Desa - 2012 Faaliyet Raporu / İngilizce

AnnualReport

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C o n t e n tMain Information ....................................................4DESA at a Glance ...............................................10Key Performance Indicators ..............................14Chairman’s Message ..........................................18Board Members .................................................20Management Team .............................................22History of DESA ...............................................26

Vision & Mission ...............................................28Value Chain & Targets ......................................28Business Model Distinguishing DESA .....................30Highlights of 2012 ..............................................32Human Resources ..............................................34Investor Relations ..............................................36Other Activities ...................................................38Corporate Governance Principles Compliance Report ....49Audit Report .......................................................62Contact Information .......................................138

Designing, manufacturing and

creating ultimate value

for a fashionable and

lucrative future…

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Main inform

ation

88 Domestic Stores

25 Samsonite Stores

14 owned by DESA

11 owned by the Partnership

3 International Stores

2 in London

1 in Jeddah

Export Champion for three consecutive years

40 years experience

Solution provider of international brands20,000 m² indoor area for leather tanning facilities

Düzce Facility with an indoor area of 10,000 m²spanning a total area of 20,000 m²

Production Facility and Headquarters in Sefaköy with

an indoor area of 17,000 m²built on an area of 6,000 m²

1,954 Employees

International Design Team

Head Office and Showroom in LondonDistributorship of Aerosoles in Turkey since 2003

Samsonite Distributorship for 26 years

Partnership for 6 years (40% - 60% JV)

Revenue TL 181.1 million

EBITDA TL 9.5 million

Total Assets TL 144.0 million

Total Equity TL 70.2 million

Net Income TL 2.8 million5

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DESA at a GlanceFounded in 1972 as a family-run workshop, Desa has signed off significant accomplishments during its 40-year saga and became leading leather and leather products manufacturer of Turkey. Taking a special pride to be “Turkey’s Export Champion” in leather industry for three consecutive years in 2010, 2011 and 2012 as well as possessing a unique and vertically integrated business model, the company set out to became a global brand via its Desa branded products by strengthening its current international profile.

The Group is principally engaged in tanning, design and manufacturing of womenswear, menswear, accessories, footwear and luggage as well as subsequent distribution via both its wholesale and retail sales channels. While Desa’s operations are primarily based in Turkey with its 88 stores in 27 different cities, it also has two stores in London and one in Jeddah as a Desa franchise. The Group has production facilities in Istanbul and Düzce spanning 27,000 m² area while tannery facility located in Çorlu covers 20,000 m² area. Desa stands as a provider of one-stop solutions to many international luxury brands; such as Prada, Miu Miu, Mulberry and so on. The company strengthened its

international profile by establishing a 40%-60% JV in 2006 with the world’s largest travel luggage company Samsonite following 26-year distributorship in Turkey.

The Group puts top priority to maintaining the highest standards for materials and craftsmanship which creates

superior product quality and durability. The company offers its products on-line in two countries; Turkey and United Kingdom via launching its on-line stores at www.desa.com.tr and www.desa.uk.com.

In line with its perfectionist understanding in service quality, the Group consistently invests in design, research & development and human resources. Its long-term strategic

plan is to increase its penetration with Desa-branded products both locally and internationally, while targeting international consumers, with an emphasis on the Asian markets.

Desa is a publicly traded company listed on the Istanbul Stock Exchange, trading under the symbol “DESA” since May 2004. Desa reported TRY181 million net revenues with total assets of TRY144 million as of December 31, 2012. 54.3% of Desa’s share capital is held by Çelet Holding, 10.0% by Mr. Melih Çelet, 0.8% by others while the remaining 34.9% is free float.


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Key PerformanceIndicators

REVENUE GROWTH

STORE GROWTHNET INCOME GROWTH

2011

2011

2011

83 Stores

15,892 m²TL 1.3 Million

TL 175.2 Million

2012

2012

2012

88 Stores

16,723 m²TL 2.8 Million

TL 181.1 Million

3.4%

115.4%

VOLUME GROWTH

2011

997,000 Unit

2012

1,111,000 Unit

11.4%

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Summary Balance Sheet (TL Million) 2011 2012

Summary Income Statement (TL Million)

Current AssetsFixed AssetsTotal Assets

Short-Term LiabilitiesLong-Term LiabilitiesTotal Financial LiabilitiesNet DebtTotal Equity

101.028.7129.2

65.75.621.221.058.0

107.636.5144.1

69.64.327.126.370.2

RevenueGross ProfitGross Profit MarginOperational ProfitOperational Profit MarginNet IncomeNet Income Margin

175.369.639.7%8.85.0%1.30.7%

181.162.734.6%4.72.6%2.81.6%

REVENUE DISTRIBUTION BY CHANNEL

Retail

44.92%

Wholesale

5.44%Other

0.02%

Export

49.61%

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Chairman’s MessageHow was the general view of the retail sector in 2012?

A contracting trend took place in the retail sector throughout the world in 2012. We have seen that the sector profitability was negatively impacted despite the minor growth rates in the sector revenues in Turkey. Transformation of consumer shopping habits into an opportunity-driven shopping understanding had a considerable effect on the declining profitability levels. Therefore, we have seen a decline in profitability per square meter, which is a key performance indicator for the sector.

What do you think about the performance of Desain 2012?

Our revenues reached TL 181.1 million with an increase of 3.3% compared to the previous year in 2012. Our net income was TL 2.8 million. Both the retail segment and export had positive contributions to our revenue growth. We have been entitled as the ‘Turkey Export Champion”, which we achieved during the last two years, also this year based on the figures from the Turkish Leather and Leather Products Exporters’ Union, and continued our leadership position in the sector. We have reached a total area of 16,723 square meters in 88 stores with an increase of 6% by opening 8 Desa stores and 3 mono-brand Samsonite stores throughout the year.

We have made investments, which brings many innovations and developments, in our operations by maintaining our commitment in the importance of development and change at the 40th anniversary of the Company established in 1972. We further have developed our customers’ shopping experience by making changes in decoration of the existing stores as well as closing the stores with a relatively low square meter profitability.

We have made more prominent our difference created in product development and design internationally in the path we set out to make Desa a global brand. Graeme Black, who has worked with global giants such as John Galliano, Giorgio Armani, Salvatore Ferragamo and celebrities such as Victoria Beckham, Elle Macpherson and the Queen of Jordan, designed

the AW 12-13 collection in 2012 in DESA as the Creative Director. In this way, he created collections that would allow DESA to compete with the world’s giants. In addition, Paolo Ferrari, who has worked with the world-renowned brands such as Chloe, Christian Dior, Dolce & Gabbana, and Yossi Cohen, who designed the 365 Fendi Collection, design DESA-branded products that create a difference around the world.

We have made various steps during the year to further improve our human resources and organizational structure.

We have been continuing training of our store staff. In order to further improve the Company’s balance sheet structure, develop the financial reporting standards and conduct budget works at international levels, Mr. Ayhan Diribaş, who has a very extensive experience in the retail sector, joined our company as the CFO. On the other hand, we have been receiving consultancy services in the field of investor relations in order to express the Company’s potential to both individual and institutional investors more effectively, establish a communication at global standards competing with our international peers and ensure reflection of the Company’s inherent value in our market capitalization.

2012 has been a year in which we have invested to prepare the Company for the future in terms of technology. We have taken a further step to increase our operational efficiency by implementing the SAP integration investment, started in 2011, to all departments of the Company.

What is your strategy regarding the JV you established with Samsonite in 2006 after a 24-year distributorship agreement?

The cooperation with Samsonite dates back 30 years. In 2006, we decided to move on by establishing a joint venture, in which we have 40% ownership, with Samsonite which we became a distributor back in 1980, and we have made a 10-year projection for this joint venture. The joint venture, managed by DESA, has 11 stores in Turkey, and Desa has 14 own Samsonite stores. The joint venture registered TL 2.8 million net income and an operational profit margin at 15% levels. We expect the JV to increase its revenues 5% in 2013. We plan to add 8 new stores in 2013 to Samsonite stores which have square meter efficiency levels well above the sector average. We are confident in our joint venture that incorporates a great value.

Should we expect such strategic co-operations in the upcoming period?

The foundations of the cooperation, which we established with Samsonite, the world’s largest travel luggage company, were laid quite a long time ago. We are always open to such co-operations that will add value to Desa brand and a difference to us in becoming a global brand with its vision as well as know-how and experience.

