC38100 Set top Box Remote Control SAY 4K UHD Media Player 55330 Slim Edge Led TV 55360 Slim Art Led TV 65” FHD Smart TV Sade Turkish Coffee Machine Envo Electric Vehicle Charger VENUS 3R 5.5” Smartphone

Awards won by Vestel Beyaz Eşya (13 Awards)

Vestel Beyaz Eşya won a total of 13 awards in international design competitions which it had participated in 2015 including the following;

• Design award for the Solid Refrigerator and Karma Washing Machine in the IF Design Award,

• Design award for the Neo Refrigerator in the Red Dot Design Award,

• High quality, design and ease of use awards with the Inline and Amaranth Dishwashers in the Plus X Award,

• Design and ease of use awards with the Neo Refrigerator in the Plus X Award,

• Functionality and ease of use awards with the Sefa Tea Maker in the Plus X Award.

Marketing Communications Awards

A record breaking 13 awards in the Crystal Apple 2015 AwardsVestel won 13 awards in 12 categories including 4 crystal, 6 silver and 3 bronze apples with the ‘Am I Not Vestel?’, ‘Mothers Who Do the Same’, ‘Speaking Recipes’, the ‘4K curved TV’ and the ‘Proudly Local’ campaigns in the fields of digital and media in the “Crystal Apple Creativity Awards” given within the scope of the Crystal Apple Festival, which is one of Turkey’s largest events in the communications sector. Vestel both broke a record with its 13 awards and became the most awarded brand in its sector.

The ‘Notice the Bicycle!’ Campaign won one Crystal Apple Award in 2015 and was also awarded at the Communication Academicians Media and Communications Awards organized by Maltepe University. Another campaign that won the Crystal Apple Award was the ‘Proudly Local Guerrilla Channel’. No other brand received an award in the Online Film branch in the consumer durables category, in which only white goods and consumer electronics companies compete.

Gold Effie Award for Vestel with “Very Thoughtful Mothers” campaign Vestel won the Gold Award in the ‘Achievers on Special Occasions’ category in Effie Turkey 2015 with the “Very Thoughtful Mothers” campaign, organized especially for the Mother’s Day.

Vestel’s “Very Thoughtful Mothers” campaign, which received three awards from Crystal Apple and two awards from MediaCat Felis increased the total number of awards to six with the Gold Effie Award. Vestel’s “Very Thoughtful Mothers” commercial is dedicated to mothers who always consider their children with a humorous story of a mother and her young son who gives his mother a Vestel Sultan tea maker as a gift.

Vestel wins the “Retail Sun” Award with its social media campaign for the second timeActing with a vision to become Turkey’s leading retailer, Vestel’s ‘Sunday Breakfast’ themed campaign, launched via social media on Women’s Day on the 8th of March, was awarded with the “Most Successful Use of Social Media Award” in the Retail Sun Awards.

AWARDS RECEIVED IN 2015


16

Vestel City wins “Turkey’s BrandFace” awardVestel City won the “Turkey’s BrandFace Award” Special Award given for the first time this year in the Golden Lens Awards organized by the Magazine Journalists Association. Vestel City, which is Vestel’s production hub and a mega factory, was granted the award in recognition of its success in representing Turkey in national and international arenas in the best way.

Vestel Elektronik wins the “The Brand to Improve its Reputation the Most” AwardVestel was awarded in the electronics category in “The ONE Awards, Integrated Marketing Awards” organized in cooperation with Akademetre, which is known for its research competency in the fields of market and consumer attitude, and Marketing Turkey, which is one of the most important journals in the marketing sector.

Vestel ranked the first among the 10 most prestigious brands in the electronics category in the competition held for the second time in 2015, in which the public jury selected the brands which have improved their reputation the most according to the results of the “2015 Reputation and Brand Value Performance Measurement” study.

Vestel wins the “Consumer Satisfaction Focused Company” Award Vestel was granted the “Consumer Satisfaction Focused Company” Award at the “Consumer Awards” organized by the Ministry of Customs and Trade, Directorate General of Consumer Protection and Market Surveillance, for the recognition of companies that adopt the principle of customer satisfaction, consumer protection organizations and scientific studies.

HR Awards

Three awards from Kariyer.net in the Respect for People categoryVestel and its parent company, Zorlu Holding AŞ, which provide feedback to all the job applicants reaching them via Kariyer.net, won the Respect for People Award with their 100% response rate and the value they attach to the job candidates.

Vestel also won the “Most Admired Company Award” by gathering the most votes in an open-ended vote on Kariyer.net. Vestel was also handed the “The Company that Receives the Highest Number of Applications in Anatolia” Award for having received the most applications for its job postings among the companies in Anatolia.


17

IFA Fair

Vestel has been participating in the IFA for the past 25 years, which is Europe’s largest electronics fair held in Germany’s capital city, Berlin. At the 2015 exhibition, Vestel displayed 680 different products in a 3,000 square meter booth. Vestel shared its vision of the future with visitors and business partners through the “Smart City” technology platform at the Vestel booth, where it also displayed the new models of Venus, Turkey’s first and the only domestically produced and designed smartphone. Smart products capable of communicating with each other and which can be controlled via mobile devices located in the “Smart City” were among the most outstanding products at the Vestel booth. The ‘Internet of Things’ platform, which is the infrastructure of the “Smart City” built at IFA, will form the basis of Vestel’s new product range.

Mobile World Congress

Vestel staged a technology show with 60 different products at the Mobile World Congress in Barcelona (MWC), which is the world’s largest event in the field of mobile technology. While the Venus smartphone and prototypes of its new models attracted the greatest interest at the Vestel booth, Vestel’s mobile-interactive smart TVs with 4K technology, digital information displays, hotel TVs, smart boards and smart home systems also stood out in the exhibition.

Living Kitchen Fair

Vestel participated in the Living Kitchen Fair held in Cologne, Germany, in which 200 companies took part, with its 58 different freestanding and built-in appliances. Vestel won wide acclaim, especially with the 2016 model 177 cm built-in fridge-freezer and sliding door built-in dishwasher exhibited at its booth.

PARTICIPATION IN FAIRS IN 2015


18

Vestel has been participating in the IFA Fair for the last 25 years,

which is Europe’s largest electronics fair held in Germany’s capital, Berlin. At the 2015 exhibition, Vestel displayed 680 different products

in a 3,000 square meter booth.


19

CHAIRMAN’S MESSAGE

Esteemed Shareholders,

Global growth has not yet reached the desired level.

The world economy could not achieve the strong recovery that we had hoped for during 2015. The pressure associated with the Fed’s impending rate hike left its mark, especially on those developing countries that have a high dependence on external financing. The robust signals of recovery in the US economy and the improvement in the labor market created a suitable environment for the Fed to raise interest rates, even though the inflation remained below the 2% target and thus, the long awaited rate hike came before the end of the year.

The upcoming rate hike cycle bears importance for the capital flows into developing countries. The signs of weakening in the US economy, which emerged in the 4th quarter of 2015, have raised the expectations that the future interest rate hikes would be pushed further away, which should help shield the emerging economies from sudden shocks, at least for a while.

Despite the significant steps taken in 2015, the recovery in the European economy is expected to remain limited in scope, with no signs in the near future for the existing weak demand-low inflation cycle to be overcome, leaving the EU economies on course for another tough year in 2016. The quantitative easing program, which the European Central Bank has initiated in 2015 to stimulate the economy and which was extended until 2017 at the end of the year, constitutes the main premise for the growth expectations.

The slowdown in China, associated with the world’s second largest economy’s quest for a new economic equilibrium, continues to weigh on global economic growth. The extended slump in oil and commodity prices on the back of the sharp decline in demand, the supply glut and the strengthening of the US dollar have put the oil and commodity exporting countries in an increasingly challenging situation.

In spite of the internal and external uncertainties, Turkish economy grew by 4% in 2015.

Despite the challenging external conditions and the two elections held during the year, the Turkish economy succeeded to grow by 4% in 2015. However, for sustainable growth it is essential to shift the existing consumption oriented growth model to a more production oriented structure. Focusing on structural reforms and putting these into implementation is very important in this respect. For the coming period, the emphasis should be on boosting the investments, improving the productivity and value add in the industrial sector and increasing the share of the medium-high and high technology products in overall exports.

Turkey’s current account deficit contracted in 2015 with the help of the falling oil prices and the decline in import demand, which was in turn caused by the weakening currency and relatively modest economic growth. On the other hand, while export revenues were hurt by the sharp fall in EUR/$ parity and continuing turmoil in the Middle East, the crisis with Russia in the last quarter of the year and the growing unease since then has also begun to take a toll on tourism revenues. Meanwhile, inflation, which is trending well above the target, remains a risk factor that requires prudent measures to be taken.

Turkey’s economy is expected to maintain its growth momentum in 2016. While the positive effect of the low energy prices on imports continues, the negative effect of the exchange rate on inflation is expected to abate gradually. Domestic demand is expected to contribute positively to economic growth with the support of Turkey’s favorable demographics and the 30% increase in the minimum wage effective from the beginning of 2016. Compared to other

Modest growth in global economyFor the first time in nearly a decade, Fed raised interest rates

in December 2015.

Despite the challenging external conditions and the two elections held in Turkey during the year, the Turkish economy managed to grow by 4% in 2015.


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Ahmet Nazif ZorluChairman

Vestel plays a pioneering role in the development of “Internet of Things” in Turkey and assumes an important part in this evolution with its leading position in the consumer electronics sector.


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developing countries Turkey is relatively immune against the risk of a slowdown in the Chinese economy. The main risk factors facing Turkey in the coming period would be the geopolitical risks, persistently high inflation and the sizable capital outflows which may occur depending on the global capital movements.

Vestel invests in future with its focus on the production and development of new technologies.

As one of Europe’s top three TV producers, we continue to lead the consumer electronics sector in the Turkish market; while also bolstering our progress towards becoming one of the biggest players in the global TV market. We take pride in bringing the 4K 3D curved TV to the market, taking part in our country’s first hybrid broadcast platform and representing high technology and design power through the new models of Venus, the first domestically produced smartphone, which we began manufacturing last year.

Vestel plays a pioneering role in the development of “Internet of Things” in Turkey and takes an important part in this evolution with its leading position in the consumer electronics sector. While envisaging the smart houses of the near future, our technological preeminence in smartphones and TVs, which will replace the remote control in the future, set us apart from competition. This overlaps with our claim of being a pioneer in the concept of smart home - smart city in Turkey.

As a manufacturer, which is preeminent in R&D and design and good at exploiting market opportunities, Vestel achieves increasingly more profitable growth in the white goods segment thanks to its robust financial structure and extensive range of mid to high-end products, which are both eco-friendly and water and energy efficient.

There is considerable demand for white goods in Turkey thanks to the country’s favorable demographics, developing infrastructure, and rapid transition to a digital economy. The development potential of domestic demand is the main growth driver for Vestel in the white goods segment. On the other hand, the Company is also increasing its presence in international markets by both expanding its export volumes and by adding new A brand clients to its customer portfolio.

Vestel Ventures was founded in 2015 to support entrepreneurs with innovative ideas through an initiative which will carry our innovative focus forward. As an “angel investor”, Vestel Ventures provides seed capital aid to support initiatives that are at an idea stage. In addition, entrepreneurs can access Vestel’s R&D know how and production facilities and receive support during the commercialization phase of their initiatives. In order for the initiative to receive seed capital, criteria such as innovativeness, competitiveness, marketability, growth potential and sustainability are taken into consideration.

In our age, there are four basic trends that are affecting the businesses all around the world, namely, mobility, social applications, the cloud and big data. To successfully achieve the digital transformation and to pioneer in the Industry 4.0 era, accepted as the “New Industrial Revolution”, companies need to be able to manage these four forces effectively. Besides, the digitization of processes, successful handling of extraordinary situations and monitoring of all processes across the enterprise are also essential for today’s companies.

While Vestel continues to break new ground in Turkey’s consumer electronics sector, it continues to take decisive steps towards the goal of becoming one of the biggest players in the global market.

CHAIRMAN’S MESSAGE


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Our imagination, our confidence that enables us to achieve our objectives, our innovation, our faith in research and development and our entrepreneurial spirit lie at the heart of our successes.

We are open to innovation and change in every circumstance. This approach has guided us since our foundation and has been one of the most important factors that have carried us to our leading position. We reflect what the time brings and necessitates to our business processes in all the areas we operate. We can put forward projects, products and services that break new ground by blending change with development. At Vestel, we see how the actions we have taken at the right time in accordance with our predictions have proven to be precise.

Our imagination, our confidence that enables us to achieve our objectives, our innovation, our dedication to research and development and our entrepreneurial spirit lie at the heart of our successes. I fully believe that we will grow by working together and will always catch the era. At this point, I want to thank all of my colleagues who have worked so hard and put so much effort for Vestel.

In 2015, Vestel Elektronik took its place in the BIST Sustainability Index.

I am proud to highlight a development that clearly demonstrates the concept of sustainability, which is one of our core values and one which we have internalized; Vestel Elektronik’s inclusion into the BIST Sustainability Index, which comprises publicly traded companies with high rating on corporate sustainability performance. Vestel was included in the index on 2 November 2015 as a result of the assessments undertaken by Borsa Istanbul during 2015. We view the creation of lasting value for our country and all of our stakeholders as part of our mission and our responsibility, both today and in the future.

We will increasingly raise our contribution to Turkish economy in 2016.

We will continue to move forward by increasing our contribution to Turkish economy through the investments we will undertake and through our operations in the coming period. We will keep contributing decisively to the goal of a more liveable world and increase our social support through the activities, events and sponsorships that we will carry out.

I would like to thank all of our stakeholders who have helped bring our dreams to life and have made Vestel a competitive force in the global arena.

Yours faithfully,


Vestel Elektronik was included in the BIST Sustainability Index on 2 November 2015, which comprises publicly traded companies with a high rating on corporate sustainability performance.


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BOARD OF DIRECTORS

Mehmet Emre ZorluBoard Member

Hacı Ahmet KılıçoğluBoard Member

Mümin Cengiz UltavBoard Member


Ali Akın TarıVice Chairman

Selen Zorlu MelikBoard Member


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Ahmet Nazif ZorluChairman(1944 - Denizli) Ahmet Nazif Zorlu began his professional career in a family owned textiles business in Denizli, Babadağ. He opened his first textile store in Trabzon, later in 1970 Mr. Zorlu moved the Company’s headquarters to Istanbul and laid the foundations of Zorlu Holding with his brother, Zeki Zorlu. Ahmet Zorlu set up his first company, Korteks in 1976 and gathered all of his companies under the roof of Zorlu Holding in 1990. Acquiring Vestel in 1994, Ahmet Zorlu opened the door to new lines of business for Zorlu Holding. Mr. Zorlu’s entrepreneurialism, which began with the textile industry, went on to manifest itself in more companies operating in highly diverse fields such as white goods, electronics, energy, property development, metallurgy and defense. Ahmet Zorlu has been serving as the Chairman or Deputy Chairman of the Board in numerous Zorlu Group companies operating in different sectors.

With a keen interest in civil society organizations, Ahmet Zorlu is a member of the Board of Directors of the Foreign Economic Relations Board, the Turkish Industry and Business Association, the Education and Culture Foundation of the Society of Denizli, the Babadağ Industry and Business Association and the Turkish Home Textile Industrialists and Businessmen Association. Ahmet Zorlu is the founder of Mehmet Zorlu Education, Health, Culture, and Solidarity Foundation (MZV) and carries out his social responsibility projects through MZV since its foundation in 1999. MZV has built many schools and provides scholarships to a large number of students. Ahmet Zorlu also attaches great importance to the social efforts aimed to boost the influence of the Turkish business world in international markets. Accordingly, he was awarded the Royal Spanish Order of Civil Merit by King Juan Carlos I of Spain in 2007 for his contribution in developing and strengthening the relations between Spain and Turkey.

Ali Akın TarıVice Chairman(1943 - Koruköy) After his graduation from the Istanbul Law Faculty, Ali Akın Tarı served as a Tax Inspector and as a Chief Tax Inspector at the Ministry of Finance between 1972 and 1986. He was appointed as the Vice-President of the Tax Inspectors Board in 1986 and Group Head of the Istanbul Tax Inspectors Board in 1989, and continued to serve in this position until he was appointed as a Board Member to the Banking Regulation and Supervision Agency in 2001. Ali Akın Tarı was also elected as a Board Member to the Saving Deposits Insurance Fund in the same year in addition to being a Board Member of the Banking Regulation and Super-vision Agency. He left his position at the Banking Regulation and Supervision Agency when his period of duty expired in 2004, and was appointed as a Consultant for the Ministry of Finance. Mr. Tarı served in this position until 2007, when he voluntarily left his po-sition in the public sector to work in different areas in the private sector. Mr. Tarı became a member of the Board of Directors and the Audit Committee of Dilerbank in 2008; and was also appointed as a member of the Board of Directors of Diler Holding in 2011. In addition to his board membership at Vestel Elektronik Sanayi ve Ticaret AŞ, Ali Akın Tarı also serves as a Board Member at Vestel Beyaz Eşya Sanayi ve Ticaret AŞ and Zorlu Enerji Elektrik Üretim AŞ.

Selen Zorlu MelikBoard Member(1975 - Trabzon) Selen Zorlu Melik graduated from the Faculty of Economics and Administrative Sciences, Department of Business Administration at Uludağ University. She began her professional

career at Denizbank in 1998. Following her internship at the Denizbank Bursa Branch, she joined the Management Trainee Program at the same bank in 1999. After working in a number of positions at the Denizbank head office, Mrs. Zorlu Melik attended a Marketing Certificate Program at the University of California, Berkeley, USA in 2001. She subsequently began working at the Korteks Yarn Plant in 2002 and became a Board Member of the same company in 2004. Selen Zorlu Melik currently serves as a Board Member in numerous companies within the Zorlu Group as well as being a Board Member at Vestel Elektronik.

Mehmet Emre ZorluBoard Member(1984 - Istanbul) Mehmet Emre Zorlu graduated from the Department of Electrical and Electronic Engineering at Koç University in 2006. He completed a master’s degree in Innovation and Technology Management from the University of Essex in the United Kingdom in 2008. Mr. Zorlu began working for the Vestel Group of Companies in 2009. In addition to his position as a Board Member at Vestel Elektronik, Mehmet Emre Zorlu also serves as a Board Member at Zorlu Holding and its affiliated companies. Mr. Zorlu is a member of Young Presidents’ Organization (YPO), Young Businessmen Association of Turkey (YBAT) and Endeavour Turkey.

Mümin Cengiz UltavBoard Member(1950 - Eskişehir) Mümin Cengiz Ultav graduated from the Middle East Technical University with BSc and MSc degrees in Electronics Engineering. He began his professional career at the International Philips Institute and subsequently served in the IT and R&D departments of various electronics companies in Turkey and abroad. Mr. Ultav joined Vestel in 1997 as the President responsible for Technology. He stepped down from his position as a Member of the Executive Committee responsible for Strategic Planning and Technology on June 30, 2011. Mümin Cengiz Ultav currently serves as a Board Member at Vestel Elektronik Sanayi ve Ticaret AŞ.

Hacı Ahmet KılıçoğluBoard Member(1956 - Giresun) Ahmet Kılıçoğlu graduated from the University of Essex with a Bachelor’s degree in Economics in 1977 and a Master’s degree in Economics in 1978. He began his professional career at the Ministry of Industry and Technology in 1979 and continued his career as an Assistant Specialist at Türkiye İş Bankası in 1980. After completing his military service, Mr. Kılıçoğlu worked in the private sector for a couple of years. Mr. Kılıçoğlu then held administrative positions at the United Nations Development Program (UNDP) and the F-16 project, before going on to take office at Türk Eximbank in 1987, where he worked in various positions. He later served as the CEO of the bank and as a Board Member between 1998 and 2010. Mr. Kılıçoğlu served as a Board Member at the Turkish Banks Association between 1998 and 2010 and was also elected as the President of the World EximBanks Union (The Berne Union) in 2001. He also served as a Consultant to the President at the Islamic Development Bank between 2008 and 2009. Mr. Kılıçoğlu served as a Vice Chairman at Denizbank in 2010. In addition to being a Board Member at Vestel Elektronik Sanayi ve Ticaret AŞ, Mr. Kılıçoğlu also serves as a Board Member at Vestel Beyaz Eşya Sanayi ve Ticaret AŞ and Zorlu Enerji Elektrik Üretim AŞ, which are Zorlu Group companies. He is also a Board Member at Şeker Mortgage Finansman AŞ, Şekerbank Kıbrıs Ltd, Doğan Gazetecilik AŞ and Doğan Holding AŞ.


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As we leave behind a difficult year, could you briefly assess the impact of the economic developments in 2015 on the sectors and the markets in which you operate?

2015 has indeed been a challenging year, both on the economic and political fronts.

A slew of developments such as the weakening of growth in developing countries, the strong appreciation of the US dollar against other currencies, including the Euro, and the Fed’s first rate hike in 9 years all weighed on the global markets and led to sharp currency devaluation in developing countries and triggered sizable capital outflows from these markets.

In addition to the volatility in global markets, the rapid escalation of geopolitical risks in the Middle East has affected our region and increased uncertainties.

The slowdown in the Chinese economy had an adverse impact on global growth, while the sharp decline in commodity prices sent oil and commodity exporting countries into recession.

Despite the accommodative policies and the monetary expansion program implemented by the European Central Bank, growth in the Eurozone did not reach the desired levels.

The year 2015 was marked by two elections in Turkey, while the uncertainty has eased to some extent in the last quarter of the year. As political tensions with neighboring countries had a negative impact on foreign trade, Turkey continued to grow with domestic consumption and closed the year 2015 with 4% economic growth.

To give a brief assessment of the sectors in which we operate;

According to data released by the White Goods Manufacturers’ Association of Turkey (“WGMAT”), domestic white goods sales reached 7.1 million units in 2015, showing an almost 6% yoy growth.

Although the consumer confidence index dipped to its lowest level of the last few years, white goods sales increased in 2015 driven by the realization of the pent-up demand from 2014 and an 11% increase in housing sales.

As for international sales, despite the adverse developments in Russia, Ukraine and the Middle East, total white goods exports reached a record high 18.1 million units in 2015, with a 7% yoy growth, supported by the recovery in the Western European market, which is our main export market and enhanced competitiveness of Turkish manufacturers against their Far Eastern rivals with the sharp fall in Euro/US$ parity during the year. Reflecting the strong growth in domestic and international volumes, total white goods production reached 24.6 million units in 2015 and Turkey maintained its position as a production hub for white goods in Europe.

In the TV segment, a combination of the absence of a major sporting event during the year and the strong appreciation of the US dollar against other currencies had a negative impact on TV demand. According to research company GfK, TV sales grew by a limited 2% in Turkey in 2015 based on retail sales. Due to the sharp fall of the Euro against the US dollar in 2015, European consumers suffered a severe drop in their purchasing power given that the pricing of televisions is mainly done in dollars, and as a result, there was a 10% yoy contraction in the Western European TV market, which was further exacerbated by the high base effect in 2014 caused by the World Cup.

Vestel successfully maintained its growth in 2015 despite all the negative developments in domestic

and international markets.

Total white goods production stood at 24.6 million units and Turkey maintained its position as a production base for white goods in Europe in 2015.

INTERVIEW WITH THE CEO


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Enis Turan ErdoğanCEO

EBITDA increased by 21% in 2015 to reach an all-time high of TL 880 million.


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How did 2015 turn out for Vestel? How would you evaluate your financial and operating results with your position in domestic and foreign markets?

In 2015, Vestel demonstrated success in maintaining its growth despite all the negative developments in domestic and international markets.

Our consolidated revenues reached TL 9.3 billion with a 19% yoy growth in 2015. The share of domestic sales in overall revenues rose from 29% in 2014 to 35% in 2015, while sales to Europe and other countries comprised 59% and 6% of total revenues, respectively.

Vestel, which exports to 152 countries and accounts for around 90% of Turkey’s TV exports and about 30% of Turkey’s white goods exports, maintained its leading exporter position in the Turkish electronics sector for the 18th year in 2015.

During this period, marked by a contraction in the European TV market, we experienced a relatively milder decline in our sales volumes compared to the market and hence managed to increase our market share thanks to our high production capacity as one of the three major players in this market, flexible production capability and preeminence in R&D and design.

In the white goods segment, we increased our white goodsexports thanks to the addition of new A-brand clients to our customer portfolio and the positive contribution from the Sharp branded white goods sales to Europe, which began for the first time this year under the brand licensing agreement entered into with Sharp Corporation in September 2014.

While our exports increased, we also continued to expand in the domestic market. Within the scope of our multi-channel strategy, we continued to see the positive effects of our expansion into new sales channels which we have initiated in 2013. We once again became the leader in the domestic TV market based on retail sales and increased our market share further compared to 2014 in the final months of 2015,

supported especially by our increased penetration into the technology retailers channel. Additionally, we completed the majority of the smart board deliveries within the scope of the FATIH Project this year. This, together with the increase in our smartphone sales, made a positive contribution to our consumer electronics revenues.

As for the domestic sales of white goods, due to the restructuring of the sales and distribution network of Regal brand, which is our second largest brand after Vestel, we experienced a slight market share loss in 2015 according to WGMAT figures. We expect the change in Regal’s sales strategy to make a positive impact on our operating profitability in 2016.

In addition to the growth in consolidated revenues, Vestel succeeded in improving its gross profit margin from 20.2% to 21.2% thanks to the sharp drop in raw material prices during the year (cell prices in the TV segment; and steel, plastics and base metal prices in the white goods segment), improving export margins with the weakening TL, an improved product/price mix, hedging gains from the EUR/US$ parity hedges recorded at the gross profit level and continuing efficiency and cost reduction efforts. In parallel with the growth in turnover and gross profit, EBITDA1 increased by 21% in 2015 to reach an all-time high of TL 880 million with an EBITDA margin of 9.5%. Despite the negative impact of the appreciating US dollar on our balance sheet, we closed the year with a consolidated net profit of TL 69 million, mainly driven by the strong growth at the operating profit level.

Could you discuss the outstanding developments for Vestel in 2015? What kinds of perceptions have been created by bringing the smartphone Venus and UHD and curved TVs to the market? Could you evaluate the collaboration initiated with Sharp? Could you also talk about your leadership in the LED lighting sector?

We follow the trends in the world very closely and continue to bring the latest technologies to consumers through our R&D efforts.

Vestel, which exports to 152 countries and accounts for around 90% of Turkey’s TV exports and about 30% of Turkey’s white goods exports, maintained its leading exporter position in the Turkish electronics sector for the 18th year.

1Excluding other income and expenses from operating activities.



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Vestel produced Turkey’s first domestically manufactured curved TV, which has 4K Ultra HD and 3D features, and brought it to the market in the first half 2015. Smart TVs allow users to connect to the internet wirelessly without the need for an external device. Users can manage their TVs through the smart remote control feature in the Vestel Smart Tablet, doing away with the need for a remote control. Breaking important new ground in 2015, we introduced the first UHD TVs and set-top devices that support the Android TV platform. These products, which work with Android TV, are expected to represent a new milestone in Vestel’s digital TV solutions, which have a rich variety, through their feature of providing easy access to content.

With the launch of a range of new smartphone models, we demonstrated that we would remain in the smartphone market which we had entered into in 2014. We put special emphasis on the smartphone market and continue to increase our smartphones sales gradually. In November, we launched the Venus V3, the latest series of Turkey’s first domestic smartphone, Venus. The new Venus V3, which stands out with its thinner and lighter design, has now become faster and stronger. The new V3 series is offered to customers in a trinity of new models – the 5570, 5070 and 5040. The 5570 model of the V3 series intended for the upper segment, is designed to provide a superior smartphone experience with the QuickCharge 2.0 feature which shortens the charging time by 75%, a 13MP rear camera and an 8MP front camera, a 5.5’’ Full HD IPS display, an 8-core 64 bit Qualcomm processor, 2GB of RAM and 32GB of internal storage capacity. We will continue to develop the Venus in line with the users’ expectations and needs in the coming period.

In September 2014, we signed an agreement with the Sharp Corporation covering 5 years for the licensing of the Sharp brand in the white goods sector. Our 100% owned subsidiary, Vestel Ticaret took over the rights and privileges for the development, manufacturing, sales and marketing of Sharp branded white goods in Europe from 1 January 2015. A team of 50 people was set up to exclusively work for the Sharp brand in the countries where Vestel Ticaret has sales offices. In addition, a sales and product management team consisting of 10 people was established within Vestel Ticaret in Turkey.

Prior to licensing, Sharp was only selling refrigerators and microwave ovens in the white goods category in the European market. After licensing, we expanded Sharp’s product range to include all the major white goods products by developing specific product lineups for the Sharp brand. At the 2015 IFA Fair in Berlin, we launched Sharp as a white goods brand for the first time in Europe with a range of products which we exhibited in the refrigerator, washing machine, dishwasher, built-in oven, cooker, extractor hood and microwave oven categories. At present, the Sharp branded Vestel products are sold and offered to consumers in all the main sales channels in Europe.

We recorded EUR 50 million of revenues from the sale of Sharp branded products in its first year in 2015. We aim to double our turnover from the Sharp branded sales in 2016.

We became the market leader in the LED lighting market within the space of just three years by demonstrating our strengths in the fields of R&D and after-sales services. According to a study conducted by Frost & Sullivan, one of the world’s most important research companies, Vestel was the leader in the LED lighting market in Turkey in 2015 as it was in 2014. As a result of the assessment made by Frost & Sullivan against five different criteria, we succeeded in increasing our market share from 14% in 2014 to 20% in 2015.

Vestel aims to demonstrate strong growth in international markets as well as in the domestic market with these products that encompass the latest technologies and offer increasing sales potential.

In November 2015, we launched Venus V3, the latest series of Turkey’s first domestically produced smartphone, Venus.


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Vestel has notched up a significant achievement in the FATIH Smart Board Project. Could you discuss some of the developments in this area?

Following the first phase in FATIH Smart Board Project, Vestel also went on to win the tender for the second phase. Vestel completed the delivery of the smart boards in the first phase in 2012. As for the second phase, Vestel completed the installation of the majority of the smart boards in 2015, with the remaining planned to be delivered in 2016.

In smart boards we also aim to add large global players to our existing customer portfolio. We have an export target of US$ 100 million for this business apart from the tenders like the FATIH Project, which we will participate in abroad.

Vestel sets itself apart in both sales and after-sales service organization, as well as its corporate communications strategy. Is there anything you would like to say about this?

According to the Şikayetendex study, which measures the satisfaction level of customers leaving feedback on the www.sikayetvar.com website, Vestel was declared to be the brand which received the highest number of thank you messages from its customers by ranking the first in five categories with its success in complaint management in both 2013 and 2014. The sikayetvar.com website revised its assessment criteria in 2015, with the new report prepared as a “Customer Experience Index” consisting of two main categories, namely brand perception change (satisfaction-loyalty-recommendation) and the customer sharing management, (contact speed-complaint process-solution rate- satisfaction from the result- gratitude rate) as well as sub-categories.

According to Customer Experience Index measurements, Vestel, by making a difference in after-sales services, once again ranked the 1st and maintained its leadership in the White Goods and Television categories in 2015.

Vestel was also declared “The Company with the highest gratitude rate” in 2015 by the sikayetvar.com website independent of sector.

As a company which attaches the highest priority to listening to our customers’ requests and responding to their demands as quickly as possible, we introduced a novel approach in after-sales support services and launched the “Live Support” (CapCanlı Destek) Project in 2015 in order to show our customers that a real person instead of robots, is striving to address their problems.

Live support is offered on the http://www.capcanlidestek.com/ website where customers can access the team members through online messaging. In order to prove this, real-time video recording was made and presented for viewing on the internet. A total of 16 hours of video recording was prepared for the website. These records were prepared in a manner which reflects the work in real time either during day or night work hours.

Vestel rapidly reaped the benefits of the Live Support team’s efforts. Accordingly, the number of requests from consumers by phone decreased and the use of Live Support increased by 30%, with the duration of online conversations decreasing by 18%.

Vestel exhibited a total of 680 different products in its 3,000 square meter booth at the IFA, which is Europe’s largest electronics fair held in Berlin, in 2015.



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GüVENUSsü (Trust Base) repair centers were established in Istanbul, Ankara and Izmir to provide a distinctive service approach for smartphone and tablet products. In addition to the software and accessories repair services provided by the other Vestel authorized service centers, güVENUSsü repair centers also provide hardware repair and device replacement services.

In case the defective product is brought to the güVENUSsü repair center by hand, a repair service is provided within 20 minutes in the güVENUSsü repair centers that work with the target of a maximum turnaround time of 7 days in a bid to increase customer satisfaction. In addition, for the products which reach the güVENUSsü centers by post, there is a target of dispatching them by the next day at the latest.

In order to maximize customer satisfaction in after-sales services, all stages of the service process were brought under the control of the venusdestek.vestel.com.tr platform. From this address, records of failure are opened and the service process can be monitored either through an IMEI or a call number. If a product is out of warranty, preliminary price information can be provided and the service fee can be paid securely and quickly through this site.

In 2015, we also expanded our service organization and carried out activities to measure customer, product and service network satisfaction. Established with the aim of improving the quality in after-sales services and to ensure customer satisfaction, Vestel Customer Services implemented training programs in collaboration with the Yaşar University Continuing Education Center (YÜSEM) to help the authorized service center owners and managers achieve sustainable success, which represents a prime example of university-industry collaboration. The Vestel Service Academy and YÜSEM were awarded the Grand Prize in the category of “Successful Team of the Year-Public” in the Excellence Quest Sympoisum in 2015, which was organized for the 16th time by the Izmir Branch of KalDer in 2015. We intend to continue with our projects aimed at improving customer satisfaction in 2016.

Vestel’s presence, especially in the international exhibitions, is attracting a great deal of interest. What happened in this area in 2015?

We staged a technology show with 60 different products in the Mobile World Congress (MWC) held in March 2015 in Barcelona, which is the world’s biggest event in the mobile technology field. The Vestel tablet, which we exhibited next to our Venus smartphone models, mobile-interactive smart TVs with 4K technology, digital information displays, hotel TVs, smart boards and smart home systems all attracted a great deal of interest from the participants. Vestel also exhibited a total of 680 different products in its 3,000 square meter booth at the IFA, which is Europe’s largest electronics fair held in Berlin, in 2015. The “Smart City” technology platform at the Vestel booth, where the new models of Venus - Turkey’s first and the only smartphone to be produced and designed domestically - were displayed, was one of the areas attracting the most attention from visitors. Vestel’s LED street lighting, bulbs, spotlights, tubes, panel lighting, ray spot and linear lighting products were also exhibited at the fair. We also showcased the washing machines and dishwashers that break records with their efficiency, illustrating the importance we attach to energy efficiency, as much we do for design and technology.

Vestel was deemed worthy of an array of awards, especially in design and R&D. What were the major awards of 2015?

Vestel obtained the CIPS (Chartered Institute of Procurement and Supply) Certificate, a corporate procurement certificate held by only a very few companies in the world. With this most valuable certificate in procurement practices, Vestel once again certified that it is a company which meets the international standards. We continue our activities with the vision of making “the highest quality” accessible to our customers and becoming the leader in the market. We accomplish lasting success by reflecting this vision in every department at the Company. Vestel Elektronik won the “Award for Excellence in Consistent TPM Commitment” and Vestel Beyaz Eşya the “Award for TPM Excellence” in the TPM Awards, which recognize companies that achieve worldwide success in the area of Total Productive Maintenance (TPM) practices. As the first company entitled to this award with its

In 2015, Vestel obtained the CIPS (Chartered Institute of Procurement and Supply) Certificate, a corporate procurement certificate held by only a very few companies in the world.


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five factories at the same time in the white goods sector, Vestel achieved a success on a worldwide scale.

Our production base, Vestel City, located on a 1.1 million square meter plot and a production hub for some of the world’s most advanced technologies, won the “Turkey’s BrandFace” Award - the Special Award given for the first time this year in the Golden Lens Awards organized by the Magazine Journalists Association. The Vestel City, which consists of 7 factories and is one of Europe’s largest industrial complexes producing in a single location, was deemed worthy of the award for its success in best representing Turkey in the national and international arenas.

Vestel won the top prize at the Stars of Exports Award ceremony organized by IMMEA (Istanbul Minerals and Metals Exporters’ Association) in recognition of the Company for making the highest contribution to Turkey’s exports in 2014. Winning the first prize was credited as a success in 2015. As a company which maintains its position as the nation’s leading exporter in the electronics sector for 18 years, we won a total of six “Stars of Exports” Awards as the first in “Electrical and Electronics Nationwide”, “TV Receivers” and “Other Electrical and Electronic Production and Distribution Equipment” categories, the second in the “Iron and Steel Products” category and the third, the third in the “White Goods” category. Vestel won the most first prizes in all categories and received the most awards of any company in total.

In an achievement which has done us proud, Vestel has broken a record and became the brand to win the most awards in its sector with a total of 13 awards in 12 categories in the fields of digital and media at the “Crystal Apple Creativity Awards” which are granted within the scope of the Crystal Apple Festival, one of Turkey’s largest events in the communications sector. No brand other than Vestel received an award in the Online Film branch in the consumer durables category, in which only white goods and consumer electronics brands participate. Vestel received more than 100 design awards in 2014 and 2015, and has won more than 400 awards in national and international design competitions over the last 5 years.

We see R&D as one of Vestel’s core strengths. We have an R&D team consisting of around 1,200 people, most of whom are engineers. Vestel has a total of seven R&D Centers on a global scale, five of which are in Turkey and the others are in the UK and China. As a result of the assessment carried out by taking into account a wide range of criteria such as employment, expenditure density, project capacity, cooperation and interaction, commercialization and intellectual property competency by the Ministry of Science, Industry and Technology, we received the Industry First Prize for the third time among a total of 204 R&D centers, which were awarded with the R&D Center Certificate in accordance with the Law No. 5746, from 24 sectors.

Could you talk about the studies you are carrying out as part of the Industry 4.0?

The ‘Internet of Things’ and Industry 4.0 will be the most talked about topics in the world in the coming period. We are the biggest adopter of Industry 4.0 in Turkey. As Vestel, we are realizing the Industry 4.0 transformation by developing and renewing the equipment and machineries at our factories as well as by manufacturing devices which communicate with each other. We have been continuing this work, with intensifying efforts, for more than a year. Now everything is becoming smarter in factories and enterprises with the Industry 4.0. You can now see the product on the production line and what product will come out on your mobile phone. It is also clear where that product will go, thus increasing both efficiency and production quality. The fact that Vestel Elektronik won the “Award for Excellence in Consistent TPM Commitment” and Vestel Beyaz Eşya the “Award for TPM Excellence” in the awards given to companies achieving worldwide success in the Total Productive Maintenance (TPM) works stands as testament to our success. We have understood the importance of the work we carried out as part of the Industry 4.0 this year in Davos, where Industry 4.0 was the main topic of discussion. While Europe pioneered the industrial revolution, especially the third one, it has been left behind in the digital revolution by the US and the Far East. The fact that Industry 4.0 is emphasized by the Europeans is extremely meaningful and understandable.

Besides improving existing technologies and producing innovative products, we are also patrons of new technologies. Through Vestel Ventures, we will support the development of new technologies.



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Besides improving existing technologies and producing innovative products, we are also patrons of new technologies. Through Vestel Ventures, we will also support the development of new technologies. In the coming years, we can say that we will come up with new projects that will have an impact on the world.

Could you tell us about your practices and projects with regard to corporate social responsibility?

When people with disabilities are given equal opportunities and are provided with a suitable working environment, we believe that they can productively participate in the working life in harmony with the able-bodied employees. Therefore, we launched the “Equal Opportunities” project in 2015. The project was initiated following a visit of students from the Izmir Kınık Special Education Vocational High School; the video, which was prepared using sign language by our two employees who graduated from this school, was watched by the school’s students and received a very positive response. According to research studies conducted by Turkish Statistical Institute on people suffering from disabilities, 43% of the hearing impaired individuals want job opportunities to increase. In addition, when we heard that only 10% of the graduates from the special education vocational high schools are able to find work, we once again understood the importance of this project. We at Vestel ask graduates of the 19 Special Education Vocational High Schools in Turkey to come forward, and we will offer them job opportunities. We currently have 104 employees with hearing impairment on our payroll; and we do not have a limit for employment within the scope of this project. Our goal is to reach all graduates of the Special Education Vocational Schools with the hearing impairment. We consider this project independent from the compulsory disabled personnel employment through the Turkish Labor Agency (İŞKUR) scheme. We are undertaking special studies together with the specialists for the technical words used in our production facilities, which are not available in sign language. It will be possible to initiate the educational process at the school without attending the factory with the Vestel Unhindered (Engelsiz) Academy training module.

Our work to support disabled citizens is not limited to the “Equal Opportunities” project. Also in 2015, we brought two young people suffering from the Down syndrome and two mentally disabled young individuals into working life by creating job opportunities for them at Vestel City through the launch of the “I’m part of life” project.

We are also continuing our efforts to include young people with disabilities into life through the “Just Give a Chance” project that we launched in cooperation with the Foundation for the Training and Protection of Mentally Handicapped Children (ZİÇEV) in 2014.

What would you like to say about 2016?

The production and consumption dilemma which, Turkey has been facing, remains as a structural problem challenging the economy. In this respect, Turkey should bring production and consumption patterns closer to each other, attach priority to domestic production, prefer locally manufactured goods as far as possible and strive to move away from the current environment of high consumption of imported products. Vestel is one of the companies attaching the utmost importance to domestic production. We also often express this issue with our motto of “Proudly Local” in various communication media.

Vestel, which owns and pioneers the concept of the “Smart City” while moving forward in technology in our country with the first domestic smartphone, will continue to lead the market as a strong producer on a global scale and to “touch the future” through the roadmap guided by the technology.

156 cyclists from 21 countries passed through the Vestel City, which is one of Europe’s largest industrial complexes established in a single location, in the Selcuk- Izmir stage of the Presidential Cycling Tour.*

*Vestel City has been the first manufacturing complex in the world hosting an international bicycle race.


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EXECUTIVE COMMITTEE

Necmi KavuşturanExecutive Committee Member

Ahmet Süha Erol Executive Committee Member

Nedim SezerExecutive Committee Member

Özer EkmekçilerExecutive Committee Member

Bekir Cem Köksal Executive Committee Member

İhsaner AlkımExecutive Committee Member

Enis Turan ErdoğanChairman of the Executive Committee


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Enis Turan ErdoğanChairman of the Executive Committee(1955 - Mersin) Enis Turan Erdoğan graduated from the Department of Mechanical Engineering at Istanbul Technical University in 1976 and completed a master’s degree in Production Management at Brunel University in the UK in 1979. After returning to Turkey, he served in a number of different managerial positions for various companies before joining Vestel in 1988. Mr. Erdoğan has served in various managerial positions at Vestel since 1988. He has served as the President of Vestel Dış Ticaret AŞ and a member of the Executive Committee of Vestel Elektronik until 2013. Turan Erdoğan was appointed as the Chairman of the Executive Committee of the Vestel Group of Companies on January 1, 2013. Mr. Erdoğan served as the President of TURKTRADE (Turkish Foreign Trade Association) for two periods between 2002 and 2006. He also served as a Board Member of Europe’s largest ICT Confederation, DIGITALEUROPE, between 2010 and 2014 as the first Turkish citizen to be elected.