What is your insight regarding the retail sector in 2013? The retail sector has grown impressively in the past six years. Players in the industry have made significant investments in this period. In this process, a market

structure directing consumers to purchasing with promotions and campaigns has emerged in Turkey. This process has triggered a transformation from brand-loyal customer profile into to opportunity-oriented customer profile. As we have mentioned in the beginning, we think that this situation, which adversely impacted the profit margins, could lead to some consolidations in the retail sector in 2013. Therefore, a significant segregation can be expected among companies with or without a strong equity capital. We are now in a period in which those who create a difference with product quality and design will move forward in the industry. We will see in the forthcoming period that brands gaining customer trust with their products versus pricing structure will be successful. We expect the growth momentum taken in the last six years in the sector to continue also in 2013.

What are the goals of Desa for 2013?

We aim to increase revenues of Desa which we have managed to increase continuously for 4 years in a row by 10% in 2013. We will continue to invest to ensure DESA to continue move on as a fashion brand beyond the borders of the country that we have managed to make it an industry leading brand in the past 40 years. To this end, we will focus on the Far East markets with high demands especially for luxury consumer products.

What is your growth model for the coming period? Is there any particular segment and / or region you will focus on?

We will face to China in the Far East market by keeping pace with the general trend of luxury product segment observed throughout the world in 2013 and following periods. It is among our highest priorities to take our place in this market where luxury and quality products draw great attention with two or three stores which we plan to open in Shanghai in the last quarter of 2013. In addition, we will continue to grow in the retail segment with our Desa and Samsonite stores we plan to open in strategic locations. Our primary strategy is to grow the share of Desa-branded products in our total sales which will increase our revenue and profitability. Therefore, increasing the brand strength and continuing initiatives to create value for our shareholders will be our top priority.

To conclude, we are aware of the advantages that our integrated business model, design and product quality with international standards provide us in becoming a global brand. I would like to this an opportunity to thank all our employees, customers, suppliers and, of course, our investors for their contributions and sharing this enthusiasm triggered by this goal with us that we have undertaken.


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Board Members

Melih ÇELET, founded Desa in 1972, graduated from Ankara College in 1968, completed his undergraduate degree at Istanbul University, Faculty of Pharmacy. Melih ÇELET is fluent in English.

Mrs. Burçak ÇELET completed her bachelor’s degree in Industrial Engineering at Yildiz Technical University in 1999. Between 1999 and 2001, she worked as Planning Director at Toys’R’Us. She received her Master of Science degree in Retail Management from University of Surrey in 2002 and she served as Category Director at Joker Maxitoys between 2003 and 2004. Mrs. Burcak ÇELET, who has been serving as CRM and E-Trade Manager as well as a Board Member in the Company since 2004, speaks Italian, English and French.

Mr. Mehmet Kaan KOZ completed his undergraduate education at Bogazici University, Department of Mechanical Engineering in 1999 that he entered in 1995 after graduating from the German High School. He began his professional career in Arçelik A.S. Research and Technology Development Centre as a member of Koç Holding’s Management Trainee Program in 1999 and then he became the Managing Partner of Anova Ltd. Şti. established in 2003. Mr. KOZ was elected as an independent board member for a period of two years with the resolution dated May 31, 2012 taken in the Company’s annual general assembly meeting for the year 2011.

Mr. Burak ÇELET graduated from Bogazici University in 1999, with a Bachelor’s degree in Mechanical Engineering. He received an MBA degree in Finance and Investments from University of Wisconsin, Madison, in 2001. He obtained a Master of Science degree in Leather Technology from Northampton College in 2002. Mr. Burak ÇELET serves as a Board Member of the United Brands Association, Board Member of the Istanbul Leather and Leather Products Exporters’ Association and Member of the Turquality Working Group as well as his General Manager duty at the Company. Mr. Burak ÇELET speaks English and German.

Mr. Osman TAVTAY, who completed his bachelor’s degree in Geophysical Engineering at Istanbul Technical University in 1986, served as a Senior Trader at Koç Menkul Değerler between 1996 and 1998 after serving as a Stock Exchange Agent and Expert at Can Menkul Değerler, Piramit Menkul Kıymetler and Ekinciler Yatırım between 1990 and 1996. Mr. TAVTAY, who served as Domestic Operations Director at ABN Amro Yatırım A.S. between 1998 and 2004, was elected as an independent board member for a period of two years at the Company’s 2011 annual general meeting dated May 31, 2012.

Independent Board Member

1.

2.

3.

4.

5. Independent Board Member

Chairman

Chairman Board Member


Board Member, General Manager


Board Member, General Manager

Board Member

Osman TAVTAY

Mehmet Kaan KOZ

Melih ÇELET

Melih ÇELET Burçak ÇELET

Mehmet Kaan KOZ

Burak ÇELET

Osman TAVTAY

Burak ÇELET

Burçak ÇELET

1

23

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Management Team

Mr. Ayhan DİRİBAŞ completed his undergraduate education on Business Administration at Mugla University in 1994 and completed his master’s degree on Pre-Business Administration at LaSalle University and Marmara University in 2003. Mr. DİRİBAŞ, who began his career at Dogus Holding Finance Department in 1992, served as Internal Auditor at Oger Holding between 1996 and 1998, as Executive Vice President at Reysaş Holding A.S. between 1999 and 2004 and as Retail Group Accounting and Finance Director at Unitim Holding A.S. between 2005 and 2010. Mr. DİRİBAŞ was appointed as Executive Vice President of Financial Affairs in our Company in January, 2013.

Mr. Alpaslan KARAYALÇIN completed his bachelor’s degree at St. Mary’s University of Texas in 1978 and completed his master’s degree on Operational Research at Lancaster University and Bogazici University in 1981. After executing many infrastructure projects for ISKI and Istanbul Municipality at Karayalçın İnş. Taahhüt Ltd., which he owned, between 1982 and 1987, Mr. KARAYALÇIN served as Brand Manager at MUDO A.S. between 1987 and 1989, Vice General Manager at Sanko A.S. between 1989 and 1991, Vice General Manager at Vepa A.S. between 1991 and 2000, Garment and Accessories Sales Manager at Nike BV between 2000 and 2001, Sales and Marketing Director at Esemspor A.S. between 2001 and 2003, Managing Director at Alan Alternatif Sporlar A.S. between 2003 and 2005 and Deputy General Manager and Vice General Manager and Operations Assistant General Manager at Intersport between 2006 and 2007. Mr. KARAYALÇIN has been serving as Executive Vice President of Marketing and Sales in our Company since 2010.

Executive Vice President of Financial Affairs

Executive Vice President of Marketing and Sales

Ayhan DİRİBAŞ

Alpaslan KARAYALÇIN

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History of DESADESA was founded by Mehmet, Melih and Semih Çelet brothers as a collective company.

Managed to rank 937 in the ISO 1000 list thanks to its business concept that always prioritizes quality. Opened its new tannery in Çorlu in the same year in order to further improve its production capability and pushthe cost control to the higher levels.

Düzce facility, enabling to increase the Company’s production capacity by 60%, spanning 20,000 square meters area was established. DESA was chosen as the brand to be supported under the Turquality program created by the Undersecretariat of Treasury and Foreign Trade. DESA International Limited, the retail store company, was founded in the UK in the same year. The first overseas sales point was opened inside Debenhams department store on London’s Oxford Street. DESA once again proved its difference in the industry by introducing Turkey’s first collection of waterproof leather garments.

Put its online sales store into the customer services and took the first steps towards moving its position of being Turkey’s leading fashion retailer to the international markets with two new stores opened in the United Kingdom. Became distinctly Turkey’s Export Champion in its sector based on Leather and Leather Products Exporters’ Association figures. Ranked 210th in the list of in the second 500 largest industrial companies by the Istanbul Chamber of Industry.

Started its operations in 1972 with the production of leather handbags, DESA today has a wide product range from many clothing and accessories, such as garment, handbag, luggage, belt, wallet, to airplane seats. DESA provides significant contribution to the economy of Turkey with the potential for exports and employment it has created.

Becoming a fully integrated leather product manufacturing facility with a total production area of 37,000 square meters consisting 20,000 square meters tannery facility in Çorlu, 17,000 square meters indoor area in Sefaköy and 20,000 square meters total area in Düzce, the Company realized sales of 432,198 pieces handbags, 292,456 pieces accessories, 50,246 pieces garment, 327,292 pieces footwear and 8,294 pieces textile products in 2012. DESA, with a total of 88 stores in Turkey as well as the two stores in London and a franchise store in Jeddah opened in parallel with its target to become a global brand, is one of the leading companies in the leather sector.

Ranked 449th in Fortune 500 list. DESA purchased the factory building in Çorlu with its land and all fixtures.

DESA became a joint-stock company.

Strengthened its belief in quality with ISO 9001:2000 Quality Certificate. Ranked 250 in the ISO 500 list in the same year and took a special pride in ranking the first in its sector.

Established a leather processing facility in Çorlu in line with its goal of building an integrated business model.

First store was opened on Istanbul’s Bağdat Caddesi.

Decided to move on with a global vision and opened the DESA UK office in London.

After 26-year distributorship of Samsonite, established a joint venture on a share basis of 40% Desa and 60%. Had a cooperation with Genex, a UK-based brand consulting company,in order to receive consulting services on branding in line with its goal of becoming a global brand. For this purpose, significant changes were made in logo, corporate identity and store concepts.

Took a special pride in being entitled as the export champion of the sector for the second time. DESA store in Covent Garden, London was selected as one of the world’s top 60 stores in International Store Design Contest in which brands around the world compete. At the end of the contest, DESA was also covered in “Retail Spaces/ Small Stores” book.

The first international franchise store was opened in Jeddah. Ranked 355th in the list of 500 largest industrial companies by the Istanbul Chamber of Industry and ranked 471st in Fortune 500 list. T

OD

AYTaking into account the values that

participation into the capital markets would bring the Company in terms of transparency, reliability and accountability, Desa was listed on the Istanbul Stock Exchange. The Company received investment incentive certificate for its investment project in Düzce Organized Industrial Zone and made a total ofTL 3.2 million investments.

Became distributor of the globally-renown travel products brand “Samsonite” in Turkey.

Opened the manufacturing facility with 17,000 square meters indoor area in Sefaköy.

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Vision & Mission

Value Chain & Objectives

Targets

To become a fashion brand that makes its customers proud and excited with its products produced with its deep expertise in the design and leather which is fed

from Istanbul but a world citizen.

To become a fashion brand that takes its strength from the investment in design and expertise on leather, is expert in the leather fashion sector in Turkey and the world with its products‘ quality, style and the best values; that provides its customers with a pleasant shopping environment, maximizes its shareholders’ profitability, respectful to the society, environment and employees and remain as the fashion brand leader in the consumers’ mind.

Customer SatisfactionDESA operates both in the production and retail sectors by its business model. DESA aims to provide unconditional pre-sale

and post-sale customer satisfaction, by offering high quality products based on a principle of perfectionism.

QualityOur product quality, hand-craftsmanship tradition, modern and functional designs and brand are our most important assets. We are not only offering our customers clothing products and leather accessories but also a distinct style, an understanding

and a way of life without sacrificing from quality.

Profitability Profitability is the main source that DESA utilizes to finance its new investments and research and development activities.

For this reason, the most important criteria that we consider when evaluating the performance of the Company is profitability. Therefore, our goal is to grow profitably in the long term and become an undisputed leader

in every field we operate in.

StoresWe enhance shopping

experience to the highest level with our modern and alluring stores.

Global PresenceWe transcend national

boundaries with international stores.

FlexibleProduction CapacityWe have a production capacity to meet the

increasing demand and future growth.

PR ActivitiesWe reinforce our brand image and

awareness through strong and innovative

communication.

IntegratedBusiness Model

We save on the costs via vertical integration of

manufacturing.

ProfoundExperience

We have a knowledge-driven and proficient management team striving for strategic

opportunities.

TechnologyWe have an advanced

technological infrastructure

designed to support our growth.

Flexible Supply ChainWe have a supply chain

that adapts to rapid changes quickly andin a flexible manner.

Human ResourcesWe meet the expert

hand craftsmanship with contemporary design.

DesignThe unique skill of our designers embodying artisan craftsmanship.

Our BrandWe are able to exhibit our brand value with

our Vertically Integrated Manufacturing Model.

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Business Model Distinguishing DESAVertically Integrated Business Model

The element that distinguishes DESA from others is that the Company controls all phases of the services process offered to customers by possessing its own tanneries, leather garments, bags and accessories manufacturing

capabilities and its retail sale points.

DESA, which is a leader in the fields of production, export and retail in the sector, makes significant investments in the

areas of design, R & D, human resources and training in order to increase the customer satisfaction with its trendy and high

quality products as well as perfect service concept.

Raw Material Production

Leather production in the Çorlu tannery

20,000 m² indoor production area

Weekly capacity

28,850 kg of Cattle raw leather processing

170,200 kg of Small cattle

raw leather processing

Suede, Napa, Fur, Calf leather processing

Finsihed Goods Production

Leather garments,

bags and accessories production

International design team

Istanbul facility

17,000 m²

indoor production area

Weekly capacity

2,000 pieces leather garments

1,000 pieces textiles

6,000 pieces bags

Düzce facility

10,000 m² indoor production area

Weekly capacity

10,000 pieces bags

Retail sales points

73 Desa mono brand stores

14 Desa Samsonite stores

5 Desa Go stores

1 Online Store Desa.com.tr

2 in UK

1 in Jeddah

16,723 m²

11 Samsonite Stores under 40% Desa

and 60% Samsonite partnership (JV)

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Highlights of 2012 Blending Design with a Spectacular Hand-CraftsmanshipDESA produces its own leathers in its own tannery and processing the raw materials in accordance with traditional hand craftsmanship techniques as well as modern design concept. Therefore, DESA products reflect the contemporary design, combining the best of traditional techniques with modern style.

Frequently cited in the retail industry for its innovative nature and for the steps taken to to rejuvenate itself, DESA is pursuing its aim to become a global brand by putting high priority on design since 2008.

Having an astonishing transformation from its logo to store concept and to the collection of ready-made garments prepared with the 2008 Spring / Summer season with the London design office established under the leadership of Italian Fred Tutino and his creative team, DESA has taken its rightful place as a go-to brand for the fashion conscious beyond just a brand in the leather sector.

In 2009, designs that combine stunning fabrics and leather were added to this new textile collection.

The next year, in 2010, DESA took its designs a step further through a partnership with the famous Italian designer Davide Gatto, signing off a

collection that strengthened the brand’s fashion image. The timeless style of the minimalist bags and shoes, with luxury in all the details, in the 2010 collection attracted great attention.In 2011, DESA began working on plans to feature the tradition of craftsmanship - which distinguishes the brand from others in the industry - by combining the styles and design languages of several different designers within its expanded design team, bringing together a wide range of products representing many different styles and the various tastes of DESA’s consumers.

In 2012, DESA took serious steps in order to prove its brand in the international platform. One of them is that Desa had Graeme Black, who worked with global giants such as John Galliano, Giorgio Armani, Salvatore Ferragamo and appointed as Creative Director to Desa, designed the AW 12-13 collection.

Putting his differences in this regard, the design director prepared a collection with a line that would allow Desa to compete with global giants in the international platform.

Desa’s Must: Innovation Bringing a new dimension to the leather sector with the waterproof leather technology launched in 2006 and

waterproof leather products produced, DESA’s investments in this direction are ongoing. Products developed with the R & D efforts carried out in order to spread the sense of elegance and comfort of the leather to every phase of life and to each season and performed from tanning processes of leather to design are offered to consumers by adorning with a unique handmade art of Desa. Transforming leathers, tanned in its own tanneries, into waterproof leather products that can be worn not only in winter but also in summer and that are very light and facilitate to wear in winter, DESA uses the advantage of controlling all the phases of production.

Desa once again exhibited its difference with its double-sided designs in 2012.

One of them is the leather jacket that can be worn also in the rain. Jackets that provide a functional usage or can be worn with alternative colour options when a different combination is desired with the feature of being produced of a fabric which can be worn turning inside out attracted a great attention from leather lovers. In addition, Desa offers the customers the option to complete their clothes with alternatives in different color tones viadouble-sided bags.

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Looking at the world from DESA...When assuming the responsibility of being a global brand,

there are priorities we emphasize on as the Company.

Unconditional customer satisfaction,

Development and training of employees,

Conclusion of our efforts with success.

We take our strength, which we have turned into a worldwide

success, from the principles we have determined in accordance

with our priorities and committed strictly. Unconditional customer

satisfaction, flexibility, and quick response to customers’ queries

are the most important criteria for us at the point we have

reached never forgetting the fact that our main support and

resource is people, and without compromising on quality. The

40-year DESA miracle is the product of our high performance and

quality understanding we have shown at every point.

While the Company aims at having competent human resources

considering the future from today, all the employees striving for

maintaining the positive image of the Company and our products

home and abroad.

Creating the brand of personalized products working in the

light of these principles and proving its quality and leadership

home and abroad, the Company provides its employees with the

privilege of being part of a global brand.

We provide our employees with opportunities of specializing and having a career in the sector as well as rewarding their efforts.

DESA, which ensures its success with the adherence to the principles, plans its future with the awareness that the most important basis is the human resources. With this approach, we summarize our Company’s human resource development philosophy as follows: “We will train our human resources in houseat every level”

In line with this philosophy, DESA carries out the training and development activities in house in order to train and develop its employees.

The Desa Training System is based on the training and development of its employees by taking into account the sector specific conditions.