Bekir Cem Köksal Executive Committee Member(1967 - Ankara) Bekir Cem Köksal graduated from the Department of Mechanical Engineering at Boğaziçi University in 1988, and completed a master’s degree at Bilkent University in 1990. Cem Köksal, who worked in the banking industry between 1990 and 2001, was appointed as the Assistant General Manager at Denizbank in 1997. Mr. Köksal joined Vestel as the Chief Financial Officer in 2002. Mr. Köksal currently serves as an Executive Committee Member in charge of Finance at Vestel Group of Companies.

İhsaner AlkımExecutive Committee Member(1954 - Kırklareli) İhsaner Alkım graduated from the Department of Electronics and Communications Engineering at Istanbul Technical University in 1977. After assuming various positions in the communications and electronics sectors, he joined Vestel family in 1988. Mr. Alkım has served in various R&D related positions at Vestel, except for a break which he took between 1998 and 2002. In 2005, Mr. Alkım was appointed as a Member of the Executive Committee and continues to hold this position as the Member in charge of Electronic Operations at the Vestel Group of Companies.

Necmi KavuşturanExecutive Committee Member(1956 - Gaziantep) Necmi Kavuşturan graduated from the Faculty of Political Sciences at Ankara University in 1979. He began his banking career at İş Bank in 1979. He held various managerial positions at Interbank between 1985 and 1997. He was appointed as the Assistant General Manager of the Management Services Group at Denizbank in 1997. Mr. Kavuşturan was appointed as the Group Head of Human Resources of Zorlu Holding in 2003. He has been serving as the Executive Committee Member in charge of Human Resources at the Vestel Group of Companies since 2005.

Ahmet Süha Erol Executive Committee Member(1957 - Izmir) Ahmet Süha Erol graduated from the Department of Electrical Engineering at Middle East Technical University in 1979. He worked as a Foreign Trade Executive in various companies in Algeria, the UK and Turkey before joining Vestel in 1998. Mr. Erol began his career at Vestel as a Procurement Manager between 1998 and 2000. He then continued serving as the Foreign Trade Assistant General Manager between 2000 and 2006 and as the General Manager of Vestel Dış Ticaret AŞ between 2006 and 2013. He was appointed as the Executive Committee Member in charge of Foreign Trade at the Vestel Group of Companies on January 1, 2013 and has been serving in this position since then.

Nedim SezerExecutive Committee Member(1958 - Tekirdağ) Mr. Sezer graduated from the Department of Mechanical Engineering at Istanbul Technical University in 1982. He completed a master’s degree in the Institute of Business and Economics at Istanbul University in 1990. After serving in various Turkish companies, he was appointed as the Plant Manager at Vestel Beyaz Eşya’s Washing Machine Factory in 1998. Mr. Sezer, who also assumed duty as the General Manager of Vestel Beyaz Eşya Sanayi ve Ticaret AŞ until April 1, 2015, has been serving as the Executive Committee Member in charge of White Goods at the Vestel Group of Companies since 2012.

Özer Ekmekçiler1

Executive Committee Member(1957 - Izmir) Özer Ekmekçiler graduated from the Department of Industrial Engineering at Middle East Technical University. After serving in senior executive positions in a number of sectors, he was appointed as the General Manager of Vestelkom AŞ in 2000. Mr. Ekmekçiler who was appointed as a Member of the Executive Committee in 2005, remained in this post until February 15, 2016.

*Mr. Ekmekçiler retired from office as of 15.02.2016.


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THE PRIDE OF TURKEY

VESTEL IS TURKEY’S ICON AND SOURCE OF PRIDE IN THE FIELD OF TECHNOLOGY EXPORTS

TO THE WORLD.


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VESTEL IN BRIEF

Vestel, a strong and market leading company not only in our country but also in global markets with its world class manufacturing approach, innovative and high quality products and broad vision, is Turkey’s icon and source of pride in the field of technology exports to the world.Vestel is a global group of companies consisting of 23 companies, 16 of which are located abroad. Employing nearly 16,000 people, Vestel represents an important source of power for the Turkish economy with its competency in technological development and share in the country’s total exports.

Vestel operates in the following areas:

• consumer electronics,

• white goods and

• digital products

Vestel, which is one of the world’s leading ODMs (Original Design Manufacturer) in the fields of consumer electronics and white goods, is one of the three largest TV manufacturers and among the top 10 white goods manufacturers in Europe. A strong and well known brand domestically, Vestel is also the leader in the Turkish TV market and one of the top three players in white goods in Turkey. At the same time, Vestel is among the ten most recognized brand names in Turkey.

Vestel stands out from the competition with the following advantages:

• the geographical location of its plants and their low cost advantage stemming from economies of scale,

• flexibility in manufacturing and product customization competencies,

• its superior position in R&D, innovation and design, and its strong sales organization and after-sales service network.

Vestel’s manufacturing plants are located in Manisa in Turkey and in Alexandrov1 in Russia. The Vestel City, established on a 1.1 million m2 area in Manisa, is one of Europe’s largest industrial manufacturing complexes in a single location.

Vestel is a strong and market leading company, not only domestically but also in global markets with its world class manufacturing approach, innovative and high quality products and its far reaching vision. Vestel is the pride and symbol of Turkey in the field of technology exports to the world. Vestel appeals to different consumer tastes in 152 countries with its diverse product range based on its competency in technology and design development and accounts for around 90% of Turkey’s total TV exports and 30% of Turkey’s total white goods exports. Vestel has been the Turkey’s indisputable export leader in the electronics sector for the past 18 years.

Vestel’s sales strategy is implemented on two pillars:

• In the European market, mainly operate as an ODM and also undertake some branded sales through the well-known regional brands which its owns and global brands which it licenses,

• To sell with its own brands, mainly its leading Vestel brand, in Turkey, the CIS and the Middle East.

Reaching a wide range of consumers through the “multi-brand and multi-channel strategy” which is domestically pursued, Vestel boasts one of Turkey’s most extensive sales and after-sales service networks.

Vestel: A Global ManufacturerOne of the top 3 television manufacturers and one of the top 10 white goods manufacturers in Europe, the leader in the Turkish TV market and one of the

three largest manufacturers of white goods in Turkey

1 The manufacturing operations of Vestel CIS Ltd, Vestel’s 100% owned subsidiary, which was engaged in the production and sale of white goods and TVs in Russia, were gradually ceased in 2015 due to adverse market conditions. However, the company’s sales activities are continuing. At this stage, no Board decision has been taken for the closure of the plant while the evaluations regarding the utilization of the factory and its equipment are still underway.


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VESTEL’S MAIN STRENGTHS

Innovation

• Creating innovation by combining strengths in R&D and industrial design with manufacturing competency,

• Rapidly transforming new technologies into products in a cost effective manner.

Flexibility in Manufacturing and Product Customization

• Product development and diversification according to customers’ varying needs; being able to differentiate mass production on an order basis thanks to flexible manufacturing capability,

• Product customization according to customer demand and/or geographical and socio-cultural characteristics,

• Ability to develop a wide range of models for various brands.

Customer Commitment

• Offering an impeccable ODM service that covers everything from original design and manufacturing to point distribution,

• Not directly competing with the customers’ brands in Europe,

• Prompt production and delivery and ability to handle small batch orders.

Cost Advantages

• Benefiting from economies of scale in procurements, in particular, in component purchases, by virtue of its purchasing power as a large scale manufacturer,

• Efficiency, effectiveness and cost advantages arising from manufacturing at Vestel City, one of Europe’s largest industrial manufacturing complexes located under a single roof,

• The logistical advantage for exports arising from the proximity of Vestel plants to European market, when compared to the Far Eastern competitors,

• The existence of a developed supplier base in Manisa, especially for white goods, and the cost advantages in terms of distribution and logistics, facilitated by Vestel City’s close proximity to Izmir port and suppliers,

• Relatively low unit labor costs when compared to European manufacturers,

• Newer and modern production facilities when compared to European manufacturers,

• The import tax advantage in countries with which Turkey has a Free Trade Agreement over the manufacturers of countries for which there is no such agreement.

Vestel offers an impeccable ODM service that covers everything from original design and manufacturing to point distribution.


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VESTEL’S MANUFACTURING POWER: VESTEL CITY

Officially opened in 2003, Vestel City is today one of the Europe’s largest industrial complexes manufacturing in a single location. Vestel’s mega factory - Vestel City - was featured in the “Mega Factories” documentary series on the National Geographic Channel. Vestel was the world’s first electronics and white goods company and Turkey’s first brand and industrial facility to appear in the documentary series, which features the world’s most famous brands.

In 2012, Vestel City was awarded Total Productive Maintenance (TPM) Certificate by the Japan Institute of Plant Maintenance.

In 2014, Vestel Elektronik received the “Award for Excellence in Consistent TPM Commitment” in recognition of its success in the field of TPM works which Vestel has advanced to the next level. Vestel Beyaz Eşya also won the “Award for TPM Excellence”.

Vestel City:· Manufacturing on an area of 1.1 million m2

· A total manufacturing capacity of 24 million units/year including an annual production capacity of 15 million units for consumer electronics and digital products and 9.4 million units for white goods.


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Domestic Sales NetworkReaching a wide range of consumers through the domestically pursued “multi-brand and multi-channel strategy”, Vestel boasts one of the most extensive sales and after-sales service networks in Turkey.

1,250 Vestel stores11 VS Outlet storesemagaza.vestel.com.trvsoutlet.com.tr

Within the scope of its multi-channel strategy, Vestel reaches consumers through technology retailers, hypermarkets, household stores and e-commerce web sites, in addition to its exclusive dealers. With this new strategy, the Company increased its effectiveness and market share in the domestic market, reaching a higher number of consumers.

Domestic After-Sales Services 334 Authorized Service Centers13 Central Services Call Center

VESTEL IS PRODUCING FOR THE WORLD


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Vestel’s Global Network Vestel’s international sales & marketing organization includes local sales offices of foreign trade companies in ten countries in Europe and the direct sales points in the region, which includes the CIS and the Middle East.

Foreign Trade Companies operating in 10 countriesFrance Germany Spain England Netherlands Finland Russia Kazakhistan Romania Poland

Vestel branded products are sold at 2,750 stores and sales points in Russia, the CIS and the Middle East.

1,250Domestic

Vestel stores

2,750Stores and sales

points abroad

152Export

destinations

10 Foreign trade

companies in Europe


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VESTEL’S STRATEGY AND REALIZATIONS IN 2015

Main strategyTo invest and grow in its main areas of operation and in

new business lines that offer high growth potential.

To also grow in markets other than Europe, which is Vestel’s main export market, where it is among the leading ODM producers.

To evaluate different entry alternatives into these markets, such as direct investment, partnerships and contract manufacturing.

Strategies

Increasing market diversity1

Branded growth

To increase market share in the domestic market with its own brands by strengthening the brand image, the sales and distribution network and after-sales service quality.

To strengthen its position in the European market through the well-known regional brands in Vestel’s portfolio and the global brands which are licensed.

To accelerate branded growth by capitalizing on brand licensing partnerships for both the European and other markets.

To strengthen its market position also in the surrounding region by developing operations in nearby countries with its own brands.

3

To develop products which have a similar technology with Vestel’s existing products, but with different areas of

use, in the consumer electronics, digital products and IT sectors.

Capturing market share in new and expanding areas of use4

To increase the number of A-brand clients in the customer portfolio, for which ODM service is provided.

To expand market share by diversifying the product range in consumer electronics; To increase the sales of larger screen premium TVs with advanced features, to further enhance the product range in white goods, to increase the sales of built-in products by increasing its penetration in the kitchen manufacturers channel.

To obtain a higher share in the rising “outsourcing” trend, especially among the A-brand customers.

To maximize customer satisfaction by continuously working on areas such as energy efficiency, water conservation, the ‘internet of things’ and meeting market expectations in the best possible manner with the existing products.

Increasing customer and product diversity2


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Main strategic goal

To create value for the Company’s shareholders by increasing revenue and profitability through sustainable growth

Gaining new A-brand customers in the white goods segment in line with the increasing competitiveness in the European market

Increasing the share of larger screen and mid to high-end televisions in production and sales, increased the average screen size by nearly 1 inch in 2015, launched Turkey’s first domestically produced curved TVs to the market, introduction of UHD TVs and set-top devices that support the Android TV platform.

New generation products in white goods: A dishwasher which is 20% more efficient than the A+++ energy class and a washing machine 70% more efficient which the A+++ energy class; Smart built-in oven, 70 cm double door top Freezer Frost Free products with a new generation cooling system and inverter air conditioner.

Continuing the successful sales and marketing initiative launched with the “Turkey is Vestelized” campaign with the “Proudly Local” campaign, continuation of activities aimed at the strengthening of the after-sales services, customer services and dealer network and continued growth in new sales channels entered into under the multi-channel strategy.

Vestel Group has reinforced its leading position in Turkey’s TV market by increasing its market share further.

As part of the strategy to increase branded sales in international markets, commencement of the first Sharp branded white goods exports to Europe under the brand licensing agreement with Sharp.

• The launch of Venus V3, the new series of the first domestic smart phone, Venus

• Transition into Smart Home system• Growth in LED lighting• Smart City technology platform• Electric vehicle charging station

Vestel Ventures Ar-Ge AŞ, which was established as a 100% subsidiary of Vestel at the end of 2014, with the aim of supporting and investing in innovative ideas and projects, in particular, the ‘Internet of Things’, mobile projects and electronic devices, made its first investments in the health technologies and energy sectors.

Next step: To advance the smart platform structure one step forward with the Vestel Cloud; the productization of wearable technologies.

Exports to 152 countries through the addition of new markets Positive steps taken towards expanding exports, especially in North Africa, Eastern Europe and the Sub-Saharan region

Realizations


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ZORLU GROUP

Home TextileKorteksZorluteks• Turkey’s largest integrated producer and exporter of

polyester yarn• Europe’s leading home textiles company

Consumer Electronics and Digital Products, Household Appliances Vestel• One of the leading ODM providers of TVs, white goods and

digital products for the European market• One of the leading players in the European TV market• One of the biggest players in the domestic TV and white

goods markets through its well-known Vestel brand

EnergyZorlu Enerji Group• A rising player in Turkey with 627 MW of installed capacity • 56.4 MW of installed capacity in Pakistan and 290 MW of

installed capacity in Israel (through a 25% stake in the 840 MW Dorad Natural Gas Combined-Cycle Power Plant and a 42.15% stake in the 64.54 MW Ashdod and 126.4 MW Ramat Negev Natural Gas Co-generation Power Plants)

• Competency in providing integrated services, which comprise generation and sale of electricity and steam, electricity trading; “turnkey” construction of power plants, including the project development phase, long-term operation, maintenance and repair of power plants and natural gas distribution and trade.


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With its strong and pioneering companies in different sectors, Zorlu Group is focused on creating higher and sustainable value for Turkey.

Real EstateZorlu Gayrimenkul Geliştirme ve Yatırım• Established in 2006 to develop, sell, lease and operate

quality housing, office space, business centers, shopping malls, hospitals, hotels and mixed-use real estate projects at prime locations both in Turkey and abroad.

• Standing out as Turkey’s first mixed-use project with five functions, the Zorlu Center is home to a Performing Arts Center, a shopping mall, a hotel (Raffles Istanbul Zorlu Center), offices and residential areas. Zorlu Center commenced full operation with all of its functions with the opening of the Raffles Hotel in 2014.

• The Group’s Levent 199 office project on Büyükdere Avenue was completed in the third quarter of 2014. Zorlu Levent 199, a Class A+ office building has 40,000 m² of gross leasable area.

Mining - MetallurgyMeta Nikel Kobalt Madencilik• Specialized in the development of nickel cobalt resources• Aiming to become a regional supplier of nickel and cobalt• Additional investments in the Gördes Nickel Cobalt Plant

and the extraction of nickel-cobalt reserves under the permits in Eskişehir and Uşak

Gördes Nickel Cobalt Plant:

• 300,000 tones of proven nickel reserves• The first stage of the project is a hydro-metallurgy plant

with 10,000 tons of annual nickel production capacity and undertaken with an investment of US$400 million.

• As of September 2014, the commissioning works at the plant have commenced and the first concentrate nickel was produced in December 2014. Within the scope of trial production activities, commercial concentrate nickel production commenced in 2015 and was exported to China.

• There are plans for the doubling of the Gördes Nickel Cobalt Plant’s nickel concentrate production capacity and for the production of high value added end products within the scope of the ongoing R&D activities in the coming period.

FactoringZorlu Faktoring• Established in 2012 to provide factoring services in Turkey

and abroad• Operating with the objective of extending its factoring

products and services throughout Turkey by focusing on leading companies with a wide supplier and dealer network, in addition to medium and large scale companies.


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LEADING TECHNOLOGIES

VESTEL DEVELOPS LEADING

TECHNOLOGIES WITH A TEAM OF 1,200 PEOPLE IN FOUR R&D CENTERS

LOCATED IN VESTEL CITY.


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VESTEL R&D: LEADING TECHNOLOGIESFOR TOMORROW’S WORLD

Vestel invests in knowledge and technology in its R&D centers in different locations in order to offer value added projects and innovative products to world markets, and differentiates itself through its design and test infrastructure which rapidly adapts to changing technology. In all of Vestel’s R&D units, technological developments are closely followed while Vestel also directly contributes to these technological developments.

Vestel establishes long-term strategies with the awareness that having the ability to transform scientific and technological findings into economic and social benefits is the basis for maintaining its presence in today’s competitive global environment. Vestel is determined to maintain sustainable corporate growth and increase its share in the world markets through its intensive R&D efforts.

With its strong vision, Vestel aims to be a leader in the field of “4C convergence” that has emerged through the integrated use of communication, consumer electronics, computing and content technologies in Turkey and Europe. In line with this, Vestel’s R&D mission is based on the development of technologies that will provide Vestel with advantages over its rivals in a fiercely competitive environment, while also being a pioneer of technology in fields that will enable the sustainability of its competitive position, which will carry the Company to the future.

Vestel’s R&D units employ a total of 1,200 people. Within the scope of their efforts, Vestel R&D units closely collaborate with a number of national and international institutions and agencies, especially universities.

Deriving its power in manufacturing from its R&D activities, Vestel allocates approximately 2% of its sales revenues to R&D spending on a yearly basis. Vestel is one of the three Turkish

companies to be listed among the top 1,000 companies in the world by R&D spending. The Company employs new specialists in its R&D units each year, in line with its growth target.

Vestel was one of the first companies to be accredited as an “R&D Center” by the Ministry of Science, Industry and Technology in accordance with the Law No. 5746.

Vestel’s EMC Laboratories, which were accredited by the Turkish Accreditation Agency (TÜRKAK) on 13 October 2009, set themselves apart from their rivals with 30,000 test scenarios. Vestel’s R&D is authorized to issue Electromagnetic Compatibility Certifications.

Vestel’s R&D Centers

Vestel has a total of four R&D Centers, three of which are Electronics R&D centers and one White Goods R&D center. The R&D centers, which are accredited in accordance with the Law No. 5746, are located in Vestel City, Manisa.

• R&D Center 1: Electronics High-End

• R&D Center 2: Electronics Center

• R&D Center 3: Electronics Digital Devices

• R&D Center 4: White Goods

Other Vestel Elektronik R&D Centers located in Turkey and abroad:

• Istanbul İTÜ Teknopark Vestek, where development activities are carried out for IPTV, 3D algorithm and server software used in TV interaction

• Cabot UK, which develops middleware software for digital broadcasts (DVB T/T2, C, S/S2) in Bristol, UK

• Vestel Elektronik Shenzhen R&D Office, which operates mainly in the area of component certification

Vestel R&D Center Vestel was one of the first companies to be accredited as an

“R&D Center” by the Ministry of Science, Industry and Technology.


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Project Based R&D Activities

Vestel conducts its R&D activities on a project basis in seven main groups, in addition to many auxiliary subgroups:

• Hardware Design

• Software Development

• Industrial and Mechanical Design

• Power Card Design

• Testing and Approval

• Certification of Compliance to International Directives and Standards

• Optical Design

Intellectual Properties and Patents

Vestel demonstrates its power and innovation in R&D through its claim in intellectual property and patents.

Vestel Elektronik applied to the European Patent Office for 13 patents that met the criteria in 2015. The Company had a total of 82 patented inventions which were registered as of the end of 2015.

Vestel Beyaz Eşya, which already holds 128 registered patent families, submitted a total of 21 patent family applications in 2015.

Vestel invests in knowledge and technology in its R&D centers in order to offer innovative products and projects to world markets and differentiates itself through its design and test infrastructure which rapidly adapts to changing technology.

Vestel Elektronik applied to the European Patent Office for 13 patents that met the criteria in 2015. Vestel had a total of 82 registered patented inventions as of the end of 2015.



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Vestel R&D’s Development Stages

Superior Picture Quality

4K, 8K, New generation Blu designs, High Dynamic Range (HDR)

More Sophisticated Software

Multi-processor and operating system support, partnerships with Android, HTML, Java, content providers

Automotive Electronics

Vehicle charging stations, in-vehicle digital information displays

Design for Manufacturing

Reflecting technologies that can be productized to design. Smart and advance technology that supports manufacturing automation: Industry 4.0, Robot technology

Internet of Things

The internet is everywhere in our lives with improved connectivity: smart things, smart home, smart TV and smart grid

“Greener” Products

LED lighting, local dimming, white goods with high energy efficiency and lower water consumption, reduced carbon emissions, solar energy storage systems


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Vestel’s R&D Collaborations

Industry-University Cooperation Forming collaborations with universities throughout Turkey is an important element of sustainable development for Vestel. In this context, various activities are carried out such as academic publications, career days, supporting of student clubs and projects, contests that encourage competition among students as well as activities with focus groups on a project basis. Vestel’s “Design for Manufacturing” Program is one of the exemplary practices carried out through collaboration with the universities. The aim of this program is to develop technologies that can be cost effectively transformed into products and to reflect those technologies onto product designs.

Vestel’s industry-university collaboration projects are shaped on the basis of supporting and encouraging research activities. The works that result in success are placed in national patent pool by means of obtaining patents and create added value for our country.

Joint projects undertaken by Vestel’s R&D centers and universities strongly contribute to university-industry synergy. Knowledge created in universities is transformed into

Vestel’s industry-university collaboration projects are shaped on the basis of supporting and encouraging research activities.

technology at Vestel’s R&D units by the expert teams and the software and hardware developed are used in new designs.

Vestel takes important steps for the future of university-industry cooperation by actively participating in External Consultancy Committees of the universities with which it cooperates.

Vestel carries out project-based cooperation and event participation with a number of universities, including Ege, 9 Eylül, Celal Bayar, Izmir Katip Çelebi, Yaşar, İTÜ, ODTÜ (METU), Boğaziçi, Koç, Sabancı, Bilkent, Fırat, Anadolu, Çukurova, Marmara, Gediz, Sivas Cumhuriyet, Ekonomi, Süleyman Demirel, Kocaeli, Erzurum Atatürk and Mimar Sinan Universities.

Vestel also supports scientific and academic theses oriented towards the needs of the industry within the framework of the San-Tez Program implemented by the Ministry of Science, Technology and Industry.



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Non-Governmental Organizations (NGO)In an effort to enhance the global competitiveness of Turkish IT and electronics sector, and bring its innovation potential to life, Vestel contributes to NGOs such as the Technology Development Foundation of Turkey (TTGV), the Western Anatolian IT and Electronics Regional Innovation Centre (BATIBINOM) and Informatics Valley.

Vestel actively takes part in the BATIBINOM Project backed by the Scientific and Technological Research Council of Turkey (TUBITAK) with the purpose of enhancing R&D and innovation capabilities of companies operating in Western Anatolia. As part of the project, Vestel supports the transformation process of information and knowledge into technology by serving on the external consultancy boards of the universities in the region.

International Technology PlatformsAs Europe’s largest ODM TV manufacturer, Vestel also continues its joint efforts with its international partners in R&D projects carried out on the European Technology Platforms such as Eureka, ITEA and Celtic. Vestel, which has been involved in a total of 25 project processes with its international partners since 2006, also aims to contribute actively to the studies within the framework of the Horizon 2020 in the coming years.

Industrial Partners Vestel established important collaborations with more than 70 industrial business partners, among which are Google, Viaccess, Mstar and Nagra.

Technology Transfer OfficesVestel collaborates with Technology Transfer Offices throughout Turkey, especially with the successful Technology Transfer Offices in the Aegean Region.

R&D support through Vestel Ventures Established with the aim of helping entrepreneurs who carry out R&D activities to develop new technologies, Vestel Ventures extends support for studies carried out in the areas of the ‘Internet of Things’, mobile projects and electronic devices.

In this context, know how and production facilities are made available to entrepreneurs in all the stages of the productization process, such as product design, industrial design, multi-screen interface design, prototyping, testing, certification and production.

As Europe’s largest ODM TV manufacturer, Vestel continues its joint efforts with its international partners in R&D projects carried out on the European Technology Platforms such as Eureka, ITEA and Celtic.


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Product Groups and Innovations in Consumer ElectronicsProduct Group

Products Specifications/Explanations

TV

Curved LED TV Curved TV that offers the same picture quality from all viewing angles.

Ultra HD TVELed / DLed, Flip Chip DledH.265, Netflix, HTML 5, HBB 2.0Wide Color Gamut, Quantum Dot Technology, High Dynamic Range (HDR)

Super Wide TV (85” - 110”) Smart Center technology that enables TVs, tablets and smartphones to communicate with each other; super thin bezels and borderless TV

8K TV Development of Multicore ARM Android applications

Set-Top Boxes (STB)

Security Oriented DVB OTT (Over the Top) set-top boxes with which satellite and cable broadcast operators reach consumers through standard internet infrastructure

IP & TV set-top boxes that support the applications of other devices used simultaneously with the television, android based set-top boxes supported by Marvell and AMlogic platforms with advanced features

Set top boxes that support the smart home concept

IP & Hybrid Oriented

Android STB

Smart Home, Smart Grid

4K Satellite Receiver

ProfessionalScreens

Digital Signage

The Digital Signage Display (32”, 40”, 46” and 55” Digital Signage) is a closed circuit broadcasting system with digital content. It is used for information-promotion purposes in various venues such as shopping malls, airports, hospitals and hotels. Its design and software can be developed according to customer specifications

Special Applications IP based interactive TV for use in hotels, hospitals and homes, which enables access to a wide range of content over a server

Media Monitor Videowall units (46” LCD - 47” and 55” LED) used at plaza entrances, shopping malls and stores, sales offices and similar environments

Mobile Devices Smartphone - Tablet

The design and manufacture of domestic smartphone Turkey’s first smartphone that uses the Android 5.1 Lollipop operating systemTurkey’s first and only Google Certified tablet and smartphone that have the legal right to use Google Play

LED Lighting LED Lighting FixturesLED Power Sources

Highly energy efficient lighting products, the R&D and design of which are carried out at Vestel City, including outdoor and indoor lighting fixtures such as street lighting, office lighting, architectural lighting and industrial lighting as well as power source products suitable for different purposes

Innovative Areas

Sensors / Piezo

Products for different uses with similar technology, which are developed with Vestel’s technological infrastructure formed by its unrivalled electronics R&D and know-how built up over the years

Automotive ElectronicsTelecommunication ProductsWearable TechnologiesTouch Screen TechnologiesAdvanced Material Technologies



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Product Groups and Innovations in White GoodsProduct Group

Products Specifications/Explanations

Refrigerator70 cm wide No-Frost Products with Frost Free Technology

Thanks to a new generation cooling system, food shelf life is increased and vitamins are retained; food aromas do not mix with each other thanks to two independent air cycles in the fridge and freezer sections; the dual cooling system allows the unit to use less energy and cool faster.

Thanks to the patented V-Lift mechanism, the refrigerator door shelves provide storage areas to suit needs. The shelf height adjustment can be made at 6 different levels with the V-Lift smart storage solution unit, therefore rendering it unnecessary to take out other food in order to place items in the refrigerator door shelves.

Every corner of the refrigerator can be seen clearly thanks to the LED lighting system that is located on the side of the cooler, above the freezer.

The ice maker, designed with a minimalist touch, provides flexible use alternatives based on the size of the foods thanks to its moving structure.

The Zero Overflow System allows the new generation no-frost products to fit snugly into the allocated space in the kitchen with the no-overflow gate design eliminating the need for extra space to open the door.

RefrigeratorA++ No-Frost Refrigerator with Single Speed Engine Technology

Highly energy efficient and high performance fridge with a spacious interior capacity with its 195x70 cm dimensions.

RefrigeratorA+++ (-20%) Refrigerator with Pro-Drive Engine Technology

The refrigerator with Pro-Drive engine technology, consumes 20% less energy than A+++ products and 80% less energy than A class products due to its smart software.The two different cooling systems in the cooler and freezer sections prevent scents in the refrigerator from mixing with each other.

Deep Freezer

54 cm Vertical Type Freezer with 15 kg Freezing Capacity

A high-volume vertical deep freezer which has interior accessories with minimalist and stylish design, electronic control panel, fast freezing feature and high energy efficiency.

Cooker 75 liter Built-in Oven Product Family

Oven with 75 liter interior volume, slim control panel, 6 cooking racks, a wide range of remote control functions from simple oven remote controls to top level electronic oven controls, detachable large interior glazing and large visor oven door, hinge system (SoftClose) that prevents the slamming of the oven door by instantly braking at the moment of closure, wire shelf, fully extendable telescopic rails, catalytic cleaning, VapClean®cleaning function.

Cooker 90 cm Sekurit Built-in Cooker

90 cm wide glass stove plate, 5 gas hobs, highly efficient dual controlled triple flame wok burner (triple circle of flame that can be separately controlled with extra power gas burner), emergency gas cut-off switch, large-surface cast grid and automatic ignition.

Cooker 65 liter Active Cool Pyrolytic Built-in Oven

By creating a cold surface on the large inner glass oven door with a specially designed cooling system on the 65 liter pyrolytic built-in oven platform, even when the temperature inside the oven rises to about 500°C when the oven is in the cleaning process (pyrolysis), the temperature on the door surface is kept below the 35 K limit and below 10 K under normal cooking functions.

Cooker A++ Energy Class Built-in Oven

Built-in oven developed by Vestel, with the best energy class ranking in the world in its segment with an ‘A++’ rating.

Air Conditioner Buzz Inverter A/C

Inverter air conditioning unit with an A++ energy efficiency, capable of efficiently cooling at temperatures of up to 46°C with 170 Watt and capable of operating at temperatures of up to 54°C with a 145 Watt power supply.

Air Conditioner

Inverter A/C designed & manufactured in Turkey

Inverter air conditioner which is designed and developed by the Vestel Beyaz Eşya’s R&D team and manufactured in Vestel Beyaz Eşya’s production facilities. Due to the feature of being operated from outside the home, the ambient temperature can be displayed on a smartphone or a tablet, from which the desired temperature and desired operating mode can be set.

Air Conditioner

Active Carbon Filtered Inverter A/C

A/Cs which clean the air 10 times more effectively than existing filters due to the active carbon filter which was developed in collaboration with a university and productized through the Vestel branded A/Cs.

Air Conditioner A+++ (-7%) Inverter A/C

The highly efficient inverter air conditioner designed at Vestel, enabling optimal operating efficiency at entire heat loads with the electronically controlled throttle, DC compressor with variable speed and silent design with external fan motor and high efficiency.

Washing Machine

9 kg Capacity PyrojetTM Washing Machine

The washing machine with PyrojetTM technology, consumes 60% less energy than products with a 9 kg capacity in the A+++ energy class, saves 3,080 liters of water annually and provides maximum hygiene with the Allergy Specialist Program endorsed by Allergy UK.

Washing Machine

Product Family with Low Energy Consumption

A range of 6, 7, 8 and 9 kg capacity washing machines reaching A+++ energy efficiency – the highest class on the energy label, offering economy and high performance.

Washing Machine

Digital DriveTM Product Family

A range of 8-9 kg Digital DriveTM Washer and Washer&Dryer product family offering high energy efficiency (improvements of up to 30%) and low noise levels (reductions of up to 8 dBA at the washing cycle, and up to 5 dBA in the spin cycle) compared to the existing engine technology widely used in washing machines.

Washing Machine

10 kg Capacity TwinJetTM Washing Machine

A standard body sized washing machine with large internal volume and a 10 kg loading capacity with TwinJetTM technology reaching a A +++ (-10%) energy efficiency level.

DishwasherProduct Family with Low Energy Consumption

Economical and high performance products with “Waterbox” and “Autodoor” technologies, washing capacity for 14 people, 20% more energy efficient than A +++, “Smartwash” technology that sets the washing program according to the degree of soiling, and “EasyTray” 3rd basket feature.

Dishwasher Touch Control Full Built-in Product Family

Economical and high performance touch control full built-in product family with washing capacity for 12 and 15 people, reaching A+++ energy efficiency which is the highest class on the energy label.

Dishwasher 45 cm Product Family with 3rd basket

Economical and high performance products with washing capacity for 10 people, variable speed washing pump with “Autodoor” technology reaching A+++ energy class / 44 dBA noise level, and “EasyTray” 3rd basket feature.


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OFFERING A UNIQUE CUSTOMER EXPERIENCE IN SALES AND AFTER-SALES SERVICES

International Sales

Vestel’s international sales strategy is implemented on the axis of sales to A-branded business partners, distributors, wholesalers and retail chains within the scope of ODM services, as well as branded sales through the regional brands which Vestel Group owns and global brands licensed.

Besides expanding its ODM customer portfolio, Vestel aims to increase its brand penetration and market share in global markets through the well-known regional brands acquired in Europe, and through the global brands licensed.

In line with its profitable growth strategy, Vestel is increasing the share of mid to high-end products in its sales mix.

Vestel exported to 152 countries in 2015 and maintained its leading position in Turkey’s exports in the electronics sector for the 18th year.

Vestel carries out its marketing and sales activities in the European market through the local sales and distribution network of its wholly owned foreign trade subsidiary, Vestel Ticaret AŞ (“Vestel Ticaret “) in France, Germany, Spain, the UK, the Netherlands, Finland, Russia, Kazakhstan, Romania and Poland. Sales and marketing activities in other international markets are carried out directly by Vestel Ticaret.

Vestel Ticaret took over the rights and privileges for the development, manufacturing and sales and marketing of white goods products in Europe under the Sharp brand through the brand licensing agreement signed with the Sharp Corporation in September 2014. As of 1 January 2015, Vestel Ticaret became the exclusive distributor of Sharp branded products in Europe which are produced at Vestel Beyaz Eşya’s factories and Sharp Corporation’s facilities in Asia. This agreement will strengthen Vestel’s presence in the European white goods market, while also increasing its premium and branded product sales.

Vestel maintains its rapid growth in the Eastern European market as well.

Besides Europe, Vestel also exports to markets in Australia, India, Africa, the Middle East, Oceania and Latin America. Vestel unwaveringly continues to expand its export destinations, especially taking into account the potential growth expected in the sub-Saharan region.

Domestic Sales

All of Vestel’s sales and marketing activities in Turkey are carried out by Vestel Ticaret. The superior quality and diversity of Vestel’s product range and the experience it gained in the multi-brand concept are complemented by Vestel Ticaret’s strong distribution channels, which represent an important competitive advantage.

In addition to its physical distribution network, Vestel was the first consumer durables brand which started selling products over the internet where the Company reaches consumers through the emagaza.vestel.com.tr website. All Vestel products are available for sale on this website, which offers an eye-catching, user friendly design.

Periodic campaigns and promotions are constantly held on the e-store. Shoppers visiting the Vestel e-store can take advantage of special offers which can be followed at this site. Vestel also sells its products through vsoutlet.com.tr over the internet.

As of the end of 2015, the vestel.com.tr platform had 241,778 members while the vsoutlet.com.tr platform had 9,632 members.

Within the scope of the domestic sales organization, Vestel accesses to a broad customer base through the 1,250 Vestel stores, 11 VsOutlet stores, e-store, vsoutlet.com.tr, technology retailers, hypermarkets, household stores and e-commerce websites.

Vestel offers its productsto millions of consumers through its strong sales organization in Turkey and

in international markets, which is managed with proactive strategies.


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Vestel’s renewed retail concept

Within the framework of its new store concept, Vestel renewed the exterior frontage and the interior layout of the majority of its 1,250 dealers’ stores. Vestel adheres to an integrated approach in everything from the window display layouts to in-store events at every point where it comes into contact with the consumers.

With the new arrangement, all products can describe themselves directly to customers through the POPs in the Vestel stores. Shoppers can learn all the details and features of a product, and the advantages which separate that product from other products through the POPs in the store. Consumers are also permitted to test the products. This creates an appropriate environment that allows consumers to comfortably carry out comparisons in each product group.

Distinguishing itself with its after-sales services

Vestel’s after-sales activities are carried out by Vestel Customer Services General Directorate (“Vestel Customer Services”). Vestel Customer Services promises a unique customer experience with the mission of providing reliable services that transform expectations into satisfaction and satisfaction into gratitude through the 334 authorized service centers which provide after-sales services across the country, the Central Services positioned in 13 locations in 12 different cities, the call center and the technical and field units.

Vestel Customer Services General Directorate created a difference in after-sales services in the sector through its new organization and the new practices it has initiated.

Investments carried out during this transformation process include the Central Services, training leaps, revisions to the spare parts unit and the warehouse, projects developed in the IT field and restructuring of the call center.

Vestel Service Academy team together with Yaşar University received the award for the “Successful Team of the Year” by KalDer with the Authorized Service Business Management Certificate Program in 2015.

The Call Center service was restructured within the Customer Services General Directorate at Vestel City in Manisa, which is the heart of Vestel’s production activities. With the capacity to respond to 400 calls at the same time, Vestel Call Center is comprised of two units: a Communications Center that initially answers the calls and a Solution Center that monitors the resolution process. Specialist customer representatives working on a 24/7 basis strive to offer solutions in the first call. Calls from social media, the internet, the website and all other defined channels as well as by phone are all monitored. The Call Center aims to resolve the customer problems primarily on the phone by providing customers the right information.

Vestel Customer Services established the Central Services to be a role model for the authorized service centers. Central Services, which were established for the coordination, training, inspection and rapid supply of spare parts to authorized service centers, operate in 13 locations in 12 different cities throughout the country.

A big step was taken in the direction of providing faster after-sales services and resolution to customers with the Central Service organization. In addition, the Central Services work in coordination with the central technical units in new product testing.

Within the framework of this organization, Vestel relocated its spare parts warehouse to its new location at Vestel City, thus increasing the inventory carrying capacity. This allowed Vestel to dispatch 97% of spare part demands within 24 hours.

A big step was taken in the direction of providing faster after-sales services and resolution to customers with the Central Service organization.



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An array of impressive pioneering projects commissioned by Vestel Customer Services in 2015.

Mobile AssistantThrough the Mobile Assistant application, which the customers can download to their smartphones, they may request an after-sales service for their appliance, chat with the customer representative, track the service process and instantly access the technical details of the products.

Live (CapCanlı) SupportThe “Live (CapCanlı) Support” project was developed in 2015 in order to differentiate after-sales support services. Live support is offered on the http://www.capcanlidestek.com/ website where customers can access the team members through online messaging. In order to prove the live support feature, real-time video recordings were made and presented for viewing on the internet. The Vestel Live Support team’s efforts produced positive results in a very short period of time; phone requests from consumers decreased and the use of the Live Support team increased by 30%, with the duration of online conversations decreasing by 18%.

güVENUSsü (Trust Base)güVENUSsü (Trust Base) repair centers were established in Istanbul, Ankara and Izmir to provide a distinctive service approach for smartphone and tablet products. In addition to the software and accessories repair services provided by the other Vestel authorized service centers, güVENUSsü repair centers also provide hardware repair and device replacement services.

The güVENUSsü repair centers work with the target of resolving customer records for defects within a maximum of 7 days with the aim of boosting customer satisfaction. When a defective product is brought physically to güVENUSsü repair centers, the repair service is provided within 20 minutes. For the products reaching the güVENUSsü centers by post there is target of dispatching them by the next day at the latest.

All stages of the service process can be monitored from venusdestek.vestel.com.tr, where the record of failure is opened and the service process can be monitored either with IMEI or a call number. If a product is out of warranty, preliminary price information can be accessed and the service fee can be paid securely and quickly through this site.

Vestel Central Services in Turkey

Adana Gaziantep

Diyarbakır

Kayseri

Istanbul EuropeIstanbul Asia

BursaAnkara

SamsunTrabzon

MuğlaAntalya

Izmir


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Vestel was declared “The Company with the highest gratitude rate” independent of sector in 2015 by the sikayetvar.com website.

The company receiving the most gratitude according to Şikayetendex report

According to the Şikayetendex report, which measures the satisfaction level of customers leaving feedback on the www.sikayetvar.com website, Vestel was declared to be the brand receiving the most thanks from its customers, ranking the first in five categories with its success in complaint management in both 2013 and 2014. The sikayetvar.com website revised the assessment criteria in 2015. The new report, prepared as a “Customer Experience Index”, consists of two main categories, including brand perception change (satisfaction, loyalty and recommendations) and customer sharing management (contact speed, complaint process, solution rate, satisfaction with the result and gratitude rate) as well as sub-categories.

According to the Customer Experience Index measurements, Vestel, by making a difference in after-sales services, once again ranked the 1st and maintained its leadership in the White Goods and Television categories in 2015. Vestel was also declared “The Company with the highest gratitude rate” in 2015 by the sikayetvar.com website independent of sector.

Long Term Specialist Education Project In 2015, a total of 320 technicians in 17 groups, including Home Type Air-Conditioner Systems in 4 Groups, Image and Sound Systems in 4 Groups, Washing Machines in 4 Groups, Coolers in 4 Groups and Cookers and Built-in Appliances as 1 Group, completed the Long Term Specialist Training Program and

went back to the field as “Specialist Technicians”. A total of 646 Specialist Technicians have been trained so far.

Diplomas awarded to Vestel Authorized Service Centers from Yaşar University in the second term of the Certificate Program.In line with the concept of “Perfect service”, an Authorized Service Center Business Management Certificate Program was developed in collaboration with Yaşar University, specifically for the authorized service center owners and managers. The Program produced its first graduates in April 2014 when 96 authorized service center owners received their diplomas after completing 80 hours of training. The second Certificate Program began in 2015 with the participation of 115 authorized service owners, who graduated in May 2015.

The objectives of the certification program are to help authorized service centers to improve themselves in the area of efficient and profitable business management, to increase the quality of the service which they provide on behalf of Vestel, to ensure that they completely and properly fulfill their legal and regulatory obligations, and to maximize customer satisfaction.

Authorized service center personnel may access up-to-date technical information very rapidly through the regular online training carried out from a live broadcast studio.

Vestel Service Academy team together with Yaşar University received the award for the “Successful Team of the Year”



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by KalDer with the Authorized Service Center Business Management Certificate Program in 2015.

The Certified Quality in Customer ServicesThe ISO 9001: 2008 Quality Management System Certificate was obtained in the first quarter of 2015 as part of the pursuit of quality launched by the Customer Services General Directorate.

Vestel Customer Services is currently working on projects to qualify for the ISO 10002:2006 Customer Satisfaction Management System Certification.

Corporate Brand and Communications Strategy

Launched by Vestel in 2014, the “Turkey is Vestelized” (“Türkiye Vestelleniyor”) communications campaign achieved its targets in its first year and continued to achieve further success in 2015.

The basic elements of Vestel’s new communications campaign can be summarized as follows;

• To convey “making world class technology accessible in Turkey”, which represents the purpose of Vestel’s existence, as a key message for consumers when communicating Vestel through the technology it produces,

• To reinforce the perception of Vestel as a technological brand in the minds of consumers through the narrative of Vestel City, the solid power behind the Vestel brand.