The amount of severance pay entitled by the employees as of 31.12.2012 is TL 1,838,958. The provision set aside in 2012 is TL 373,259.

Human Resources The total number of employees of the Company, which has a labour-intensive business model in the production field,is 1,954 as of the end of 2012.

1,1691,323

Employees

MALE

FEMALE

TOTAL

785697

1,9542,020

1,3081,450

1,9542,020

646570

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Collar Distribution

BLUE COLLAR

WHITE COLLAR


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Investor Relations Since the initial public offering in May 2004, the Investor Relations Department aims to establish close relationships with our stakeholders at an equal distance and provide them with maximum value in parallel to the principles of honesty, accountability and reliability adopted by the Company’s corporate governance standards. A total of 12 announcements were made in 2012 in accordance with the Capital Markets Legislations, and queries delivered by analysts and investors to the Investor Relations Department via telephone and electronic mail were replied.

Share Performance and Market Value

DESA shares have been publicly traded on the Istanbul Stock Exchange (ISE) since May 6, 2004 with “DESA” code.

The Company was registered in the registered capital system in 2007. The Company’s registered capital ceiling is TRY

150,000,000. Issued capital of the Company is TRY 49,221,970 and divided into 4,922,196,986 shares each with a nominal value of 1 Kr.

DESA’s market capitalization as of December 31, 2012 was TRY 40,854,235. The average trading volume of DESA

shares in 2012 was TRY 0.6 million.

DESA 2012 Relative Share Performance

0.85

30.12.2011

27.01.2012

24.02.2012

23.03.2012

20.04.2012

22.05.2012

19.06.2012

17.07.2012

14.08.2012

14.09.2012

12.10.2012

14.11.2012

12.12.2012

0.95

1.05

1.15

1.25

1.35

1.45

1.55

DESA ISE

Share Data

* As of 31.12.2012

Shareholder

Çelet Holding Anonim Şirketi

Melih Çelet

Other

Free Float

Total

35% Free Float

10% Melih Çelet

1% Other

54% Çelet Holding

Nominal share value (TRY)

26,717,682

4,922,197

393,780

17,188,315

49,221,974

Share (%)

54.3%

10.0%

0.8%

34.9%

100.0%

ISE Code:Reuters Code:

Bloomberg Code:Date of Public Offering:Market Capitalization*:

DESADESA.ISDESA.TI06.05.2004TL 40.9 million

%


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Based on the resolution numbered 10/2013, dated 18.03.2013 of Desa Deri San.ve Tic. A.S., the followings were decided to be submitted to the General Assembly unanimously;

1. Allocation of a net distributable profit amounting to TL 2,051,941 from the Company’s Profit for the Period of 2012 which is TL 3,563,286.00 according to the CMB Profit Distribution Statement prepared in accordance with the communiqués of the Capital Markets Board after deducting payable taxes amounting to TL 734,331, Primary Legal Reserves amounting to TL 113,838 and the distributable profit amounting to TL 663,176 of the consolidated subsidiaries without distribution decision respectively,

2. It is the net distributable period profit with donations added for which the First Dividend amounting to TL 2,184,671 found adding the donations of TL 132,730 made during the year to the Net Distributable profit, to be calculated. Allocation of Secondary Legal Reserve amounting to TL 53,890,

3. According to the Dividend Distribution decisions of the Capital Markets Board, distribution of a total dividend amounting to TL 3,000,000.00 which TL 2,184,671 will be covered from the profit of the year 2012 and the remaining amount from the profit of the year 2011.

- Payment of 0.06095 profit gross = net cash dividend for one share in proportion to 6.09% and with a nominal value of 1 Kr to full-resident corporations and limited taxpayer corporate shareholders obtained dividend through a place of business or a permanent representative office in Turkey,

On this occasion, the Resolution No. 2013/10, dated 18.03.2013, of the Board of Directors and the Statement of Profit Distribution is submitted for your review regarding the acceptance of the Profit Distribution proposal to be submitted to the General Assembly with the approval of the Report of the Board of Directors.

12.03.2013

Dividend Policy

Based on the resolution numbered 09/2013, dated 12.03.2013 of the Company,

The Company has adopted a dividend distribution to the shareholders taking into consideration utilizing internal and external investment opportunities as well as the shareholders’ and the Company’s interests in order to consider additional investments to be made abroad and prevent possible effects of a global economic crisis in line with the targets of DESA to grow, develop and become a global company with a strong financial structure in accordance with the Corporate Governance Principles of the Capital Markets Board.

The profit distribution policy is drawn in Articles 29, 30, 31, titled “Profit Distribution”, “Profit Distribution Date” and “Reserve”, of the Articles of Association of the Company in accordance with the Turkish Commercial Code and the relevant provisions of the Capital Markets Board. Privilege is not in question for dividend distribution to shareholders with Group A and B shares representing the capital.

The Board of Directors shall submit a profit distribution proposal to the General Assembly for the payment of past years’ profits and annual dividend by taking into account the Company’s performance in that year, the economic conditions, investments and the Company’s cash flow. Pursuant to Article 29 of the Articles of Association; from the

Net Distributable Period Profit after deducting payable taxes and past years’ losses from the net profit calculated,

1. A legal reserve in proportion to 5% is allocated.

2. First dividend in the rate and amount determined by the Capital Markets Board from the remaining amount is allocated to be distributed to the shareholders.

3. Without prejudice to the first dividend, a dividend up to 10% of the gross profit of the Company can be allocated to the Board Members and/or company executives and personnel.

4. The remaining profit can be distributed as a second dividend in part or whole with decision of the General Assembly or can be kept as any reserve.

5. One-tenth of the amount, found after deducting dividend amounting to 5% of the paid-up capital from the portion decided to be distributed to shareholders and those participating in the profit, is allocated as the legal reserve in accordance with Article 519 of the Turkish Commercial Code.

6. Unless reserves to be allocated according to the provisions of Law and the first dividend specified for shareholders in the Articles of Association are allocated, another reserve cannot be allocated or profit transfer to the following year cannot be made and unless the first dividend is not distributed in cash and/or in the form of share certificate decision for distribution of share from profit to members of the Board of Directors, employees, foundations similar persons and/or institutions established with various purposes cannot be taken. 7. All of the shares are distributed equally as of the date of dividend distribution regardless of issuance and acquisition dates of the shares.

In the event that distributable profit is available in accordance with relevant communiqués, the Profit Distribution resolution to be taken by the Board of Directors within the frame of the provisions of Capital Market Legislation and Turkish Commercial Code shall be submitted to the approval of General Assembly; and the distribution shall be completed within legal terms.

Share Group InformationCash Dividend Proposed to be Paid for

Share with a Nominal Value ofTRY 1 - Gross (TRY)

Cash Dividend Proposed to be Paid for Share with a Nominal Value of

1 TRY - Net (TRY)

Group B, DESA (Former), TREDESA00015 0,0609500 0,0609500

Group A, Not Traded (preferred),TREDESA00023

0,0609500 0,0609500

Share Group InformationDividend Proposed to be Distributed in

Shares (TRY)Dividend Proposed to be Distributed in

Shares (TRY)

Group B, DESA (Former), TREDESA00015 0,000 0,00000

Group A, Not Traded (preferred),TREDESA00023

0,000 0,00000

18.03.2013

Other Activities


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The date of distribution of the dividend to the shareholders shall be determined by the General Assembly upon proposal of the Board of Directors. Dividend payments shall be carried out within the legal terms. The relevant legislations, communiqués and regulations of the CMB are observed in other methods of distribution.Dividend to be paid depending on the decision to be taken at the General Assembly can be determined in cash or all free share and/or shares partly cash and partly free.A policy consistent both with interests of the shareholders and the Company is adopted for implementing the profit distribution policy.

If no profit distribution is made, the Board of Directors shall explain the shareholders at the General Assembly why profit is not distributed and how undistributed profit will be used.

11.03.2013

According to data from the Istanbul Textile and Apparel Exporters’ Association, the Company “Desa Deri San. ve Tic. A.Ş.” has been the leader in the export sector in 2012 with the export of TL 49,675,198.32 in the year 2012. We, as Desa, have proven our aim to grow in the long term and claim to be a leader in all fields we operate by becoming the industry’s export leader in the years 2010, 2011 and 2012.

05.03.2013Invitation for General Assembly Meeting

Date of Resolution 05.03.2013

Type of General Assembly Ordinary

Start Date of the Reporting Period 01.01.2012

End Date of the Reporting Period 31.12.2012

Date and Time 05.04.2013 16:30

Address Halkalı Cad. No:208 Sefaköy/K.Çekmece/İstanbul

Agenda

DESA DERİ SANAYİ VE TİCARET ANONİM ŞİRKETİ1. Election of the Presidency Board and authorizing Presidency Board to sign the meet-ing minutes,

2. Read and discussion of Annual Report of the Board of Directors for the 2012 account-ing period, summary of the report of the independent external audit firm and the report of the Company’s auditor,

3. Read, discussion and approval of the balance sheet and the income statement for the 2012 accounting period,

4. Releasing the Board Members and auditors from activities, transactions and accounts for the 2012 accounting period,

5. Accepting, or accepting with amendment or refusing the proposal of the Board of Directors for profit distribution,

Agenda

6. Submitting the amendments in Articles 18, 20, 21, 26, 29, 31, 32 of the Articles of Association as annexed, permitted with the letters numbered 1128, dated 08.02.2013 of the Capital Markets Board of Republic of Turkey Prime Ministry and the letters numbered 1373, dated 01.03.2013 of the General Directorate of Internal Trade of the Ministry of Customs and Commerce, to the General Assembly for review and approval,

7. Informing the General Assembly about the Remuneration Policy of the Board Members and Executives,

8. Approval of the Independent Auditing Firm selected by the Board of Directors pursuant to the Turkish Commercial Code and the Capital Market Board regulations,

9. Accepting, or accepting with amendment or refusing the proposal of the Board of Directors on the ‘’General Assembly Internal Regulation’’ containing rules for working principles and procedures of the General Assembly,

10. Submission of the profit distribution policy for 2013 and following years to the shareholders for review,

11. Submitting information to the shareholders on transactions carried out with the related parties and the valuation liability in accordance with Articles 4 and 5 of the Communiqué Serial IV, No. 41 of the Capital Markets Board,

12. Submitting information to the shareholders on the guarantees, pledges, mortgages and sureties given to the related parties pursuant to the Principle Resolution numbered 28/780, dated 09/09/2009 of the Capital Markets Board,

13. Submitting information to the shareholders on grants and donations during the year,14. Submitting the issue for the majority shareholders, board members, senior managers and their spouses and blood relatives or relatives up to second degree to make transactions that may cause conflict of interest and compete with the Company or affiliates personally or on others behalf and become partners to such companies for the approval of the General Assembly in accordance with Article 1.3.7. of the Communiqué on the Determination and Implementation of the Corporate Governance Principles published by the Capital Markets Board,15. Wishes and closing.

Is there any Amendment to the Articles of Association on the Trade Name among the Agenda Items?

No

Is there any Amendment to the Articles of Association on the Field of Activity among the Agenda Items?

No

Is there any Amendment to the Articles of Association on the Registered Office among the Agenda Items?

No


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Amendment of Articles 18, 20, 21, 26, 29, 31 and 32 of the Company’s Articles of Association as shown in the attached amendment draft below, applying first to the Capital Markets Board of Turkey and then the Ministry of Customs and Trade to obtain permission for this purpose, call the General Assembly for meeting upon obtaining permissions from the Capital Markets Board and the Ministry of Customs and Trade and completion of the legal procedures after approval of the General Assembly were decided unanimously at the meeting of the Board of Directors dated 01.22.2013 to be put to vote at the first ordinary General Assembly meeting pursuant to Article 5 and provisional Article 1 of the Regulation on the Electronic General Assembly Meetings of Joint Stock Companies drawn in order to comply with the Turkish Commercial Code (“TCC”) No. 6102 and Article 1527 of the TCC No. 6102.

22.01.2013 – Decision of the Board of Directors on the Amendment to the Articles of Association

FORMER VERSION NEW VERSION

Auditors and Term of Office

Article 18

The General Assembly shall elect two (2) auditors with a higher education degree and knowledge and experience in Economics, Law, Finance, Business Administration and Engineering to serve a year either among the shareholders or outsider candidates to be nominated. Auditors will be selected from among the candidates nominated by the Group (A) shareholders.

Auditors are required to perform the tasks set forth in Articles 353 and 357 of the Turkish Commercial Code.

Auditors will assess the Company’s activities in accordance with the Turkish Commercial Code and other legislative provisions and submit their reports to the General Assembly along with their proposals. Auditors shall be jointly and severally liable for failing the duties assigned to them in accordance with the law and the Articles of Association.

Auditors’ report must be prepared in accordance with the form and principles to be determined by the Capital Markets Board.

The provision of this Article on electing the first Auditors among candidates to be nominated by the Group (A) shareholders and the provision of this paragraph can only be amended by a decision of the General Assembly to be taken unanimously with the participation of all the shareholders.. These quorums are required also in the first and subsequent meetings of the General Assembly.

Auditors and Term of Office

Article 18

The relevant provisions of the Turkish Commercial Code and the Capital Markets Legislation shall apply to auditing the Company and other issues stipulated in the legislation and the auditors.

30.01.2013

One (1) new store is opened with the title of “Desa Deri San. Ve Tic. A.Ş. Cevahir Shopping Centre Store - Branch” in the address Cevahir Alışveriş Merkezi Meşrutiyet Mah. Büyükdere Cad. No:22/250A Şişli / Istanbul.

One (1) new store is opened with the title of “Desa Deri San. Ve Tic. A.Ş. Konya Kentpark Shopping Centre Store - Branch” in the address Konya Kentpark Plaza Alışveriş Merkezi Bedir Mah. Ataseven Cad. No:2 Mağaza No:ZK-24 Selçuklu/Konya.

One (1) new store is opened with the title of “Desa Deri San. Ve Tic. A.Ş. Konya Kentpark Shopping Centre Samsonite Store - Branch” in the address Konya Kentpark Plaza Alışveriş Merkezi Bedir Mah. Ataseven Cad. No:2 Mağaza No:ZK-19 Selçuklu/Konya.

One (1) store with the title of “Desa Deri San. Ve Tic. A.Ş. Istanbul Sabiha Gokcen Airport Store - Branch” in the address Istanbul Sabiha Gokcen Airport, the New International Terminal Departure Floor Pendik / Istanbul with the store code: DL1108 was closed.

One (1) store with the title of “Desa Deri San. Ve Tic. A.Ş. Carrefour Shopping Center Store - Branch” in the address İnkilap Mah. Küçüksu Cad. No:68 Mağaza No:7 Umraniye Carrefour Shopping Center Umraniye / Istanbul was closed.


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General Assembly

Article 20

The General Assembly shall hold ordinary and extraordinary meetings in accordance with the provisions of the Turkish Commercial Code and the Capital Market Law.

a) Form of Invitation:

The provisions on announcements of the Capital Market Legislation and the provisions of Articles 355, 365, 366 and 368 of the Turkish Commercial Code shall apply to invitations to these meetings.

b) Meeting Period:

Ordinary General Assembly shall meet within three months after accounting period of the Company and at least once a year, and Extraordinary General Assembly shall meet if and when required by the Company’s businesses and Law.

c) Place of Meeting:

The General Assembly meeting is hold at the Company’s headquarters. However, if necessary, the General Assembly may convene at another suitable place in the city where the Company’s headquarters is located in with the decision of the Board of Directors.

General Assembly

Article 20

The General Assembly shall hold ordinary and extraordinary meetings in accordance with the provisions of the Turkish Commercial Code and the Capital Market Law.

a) Form of Invitation:

The provisions on announcements of the Capital Market Legislation and the relevant provisions and regulations of the Turkish Commercial Code governing this issue shall apply to calls for these meetings.

b) Meeting Period:

Ordinary General Assembly shall meet within three months after accounting period of the Company and at least once a year, and Extraordinary General Assembly shall meet if and when required by the Company’s businesses and Law.

c) Place of Meeting:

The General Assembly meeting is hold at the Company’s headquarters. However, if necessary, the General Assembly may convene at another suitable place in the city where the Company’s headquarters is located in with the decision of the Board of Directors.

Participation in the general assembly meetings in an electronic environment; The Shareholders entitled to attend the general assembly meetings of the Company can attend these meetings in an electronic environment in accordance with Article 1527 of the Turkish Commercial Code. The Company can purchase service from the systems established for this purpose as well as establishing an electronic general assembly system that will allow the shareholders to participate in the general assembly meeting in an electronic environment, state their opinions, make proposals and vote in accordance with the provisions of the regulation on the Electronic General Assembly Meetings of Joint Stock Companies. The shareholders and their representatives are enabled to use their rights specified in the said Regulation over the system established in accordance with this provision of the Articles of Association at all general assembly meetings.


General Assembly

d) Voting and Proxy Appointment:

Group (A) shareholders have 50 (fifty) voting rights for one (1) share and non-Group (A) shareholders have 1 (one) voting right for 1 (one) share at the Ordinary and Extraordinary General Assembly Meetings.

Shareholders may be represented by other shareholders or a proxy to be appointed outside within the framework of the regulations of the Capital Markets Board at the Ordinary and Extraordinary General Assembly Meetings. Power of attorneys for such representation must be in writing. The provisions of the Capital Markets Legislation shall apply to the form of voting by proxy and the power of attorney.