The new communications strategy focuses on highlighting the young, dynamic and competitive features of the Vestel brand while emphasizing the key messages of ‘Vestel is “the smartest choice” for Turkish consumers when compared with the other global brands’ and ‘Vestel brings world class technology to Turkey at affordable prices’. With the “Vestelizing” concept, we aim to spread the purpose of Vestel’s existence throughout Turkey. Turkey’s “Vestelizing” stories will continue to be told through the innovative Vestel products over the course of the campaign.

The campaign that features the “Proudly Local” theme was built on communicating the importance of home-grown production and demonstrating how the world’s latest technology is produced at Vestel City, which is one of Europe’s mega factories.

Launched by Vestel in 2014, the “Turkey is Vestelized” (“Türkiye Vestelleniyor”) communications campaign achieved its targets in its first year and continued to achieve further success in 2015.

“Turkey continues to be Vestelized through the pride of domestic production.”Vestel City is at the focal point of the communications campaign introduced in 2015 as a continuation of Vestel’s existing campaign. The campaign that features the “Proudly Local” theme was built on “communicating the importance of home-grown production and demonstrating how the world’s latest technology is produced at Vestel City, which is one of Europe’s mega factories”.

To emphasize the mission of “being the pioneer of Turkey’s digital revolution” adopted by Vestel, Vestel highlighted in its new ad campaign, where and how the products which will be the pride of Turkey are produced by opening the doors of Vestel City, which is a giant industrial complex, where the world’s latest technologies are developed for the whole world and which is seen as the epicenter of the digital revolution carried out by Vestel.


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VESTEL LED LIGHTING

Vestel became the first and the only Turkish member of the Lighting Industry Association (LIA), which is the largest association in the European lighting sector.

Turkey’s Market Leader in LED Lighting Products

Vestel, which is a leader in terms of energy efficiency in the electronics and white goods products, reinforced its leadership in energy efficiency solutions by including LED lighting products to its portfolio.

LED lighting products, which provide energy savings of up to 80%, are environmentally friendly as they do not contain mercury and have an operating life of more than 35,000 hours, helping to lower carbon emissions by consuming less energy than standard lighting fixtures.

The optical, mechanical, electronic and power unit designs of Vestel’s LED products are undertaken by the Turkish engineers in the R&D Center in Manisa. Vestel carries out the testing of its LED lighting products at its optical measurement laboratory in Vestel City.

Vestel’s LED lighting product group and LED panel product group, street lighting, industrial lighting and architectural lighting fixtures are in line with the Company’s efforts to shift its entire product range, including consumer electronics and white goods, to energy efficient devices with an energy class rating of A+ or higher.

While LED lighting is mostly used in stores and offices, hospitals and other health institutions as well as street lighting stand out as the other areas which offer future development potential for LED lighting.

Vestel carries out the R&D activities for its LED lighting products. Its “street lighting” product reduces energy consumption through its smart lighting feature. Vestel took the first step by participating in the project that aims to achieve considerable energy savings by replacing all the conventional street lighting in Turkey with LED lighting.

Vestel achieved high sales figures with its LED Panel products, which enjoyed even higher levels of energy efficiency with the Backlight technology. Vestel also brought the LED High ceiling and LED Batten luminaires to the market, with applications in hypermarket and warehouse lighting.

Vestel also demonstrated its strengths in production quality and R&D in the field of LED lighting, by successfully increasing its market share by almost 50% in 2014. It continued to strengthen its market leadership, reaching a 20% market share.

Vestel became the first and the only Turkish member of the Lighting Industry Association (LIA), which is the largest association in the European lighting sector. Vestel’s Panel Light and Power Supply LED products received quality certification at international standards from the LIA that has 175 years of experience in the lighting sector.

Vestel participates in the DIALux Program, which is being used by more than 500,000 lighting planners and designers worldwide. Vestel LED Lighting products will reach a mass market of global users through the DIALux’s online, free of charge catalogue that can be accessed in 10 languages.

According to a research study carried out by Frost & Sullivan, the leading international research company, the LED market is expected to grow at an annual average growth rate of 21% between 2015 and 2020 in Turkey with LED lighting products targeted to reach a consumption level of 75%, with a corresponding decline in the use of conventional products.


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VESTEL SAVUNMA

Vestel, through Vestel Savunma, manufactured the first domestic tactical Unmanned Aerial Vehicle (UAV), the Karayel (Southwind), which was developed and produced in accordance with Stanag 4671, which is NATO’s airworthiness standard, by carrying its high technological competence in R&D into the field of defense-aviation.

Karayel UAV system produced for the Turkish Armed Forces consists of 6 aircrafts, 3 ground control stations and ancillary subsystems.

Karayel completed the flight tests in 2014 showing the success of staying 8 hours in the air at an altitude of 21,500 feet. During Deniz Kurdu (Sea Wolves) military exercise, it completed a total of 15 operational flight hours by fulfilling the tasks assigned by the Naval Forces Command.

Karayel performs superior performance in harsh weather conditions due to the ice removal system on the aircraft.

Karayel is distinguished with its 70 kg of payload capacity and the target of up to 20 hours of endurance in the air as an advanced UAV.

Vestel Savunma also developed Bora training aircraft to be used in avionics testings and pilot trainings apart from Karayel.

Karayel completed the flight tests in 2014, successfully staying in the air for 8 hours at an altitude of 21,500 feet, and completed a total of 15 operational flight hours by fulfilling the tasks assigned by the Naval Forces Command.

The features of Bora;

• Operation Altitude: 18,000 feet

• Payload Capacity: 10 kg

• Endurance: up to 5 hours

The Karayel (Southwind) UAV (Unmanned Aerial Vehicle) system produced for the Turkish Armed Forces consists of six aircrafts, three ground control stations and ancillary subsystems.


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VESTEL VENTURES

Vestel Ventures is an investment company established by Vestel to support entrepreneurs with innovative ideas.

Vestel Ventures Ar-Ge AŞ (“Vestel Ventures”), Vestel’s 100% owned subsidiary, is an open platform for everyone. It was established at the end of 2014 with the aim of providing support to entrepreneurs in order to implement new ideas and transform these into commercial success.

Vestel Ventures provides Vestel’s R&D, production, marketing, distribution, sales channels and strength in design, business network and management experience to help entrepreneurs to channel all their attention to their projects under the formula of V3® Formula = Cash + Support + Fund, which it has developed.

Finding capital is one of the hardest challenges facing entrepreneurs or those with an idea in the early stages. Vestel Ventures finds solutions to entrepreneurs’ financial difficulties through the seed investment and support which it provides. Entrepreneurs are also provided with cash assistance through access to grant funds via Vestel’s experience in grant funds in Turkey and Europe. If needed, counselling is provided to help find solutions to the problems faced by the entrepreneurs.

Entrepreneurs are provided with Vestel’s know how and production facilities in all the stages of the productization process, including product design, industrial design, multi-screen interface design, prototyping, testing, certification and production.

In addition, Vestel provides support to entrepreneurs in international trade fairs and exhibitions for their marketing and branding workshops. Exporting products to 152 countries and being a major force in its home market, Vestel has the ability to work with the top-notch academicians, industrial designers, and internationally-recognized consultants in all parts of the world.

These specialists, who are the best in their respective fields, provide support to entrepreneurs in resolving their problems and in accessing know how.

Supported Projects

Vestel Ventures aims to deploy Vestel’s leverage to transform technologies, which improve efficiency and day to day life, into products. It works to free up the time of the entrepreneurs and extends support to their investments in the fields of the internet of things, innovative devices and mobile projects.

Initiatives that will make a difference or create significant value for Vestel or its users are supported by Vestel Ventures.

The Internet of ThingsProjects involving devices communicating with each other over the internet and development of a communication ecosystem.

Mobile ProjectsInitiatives with regard to mobile devices and mobile applications and innovations.

Innovative Devices All innovative ideas that make a difference either for end-users or on an industrial scale by simplifying processes, reducing costs and increasing efficiency. The realization of ideas and their success are indispensable for Vestel Ventures, which prioritizes ideas, which will bring efficiency into our lives, innovative mobile projects, the internet of things topics and new innovative devices.

Vestel Ventures, an idea arena where entrepreneurial technologies can meet, aims to strongly contribute to Vestel in global competition through the companies that it invests in by expanding the technological potential in the ecosystem.

While Vestel Ventures mobilizes all of Vestel’s resources to help the entrepreneur to focus on its business, it offers the advantage of Vestel’s design, production power and business network to the entrepreneur with the V3® Formula, which it has developed.

For more information www.vestelventures.com


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SUSTAINABILITY AND VESTEL: TODAY, TOMORROW, FOREVER

Vestel’s approach to sustainability has been shaped by a goal of better future on the basis of the economy, people, the environment and social contributions.

Applying sustainability in its entire business model, Vestel Elektronik was included in the Borsa Istanbul (BIST) Sustainability Index, which comprises the publicly traded companies with a high rating on corporate sustainability performance, as a result of the assessments conducted by Borsa Istanbul in 2015.

Vestel Elektronik was included in the Borsa Istanbul (BIST) Sustainability Index as of 2 November 2015.

Human Resources at Vestel

Innovative, dynamic, team spirited human resourcesVestel is aware that it is not the giant factories or the state-of-the-art technology products manufactured that are behind its sustainable success, but rather it is the highly motivated and happy employees who have the skills to manage and utilize these in pursuit of a common goal. Accordingly, Vestel is continuously reinforcing its workforce by steadfastly investing in qualified human resources, thereby contributing to the nation’s employment.

Vestel formulates its change and development strategies based on the idea of “To be where the talent is”. Vestel began the journey towards becoming a preferred employer with “The campuses are Vestelized” project in 2013 in order to “Vestelize” young talented individuals required by the Company. Vestel initiated awareness efforts at universities and continued to spread its internal communication works in 2015. The starting point of this project was the creation of new ways outside the existing means in reaching qualified candidates and finding talented individuals before they graduate.

On the basis of the importance that Vestel attaches to the employment of new graduates and young talented individuals, university students were identified as potential candidates; intensive activities were carried out in university campuses to further enhance the perception of Vestel as an “Attractive Employer”. These activities have included university career activities, engineering competitions, graduation projects, sponsorships, workshops and case studies that require close relationships with the university career centers and student clubs, and projects that support the collaboration between university and industry. As a result of these activities, Vestel won acclaim in a study of “Turkey’s Best Employers”. In 2014, Vestel was the only institution deemed worthy of receiving the “Most Admired Company” Award among the candidates in Kariyer.net with its Human Resources practices.

One of the most important goals of Vestel’s Human Resources Policy is to become a company which talented individuals target working for and to ensure their loyalty to the Company by providing them a suitable career path. In line with this

Vestel Elektronik was included in Borsa Istanbul (BIST) Sustainability Index as of 2 November 2015.


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goal, projects are being developed aimed not only at reaching such individuals, but also at retaining them and ensuring their loyalty to the Company.

In accordance with this goal, Vestel

• pays attention to the needs of its personnel in order for them to be successful in their jobs,

• upholds justice and equal opportunities among personnel by balancing its personnel’s expectations with those of the Company,

• ensures the development of its personnel by continuously providing training programs,

• keeps track of and evaluates the performance of its personnel and encourages and rewards achievement,

• performs career planning with vertical and horizontal promotions.

New developments are monitored, evaluated and implemented for improving the human resources management at Vestel. Internal duty backups for sustainability are conducted periodically and mainly in-house human resources are utilized to meet the needs.

Human resource applications are shaped by the principles of increasing the sense of belonging, the internalization of the corporate culture and employee engagement, and ensuring long-term cooperation. The Human Resources is represented at the Executive Committee level in the Company in order to set the basis for the Human Resources Policy and to implement it effectively.

Continuity in Training Activities At Vestel, each employee is recognized as an asset, and a steady training model is adopted to improve the existing talents of the personnel and facilitate their adaptation to innovation and change. In this context, qualified and sustainable training activities are carried out in order to sustain the human resources who contemplate, explore, question and who are creative, entrepreneurial and productive. In line with this, in 2015, the Company held technical training programs such as ISO 9001, ISO 27001, project management, in addition to soft skills training such as team work, innovation, presentation

techniques and leadership skills. Technology Academy trainings continued in the electrical, electronics, computer, industry and mechanical engineering fields and trainings were also carried out to raise the awareness of personnel in the areas of occupational health and safety and environment.

In 2015, senior managers received a total of 4,879 hours of training while training hours for other employees amounted to a total of 88,695 hours.

Vestel’s human resource processes are awarded Vestel invests in qualified human resources and contributes to country’s employment by continuously strengthening its workforce. The methods applied by the Company in the formation of its human resources, which Vestel considers to be one of the most important factors behind its position and success in the sector, were deemed worthy of a number of awards from different organizations in 2015.

“Respect for Human” Award by Kariyer.netVestel won the “Respect for Human” Award from Kariyer.net with hundred percent response rate to all job applicants, in recognition of the value it attaches to people.

“Anatolian company which received the most applications” Award by Kariyer.netVestel won this award as the Company to have received the highest number of applications for its job postings.

At Vestel, each employee is recognized as an asset, and a steady training model is adopted to improve the existing talents of the personnel and facilitate their adaptation to innovationand change.


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Brandon Hall Competition AwardVestel’s training activities were deemed worthy of silver prize in the “Best Learning Team” category with “V for VESTEL, WE for learning” project in the Brandon Hall Awards, which is considered to be one of the most prestigious prizes at international level in the field of education.

Vestel Technology AcademyLifelong learning opportunity is provided at Vestel Technology Academy which was developed via collaboration between Vestel Group of Companies and Özyeğin University. The Program is aimed at enhancing the technical knowledge and experience of Vestel’s engineers in their fields.

The Program

• allows employees who have been educated in different fields of engineering to address their weaknesses in areas required by Vestel,

• allows employees to obtain post-graduate degrees in areas in which they had received undergraduate education,

• allows employees, who have graduate degrees to obtain a PhD degree.

A total of 283 Vestel employees attended the training programs offered by Vestel Technology Academy in 2015.

Vestel Management AcademyIn addition to the technical training programs, the Company carries out Master of Business Administration Program without a thesis at Management Academy in collaboration with

Özyeğin University. The Program is designed to support the education of non-engineering personnel. 34 Vestel employees are currently enrolled in this Program.

Vestel Management Trainee ProgramVestel launched its sixth Vestel Management Trainee (“MT”) Program which is carried out with the academic support of Özyeğin University in order to cultivate young talented university graduates as potential managers of the future. A total of 24 candidates, who successfully completed all phases of the MT Program, joined Vestel in 2015. Two of these candidates will take up duty in other Zorlu Group companies.

Within the scope of the MT Program, the young talented individuals who join Vestel, after going through a number of phases, receive four months of theoretical training starting from their first day at work and two months of internship at Vestel companies before assuming their duties.

The Program aims to ensure that the young management candidates who join the Vestel family comprehend both Vestel and the sector thoroughly, develop new projects by employing what they had learned in the Program and create value for the Company.

Vestel Supply Chain AcademyThe Supply Chain Academy was established for the Vestel Supply Chain Group in 2015. Both technical and personal development training were provided to employees with the aim of increasing their competence in this field.

Vestel’s Basic HR Indicators (Based on the end of 2015 data)Personnel Number %Total 15,690Female 5,557 35Male 10,133 65Average Seniority 4 yearsBreakdown of Senior Management Based on Gender Female MaleGeneral Manager 1 7Assistant General Manager 2 28Mid Level Management 31 203Breakdown of Personnel Based on Education Level Female MalePhD 4 10Master's degree 101 285University graduate 710 1,544Vocational high school graduate 644 1,037High school graduate 4,098 7,257Total 5,557 10,133

Number of Personnel by CategorySenior

ManagementOther Employees (Excluding Administrative Personnel)

272 15,418



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Vestel and the Environment

Vestel is also a leading industrial organization in its environmental practices.Vestel adopted an organizational culture that complies with the philosophy of Total Quality Management. Vestel together with its employees has adopted the general objective of maintaining and improving environmental quality by carrying out environmental impact reviews of all of its operations, production lines and products.

In this respect, Vestel’s fundamental targets are as follows:

• To use energy efficient and eco-friendly technologies to improve its energy performance,

• To continuously improve its energy performance by benchmarking it with the best practices in the world,

• To use renewable energy resources,

• To conduct activities necessary for the reduction, reuse, recycling and recovery of waste,

• To foster a culture of participation and innovation among stakeholders to ensure energy saving,

• To regularly conduct internal and external energy efficiency studies by identifying areas which require improvement in energy efficiency,

• To raise awareness of energy efficiency through training, seminars and informative posters in order to ensure that all employees play a role in the reduction of energy consumption,

• To modify equipment and processes in order to optimize energy consumption,

• To support creative ideas for using and improving new technology.

Maximum energy efficiency in all productsA significant portion of Vestel’s R&D efforts are directed towards developing environmentally friendly technologies and products that provide extra hygiene and use resources efficiently by maximizing energy and water saving.

Continuously revising its energy efficiency targets, Vestel shifted its entire product range towards A+ and above rated energy efficient appliances. Vestel strives to develop highly energy efficient and environmentally friendly products which have a minimum impact on the environment by continuously carrying out R&D and innovation studies. Vestel currently allocates half of its R&D budget to the development of environmentally friendly products as well as provides additional funding to such projects, which are commenced without delay.

90% of Vestel’s white goods product range consists of environmental friendly products. Vestel reduced its energy consumption by 80% and water consumption by 45% compared to its levels 5 years ago.

• Vestel Pyrojet washing machine, which consumes 70% less energy than machines with an 8 kg capacity and 60% less energy and 22% less water than machines with a 9 kg capacity in the A+++ energy class, is now the world record holder for energy efficiency.

• Vestel Ekomaks dishwasher consumes 20% less energy than an A+++ energy class dishwasher.

• Pyrojet and Ekomaks received VDE approval from the German Association for Electrical, Electronic and Information Technologies by virtue of their energy efficiency.

• The Eco Time mode embedded in Vestel’s new generation washing machines allows the machines to work at off-peak hours at lower electricity tariffs by setting the program’s start time.

• Vestel’s 100% domestically produced first induction cookers consume 40% less energy than electric cookers and 55% less energy than gas cookers.

• The Vestel Puzzle fridge enables energy efficiency through its lights that automatically turn themselves off in a motionless environment with the Motion Sensored Smart Light Technology, and also its sections that can be closed when not used.

90% of Vestel’s white goods product range consists of environmentally friendly products. Vestel reduced its energy consumption by 80% and water consumption by 45% compared to its levels 5 years ago.


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Seeking to contribute to Turkey’s energy efficiency with its LED Lighting products, Vestel supports the LED street lighting project. At the same time, Vestel is carrying out activities aimed at increasing the use of LED lighting products at homes. The environmentally friendly LED lighting products, which do not contain mercury, help to reduce carbon emissions and create a healthier environment at home.

Vestel was the first Turkish company to be certified by the ISO 50001 Energy Management System As a result of its efforts to protect the environment, reduce greenhouse gas emissions, use resources effectively and cut energy expenses, Vestel Beyaz Eşya won the title of being the first Turkish company to obtain the ISO 50001 Energy Management System Certificate. Having integrated its business processes with the Environmental Management System and other management systems in order to manage energy consumption systematically, Vestel Beyaz Eşya was awarded this certificate by the Turkish Standards Institute (TSE).

Vestel’s production processes are driven by respect for the environment and people Through its state-of-the-art production processes, which respect the environment and people, Vestel not only reduces the environmental impact of its operations, but also minimizes production costs and risks.

Vestel prevents potential environmental damage through a raft of measures, which include energy saving, reduction, reuse and recycling of waste and limiting the use of hazardous chemicals.

Vestel saves a significant amount of energy and water through the environmental impact reviews which it carries out on a yearly basis, hence achieving significant progress in terms of operating cost management, in addition to making a valuable contribution to the environment.

As a result of these activities, Vestel reduced its water consumption per unit product by 1%, its thermal energy consumption by 22.4%, its natural gas consumption by 13.3%, its diesel consumption by 18.2%, its use of plastic raw materials by 33.6%, its use of varnish raw material by 77.4%,

its use of solder raw materials by 14.5% and the amount of hazardous waste generated as a result of manufacturing by 34.2%.

Occupational Health and Safety at Vestel

Occupational Health and Safety: Another definition of respect for peopleVestel, which demonstrates sensitivity regarding occupational health and safety for a safe and healthy work environment, attaches importance to the assessment and management of the potential impact of risks in the workplace on personnel, subcontractors, visitors, solution partners and other personnel in the workplace environment. Vestel continually trains all of its personnel to ensure that they gain the right behavioral habits with respect to quality, environmental awareness, energy efficiency, information security and potential health and safety risks.

The framework of Vestel’s occupational health and safety policies consist of the following:

• To create a “Safety Culture” throughout the Company and ensure that it is adopted,

• To avoid conditions which are dangerous and harmful to health, which may arise during the course of operations and to create a healthier work environment by conducting up-to-date risk analyses based on the policy of “preventing before it happens”,

• To ensure occupational health and safety together with the personnel, by asking for their feedback through continual training and the platforms in which the personnel participate,

• To ensure that all employees accept occupational health and safety as an indispensable priority and an inseparable part of their jobs,

• To create a safe working environment by completely preventing or minimizing fire risk and accidents during the operations,

• To eliminate or minimize unsafe situations or acts in the workplace by conducting risk analyses and implementing preventive plans based on “The right work for the right employee” principle.



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Vestel and the Community

It is essential for Vestel to grow by sharing with the community.The principle of creating value for the community and keeping values alive together with the community underpins Vestel’s fundamental business strategy. Vestel aims to provide resources and opportunities especially for the younger generations through long-term social contribution projects in the areas that receive limited support. Vestel continues to develop social projects that are focused on the future on the axes of the environment and people, and that reflect Vestel’s perfectionism.

Many projects are carried out at Vestel, where the greatest sensitivity is shown to disabled citizens at every opportunity. These projects are summarized briefly below:

• We employed four disabled young people, including two with Down syndrome and two who were mentally disabled through the “I’m part of life” project, which was developed to support disabled individuals to be a “part of life” by offering them job opportunities at Vestel and including them in the work life.

• 11 young people who were hearing and visually impaired joined Vestel family on 5 May 2015 through the “Equal Chance” project. Production lines were specifically organized for those with disabilities. A “Basic Sign Language Education” was launched jointly with the Celal Bayar University Continuing Education Center on 22 December 2015 to improve the lives of people with disabilities who were employed through this project, to increase the awareness of employees without disabilities and to strengthen their communication with each other. A total of 27 Vestel employees received their certificates by participating in this program.

• Vestel employees have demonstrated their sensitivity not only in the form of employment, but also at every stage where they can support the lives of people with disabilities. Under the leadership of the Vestel Air Conditioner Production Directorate, wheelchairs were distributed to eight disabled individuals on the World Disability Day on 8 December 2015.

During the last one year, 177 disabled people were employed at Vestel Elektronik, thus taking the number of employees with disabilities working at the Company to 257.

Vestel, which takes into consideration the environment and people at every stage from its efficiency-oriented production technologies that minimize the strain on natural resources to its energy-saving products, expanded its activities carried out within the framework of sustainability with the Vestel Forest, which consists of a nursery of 10,000 saplings.

The Vestel Forest is being developed in Çeşme-Ildırı-Kadıovacık region with the slogan of “future generations will not talk about deforestation” jointly with the Aegean Forestry Foundation, which has achieved a great success in its environmental protection efforts for the last 20 years. Vestel cooperates with its customers to give life to this forest that it sees as a symbol of respect for the environment and people. In this context, consumers who buy Vestel products will be able to donate a sapling through a code that will be delivered to them via a text message. Customers who donate a sapling to the Vestel Forest will receive an Eco-Friendly Certificate.

The cyclists who participated in the 51st Presidential Cycling Tour of Turkey held with Vestel’s sponsorship passed through Vestel City, Vestel’s production complex built over an area of 1.1 million m2.


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FINANCIAL INFORMATION AND REPORTS


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2015 ANNUAL REPORT 2015 FAALİYET RAPORU

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RISKS AND ASSESSMENT OF THE BOARD OF DIRECTORS

Risk Management

Zorlu Holding’s Enterprise Risk Management Department is responsible for the early detection of risks which could jeopardize Vestel Elektronik Sanayi ve Ticaret AŞ’s (“the Company”) existence, development and continuity, implementation of the necessary measures against these risks and management of risks in a centralized manner. Zorlu Holding Risk Policy and Procedure and Enterprise Risk Management Framework, which are applicable to all the Zorlu Group companies, form the basis for the Group’s risk management activities.

Zorlu Holding Enterprise Risk Management Policy is summarized below:

Goal Setting · Embedding risk management principles into strategic planning and goal setting processes· Aligning the strategy and goals set with the Company’s risk appetite

Risk Definition· Identifying the risks and opportunities that may affect the Company’s goals with the

participation of the entire organization in a coordinated manner and within the framework of a shared perception

Risk Assessment and Inherent Risk

· Assessing the probability of risks and their impact on the Company in case of their occurrence

· Determining the value of risk before the actions taken and control activities, i.e. inherent risk

Determining Actions

· Addressing the risks in the most appropriate way (Accepting the Risk, Transferring the Risk, Treating the Risk, Avoiding the Risk) by taking into consideration the risk appetite and cost-and-benefit factors

· Determining actions in line with the responses identified and managing the risks proactivelyResidual Risk and Action Plan Follow-up

· Determining the value of risk after the actions taken and control activities, i.e. residual risk· Monitoring the completion process of the activities specified in action plans

Reporting and Communication of Risks

· Prioritizing the revealed risks and tracking them using the Key Risk Indicators· Measuring and reporting the key risk indicators that give warnings and all other risks

taking into consideration the control points· Sharing all the activities transparently and ensuring that risk management process is

integrated into the decision-making mechanisms with the establishment of a culture of risk awareness across the entire organization

Vestel Elektronik’s Early Detection of Risk Committee, which was established on 15 March 2013, undertakes studies for the early detection of risk factors which could jeopardize the existence, development and continuity of the related companies, implementation of the necessary actions and remedies, and managing the risks in a coordinated manner for the purpose of achieving compliance with the Article 378 of the Turkish Commercial Code no. 6102. During 2015, Enterprise Risk Management Department submitted 6 risk reports to the Early Detection of Risk Committee to enable the Committee to effectively supervise the enterprise risk management processes, and these reports were presented to the Board of Directors following the review of the Committee.

The Company’s vision is defined as creating sustainable value for all the parties involved by securing operational effectiveness, growth and regulatory compliance. Below is the summary of the four existing and potential risk categories which may have an impact on the attainment of the Company’s goals towards its vision, and the actions taken in relation thereto.


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Strategic Risks

Strategic risks mean the inadequacy of the Company’s strategies and inability to remain competitive and achieve targets due to failure to accurately identify the external factors, the employment of an outdated business model, incorrect composition of the business portfolio, inefficient organizational structure, inconsistency of performance measures with the business strategies and insufficient resource allocation.

The strategic risks category includes, among others, various risks in relation to environmental analysis, business model and port-folio, organizational structure, resource allocation and planning.

The following actions are taken in relation to these risks:

• Conducting of coordinated feasibility studies, benefit and cost analysis and budgeting studies by the relevant departments in relation to new investment decisions,

• Evaluation of the legal, political, etc., risks before and after the investment by obtaining consultancy services as and when necessary,

• Diversification of investments made in different countries and business lines,

• Monitoring of the return on investments,

• Using dealers, distributors, online sales and similar distribution channels actively and considering each one as a business model,

• Entering new business lines by making use of strategic partnerships in public and private sectors,

• Determining innovative strategies with respect to sales and marketing.

Financial Risks

Financial risks refer to the Company’s inadequate finances, the emergence of currency, interest rate, credit risks and other uncertainties and fluctuations in financial markets, which may have a negative impact on the Company, and inability to secure liquidity.

The financial risks category includes, among others, risks in relation to interest rate, currency, capital, financial derivatives, energy and commodity prices, stock prices, liquidity, cash flow management and receivable collection.


• Using alternative financing methods,

• Asset and liability management,

• Making use of various derivatives for hedging purposes, when necessary,

• Paying attention to not take on a financing burden which cannot be covered with the highly liquid assets as per the Company’s philosophy,

• Following up the budget targets with the actual results on a monthly basis and making revisions as necessary,

• Following up the profit target with the realizations on a monthly basis and making revisions as necessary,

• Insuring receivables and obtaining various guarantees.


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RISKS AND ASSESSMENT OF THE BOARD OF DIRECTORS

1. Fire, Machinery Breakdown and Loss of Profit

2. Employer’s Liability

3. Directors and Officers (D&O) Liability

4. Professional Indemnity

5. Third Party Liability

6. Product Liability

7. Credit Insurance

8. Marine / Cargo

9. Fidelity Guarantee

10. Personal Accident

Operational Risks

Operational risks refer to the inability of the Company’s business model to secure and sustain operational efficiency over the course of its operations towards achieving customer satisfaction and the Company’s performance targets in relation to quality, cost and time.

The operational risks category includes, among others, risks in relation to decision making with respect to operational processes such as supply, capacity, business interruption, customer satisfaction, human resources, environmental health and safety, information capital, authorization, information processing and technology, contractual obligations and pricing and risks related to financial reporting processes and budgeting and fraud risks.


• Supervision of all operational activities by the Internal Audit, Financial Audit and Tax Audit Departments set up under the Holding organization,

• Oversight by Zorlu Holding Enterprise Risk Management Department of the operational risks deemed significant via key risk indicators through the IT system, and informing the related business units on risk levels, when necessary,

• Measuring, reporting, and monitoring of customer satisfaction in relation to products and service network,

• Regularly providing compulsory training programs on occupational health and safety to all Zorlu Holding employees in accordance with the related regulations,

• Centralized follow-up on recommendations proposed by the insurers to Group companies subsequent to risk inspections,

• Monitoring and keeping records of repair and maintenance of plant and machinery,

• Following-up the policies and procedures for compliance with the legally defined standards in relation to environmental health, stakeholder safety and stakeholder health,

• Making commitments in relation to compliance with various principles such as human rights, environment, society, ethics, and anti-corruption, etc. through the United Nations Global Compact.

External Risks

External risks refer to the presence of external factors that may affect the continuity of the Company’s business model and the core values that drive the overall targets and strategies.

The external risks category includes, among others, risks in relation to access to capital, shareholder relations, natural disasters (force majeure risks), competition, customer demands (trends), financial markets, market sensitivity, sector risks, legal risks and risks in relation to regulatory compliance, political status and technological innovation.


• Developing necessary plans for recovering and resuming critical systems, technical infrastructure and facilities in alternative sites in case of a natural disaster or contingency, regularly monitoring business continuity and emergency action plans,

• Determining a broad insurance coverage across the Company, taking into consideration the natural disasters and terrorist acts to transfer potential risks to insurance companies, and minimizing the potential tangible effects of such incidents,

• Managing regulatory changes, legal actions, tax conflicts, intellectual property infringements, unfair competition and risks in relation thereto through coordinated communication among all the relevant Company units,

• Carrying out specific short-lived rehabilitations and works to integrate with the new technologies,

• Taking proper measures against adverse geographical and climatic conditions,

• Maintaining continuous and healthy communication that is open to all stakeholders through the activities of the Corporate Communications Department.

Other than the actions listed under the risk headings above, insurance policies are purchased as a risk transfer mechanism. The primary insurance policies purchased are listed below:


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INTERNAL AUDIT DEPARTMENT AND ITS ACTIVITIES

At Vestel Elektronik Sanayi ve Ticaret AŞ and other Zorlu Group companies, the internal audit function is being performed by the Internal Audit Department of Zorlu Holding since 2000. The Internal Audit Department conducts its activities based on the International Internal Audit Standards in accordance with the legal requirements and audit programs approved by the senior management. The Department shares the audit reports prepared after each audit, as well as the annual reports on the audit results for the full year, with the Holding’s Board of Directors, the Audit Committees and the Sector Heads. In addition to the Internal Audit Department, Financial Audit and Taxation Department was established in 2011 in order to perform financial audits across all the Group companies and commenced its activities in 2012. Additionally, in the last quarter of 2013, Internal Audit Department and Financial and Tax Audit Department were gathered under the umbrella of Zorlu Holding General Directorate of Audit and Internal Control. The objective, authority, responsibilities, operating principles and structure of the internal audit function are outlined in the “Internal Audit Regulation” and “Internal Audit Operating Principles” documents, which have been approved by the Board of Directors. The said documents were revised on 1 April 2014 and shared with the individual companies.

Under the risk-based annual audit program approved by the Board of Directors, the Audit Committee and the Sector Heads, audits are conducted in the areas of efficient and productive use of resources, compliance with the applicable laws, regulations, in-house policies and rules and the accuracy, reliability and security of information. Whenever deemed necessary, prior to each audit, the Department meets with the senior management to make risk assessments, and position the companies’ targets and risks that could jeopardize these targets in the risk matrix according to their effects and probabilities. During the audit field work, tests are carried out to evaluate the effectiveness of internal controls which monitor risks with significant effects and high probabilities. The results of observations are shared with the company management as a draft report; and then a final report, including the opinions of the management, is sent to the senior management. As a result, the Department offers consultancy services with a reasonable assurance level, and at the same time capitalizes on group synergy to highlight the best practices. One month after the issue of the final report, the actions taken are shared with the Board of Directors, in line with the 4T approach (Treat, Terminate, Transfer and Tolerate).

Audit Committee meetings are organized by the Audit Committee during the year. The Board of Directors is also invited to some of these meetings. In the meetings, information is provided on the planned or completed audits and the findings of the audit reports which were shared with the Board of Directors during the period.

Zorlu Group supports and promotes Zorlu Group Internal Audit Team, which consists of 13 people, in the areas of receiving additional training to improve and enhance their existing knowledge, skills and other qualifications, becoming a member of the related associations (e.g. The Institute of Internal Auditors, Turkey -TIA) and obtaining international certificates related with their occupation. Internal Audit team includes 2 CIA (Certified Internal Auditor), 2 CPA (Certified Public Accountant), 1 CISA (Certified Information Systems Auditor), and 6 CRMA (Certification in Risk Management Assurance).


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CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT

CONTENTS

PART I - STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE

PRINCIPLES

PART II - SHAREHOLDERS2.1. Investor Relations Department

2.2. Exercise of Shareholders’ Rights to Obtain Information

2.3. General Assembly Meetings

2.4. Voting Rights and Minority Rights

2.5. Dividend Right

2.6. Transfer of Shares

PART III - PUBLIC DISCLOSURE AND TRANSPARENCY3.1. Corporate Website and its Content

3.2. Annual Report

PART IV - STAKEHOLDERS4.1. Informing Stakeholders

4.2. Stakeholders’ Participation in Management

4.3. Human Resources Policy

4.4. Code of Ethics and Corporate Social Responsibility

PART V - BOARD OF DIRECTORS5.1. Structure and Composition of the Board of Directors

5.2. Operating Principles of the Board of Directors

5.3. Number, Structure and Independence of the Board Committees

5.4. Risk Management and Internal Control Mechanisms

5.5. Strategic Targets of the Company

5.6. Financial Benefits


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PART I - STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES

In line with the corporate governance practices initiated in late 2004, Vestel Elektronik Sanayi ve Ticaret AŞ (“Vestel Elektronik” or “Company”) began to operate the corporate governance mechanisms in parallel with the Corporate Governance Principles. In order to have an independent evaluation of the Company’s corporate governance practices and announce the results to the public, the Company has been obtaining corporate governance rating services for the past eight years. Vestel Elektronik’s Corporate Governance Rating has been improving steadily since its inclusion in the BIST Corporate Governance Index in 2007. Based on the evaluations of SAHA Corporate Governance and Credit Rating Services Inc. studies, the Company’s corporate governance rating was revised up to 9.12 on a scale of 10 as of February 23, 2015. This high score yet again confirms the importance Vestel Group attaches to corporate governance and its commitment to achieve further progress in this area. In parallel with being one of the pioneering companies that has adopted corporate governance practices in Turkey and the progress it has achieved so far in this field, Vestel Elektronik was also awarded with the “Best Corporate Governance, Turkey 2013” Prize by World Finance in 2013.

The breakdown of the Company’s Corporate Governance Rating by sub-categories is as follows:

Sub-categories Weight Rating in 2015Shareholders 0.25 9.49Public Disclosure and Transparency 0.25 9.14Stakeholders 0.15 8.91Board of Directors 0.35 8.95Total 1.00 9.12

Vestel Elektronik carries out all its activities in compliance with the applicable regulations and the Capital Market Board’s (CMB) “Corporate Governance Principles”. The Company has adopted the majority of the non-compulsory principles included among the Corporate Governance Principles appended to the CMB’s Communiqué on Corporate Governance no. II-17.1. As briefly summarized below, the Company took the following actions in order to further improve its compliance with the Corporate Governance Principles in 2015.

• The Company has been included in the BIST Sustainability Index from November 2, 2015, as result of the evaluations held by Borsa Istanbul. BIST Sustainability Index is comprised of companies with a high rating on corporate sustainability performance.

• The Company’s “Code of Ethics” has been amended within the framework of the Corporate Governance Principles appended to the CMB’s Communiqué on Corporate Governance, and has been made available for the information of shareholders via the Company website.

• The Company’s “Disclosure Policy” has been amended in accordance with the changes made in the CMB regulations, and has been presented to the information of shareholders via the Public Disclosure Platform and the Company website.

• Under the Article 10 of the CMB’s Communiqué on Corporate Governance and Article 5 of the Communiqué Serial: IV-41 on the “Principles to be Adhered to by Joint Stock Companies Subject to the Capital Market Law”, the conclusion section of the report on the related party transactions exceeding the stipulated thresholds between the Company and its subsidiaries and their related parties has been made available for the information of shareholders via the Public Disclosure Platform and the Company website.

• Pursuant to the Article 19 of the Capital Market Law no. 6362, the upper limit for the donations to be made in 2015, as proposed by the Board, was submitted to the approval of shareholders at the Annual General Assembly Meeting and was approved by the General Assembly.

In the implementation of Corporate Governance Principles, certain principles that do not conform to the Company’s structure and that are regarded as potential obstacles to operations are excluded. These principles and the reasons for opting not to implement these are summarized below:

• Granting shareholders the right to demand special audit and inclusion of an additional provision in the Company’s Articles of Association for the minority rights: Since the existing provisions in the Turkish Commercial Code on the appointment of a special auditor and minority rights are considered to be adequate, these rights are not separately stipulated in the Company’s Articles of Association.

• Due to the number of the members of the Board of Directors and the committee formation requirements, some Board members serve on more than one committee.

• Pursuant to the Article 4.6.5 of Corporate Governance Principles, remuneration and benefits provided to Board members and executive managers are publicly disclosed in the Company’s annual report. However, such disclosure is not made on an individual basis.


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• Currently, Mrs. Selen Zorlu Melik is the only female member on the Company’s Board of Directors and increasing the ratio of female Directors to the level set forth in the Article no. 4.3.9 of the Corporate Governance Principles lies among the Company’s medium term targets.

• A Directors & Officers Liability Policy has been purchased to cover the losses which the Company may suffer due to the wrongful acts of the members of the Board of Directors in the execution of their duties; however, the total annual liability limit does not exceed 25% of the Company’s share capital.

Those principles that remain outside the scope of the currently implemented principles and that are not yet implemented have not led to any conflicts of interest among the stakeholders to this date.

Acknowledging the contributions of the Corporate Governance Principles to the Company, Vestel Elektronik targets to attain a higher degree of compliance with those principles with the involvement of its employees and senior executives and to reach the highest standards in the field of corporate governance. The Company also continues with the necessary efforts to achieve compliance with the non-compulsory principles.

PART II - SHAREHOLDERS

2.1. Investor Relations Department

The Investor Relations Department is responsible for managing and maintaining the relations with the existing and potential shareholders, protecting and facilitating the use of the shareholder rights, including first and foremost the rights to obtain information and examination, raising the investor awareness and market credibility of the Company, and carrying out the necessary works for ensuring compliance with the capital market legislation. The Department reports to Mr. Bekir Cem Köksal, the Company’s Executive Committee Member in charge of Finance.

The Investor Relations Department presents a report on its activities to the Board of Directors at least once a year. The Department submitted its report on its 2015 activities to the Board on January 8, 2016.

The individuals in charge of the investor relations are as follows:

Name Duty License

Serap Mutlu Investor Relations Director and Member of Corporate Governance Committee

Capital Market Activities Advanced Level License (No: 201618)Corporate Governance Rating Specialist License (No: 700906)

Özgün Ünaldı Investor Relations Assistant Specialist -

Information relating to individuals working in the Investor Relations Department was announced on the Public Disclosure Platform (in Turkish: KAP) on July 31, 2014 and December 29, 2014.

The Investor Relations Department performed the following activities during 2015:

• Ensured that the records of correspondences between the Company and the investors, and of other information and documents are kept in a proper, secure and up-to-date manner; coordinated the transactions related with Merkezi Kayıt Kuruluşu AŞ (the Central Registry Agency) jointly with the Legal Affairs Department,

• Responded to the information requests about the Company, except for confidential information and trade secrets that are not disclosed to the public, in a clear and timely manner and in line with the Company’s Disclosure Policy, either via face-to-face meetings or using various other communication means,

• In cooperation with the Legal Affairs Department, ensured that the Ordinary General Assembly Meeting during the reporting period was carried out in accordance with the legislation, Articles of Association, and other internal regulations,

• Developed ways that would facilitate the shareholders’ participation in the General Assembly Meeting and improve communication during the course of the meeting, prepared the necessary documents that will be utilized by the shareholders at the General Assembly Meeting, and posted all kinds of updated information and disclosure that might affect the execution of the shareholders’ rights on the Company’s website,

• Maintained the Company website up-to-date, thereby enabling shareholders to access continuous and timely information about the Company,

• Monitored and supervised the fulfillment of the obligations arising from the capital market legislation, including all aspects of the corporate governance and public disclosure, coordinated the communication with the public, as well as the material event disclosures required by the legislation; held informative meetings with the domestic and foreign investors and analysts about the Company’s operations, financial performance and other developments during the reporting period; and participated in the conferences and roadshows organized by the brokerage houses.


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Towards informing the shareholders and investors during 2015, Investor Relations Department:

- Attended 4 investor conferences and 3 roadshows organized in Turkey and abroad by the brokerage houses,

- Held a total of 113 meetings with the investors and analysts either face-to-face or through teleconferences,

- Responded to nearly 100 enquiries received through e-mails and telephone calls in a timely fashion,

- Made a total of 70 material event disclosures within the scope of public disclosure as per the CMB regulations. All the material event disclosures were published simultaneously on the Company website.

2.2. Exercise of Shareholders’ Rights to Obtain Information

• The Company’s Articles of Association does not contain any provisions, which eliminate or restrict the shareholders’ rights to obtain information and examination, which are recognized by the legislation.

• The Company received various information requests from the shareholders during 2015. In accordance with the Company’s Disclosure Policy, these requests were responded to in a coherent, clear, and detailed manner, and all the inquiries except those related to trade secrets were replied to the satisfaction of shareholders. These queries were responded to via phone, e-mail or postal mail, in writing or verbally, further to the demands of the shareholders.

• During 2015, developments that might have an impact on the use of the shareholders’ rights were disclosed to the public through the material event disclosures made on the Public Disclosure Platform (PDP) and via the Company website.