The provision of this Article on Group (A) shareholders have 50 (fifty) voting rights for one (1) share and non-Group (A) shareholders have 1 (one) voting right for 1 (one) share at the General Assembly Meetings and the provisions of this paragraph can only be amended by a decision of the General Assembly to be taken unanimously with the participation of all the shareholders. These quorums are required also in the first and subsequent meetings of the General Assembly.

e) Quorums for Meeting and Decision:

The issues written in Article 369 of the Turkish Commercial Code are discussed and necessary decisions are taken at the General Assembly Meetings of the Company. The provisions of the Capital Market Law on quorum for the General Assembly meetings shall prevail. The provisions of the Turkish Commercial Code shall apply to the matters that are not regulated by the provisions of the Capital Markets Law.

General Assembly

d) Voting and Proxy Appointment:

Group (A) shareholders have 50 (fifty) voting rights for one (1) share and non-Group (A) shareholders have 1 (one) voting right for 1 (one) share at the Ordinary and Extraordinary General Assembly Meetings.

Shareholders may be represented by other shareholders or a proxy to be appointed outside within the framework of the regulations of the Capital Markets Board at the Ordinary and Extraordinary General Assembly Meetings. Power of attorneys for such representation must be in writing. The provisions of the Capital Markets Legislation shall apply to the form of voting by proxy and the power of attorney.

The provision of this Article on Group (A) shareholders have 50 (fifty) voting rights for one (1) share and non-Group (A) shareholders have 1 (one) voting right for 1 (one) share at the General Assembly Meetings and the provisions of this paragraph can only be amended by a decision of the General Assembly to be taken unanimously with the participation of all the shareholders.. These quorums are required also in the first and subsequent meetings of the General Assembly.

e) Quorums for Meeting and Decision:

The issues written in Article 413 of the Turkish Commercial Code are discussed and necessary decisions are taken at the General Assembly Meetings of the Company. The provisions of the Capital Market Law on quorum for the General Assembly meetings shall prevail. The provisions of the Turkish Commercial Code shall apply to the mattersthat are not regulated by the provisions of the Capital Markets Law.


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General Assembly

Commissioner:

Article 21

A commissioner from the Ministry of Customs and Commerce must be present at the Ordinary and Extraordinary General Assembly Meetings. All decisions to be taken at meetings of the General Assembly in the absence of a commissioner and meeting minutes without signature of the commissioner shall not be valid.

Documents to be sent to the Ministry of Industry and Trade

Article 26

Two copies of the Turkish Trade Registry Gazette in which the Company’s Articles of Association was published shall be sent to the Ministry of Industry and Trade. One copy shall be sent to the Capital Markets Board.

Three copies of the Board of Directors and Audit reports and annual Balance Sheet and Profit and Loss Statements, the General Assembly minutes, attendance sheet shall be sent to the Ministry of Industry and Trade no later than one month of the date of the meeting, or these copies shall be presented to the Commissioner of the Ministry of Industry and Trade present at the meeting.

General Assembly

Representative:

Madde 21

A representative from the Ministry of Customs and Commerce must be present at the Ordinary and Extraordinary General Assembly Meetings. All decisions to be taken at meetings of the General Assembly in the absence of a representative and meeting minutes without signature of the representative shall not be valid.

Documents to be sent to the Ministry of Customs and Trade

Article 26

Two copies of the Turkish Trade Registry Gazette in which the Company’s Articles of Association was published shall be sent to the Ministry of Customs and Trade. One copy shall be sent to the Capital Markets Board.

Three copies of the Board of Directors and Auditor reports and annual Balance Sheet and Profit and Loss Statements, the General Assembly minutes, attendance sheet shall be sent to the Ministry of Customs and Trade no later than one month of the date of the meeting, or these copies shall be presented to the Commissioner of the Ministry of Customs and Trade present at the meeting.


Distribution of Profit:

Article 29

From the amount remaining after deducting payable taxes from the net profit to be determined in accordance with the above Article;

a) A legal reserve in proportion to 5% is allocated.

b) First dividend in the rate and amount determined by the Capital Markets Board from the remaining amount is allocated to be distributed to the shareholders.

c) Without prejudice to the first dividend, a dividend up to 10% of the gross profit of the Company can be allocated to the Board Members and/or company executives and personnel.

d) The remaining profit can be distributed as a second dividend in part or whole with decision of the General Assembly or can be kept as any reserve.

e) One-tenth of the amount, found after deducting dividend amounting to 5% of the paid-up capital from the portion decided to be distributed to shareholders and others participating in the profit, is allocated as the legal reserve in accordance with the subparagraph 3 of the paragraph 2 of Article 466 of the Turkish Commercial Code.

f) Unless reserves to be allocated according to the provisions of Law and the first dividend specified for shareholders in the Articles of Association are allocated, another reserve cannot be allocated or profit transfer to the following year cannot be made and unless the first dividend is not distributed in cash and/or in the form of share certificate decision for distribution of share from profit to members of the Board of Directors, employees, foundations similar persons and/or institutions established with various purposes cannot be taken.

g) All of the shares are distributed equally as of the date of dividend distribution regardless of issuance and acquisition dates of the shares. Dates, form and method for paying the annual profit to the shareholders shall be determined by the General Assembly. The General Assembly shall determine the dates, ratio and form of distributing the profit according to the provisions of the Capital Market Law.

Distribution of Profit:

Article 29

From the amount remaining after deducting payable taxes from the net profit to be determined in accordance with the above Article;

a) A legal reserve in proportion to 5% is allocated.

b) First dividend in the rate and amount determined by the Capital Markets Board from the remaining amount is allocated to be distributed to the shareholders.

c) Without prejudice to the first dividend, a dividend up to 10% of the gross profit of the Company can be allocated to the Board Members and/or company executives and personnel.

d) The remaining profit can be distributed as a second dividend in part or whole with decision of the General Assembly or can be kept as any reserve.

e) One-tenth of the amount, found after deducting dividend amounting to 5% of the paid-up capital from the portion decided to be distributed to shareholders and others participating in the profit, is allocated as the legal reserve in accordance with Article 519 of the Turkish Commercial Code.

f) Unless reserves to be allocated according to the provisions of Law and the first dividend specified for shareholders in the Articles of Association are allocated, another reserve cannot be allocated or profit transfer to the following year cannot be made and unless the first dividend is not distributed in cash and/or in the form of share certificate decision for distribution of share from profit to members of the Board of Directors, employees, foundations similar persons and/or institutions established with various purposes cannot be taken.

g) All of the shares are distributed equally as of the date of dividend distribution regardless of issuance and acquisition dates of the shares. Dates, form and method for paying the annual profit to the shareholders shall be determined by the General Assembly. The General Assembly shall determine the dates, ratio and form of distributing the profit according to the provisions of the Capital Market Law.


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Reserve:

Article 31

The legal reserve allocated by the Company is allocated until it reaches one-fifth of the Company’s capital. (The provisions of Article 467 of the Turkish Commercial Code are reserved.)

In the event that the amount reaching one-fifth of the capital decreases, the legal reserve is continued to be reserved again until one-fifth level is reached.

The legal reserve can be used especially to recover losses, maintain the business in difficult situations, prevent unemployment or mitigate the consequences and take useful measures as long as they do not exceed one half of the main capital.

Reserve for Assistance:

Article 32

The General Assembly may decide to allocate a reserve for assistance from the net profit for establishment and support of aid funds and other aid organizations, foundations for its officers, servants and workers in accordance with the provisions of the Capital Markets Law without prejudice to the first dividend in Article 34. The provision of Article 466 of the Turkish Commercial Code shall apply in this regard.

Establishment, operation, management of the aid organization and determination of beneficiaries from the foundation shall be determined by the General Assembly.

Reserve:

Article 31

The legal reserve allocated by the Company is allocated until it reaches one-fifth of the Company’s capital. (The provisions of Article 521 of the Turkish Commercial Code are reserved.)

In the event that the amount reaching one-fifth of the capital decreases, the legal reserve is continued to be reserved again until one-fifth level is reached.

The legal reserve can be used especially to recover losses, maintain the business in difficult situations, prevent unemployment or mitigate the consequences and take useful measures as long as they do not exceed one half of the main capital.

Reserve for Assistance:

Article 32

The General Assembly may decide to allocate a reserve for assistance from the net profit for establishment and support of aid funds and other aid organizations, foundations for its officers, servants and workers in accordance with the provisions of the Capital Markets Law without prejudice to the first dividend in Article 34. The provision of Article 519 of the Turkish Commercial Code shall apply.

Establishment, operation, management of the aid organization and determination of beneficiaries from the foundation shall be determined by the General Assembly.

CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORTSTATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES Desa Deri Sanayi ve Ticaret A.S. has identified the principles in the Corporate Principles published by the Capital Markets Board as a target for itself.

The ability to operate at international standards is also of utmost importance besides creating value to the shareholders with a stable and profitable growth performance in order to effectively take a place in the financial markets developing with the depth emerging as a result of globalization trends in the financial markets.

A good corporate governance has a significant contribution to the sustainability of the Company, increase its reliability and prestige in the finance and capital markets.

DESA communicates the necessary information to all its investors and analysts simultaneously in a timely, secure, stable and proper manner under the legal and regulatory rules. Investors and other shareholders can access DESA-related historical and current information in real-time and full presented on our website in the Investor Relations section.

The Company’s management aims at complying with the obligations arising out of the Communiqué Series IV, No. 56, amended by the Communiqué Series IV, No. 57, on Determination and Implementation of the Corporate Governance Principles published by the Capital Markets Board Communiqué as a whole, and has taken the necessary actions for this purpose. The principles mandated for our company within the scope of the communiqué on the determination and implementation of the Principles of Corporate Governance are complied with.

Part 1 - SHAREHOLDERS

1. INVESTOR RELATIONS DEPARTMENT

1.1. Investor Relations Department and Duties

The legislation and the Articles of Association are complied for the exercise of shareholders’ rights and practices that will ensure the exercise of these rights are available. Desa Deri San. ve Tic. A.S. established an “Investor Relations Department” to manage relations with the investors from the date of the public offering in 2004. All relationships between DESA and the shareholders are carried out under the responsibility of the “Investor Relations Department” as a result of the joint efforts conducted with the relevant departments in accordance with the following principles.

The Investor Relations Department is responsible for informing on the Company’s activities and financial condition, excluding confidential information and trade secrets of the shareholders and potential investors, on a regular basis so as to not to cause an information inequality and managing the communication between the shareholders and the Company in coordination with the other departments.

In this context, the Investor Relations Department is responsible for:

Promoting the Company before existing and potential investment and brokerage institutions, meeting the queries by research analysts working in these institutions,

Answering questions and requests from the shareholders,

Ensuring investor-related databases and records to be kept up to date and orderly,

Providing a two-way information flow acting as a bridge between the shareholders and the Company’s senior management and the Board of Directors,

Reporting to the relevant departments within the Company and senior management about developments in the capital markets and stock performance,

Ensuring the shareholders to access the most accurate, quick and complete information by updating the web-page, annual report, investor presentations, investor press releases, corporate videos and so on communication means on a regular basis which the shareholders can receive information about DESA,


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In addition, the Department helps executing the General Assembly Meetings conducted within the Company in accordance with the legislation in force and the Articles of Association and other internal regulations. Minutes of the General Assembly meetings ensures keeping voting results recorded and the through the minutes of the General Assembly meeting and relevant reports are submitted to the shareholders by the Investor Relations Department.

The Investor Relations Department performs all kinds of public disclosures, such as disclosing financial reports prepared by the Finance Department and material events as required by legislation.

1.2. Information on the Investor Relations Department Activities in 2012

Questions that were addressed to the investor relations department by phone or e-mail were answered. The Company’s web-page, investor presentations were regularly updated in order to ensure investors to monitor up-to-date information. Disclosures which are important to investors were published on the Company’s web-page after announced in the Public Disclosure Platform (PDP).

Updates in the investor tools are made on a quarterly basis. Compliance with the legislation is observed to the maximum extent for fulfilling the investor demands, and no complaint against the Company about the exercise of the shareholders’ rights or administrative and legal proceedings brought against the Company in this regard was made in the past year to the best of our knowledge.

2. SHAREHOLDER’S RIGHT TO ACCESS INFORMATION2.1. Principles of the Right to Access and Review Information

No distinction is made between the shareholders regarding the exercise of the right to access and review information. Apart from information in trade secret nature from the

shareholder, all requests to obtain information are discussed with the relevant departments, answered and communicated to the shareholders by telephone or e-mail.

Any kind of information that would interest to the shareholders during the year is disclosed with the necessary explanations and published on the website.

2.2. Right to Request a Special Auditor

Although no regulation on appointment of a special auditor exists in the Articles of Association, no request has been received from the shareholders in this direction. The Company’s activities are periodically audited by an Independent Auditor and Statutory Auditors determined at the General Assembly. The independent auditing company, selected in the Ordinary General Assembly in 2011, is Kapital Karden Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi.

3. INFORMATION ON GENERAL ASSEMBLY

The General Assembly meetings are held taking into account the Turkish Commercial Code, the Capital Markets Legislation and the Corporate Governance Principles to allow the shareholders to obtain adequate information and broad participation.

3.1. General Assemblies in 2012

A General Assembly meeting was held on May 31, 2012 with a quorum of 76%. No specific period of time was provided to register the registered shareholders into the share ledger and the relevant provisions of the Turkish Commercial Code were applied. The General Assembly meeting was held in the Company’s headquarters in order to facilitate the participation under the supervision of the Commissioner appointed by the Ministry of Industry and Trade. A separate agenda item on the donations and aids made during the year was included in the agenda of the General Assembly.

Article 1527 of the Turkish Commercial Code No. 6102 dated 01.13.2011 resolved that attending joint-stock company general assemblies, making proposals, expressing views and

Contact information of the Investor Relations Department is provided below.

Pınar Kaya – Investor Relations SpecialistPhone: 0212 473 18 00 Fax: 0212 698 98 12

E- mail: [email protected] mail: [email protected]

explanations and voting in an electronic environment result all the legal consequences of physical attendance and voting, and the system for attending general assembly meetings and voting in an electronic environment is mandatory for companies listed in the stock exchange. In order to determine the implementation principles of the aforementioned Article, the Regulation on the Electronic General Assembly Meetings of Joint Stock Companies (EGKS Regulation) was published in the Official Gazette No. 28395, dated 08.28.2012, and the Communiqué on the Electronic General Assembly System Applicable to Joint Stock Companies, which governs the procedures and principles of establishment, operation, technical issues and security criteria of the general assembly electronic system, was published in the Official Gazette No. 28396, dated 08.29.2012, and the effective date of these regulations was determined as 10.01.2012. Accordingly, necessary preparations are made to transform the Company’s General Assemblies into e-General Assembly implementation in accordance with the legislation.

3.2. Invitations and Announcements

Invitations to the General Assembly meetings are made by the Board of Directors in accordance with the Turkish Commercial Code (TCC), the Capital Market Law and the provisions of the Company’s Articles of Association. When the Board of Directors takes a decision for a General Assembly, the necessary announcements are made via the PDP and the public is informed.

Announcement for a General Assembly meeting is published on all editions of a newspaper published daily in Turkey and on the Trade Registry Gazette to reach the greatest possible number of shareholders within the framework of the necessary legal provisions.

The legal processes and regulations are observed for all announcements by disclosing the necessary documents on the agenda items to the public before General Assembly meetings. The Company’s annual report was presented to the shareholders at the Company’s headquarters before the General Assembly within the time periods provided in the legislation. In addition, it was posted for review of the shareholders and all other stakeholders at the Company’s web site (www.desa.com.tr). In order to comply with the

Communiqué Series: IV, No. 56, amended by the Communiqué Series: IV, No. 57, on Determination and Implementation of Corporate Governance Principles, published by the Capital Markets Board, the changes to the Articles of Association were submitted to the approval of the shareholders in the Ordinary General Assembly Meeting in 2011 after the necessary legal permissions were obtained. Although the shareholders are entitled to exercise their right to raise questions, no question was raised in the general assembly.

3.3. Methods of Voting

The sample of the power of attorney for shareholders who will be represented by a proxy in the General Assembly Meeting is available on the Company’s web-page and newspaper advertisement. The necessary efforts to increase the possibility of voting by the shareholders using the e-General Assembly system are ongoing and the Company’s Articles of Association is amended accordingly, and the necessary works are carried out to implement the system in the next year.