• To facilitate the exercise of the shareholders’ rights to obtain information and examination, the Investor Relations website was redesigned and its content was enriched in 2011, and thereby, it was ensured that both domestic and international investors have an easy access to the highest amount of information within the shortest period of time, in an accurate, quick, simultaneous, complete and comprehensive manner. All the information required in the CMB’s Corporate Governance Principles is included on the Company website. Updating and monitoring of the website are the responsibility of the Investor Relations Department.

• The Company’s Articles of Association does not contain any clauses that prohibit special audit. Since this right is already granted to each shareholder at joint stock companies by the Article 438 of the Turkish Commercial Code, it was not deemed necessary to further stipulate it in the Articles of Association. The Company received no requests for the appointment of a special auditor during the reporting period.

2.3. General Assembly Meetings

• The Company’s General Assembly meetings are held in compliance with the principles listed under the “General Assembly” heading of the Corporate Governance Principles.

• General Assembly meetings are held in a way not causing any inequality between shareholders and enabling them to participate in the least costly manner as possible, in order to increase the participation of shareholders.

• Vestel Elektronik held its Ordinary General Assembly Meeting for the year 2014 on April 27, 2015 at 10:30 a.m. at the address of Levazım Mahallesi, Koru Sokak No: 2, Zorlu Center, Meydan Fuaye Alanı, 34340 Beşiktaş, Istanbul, in compliance with the Company’s Articles of Association.

• Invitation for the meeting was made in due time as set out in the Law and the Company’s Articles of Association, by being published in the Turkish Trade Registry Gazette No. 8792 and dated April 2, 2015 and in Dünya and Milliyet newspapers both dated April 2, 2015, and also by being posted on the Public Disclosure Platform, E-General Assembly System of Merkezi Kayıt Kuruluşu AŞ and the Company’s website at “www.vestelinvestorrelations.com”, by announcing the date and the agenda of the meeting. In order to facilitate attendance to the General Assembly, announcements were published in the Turkish dailies with high circulation and all the information and documents concerning the Ordinary General Assembly Meeting, including the meeting invitation and the General Assembly Information Document, were posted on the Company’s website.

• With the General Assembly Information Document prepared in accordance with the Corporate Governance Principle no. 1.3.1, access was given to all the necessary information about the General Assembly Meeting as well as to the information and announcements required by the regulations, and the relevant documents were also made available in hard copy for the examination of shareholders at the Company’s headquarters. A sample power of attorney form was also made available for the use of shareholders on the Company’s website.


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• Out of the total 33,545,627,500 shares corresponding to the Company’s total share capital of TL 335,456,275.00, 272,593 shares corresponding to TL 2,725.93 in capital were represented in person and 29,245,249,564.4 shares corresponding to TL 292,452,495.644 in capital were represented by proxy at the meeting. The meeting quorum achieved in the General Assembly was 87.18%.

• Prior to the Ordinary General Assembly Meeting, the shareholders, Capital Markets Board and/or other relevant public agencies and institutions did not request to add any items to the agenda.

• The agenda of the meeting was prepared in such a way that, each proposal was given under a separate heading and the headings were expressed clearly and in a way that will not lead to different interpretations. The care was shown for the agenda not to include phrases such as “other” and “various” and the information to be provided prior to the General Assembly Meeting was given with a reference to the related agenda items.

• In accordance with the “Communiqué Regarding the Electronic General Assembly System to be Implemented in the General Assembly Meetings of Joint Stock Companies”, published in the Official Gazette dated 29.08.2012 and numbered 28396, shareholders were granted the right to attend and cast vote at the Ordinary General Assembly through an electronic medium.

• The Company’s Articles of Association contains no provisions for the participation of stakeholders or the media at the General Assembly Meeting. However, participation is possible provided that the Company is informed beforehand. Only shareholders attended the 2014 Ordinary General Assembly Meeting while there was no attendance either from the other stakeholders or the media.

• It was ensured that the Board members who were related to the significant agenda items of the General Assembly, other related persons and officers who had responsibility in the preparation of the financial statements as well as the auditors were present at the General Assembly Meeting so that they could provide the necessary information and answer the questions about the important subjects on the agenda.

• Shareholders were allowed to express their opinions and pose questions under equal conditions at the Ordinary General Assembly Meeting. The shareholders did not ask any questions irrelevant to the agenda or so detailed that they could not be answered immediately, during the Ordinary General Assembly Meeting.

• At the General Assembly Meeting, shareholders were informed under a separate agenda item about the total donations amounting to TL 1,172,545.12 made during the year 2014 to Mehmet Zorlu Foundation and various educational institutions.

• The upper limit for the donations to be made in 2015 pursuant to the Article 19 of the Capital Market Law numbered 6362 was submitted to the approval of the General Assembly.

• In 2014, there has not been any transaction which required the approval of the majority of the independent Board members for the Board of Directors to take a decision and where the decision was left to be resolved by the General Assembly.

• During the year, the controlling shareholders, Board members, executives with administrative responsibilities and their spouses and relatives by blood or marriage up to second degree did not conduct any material transaction which may lead to a conflict of interest with the Company or its subsidiaries and/or did not carry out a commercial business transaction which is in the same field of activity with the Company or its subsidiaries on behalf of themselves or for a third party or did not become an unlimited shareholder in another company which operates in the same field of activity with the Company or its subsidiaries. There were also no transactions conducted by individuals who have access to the Company information in a privileged way, on their behalf within the scope of the Company’s field of activity.

• The minutes of the General Assembly Meeting and the list of attendees were disclosed to the public via the Public Disclosure Platform on the same day with the General Assembly Meeting. They are also made available for the examination of shareholders at the Company’s headquarters. All the announcements, documents, and other materials related to the General Assembly Meetings are accessible to the shareholders and all other stakeholders on the Company website.

2.4. Voting Rights and Minority Rights

• At Vestel Elektronik, the practices that impede the exercise of the right to vote are avoided and each shareholder, including the international shareholders, is given the opportunity to exercise his/her voting right in the easiest and most convenient way. In this context, according to the Article 21 of the Articles of Association titled the Ordinary and Extraordinary General Assembly and Quorum, shareholders who are entitled to attend the Company’s General Assembly Meetings are given the right to participate in these meetings via the electronic media as per the Article 1527 of the Turkish Commercial Code.

• All Vestel Elektronik shares are entitled to the same rights. There is no privilege concerning the voting right and this is stipulated in the Company’s Articles of Association.

• The Company’s subsidiaries do not have any shareholding interests in Vestel Elektronik. For this reason, there are no cross-shareholding interests and therefore, this issue was not put to vote at the General Assembly Meeting.


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• The Company’s Articles of Association does not contain any specific arrangements for the shareholders representing less than one twentieth of the Company’s paid-in capital, apart from the rights given by the law. However, two independent members serve on the Board of Directors to represent the interests of all shareholders and stakeholders, particularly those of the minority shareholders.

2.5. Dividend Right

• There is no privilege granted to shareholders regarding the distribution of dividends. Each share is entitled to an equal dividend.

• The Company’s Dividend Distribution Policy which, has been put in place by the Board of Directors’ resolution no. 2007/9 and dated 19 March 2007, has been amended in line with the CMB Communiqué on Dividends no. II-19.1. The Policy was submitted to the approval of shareholders at the 2013 Ordinary General Assembly Meeting, and was also made available for the information of shareholders on the Public Disclosure Platform and the Company website.

• The Company’s Dividend Distribution Policy, which has been accepted by the Board of Directors and disclosed on the Public Disclosure Platform, stipulates the ratio of dividend payouts which will be distributed in cash and/or in the form of bonus shares as minimum 25% of the net distributable profit, which will be reviewed by the Board each year depending on the domestic and global economic conditions, and the Company’s growth and investment plans and financial position.

• As per the Board of Directors’ resolution numbered 2015/16 and dated 1 April 2015, a separate item was included in the agenda of the 2014 Ordinary General Assembly Meeting for informing the shareholders that no profit distribution will take place for the year 2014 despite the fact that the Company recorded a TL 97,376,000.00 net profit in its 2014 consolidated financial statements prepared in accordance with the Turkish Accounting Standards and a TL 94,096,919.00 net profit in its statutory financial statements prepared under the provisions of the Tax Procedure Code, as there remains no distributable profit after offsetting these against the previous years’ losses and therefore, no dividends were paid.

• The Company’s Dividend Distribution Policy is disclosed to the public via the Company’s website and the annual report.

2.6. Transfer of Shares

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

PART III - PUBLIC DISCLOSURE AND TRANSPARENCY

3.1. Corporate Website and its Content

• The Company has an active and easily accessible website. The website was set up to ensure that shareholders, stakeholders and the general public are kept informed in an open, clear and simultaneous fashion. Information presented on the website is regularly updated.

• Company’s web address is “www.vestelinvestorrelations.com”. Furthermore, pursuant to the “Regulation on Websites to be Launched by Joint Stock Companies” and the 1st paragraph of the Article 1524 of the Turkish Commercial Code, in accordance with the principles and procedures regarding the launching of a website, allocation of a section of this website to publishing the announcements that are required to be made by the Company under the law and to information society services, our Company procures Central Database Service Provider support services from Merkezi Kayıt Kuruluşu AŞ (CRA) and the announcements that are required to be made by the Company by law can be accessed through the e-Company Information Portal of the CRA.

• The Company’s website contains the required information and documents stipulated in the CMB’s Corporate Governance Principles and the Turkish Commercial Code.

• The information on the website is also available in English in order to provide information to international investors.

3.2. Annual Report

• The Company’s annual and interim reports are prepared in accordance with the Turkish Commercial Code and associated legislation, the Capital Market legislation, and hence, Corporate Governance Principles, and in sufficient detail to give the public access to complete and accurate information about the Company’s operations and activities.

• Moreover, the Board of Directors’ Annual Report is prepared in accordance with the provisions of the “Regulation Regarding the Determination of the Minimum Contents of the Companies’ Annual Reports”, published in the Official Gazette dated 28.08.2012 and numbered 28395.


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PART IV - STAKEHOLDERS

4.1. Informing Stakeholders

• Stakeholders are individuals, institutions or interest groups that are related with the achievement of goals or activities of the Company such as employees, creditors, clients, suppliers and various non-governmental organizations. The Company protects the rights of the stakeholders, which are set by the legislation and mutual agreements, in its transactions and operations. In cases where these rights are not protected by law and mutual agreements, utmost care is given to protect the rights of the stakeholders in good faith and within the Company means.

• Stakeholders are regularly informed about the matters related to them in accordance with the Company’s Public Disclosure Policy.

• Employees and management take part in periodic meetings which help employees to remain actively informed about the Company. Attention is given to ensure two-way communication with information flowing upward to management from employees as well as downward from management to employees. The Company adheres to an “open door policy” to keep channels of communication open between the management and employees. In addition, employees are kept continuously informed via the corporate portal and e-mails.

• Periodic meetings are held with the customers and suppliers and all customers and suppliers are kept informed about the Company-related issues that may be of concern to them. The Company regularly organizes meetings with its dealers in order to measure customer satisfaction. When deemed necessary, additional one-on-one and group meetings are also held.

• The stakeholders can report Company’s transactions violating legislation or not compliant with the ethical rules to the Corporate Governance Committee, Audit Committee or the Investor Relations Department by accessing them via phone and/or e-mail.

4.2. Stakeholders’ Participation in Management

• Models supporting the participation of stakeholders, primarily of the employees, in the company management are developed in a manner not to hinder the activities of the Corporation. Besides, the independent members serving on the Board of Directors guarantee that not only the Company and the shareholders, but also all the stakeholders are represented in management.

• The Executive Committee Member responsible for Human Resources represents the employees, one of the Company’s largest stakeholder groups, on the Executive Committee.

• In making important decisions with regard to stakeholders, senior executives representing stakeholders are invited to the Board and Executive Committee meetings to express their opinions. Moreover, attention is paid to ensure that employees participate in the Board and Executive Committee meetings at certain intervals so that they can provide their opinions first-hand.

• Employees may convey their proposals that will add value to the Company and their complaints, if any, to the Human Resources Department through the “Vestel Suggestion and Improvement System” located on the Company’s corporate portal. Moreover, the employees can share their quality, cost and efficiency improving suggestions regarding the daily production processes and their creative ideas with the management within the scope of the Total Productive Maintenance and Kaizen-Continuous Improvement activities, in which the participation of all employees is ensured, by using the kiosks located in different parts of the factories, via the web, through “Suggestion and Appreciation Recognition System” located on the corporate portal or via the suggestion forms left in the suggestion boxes or in the autonomous maintenance boxes. The employee suggestions which are deemed to be suitable are transformed into projects in line with the Company’s goals and strategies and improvements are achieved in all processes with teamwork.

• Vestel Elektronik pays utmost attention to the monitoring and evaluation of the customers’ and dealers’ suggestions and complaints. In this context, after-service satisfaction surveys are conducted with the customers and satisfaction messages are sent via phone in order to instantly measure whether the customers are satisfied with the service they have received. Regular face to face interviews are conducted with the dealers, authorized service centers and retail chains. “Stakeholder Perception Surveys” are conducted once a year by an independent research company in order to gather and evaluate the feedback of the stakeholders.

• In addition to surveys and visits, customers can also communicate their complaints and suggestions to Vestel Customer Services through the 7/24 serving Vestel Call Center, the corporate website or CapCanlı (Live) Support line that provides direct access to customer representatives through a mobile application, social media accounts, [email protected] and via the dealers and service points. All the suggestions and complaints are handled by the complaint system which Vestel Customer Services is managing within the framework of ISO 10002 Customer Satisfaction Management System. Incoming complaints are recorded and followed by the complaint tracking number. Evaluation and resolution of the complaints and communication of solutions and feedback to and from the customers are standardized within the System. In order to prevent complaints and to ensure customer satisfaction, projects intended to eliminate the root causes of complaints as well as improvement studies are carried out. The system is intended to be constantly improved via the conduct of trainings, system audits, satisfaction management and complaint analysis.


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• In order to give customers an exceptional experience that goes beyond mere satisfaction, calls that are finalized with an expression of thanks are followed. Further improvement activities are taken so as to ensure quality service and sustainability of the Company’s success.

4.3. Human Resources Policy

• The Company’s human resources operations are carried out by the Vestel Human Resources Department, which reports to the Zorlu Holding Human Resources Group. The Department includes a Human Resources and Training Unit and an Industrial Relations Unit. Transactions related to the administrative affairs, career development and recruitment are carried out under the direct supervision of the Human Resources Director. Zorlu Holding Human Resources Group Head is also a member in the Executive Committee of the Vestel Group of Companies. Thus, provision of information on employee related issues to the management on a regular basis is ensured.

• The Company’s Human Resources Policy is set forth in writing and covers all the issues related to hiring, promotion, dismissal, compensation, career planning, performance evaluation system, linking performance results to remuneration, and training policies. The employees have been informed about their job descriptions and division of tasks, as well as the performance and compensation criteria through the Human Resources Policy.

• The following are implemented within the scope of the Human Resources Policy:

- Recruitment, promotion and dismissal criteria are documented in writing. Recruitment and promotion criteria are detailed in the Recruitment Regulation and Promotion Regulation, respectively.

- Vestel Group has in place a performance evaluation system which is based on individual performance, but is also linked to departmental and company-wide results, and is aimed at contributing to the individual development of employees and the corporate development of the organization. The outcomes from the performance evaluation system are used as an input for remuneration, training and career development.

- Job evaluation has been performed according to the criteria of the Hay Group Grade system, and the employees were assigned to grades. The remuneration policy has been determined taking into consideration the said grading system and a remuneration system has been established, which is updated in line with the prevailing conditions.

- Comprehensive training programs are held for employees. While the training process is centrally handled for all the Vestel Group of Companies, the whole process takes place on the intranet. Training programs are developed in a comprehensive scope and in a manner to facilitate advancement of employees in their careers. Employees are provided the opportunity to choose the training programs in line with their career plans and needs.

- Vestel Technology Academy was founded mainly for Vestel Group’s engineering staff. The Academy provides masters and PhD level educational opportunities to around 200 employees. Additionally, the “Management Trainee” and similar programs are planned and implemented on a yearly basis in order to cultivate qualified managers.

- Two separate career development structures have been set up: promotion and horizontal advancement. The system is run at periods specified in the regulation.

- Employee orientation programs are being carried out. Individual programs are designed specifically for each department and position. The programs present differences in terms of duration and content.

- Periodic information provision to employees is carried out using the corporate portal and the e-mail system. Each unit holds internal meetings at certain intervals. These are production meetings (every morning at factories), departmental meetings (every Monday), happy hour gatherings (on Fridays), quality management meetings (once in every two months), budget meetings (every month), and R&D new product meetings (every month).

- All employees are treated equally and without any discrimination based on ethnic background, religion, language, race, gender, and the like whatsoever in all matters involving training, career development and promotion.

- Measures are taken to prevent any practices that might cause discrimination among employees and all personnel are treated equally without any distinctions. There were no complaints from the employees related to discrimination.


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4.4. Code of Ethics and Social Responsibility

• Vestel Elektronik’s Code of Ethics has been set forth in writing and published on the Company website within the frame of the Public Disclosure Policy. Utmost care is taken to ensure that the Code of Ethics, which is formulated for the Company and its employees, is complied with in full.

• Under its social responsibility principle, Vestel Elektronik undertakes social efforts by both contributing to the social responsibility projects carried out by Zorlu Holding in the areas of education, sports and culture, as well as by undertaking projects on its own. Zorlu Group, of which Vestel Elektronik is a member, took a major step in bringing a global social responsibility dimension to the principles and values espoused since its foundation, by signing the United Nations Global Compact in 2007. Since signatory companies to the Compact commit themselves to issuing annual progress reports outlining their activities and the value created in this scope, in 2015 Vestel Elektronik published its progress report for the year 2014 on the unglobalcompact.org website via Zorlu Holding.

• In support of responsible and ethical business practices, the Company is a Class B member of SEDEX (Supplier Data Ethical Exchange), and a registered supplier with the BSCI (Business Social Compliance Initiative). In addition to the SEDEX and BSCI social responsibility audits, the Company also undergoes periodic FWC (Fair Working Conditions), ICS (Initiative Clause Social) and Walmart audits by the independent audit firms. In 2016, DISNEY ILS and EICC (Electronic Industry Citizenship Coalition) social compliance audits, for which the preparation works were concluded in 2015, will be added to this list.

• Assuming the responsibilities of being a global player in consumer electronics and white goods, Vestel Elektronik carries out environmental impact reviews of all its operations, production lines, and products. The Company believes that it has a duty to be acutely aware of the health and safety of its employees, customers, and the general public who may be affected by its operations, products, and services and to protect the environment and nature for the good of future generations. Vestel Elektronik demonstrated its commitment to this area by obtaining TS-EN ISO 14001 Environmental Management System Certification in 1998. The Company has pledged itself to continuously improve its performance on environmental issues, prevent pollution, strictly obey all the environment-related laws, legislation, and administrative regulations, and allocate sufficient and appropriate resources in its efforts to:

- Take environmental factors into account when evaluating projects for new products and operations,

- Reduce the use of harmful materials in its products and production processes and to search for materials that are less polluting,

- Reduce, reuse, recycle, and recover waste,

- Ensure savings of energy, water and natural resources by promoting productivity increases and use of new technologies,

- Use recycled/recyclable packaging materials wherever feasible,

- Conduct activities aimed at fostering environmental awareness.

• The Company’s environmental practices were awarded various prizes in 2014. These are, in order, the First Prize in Manisa Organized Industrial Zone Environmentally Sensitive Facility Competition, First Prize in the Istanbul Chamber of Industry Environment Friendly Application Category, and ÇEVKO (Environmental Protection and Packaging Waste Recovery and Recycling Foundation) Green Point Industry Encouragement Prize.

• As for biodiversity, the green space surrounding Vestel facilities covers an area of about 40,000 m2 and the Company plans to further expand these green areas. This space is currently home to around 110 different species of plants and trees.

Compliance with National and International Legislation Related to the Environment and Energy

• The Company closely monitors its compliance with all the mandatory regulations throughout a product’s life cycle. Legal compliance issues are dealt with in accordance with both ISO 14001 Environmental Management System and ISO 50001 Energy Management System standards. In order to safeguard the human and environmental health and safety, Vestel Elektronik has formulated many procedures that are rooted both in the mandatory regulatory requirements and in the management systems policy and the Company ensures that its operations abide strictly by such procedures and requirements.


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The Company also fully complies with the following EU laws and regulations applicable to its industry:

- WEEE (Waste of Electrical and Electronic Equipment) Directive,

- RoHS - (Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment),

- Ecodesign Framework Directive for Energy-Related Products,

- REACH - Regulation of the Registration, Evaluation, Authorization and Restriction of Chemicals,

- Regulation on Energy Efficiency and Increasing Efficiency in the Use of Energy Resources.

Energy Efficiency

• Vestel Elektronik capitalizes on energy efficiency opportunities in its operations and systematically implements various projects related to this area. The Company’s main policy is to reach a high level of production with low energy consumption. In light of this approach, the Company reviews the energy consumption of its production processes and strives to obtain better results in terms of productivity and quality.

• Under the Environment and Energy Management Systems, the Company manages energy consumption and related processes in tandem with the Total Productive Maintenance (TPM) model, corporate business plans and the key performance indicators methodology. The Company ensures sustainability by successfully implementing the TPM Management System. TPM is a maintenance system, which targets zero equipment stoppage and zero quality defects in production systems. TPM is a maintenance management approach, which requires the participation of all employees in production and service processes, envisages autonomous maintenance, adopts a preventive approach rather than trouble-shooting and allows for the highest degree of equipment efficiency. Environmental gains through the TPM system approach may be listed as follows:

- Ensuring organization and order and reducing contamination with the 5S Approach,

- Improvement works with the Kaizen approach,

- Less equipment breakdown, less dissemination, saving of energy and raw materials with the Autonomous Maintenance approach,

- Reducing scrap and rework, therefore, reducing waste,

- Increasing efficiency and quality and achieving continuous improvement.

• Vestel Elektronik has successfully completed the first phase of the TPM Management System and on January 11, 2013, became eligible for receiving the “TPM Excellence Award”. At the end of 2014, the Company successfully passed the consistent TPM commitment audit for the TPM Excellence Award. Vestel Beyaz Eşya, the Company’s subsidiary, also received the “TPM Excellence Award” in 2014.

• Senior executives regularly monitor and assess the relevant performance results. The Company has assigned an energy officer and energy management representative to ensure that the Energy Management System is operated efficiently. Our factory passed all the required audits in 2012 and obtained TS EN 50001 Energy Management System Certification and ensured its continuity in 2014. During 2015, “Increasing Energy Efficiency in Injection Molding Machines with Variable Speed Drive Application”, whose project previously obtained incentive approval from the Ministry of Energy and Natural Resources General Directorate of Renewable Energy, was completed in 36 machines and 3,000,000 kWh/year of energy savings were achieved since the implementation of the project.

• Additionally, the optimization of the pumps used in cooling systems in different areas of the factory was achieved with the usage of variable speed drive and the pumps were made to operate energy efficiently. Centralization of the A/C systems and the LED lighting conversion in different areas of the factory were some of the ongoing energy saving activities in 2015.

Climate Change

• Climate change is not only an environmental but also a social and economic threat. Vestel Elektronik considers climate change as an important risk for both the future of the world and sustainability of the Company and carries out pivotal projects in this regard. The Company initiated studies for the measurement and reduction of its carbon footprints and participated in the Carbon Disclosure Project. In 2015, Vestel Elektronik published its carbon emissions data on the Carbon Disclosure Project’s (CDP) website, cdproject. As is known, CDP is an initiative, which was initiated in 2000, to encourage companies, investors and governments to collect and share emissions-related data which could help in the fight against climate change. The companies from Turkey which responded to CDP are also rated according to the CDP’s methodology, with the support of Ernst & Young Turkey. In CDP’s 2015 evaluation, Vestel Elektronik’s carbon disclosure score was raised from 89 to 95.


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Sustainability

• Environmental awareness and sustainability are the most important elements of Vestel Elektronik’s vision. Due to the rapid change in social, economic and environmental factors in the world, the increasing strain on natural resources creates a threat for damaging the natural structure. Vestel Elektronik is aware that the sustainability of its success is possible only if it adheres to a fully-responsible approach in the design of its products. Considering this fact, Vestel Elektronik allocates a considerable amount of funds to research and development activities; for both reducing the energy consumed by its products and for the development of new environmentally friendly and recyclable materials that will be used in its products. Issues such as less power consumption, reliability for long product life, elimination of hazardous chemicals, use of recyclable materials, reducing variety in the use of materials and less use of raw materials, etc. are considered to be the main design elements in its product designs. Considering that the Company has annual production capacities of 15 million units in electronic and digital products and 10 million units in white goods, improving the design of a product will create a chain reaction in improving the environmental impacts in the supply chain, during the production and use of the product and at the end of the life of the product, such as reducing energy consumption, fuel consumption, transport-based carbon emissions, decreasing the use of packaging, etc. and thus, Vestel Elektronik has been constantly increasing the resources allocated to this matter.

• Vestel Elektronik has been included in the BIST Sustainability Index since November 2, 2015, as a result of the evaluations conducted by Borsa Istanbul regarding the Company’s practices in the area of sustainability. BIST Sustainability Index is comprised of publicly traded companies with a high rating on corporate sustainability performance. Information related to sustainability issues can be found on the Company’s website at www.vestelinvestorrelations.com.

• At Vestel Group of Companies (“Vestel”), of which Vestel Elektronik is a part, corporate development is equivalent to social development. With this approach, the Company will continue to firmly support the corporate social responsibility initiatives that add value to society, pioneer new initiatives in this area, and raise the social awareness by promoting its future oriented and eco-friendly products.

• Vestel does its utmost to ensure that its corporate social responsibility activities deliver concrete and sustainable benefits to society. As a result, the Company chooses to support long-term projects. Prior to developing social responsibility projects, the Company first identifies the areas in which public support is insufficient or lacking. In the social responsibility initiatives it undertakes, Vestel demonstrates the same high performance and meticulousness that it displays in all of its operations, never compromising its total quality approach.

• Many projects are carried out at Vestel, where the greatest care is shown for the disabled citizens at every opportunity. These projects are summarized below;

- Within the scope of “I am part of life” Project, aiming to support young people with Down syndrome and with mental disabilities and to include them in work life by offering them job opportunities at Vestel, 4 young people have been employed at Vestel; two with Down syndrome and two with mental disabilities.

- With the “Equal Chance” Project carried out at Vestel Elektronik factory, it was aimed to create employment for individuals who are hearing and visually impaired following various training programs. Within this scope, the number of disabled employees which started off as 11 on May 5, 2015 has increased to 104 by the end of the year. Production lines were specifically organized for those with disabilities in the areas they will work. “Basic Sign Language Education” was launched with the Celal Bayar University Continuing Education Center on December 22, 2015 to improve the lives of people with disabilities who were employed through this project, to increase the awareness of employees without disabilities and to strengthen their communication with each other. A total of 27 Vestel employees received their certificates by participating in this program.

- Vestel Elektronik does not only consider employment for the handicapped, but also tries to make their lives easier. For this purpose, the Company distributed wheelchairs to 8 handicapped citizens on the World Disability Day on December 8, 2015; led by Vestel AC Production Directorate.

- Within the last one year, 177 individuals with disabilities have been employed at Vestel Elektronik, raising the total number of employees with disabilities to 275.


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PART V - BOARD OF DIRECTORS

5.1. Structure and Composition of the Board of Directors

Board of Directors

Member Duty Term of OfficeOther Positions Held Within the Group

Positions Held Outside the Group

Status

Ahmet Nazif Zorlu Chairman

Until 2015 Ordinary General Assembly Meeting

Chairman and Vice Chairman - Zorlu Group Companies - Non-executive

Ali Akın Tarı Vice Chairman


Board Member - Vestel Beyaz Eşya San. ve Tic. AŞ, Vice Chairman - Zorlu Enerji Elektrik Üretim AŞ

Board Member and Audit Committee Member - Dilerbank; Board Member - Diler Holding

Independent

Selen Zorlu Melik

Board Member

Until 2015OrdinaryGeneralAssemblyMeeting

Deputy President - Zorlu Energy Group

Board Member - Zorlu Group Companies

- Non-executive

Mehmet Emre Zorlu

Board Member


Board Member - Zorlu Group Companies - Non-executive

Mümin Cengiz Ultav

Board Member


-

Chairman - Technology Development Foundation of Turkey (TTGV), Founding Member - Turkish Informatics Foundation (TBV) and Unix Users Foundation

Non-executive

Hacı Ahmet Kılıçoğlu

Board Member


Vice Chairman - Vestel Beyaz Eşya San. ve Tic. AŞ, Board Member - Zorlu Enerji Elektrik Üretim AŞ

Board Member - Doğan Gazetecilik, Board Member - Şeker Mortgage Finansman

Independent


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Ahmet Nazif ZorluChairman(1944 - Denizli) Ahmet Nazif Zorlu began his professional career in a family owned textiles business in Denizli, Babadağ. He opened his first textile store in Trabzon, later in 1970 Mr. Zorlu moved the Company’s headquarters to Istanbul and laid the foundations of Zorlu Holding with his brother, Zeki Zorlu. Ahmet Zorlu set up his first company, Korteks, in 1976 and gathered all of his companies under the roof of Zorlu Holding in 1990. Acquiring Vestel in 1994, Ahmet Zorlu opened the door to new lines of business for Zorlu Holding. Zorlu’s entrepreneurialism which began with the textile industry went on to manifest itself in more companies operating in highly diverse fields such as white goods, electronics, energy, property development, metallurgy, and defense.

With a keen interest in civil society organizations, Ahmet Zorlu is a member of the Board of Directors of the Foreign Economic Relations Board, the Turkish Industry and Business Association, the Education and Culture Foundation of the Society of Denizli, the Babadağ Industry and Business Association, and the Turkish Home Textile Industrialists and Businessmen Association. Ahmet Zorlu is the founder of Mehmet Zorlu Education, Health, Culture, and Solidarity Foundation (MZV) and carries out his social responsibility projects through MZV since its foundation in 1999. MZV has built many schools and provides scholarships to a large number of students. Ahmet Zorlu also attaches great importance to the social efforts aimed to boost the Turkish business world’s influence abroad. Accordingly, he was awarded the Royal Spanish Order of Civil Merit by King Juan Carlos I of Spain in 2007 for his contribution to developing and strengthening the relations between Spain and Turkey.

Ali Akın TarıVice Chairman (1943 - Koruköy) After his graduation from the Istanbul Law Faculty, Ali Akın Tarı served as a Tax Inspector and as a Chief Tax Inspector at the Ministry of Finance between 1972 and 1986. He was appointed as the Vice-President of the Tax Inspectors Board in 1986 and Group Head of the Istanbul Tax Inspectors Board in 1989, and continued to serve in this position until he was appointed as a Board Member of the Banking Regulation and Supervision Agency in 2001. He was also elected as a Board Member of the Savings Deposit Insurance Fund in the same year. He left his position at the Banking Regulation and Supervision Agency when his period of duty expired in 2004, and was appointed as a Consultant for the Ministry of Finance. Mr. Tarı served in this position until 2007, when he voluntarily left his position in the public sector to work in different areas in the private sector. Mr. Tarı became a member of the Board of Directors and the Audit Committee of Dilerbank in 2008; in addition to this position, he was appointed as a member of the Board of Directors of Diler Holding in 2011. Besides his position as a Board Member at Vestel Elektronik, Mr. Tarı also serves as a Board Member at Vestel Beyaz Eşya and Zorlu Enerji.

Selen Zorlu MelikBoard Member(1975 - Trabzon) Selen Zorlu Melik graduated from the Faculty of Economics and Administrative Sciences, Department of Business Administration at Uludağ University. She began her professional career at Denizbank in 1998. Following her internship at the Denizbank Bursa Branch, she joined the Management Trainee Program at the same bank in 1999. After working in a number of positions at the Denizbank head office, Mrs. Zorlu Melik attended a Marketing Certificate Program at the University of California, Berkeley, USA in 2001. She subsequently started to work at the Korteks Yarn Plant in 2002 and became a Board Member of the same company in 2004. Selen Zorlu Melik currently serves as a Board Member in numerous companies within the Zorlu Group as well as being a Board Member at Vestel Elektronik. Since April 2012, Mrs. Zorlu Melik has been acting as the Deputy President of Zorlu Energy Group.

Mehmet Emre ZorluBoard Member(1984 - Istanbul) Mehmet Emre Zorlu graduated from the Department of Electrical and Electronics Engineering at Koç University in 2006. He went on to complete a master’s degree in Innovation and Technology Management from the University of Essex in the United Kingdom in 2007 and 2008. Mr. Zorlu began working at the Vestel Group of Companies in 2009. In addition to his position as a Board Member at Vestel Elektronik, Mr. Zorlu also serves as a Board Member at Zorlu Holding and its affiliated companies. Mehmet Emre Zorlu is a member of the Young Presidents’ Organization (YPO), the Young Businessmen Association of Turkey (TÜGİAD) and Endeavor Turkey.


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Mümin Cengiz UltavBoard Member(1950 - Eskişehir) Mümin Cengiz Ultav graduated from Middle East Technical University with BSc and MSc degrees in Electronics Engineering. He began his professional career at the International Philips Institute and subsequently served in the IT and R&D departments of various electronics companies in Turkey and abroad. Mr. Ultav joined Vestel in 1997 as the President responsible for Technology. He stepped down from his position as a Member of the Executive Committee responsible for Strategic Planning and Technology on June 30, 2011. Mümin Cengiz Ultav currently serves as a Board Member at Vestel Elektronik Sanayi ve Ticaret AŞ.

Hacı Ahmet KılıçoğluBoard Member(1956 - Giresun) Hacı Ahmet Kılıçoğlu graduated with a Bachelor’s degree and Master’s degree in Economics from the University of Essex. He started his professional career at the Ministry of Industry and Technology in 1979. In 1980 he became an Assistant Specialist at Türkiye İş Bankası and after working in the private sector for a couple of years, Mr. Kılıçoğlu held administrative positions at the United Nations Development Program (UNDP) and the F-16 project. He then took office at Türk Eximbank in 1987, where he worked in various positions. He later served as the CEO of the bank and as a Board Member between 1998 and 2010. He also served as a Board Member at the Banks Association of Turkey between 1998 and 2010 and was elected as the President of the World EximBanks Union (The Berne Union) in 2001. Mr. Kılıçoğlu also served as a Consultant to the President at the Islamic Development Bank between 2008 and 2009 and as a Vice Chairman at Denizbank in 2010. In addition to his position as a Board Member at Vestel Elektronik, Mr. Kılıçoğlu also serves as a Board Member at Vestel Beyaz Eşya and Zorlu Enerji, which are Zorlu Group Companies. He is also a Board Member at Şeker Mortgage Finansman AŞ and Doğan Gazetecilik AŞ.

The Chairman of the Executive Committee is Mr. Enis Turan Erdoğan.

Enis Turan ErdoğanChairman of the Executive Committee(1955 - Mersin) Enis Turan Erdoğan graduated from the Department of Mechanical Engineering at Istanbul Technical University in 1976 and completed a master’s degree in Production Management at Brunel University in the UK in 1979. After serving in managerial positions for various firms in Turkey, Mr. Erdoğan joined Vestel in 1988. Having held various managerial positions at Vestel since 1988, he served as the President of Vestel Foreign Trade and a member of the Executive Committee of Vestel Elektronik until 2013. Turan Erdoğan was appointed as the Chairman of the Executive Committee of the Vestel Group of Companies on January 1, 2013. Mr. Erdoğan served as the President of TURKTRADE (Turkish Foreign Trade Association) for two periods between 2002 and 2006 before being the first Turkish citizen to be appointed as a Board Member of Europe’s largest ICT Confederation, DIGITALEUROPE, a position which he held between 2010 and 2014.

• The Company’s Board of Directors is structured to provide the highest level of efficiency and effectiveness. The Company pays utmost attention to compliance with the Capital Market Law and CMB regulations in this area.

• Vestel Elektronik’s Board of Directors consists of 6 members. Four of the six members of the Board are non-executive members and two are independent members. In accordance with the CMB’s Corporate Governance Communiqué, one third of the Board is comprised of independent Directors.

• The Chairman of the Board and the Chairman of the Executive Committee are different individuals: The Chairman of the Board is Mr. Ahmet Nazif Zorlu and Chairman of the Executive Committee is Mr. Enis Turan Erdoğan.

• There are no restrictions with respect to the Board members taking up other duty or duties outside the Company, but the regulations set forth in the Corporate Governance Principles are complied with in this regard.

• Prior to the General Assembly Meeting for the year 2014, two independent board member candidates were presented to the Corporate Governance Committee, which also fulfills the duties of the Nomination Committee. The candidates for the independent board membership submitted their written statement of independency within the framework of the legislation, Articles of Association and the independence criteria set forth in the Corporate Governance Communiqué to the Corporate Governance Committee at the time they were proposed as candidates. The Committee submitted its assessment report on whether these candidates fulfill the independence criteria to the Board of Directors on March 30, 2015. Upon a resolution by the Board of Directors dated April 1, 2015 and numbered 2015/12, it was decided that these candidates would be submitted to the approval of shareholders at the General Assembly to become independent Directors. The Board’s proposal was approved by the shareholders at the 2014 General Assembly Meeting held on April 27, 2015. Information on the independent Board member candidates was disclosed to the public with the General Assembly Information Document issued together with the General Assembly invitation.


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Statement of independence of the independent board member candidates is provided herein below:

“I hereby acknowledge, commit and declare that I have read and understood the capital market legislation, the Company’s Articles of Association and the Capital Markets Board’s Corporate Governance Principles appended to the CMB’s Communiqué on Corporate Governance no. II-17.1, and that I meet all of the criteria required for Independent Board membership that are stipulated in the Principle no. 4.3.6 appended hereto within the framework of the applicable legislation.”

• Board Members Mr. Hacı Ahmet Kılıçoğlu and Mr. Ali Akın Tarı are independent Directors who fulfill the independence criteria envisaged in the CMB’s Corporate Governance Principles. No circumstances occurred during the reporting period to end the independence status of the independent board members.

• Currently, one female member serves on the Company’s Board of Directors, and it is among the Company’s medium-term targets to reach the minimum 25% ratio set in the Corporate Governance Principles for the female Directors. However, a policy has not yet been formulated towards reaching this goal.

5.2. Operating Principles of the Board of Directors

• The gathering procedures and frequency of Board meetings are set forth in the Company’s Articles of Association.

• Agendas for the Board meetings are determined by the Chairman and Board Members. Requests coming from the Company management are also taken into account when setting the meeting agendas.

• Article 16 of the Company’s Articles of Association stipulates that Board meetings shall be held as and when deemed necessary, and at least once a month. The Board of Directors shall be convened by the Chairman of the Board or the Deputy Chairman when the Chairman is not available. Any member may request from the Chairman to call the Board for a meeting.

• In order to increase the attendance at the meetings, the meeting dates are determined and notified to the Board Members at the beginning of the year. As a result, Board Members are given the opportunity to adjust their schedules according to meeting dates. As another measure to increase attendance at the meetings, the following article was added to the Company’s Articles of Association: “The Board membership of a Board Member who fails to participate in three consecutive meetings without the Board’s permission is deemed to be null and void.”

• The Board of Directors convenes with absolute majority and resolves with the majority of those present at the meetings.

• During 2015, the Board of Directors passed 55 decisions in 42 meetings held. The meeting attendance rate was 100%, and 100% of the decisions were passed with the unanimous votes of the attendants.

• Invitation to the meetings is made via e-mail at least 7 days before the meeting. The secretariat which has been set up within the Company to report to the Board of Directors, provides the Board Members with the agenda and documents related to the matters on the agenda, together with the invitation.

• Reasonable and detailed justifications for dissenting votes are required to be entered into the records on matters for which there were differing opinions at the Board meetings; however, there has never been such an instance to date. The minutes taken by the Board’s secretariat also include any questions posed by the members and the responses given.

• No Board member, including the Chairman, has a preferential voting right or the right to veto Board’s decisions. Each member possesses an equal vote.

• The Board decisions relating to all kinds of related party transactions of the Company are taken with the approval of the majority of the independent board members in accordance with the Corporate Governance Principles.

• A Directors & Officers Liability Policy has been purchased to cover the potential losses which the Company may suffer due to the wrongful acts of the board members in the execution of their duties. However, the total annual liability limit does not exceed 25% of the Company’s share capital.

5.3. Number, Structure and Independence of the Board Committees

• In order to help the Board of Directors to perform its duties and responsibilities more effectively, a Corporate Governance Committee, an Early Detection of Risk Committee and an Audit Committee have been set up, all three of which report directly to the Board. Owing to the nature of the Board structure, the Company has not set up a separate “Remuneration Committee” or a “Nomination Committee”, the duties of which are performed by the Corporate Governance Committee.

• As per the Corporate Governance Principle no 4.5.3, all members of the Audit Committee and the chairmen of the other committees are elected from among the independent members of the Board. In accordance with the Principles, the Chief Executive Officer does not serve on the committees.


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• Committee members Mr. Ali Akın Tarı and Mr. Hacı Ahmet Kılıçoğlu serve on more than one committee due to the number of the Board Members and the committee formation requirements in accordance with the CMB’s Corporate Governance Principles.

• Committees convene at intervals stipulated by the legislation and the related Committee’s working principles or upon a request from a member. The Committees’ activities and meeting minutes are presented to the Board of Directors.

• All kinds of resources and support are provided by the Board of Directors to the committees to enable them to perform their duties. Committees can invite individuals who are deemed to be necessary to their meetings in order to obtain their views.

• Duties, working principles and the members of the Committees are determined by the Board of Directors and are publicly disclosed on the Public Disclosure Platform and the Company website.

Audit Committee

• The Audit Committee was set up for the effective oversight of the Company’s financial and operational activities pursuant to the Article 3 of the CMB’s Communiqué Serial X, No: 19. The Committee is responsible for the supervision of the Company’s accounting system, public disclosure of the financial information, independent auditing and the operation and efficiency of the Company’s internal control and internal audit system.

• The Audit Committee can seek the opinions of independent experts on matters which they find necessary with regard to their activities. The costs of the consultancy services required by the Audit Committee are borne by the Company.

• Pursuant to the CMB’s Communiqué on Corporate Governance no: II-17.1, the “Working Principles of the Audit Committee” were revised and approved at the Board of Directors’ meeting dated March 27, 2014. The revised version of the working principles was disclosed to the shareholders via the Public Disclosure Platform and the Company website.

• The Audit Committee is structured in accordance with the Capital Markets Board’s Corporate Governance Principles and comprises two members.

• The Chairman of the Committee was elected from among the independent members of the Board and certain criteria were taken into account in the election process. The Chairman of the Audit Committee is ensured to have served in a similar position previously, have the knowledge and experience needed to analyze financial statements and be versed in accounting standards.

• Both Audit Committee members were elected from among the independent Directors. The Chairman of the Committee is Mr. Ali Akın Tarı, and the other member is Mr. Hacı Ahmet Kılıçoğlu.

The structure of the Committee and membership information are as follows as per the decision taken in the Company’s Board meeting on 28 April 2015:

Committee Members Duty StatusAli Akın Tarı Chairman of the Committee Independent Board MemberHacı Ahmet Kılıçoğlu Member of the Committee Independent Board Member

• In principle, the Audit Committee shall convene at least four times a year, being once in each quarter. The Committee convened 6 times in 2015.

• The Board of Directors’ secretariat is responsible for keeping the records of the decisions made by the Committee, as well as the minutes of the meetings.

• The Committee carries out its activities in line with the working principles put into writing in detail.• In 2015, the Audit Committee performed the following functions:

- Monitoring of the Company’s financial and operational activities,- Supervision and approval of the accuracy and conformity of the annual and interim financial statements, which will be disclosed

to the public, with the accounting principles employed by the Company,- Election of the independent audit firm, preparation of the independent audit contract and initiation of the independent audit

process,- Following up of the effectiveness and performance of the independent audit activity, - Supervision of the operation and efficiency of the internal control and internal audit system, conducting studies on the efficiency

and adequacy of the internal control system and reporting its evaluations to the Board of Directors, - Review and approval of the internal control and internal audit reports.


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Corporate Governance Committee

• The Corporate Governance Committee was established to monitor the Company’s compliance with the CMB’s Corporate Governance Principles, carry out studies for improvement and make proposals to the Board of Directors in order to improve the implementation of corporate governance practices.

• Pursuant to the CMB’s Communiqué on Corporate Governance no: II-17.1, the “Working Principles of the Corporate Governance Committee” were revised and approved at the Board of Directors’ meeting dated 27 March 2014. The revised version of the working principles was disclosed to the shareholders via the Public Disclosure Platform and the Company website.

• The Corporate Governance Committee is composed of at least three members, including two non-executive Board Members and the Investor Relations Manager. The Chairman of the Committee is Mr. Ali Akın Tarı, an independent Board member.


Committee Members Duty StatusAli Akın Tarı Chairman of the Committee Independent Board MemberMehmet Emre Zorlu Member of the Committee Non-executive Board MemberSerap Mutlu Member of the Committee Investor Relations Director

• In principle, the Committee convenes at least twice a year in order to ensure the effective performance of its duties. Corporate Governance Committee convened 3 times in 2015.

• The activities carried out by the Corporate Governance Committee in 2015, in accordance with its working principles put into writing in detail, are presented below:

- Proposing improvements in corporate governance practices to the Board of Directors in order to enhance compliance with the CMB’s Communiqué on Corporate Governance no. II-17.1; conducting and supervising the necessary works for the alignment with the legislation,

- Overseeing the activities of the Investor Relations Department, - Preparing the evaluation reports on the independency status of the independent Board member candidates for submission to

the Board of Directors,

- Carrying out the activities related with the Corporate Governance Rating.

Early Detection of Risk Committee

• The Early Detection of Risk Committee was set up in order to identify the risks which could threaten the existence, development and continuity of the Company, take the necessary measures against the identified risks and undertake risk management activities in line with the Turkish Commercial Code, Articles of Association and CMB’s Communiqué on Corporate Governance Principles. The Committee continues its activities with regard to the early detection of threats which may have negative consequences on the development and continuity of the Company and manage the risks effectively by developing action plans against the identified threats.

• Pursuant to the CMB’s Communiqué on Corporate Governance no: II-17.1, the “Working Principles of the Early Detection of Risk Committee” were revised and approved at the Board of Directors’ meeting dated 27 March 2014. The revised version of the working principles was disclosed to the shareholders via the Public Disclosure Platform and the Company website.

• The Early Detection of Risk Committee is composed of at least two Board members. In case the Committee has only two members, both of them, and in case it has more than two members, the majority of them, must be non-executive Board members. The Chairman of the Committee is the independent Board member, Mr. Hacı Ahmet Kılıçoğlu. The other member is Mrs. Selen Zorlu Melik.

• Early Detection of Risk Committee submits a report to the Board of Directors once in every two months.


Committee Members Duty StatusHacı Ahmet Kılıçoğlu Chairman of the Committee Independent Board MemberSelen Zorlu Melik Member of the Committee Non-executive Board Member


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• The Early Detection of Risk Committee convenes as frequently as necessitated for the efficiency of its activities and in principle at least three times a year. The Committee held 6 meetings in 2015 and presented 6 risk reports to the Board of Directors.

• The activities carried out by the Committee in 2015, in line with the working principles put into writing in detail, are presented below:

- High risk evaluation was carried out and risk inventory was prepared containing strategic, financial and operational risks which are critically important for the Company.

- Risks were evaluated in two different ways, namely, with (residual risk) and without (inherent risk) taking into account the efficiency performance of the existing control and precaution measures.

- Inherent and residual risks contained in the risk reports were evaluated based on the 4-tier scale (Acceptable, Acceptable with Control, Undesired, Unacceptable).

- Sector and company based risks contained in the risk reports were grouped under 9 main risk headings (External Environment, Operational, Authorization, Information Technology and Technology, Honesty/Integrity, Financial, Process/Operational, Reporting and Strategic) according to COSO (The Committee of Sponsoring Organizations of the Treadway Commission) risk taxonomy.

- As a result of these assessments, it was seen that risks were generally gathered under the main headings of External Environment, Operational, Financial and Strategic.

- As a result of the risk inventory and risk management analyses, risk reports were prepared and submitted to the Committee in order to ensure early detection of risks which may jeopardize the Company’s existence, development and continuity and adoption of the necessary measures against the detected risks and management of risk.

These reports were as follows:

· PESTLE analysis for the White Goods Sector,

· PESTLE analysis for the Consumer Electronics Sector,

· Corporate Sustainability,

· Evaluation of the performance in the first quarter of 2015,

· Vestel Risk Inventory and

· Risk Management in Real Sector and Vestel’s Practices.

- Risks and action plans are recorded into and followed-up through the SAP GRC (Governance, Risk and Compliance) System by the Corporate Risk Management Department.

5.4. Risk Management and Internal Control Mechanism

• Zorlu Holding Corporate Risk Management Department was founded in 2012 with the purpose of early detecting the risks that may jeopardize the existence, development and continuity of Vestel Elektronik, taking the necessary measures against the identified risks, and managing the risks in a centralized manner. The Zorlu Holding Risk Policy and Procedure and Corporate Risk Management Framework, which are applicable to all the Zorlu Group companies, form the basis for the Group’s risk management activities.

• The Company makes intensive use of information technologies and uses the SAP system to secure internal control. Through the SAP system, all the integrated business processes in the Company are carried out/registered on the information systems, thus granting increased speed and productivity to the business. Efficient use of these systems allows employees and managers to easily access all sorts of information and reports that concern them in line with their authorities. Vestel Elektronik employs the SAP GRC (Governance Risk Compliance) system to monitor the risks which the Company is exposed to.

• The Company’s internal control systems are evaluated with a risk-focused approach by taking into account the risks which are identified through the risk management analysis and/or during the internal control activities and by taking into account the related actions for risk reduction. During the course of its activities carried out in line with its vision and mission, the Company may become exposed to risks related with the strategic goals, financial position, operational activities, legislation, occupational health and safety, and protection of assets and reputation. In order to accurately define and manage these risks, Zorlu Holding Corporate Risk Management philosophy is summarized below:

- Incorporating risks into the decision-making mechanisms by establishing risk awareness and risk culture throughout the Company,

- Collaborating to reveal the risks and opportunities that may have an impact on the Company’s targets based on a shared perception,


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- Defining and evaluating risks according to their impact and probability,- Proactively managing these risks through the best actions taken in accordance with the risk appetite.

• Founded on 15 March 2013, the Early Detection of Risk Committee is involved in the early detection of risks that could jeopardize the existence, development and continuity of the related companies, implementation of the necessary measures against the identified risks, and management of risks for the purposes of achieving compliance with the Article 378 of the Turkish Commercial Code no. 6102 and of coordinated risk management.

• The Internal Audit Department reviews the efficiency and effectiveness of these systems at certain intervals in accordance with the approved annual plans, and reports the results to the Board of Directors for necessary action.

5.5. Strategic Targets of the Company

• In addition to managing and representing the Company with a rational and prudent risk approach which optimizes the balance between growth, risk and return and which is above all the mindful of the Company’s long-term interests, the Board of Directors is also responsible for achievement of the Company’s pre-set financial and operational targets.

• The Board of Directors or the management may formulate opinions on the Company’s strategic targets. The Board of Directors always seeks the opinions of the managers on the targets they set. The targets set by the managers are first discussed at the relevant management level, then presented to the Board of Directors and finally approved by the Board. Managers can be invited to the meetings on strategic targets. Actions to achieve the approved targets are initiated as soon as possible; the results are regularly monitored throughout the year by the managers and reported to the Board of Directors.

• The Board of Directors holds an evaluation meeting at least once a year in order to review the Company’s operational performance and degree of target achievement.

5.6. Financial Benefits

• The Company’s Remuneration Policy for the Board Members and Executive Managers, which has been accepted by the Board of Directors’ decision dated 18 May 2012 and made available for the information of shareholders on the Company website pursuant to the Corporate Governance Principles, was amended in line with the new Corporate Governance Principles appended to the CMB’s Communiqué on Corporate Governance, and was publicly disclosed on 26 March 2014 via the Public Disclosure Platform and was also made available for the information of the shareholders via the Company website.

• The attendance fees to be paid to the members of the Board of Directors are determined each year at the General Assembly Meeting. The fee is determined according to the Board Member’s status (whether independent or executive), responsibilities, seniority, know-how, skills and experience.

• Vestel Elektronik’s Board members were paid a total gross sum of TL 101,000.00 as an attendance fee in 2015, commensurate with the practices of the peer companies in the sector. The amounts for 2016 will be decided at the 2015 Ordinary General Assembly Meeting. No other benefits are provided to Board members.

• There is no rewarding scheme based on the performance measurement for the Board members.

• The Company does not use payment plans such as dividend, stock options or payment options based on the Company’s performance in the remuneration of the independent Board members.

• The salaries of Vestel Elektronik’s Executive Managers are determined by the Board of Directors. In addition, Executive Managers may be entitled to bonus payments at the end of the year, in line with the Company’s financial performance and their respective contribution to this performance. The amounts of such bonus payments are determined by the Board of Directors. The “Senior Executive Remuneration Policy” is determined in accordance with the size of the Company’s production and sales activities, the extensiveness of its operations, existence of international operations, the number of employees, subsidiaries and their weight in total operations, the level of knowledge required to sustain the operations, the characteristics of the sector, the competitive environment, and the level of salaries paid by the peer companies.

• Remunerations provided to the Company’s Chairman, Board Members and Executives Managers are disclosed in the footnotes of the financial statements and in the annual report on a cumulative basis. In this regard, the total amount of remunerations paid to the above during the 12 months ending on 31 December 2015 was TL 25,448 thousand (01.01-31.12.2014: TL 19,433 thousand).

• During 2015, the Company did not lend money or make credit available to any Board Member or Executive Manager, did not extend the maturity of the existing loans nor improved conditions, did not lend any credit via a third party under the name of a personal loan or grant any guarantee such as surety in their favor.


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THE EVALUATION OF THE BOARD OF DIRECTORS REGARDING THE WORKING PRINCIPLES AND EFFECTIVENESS OF THE BOARD COMMITTEES

The Board Committees were established in order to help the Board of Directors to fulfill its duties and responsibilities more effectively. In line with the Corporate Governance Principles of the Capital Markets Board, at its meeting on 28 April 2015 the Board of Directors resolved to:

• Elect Mr. Ali Akın Tarı, Independent Member of the Board, as the Chairman of the Corporate Governance Committee and Mr. Mehmet Emre Zorlu, Board Member, and Ms. Serap Mutlu, Investor Relations Director, as the Committee members,

• Elect Mr. Ali Akın Tarı, Independent Member of the Board, as the Chairman of the Audit Committee and Mr. Hacı Ahmet Kılıçoğlu, Independent Member of the Board, as the Committee Member,

• Elect Mr. Hacı Ahmet Kılıçoğlu, Independent Member of the Board, as the Chairman of the Early Detection of Risk Committee and Mrs. Selen Zorlu Melik, Board Member, as the Committee Member.

Due to the structure of the Board, the Company did not establish a separate “Remuneration Committee” and a “Nomination Committee”. The duties of these Committees are fulfilled by the Corporate Governance Committee.

The Working Principles of the Board Committees were revised in accordance with the CMB’s Communiqué on Corporate Governance no. II-17.1, and approved at the Board meeting held on 27.03.2014. The revised Working Principles were announced to the public via the Public Disclosure Platform (PDP) and the Company’s website (www.vestelinvestorrelations.com).

In 2015, the Board Committees performed their duties and responsibilities as required in the Corporate Governance Principles and their own Working Principles.

In compliance with the way required for the effectiveness of their functions, their Working Principles and annual meeting schedules, in 2015:

• Corporate Governance Committee met twice on 25.06.2015 and 24.12.2015,

• Corporate Governance Committee convened on 30.03.2015 in order to fulfill the duties of the Nomination Committee,

• Audit Committee met 6 times on 24.02.2015, 30.03.2015, 27.04.2015, 04.05.2015, 11.08.2015 and 21.10.2015,

• Early Detection of Risk Committee met 6 times on 26.01.2015, 18.03.2015, 15.04.2015, 20.05.2015, 20.08.2015 and 23.12.2015.

The Committees submitted reports to the Board, regarding the results of their meetings held during the year.

According to these meetings:

• The Corporate Governance Committee, established in line with the Capital Markets Board’s Corporate Governance Communiqué to monitor the Company’s compliance with the Corporate Governance Principles, carry out studies for improvement and make proposals to the Board in order to improve the implementation of corporate governance practices, identified whether the Corporate Governance Principles were implemented at the Company, assessed the rationale for incompliance, if any and the conflicts of interest caused by such incompliance and made recommendations to the Board of Directors to improve corporate governance practices, oversaw the activities of the Investor Relations Department, carried out Corporate Governance Rating activities and updated the Company’s Code of Ethics and Disclosure Policy in line with the changes in the Capital Markets Board regulations.

• The Audit Committee, which was established for the supervision of the Company’s accounting system, the independent audit, public disclosure of the financial information, and the functioning and efficiency of the Company’s internal control and internal audit system, presented its views and recommendations in the areas of its responsibility to the Board of Directors.

• Early Detection of Risk Committee, which was established for the early detection of risks which could threaten the Company’s existence, development and continuity, implementation of the necessary measures against the identified risks and management of risks, made a high-level risk assessment during the year, prepared a risk inventory pertaining to the risks in strategic, financial and operational areas which have critical importance for the Company and prepared and submitted six Risk Reports to the Board within the scope of its duties set forth in its Working Principles.


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1. Opening, the moment of silence and election of the Presidential Board,

2. Authorization of the Presidential Board for signing the minutes of the General Assembly Meeting,

3. Review and discussion of the 2015 Annual Report of the Board of Directors,

4. Review of the Summary Statement of the Independent Audit Report for the fiscal year 2015,

5. Review, discussion and approval of the Consolidated Financial Statements for the fiscal year 2015,

6. Acquittal of the members of the Board of Directors severally for their activities and transactions in relation to the Company for the year 2015,

7. Determination of the number and the tenure of office for the members of the Board of Directors and election of the Board members including the Independent Directors,

8. Determination of the remuneration for the members of the Board of Directors for the year 2016,

9. Informing the General Assembly about the Board’s resolution that no profit can be distributed for the year 2015 due to accumulated losses from previous years,

10. Granting permission to the members of the Board of Directors for performing the transactions stated in the Articles 395 and 396 of the Turkish Commercial Code,

11. Discussion and approval of the Board of Directors’ proposal regarding the selection of the independent audit company for auditing the Company’s accounts and transactions for the fiscal year 2016 in accordance with the Capital Market Law and the Turkish Commercial Code,

12. Informing the General Assembly about the donations and aids made in 2015; discussion and approval of the upper limit for the donations to be made during the period of 1 January-31 December 2016,

13. Informing the General Assembly about the collaterals, pledges, mortgages and sureties granted by the Company and its subsidiaries in favor of third parties and the income and benefits generated therefrom in accordance with the CMB regulations,

14. Discussion and approval of the amendment of the following articles of the Company’s Articles of Association provided that the necessary approvals are obtained from the Ministry of Customs and Trade and the CMB prior to the date of the General Assembly:

· The Article 3 of the Articles of Association titled “Purpose and Subject” will be amended to include design development among the Company’s fields of activity,

· The Article 4 of the Articles of Association titled “Company’s Head Office and Branches” will be amended to incorporate the new address of the Company’s headquarters,

· The Article 6 of the Articles of Association titled “Company’s Share Capital and Kind of Share Certificates” will be amended to extend the duration of the existing registered capital ceiling, which is valid until the end of 2016 by another 5 years to the end of 2020 without making any change in the amount of the ceiling.

AMENDMENTS TO THE ARTICLES OF ASSOCIATION

FORMER TEXT NEW TEXTArticle 3 Purpose and SubjectCompany’s purpose and subject is the production, import and export of all kinds of electrical, electronic, digital electronic tools, devices, hardware, spare parts, parts, components, video and television and smartphones.

The Company is also engaged in manufacturing, assembly, purchase, sales, import, export, leasing, distribution and technical services of electronic circuit elements, intercommunication, communication, products and parts that are used in the storage, conveyance transfer, copying, projection of sound, images and information, information technologies devices and equipment, electrical, electronic, mechanical and pneumatic systems.

Article 3 Field of OperationCompany’s field of operation involves the manufacturing, import and export of all kinds of electrical, electronic, digital electronic devices, equipment, hardware, spare parts, parts, components, video, televisions and smartphones.

The Company is engaged in the manufacturing, assembly, purchase, sales, import, export, leasing, distribution and technical services of electronic circuit elements, intercommunication and communication products and parts, products and parts that are used in the storage, conveyance transfer, copying, projection of sound, images and information, information technology devices and equipment and electrical, electronic, mechanical and pneumatic systems. The Company is also engaged in electronic hardware design and development, software design and development and optoelectronics and optomechanical design and development as regards to its fields of operation.

AGENDA FOR THE 2015 ORDINARY GENERAL ASSEMBLY MEETING


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The Company tests the quality and compliance with the relevant technical level, checks the quality, conducts tests to increase the quality of all kinds of electrical, electronic, digital electronic tools, devices, hardware, spare parts, parts, components, video and television and engages in any and all activities related to the same.

Without being limited to the matters listed below, in order to accomplish this purpose and objective, the Company may act.

A) The Company may import, export and manufacture the machinery, parts, accessories and facilities and their spare parts, used in the processes of the raw materials, semi-finished and finished materials concerning its subject,

B) In line with its scope of business, the Company may engage in import, export, manufacture, contract trade, domestic trade, commissioning, undertaking, internal and external international representation, marketing works,

C) The Company may obtain long, mid or short term loans from internal or external markets for its operations, may receive loans for tourism or alike or asset and guarantee loans, commodity credit, import credit, open credit or obtain advance loans or other kinds of credits on share certificates and deeds,

D) The Company may make industrial and commercial investments that fall into its purpose and subject,

E) In order to achieve its purpose and subject, the Company may engage in any and all financial, industrial, administrative dispositions and activities,

The Company tests the quality level and compliance with the relevant technical regulations, performs quality control and conducts tests to increase the quality of all kinds of electrical, electronic, digital electronic devices, equipment, hardware, spare parts, parts, components, video and televisions and engages in any and all activities related to the same.

The Company may operate without being limited to the matters listed below, in order to accomplish its field of operation.

A) The Company may import, export and manufacture the machinery, parts, accessories, equipment and their spare parts, used in the processing of raw materials, semi-finished and finished products concerning its field of operation,

B) The Company may engage in import, export, manufacturing, contract trade, domestic trade, commissioning, undertaking, domestic and international representation and marketing activities in relation to its field of operation,

C) To realize its field of operation, the Company may obtain long, mid or short term loans from domestic or international markets, tourism loans or alike, corporate and guarantee loans, commodity loans, letters of credit, open credit or obtain advance or other kinds of credit on debt instruments and deeds,

D) The Company may undertake industrial and commercial investments that fall into its field of operation,

E) In order to achieve its field of operation, the Company may engage in any and all kinds of financial, industrial and administrative dispositions and activities,

F) The Company may establish other companies which have the same business scope of the Company, establish joint ventures, participate in the previously established entities, purchase and sell, replace and pledge or take guarantee on the shares, bonds and other securities of these entities provided that such involvement is not deemed as investment services and investment activities; in addition, in accordance with the Capital Markets legislations and provided that they are related to its subject, the Company may establish foundations with social objectives and participate in the previously established ones, in such way and scale that would not jeopardize the achievement of the main purpose of the company. By a resolution of the General Assembly, it may set aside a portion of its net profit for these foundations, on the condition that it complies with the Capital Markets legislations,

G) In order to reach the Company’s purpose, the Company may acquire, purchase, sell, transfer, lease as lessee and lease as lessor the necessary equipments, facilities and real estates, to impose servitude, usufructs, right of habitation, encumbrance, condominium ownership on the real estate and to transfer and purchase thereof, construct factories, warehouse, stores and administration buildings,

F) The Company may establish companies with real persons and legal entities which have the same field of operation with the Company, provided that such involvement is not deemed as investment services and activities, establish joint ventures, participate in existing commercial entities, purchase and sell, convert and pledge or give as collateral the shares, bonds and other securities of these entities; In accordance with the Capital Market legislations and provided that they are related to its subject, the Company may in addition establish foundations with social objectives and participate in existing ones, in such a fashion and scale that would not jeopardize the achievement of the main purpose of the Company. By a resolution of the General Assembly, the Company may set aside a portion of its net profit for these foundations, on the condition that it complies with the Capital Market legislations,

G) In order to undertake its field of operation, the Company may acquire, purchase, sell, transfer, lease as a lessee and lease as a lessor the necessary equipment, facilities and real estates, to impose servitude, usufructs, right of habitation, encumbrance, condominium ownership on real estate and to transfer and purchase thereof and construct factories, warehouses, stores and administration buildings,


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H) In relation to the Company’s purpose and in order to secure the debts and receivables of the company and third parties, it may obtain mortgages, pledges, sureties and other collaterals grant mortgages, pledges, sureties and other collaterals, partially or wholly release mortgages and pledges in its favor and against it, release mortgages, act as a guarantor and set up mortgages for the debts of third parties.

However; principles set out under the capital markets legislations shall apply to matters such as granting of guarantees, securities or setting up of pledge rights including mortgages in the name of the Company and in favor of 3rd parties,

I) The Company may acquire, transfer and make real and personal dispositions on the vehicles (including vessels) that are necessary for the Company’s affairs,

J) In relation to the Company’s purpose, the Company may acquire, transfer trademarks mastership, know-how and all kinds of other property rights and enter into license agreements thereon,

K) In relation to the Company’s purpose, it may open, operate customs warehouses and carry out customs entries,

L) The Company may make donations to Associations, Foundations and other Corporations and Institutions in cash or in kind provided that the upper limit of such donations is determined by the general assembly, donations made do not exceed such limit, donations made are added to the distributable profit base and donations do not contradict with the Capital Markets Law and the pertinent legislations, necessary special event disclosures are made and the donations made within that year are announced to the shareholders at the general assembly.

H) In relation to the Company’s field of operation and in order to secure the debts and receivables of the Company and third parties, it may obtain mortgages, pledges, sureties and other collaterals, grant mortgages, pledges, sureties and other collaterals, partially or wholly release mortgages and pledges in its favor and against it, release mortgages, act as a guarantor and set up mortgages for the debts of third parties.

However; principles set out under the Capital Market legislations shall apply to matters such as granting of guarantees, securities or setting up of pledge rights including mortgages in the name of the Company and in favor of the third parties,

I) The Company may acquire, transfer and make real and personal dispositions on the vehicles (including vessels) that are necessary for the Company’s affairs,

J) In relation to the Company’s field of operation, the Company may acquire, transfer trademarks, patents, know-how and all kinds of other property rights and enter into license agreements thereon,

K) In relation to the Company’s field of operation, it may open, operate customs warehouses and carry out customs entries,

L) The Company may make donations provided that donations do not contradict with the regulations of the Capital Market Law regarding the transfer of concealed gain and pertinent legislations, the upper limit of such donations is determined by the General Assembly, donations made do not exceed such limit, donations made are added to the distributable profit base, necessary material event disclosures are made, donations made within a year are announced to the shareholders at the General Assembly, and donations do not disrupt its field of operation.

The Company may also engage in activities other than those listed here that are deemed related to or beneficial for its field of operation provided that they are authorized by the resolutions of the General Assembly, the Company fulfills the requirements stipulated by the legislation, and such activities do not contradict with the legislation.

Article 4Company’s Head Office and BranchesCompany’s head office is: The city of Istanbul, district of Avcılar. Company’s address is: Zorlu Plaza 34310 Avcılar/Istanbul.

In case of a change of address, the address shall be registered with the Trade Registry and announced in the Turkish Trade Registry Gazette and further notified to the Ministry of Customs and Trade and the Capital Markets Board. Notifications served to the registered and announced address shall be deemed as made to the Company. Failure to register the new address despite leaving the registered and announced address constitutes a ground for termination for the Company.

The Company may open branches within the country and abroad. If the Company opens branches, such branches shall be registered with the Trade Registry and announced in the Turkish Trade Registry Gazette.

Article 4Company’s Head Office and BranchesCompany’s head office is: The city of Istanbul, district of Şişli. Company’s address is: Levent 199 Büyükdere Cad. No: 199 34394 Şişli/Istanbul.

In case of a change of address, the new address shall be registered with the Trade Registry and announced in the Turkish Trade Registry Gazette. Notifications served to the registered and announced address shall be deemed as made to the Company. Failure to register and announce the new address within the required time despite leaving the registered and announced address constitutes a ground for termination for the Company.

The Company may open branches and representative offices within the country and abroad by resolutions of the Board of Directors provided that the Ministry of Customs and Trade and the Capital Markets Board are duly informed.

AGENDA FOR THE 2015 ORDINARY GENERAL ASSEMBLY MEETING


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Article 6Company’s Share Capital and Kind of Share Certificates Company accepted registered capital system as per to the amended Capital Markets Law No 2499 with Law No 3794 and enter into this system by the written consent dated 22/11/1990 and numbered 877 of Capital Markets Board.

Company’s Registered Share Capital is TL 1,000,000,000.-(one billion) and this share capital is divided into 100,000,000,000 (one hundred billion) bearer shares, each with a nominal value of 1 Kurus.

Article 6Company’s Share Capital and Kind of Share CertificatesCompany adopted the registered capital system as per the Capital Market Law and switched to this system by the written consent dated 22/11/1990 and numbered 877 of the Capital Markets Board.

The Company’s Registered Capital ceiling is TL 1,000,000,000.-(one billion) and this is divided into 100,000,000,000 (one hundred billion) bearer shares, each with a nominal value of 1 Kurus.

The Company’s issued capital is TL 335,456,275.00 (three hundred thirty five million and four hundred fifty six thousand and two hundred fifty five), divided into bearer shares, each with a nominal value of 1.00 (One) Kurus, and has been fully paid free from collusion.

The registered capital ceiling permission given by the Capital Markets Board is valid between 2012 and 2016 (5 years). Even if the permitted registered capital ceiling is not achieved at the end of 2016, in order for the Board of Directors to be able to pass a decision on capital increase after 2016; it must be authorized by the General Assembly for a new period, by obtaining permission from the Capital Markets Board for the previously permitted ceiling or a new ceiling. In case of failure to get such authorization, the company shall be deemed as having left the registered capital system.

Company’s issued capital is TL 335,456,275.00 (threehundredthirtyfivemillion fourhundredfiftysixthousand twohundredseventyfive) and the capital has been fully paid.

Shares representing the capital are as follows: Type: Bearer Number of Shares: 33,545,627,500 Amount of Shares (TL): 335,456,275.00

Between 2012 and 2016, the Board of Directors is authorized, when it deems necessary, to increase the issued capital by issuing bearer shares up to the registered capital ceiling, in accordance with the provisions of the Capital Markets Law. The Board of Directors is also authorized to issue shares above the nominal value and to restrict the rights of the shareholders to acquire new shares. Matters under this article shall be announced in accordance with the provisions of the Articles of Association, Turkish Commercial Code, Capital Markets Law and the relevant legislations. No bearer shares may be issued unless and until all share prices are fully paid.

Share capital of the Company may be transferred without prejudice to the provisions of Capital Markets Law and Turkish Commercial Code as well as the provisions of these Articles of Association.

Shares representing the capital shall be monitored in a dematerialized manner, in accordance with the principles of dematerialization.

The registered capital ceiling permission given by the Capital Markets Board is valid between 2016 -2020 (5 years). Even if the permitted registered capital ceiling is not reached by the end of 2020, in order for the Board of Directors to be able to pass a decision on capital increase after 2020; it must be authorized by the General Assembly for a new period, by obtaining permission from the Capital Markets Board for the previously permitted ceiling or a new ceiling, provided that this new period will not exceed 5 years. In case of failure to get such authorization, an increase of capital cannot be done with a Board of Directors’ resolution.

The Board of Directors is authorized for the period between 2016 and 2020, to increase the issued capital, when it deems necessary, by issuing bearer shares up to the registered capital ceiling in accordance with the provisions of the Capital Market Law, to issue shares above the nominal value, to restrict the pre-emptive rights of the shareholders and to issue shares below the nominal value. The right to acquire new shares cannot be exercised in a manner that causes inequality between the shareholders.

No new shares may be issued unless and until all issued shares are fully sold and paid or unsold shares are cancelled.

The Company’s shares may be transferred without prejudice to the provisions of the Capital Market Law and Turkish Commercial Code as well as the provisions of these Articles of Association.

Shares representing the issued capital shall be monitored in a dematerialized manner, in accordance with the principles of dematerialization.

15. Closing.


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The Company distributes profit in accordance with the provisions of the Turkish Commercial Code, Capital Market Regulations, Tax Regulations and other pertinent legislation as well as the profit distribution provision of its Articles of Association. The amount of profit to be distributed and date of distribution are approved by the General Assembly, upon the proposal of the Board of Directors.

The Company has adopted the profit distribution policy of distributing at least 25% of its distributable profit in cash and/or as bonus shares. Board of Directors shall review this policy every year, by taking into account the domestic and global economic conditions, Company’s growth and investment plans and financial position. Revisions made in the policy shall be submitted to the approval of the shareholders at the first General Assembly Meeting following such revisions and the policy will be published on the Company’s website.

Distribution of profit shall commence on the date determined by the General Assembly, provided that it is no later than the end of the year in which the General Assembly Meeting is held. Subject to the provisions of the legislation in force, the Company may consider distributing advance dividends or paying dividends in equal or in varying installments.

DIVIDEND DISTRIBUTION POLICY

Board’s Decision for Profit Distribution for the Year 2015

At its meeting on 28 March 2016, our Company’s Board of Directors resolved that;

No profit distribution can be made for the year 2015 due to accumulated losses from previous years although the Company recorded TL 59,620,000 of net profit in its consolidated financial statements prepared under the Turkish Accounting Standards/Turkish Financial Reporting Standards and TL 135,385,025.59 of net profit in its statutory financial statements prepared in accordance with the Tax Procedure Law, and this decision will be presented for the information of shareholders at the Annual General Assembly Meeting.


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CONCLUSION SECTION OF THE AFFILIATION REPORT PREPARED PURSUANT TOTHE ARTICLE 199 OF THE TURKISH COMMERCIAL CODE

During 2015, our Company did not enter into any legal transaction on behalf of Zorlu Holding AŞ (our controlling company) or its affiliates and did not take or avoid any measures to benefit Zorlu Holding AŞ or its affiliates under the direction of Zorlu Holding AŞ.


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STATEMENT OF THE INDEPENDENCE BY THE INDEPENDENT BOARD MEMBER CANDIDATES

Statement of Independence

To the Board of Directors of Vestel Elektronik Sanayi ve Ticaret AŞ

I hereby declare that I am a candidate for assuming the role of an “Independent Member” on the Board of Directors of Vestel Elektronik Sanayi ve Ticaret AŞ within the scope of the criteria stipulated in the legislation, the Company’s Articles of Association, and the Capital Markets Board’s Communiqué on Corporate Governance no. II-17.1, and in that regard;

a) Within the last five years, no employment relationship has been established between me, my spouse and my relatives by blood or marriage up to second degree and the Company, the affiliated companies which the Company controls the management of or has material influence over, shareholders who control the management of or have material influence over the Company and legal entities which these shareholders control the management of, in an executive position with important duties and responsibilities, nor have I/we individually or jointly held more than 5% of the capital or voting rights or privileged shares in or established a material business relationship with the same,

b) Within the last five years, I have not been a shareholder (5% and more), or held an executive position with significant duties and responsibilities, or served as a Board member in any company from or to which the Company purchases or sells a significant quantity of products or services based on the agreements made during the periods these products or services were sold or purchased including particularly those companies which provide auditing (including tax audit, legal audit and internal audit), rating and consultancy services to the Company,

c) I have the professional education, knowledge and experience necessary to duly carry out the duties which I shall assume due to my position as an independent Board member,

d) I will not be working as a full time employee at any public institution or organization after being elected as a Board member with the exception of working as a faculty member at a university provided that this is in compliance with the relevant legislation,

e) I am deemed to be a resident in Turkey according to the Income Tax Law dated 31 December 1960 and numbered 193,

f) I have strong ethical standards, professional reputation and experience which will allow me to make positive contributions to the operations of the Company, to protect my neutrality in case of conflicts of interest between the Company and the shareholders and to decide independently by taking into consideration the rights of the stakeholders,

g) I will be able to dedicate a sufficient amount of time to the affairs of the Company in a manner to follow up the conduct of the Company activities and to duly perform the duties I shall assume,

h) I have not served as a Board member at the Company’s Board of Directors for more than 6 years within the last ten years,

i) I am not serving as an independent board member at more than three companies whose management is controlled by the shareholders controlling the Company and Company management and at more than five companies which are traded on the stock exchange,

j) I am not registered and declared on behalf of the legal entity which is elected as a board member.

Ali Akın TARI

24 March 2016


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STATEMENT OF THE INDEPENDENCE BY THE INDEPENDENT BOARD MEMBER CANDIDATES

Statement of Independence

To the Board of Directors of Vestel Elektronik Sanayi ve Ticaret AŞ

I hereby declare that I am a candidate for assuming the role of an “Independent Member” on the Board of Directors of Vestel Elektronik Sanayi ve Ticaret AŞ within the scope of the criteria stipulated in the legislation, the Company’s Articles of Association, and the Capital Markets Board’s Communiqué on Corporate Governance no. II-17.1, and in that regard;

a) Within the last five years, no employment relationship has been established between me, my spouse and my relatives by blood or marriage up to second degree and the Company, the affiliated companies which the Company controls the management of or has material influence over, shareholders who control the management of or have material influence over the Company and legal entities which these shareholders control the management of, in an executive position with important duties and responsibilities, nor have I/we individually or jointly held more than 5% of the capital or voting rights or privileged shares in or established a material business relationship with the same,

b) Within the last five years, I have not been a shareholder (5% and more), or held an executive position with significant duties and responsibilities, or served as a Board member in any company from or to which the Company purchases or sells a significant quantity of products or services based on the agreements made during the periods these products or services were sold or purchased including particularly those companies which provide auditing (including tax audit, legal audit and internal audit), rating and consultancy services to the Company,

c) I have the professional education, knowledge and experience necessary to duly carry out the duties which I shall assume due to my position as an independent Board member,

d) I will not be working as a full time employee at any public institution or organization after being elected as a Board member with the exception of working as a faculty member at a university provided that this is in compliance with the relevant legislation,

e) I am deemed to be a resident in Turkey according to the Income Tax Law dated 31 December 1960 and numbered 193,

f) I have strong ethical standards, professional reputation and experience which will allow me to make positive contributions to the operations of the Company, to protect my neutrality in case of conflicts of interest between the Company and the shareholders and to decide independently by taking into consideration the rights of the stakeholders,

g) I will be able to dedicate a sufficient amount of time to the affairs of the Company in a manner to follow up the conduct of the Company activities and to duly perform the duties I shall assume,

h) I have not served as a Board member at the Company’s Board of Directors for more than 6 years within the last ten years,

i) I am not serving as an independent board member at more than three companies whose management is controlled by the shareholders controlling the Company and Company management and at more than five companies which are traded on the stock exchange,

j) I am not registered and declared on behalf of the legal entity which is elected as a board member.

Hacı Ahmet Kılıçoğlu

24 March 2016


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STATEMENT OF RESPONSIBILITY

BOARD OF DIRECTORS’ RESOLUTION ON THE APPROVAL OF FINANCIAL STATEMENTS AND ANNUAL REPORTRESOLUTION DATE: 16.02.2016RESOLUTION NUMBER: 2016/6

STATEMENT OF RESPONSIBILITY PURSUANT TO THE ARTICLE 9 OF THE SECOND SECTION OF THE CAPITAL MARKETS BOARD’S COMMUNIQUÉ ON PRINCIPLES OF FINANCIAL REPORTING IN CAPITAL MARKETS NO: II-14.1

We hereby declare that:

a) We have reviewed our Company’s consolidated financial statements and annual report for the fiscal year ended 31 December 2015, which have been prepared in accordance with the Turkish Accounting Standards/Turkish Financial Reporting Standards published by the Public Oversight Accounting and Auditing Standards Authority pursuant to the provisions of the Capital Markets Board’s Communiqué on the “Principles of Financial Reporting in Capital Markets” no. II-14.1 and approved by the Board of Directors’ decision dated 16 February 2016 and numbered 2016/6,

b) Based on the information we possess within the scope of our duties and responsibilities in the Company, the consolidated financial statements and the annual report do not contain any incorrect statement or any omission of material facts that may result in misleading conclusion as of the date of the issuance,

c) Based on the information we possess within the scope of our duties and responsibilities in the Company, the consolidated financial statements prepared in accordance with the financial reporting standards in effect provide an accurate view of the assets, liabilities, financial position and profit (loss) of the Company, and the annual report provides an accurate view of the development and performance of the business and the consolidated financial position of the Company along with the principal risks and uncertainties the Company is exposed to.

Sincerely,

Ali Akın TARI Hacı Ahmet KILIÇOĞLU Alp DAYIVice Chairman Board Member Financial Affairs Coordinator


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To the Board of Directors of Vestel Elektronik Sanayi ve Ticaret Anonim Şirketi

Report on the Consolidated Financial Statements

1. WehaveauditedtheaccompanyingconsolidatedfinancialstatementsofVestelElektronikSanayiveTicaretAnonimŞirketi(the“Company”)anditsSubsidiaries(collectivelyreferredtoasthe“Group”),whichcomprisetheconsolidatedstatementoffinancialpositionasat31December2015andtheconsolidatedstatementofprofitorlossandothercomprehensiveincome,consolidatedstatementofchangesinequityandconsolidatedstatementofcashflowsfortheperiodthenendedandasummaryofsignificantaccounting policies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial Statements

2. TheGroup’smanagementisresponsibleforthepreparationandfairpresentationoftheseconsolidatedfinancialstatementsinaccordancewithTurkishAccountingStandardsandforsuchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationofconsolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Independent Auditor’s Responsibility

3. Ourresponsibilityistoexpressanopinionontheseconsolidatedfinancialstatementsbasedonouraudit.OurauditwasconductedinaccordancewithstandardsonauditingissuedbytheCapitalMarketsBoardofTurkeyandIndependentAuditingStandardsthat part of Turkish Standards on Auditing issued by the Public Oversight Accounting and Auditing Standards Authority. Those standardsrequirethatethicalrequirementsarecompliedwithandthattheauditisplannedandperformedtoobtainreasonableassurancewhethertheconsolidatedfinancialstatementsarefreefrommaterialmisstatement.

An independent audit involves performing procedures to obtain evidence about the amounts and disclosures in the consolidated financialstatements.Theproceduresselecteddependonindependentauditor’sprofessionaljudgment,includingtheassessmentoftherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherduetoerrororfraud.Inmakingthoseriskassessments,theindependentauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationoftheconsolidatedfinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotfor thepurposeofexpressinganopinionontheeffectivenessof theentity’s internalcontrol.An independentaudit includesalso evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatements.

Webelievethattheindependentauditevidencewehaveobtainedduringourauditissufficientandappropriatetoprovideabasisfor our audit opinion.

Opinion

4. Inouropinion, theconsolidated financial statementspresent fairly, inallmaterial respects, the financialpositionofVestelElektronikSanayiveTicaretAnonimŞirketi(anditsSubsidiaries)asat31December2015andtheirfinancialperformanceandcashflowsfortheperiodthenendedinaccordancewithTurkishAccountingStandards.

INDEPENDENT AUDITOR’S REPORTVestel Elektronik Sanayi ve Ticaret Anonim Şirketi

109


Other Responsibilities Arising From Regulatory Requirements

5. Inaccordancewithsubparagraph4ofArticle398oftheTurkishCommercialCode(“TCC”)No:6102;auditor’sreportontheearlyriskidentificationsystemandcommitteehasbeensubmittedtotheCompany’sBoardofDirectorson16February2016.

6. Inaccordancewithsubparagraph4ofArticle402oftheTCC;nosignificantmatterhascometoourattentionthatcausesustobelievethattheCompany’sbookkeepingactivitiesfortheperiod1January-31December2015isnotincompliancewiththecodeandprovisionsoftheCompany’sarticlesofassociationinrelationtofinancialreporting.

7. Inaccordancewithsubparagraph4ofArticle402oftheTCC;theBoardofDirectorssubmittedtousthenecessaryexplanationsandprovidedrequireddocumentswithinthecontextofaudit.

BaşaranNasBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.a member of PricewaterhouseCoopers

TalarGül,SMMMPartner

İstanbul,16February2016

INDEPENDENT AUDITOR’S REPORTVestel Elektronik Sanayi ve Ticaret Anonim Şirketi

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PAGE

CONSOLIDATED BALANCE SHEETS 112

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 115

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 116

CONSOLIDATED STATEMENTS OF CASH FLOWS 118

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2015 120 - 166

NOTE1 GROUP’SORGANISATIONANDNATUREOFOPERATIONS 120

NOTE2 BASISOFPRESENTATIONOFCONSOLIDATEDFINANCIALSTATEMENTS 120

NOTE3 INTERESTSINOTHERENTITIES 133

NOTE4 SEGMENTREPORTING 134

NOTE5 CASHANDCASHEQUIVALENTS 135

NOTE6 FINANCIALASSETS 136

NOTE7 FINANCIALLIABILITIES 136

NOTE8 RELATEDPARTYDISCLOSURES 138

NOTE9 TRADERECEIVABLESANDPAYABLES 140

NOTE10 OTHERRECEIVABLES 141

NOTE11 INVENTORIES 142

NOTE12 PREPAIDEXPENSES 142

NOTE13 PROPERTY,PLANTANDEQUIPMENT 143

NOTE14 INTANGIBLEASSETS 145

NOTE15 GOODWILL 146

NOTE16 GOVERNMENTGRANTS 147

NOTE17 PROVISIONS,CONTINGENTASSETSANDLIABILITIES 147

NOTE18 COMMITMENTS 149

NOTE19 EMPLOYEEBENEFITS 149

NOTE20 EXPENSESBYNATURE 150

NOTE21 OTHERASSETSANDLIABILITIES 151

NOTE22 CAPITAL,RESERVESANDOTHEREQUITYITEMS 151

NOTE23 SALES 153

NOTE24 GENERALADMINISTRATIVEEXPENSES,MARKETINGEXPENSES,RESEARCHANDDEVELOPMENTEXPENSES 153

NOTE25 OTHERINCOMEANDEXPENSEFROMOPERATINGACTIVITIES 154

NOTE26 FINANCIALEXPENSEANDFINANCIALINCOME 154

NOTE27 ANALYSISOFOTHERCOMPREHENSIVEINCOMEITEMS 155

NOTE28 TAXESONINCOME(INCLUDINGDEFERREDTAXASSETSANDLIABILITIES) 156

NOTE29 EARNINGS/(LOSS)PERSHARE 158

NOTE30 DERIVATIVEINSTRUMENTS 159

NOTE31 FINANCIALINSTRUMENTSANDFINANCIALRISKMANAGEMENT 159

NOTE32 FINANCIALINSTRUMENTS(FAIRVALUEANDHEDGEACCOUNTINGDISCLOSURES) 166

CONTENTS

111

(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise indicated.)

Vestel Elektronik Sanayi ve Ticaret Anonim Şirketi

Notes

Audited Audited 31 December 2015 31 December 2014 ASSETS Current assets Cash and cash equivalents 5 728.219 618.673Derivative financial instruments 30 74.303 99.300Trade receivables 2.767.366 1.931.883Relatedparties 8 27.997 54.449Other parties 9 2.739.369 1.877.434

Other receivables 369.541 377.605Relatedparties 8 22.098 177.098Other parties 10 347.443 200.507

Inventories 11 2.203.005 1.722.930Prepaid expenses 12 52.712 89.490Current income tax assets 28 24.885 5.180Other current assets 21 27.714 21.532 Total current assets 6.247.745 4.866.593 Non-current assets Financialinvestments 6 7.639 6.577Trade receivables 140.183 118.358

Other parties 9 140.183 118.358Other receivables 798.465 420.990Relatedparties 8 781.743 404.455Other parties 10 16.722 16.535

Prepaid expenses 12 7.540 8.726Property,plantandequipment 13 1.528.666 1.365.087Intangibleassets 542.762 482.229Goodwill 15 197.793 197.793Other intangible assets 14 344.969 284.436

Othernon-currentassets 21 11.224 13.566Deferred tax asset 28 51.725 39.219 Total non-current assets 3.088.204 2.454.752 TOTAL ASSETS 9.335.949 7.321.345

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

CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2015 AND 31 DECEMBER 2014

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NotesAudited Audited

31 December 2015 31 December 2014 LIABILITIES Current liabilities Short term financial liabilities 7 356.880 325.436Short term portion of long term financial liabilities 7 384.106 125.889Trade payables 4.536.791 3.720.176Relatedparties 8 4.567 5.064Other parties 9 4.532.224 3.715.112

Liabilitiesforemployeebenefits 19 67.006 60.840Other payables 8.135 1.672

Other parties 8.135 1.672Derivative financial instruments 30 61.275 32.391Current income tax liabilities 28 1.799 4.224Short term provisions 205.438 140.877

Other short term provisions 17 205.438 140.877Other current liabilities 21 235.984 164.124 Total current liabilities 5.857.414 4.575.629 Non-current liabilities Longtermfinancialliabilities 7 1.720.198 1.198.207Other payables 1.558 1.338

Other parties 1.558 1.338Longtermprovisions 101.459 97.183

Provision for employee benefits 19 68.311 73.768Other long term provisions 17 33.148 23.415

Derivative financial instruments 30 - 23.121Othernon-currentliabilities - 332Deferred tax liability 28 81.512 54.886 Total non-current liabilities 1.904.727 1.375.067 TOTAL LIABILITIES 7.762.141 5.950.696



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Notes

Audited Audited 31 December 2015 31 December 2014 EQUITY Paid in capital 22 335.456 335.456Adjustmentstosharecapital 22 688.315 688.315Share premium 22 103.165 103.078Othercomprehensiveincome/expensenottobereclassifiedtoprofit or loss 563.302 411.851Revaluationgain/loss 563.302 411.851-Revaluationoftangiblefixedassets 27 574.004 435.434-Actuarialgain/lossarisingfromdefinedbenefitplans 27 (10.702) (23.583)

Othercomprehensiveincome/expensetobereclassifiedtoprofitorloss (26.378) (3.691)Foreigncurrencytranslationdifferences (47.686) (40.450)Cashflowhedges 27 19.256 34.523Financialassetsrevaluationfund 22 2.052 2.236

Restrictedreserves 22 28.314 28.314Accumulated deficit 22 (227.257) (334.583)Netprofitfortheperiod 59.620 97.376Non-controlling interest 49.271 44.533 Total equity 1.573.808 1.370.649 TOTAL LIABILITIES AND EQUITY 9.335.949 7.321.345

Consolidatedfinancialstatementsfortheperiod1January-30December2015,wereapprovedbytheBoardofDirectorsofVestelElektronikSanayiveTicaretA.Ş.on16February2016.



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Audited Audited Notes 1 January - 31 December 2015 1 January - 31 December 2014

Revenue 23 9.250.461 7.767.303Cost of sales 23 (7.292.391) (6.197.419) Gross profit 1.958.070 1.569.884 Marketing,sellinganddistributionexpenses 24 (1.032.212) (826.217)Generaladministrativeexpenses 24 (220.456) (186.993)Researchanddevelopmentexpenses 24 (120.830) (103.139)Other income from operating activities 25 433.707 131.365Other expenses from operating activities 25 (706.007) (440.107) Operating profit 312.272 144.793 Financialincome 26 1.066.185 571.879Financialexpenses 26 (1.304.279) (590.182) Profit before tax 74.178 126.490 Tax benefit/(expense) Current tax expense 28 (16.615) (24.456)Deferred tax benefit 28 11.014 2.088 Net income for the period 68.577 104.122

Attributable to: Non-controllinginterests 8.957 6.746Equity holders of the parent 59.620 97.376 Net income for the period 68.577 104.122

Earnings per 1000 shares with a Kr 1 of face value (TL) 29 0,18 0,29

Other comprehensive income/(loss):

Items not to be reclassified to profit or loss 163.992 (22.702)Revaluationoftangiblefixedassets 176.890 -Actuarialgain/(loss)arisingfromdefinedbenefitplans 16.482 (28.378)Tax effect of other comprehensive income not to be reclassified to profit or loss (29.380) 5.676

Deferred tax income (29.380) 5.676Items to be reclassified to profit or loss (23.398) (13.729)Currency translation differences (7.236) (64.687)Fairvalueincrease/decreaseonavailableforsalefinancialassets (230) 2.340Cashflowhedges (19.972) 61.357Taxeffectofothercomprehensiveincome/expensetobereclassified to profit or loss 4.040 (12.739)Deferredtaxincome/loss 4.040 (12.739)

Other comprehensive income/(loss) 140.594 (36.431) Total comprehensive income 209.171 67.691 Attributable to: Non-controllinginterests 11.170 7.582Equity holders of the parent 198.001 60.109


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIODS 1 JANUARY - 31 DECEMBER 2015 AND 2014

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Other comprehensive loss not to be reclassified to profit or loss

Other comprehensive loss to be reclassified to profit or loss

Accumulated deficit/Retained Earnings

Paid in capitalAdjustments to

share capital Share premiumFixed assets

revaluation fund

Actuarial loss on employee

benefits

Currency translation differences

Financial assets

revaluation fund

Cash flow hedge fund

Restricted reserves

Accumulated deficit

Net Profit/(loss) for

the period

Equity holders of the parent

Non-controlling

interests Total equityBalances at 1 January 2014 335.456 688.315 95.566 443.773 (1.360) 24.237 364 (12.960) 28.314 (239.297) (99.721) 1.262.687 82.503 1.345.190Transfer to accumulated deficit - - - - - - - - - (99.721) 99.721 - - -Depreciationtransfer-net - - - (16.378) - - - - - 16.378 - - - -Totalcomprehensive(loss)/income - - - - (22.210) (64.687) 1.872 47.758 - - 97.376 60.109 7.582 67.691Dividends - - - - - - - - - - - - (1.594) (1.594)Transactionswithnon-controllinginterests - - 7.512 8.039 (13) - - (275) - (11.943) - 3.320 (43.958) (40.638) Balances at 31 December 2014 335.456 688.315 103.078 435.434 (23.583) (40.450) 2.236 34.523 28.314 (334.583) 97.376 1.326.116 44.533 1.370.649 Balances at 1 January 2015 335.456 688.315 103.078 435.434 (23.583) (40.450) 2.236 34.523 28.314 (334.583) 97.376 1.326.116 44.533 1.370.649Transfer to accumulated deficit - - - - - - - - - 97.376 (97.376) - - -Depreciationtransfer-net - - - (9.711) - - - - - 9.711 - - - -Totalcomprehensive(loss)/income - - - 148.194 12.889 (7.236) (184) (15.282) - - 59.620 198.001 11.170 209.171Dividends - - - - - - - - - - - - (5.639) (5.639)Transactionswithnon-controllinginterests - - 87 87 (8) - - 15 - 239 - 420 (793) (373) Balances at 31 December 2015 335.456 688.315 103.165 574.004 (10.702) (47.686) 2.052 19.256 28.314 (227.257) 59.620 1.524.537 49.271 1.573.808


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE PERIODS 1 JANUARY - 31 DECEMBER 2015 AND 2014

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Other comprehensive loss not to be reclassified to profit or loss

Other comprehensive loss to be reclassified to profit or loss

Accumulated deficit/Retained Earnings

Paid in capitalAdjustments to

share capital Share premiumFixed assets

revaluation fund

Actuarial loss on employee

benefits

Currency translation differences

Financial assets

revaluation fund

Cash flow hedge fund

Restricted reserves

Accumulated deficit

Net Profit/(loss) for

the period

Equity holders of the parent

Non-controlling

interests Total equityBalances at 1 January 2014 335.456 688.315 95.566 443.773 (1.360) 24.237 364 (12.960) 28.314 (239.297) (99.721) 1.262.687 82.503 1.345.190Transfer to accumulated deficit - - - - - - - - - (99.721) 99.721 - - -Depreciationtransfer-net - - - (16.378) - - - - - 16.378 - - - -Totalcomprehensive(loss)/income - - - - (22.210) (64.687) 1.872 47.758 - - 97.376 60.109 7.582 67.691Dividends - - - - - - - - - - - - (1.594) (1.594)Transactionswithnon-controllinginterests - - 7.512 8.039 (13) - - (275) - (11.943) - 3.320 (43.958) (40.638) Balances at 31 December 2014 335.456 688.315 103.078 435.434 (23.583) (40.450) 2.236 34.523 28.314 (334.583) 97.376 1.326.116 44.533 1.370.649 Balances at 1 January 2015 335.456 688.315 103.078 435.434 (23.583) (40.450) 2.236 34.523 28.314 (334.583) 97.376 1.326.116 44.533 1.370.649Transfer to accumulated deficit - - - - - - - - - 97.376 (97.376) - - -Depreciationtransfer-net - - - (9.711) - - - - - 9.711 - - - -Totalcomprehensive(loss)/income - - - 148.194 12.889 (7.236) (184) (15.282) - - 59.620 198.001 11.170 209.171Dividends - - - - - - - - - - - - (5.639) (5.639)Transactionswithnon-controllinginterests - - 87 87 (8) - - 15 - 239 - 420 (793) (373) Balances at 31 December 2015 335.456 688.315 103.165 574.004 (10.702) (47.686) 2.052 19.256 28.314 (227.257) 59.620 1.524.537 49.271 1.573.808

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE PERIODS 1 JANUARY - 31 DECEMBER 2015 AND 2014


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Audited Audited 1 January - 1 January - Notes 31 December 2015 31 December 2014Operating activities: Profit before tax 74.178 126.490

Adjustments to reconcile net cash provided from operating activities to profit before taxes: -Depreciationandamortization 13 295.262 270.695-Goodwillimpairment - 4.640-Changesinotherprovisions 74.294 15.103-Provisionforemploymentterminationbenefits 19 23.451 14.672-Provisionforimpairmentoninventories 11 (5.741) 8.093-Provisionfordoubtfulreceivables 9 13.821 20.983-Interestexpense 26 273.470 164.364-Interestincome 26 (91.181) (88.153)-(Gain)/lossfromsalesoftangibleandintangibleassets (7.422) (2.332)-Derivativefinancialinstruments(income)/expenseaccrual 10.788 (34.577)-Unrealizedforeignexchangedifferences 49.349 9.076Change in blocked cash and cash equivalents 5 (7) (9.634) Changes in working capital: (Increase)/decreaseintradereceivables (871.129) (343.874)(Increase)/decreaseininventories (474.565) (462.329)(Increase)/decreaseinotherreceivablesandothercurrentassets (93.688) (40.937)(Increase)/decreaseinothernon-currentassets 2.155 (4.145)Increase/(decrease)intradepayables 816.615 884.164Increase/(decrease)inotherpayablesandotherliabilities 84.377 75.916 Cash flows from operating activities: Employment termination benefits paid 19 (12.426) (9.544)Current income tax paid 28 (41.171) (22.132) Net cash provided by operating activities 120.430 576.539


CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS 1 JANUARY - 31 DECEMBER 2015 AND 2014

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Audited Audited 1 January - 1 January -Investing activities: Notes 31 December 2015 31 December 2014

Changes in financial assets (1.062) (4.125)Acquisition of tangible assets 13 (220.624) (287.639)Cash provided from sales of tangible and intangible assets 18.062 6.423Acquisition of intangible assets 14 (129.520) (108.421)Transactionswithnon-controllinginterests (373) (40.638) Net cash used in investing activities (333.517) (434.400) Financing activities:

Proceedsfrombankborrowings 2.991.105 2.091.057Repaymentofbankborrowings (2.279.244) (1.472.514)Dividends paid (5.639) (1.594)Increaseinotherreceivablesfromrelatedparties (222.288) (433.867)Interestpaid (223.028) (142.468)Interestreceived 91.181 88.153 Net cash provided by financing activities 352.087 128.767 Net increase in cash and cash equivalents before foreign currency translation differences 139.000 270.906 Effect of currency translation differences on cash and cash equivalents (29.461) (12.845) Net increase/(decrease) in cash and cash equivalents 109.539 258.061Cash and cash equivalents at the beginning of the period 5 565.751 307.690 Cash and cash equivalents at the end of the period 5 675.290 565.751


CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS 1 JANUARY - 31 DECEMBER 2015 AND 2014

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Vestel Elektronik Sanayi ve Ticaret Anonim ŞirketiNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2015

NOTE 1 - GROUP’S ORGANISATION AND NATURE OF OPERATIONS

Vestel Elektronik Sanayi ve Ticaret Anonim Şirketi (“Vestel Elektronik” or “the Company”) and its subsidiaries (together “theGroup”),mainlyproduceandsellarangeofbrowngoodsandwhitegoods.TheCompany’sheadofficeislocatedatLevent199,BüyükdereCaddesiNo:199,34394Şişli/Istanbul.TheGroup’sproductionfacilitiesarelocatedinManisaOrganizedIndustrialZone,İzmirAegeanFreeZoneandRussia.

TheGroup’srefrigeratorandairconditionersalesincludetheeffectsofseasonalvariationswhilsttelevisionandelectronicdevicesand other segment sales are not materially affected by seasonality.

TheultimatecontrolleroftheCompanyisZorluFamily.

VestelElektronik,isregisteredtoCapitalMarketBoard(“CMB”)anditsshareshavebeenquotedtoBorsaIstanbul(“BİST”)since1990(note20).Asof31December2015,35.59%oftheCompany’ssharesarepubliclytraded.

Asof31December2015thenumberofpersonnelemployedatGroupis15.690(31December2014:15.877).

TheCompany’ssubsidiariesandassociatesareasfollows:

Subsidiaries Country Nature of operationsVestelBeyazEşyaSanayiveTicaretA.Ş. Turkey ProductionVestelKomünikasyonSanayiveTicaretA.Ş. Turkey SalesVestelTicaretA.Ş. Turkey SalesVestelCISLtd. Russia SalesVestelIberiaSL Spain SalesVestelFranceSA France SalesVestelHollandBV Holland SalesVestelGermanyGmbH Germany SalesCabotCommunicationsLtd. UK SoftwareVestelBeneluxBV Holland SalesVestelUKLtd. UK SalesVestekElektronikAraştırmaGeliştirmeA.Ş. Turkey SoftwareVestelTradeLtd. Russia SalesOYVestelScandinaviaAB Finland SalesIntertechnikaLLC Russia ServiceVestelCentralAsiaLLP Kazakhstan SalesVestelVenturesAr-geA.Ş. Turkey ServiceVestelPolandsp.z.o.o. Poland Sales

Investments accounted for using equity method Country Nature of operations

VestelSavunmaSanayiA.Ş. Turkey Production/SalesAydınYazılımElektronikveSanayiA.Ş. Turkey Software

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

2.1 Basis of presentation

2.1.1 Statement of compliance

TheaccompanyingconsolidatedfinancialstatementsarepreparedinaccordancewiththeCommuniquéSerialII,No:14.1,“PrincipalsofFinancialReportinginCapitalMarkets”publishedintheOfficialGazettenumbered28676on13June2013.Accordingtothearticle5oftheCommuniqué,consolidatedfinancialstatementsarepreparedinaccordancewithTurkishAccountingStandards/TurkishFinancial Reporting Standards (“TAS”/“TFRS”) and its addendum and interpretations (“IFRIC”) issued by the Public OversightAccountingandAuditingStandardsAuthority(“POAASA”)TurkishAccountingStandardsBoard.

The Company and its subsidiaries operating in Turkey maintains its accounting records and prepares its statutory financial statementsinaccordancewiththeTurkishCommercialCode(“TCC”),taxlegislationandtheuniformchartofaccountsissuedbytheMinistryofFinance.Theconsolidatedfinancialstatements,exceptforland,buildingsandlandimprovementsandthefinancialassetsandliabilitiespresentedwiththeirfairvalues,aremaintainedunderhistoricalcostconversioninTL.

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NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS (Cont’d)

2.1 Basis of presentation (Cont’d)

2.1.1 Statement of compliance (Cont’d)

ConsolidatedsubsidiariesoperatinginforeigncountrieshavepreparedtheirfinancialstatementsinaccordancewiththelawsandregulationsofthecountriesinwhichtheyoperatewiththerequiredadjustmentsandreclassificationsreflectedinaccordancewithCMBFinancialReportingStandards.Thesefinancialstatementsarebasedonthestatutoryrecordswhicharemaintainedunderhistorical costconversion,with the requiredadjustmentsand reclassifications reflected for thepurposeof fairpresentation inaccordancewiththeTAS/TFRS.

With thedecision takenon17March2005, theCMBannounced that,effective from1January2005, theapplicationof inflationaccountingisnolongerrequiredforthecompaniesoperatinginTurkeyandpreparingtheirfinancialstatementsinaccordancewithCMBFinancialReportingStandards.Accordingly,TAS29,“FinancialReportinginHyperinflationaryEconomies”issuedbytheIASB,hasnotbeenappliedinthefinancialstatementsfortheaccountingyearcommencingfrom1January2005.

2.1.2 Currency used

i) Functionalandpresentationcurrency

ItemsincludedinthefinancialstatementsofeachoftheGroup’sentitiesaremeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichtheentityoperates(“functionalcurrency”).TheconsolidatedfinancialstatementsarepreparedandpresentedinTurkishLira(“TL”),whichisthefunctionalcurrencyoftheparentcompany.

ii) Transactions and balances

Transactions in foreign currencies have been translated into functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from the settlement and translation of monetary assets and liabilities denominated in foreigncurrencyattheexchangeratesprevailingatthebalancesheetdatesareincludedinconsolidatedcomprehensiveincome,exceptfortheeffectiveportionofforeigncurrencyhedgeofcashflowandnetinvestmentwhichareincludedundershareholdersequity.

iii) Translation of financial statements of subsidiaries operating in foreign countries

AssetsandliabilitiesofsubsidiariesoperatinginforeigncountriesaretranslatedintoTLattheexchangeratesprevailingatthebalancesheetdates.ComprehensiveincomeitemsofthosesubsidiariesaretranslatedintoTLusingaverageexchangeratesfortheperiod(iftheaverageexchangeratesfortheperioddonotreasonablyreflecttheexchangeratefluctuations,transactionsaretranslated using the exchange rates prevailing at the date of the transaction). Exchange differences arising from using average and balancesheetdateratesareincludedin“currencytranslationdifferences”undertheshareholders’equity.

The balance sheet date rates and average rates used for translation of income statement items for the related periods are as follows:

Period end: 31 December 2015 31 December 2014

TurkishLira/EUR 0,3147 0,3545TurkishLira/GBP 0,2325 0,2781TurkishLira/RUB 25,246 24,851

Average:1 January -

31 December 20151 January -

31 December 2014

TurkishLira/EUR 0,3313 0,3441TurkishLira/GBP 0,2408 0,2781TurkishLira/RUB 22,490 17,385

2.1.3 Basis of consolidation

Theconsolidatedfinancialstatementsincludetheaccountsoftheparent,Company,anditssubsidiariesfromthedateonwhichthecontrolistransferredtotheGroupuntilthedatethatthecontrolceases.Thefinancialstatementsofthecompaniesincludedin the scope of consolidation have been prepared as of the date of the consolidated financial statements and have been prepared in accordancewithCMBFinancialReportingStandardsbyapplyinguniformaccountingpoliciesandpresentation.

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2.1 Basis of presentation (Cont’d)

2.1.3 Basis of consolidation (Cont’d)

a) Subsidiaries

TheGrouphaspoweroveranentitywhenithasexistingrightsthatgiveitthecurrentabilitytodirecttherelevantactivities,i.e.theactivitiesthatsignificantlyaffecttheentity’sreturns.Ontheotherhand,theGroupcontrolsanentitywhenitisexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowerovertheentity.

InordertobeconsistentwithaccountingpoliciesacceptedbytheGroup,accountingpoliciesofthesubsidiariesaremodifiedwherenecessary.

Thebalancesheetandstatementofincomeofthesubsidiariesareconsolidatedonaline-by-linebasisandallmaterialintercompanypayable/receivablebalancesandsales/purchasetransactionsareeliminated.ThecarryingvalueoftheinvestmentheldbyVestelElektronikanditssubsidiariesiseliminatedagainsttherelatedshareholders’equity.

Thenon-controllingshareinthenetassetsandresultsofsubsidiariesfortheperiodareseparatelyclassifiedas“non-controllinginterest”intheconsolidatedstatementsofcomprehensiveincomeandtheconsolidatedstatementsofchangesinshareholders’equity.

As of the balance sheet date, consolidated companies and the proportion of ownership interest of Vestel Elektronik in thesesubsidiaries are disclosed in note 3.

FinancialassetsinwhichtheGrouphasdirectorindirectvotingrightsequaltoorabove50%whichareimmaterialtotheGroupfinancial resultsoroverwhicha significant influence isnot exercisedby theGroupare carriedat cost lessanyprovisions forimpairment.

b) Investments in associates

Investmentsinassociatesareaccountedforbytheequitymethodandareinitiallyrecognizedatcost.TheseareentitiesinwhichtheGrouphasaninterestwhichismorethan20%andlessthan50%ofthevotingrightsoroverwhichasignificantinfluenceisexercised.UnrealizedgainsontransactionsbetweentheGroupanditsassociateareeliminatedtotheextentoftheGroup’sinterestintheassociates,whereasunrealizedlossesareeliminatedunlesstheydonotaddressanyimpairmentoftheassettransferred.NetincreaseordecreaseinthenetassetofassociatesareincludedintheconsolidatedstatementsofcomprehensiveincomeinregardswiththeGroup’sshare.

TheGroupceasestoaccounttheassociateusingtheequitymethodifitlosesthesignificantinfluenceorthenetinvestmentintheassociatebecomesnil,unlessithasenteredtoaliabilityoracommitment.AftertheGroup’sinterestintheassociatesbecomesnil,additionallossesareprovidedfor,andaliabilityrecognized,onlytotheextentthattheGrouphasincurredlegalorconstructiveobligationsormadepaymentsonbehalfoftheassociate.Iftheassociatesubsequentlyreportsprofits,theGroupresumesincludingitsshareofthoseprofitsonlyafteritsshareoftheprofitsequalstheshareofnetlossesnotrecognized.

SinceVestelSavunmaandAydınYazılımhasnetliabilitypositionasof31December2015and31December2014,carryingvalueofthose investment in associates accounted for by equity method is resulted as nil in the consolidated balance sheets.

The Group’s voting rights and effective ownership rates in Vestel Savunma and Aydın Yazılım are 35% and 21% respectively(31December2014:35%,21%).

2.2 Comparatives

ConsolidatedfinancialstatementsoftheGrouphavebeenpreparedcomparativelywiththeprecedingfinancialperiod,inordertoenabledeterminationoftrendsinfinancialpositionandperformance.Comparativefiguresarereclassified,wherenecessary,toconform to changes in presentation in the consolidated financial statements.

Foreignexchangeincomefromotherreceivablesamountingto101.607thousandTL,whichweredisclosedasotherexpensefromoperatingactivitiesintheGroup’sconsolidatedstatementofcomprehensiveincomeasof31December2014arereclassifiedasfinancial income.

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2.3 Restatement and errors in the accounting estimates

Majorchanges inaccountingpoliciesareapplied retrospectivelyandanymajoraccountingerrors thathavebeendetectedarecorrected and the financial statements of the previous period are restated. Changes in accounting policies resulting from the initialimplementationofanewstandard,ifany,areimplementedretrospectivelyorprospectivelyinaccordancewiththetransitionprovisions.Ifthechangesinaccountingestimatesonlyapplytooneperiod,thentheyareappliedinthecurrentperiodinwhichthechangeoccurred;ifthechangesalsoapplytofutureperiods,theyareappliedinboththeperiodofchangeandinthefutureperiods,prospectively.

2.4. Amendments in International Financial Reporting Standards

a) New standards, amendments and interpretations issued and effective for the financial year beginning 1 January 2015 and are adopted by the Group:

• TAS 19 Defined Benefit Plans: Employee Contributions (Amendment), effectiveforannualperiodsbeginningonorafter1July2014.Theamendmentsclarifythat,iftheamountofthecontributionsisindependentofthenumberofyearsofservice,anentityispermittedtorecognisesuchcontributionsasareductionintheservicecostintheperiodinwhichtheserviceisrendered,insteadof allocating the contributions to the periods of service. The amendments had no effect on the financial position or performance oftheGroup.

• Annual Improvements - 2010-2012 Cycle;effectiveforannualperiodsbeginningonorafter1July2014. The2010-2012Cycleimprovementshaveamendedthebelowstandards:

• TFRS2Share-basedPayment:

• TFRS3BusinessCombinations

• TFRS8OperatingSegments

• TFRS13FairValueMeasurement

• TAS16Property,PlantandEquipmentandTAS38IntangibleAssets

• TFRS9FinancialInstruments;TAS37,Provisions,ContingentLiabilitiesandContingentAssets

• TFRS39FinancialInstruments-RecognitionandMeasurement

• Annual improvements 2013; Effectiveforannualperiodsbeginningonorafter1July2014.AnnualImprovementstoTFRSs2011-2013Cycleamendthefollowing4standards:

• TFRS1;First-timeAdoptionofTFRS

• TFRS3,BusinessCombinations

• TFRS13,FairValueMeasurement

• TAS40,InvestmentProperty

b) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group:

• TFRS 9 “Financial instruments - classification and measurement”, Effective for annual periods beginning on or after 1January2018.ThisstandardwillreplaceIAS39.Theamendmentsincludechangesintheclassificationandmeasurementoffinancialassetsandliabilitiesandintroducesan“expectedcredit-loss”modelforthemeasurementoftheimpairmentoffinancialassets.

• TFRS 11 (amendments), “Joint Arrangements”, is effective for annual periods beginning on or after 1 January 2016. Thisamendmentaddsnewguidanceonhowtoaccountfortheacquisitionofaninterestinajointoperationthatconstitutesabusiness.The amendments specify the appropriate accounting treatment for such acquisitions.

• TAS 16 and TAS 38 (amendments), “Tangible Assets ”, “Intangible Assets”, is effective for annual periods beginning on or after 1January2016.InthisamendmenttheIASBhasclarifiedthattheuseofrevenuebasedmethodstocalculatethedepreciationofan asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset.

• TFRS 14, “Regulatory deferral accounts”, is effective for annual periods beginning on or after 1 January 2016. ‘Regulatorydeferralaccounts’permitsfirst-timeadopterstocontinuetorecogniseamountsrelatedtorateregulationinaccordancewiththeirpreviousGAAPrequirementswhentheyadoptTFRS.

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2.4. Amendments in International Financial Reporting Standards (Cont’d)

• TFRS 15, “Revenue from contracts with customers”, iseffectiveforannualperiodsbeginningonorafter1January2017,theInternationalAccountingStandardsBoard(IASB)andtheUSnationalstandard-setter,theFinancialAccountingStandardsBoard(FASB), initiated a joint project to clarify theprinciples for recognising revenueand to develop a common revenue standardfor IFRSandUSGAAP.Theobjectiveof thisStandard is toestablish theprinciples thatanentityshallapply toreportusefulinformationtousersoffinancialstatementsaboutthenature,amount,timinganduncertaintyofrevenueandcashflowsarisingfromacontractwithacustomer.Thenewmodelemploysanassetandliabilityapproach,ratherthancurrentrevenueguidancefocusesonan‘earningsprocess’.

• TFRS 10, “Consolidated financial statements” and TAS 28 “Investments in associates and joint ventures”, is effective for annual periodsbeginningonorafter1January2016.AmendmentsrelatedtothetreatmentofthesalesorthecontributionofassetsfromaninvestortoitsassociateorjointventureclarifytheinconsistenciesinrequirementsofTFRS10andTAS28.Thisamendmentrequirefullrecognitionintheinvestor’sfinancialstatementsofgainandlossesarisingonthesalesorthecontributionofassetsthatconstituteabusiness;requirepartialrecognitionofgainandlosseswheretheassetsdonotconstituteabusiness,i.e.gainandlossisrecognizedonlytotheextentoftheunrelatedinvestor’sinterestinthatassociateorjointventure.

Amendments to these standards also clarify issues that have arisen in the context of applying the consolidation exception for investment entities.

• TAS 1, “Presentation of financial statements”, iseffective forannualperiodsbeginningonorafter1January2016,addressperceivedimpedimentstopreparersexercisingtheirjudgementsinpresentingtheirfinancialreports.

• Annual improvements 2014 cycle, areeffectiveforannualperiodsbeginningonorafter1January2016.Makesamendmentstothefollowingstandards:

• TFRS5,“Non-currentassetsheldforsaleanddiscontinuedoperations”,changesinmethodsofdisposal

• TFRS7,“Financialinstruments:Disclosure”,servicingcontracts;applicabilityoftheamendmentsperTFRS1

• TAS19,“Employeebenefits”changesrelatedtodiscountratios

• TAS34,“Interimfinancialreporting”changesrelatedtodisclosureofinformation.

TheGroupwillevaluatetheeffectoftheaforementionedchangeswithinitsoperationsandapplychangesstartingfromeffectivedate.ItisexpectedthattheapplicationofthestandardsandinterpretationswillnothaveasignificanteffectontheconsolidatedfinancialstatementsoftheGroup.

c) Other new standards, amendments and interpretations issued and effective as of 1 January 2015 have not been presented since they are not relevant to the operations of the Group or have insignificant impact on the financial statements.

2.5. Summary of significant accounting policies

2.5.1 Revenue recognition

Revenue ismeasuredat the fairvalueof theconsiderationreceivedorreceivable.Revenue isreduced forestimatedcustomerreturns,rebates,andothersimilarallowances.

Revenuefromsaleofgoodsisrecognizedwhenallthefollowingconditionsaresatisfied:

• Grouphastransferredtothebuyerthesignificantrisksandrewardsofownershipofthegoods,

• Groupretainsneithercontinuingmanagerialinvolvementtothedegreeusuallyassociatedwithownershipnoreffectivecontroloverthegoodssold,

• Theamountofrevenuecanbemeasuredreliably,

• Itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheentity,and

•The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Wherenecessary,contractrevenueisrecognizedinproportiontostageofcompletionofafixedfeecontract.

Servicesalesandothersales:

Service income and other income are recorded using accrual accounting assumptions about the fair value of the amount that is obtained or that can be obtained in the event that the service is rendered or items relating to the income are realised or risks and benefitsaretransferredanditispossiblefortheeconomicbenefitsrelatingtothetransactionstoflowintotheCompany.

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2.5. Summary of significant accounting policies (Cont’d)

2.5.1 Revenue recognition (Cont’d)

Interestincome:

Interestincomeisaccruedintherelevantperiodattheeffectiveinterestrate,whichreducestheremainingprincipalbalanceandtheestimatedcashinflow,tobeobtainedfromtherelevantfinancialassetthroughoutitslife,andthebookvalueoftheasset.

Sales are recorded at the amount that remains after estimated discounts and returns are deducted from the price determined in the salesagreementsduringthesales.Customershavetherighttoreturnproductsinconsistencywiththemarketpractice.Previousexperiences are used for the estimation of discounts and returns. Discounts are determined by taking the performed yearly sales into consideration.

2.5.2 Inventories

Inventoriesarestatedatthelowerofcostandnetrealizablevalue.Costs,includinganappropriateportionoffixedandvariableoverheadexpenses,areassignedtoinventoriesheldbythemethodmostappropriatetotheparticularclassofinventory.Groupusesmovingweightedaveragemethodforcosting.

Netrealizablevaluerepresentstheestimatedsellingpricelessallestimatedcostsofcompletionandcostsnecessarytomakeasale.Whenthenetrealizablevalueofinventoryislessthancost,theinventoryiswrittendowntothenetrealizablevalueandtheexpenseisincludedinstatementofincomeintheperiodthewrite-downorlossoccurred.Whenthecircumstancesthatpreviouslycausedinventoriestobewrittendownbelowcostnolongerexistorwhenthereisclearevidenceofanincreaseinnetrealizablevaluebecauseofchangedeconomiccircumstances,theamountofthewrite-downisreversed.Thereversalamountislimitedtotheamountoftheoriginalwrite-down.

2.5.3 Property, plant and equipment

Land,landimprovementsandbuildingsarestatedatfairvalue,basedonvaluationsperformedat31December2015byprofessionalindependentvaluerÇelenKurumsalGayrimenkulDeğerlemeveDanışmanlıkA.Ş.

Property,plantandequipmentexceptforland,landimprovementsandbuildingsacquiredbefore1January2005arecarriedatcostintheequivalentpurchasingpowerofTLasat31December2004anditemsacquiredafter1January2005arecarriedatcost,lessaccumulatedamortizationandimpairmentlosses,ifany.

Any revaluation increase arising on the revaluation of such land, land improvements andbuildings is credited in equity to therevaluationreserve,excepttotheextentthatitreversesarevaluationdecreaseforthesameassetpreviouslyrecognizedinprofitorloss,inwhichcasetheincreaseiscreditedtoprofitorlosstotheextentofthedecreasepreviouslycharged.Adecreaseincarryingamountarisingontherevaluationofsuchland,landimprovementsandbuildingsischargedtoprofitorlosstotheextentthatitexceedsthebalance,ifany,heldinthepropertiesrevaluationreserverelatingtoapreviousrevaluationofthatasset.

Depreciation on revalued land improvements and buildings is charged to profit or loss.

Eachperiod,thedifferencebetweendepreciationbasedontherevaluedcarryingamountoftheasset(thedepreciationchargedtothestatementsofcomprehensiveincome)andthedepreciationbasedontheasset’soriginalcostistransferredfromrevaluationreserves to the retained earnings.

Landisnotdepreciated.Plantandequipmentarecarriedatcostlessaccumulateddepreciationandanyaccumulatedimpairmentlosses.

Depreciationischargedsoastowriteoffthecostorvaluationofassets,otherthanlandandpropertiesunderconstruction,overtheirestimatedusefullives,usingthestraight-linemethod.Theestimatedusefullives,residualvaluesanddepreciationmethodarereviewedateachyearend,withtheeffectofanychangesinestimateaccountedforonaprospectivebasis.

Property,plantandequipmentarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognizedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.

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2.5.3 Property, plant and equipment (Cont’d)

Gainsor lossesondisposalsofproperty,plantandequipmentaredeterminedby reference to theircarryingamountsandareincludedintherelatedincomeandexpenseaccounts,asappropriate.Onthedisposalofrevaluedassets,amountsintherevaluationreserve relating to that asset are transferred to the retained earnings.

Subsequentcostssuchasrepairsandmaintenanceorpartreplacementofplantandequipmentareincludedintheasset’scarryingvalueorrecognizedasseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothecompany.Allothercostsarechargedtothestatementsofcomprehensiveincomeduringthefinancialperiodinwhichtheyareincurred.

2.5.4 Intangible assets

a) Research and development costs

Researchcostsarerecognizedasexpenseintheperiodinwhichtheyareincurred.Anintangibleassetarisingfromdevelopment(orfromthedevelopmentphaseofaninternalproject)arerecognizedasintangibleassetswhenthefollowingcriteriaaremet;

• Itistechnicallyfeasibletocompletetheintangibleassetsothatitwillbeavailableforuse;

•Managementintendstocompletetheintangibleassetanduseorsellit;

• Thereisanabilitytouseorselltheintangibleasset;

• Itcanbedemonstratedhowtheintangibleassetwillgenerateprobablefutureeconomicbenefits;

• Adequate technical, financialandotherresources tocomplete thedevelopmentand touseorsell the intangibleassetareavailable;and

•The expenditure attributable to the intangible asset during its development can be reliably measured.

In other cases, development costs areexpensedas incurred.Development costspreviously recognizedas anexpensearenotrecognizedasanassetinasubsequentperiod.Incaseswhereitisdifficulttoseparatetheresearchphasefromthedevelopmentphaseinaproject,theentireprojectistreatedasresearchandexpensedimmediately.

b) Rights and other intangible assets

Rightsandotherintangibleassetsconsistacquiredcomputersoftware,computersoftwaredevelopmentcostsandotheridentifiablerights.Rightsandotherintangibleassetsarerecognizedattheiracquisitioncostsandareamortizedonastraightlinebasisovertheirexpectedusefulliveswhicharelessthanfiveyears.

c) Goodwill

GoodwillarisingonacquisitionistheexcessofthecostofacquisitionovertheGroup’sinterestinthefairvalueoftheidentifiableassetsandliabilitiesrecognized.WithinthescopeofTFRS3“BusinessCombinations”,beginningfrom1January2005theGrouphasstoppedamortizinggoodwill.Goodwillrecognizedonacquisitionsbefore31December2004wasbeingamortizeduntil31December2004onastraightlinebasisovertheirusefullivesnottoexceedtwentyyears.

Goodwill is tested for impairment annually ormore frequentlywhen there is an indication of impairment.Goodwill arising onacquisitions measured at cost less any impairment losses.

Impairmentlossescalculatedongoodwillcannotbereversedinthestatementofincomeeveniftheimpairmentceasestoexistinthefollowingperiods.Goodwillislinkedtocashgeneratingunitsduringtheimpairmenttest.

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2.5.5 Financial instruments

a) Financial assets

TheGroupclassifiesitsfinancialassetsintothefollowingspecifiedcategories:financialassetsasatfairvaluethroughprofitorloss,loans and receivables and available for sale financial assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financialassetsasatfairvaluethroughprofitorloss

Financialassetsatfairvaluethroughprofitorlossarefinancialassetsheldfortrading.Afinancialassetisclassifiedinthiscategoryifacquiredprincipallyforthepurposeofsellingintheshort-term.Derivativesarealsocategorizedasheldfortradingunlesstheyare designated as hedges.

Loansandreceivables

Tradereceivables,loans,andotherreceivablesthathavefixedordeterminablepaymentsthatarenotquotedinanactivemarketareclassifiedinthiscategory.Loansandreceivables(tradeandotherreceivables,bankdeposits,cashandothers)aremeasuredatamortizedcostusingtheeffectiveinterestmethodlessanyimpairment.Interestincomeisrecognizedbyapplyingtheeffectiveinterestrate,exceptforcaseswhentherecognitionofinterestwouldbeimmaterial.

Available for sale financial assets

Availableforsalefinancialassetsareanynon-derivativefinancialassetsdesignatedoninitialrecognitionasavailableforsaleoranyotherinstrumentsthatarenotclassifiedas(a)loansandreceivables,(b)held-to-maturityinvestmentsor(c)financialassetsatfair value through profit or loss.

QuotedequityinvestmentsandquotedcertaindebtsecuritiesheldbytheGroupthataretradedinanactivemarketareclassifiedasbeingavailable-for-salefinancialassetsandarestatedatfairvalue.TheGroupalsohasinvestmentsinunquotedequityinvestmentsthatarenottradedinanactivemarketbutarealsoclassifiedasavailable-for-salefinancialassetsandstatedatcostsincetheirvaluecan’tbereliablymeasured.

Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in theinvestmentsrevaluationreservewiththeexceptionofimpairmentlosses,interestcalculatedusingtheeffectiveinterestmethod,andforeignexchangegainsandlossesonmonetaryassets,whicharerecognizedinprofitorloss.Wheretheinvestmentisdisposedoforisdeterminedtobeimpaired,thecumulativegainorlosspreviouslyaccumulatedintheinvestmentsrevaluationreserveisreclassified to profit or loss.

Impairmentoffinancialassets

Financialassets,otherthanthoseatfairvaluethroughprofitorloss,areassessedforindicatorsofimpairmentateachreportingperiod.Financialassetsareimpairedwherethereisobjectiveevidencethat,asaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionofthefinancialasset,theestimatedfuturecashflowsoftheinvestmenthavebeenimpacted.

Forfinancialassetscarriedatamortizedcost,theamountoftheimpairmentisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows,discountedattheoriginaleffectiveinterestrate.

Forfinancialassetscarriedatamortizedcost,iftheamountofapastimpairmentlossdecreasesandthedecreasecanberelatedobjectively toaneventoccurringafter the impairmentwasrecognized, then the impairment is reversed throughprofitor loss.However,thecarryingamountshouldnotbeincreasedtoanamountthatexceedswhattheamortizedcostwouldhavebeenatthedateofthereversalhadtheimpairmentnotbeenrecognized.

Forfinancialassetscarriedatcost,ifthereisobjectiveevidenceofimpairment,theamountoftheimpairmentlossismeasuredasthedifferencebetweencarryingamountandthepresentvalueofestimatedfuturecashflowsdiscountedatthecurrentrateofreturnforasimilarfinancialasset.Onceanimpairmentlosshasbeenrecognizedonafinancialassetrecognizedatcost,itisnotpermittedtorecognizeareversal.

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2.5.5 Financial instruments (Cont’d)

a) Financial assets (Cont’d)

Foravailableforsalefinancialassets,asignificantorprolongeddeclineinthefairvalueoftheassetsbelowitscostisconsideredasanobjectiveindicatorofimpairment.Cumulativelossthathadbeenrecognizeddirectlyinequityshallberemovedfromequityandrecognizedinprofitorlosseventhoughthefinancialassethasnotbeenderecognized.Theamountofthecumulativelossthatisremovedfromequityandrecognizedinprofitorlossshallbethedifferencebetweentheacquisitioncostandcurrentfairvalue,lessanyimpairmentlossonthatfinancialassetpreviouslyrecognizedinprofitorloss.

b) Financial liabilities

Financialliabilitiesareclassifiedaseitherfinancialliabilitiesatfairvaluethroughprofitorlossorotherfinancialliabilities.

Financialliabilitiesatfairvaluethroughprofitorloss

Financialliabilitiesatfairvaluethroughprofitorlossarestatedatfairvalue,withanyresultantgainorlossrecognizedinprofitorloss.Thenetgainorlossrecognizedinprofitorlossincorporatesanyinterestpaidonthefinancialliability.

Other financial liabilities

Otherfinancialliabilities,includingborrowings,areinitiallymeasuredatfairvalue,netoftransactioncosts.Otherfinancialliabilitiesare subsequentlymeasured at amortized cost using the effective interestmethod plus the interest expense recognized on aneffective yield basis.

Theeffectiveinterestmethodiscalculatingtheamortizedcostofafinancialliabilityandofallocatinginterestexpenseovertherelevant period. The effective interest rate discounts the estimated future cash payments through the expected life of the financial liability,or,whereappropriate,ashorterperiod.

c) Derivative financial instruments and hedge accounting:

Derivativesareinitiallyrecognizedatfairvalueonthedateaderivativecontractisenteredintoandaresubsequentlyremeasuredattheirfairvalue.Fairvaluesofderivativesarecarriedasassetswhenpositiveandasliabilitieswhennegative.Themethodofrecognizingtheresultinggainorlossdependsonwhetherthederivativeisdesignatedasahedginginstrument,andifsothenatureof the item being hedged.

TheGroupdocuments at the inception of the transaction the relationship betweenhedging instruments andhedged items, aswellasitsriskmanagementobjectivesandstrategyforundertakingvarioushedgingtransactions.TheGroupalsodocumentsitsassessment,bothathedgeinceptionandonanongoingbasis,ofwhetherthederivativesthatareusedinhedgingtransactionsarehighly effective in offsetting changes in fair values of hedged items.

Derivative financial instruments held for trading

Group’sheldfortradingderivativefinancial instrumentsconsistofforwardforeigncurrencypurchaseandsalecontracts.Suchderivative financial instruments providing effective protection against the risk for the Group economically and due tomeetingtheconditions forhedgeaccountingusually, theyareaccountedasderivative financial instrumentsheld for trading in financialstatements.Thefairvaluechangesofthesederivativeinstrumentsarerecognizedinconsolidatedincomestatementasfinancialincome/expense.

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2.5.5 Financial instruments (Cont’d)

c) Derivative financial instruments and hedge accounting: (Cont’d)

Cashflowhedges

Theeffectiveportionofchangesinthefairvalueofderivativesthataredesignatedandqualifyascashflowhedgesisrecognizedinequitywithin cash flowhedge reserves. Thegainor loss relating to the ineffectiveportion is recognized immediately in thestatementofincomewithinfinanceincome/expense.Amountsaccumulatedinequityarereclassifiedtoprofitorlossintheperiodswhenthehedgeditemaffectsprofitorloss(forexample,whentheforecastsalethatishedgedtakesplaceorportionrelatedtotheaccruedinterest).Whenahedginginstrumentexpiresorissold,orwhenahedgenolongermeetsthecriteriaforhedgeaccounting,anycumulativegainor lossexisting inequityat that timeremains inequityand isrecognizedwhenthe forecast transaction isultimately recognized, in thestatementof comprehensive incomewithin finance income/expense.TheGrouphasevaluated itsforwardcontractsandrecognizedcertaincontractsashedgingderivative instrumentssincetheyhavebeencarryingnecessaryhedging conditions regarding to TAS 39.

2.5.6 Foreign currency transactions

Transactions in foreign currencies during the period are recorded at the rates of exchange prevailing on the dates of the transactions. MonetaryitemsdenominatedinforeigncurrenciesaretranslatedtoTLattheratesprevailingonthebalancesheetdate.Exchangedifferencesonforeigncurrencydenominatedmonetaryassetsandliabilitiesarerecognizedinprofitorlossintheperiodinwhichtheyariseexceptfortheeffectiveportionoftheforeigncurrencyhedgeofnetinvestmentsinforeignoperations.On-monetaryitemswhicharedenominatedinforeigncurrencyandmeasuredwithhistoricalcostsaretranslatedusingtheexchangeratesatthedatesof initial transactions.

Forthepurposeofpresentingconsolidatedfinancialstatements,theassetsandliabilitiesoftheGroup’sforeignoperationsareexpressedinTLusingexchangeratesprevailingonthebalancesheetdate.Incomeandexpenseitemsaretranslatedattheaverageexchangeratesfortheperiod,unlessexchangeratesfluctuatedsignificantlyduringthatperiod.Exchangedifferencesarisingarerecognizedinothercomprehensiveincomeandinequity.

Onthedisposalofaforeignoperation,alloftheexchangedifferencesaccumulatedinequityinrespectofthatoperationattributabletotheownersofthecompanyarereclassifiedtoprofitorloss.

2.5.7 Provisions, contingent assets and liabilities

ProvisionsarerecognizedwhentheGrouphasapresentobligationasaresultofapastevent,anditisprobablethattheGroupwillberequiredtosettlethatobligation,andareliableestimatecanbemadeoftheamountoftheobligation.

Possibleassetsorobligationsthatarisefrompasteventsandwhoseexistencewillbeconfirmedonlybytheoccurrenceornon-occurrenceofoneormoreuncertaineventsnotwhollywithin thecontrolof thecompanyarenot included in theconsolidatedfinancial statements and treated as contingent assets or liabilities.

2.5.8 Warranty and assembly expenses provision

Warrantyexpensesincluderepairandmaintenanceexpensesofproductssoldandlaborandmaterialcostsofauthorizedservicesforproductsunderthescopeofwarrantytermswithoutanychargetothecustomers.Basedonestimationsusingpaststatisticalinformation,warrantyexpenseprovisionisrecognizedfortheproductssoldwithwarrantytermsintheperiod,forpossiblerepairandmaintenanceexpensestobeincurredduringthewarrantyperiod.

Basedonestimationsusingpaststatisticalinformation,assemblyexpensesprovisionisrecognizedforproductssoldduringtheperiodbutnotyetinstalledinthesitesoftheendcustomers,againstthecostoffreeofchargeinstallments.

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2.5.9 Related parties

Shareholders, keymanagement personnel andboardmembers, their close familymembers and companies controlled, jointlycontrolledorsignificantlyinfluencedbythemandZorluHoldingGroupcompaniesareconsideredandreferredtoasrelatedparties.

2.5.10 Taxation on income

Taxexpensefortheperiodcomprisescurrentanddeferredtax.Taxisrecognizedintheincomestatement,excepttotheextentthatitrelatestoitemsdirectlyrecognizedinequity.Inthatcase,taxisrecognizedinshareholders’equity.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are nevertaxableordeductible.TheGroup’sliabilityforcurrenttaxiscalculatedusingtaxratesthathavebeenenactedorsubstantivelyenacted by the balance sheet date.

Deferredtaxisrecognizedontemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesinthefinancialstatementsandthecorrespondingtaxbaseswhichisusedinthecomputationoftaxableprofit.Deferredtaxliabilitiesaregenerallyrecognizedforalltaxabletemporarydifferencesanddeferredtaxassetsarerecognizedforalldeductibletemporarydifferencestotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichthosedeductibletemporarydifferencescanbeutilized.

Deferredtaxliabilitiesarerecognizedfortaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiariesandassociates,andinterestsinjointventures,exceptwheretheGroupisabletocontrolthereversalofthetemporarydifferenceanditisprobablethatthetemporarydifferencewillnotreverse intheforeseeablefuture.Deferredtaxassetsarisingfromdeductibletemporarydifferencesassociatedwithsuchinvestmentsandinterestsareonlyrecognizedtotheextentthatitisprobablethattherewillbesufficienttaxableprofitsagainstwhichtoutilizethebenefitsofthetemporarydifferencesandtheyareexpectedtoreverseintheforeseeable future.

DeferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandwhentheyrelatetoincometaxesleviedbythesametaxationauthorityandtheGroupintendstosettleitscurrenttax assets and liabilities on a net basis.

2.5.11 Employee benefits

Employment termination benefits, as required by the Turkish Labor Law and the laws applicable in the countries where thesubsidiariesoperate, represent theestimatedpresent valueof the total reserveof the futureprobableobligationof theGrouparisingincaseoftheretirementoftheemployees.AccordingtoTurkishLaborLawandotherlawsapplicableinTurkey,theGroupisobligedtopayemploymentterminationbenefitstoallpersonnelincasesofterminationofemploymentwithoutduecause,callformilitaryservice,beretiredordeathupon thecompletionofaminimumoneyearservice.Employment terminationbenefitsareconsideredasbeingpartofdefinedretirementbenefitplanasperTAS19.Allactuarialgainsandlossesarerecognized inconsolidated statements of income.

The effects of the significant forecasts used in employment termination benefits provision calculations have been recognised as actuarial gains and losses and they have been explained in the relevant note.

2.5.12 Government grants

Governmentgrants,includingnon-monetarygrantsatfairvalue,arerecognizedinconsolidatedfinancialstatementswhenthereisreasonableassurancethattheentitywillcomplywiththeconditionsattachingtothem,andthegrantswillbereceived.

Incentivesforresearchanddevelopmentactivitiesarerecognizedinconsolidatedfinancialstatementswhentheyareauthorizedbythe related institutions.

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2.5.13 Earnings per share

Earnings per share disclosed in the consolidated statement of income is determined by dividing consolidated net income attributable toequityholderoftheparentbytheweightedaveragenumberofsuchsharesoutstandingduringtheyearconcerned.

2.5.14 Statement of cash flows

Intheconsolidatedstatementofcashflows,cashflowsareclassifiedintothreecategoriesasoperating,investmentandfinancingactivities.CashflowsfromoperatingactivitiesarethoseresultingfromtheGroup’sproductionandsalesactivities.Cashflowsfrominvestmentactivitiesindicatecashinflowsandoutflowsresultingfromproperty,plantandequipmentsandfinancialinvestments.Cashflowsfromfinancingactivitiesindicatetheresourcesusedinfinancingactivitiesandtherepaymentoftheseresources.Cashandcashequivalentscompriseofcashinhandaccounts,bankdepositsandshort-term,highlyliquidinvestmentsthatarereadilyconvertibletoknownamountsofcashwithmaturitiesequalorlessthanthreemonths.

2.5.15 Segment reporting

OperatingsegmentsareidentifiedonthesamebasisasfinancialinformationisreportedinternallytotheGroup’schiefoperatingdecisionmaker.TheGroup’sBoardofDirectorshasbeenidentifiedastheGroup’schiefoperatingdecisionmakerwhoisresponsibleforallocatingresourcesbetweensegmentsandassessingtheirperformances.TheGroup’smanagementdeterminesoperatingsegmentsbyreferencetothereportsreviewedbytheBoardofDirectorstomakestrategicaldecisions.

The Group’s management evaluates the operational results at industrial and geographical level. An operating segment is acomponentofanentitythatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses.

Group’soperationsarereportedunderthreeindustrialsegments:

•Television and electronic devices

•White goods

•Other

Group’soperationsarereportedunderthreegeographicalsegments:

•Turkey

•Europe

•Other

2.5.16 Offsetting

Allitemswithsignificantamountsandnature,evenwithsimilarcharacteristics,arepresentedseparatelyinthefinancialstatements.Insignificantamountsaregroupedandpresentedbymeansofitemshavingsimilarsubstanceandfunction.Whenthenatureoftransactionsandeventsnecessitateoffsetting,presentationofthesetransactionsandeventsovertheirnetamountsorrecognitionoftheassetsafterdeductingtherelatedimpairmentarenotconsideredasaviolationoftheruleofnon-offsetting.Asaresultofthetransactionsinthenormalcourseofbusiness,revenueotherthansalesarepresentedasnetifthenatureofthetransactionortheevent qualify for offsetting.

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2.5.17 Events after the balance sheet date

Eventsafterthebalancesheetdate,announcementsrelatedtonetprofitorevendeclaredafterotherselectivefinancialinformationhasbeenpubliclyannounced,includealleventsthattakeplacebetweenthebalancesheetdateandthedatewhenbalancesheetwasauthorizedforissue.

Inthecasethateventsrequireacorrectiontobemadeoccursubsequenttothebalancesheetdate,theGroupmakesthenecessarycorrections to the financialstatements.Moreover, theevents thatoccursubsequent to thebalancesheetdateand thatdonotrequireacorrectiontobemadearedisclosedinaccompanyingnotes,wherethedecisionsoftheusersoffinancialstatementsareaffected.

2.6. Critical accounting estimates and judgments

Preparation of consolidated financial statements requires the use of estimates and assumptions that may affect the amount of assetsandliabilitiesrecognizedasofthebalancesheetdate,disclosuresofcontingentassetsandliabilitiesandtheamountofrevenueandexpensesreported.AlthoughtheseestimatesandassumptionsrelyontheGroupmanagement’sbestknowledgeaboutcurrenteventsandtransactions,actualoutcomesmaydifferfromthoseestimatesandassumptions.SignificantestimatesoftheGroupmanagementareasfollows:

i. IncomeTaxes:

Therearemanytransactionsandcalculationsforwhichtheultimatetaxdeterminationisuncertainduringtheordinarycourseofbusinessandsignificantjudgmentisrequiredindeterminingtheprovisionforincometaxes.TheGrouprecognizestaxliabilitiesforanticipatedtaxissuesbasedonestimatesofwhetheradditionaltaxeswillbedue.Wherethefinaltaxoutcomeofthesemattersisdifferentfromtheamountsthatwereinitiallyrecorded,suchdifferenceswill impacttheincometaxanddeferredincometaxprovisionsintheperiodinwhichsuchdeterminationismade(Note28).

ii. Revaluationofland,buildingsandlandimprovements:

Land,landimprovementsandbuildingsarestatedatfairvalue,basedonvaluationsperformedat31December2015byprofessionalindependentvaluerÇelenKurumsalGayrimenkulDeğerlemeveDanışmanlıkA.Ş.(note13).

Astherewerenorecentsimilarbuying/sellingtransactionsnearby,revaluationsoflandwerebasedonthemethodofreferencecomparisonwhereasrevaluationsofbuildingsandlandimprovementsandmachineryandequipmentwerebasedonthemethodofcostapproachandbasedonthefollowingvaluationtechniquesandassumptions:

• Revaluations of land were based on the method of reference comparison whereas revaluations of buildings and landimprovementswerebasedonthemethodofcostapproach,consideringexistingutilizationoftheaforementionedproperty,plant and equipments are consistent to the highest and best use approach.

• Inthemarketreferencecomparisonmethod,currentmarketinformationwasutilized,takingintoconsiderationthecomparablepropertyinthemarketinrecentpastintheregion,priceadjustmentwasmadewithintheframeworkofcriteriathatcouldaffectmarketconditions,andaccordinglyanaveragem2salevaluewasdeterminedforthelandssubjecttothevaluation.Thesimilarpiecesoflandfoundwerecomparedintermsoflocation,size,settlementstatus,physicalconditions,realestatemarketingfirmswereconsultedforup-to-datevaluationoftheestatemarket,also,currentinformationandexperienceoftheprofessionalvaluationcompanywasutilized.

• In the cost approachmethod, fair valueof thebuildings and land improvementswas calculatedby considering recent re-construction costs and related depreciation. In the cost approachmethod, above explainedmarket reference comparisonmethodwasusedincalculationofthelandvalue,oneofthecomponents.

Thecarryingvaluesofland,landimprovementsandbuildingsdonotnecessarilyreflecttheamountsthatwouldresultfromtheoutcomeofasalestransactionbetweenindependentparties.

Asofinitialrecognitionandasofbalancesheetdate,theGroupperformsimpairmentassessmentforbuildingsandlandimprovementsofwhichvaluationsarebasedoncostapproach,accordancewiththeTAS36“ImpairmentofAssets”,andnoimpairmentindicatoris identified.

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NOTE 3 - INTERESTS IN OTHER ENTITIES

Subsidiaries:

Asof31December2015and31December2014theGroup’smajorsubsidiariesareasfollows:

31 December 2015 31 December 2014

Consolidated subsidiariesVotingrights

Effective ownership

Votingrights

Effective ownership

VestelBeyazEşyaSanayiveTicaretA.Ş. 94,6 94,6 94,5 94,5VestelKomünikasyonSanayiveTicaretA.Ş. 100 100 99,4 99,4VestelTicaretA.Ş. 100 100 100 100VestelCISLtd. 100 100 100 100VestelIberiaSL 100 100 100 100VestelFranceSA 100 100 100 100VestelHollandBV 100 100 100 100VestelGermanyGmbH 100 100 100 100CabotCommunicationsLtd. 90,8 90,8 90,8 90,8VestelBeneluxBV 100 100 100 100VestelUKLtd. 100 100 100 100VestekElektronikAraştırmaGeliştirmeA.Ş. 100 100 94 94VestelTradeLtd. 100 100 100 100OYVestelScandinaviaAB 100 100 100 100IntertechnikaLLC 99,9 99,9 99,9 99,9VestelCentralAsiaLLP 100 100 100 100VestelPolandsp.z.o.o. 100 100 - -

FinancialinformationofVestelBeyazEşyaSanayiveTicaretA.Ş.whichisnotwhollyownedbytheGroupandhassignificantnon-controllinginterestsisasfollows:

31 December 2015 31 December 2014 Accumulatednon-controllinginterests 46.785 42.532Comprehensiveincomeattributabletonon-controllinginterests 11.170 7.582

Thefinancialstatementsofthesubsidiaryisadjustedtoincludetheeffectsofrevaluationofland,buildingsandlandimprovementsinaccordancewiththeGroup’saccountingpoliciesappliedinpreparationoftheconsolidatedfinancialstatements.

Condensed balance sheet:

31 December 2015 31 December 2014 Current assets 1.318.016 1.145.538Non-currentassets 587.096 532.426Current liabilities (765.123) (650.434)Non-currentliabilities (270.374) (257.575) Net assets 869.615 769.955

Condensed statement of comprehensive income:

1 January - 1 January - 31 December 2015 31 December 2014Netsales 2.524.068 2.337.141Income/(loss)beforetax 176.163 140.550Taxbenefit/(expense) (12.891) (18.660)Netincome/(loss)fortheperiod 163.272 121.891Total comprehensive income 204.483 137.282

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NOTE 3 - INTERESTS IN OTHER ENTITIES (Cont’d)

Condensed statement of cash flows:

Operating activities:Changesinworkingcapital (62.528) 79.074Current income tax paid (28.120) (17.655)Net cash provided by operating activities 176.897 315.949 Investing activities:Acquisition of tangible and intangible assets (87.383) (96.561)Net cash used in investing activities (86.358) (94.236) Financing activities:Proceedsfrombankborrowings 176.387 29.570Repaymentofbankborrowings (236.688) (210.413)Other payables to related parties 18.066 142.372Net cash (used in)/provided by financing activities (164.963) (76.664) Cash and cash equivalents at the beginning of the period 163.089 18.040Cash and cash equivalents at the end of the period 88.665 163.089

OtherfinancialinformationofGroup’ssubsidiariesarenotpresentedonthegroundsofmateriality.

NOTE 4 - SEGMENT REPORTING

OperatingsegmentsareidentifiedonthesamebasisasfinancialinformationisreportedinternallytotheGroup’schiefoperatingdecisionmaker.TheGroupBoardofDirectorshasbeenidentifiedastheGroup’schiefoperatingdecisionmakerwhoisresponsiblefor allocating resources between segments and assessing their performances. TheGroupmanagement determines operatingsegmentsbyreferencetothereportsreviewedbytheBoardofDirectorstomakestrategicaldecisions.

ConsideringthefactthattheGroup’srisksandrateofreturnsaredissimilarbetweenproducttypesandbetweengeographicalareas,TheGroupmanagementusesindustrialsegmentsasprimaryreportingformatandgeographicalsegmentsassecondaryreporting format.

Industrial segments:

Television and electronic

devices White goods Other Total

1 January -31 December 2015Revenue 6.134.810 3.115.651 - 9.250.461Cost of sales (4.891.908) (2.400.483) - (7.292.391)

Grossprofit 1.242.902 715.168 - 1.958.070 Depreciationandamortization 190.824 104.159 279 295.262

1 January -31 December 2014Revenue 4.894.641 2.864.288 8.374 7.767.303Cost of sales (3.950.196) (2.236.445) (10.778) (6.197.419)

Grossprofit 944.445 627.843 (2.404) 1.569.884 Depreciationandamortization 156.720 113.607 368 270.695

134




NOTE 4 - SEGMENT REPORTING (Cont’d)

Capital expenditure

Television and electronical

devices White goods Other Total

1January-31December2015 252.177 97.558 409 350.1441January-31December2014 286.470 109.107 483 396.060

Geographical segments:

1 January - 1 January -Segment revenue 31 December 2015 31 December 2014 Turkey 3.408.352 2.405.402Europe 5.818.671 5.248.597Other 553.646 538.078 Grosssegmentsales 9.780.669 8.192.077Discounts(-) (530.208) (424.774)Net sales 9.250.461 7.767.303

Theamountofexport for theperiod1January -31December2015 is6.372.317 thousandTL (1January -31December2014:5.786.675thousandTL).ExportsalesaredenominatedinEUR,USDandothercurrenciesas54,1%,44,4%and1,5%oftotalexportsrespectively.(1January-31December2014:49,4%EUR,49,6%USD,1,0%other).

The carrying value of segment assets and costs incurred in order to obtain these assets are not separately disclosed since significant portionofassetsoftheGrouparelocatedinTurkey.

NOTE 5 - CASH AND CASH EQUIVALENTS

31 December 2015 31 December 2014 Cash 964 544Bankdeposits-Demanddeposits 331.496 383.110-Timedeposits 285.118 123.405Cheques and notes 34.113 30.687Other 23.599 28.005Blockeddeposits 52.929 52.922 Cash and cash equivalents 728.219 618.673

Effective interest rates 31 December 2015 31 December 2014

EUR - 0,59%TL 12,07% 9,63%USD 0,75% 0,72%

Asof31December2015and2014theGroup’stimedepositshaveanaveragematurityoflessthan3months.

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NOTE 6 - FINANCIAL ASSETS

Ownership Amount 31 December 31 December 31 December 31 DecemberCountry 2015 2014 2015 2014

Financial assets available for sale:

ZorluEnerjiElektrikÜretimA.Ş. Turkey <1% <1% 5.496 4.425TursoftA.Ş. Turkey 7% 7% 11 11ZorluEndüstriyelEnerjiA.Ş. Turkey 1% 1% 51 51İzmirTeknolojiGeliştirmeA.Ş. Turkey 5% 5% 11 11 5.569 4.498

TheGroup’s publicly traded available for sale financial asset ZorluEnerji ElektrikÜretimA.Ş.’s fair value decrease of 230 TL(31December2014:2.340TLfairvalueincrease)isrecognizedinconsolidatedshareholders’equityconsidering46TLofdeferredtax(31December2014:468TL).

Non-consolidated subsidiaries :

Ownership Amount 31 December 31 December 31 December 31 DecemberCountry 2015 2014 2015 2014

VestelVenturesAr-geA.Ş. Turkey 100% 100% 1.776 1.776VestelPolandsp.z.o.o.(*) Poland 100% 100% - 9VestelElektronicaSRL Romania 100% 100% 1.778 1.778Vestel Central Asia (*) Kazakhstan 100% 100% - 8.989VestelElectronicsShanghaiTradingCo.Ltd China 100% 100% 288 288Uts-UnitedTechnicalServices,S.R.O Slovakia 100% 100% 6 6 3.848 12.846Impairment of subsidiaries (-) VestelElektronicaSRL (1.778) (1.778)Vestel Central Asia - (8.989) 2.070 2.079

(*) Consolidated in 31 December 2015 financial statements.

NOTE 7 - FINANCIAL LIABILITIES

31 December 2015 31 December 2014 Short term financial liabilities Short term bank loans 356.880 325.436Short term portion of long term bank loans 384.106 125.889 740.986 451.325 Long term financial liabilities Longtermbankloans 1.720.198 1.198.207 1.720.198 1.198.207

136




NOTE 7 - FINANCIAL LIABILITIES (Cont’d)

DetailsoftheGroup’sshorttermfinancialliabilitiesaregivenbelow:

31 December 2015 31 December 2014 Weighted average of

effective interest rates per annum

Weighted average of effective interest rates per annum

CurrencyOriginal

currencyTL

EquivalentOriginal

currencyTL

Equivalent -USD - - - 2,38% 25.214 58.468-EUR - - - 1,42% 8.495 23.963-TL 14,06% 356.880 356.880 10,21% 243.005 243.005 356.880 325.436

DetailsoftheGroup’slongtermfinancialliabilitiesaregivenbelow:

31 December 2015 31 December 2014 Weighted average of

effective interest rates per annum

Weighted average of effective interest rates per annumCurrency

Original currency

TL Equivalent

Original currency

TL Equivalent

-USD 4,26% 27.595 80.234 3,96% 13.559 31.442-EUR 3,59% 24.001 76.265 2,96% 5.096 14.375-TL 14,39% 227.607 227.607 12,32% 80.072 80.072 Short term portion 384.106 125.889 -USD 4,03% 89.148 259.206 3,73% 68.536 158.927-EUR 3,66% 152.447 484.415 3,53% 52.056 146.834-TL 15,80% 976.577 976.577 12,02% 892.446 892.446

Long term portion 1.720.198 1.198.207 2.104.304 1.324.096

ThematurityscheduleofGroup’slongtermfinancialliabilitiesisgivenbelow:

31 December 2015 31 December 2014 Onetotwoyears 1.339.391 1.051.734Twotothreeyears 219.035 54.767Three to four years 84.176 38.534Fouryearsandover 77.596 53.172 1.720.198 1.198.207

TotalamountofGroup’sfloatingbankloansis499.777thousandTL(31December2014:289.529thousandTL).

TheanalysisofGroup’sborrowingsintermsofperiodsremainingtocontractualre-pricingdatesisasfollows:

31 December 2015 31 December 2014 6monthsorless 499.777 289.529 499.777 289.529

137




NOTE 7 - FINANCIAL LIABILITIES (Cont’d)

Fairvalueofshorttermbankborrowingsareconsideredtoapproximatetheircarryingvaluesduetoimmaterialityofdiscounting.Fairvaluesaredeterminedusingaverageeffectiveannualinterestrates.Longtermbankborrowingsarestatedatamortizedcostusing effective interest rate method and their fair values are considered to approximate their carrying values since loans usually haveare-pricingperiodofsixmonths.

Guaranteesgivenforthebankloansobtainedarepresentedinnote17.

NOTE 8 - RELATED PARTY DISCLOSURES

a) Short term trade receivables from related parties


Vestel Central Asia - 21.399UTS-UnitedTechnicalServices,SpolS.R.O. 9.025 8.821VestelElektronicaS.R.L. 12.226 17.936Other related parties 6.823 6.317

28.074 54.473

Unearnedinterestonreceivables(-) (77) (24)

27.997 54.449

b) Short term trade payables to related parties

31 December 2015 31 December 2014ABHTurizmTemsilcilikveTicaretA.Ş. 1.487 1.841Other related parties 3.099 3.232 4.586 5.073Unearnedinterestonpayables(-) (19) (9) 4.567 5.064

c) Other short term receivables from related parties

31 December 2015 31 December 2014ZorluHoldingA.Ş. 9.925 167.822Z.F.SFinancialServicesIreland 12.173 9.276 22.098 177.098

d) Other long term receivables from related parties

Z.F.SFinancialServicesIreland 46.093 46.026ZorluHoldingA.Ş. 735.650 358.429 781.743 404.455

Asof31December2015theannualaverageeffectiveinterestrateofotherreceivablesfromZ.F.SFinancialServicesIrelandandZorluHoldingdenominatedinUSDisbetween5%-6%(31December2014:5%-7,5%).

138




NOTE 8 - RELATED PARTY DISCLOSURES (Cont’d)

e) Transactions with related parties

1 January - 1 January -31 December 2015 31 December 2014

SalesUTS-UnitedTechnicalServices,SpolS.R.O. 7.187 9.074ZorluYapıYatırımA.Ş 1.892 2.494VestelElectronicaS.R.L. 12.690 11.109Other related parties 7.754 9.691 29.523 32.368

1 January - 1 January - 31 December 2015 31 December 2014Operating expensesABHTurizmTemsilcilikveTicaretA.Ş. 22.675 21.141Other related parties 28.982 27.971 51.657 49.112

Other income from operating activities Other related parties 4.537 2.267 4.537 2.267

Other operating expense Other related parties 16.051 1.746 16.051 1.746

Financial incomeZ.F.SFinancialServicesIreland 28.386 10.334ZorluHoldingA.Ş. 283.100 91.273 311.486 101.607

f)Guaranteesreceivedfromandgiventorelatedpartiesaredisclosedinnote17.

g) Compensation paid to key management including directors, the Chairman and members of Board of Directors, general managers and assistant general managers

Compensationpaidtokeymanagementforthetwelvemonthsperiodended31December2015is25.448thousandTL(1January-31December2014:19.433thousandTL).

139




NOTE 9 - TRADE RECEIVABLES AND PAYABLES

31 December 2015 31 December 2014 Short term trade receivablesTrade receivables-Relatedparties(note8) 28.074 54.473-Otherparties 2.348.116 1.496.004Cheques and notes receivables 447.126 418.944Other 73.897 69.161

2.897.213 2.038.582Unearnedinterestexpense(-)-Relatedparties(note8) (77) (24)-Otherparties (26.887) (17.613)Allowancefordoubtfulreceivables(-) (102.883) (89.062) Total short term trade receivables 2.767.366 1.931.883 Long term trade receivablesReceivablesfromotherparties 112.190 97.452Cheques and notes receivables 32.691 23.995Unearnedinterestexpense(-) (4.698) (3.089) Total long term trade receivables 140.183 118.358

TheGroupprovidesallowancefordoubtfulreceivablesbasedonhistoricalexperience.

1 January - 1 January - 31 December 2015 31 December 2014 Opening balance, 01 January 89.062 68.079Current year additions 22.056 38.473Provisions no longer required - (2.349)Doubtfulreceivableswritten-off (8.360) (14.149)Currency translation differences 125 (992) Balance at 31 December 102.883 89.062

140




NOTE 9 - TRADE RECEIVABLES AND PAYABLES (Cont’d)


Short term trade payablesTrade payables-Relatedparties(note8) 4.586 5.073-Otherparties 4.535.334 3.714.117Notespayables-Otherparties 1.961 4.766Other 55 69 4.541.936 3.724.025Unearnedinterestincome(-)-Relatedparties(note8) (19) (9)-Otherparties (5.126) (3.840) Total short term trade payables 4.536.791 3.720.176

Riskanalysisoftradereceivablesandpayablesisdisclosedinnote31.

NOTE 10 - OTHER RECEIVABLES

31 December 2015 31 December 2014 Short term other receivablesVAT receivable 300.236 170.470Receivablesfromrelatedparties(note8) 22.098 177.098Deposits and guarantees given 32.101 27.719Other 104.482 91.694 458.917 466.981Allowancefordoubtfulreceivables(-) (89.376) (89.376) 369.541 377.605

31 December 2015 31 December 2014Long term other receivablesDeposits and guarantees given 16.692 15.197Receivablesfromrelatedparties(note8) 781.743 404.455Other 8.308 9.616 806.743 429.268Allowancefordoubtfulreceivables(-) (8.278) (8.278) 798.465 420.990

TheGroupprovidesallowancefordoubtfulreceivables.

141




NOTE 11 - INVENTORIES

31 December 2015 31 December 2014 Rawmaterials 950.509 875.075Work in process 213.177 100.486Finishedgoods 946.071 689.531Merchandise 109.825 73.083Other 1.361 8.203 2.220.943 1.746.378Provisionforimpairmentoninventories(-) (17.938) (23.448) 2.203.005 1.722.930

Costoftheinventoryincludedintheconsolidatedstatementofcomprehensiveincomeintheperiod1January-31December2015is6.500.264thousandTL(2014:5.445.830thousandTL)

Asof31December2015theGroupdoesnothaveinventoriespledgedassecurityforliabilities(31December2014:None).

Allocationofprovisionforimpairmentoninventoriesintermsofinventorytypeisasfollows:

31 December 2015 31 December 2014Rawmaterials 8.851 7.811Finishedgoodsandmerchandise 9.087 15.637 17.938 23.448

Movementofprovisionfordiminutioninvalueofinventoriesisasfollows:

1 January - 1 January - 31 December 2015 31 December 2014 Opening balance, 1 January 23.448 15.597Current year additions 6.685 23.502Realisedduetosaleofinventory (12.426) (15.409)Currency translation differences 231 (242) Balance at 31 December 17.938 23.448

NOTE 12 - PREPAID EXPENSES

31 December 2015 31 December 2014 Prepaid expenses in current assetsOrder advances given 17.537 68.316Prepaid expenses 34.377 19.133Businessadvancesgiven 798 2.041 52.712 89.490 Prepaid expenses in non-current assetsAdvances given for fixed asset purchases 6.371 7.513Prepaid expenses 1.169 1.213 7.540 8.726

142




NOTE 13 - PROPERTY, PLANT AND EQUIPMENT

1 January2015 Additions Disposals

Currency translation differences Transfers

Fair value increase

31 December2015

Cost or revaluationLand 159.209 1.221 - 966 - 61.963 223.359Landimprovements 45.223 130 - (126) 73 13.309 58.609Buildings 547.039 9.291 (2.224) 152 6.664 64.074 624.996Leaseholdimprovements 125.302 5.074 - 158 - - 130.534Plant and machinery 1.578.525 150.122 (39.704) (187) 10.812 - 1.699.568Motorvehicles 5.414 143 (33) (8) - - 5.516Furnitureandfixtures 263.043 30.743 (805) 578 3.553 - 297.112Other tangible assets 849 - - - - - 849Construction in progress 2.872 23.900 - - (21.102) - 5.670 2.727.476 220.624 (42.766) 1.533 - 139.346 3.046.213Accumulated depreciationLandimprovements 10.908 2.805 - 57 - (13.770) -Buildings 7.420 16.550 (428) 234 - (23.776) -Leaseholdimprovements 95.362 8.062 - 66 - - 103.490Plant and machinery 1.065.558 168.088 (31.562) 96 - - 1.202.180Motorvehicles 3.196 921 (33) 12 - - 4.096Furnitureandfixtures 179.100 28.177 (626) 285 - - 206.936Other tangible assets 845 - - - - - 845 1.362.389 224.603 (32.649) 750 - (37.546) 1.517.547 Net book value 1.365.087 176.892 1.528.666

143




NOTE 13 - PROPERTY, PLANT AND EQUIPMENT (Cont’d)



31 December2014

CostLand 163.994 - - (4.785) - 159.209Landimprovements 49.190 793 (4) (4.990) 234 45.223Buildings 588.433 16.337 (19) (62.301) 4.589 547.039Leaseholdimprovements 120.237 5.113 - (48) - 125.302Plant and machinery 1.401.366 191.000 (25.980) (36.510) 48.649 1.578.525Motorvehicles 4.938 58 (126) (192) 736 5.414Furnitureandfixtures 224.021 42.133 (2.080) (1.969) 938 263.043Other tangible assets 849 - - - - 849Construction in progress 25.813 32.205 - - (55.146) 2.872 2.578.841 287.639 (28.209) (110.795) - 2.727.476Accumulated depreciationLandimprovements - 11.628 (2) (718) - 10.908Buildings - 16.168 (13) (8.735) - 7.420Leaseholdimprovements 88.439 6.939 - (16) - 95.362Plant and machinery 948.759 161.407 (24.191) (20.417) - 1.065.558Motorvehicles 2.533 936 (111) (162) - 3.196Furnitureandfixtures 161.767 20.468 (1.504) (1.631) - 179.100Other tangible assets 844 1 - - - 845 1.202.342 217.547 (25.821) (31.679) - 1.362.389 Net book value 1.376.499 1.365.087

Additionstoproperty,plantandequipmentintheperiod1January-31December2015mainlyconsistofmachineryandequipmentinvestments made to television and electronic devices factory, first and second refrigerator, washing machine, cooker anddishwasherfactories.

Asof31December2015theGroupdoesnothaveproperty,plantandequipmentpledged(31December2014:None).

Usefullivesofproperty,plantandequipmentisasfollows:

Useful life Landimprovements 5-35yearsBuildings 25-50yearsLeaseholdimprovements 3-10yearsPlant and machinery 2-25yearsMotorvehicles 5-10yearsFurnitureandfixtures 5-14years

144




NOTE 13 - PROPERTY, PLANT AND EQUIPMENT (Cont’d)

Allocationofcurrentyeardepreciationandamortizationexpensesisasfollows:

1 January - 1 January - 31 December 2015 31 December 2014 Cost of sales 179.600 179.415Researchanddevelopmentexpenses 74.512 57.587Marketing,sellinganddistributionexpenses 25.927 19.431Generaladministrativeexpenses 13.800 12.527Otheroperatingexpense(idlecapacitydepreciationexpense) 1.423 1.735 295.262 270.695

Movementsinrevaluationfundofland,landimprovementsandbuildingsinyears2015and2014aredisclosedinnote27.

Thecarryingamountsofland,buildingsandlandimprovementsthatwouldhavebeenrecognizediftheassetshavebeencarriedunderthecostmodelat31December2015and2014areasfollows:

LandBuildings, land improvements

31 December 2015Cost 33.680 330.612Less:Accumulateddepreciation - (109.200)Net book value 33.680 221.412 31 December 2014Cost 31.822 317.464Less:Accumulateddepreciation - (102.246)Net book value 31.822 215.218

NOTE 14 - INTANGIBLE ASSETS



31 December2015

CostRights 60.431 1.162 - 265 - 61.858Development cost 454.389 112.319 (418) - - 566.290Other intangible assets 75.223 16.039 (118) 83 - 91.227 590.043 129.520 (536) 348 - 719.375Accumulated amortizationRights 37.280 2.912 - 259 - 40.451Development cost 213.481 58.404 - - - 271.885Other intangible assets 54.846 7.179 (13) 58 - 62.070 305.607 68.495 (13) 317 - 374.406 Net book value 284.436 344.969

145




NOTE 14 - INTANGIBLE ASSETS (Cont’d)

1 January

2014 Additions Disposals


31 December2014

CostRights 56.896 3.535 - - - 60.431Development cost 358.959 97.133 (1.703) - - 454.389Other intangible assets 67.470 7.753 - - - 75.223 483.325 108.421 (1.703) - - 590.043Accumulated amortizationRights 34.603 2.677 - - - 37.280Development cost 170.660 42.821 - - - 213.481Other intangible assets 47.196 7.650 - - - 54.846 252.459 53.148 - - - 305.607 Net book value 230.866 284.436

Developmentcosts,incurredbytheGroupondevelopmentprojectsrelatingtotelevisionandelectronicdevices,refrigerators,splitairconditioners,washingmachines,cookersanddishwashersarecapitalizedasintangibleassetswhenitisprobablethatcostswillberecoveredthroughfuturecommercialactivityandonlyifthecostcanbemeasuredreliably.

Usefullivesofintangibleassetsisasfollows:

Useful life

Rights 2-15yearsDevelopment cost 2-10yearsOther intangible assets 2-15years

NOTE 15 - GOODWILL

31 December 2015 31 December 2014 Cost at the beginning of the period 197.793 202.433Impairment - (4.640) Closing value 197.793 197.793

Goodwill is distributedon cashgeneratingunitwhicharebasedonsegmental reporting.Summary tableof goodwill basedonsegmentalreportingisgivenbelow:


White goods 168.543 168.543Television and electronic devices 26.998 26.998Software 2.252 2.252

197.793 197.793

146




NOTE 15 - GOODWILL (Cont’d)

ImpairmentofthegoodwillamountrelatingtothelistedsubsidiaryoftheGroupistestedthroughtheevaluationofthefairvaluedetermined on the average transaction amounts effective as of the balance sheet date as recoverable amount.

Therecoverableamountofthegoodwillrelatingtothenon-listedsubsidiaryoftheGroupisassessedbyreferencetovalueinuse.Post-taxcashflowprojectionsoftelevisionandelectronicdevices,whitegoodsandothersegmentsbasedonbudgetsofentitiesapprovedbythemanagementwereusedinthesecalculations.

NOTE 16 - GOVERNMENT GRANTS

ThereareinvestmentincentivecertificatestowhichtheGrouphasbeenentitledbytheofficialauthoritiesinconnectionwithcertaincapitalexpenditures.ThegrantsobtainedbytheGroupinnatureareasfollows:

i)Exemptionfromcustomsdutyonmachineryandequipmenttobeimported,

ii)VATexemptionwithrespecttopurchasesofinvestmentgoodsbothfromdomesticandexportmarkets,

iii)Incentivesunderthejurisdictionoftheresearchanddevelopmentlaw,

iv)Inwardprocessingpermissioncertificates,

v)CashrefundfromTübitak-Teydebforresearchanddevelopmentexpenses,

vi)Discountedcorporatetaxincentive,

vii)Insurancepremiumemployershareincentive

viii)Brandsupportincentive(Turquality)givenbyRepublicofTurkeyPrimeMinistryUndersecreteriatofTreasury.

ResearchanddevelopmentincentivepremiumfromTübitakTeknolojiveYenilikDestekProgramlarıBaşkanlığı(“TEYDEB”)amountsto9.706thousandTLfortheperiod1January-31December2015(1January-31December2014:10.254thousandTL).

Brand support incentive Turquality obtained fromRepublic of TurkeyPrimeMinistryUndersecreteriat of Treasury amounts to11.436thousandTLinyear2015(2014:10.685thousandTL).

NOTE 17 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

a) Provisions

31 December 2015 31 December 2014 Short term provisionsWarranty and assembly provision 112.730 84.775Other provisions 66.812 45.300Provisionforlawsuitrisks 25.896 10.802 205.438 140.877 Long term provisionsWarranty and assembly provision 33.148 23.415

147




NOTE 17 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (Cont’d)

a) Provisions (Cont’d)

Asof31December2015and2014movementsofwarrantyandassemblyprovisionsareasfollows:

1 January - 1 January - 31 December 2015 31 December 2014 Opening balance, 1 January 108.190 103.498

Current year additions 263.096 194.147Provisions no longer required (225.408) (189.455) Balance at 31 December 145.878 108.190

b) Waste Electrical and Electronic Equipment Directive

Legal regulation prepared in conformity with European Union Waste Electrical and Electronic Equipment Directive (“WEEE”)hasbeeneffectiveinTurkeysince2012.TheDirectivesetcollection,recyclingandrecoverytargetsforalltypesofelectricalandelectronicgoodsuponmanufacturers.TheregulationwillnothaveasignificantimpactontheconsolidatedfinancialstatementsoftheGroupasof31December2015.

c) Guarantees received by the Group

Guarantee letters, collaterals, cheques and notes received

31 December 2015 31 December 2014Guaranteeletters 250.396 194.876Cheques and notes 76.039 47.050Collaterals and pledges 865.728 746.463 1.192.163 988.389

VestelBeyazEşyaSanayiveTicaretA.Ş.andVestelTicaretA.Ş.,hasgivencollateralstovariousbanksonbehalfoftheCompanyforitsforwardcontractsandloansutilized.

d) Collaterals, pledges and mortgages (“CPM’s”) given by the Group

CPM’s given by the GroupUSD

(‘000)EUR

(‘000) TLTL

Equivalent 31 December 2015A.CPM’sgivenonbehalfofitsownlegalentity 7.694 36.399 71.314 209.347 B.CPM’sgivenonbehalfoffullyconsolidatedsubsidiaries(*) 2.262.988 349.206 2.461.378 10.150.879 C.CPM’sgivenonbehalfofthirdpartiesforordinarycourseofbusiness - - - - D.TotalamountofotherCPM’sgiven 72.691 - 91.954 303.310 i.TotalamountofCPM’sgivenonbehalfoftheparentcompany - - - -ii.TotalamountofCPM’sgiventoonbehalfofothergroupcompanieswhicharenotinscopeofBandC. 72.691 - 91.954 303.310iii.TotalamountofCPM’sgivenonbehalfofthirdpartieswhicharenotin scope of C. - - - - Total 2.343.373 385.605 2.624.646 10.663.536

(*)Fullyconsolidatedsubsidiarieshavegivencollateralstovariousfinancialinstitutionsonbehalfofeachotherfortheirforwardcontractsandforthetotalamountofloansutilized.

148




NOTE 17 - PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (Cont’d)

CPM’s given by the GroupUSD

(‘000)EUR

(‘000) TLTL

Equivalent 31 December 2014A.CPM’sgivenonbehalfofitsownlegalentity 1.686 39.395 63.535 178.566 B.CPM’sgivenonbehalfoffullyconsolidatedsubsidiaries 2.244.072 377.458 2.588.217 8.856.691 C.CPM’sgivenonbehalfofthirdpartiesforordinarycourseofbusiness - - - - D.TotalamountofotherCPM’sgiven 84.920 - 132.103 329.024 i.TotalamountofCPM’sgivenonbehalfoftheparentcompany - - - -ii.TotalamountofCPM’sgiventoonbehalfofothergroupcompanieswhicharenotinscopeofBandC. 84.920 - 132.103 329.024iii.TotalamountofCPM’sgivenonbehalfofthirdpartieswhicharenotin scope of C. - - - - Total 2.330.678 416.853 2.783.855 9.364.281

TheGrouphasblockeddepositof52.300 thousandTL in favorof itssubsidiary (31December2014:52.300 thousandTL).Asof31December2015proportionofotherCPM’sgivenbytheGrouptoitsequityis19%(31December2014:24%).

NOTE 18 - COMMITMENTS

AsofthebalancesheetdatetheGrouphascommittedtorealizeexportsamountingto749.894thousandUSD(31December2014:742.736thousandUSD)duetotheexportandinvestmentincentivecertificatesobtained.

Asof31December2015theGrouphasforwardforeigncurrencypurchasecontractthatamountsto822.012thousandUSD,326.894thousandEUR,11.614thousandGBP,1.620thousandCHFand856.846thousandTLagainstforwardforeigncurrencysalescontractthatamountsto566.810thousandUSD,567.557thousandEUR,39.097thousandGBP,2.297thousandCHF,9.930thousandRUB,3.193thousandRON,5.573thousandPLNand600.614thousandTL(31December2014:1.148.196thousandUSD,140.204thousandEUR,4.232thousandCHF,804thousandRUB,2.791thousandGBPand332.461thousandTLagainstforwardforeigncurrencysalescontractthatamountsto286.643thousandUSD,518.100thousandEUR,804thousandRUB,4.232thousandCHF,20.172thousandGBPand1.135.338thousandTL).

NOTE 19 - EMPLOYEE BENEFITS

Liabilities for employee benefits:

31 December 2015 31 December 2014 Due to personnel 48.015 45.679Social security payables 18.991 15.161 67.006 60.840

Long term provisions for employee benefits:

31 December 2015 31 December 2014Provision for employment termination benefits 68.311 73.768

UnderTurkish law, theCompany is required to pay employment terminationbenefits to eachemployeewhoseemployment isterminatedwithoutduecause.Inaddition,undertheexistingSocialSecurityLawNo.506,clauseNo.60,amendedbytheLaborLawsdated6March1981,No.2422and25August1999,No.4447,theCompanyisalsorequiredtopayterminationbenefitstoeachemployeewhohasearnedtherighttoretirebyreceivingterminationindemnities.

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NOTE 19 - EMPLOYEE BENEFITS (Cont’d)

Theamountpayableistheequivalentofonemonth’ssalaryforeachyearofserviceandislimitedtoamaximumof3.828,37TL/yearasof31December2015(31December2014:3.438,22TL/year).

Provisionforemploymentterminationbenefitsisnotsubjecttoanyfunding.

The provision is calculated by estimating the present value of the future obligation of the company arising from retirement of employees. TAS 19 (“Employee Benefits”) requires actuarial valuation methods to be developed to estimate the enterprise’sobligationunderdefinedemployeeplans.Accordinglyactuarialassumptionswereusedinthecalculationofthetotalliabilitywhicharedescribedbelow:

Theprincipalassumptionisthatthemaximumliabilityforeachyearofservicewillincreaseinlinewithinflation.Thus,thediscountrateappliedrepresentstheexpectedrealrateafteradjustingfortheanticipatedeffectsoffutureinflation.Anexpectedinflationrate and appropriate discount rate should both be determined, the net of these being real discount rate. Consequently in theaccompanyingfinancialstatementsasof31December2015,theprovisioniscalculatedbyestimatingthepresentvalueofthefutureobligation of the company arising from retirement of employees. As of 31 December 2015 provision is calculated based on real discountrateof4,48%(31December2014:2,26%)assuming6%annualinflationrateand10,75%discountrate.

Themovementintheprovisionforemploymentterminationbenefitisasfollows:

1 January - 1 January - 31 December 2015 31 December 2014 Balance at 1 January 73.768 40.262 Increaseduringtheyear 17.528 10.345Payments during the year (12.426) (9.544)Actuarial(gain)/loss (16.482) 28.378Interestexpense 5.923 4.327 Balance at 31 December 68.311 73.768

NOTE 20 - EXPENSES BY NATURE

1 January - 1 January - 31 December 2015 31 December 2014 Rawmaterials,suppliesandfinishedgoods 6.906.237 5.638.003Changesinfinishedgoods,workinprocess,tradegoods (405.973) (193.173)Personnel expenses 667.441 551.897Depreciationandamortization 293.839 268.960Warranty and assembly expenses 263.096 194.147Transportation expenses 207.164 180.283Advertising expenses 74.955 62.992Other 659.130 610.659 8.665.889 7.313.768

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NOTE 21 - OTHER ASSETS AND LIABILITIES

31 December 2015 31 December 2014 Other current assetsVATcarriedforward 16.597 17.664Other 11.117 3.868 27.714 21.532 Other non - current assetsAssets held for sale 11.224 13.566 11.224 13.566

31 December 2015 31 December 2014Other current liabilitiesAdvances received 134.081 99.965Taxes and dues payable 46.637 30.379Other 55.266 33.780 235.984 164.124

NOTE 22 - CAPITAL, RESERVES AND OTHER EQUITY ITEMS

a) Paid in capital

31 December 2015 31 December 2014 SharesofparvalueKr1eachLimitonregisteredsharecapital 1.000.000 1.000.000Issuedsharecapital 335.456 335.456

Asof31December2015and31December2014theshareholdingstructuresareasfollows:

Shareholding % Amount 31 December 2015 31 December 2014 31 December 2015 31 December 2014

ZorluHoldingA.Ş. 64,41% 64,41% 216.054 216.054Shares held by public

Other shareholders 22,46% 22,46% 75.355 75.355ZorluHoldingA.Ş. 13,13% 13,13% 44.047 44.047

100% 100% 335.456 335.456

b) Adjustment to share capital

Adjustmenttosharecapital(restatedto31December2004purchasingpowerofmoney)isthedifferencebetweenrestatedsharecapital and historical share capital.

31 December 2015 31 December 2014 Adjustmentstosharecapital 688.315 688.315

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NOTE 22 - CAPITAL, RESERVES AND OTHER EQUITY ITEMS (Cont’d)

c) Share premium

Sharepremiumaccountrefersthedifferencebetweenparvalueofthecompany’ssharesandtheamountthecompanyreceivedfornewlyissuedshares.Thesharepremiumaccountisdisclosedunderequityasaseparatelineitemandmaynotbedistributed.Itmaybeusedincapitalincrease.

31 December 2015 31 December 2014Share premium 103.165 103.078

d) Legal reserves

ThelegalreservesconsistoffirstandsecondlegalreservesappropriatedinaccordancewiththeTurkishCommercialCode(“TCC”).Thefirstlegalreserveisappropriatedoutofthestatutoryprofitsattherateof5%,untilthetotalreservereachesamaximumof20%oftheCompany’ssharecapital.Thesecondlegalreserveisappropriatedattherateof10%ofalldistributionsinexcessof5%oftheCompany’ssharecapital.UnderTCC,thelegalreservescanonlybeusedtooffsetlossesandarenotavailableforanyotherusageunlesstheyexceed50%ofpaidinsharecapital.

Legalreserves 28.314 28.314

e) Revaluation reserve

Fairvaluegainsonfinancialassets 2.052 2.236Revaluationofproperty,plantandequipment 574.004 435.434 576.056 437.670

f) Accumulated deficit

Extraordinary reserves 415.036 415.036Previousyear’sloss (762.011) (869.337)Otherinflationadjustmentofsharecapital 119.718 119.718 (227.257) (334.583)

g) Dividend distribution

For quoted companies dividends are distributed in accordance with the Communiqué Serial II:-19.1 on “Principals RegardingDistributionofInterimDividends”issuedbytheCMBeffectivefrom1February2014.

Companiesdistributedividendsinaccordancewiththeirdividendpaymentpoliciessettledanddividendpaymentdecisiontakeningeneralassemblyandinconformitywithrelevantlegislations.Thecommuniquédoesnotstateaminimumdividendrate.CompaniesdistributedividendsinaccordancewiththemethoddefinedintheirdividendpolicyorArticlesofAssociation.Additionally,dividendcan be distributed in fixed or variable installments and dividend advances can be paid over the profit on interim financial statements.

UnlessthegeneralreservesthathastobeappropriatedinaccordancewithTCCorthedividendtoshareholdersasdeterminedintheArticlesofAssociationordividendpolicyaresetaside;nodecisioncanbetakentosetasideotherreserves,totransferreservesto thesubsequent yearor todistributedividends toholdersofusufruct right certificates, toboardofdirectorsmembersor toemployees;andnodividendcanbedistributedtothoseunlessthedetermineddividendtoshareholdersispaidincash.

Ontheotherhand,inaccordancewiththeArticlesofAssociationoftheCompany,thenetperiodincomeisallocatedafterdeductingtheaccumulatedlossesfromthepreviousyears,ifany,asfollows:

a)AsperArticle519oftheTurkishCommercialCode,5%isallocatedtoagenerallegalreserve.

b)Adividendisallocatedfromtheremainingamount,attheratedeterminedbytheGeneralAssemblyoveranamounttobefoundaftertheadditionofadonation,whichismadeinlinewiththeTurkishCommercialCodeandCapitalMarketLegislation.

c) After the deductions above, the General Assembly has the right to decide how to allocate the dividend tomembers of theBoardofDirectorsandofficers,employeesandworkers,foundationsestablishedwithvariouspurposes,andsimilarpersonsandcorporations.

152




NOTE 22 - CAPITAL, RESERVES AND OTHER EQUITY ITEMS (Cont’d)

g) Dividend distribution (Cont’d)

d)Aftertheamountsstatedinparagraph(a),(b)and(c)aredeductedfromthenetperiodprofit,theGeneralAssemblyisauthorisedtoallocatetheremainingamountasaseconddividendortoallocatetheremainingamounttoitsownreserveasperArticle521ofthe Turkish Commercial Code.

e)Onetenthoftheamountobtainedafteradividendof5%ofthepaidincapitalandotherlegalreservearedeductedfromtheamount that is agreed to be allocated to the shareholders and other persons participating to the profit is added to the general legal reserveasperparagraph(c)ofthesecondclauseofArticle519oftheTurkishCommercialCode.

NOTE 23 - SALES


Domestic sales 3.408.352 2.405.402Overseas sales 6.372.317 5.786.675 Gross sales 9.780.669 8.192.077 Salesdiscounts(-) (530.208) (424.774) Net sales 9.250.461 7.767.303 Cost of sales (7.292.391) (6.197.419) Gross profit 1.958.070 1.569.884

NOTE 24 - GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH AND DEVELOPMENT EXPENSES

a) General administrative expenses:


Personnel expenses 82.592 70.066Depreciationandamortization 13.800 12.527Other 124.064 104.400 220.456 186.993

b) Marketing expenses:

1 January - 1 January - 31 December 2015 31 December 2014 Personnel expenses 158.834 115.460Depreciationandamortization 25.927 19.431Other 847.451 691.326 1.032.212 826.217

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NOTE 24 - GENERAL ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH AND DEVELOPMENT EXPENSES (Cont’d)

c) Research and development expenses:

Personnel expenses 21.823 20.299Depreciationandamortization 74.512 57.587Other 24.495 25.253 120.830 103.139

NOTE 25 - OTHER INCOME AND EXPENSE FROM OPERATING ACTIVITIES

a) Other income from operating activities:

1 January - 1 January - 31 December 2015 31 December 2014 Credit finance gains arising from trading activities 124.785 61.366Foreignexchangegainsarisingfromtradingactivities 235.481 19.061Reversalsofprovisions 1.988 2.208Other income 71.453 48.730 433.707 131.365

b) Other expense from operating activities:

1 January - 1 January - 31 December 2015 31 December 2014 Debit finance charges arising from trading activities 111.919 73.714Foreignexchangeexpensesarisingfromtradingactivities 500.919 256.911Provision expenses 37.060 55.719Other expenses 56.109 53.763 706.007 440.107

NOTE 26 - FINANCIAL EXPENSE AND FINANCIAL INCOME

a) Financial expense:

1 January - 1 January - 31 December 2015 31 December 2014 Foreignexchangelosses 423.540 152.713Lossesonderivativefinancialinstruments 603.564 271.048Interestandcommissionexpense 273.470 164.364Other finance expenses 3.705 2.057 1.304.279 590.182

b) Financial income:

Foreignexchangegains 346.652 189.187Gainsonderivativefinancialinstruments 628.352 294.539Interestincome 91.181 88.153 1.066.185 571.879

154




NOTE 27 - ANALYSIS OF OTHER COMPREHENSIVE INCOME ITEMS

a) Fixed assets revaluation fund:

1 January - 1 January - 31 December 2015 31 December 2014Opening balance, 1 January 435.434 443.773Depreciationtransferuponrevaluationreserves-netofdeferredtax (12.246) (20.985)Netdepreciationtransferuponrevaluationreservesattributabletonon-controlling interests 2.535 4.607Increaseinreservesarisingfromrevaluationofland,buildingsandlandimprovements 176.890 -Deferred tax income calculated over increase in revaluation reserves (26.084) -Increaseinrevaluationreservesattributabletonon-controllinginterests (3.082) -Deferred tax income calculated over increase in revaluation reserves attributabletonon-controllinginterest 470 -Transactionswithnon-controllinginterests 87 8.039 Balance at 31 December 574.004 435.434

b) Cash flow hedge fund:


Opening balance, 1 January 34.523 (12.960)Profit/(loss)fromcashflowhedges (19.972) 61.357Deferredtaxcalculatedovercashflowhedgefund 3.994 (12.271)(Profit)/lossfromcashflowhedgesattributabletonon-controllinginterests 870 (1.660)Deferredtaxcalculatedoverprofit/(loss)fromcashflowhedgesattributabletonon-controllinginterests (174) 332Transactionswithnon-controllinginterests 15 (275) Balance at 31 December 19.256 34.523

c) Actuarial gain/loss arising from defined benefit plans:

1 January - 1 January - 31 December 2015 31 December 2014Opening balance, 1 January (23.583) (1.360)Actuarialgain/lossarisingfromdefinedbenefitplans 16.482 (28.378)Deferredtaxcalculatedoveractuarialgain/lossarisingfromdefinedbenefitplans (3.296) 5.676Actuarialgain/lossarisingfromdefinedbenefitplansattributabletonon-controlling interests (371) 615Deferredtaxcalculatedoveractuarialgain/lossarisingfromdefinedbenefitplansattributabletonon-controllinginterests 74 (123)Transactionswithnon-controllinginterests (8) (13) Balance at 31 December (10.702) (23.583)

155




NOTE 28 - TAXES ON INCOME (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES)

31 December 2015 31 December 2014 Corporation and income taxes 13.861 25.386Prepaidtaxes(-) (36.947) (21.162) Current income tax liabilities - net (23.086) 4.224 Deferred tax liabilities (81.512) (54.886)Deferred tax assets 51.725 39.219

TurkishTaxLegislationdoesnotpermitaparentcompanyitssubsidiariesandinvestmentsinassociatestofileaconsolidatedtaxreturn.Therefore,taxliabilitiesasreflectedintheseconsolidatedfinancialstatementshavebeencalculatedonaseparateentitybasis for the fully consolidated subsidiaries.

InTurkey,beginningfrom1January2006,thecorporatetaxrateis20%.

Corporatetaxisappliedontaxablecorporateincome,whichiscalculatedfromthestatutoryaccountingprofitbyaddingbacknon-deductibleexpensesandbydeductingotherexemptincome.15%withholdingtaxrateappliestodividendsdistributedtoresidentrealpersonsexceptforthosewhoarenotliabletoincomeandcorporationtax,andtocorporationsexceptforthoseareresidentcompaniesinTurkeyorareTurkishbranchesofforeigncompanies.Undistributeddividendsincorporatedinsharecapitalarenotsubjecttoincomewithholdingtax.

InTurkey,advancetaxreturnsarefiledonaquarterlybasisattherateof20%,untilthe14thdayofthefollowingmonthandpaiduntil the17thday.Advancetaxreturns fileswithin theyearareoffsetagainstcorporate incometaxcalculatedover theannualtaxable corporate income.

AccordingtotheCorporateTaxLaw,75%ofthecapitalgainsarisingfromthesaleoftangibleassetsandinvestmentsinequitysharesownedforatleasttwoyearsareexemptedfromcorporatetaxontheconditionthatsuchgainsarereflectedintheequitywiththeintentiontobeutilizedinasharecapitalincreasewithinfiveyearsfromthedateofthesale.

UndertheTurkishtaxationsystem,taxlossescanbecarriedforwardtobeoffsetagainstfuturetaxableincomeforuptofiveyears.Tax losses cannot be carried back.

Thereisnoprocedureforafinalanddefinitiveagreementontaxassessments.Taxreturnsarefiledbetween1-25Aprilfollowingthecloseoftheaccountingyeartowhichtheyrelate.Taxauthoritiesmayhoweverexaminesuchreturnsandtheunderlyingaccountingrecordsandmayreviseassessmentwithinfiveyears.

RussianFederation

InRussia, corporate tax rate applicable is 20% (2014: 20%).Under theRussianFederation taxation system, tax losses can becarriedforwardtobeoffsetagainstfuturetaxableincomeforuptotenyears.Therearenorestrictionsontheamountssubjecttonetoff.Ontheotherhand,tax,currencyandcustomslegislationsaresubjecttovariousinterpretationsandchangeswhichcanoccurs frequently inRussian Federation.Management’s interpretation for such legislation,which is applied to theCompany’soperationsandactivities,canbeinterpretedbyregionalandfederalauthoritiesindifferentways.TheeventsoftherecentpastinRussianFederation,showsthatriskcouldbepossibleonapprovalofoperationsandactivities,whichapprovedinthepastmaynotbeapprovedinthefutureasaresultofreviewsbythetaxauthoritiesonlegislation.Accordingtoareviewbythetaxinspectionauthorities, without exceptional circumstances, tax inspection covers three years prior to the final inspection. Under certaincircumstances,suchviewsmaycoverlongerperiods.

ThetaxresultsofGroup’ssubsidiariesinothercountriesarenotmaterialtoconsolidatedfinancialstatements.

156




NOTE 28 - TAXES ON INCOME (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) (Cont’d)

Asof1January-31December2015and2014taxbenefitintheconsolidatedstatementofincomeisasfollows:

1 January - 1 January - 31 December 2015 31 December 2014 Current period tax expense (16.615) (24.456)Deferred tax benefit 11.014 2.088 Total tax (expense)/benefit (5.601) (22.368)

Totaltaxexpensefortheyearcanbereconciledtotheaccountingprofitasfollows:

1 January - 1 January - 31 December 2015 31 December 2014 Profit before tax 74.178 126.490 Localtaxrate 20% 20%Tax income calculated using local tax rate (14.836) (25.298)Carryforwardtaxlosses 13.756 6.939Effectofunusedtaxlossesforwhichnodeferredtaxassetwasrecognised (13.889) (34.028)Carryforwardtaxlossesutilized (6.939) 1.829Non-deductibleexpenses (14.997) (7.027)Adjustmentswithnotaxeffects (10.883) 11.740Researchanddevelopmentincentives 24.739 17.386Reducedtaxation 17.448 6.091 Total tax (expense)/benefit (5.601) (22.368)

Deferred tax assets and liabilities

TheGrouprecognizesdeferredtaxassetsandliabilitiesbasedupontemporarydifferencesarisingbetweentheirfinancialstatementspreparedinaccordancewithCMBCommuniquéII,No.14.1andtheirstatutoryfinancialstatements.ThesetemporarydifferencesusuallyresultfromtherecognitionofrevenueandexpensesindifferentreportingperiodsfortheCommuniquéandtaxpurposes.

Taxrateusedinthecalculationofdeferredtaxassetsandliabilitiesbasedontheliabilitymethodis20%(31December2014:20%).

Thebreakdownofcumulativetemporarydifferencesandtheresultingdeferredtaxassetsandliabilitiesprovidedusingprincipaltaxrateasofthebalancesheetdatesisasfollows:

Cumulative temporary differences Deferred tax 31 December 2015 31 December 2014 31 December 2015 31 December 2014Deferred tax assetsEmployment termination benefits (66.678) (73.768) 13.336 13.471Warranty provision (91.090) (63.980) 18.218 12.796Provision for doubtful receivables (157.975) (163.670) 31.595 32.734Unearnedinterestexpense (29.070) (25.050) 5.814 5.010Provision for impairment on inventories (7.930) (13.465) 1.586 2.693Derivative financial instruments (51.570) (40.735) 10.314 8.147Carryforwardtaxlosses (84.765) (60.564) 16.953 12.113Other (101.010) (86.815) 20.202 17.363 118.018 104.327

157




NOTE 28 - TAXES ON INCOME (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) (Cont’d)

Cumulative temporary differences Deferred tax 31 December 2015 31 December 2014 31 December 2015 31 December 2014

Deferred tax liabilitiesIncomeaccrualsofderivativetransactions 63.310 83.670 (12.662) (16.734)Usefullifeandvaluationdifferencesonproperty,plantandequipmentandintangible assets 83.240 92.140 (16.648) (18.428)Revaluationoftangiblefixedassets 691.875 527.284 (106.446) (83.012)Other 60.245 9.100 (12.049) (1.820) (147.805) (119.994) Deferred tax assets/(liabilities) - net (29.787) (15.667)

26.502thousandTLofcarryforwardtaxlosesexpiresin2017.TheGrouphasalsoR&Ddeductionof31.355thousandTLduetotheincentivesobtainedunderthejurisdictionoftheresearchanddevelopmentlaw.

31 December 31 December2015 2014

Subsidiarieswithnetdeferredtaxliabilities (81.512) (54.886)Subsidiarieswithnetdeferredassets 51.725 39.219

Themovementofnetdeferredtaxassetsandliabilitiesisasfollows:

1 January -

31 December 20151 January -

31 December 2014 Opening balance, 1 January (15.667) (18.862)Taxbenefitrecognizedinincomestatement 11.014 2.088Recognizedinshareholders’equity (25.340) (7.063)Currency translation differences 206 8.170 Deferred tax (liabilities)/assets at the end of the period, net (29.787) (15.667)

NOTE 29 - EARNINGS/(LOSS) PER SHARE


Netincome/(loss)attributabletoequityholdersoftheparent 59.620 97.376WeightednumberofordinaryshareswithaKr1offacevalue(thousandshares) 33.546.000 33.546.000 0,18 0,29

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NOTE 30 - DERIVATIVE INSTRUMENTS

31 December 2015 31 December 2014 Fair Value Fair Value

Contract amount

Assets/(Liabilities)

Contract amount

Assets/(Liabilities)

Held for tradingForwardforeigncurrencytransactions 2.873.779 25.340 2.343.096 (15.618)Foreigncurrencyswapcontracts 90.000 (49.564) 140.000 (23.121)

Cash flow hedgeForwardforeigncurrencytransactions 1.466.555 37.252 1.067.361 82.527

4.430.334 13.028 3.550.457 43.788

NOTE 31 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

a) Capital risk management:

TheGroupmanagesitscapitaltoensurethatentitiesintheGroupwillbeabletocontinueasagoingconcernwhilemaximizingthereturntostakeholdersthroughtheoptimizationofthedebtandequitybalance.

TheGroup’smanagementreviewsthecapitalstructureconsideringthecostofcapitalandtherisksassociatedwitheachclassofcapital.Basedonrecommendations,theGroupwillbalanceitsoverallcapitalstructurethroughthepaymentofdividendsandnewshareissuesaswellastheissueofnewdebtortheredemptionoftheexistingdebt.

Asof31December2015and2014gearingratiosareasfollows:


Totalfinancialliabilities(note7) 2.461.184 1.649.532Cashandcashequivalents(note5) (728.219) (618.673) Net debt 1.732.965 1.030.859

Totalshareholders’equity 1.573.808 1.370.649 Total capital invested 3.306.773 2.401.508

Gearing ratio 52% 43%

b) Financial risk factors:

TheGroup’sactivitiesexposeittocurrencyrisk,creditriskandliquidityrisk.Thegroup’soverallriskmanagementprogramfocusesontheunpredictabilityoffinancialmarketsandseekstominimizepotentialadverseeffectsonthegroup’sfinancialperformance.TheGroupusesderivativefinancialinstrumentstohedgecertainriskexposures.

159




NOTE 31 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (Cont’d)

b.1) Credit risk:

TheGroup is exposed to credit risk arising from receivables fromcredit finance sales anddepositswith banks.Credit risk ofreceivablesfromthirdpartiesismanagedbysecuringreceivableswithhighestpossiblecoverage.Methodsusedare:

• Bankguarantees(guaranteeletters,etc.)

•Credit insurance

•Mortgages

• Cheque-notes

Forcustomersreceivablesfromwhicharenotsecuredwithcollaterals,thecreditqualityofthecustomerisassessedbytakingintoaccountitsfinancialposition,pastexperienceandotherfactorsandindividualrisklimitsaredeterminedandmonitoredregularly.

Receivables Trade receivables Other receivables

31 December 2015Related

partyOther party

Related party

Other party

Bank deposits Other

Maximum exposed credit risk as of 31 December 2015 (A+B+C+D) 27.997 2.879.552 803.841 364.165 616.614 111.605-Securedportionofthemaximumcreditriskbyguarantees,etc. - (1.549.859) - - - -

A.Netbookvalueoffinancialassetseitherarenot due or not impaired 27.997 2.413.131 803.841 364.165 616.614 111.605-Securedportionbyguaranteesetc. - (1.381.263) - - - -

B.Financialassetswithrenegotiatedconditions - 119.680 - - - -C.Netbookvalueoftheoverduebutnotimpaired financial assets - 336.425 - - - --Securedportionbyguaranteesetc. - (178.912) - - - -

D.Netbookvalueoftheimpairedfinancialassets - 10.316 - - - --Overdue(grossbookvalue) - 113.199 - 97.654 - --Impairment(-) - (102.883) - (97.654) - --Securedportionofthenetvaluebyguarantees etc. - 10.316 - - - -

160





Receivables Trade receivables Other receivables

31 December 2014Related

partyOther party

Related party

Other party

Bank deposits Other

Maximum exposed credit risk as of 31 December 2014 (A+B+C+D) 54.449 1.995.792 581.553 217.042 506.515 112.158-Securedportionofthemaximumcreditriskbyguarantees,etc. - (1.412.462) - - - -

A.Netbookvalueoffinancialassetseitherarenot due or not impaired 54.449 1.533.936 581.553 217.042 506.515 112.158-Securedportionbyguaranteesetc. - (1.229.136) - - - -

B.Financialassetswithrenegotiatedconditions - 103.089 - - - -C.Netbookvalueoftheoverduebutnotimpaired financial assets - 349.874 - - - --Securedportionbyguaranteesetc. - (171.382) - - - -

D.Netbookvalueoftheimpairedfinancialassets - 8.893 - - - --Overdue(grossbookvalue) - 97.955 - 97.654 - --Impairment(-) - (89.062) - (97.654) - --Securedportionofthenetvaluebyguarantees etc. - (11.944) - - - -

Agingoffinancialassetswhichareoverduebutnotimpairedisasfollows:


Overdue1-30days 72.891 108.694Overdue1-3months 129.817 61.581Overdue3-12months 99.485 152.118Overdue1-5years 32.704 26.047Overdue more than 5 years 1.528 1.434

Total 336.425 349.874

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b.2) Liquidity risk:

TheGroupmanagesliquidityriskbymaintainingadequatereserves,bankingfacilitiesandreserveborrowingfacilitiesbycontinuouslymonitoringforecastandactualcashflowsandmatchingthematurityprofilesoffinancialassetsandliabilities.

The following tables detail theGroup’s remaining contractualmaturity for its financial liabilities. The tables have been drawnup based on the undiscounted cash flows of non-derivative financial liabilities based on the earliest date onwhich the Groupcanberequiredtopay.Thetableincludesbothinterestandprincipalcashflows.Derivativefinancialliabilitiesarepresentedbyundiscountednetinflowsandoutflows.

Asof31December2015maturityanalysisoftheGroup’sfinancialliabilitiesisasfollows:

Contractual maturitiesCarrying

valueContractual

cash flowsUp to

3 months3 - 12

months1 - 5

yearsMore than

5 years

Non-derivative financial liabilities Financialliabilities 2.461.184 2.715.833 140.564 640.441 1.843.279 91.549Trade payables 4.536.791 4.541.936 1.920.870 2.621.066 - -Other payables 9.693 9.693 9.693 - - - 7.007.668 7.267.462 2.071.127 3.261.507 1.843.279 91.549 Derivative financial instruments Derivativecashinflows 4.340.361 1.770.691 2.562.680 6.990 -Derivativecashoutflows (4.233.793) (1.756.063) (2.470.941) (6.789) - (13.028) 106.568 14.628 91.739 201 -

Asof31December2014maturityanalysisoftheGroup’sfinancialliabilitiesisasfollows:

Contractual maturitiesCarrying

valueContractual

cash flowsUp to

3 months3 - 12

months1 - 5

yearsMore than

5 years

Non-derivative financial liabilities Financialliabilities 1.649.532 1.774.052 258.678 201.392 1.251.463 62.519Trade payables 3.720.176 3.724.025 1.595.627 2.128.398 - -Other payables 3.010 3.010 3.010 - - - 5.372.718 5.501.087 1.857.315 2.329.790 1.251.463 62.519 Derivative financial instruments Derivativecashinflows 3.474.859 1.972.588 1.362.271 140.000 -Derivativecashoutflows (3.325.255) (1.948.426) (1.320.291) (56.538) - (43.788) 149.604 24.162 41.980 83.462 -

162





b.3) Foreign currency risk:

TheGroupisexposedtoexchangerateriskduetoitsforeigncurrencydenominatedtransactions.Themainprincipleofforeigncurrencyriskmanagement is tomaintain foreignexchangepositionat the level thatminimizes the impactof foreignexchangefluctuations.

Derivativeinstrumentsareusedinforeigncurrencyriskmanagementwherenecessary.InthisrespecttheGroupmainlyprefersusingforeignexchangeforwardcontracts.

31 December 2015 USD EUROther (TL

Equivalent)TL

Equivalent1. Trade receivables 304.014 371.904 141.381 2.207.0942a.Monetaryfinancialassets(includingcashandcashequivalents) 62.421 1.517 22.258 208.5742b.Non-monetaryfinancialassets - - - -3. Other 7.625 68 1.094 23.4814. Current assets (1+2+3) 374.060 373.489 164.733 2.439.1495. Trade receivables 27.896 - - 81.1106a.Monetaryfinancialassets - - - -6b.Non-monetaryfinancialassets - - - -7. Other 268.950 58 - 782.1838. Non-current assets (5+6+7) 296.846 58 - 863.2939. Total assets (4+8) 670.906 373.547 164.733 3.302.44210. Trade payables 1.394.498 68.737 16.362 4.289.42311.Financialliabilities 27.595 24.001 - 156.49912a. Other monetary liabilities 3 - 739 74812b.Othernon-monetaryliabilities - - - -13. Current liabilities (10+11+12) 1.422.096 92.738 17.101 4.446.67014. Trade payables - - - -15.Financialliabilities 89.148 152.447 - 743.62116a.Othermonetaryliabilities - 490 - 1.55716b.Othernon-monetaryliabilities - - - -17. Non-current liabilities (14+15+16) 89.148 152.937 - 745.17818. Total liabilities (13+17) 1.511.243 245.675 17.101 5.191.84819. Off-balance sheet derivative instruments net asset/(liability) position (19a+19b) 255.202 (240.663) (126.945) (149.651)19a.Hedgedtotalassets 822.012 326.894 54.692 3.483.51219b.Hedgedtotalliabilities (566.810) (567.557) (181.637) (3.633.163)20. Net foreign currency asset/(liability) position (9-18+19) (585.135) (112.791) 20.687 (2.039.057)21. Net foreign currency monetary asset/(liability) position (=1+2a+5+6a-10-11-12a-14-15-16a) (1.116.912) 127.746 146.538 (2.695.070)22. Fair value of financial instruments used in foreign currency hedging - - - 13.02823. Export 967.941 1.065.707 92.509 6.372.31724.Import 1.764.449 192.145 1.087 5.380.363

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31 December 2014 USD EUROther (TL

Equivalent)TL

Equivalent1. Trade receivables 498.610 274.198 107.976 2.037.6332a.Monetaryfinancialassets(includingcashandcashequivalents) 101.159 923 6.238 243.4192b.Non-monetaryfinancialassets - - - -3. Other 80.554 - 1.874 188.6714. Current assets (1+2+3) 680.323 275.121 116.088 2.469.7235. Trade receivables 29.553 - - 68.5306a.Monetaryfinancialassets - - - -6b.Non-monetaryfinancialassets - - - -7. Other 174.492 491 - 406.0148. Non-current assets (5+6+7) 204.045 491 - 474.5449. Total assets (4+8) 884.368 275.612 116.088 2.944.26710. Trade payables 1.458.191 79.049 8.135 3.612.50811.Financialliabilities 38.773 13.592 - 128.24812a. Other monetary liabilities 1 - 190 19212b.Othernon-monetaryliabilities - - - -13. Current liabilities (10+11+12) 1.496.965 92.641 8.325 3.740.94814. Trade payables - - - -15.Financialliabilities 68.536 52.056 - 305.76116a.Othermonetaryliabilities - 474 - 1.33716b.Othernon-monetaryliabilities - - - -17. Non-current liabilities (14+15+16) 68.536 52.530 - 307.09818. Total liabilities (13+17) 1.565.500 145.171 8.325 4.048.04619. Off-balance sheet derivative instruments net asset/(liability) position (19a+19b) 861.553 (377.896) (64.640) 867.28419a.Hedgedtotalassets 1.148.196 140.204 17.807 3.075.83219b.Hedgedtotalliabilities (286.643) (518.100) (82.447) (2.208.548)20. Net foreign currency asset/(liability) position (9-18+19) 180.421 (247.455) 43.123 (236.495)21. Net foreign currency monetary asset/(liability) position (=1+2a+5+6a-10-11-12a-14-15-16a) (936.178) 129.950 105.889 (1.698.464)22. Fair value of financial instruments used in foreign currency hedging - - - 43.78823. Export 1.209.127 910.422 50.252 5.786.67524.Import 1.793.450 196.487 1.150 4.495.950

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Asof31December2015and31December2014sensitivityanalysisofforeignexchangeratesispresentedinbelowtables.Securedportionsincludeimpactofoff-balancesheetderivativeinstruments.

Gain/Loss Equity

31 December 2015Foreign exchange

appreciationForeign exchange

depreciationForeign exchange


depreciation +/- 10% fluctuation of USD rate:USDnetasset/liability (324.753) 324.753 (324.753) 324.753SecuredportionfromUSDrisk(-) (10.924) 10.924 78.237 (78.237) USD net effect (335.677) 335.677 (246.516) 246.516 +/- 10% fluctuation of EUR rate:EURnetasset/liability 40.593 (40.593) 40.593 (40.593)SecuredportionfromEURrisk(-) (519) 519 (81.399) 81.399 EUR net effect 40.074 (40.074) (40.806) 40.806 +/- 10% fluctuation of other currency rates:Othercurrenciesnetasset/liability 14.654 (14.654) 14.654 (14.654)Secured portion from other currencyrisk(-) (11.188) 11.188 (11.188) 11.188 Other currency net effect 3.466 (3.466) 3.466 (3.466)

Gain/Loss Equity

31 December 2014Foreign exchange


depreciationForeign exchange


depreciation +/- 10% fluctuation of USD rate: USDnetasset/liability (217.090) 217.090 (217.090) 217.090SecuredportionfromUSDrisk(-) 52.215 (52.215) 122.079 (122.079) USD net effect (164.875) 164.875 (95.011) 95.011 +/- 10% fluctuation of EUR rate:EURnetasset/liability 36.655 (36.655) 36.655 (36.655)SecuredportionfromEURrisk(-) (41.749) 41.749 (107.136) 107.136 EUR net effect (5.094) 5.094 (70.481) 70.481 +/- 10% fluctuation of other currency rates:Othercurrenciesnetasset/liability 10.589 (10.589) 10.589 (10.589)Secured portion from other currencyrisk(-) 225 (225) 225 (225) Other currency net effect 10.814 (10.814) 10.814 (10.814)

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b.4) Interest rate risk:

TheGroupisexposedtointerestrateriskasentitiesintheGroupborrowfundsatbothfixedandfloatinginterestrates.TheriskismanagedbytheGroupbymaintaininganappropriatemixbetweenfixedandfloatingrateborrowings,bytheuseofinterestrateswapcontractsandforwardinterestratecontracts.

ThefinancialinstrumentsoftheGroupwhicharesensitivetoexchangeratechangesareasfollows:

31 December 2015 31 December 2014 Financial instruments with fixed interest ratesBankdeposits 338.047 176.327Financialliabilities 1.961.407 1.360.003 Financial instruments with floating interest ratesFinancialliabilities 499.777 289.529

Forfloatingrateliabilitiesifasof31December2015theinterestratesforallcurrencieshadbeen100basispointshigher/lowerandallothervariableswereheldconstant,higher/lowerinterestincome/expensefromfloatingratebankloansandbankdepositswouldresultlossbeforedecrease/increaseby11.755TL(2014:5.685TL).

NOTE 32 - FINANCIAL INSTRUMENTS (FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES)

Categories of financial instruments and fair values

Grouphasclassifieditsfinancialassetsandliabilitiesasatfairvaluethroughprofitorloss,availableforsalefinancialassetsandloansandreceivables.AmongGroup’sfinancialassets,cashandcashequivalents(note5),tradereceivables(notes8and9)andotherreceivables(notes8and10),areclassifiedasloansandreceivablesandaremeasuredatamortizedcostusingtheeffectiveinterestmethod.Group’savailableforsalefinancialassetsaredisclosedinnote6.

Group’sfinancialliabilitiesconsistoffinancialliabilities(note7),tradepayables(note8and9)andotherpayables(note8)andaremeasuredatamortizedcostusingtheeffectiveinterestmethod.

Fair value of financial instruments

Fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipants at the measurement date.

The estimated fair values of financial instrument have been determined by theGroup using availablemarket information andappropriate valuationmethods.However judgment is necessarily required to interpretmarket data to estimate the fair value.Accordingly, the estimates presentedherein are not necessarily indicative of the amount theGroup could realize in a currentmarketexchange.Followingmethodsandassumptionsareusedtoestimatethefairvalueofthefinancialinstruments:

Monetaryassets

ThebookvalueofforeigncurrencydenominatedbalanceswhicharetranslatedtoTLusingexchangeratesprevailingonthedateof thebalancesheetapproximate their fair values.For financialassetsmeasuredatcost includingcashandcashequivalents,thecarryingamountsarethesamewithfairvaluesduetotheirshorttermnature.Carryingamountsoftradereceivablesnetofimpairments approximate their fair values.

Monetaryliabilities

Duetotheirshorttermnature,thecarryingamountofshorttermbankloansandothermonetaryliabilitiesapproximatetheirfairvalues.Asof31December2015,thefairvalueoflongtermbankloansincludingshorttermportionsaswellis2.104.304thousandTL(31December2014:1.324.096thousandTL)(note7).

Fairvalueisestimatedbasedoncashflowsdiscountedbyratesdeterminedconsideringvariablecountryrisksandmarketinterestrates.

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NOTE 32 - FINANCIAL INSTRUMENTS (FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES) (Cont’d)

Fair value hierarchy

Groupclassifiesthefairvaluemeasurementofeachclassoffinancialinstrumentsaccordingtothesourceusingthethree-levelhierarchyasfollows:

Level1:Marketpricevaluationtechniquesforthedeterminedfinancialinstrumentstradedinmarkets(unadjusted)

Level2:Othervaluationtechniquesincludesdirectorindirectobservableinputs

Level3:Valuationtechniquesdoesnotincludeobservablemarketinputs

Fairvaluehierarchytablesasof31December2015and2014areasfollows:

31 December 2015 Level 1 Level 2 Level 3 Total

Financial assetsDerivative financial assets - - - -Financialinvestments 5.496 - - 5.496

Financial liabilitiesDerivative financial liabilities - (13.028) - (13.028)

31 December 2014 Level 1 Level 2 Level 3 Total

Financial assetsDerivative financial assets - 43.788 - 43.788Financialinvestments 4.425 - - 4.425

Financial liabilitiesDerivative financial liabilities - - - -

AnindependentvaluationoftheGroup’sland,landimprovementsandbuildingswasperformedbyvaluerstodeterminethefairvalueofthelandandbuildingsasat31December2015.Thefairvalueofland,landimprovementsandbuildingswasdeterminedusingtheinputsotherthanquotedprices(Level2).

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INVESTOR INFORMATION

General Information

Reporting Period: 01.01.2015-31.12.2015Corporate Title:VestelElektronikSanayiveTicaretAŞTrade Register No: IstanbulTicaretSicilMüdürlüğü,No:193621Registered Capital Ceiling:TL1,000,000,000Paid-in/Issued Capital: TL335,456,275

Headquarters/Branches Contact Details:Headquarters:Levent199BüyükdereCaddesiNo:19934394Şişli-ISTANBULPhone:+90(212)4562200

Branch 1: ManisaBranchOrganizeSanayiBölgesi,45030-MANISAPhone:+90(236)2330131

Branch 2:OrganizeSanayiBölgesiBranchOrganizeSanayiBölgesi,45030-MANISAPhone:+90(236)2330131

Independent Auditor

BaşaranNasBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikAŞA member of PricewaterhouseCoopersSüleymanSebaCad.BJKPlazaNo:48BBlok,Kat:934357AkaretlerBeşiktaş-ISTANBULPhone:+90(212)3266060Fax:+90(212)3266050

Financial Data and Company Announcements

Financialstatements,auditorreports,materialdisclosuresandannualreportsofVestelElektronikSanayiveTicaretAŞareavailableontheCompany’swebsiteathttp://www.vestelinvestorrelations.com/

Additionally, requests for informationcanbesubmitted to the InvestorRelationsDirectorateofVestelGroupofCompaniesviaphoneande-mail.

Investor Relations

Serap MutluInvestorRelationsDirector

VestelElektronikSanayiveTicaretAŞLevent199BüyükdereCad.No:19934394Şişli-ISTANBULPhone:+90(212)4563456E-mail:[email protected]

ÖzgünÜnaldıInvestorRelationsSpecialist

VestelElektronikSanayiveTicaretAŞLevent199BüyükdereCad.No:19934394Şişli-ISTANBULPhone:+90(212)4563456E-mail:[email protected]

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