3.4. Principles for Participating in the General Assembly

Group A shares are registered shares and Group B shares are bearer shares in our Company. The records in the Shareholders List of the shareholders, whose shares were in the investor accounts under the Intermediary Institutions before the Central Registry Agency and who wished to attend the General Assembly Meeting, were taken into account under the provisions governing the General Assembly Procedures of the Central Registry Agency (“CRA”) in the Company’s 2011 annual general meeting held on May 31, 2012. It was not legally possible to participate in the 2011 General Assembly meeting for the shareholders who did not register in the Shareholders List before the CRA. On the other hand, according to the Regulation on the Principles and Procedures of the General Assembly Meetings of Joint Stock Companies and Representatives of the Ministry of Customs and Trade to be present at these meetings published in the Official Gazette No. 28481, dated November 28, 2012; the list of shareholders eligible to participate in the General Assembly Meetings is prepared by the Board of Directors by the shareholder table in terms of shares monitored by recording pursuant to Article 10/A of the Law No. 2499 by the Central Registry Agency, for other uncertificated shares or bearer shares and


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certificate owners, by the share ledger, and for shareholders with bearer shares, by those with entrance card, and this list is signed by the Chairman of the Board of Directors or one of the Board Members to be appointed by the Chairman. According to the said Regulation, all shareholders in the list prepared by the Board of Directors have the right to attend General Assembly meetings. These shareholders may attend the General Assembly meetings themselves as well as being represented by a third party. Such representatives are not required to be a shareholder.

The shareholders may have themselves represented by other shareholders or by a proxy to be appointed externally in the General Assembly meetings in accordance with the Capital Markets Board regulations governing voting by proxy. Representatives, who are shareholders of the Company, are also authorized to vote on behalf of the shareholders that they represent other than their own votes.

The General Assembly Meetings are held at the Company’s headquarters. The place where the General Assembly Meeting will be held is planned space to allow the participation of all the shareholders.

3.5. Meeting Minutes

Meeting minutes are available at www.kap.gov.tr and www.desa.com.tr immediately after the end of the meeting. In addition, these minutes are available review by the shareholders at the Company’s headquarters and are shared with investors who request to access these minutes.

4. VOTING RIGHTS AND MINORITY RIGHTS

4.1. Exercise of Voting Right

The Company avoids practices that make exercising voting rights difficult and provides all shareholders with an equal, easy and convenient voting possibility. Non-preferential shareholders having the right to vote in the Company may vote themselves as well as through a third party who is not a shareholder. No provision that prevents any person, who is not a shareholder, to vote by proxy as a representative for the unprivileged shares exists in the Articles of Association.

4.2. Minority Rights

The Company pays attention to exercise of the minority rights. No complaint was made in this regard in 2012. Since we have privileged shares for the voting rights, there is no regulation on the cumulative voting.

Group A shares have the right to determine 4 out of 5 board members. Each Group A share is entitled with fifty votes and each Group B share is entitled to one vote in the ordinary and extraordinary general meetings.

No company with any cross-shareholding relations exists. Cumulative voting method is not included in the Company’s Articles of Association.

5. DIVIDEND DISTRIBUTION POLICY ANDDIVIDEND DISTRIBUTION PERIOD

5.1. Dividend Distribution Policy

DESA Deri Sanayi Ve Ticaret A.S. carries out dividend distribution in accordance with the CMB regulation. The Company has adopted a dividend distribution to the shareholders taking into consideration utilizing internal and external investment opportunities as well as the shareholders in the market and the Company’s interests in order to consider additional investments to be made abroad and prevent possible effects of a global economic crisis in line with the targets of DESA to grow, develop and become a global company with a strong financial structure in accordance with the Corporate Governance Principles of the Capital Markets Board. This dividend distribution policy is included in the annual report and available at the Company’s official web-page.

5.2. Dividend Distribution Period

The approval of the General Assembly and the legal time limits are observed based on the provisions of the Turkish Commercial Code, the Capital Market Board regulations and the provisions of the Company’s Articles of Association for dividend distribution.

6. TRANSFER OF SHARES

The Articles of Association does not include any provisions that make public Group B shareholders to freely transfer their shares difficult and restrict share transfer. Bearer shares shall be transferred and assigned in accordance with the provisions of the Turkish Commercial Code and other relevant legislation. For non-public Group A shares owned by a controlling shareholder, other Group A shareholders have a pre-emption right in proportion to their shares before the Company according to Article 9 of the Articles of Association.

Part 2 - PUBLIC DISCLOSURE AND TRANSPARENCY

7. COMPANY DISCLOSURE POLICY

7.1. General Information About Disclosure Policy

Desa Deri San. ve Tic. A.S. has been paying attention to public disclosure on the Company’s activities and financial structure and fulfilling the requirements thereof since 2004 when its shares were offered to public. The Company’s disclosure policy is based on transparency and accuracy.

Accordingly, informing the existing and potential investors of Desa Deri San. ve Tic. A.S. and all the public about the Company are aimed.

The financial statements are shared with the public timely within the framework of the CMB regulation.

After submitting private situation disclosures on negotiations, agreements concluded and so on, which will directly or indirectly affect the financial position of the Company, to the Istanbul Stock Exchange, press releases prepared thereof in order to reach a wider audience are disclosed to the public. In addition to the information specified in the CMB regulation, the public is informed about issues, such as new products and services, situations that occur within the Company and concern the public , new developments, evaluation of the Company’s activities, targets, in accordance with the CMB regulation. Methods, such as press releases, press conferences, special news and interviews given by the Chairman of the Board of Directors and the General

Manager, who are the Company’ spokesmen, to the written and visual media, press trips, oral interviews with members of the media, are observed for informing the public about Desa. In the event that disclosed future assumptions are not achieved, information about updated data are shared with the public.

Disclosure policy of Desa is carried out based on a coordinated effort by the communication consultant company, advertising-public relations and investor relations departments since 2004.

7.2. Principles of Disclosure

The Investor Relations Department can communicate on behalf of Desa Deri San. ve Tic. A.S. in order to promote the Company before existing and potential investors, investment and brokerage institutions home and abroad, meet the queries of research analysts working in these institutions and respond to questions addressed under the investor relations.

The Investor Relations Department was established under Desa Deri San. ve Tic. A.S. in order to conduct the relations with the existing and potential shareholders and analysts regularly, respond to questions from investors in the most efficient way and perform efforts to increase the Company’s value. Relations with the shareholders are carried out under the coordination of the Investor Relations Department.

The Investor Relations Department aims to inform the investors in the best way by means of presentations, websites, annual reports, etc. tools, and ensures preparation, publication and update of all of these tools in accordance with the legislation.

Presentation of financial results are prepared quarterly in order to ensure maintaining financial communication effectively and are published on the Investor Relations section of our website.

The regularly updated website and information notes distributed to the shareholders in the internet aim at allowing the shareholders and analysts to follow developments about Desa and access to the investor relations tools.


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The primary objective of the Investor Relations Department is to conduct the mutual relationship between the Company and the shareholders most effectively. In this context, the Investor Relations Department acts as a bridge between the Company’s top management and the shareholders. Thus, two-sided disclosure is achieved.

7.2. Principles of Disclosure

Annual reports are prepared in detail to allow the public to obtain full and accurate information about the operations of the Company. The Company’s annual report includes information about the number of meetings during that year and attendance of the Board Members to these meetings.

8. MATERIAL DISCLOSURE

Material disclosures are principally signed by the Chairman of the Board of Directors and sent to the ISE. 12 material disclosures were made in 2012. As the Company is not listed in overseas stock exchanges, there is no requirement to make any material disclosure in any stock exchange other than the ISE under the CMB regulations. No request for Material Disclosures was made by the CMB and the ISE, and no sanction was imposed as disclosures were made within the legal periods.

9. THE COMPANY’S WEBSITE

The official website of Desa Deri San. ve Tic. A.S. (www.desa.com.tr) is periodically updated and in addition, the website includes prospective information. The necessary information is published on the Company’s website in accordance with the CMB’s Corporate Governance Principles. The Company’s website soon will be serving also in English language in order to make the website available to foreign investors. Our investors are informed regularly on the following matters in the investor relations section of the website to provide the existing and potential investors and intermediaries with a more comprehensive flow of information.

The Company’s Articles of Association

Trade registry information

Financial Data

Audit Reports

Annual Reports

Investor Presentations

Corporate Governance Practices and Compliance Report

Duties and Working Principles of Corporate Governance Committee

Material Disclosures

Agenda of the General Assembly

Minutes of the General Assembly Meetings

Attendance Sheet

Shareholder Structure

Company Policies

Board Members

Sample of power of attorney

Frequently asked questions

Contact Details

10. DISCLOSING REAL PERSON ULTIMATE CONTROLLING SHAREHOLDER / SHAREHOLDERS

Where necessary, the existing information is shared with the public.

11. DISCLOSURE ON INSIDER TRADERS

All the employees of the Company may have limited information in areas such as finance, technology, production, new products, from time to time as required by their departments. Information that requires a special situation accordingly is announced by the Company’s management within the framework of the CMB regulation.

Part 3-STAKEHOLDERS

12. DISCLOSURES TO STAKEHOLDERS

Stakeholders will be informed on the matters that concern them through the press, material disclosures, and press and

analyst meetings and in electronic media in line with the Company’s disclosure policy.

Participation in the management requires to be elected to the Board of Directors; however, employees are encouraged to participate in the management with various business processes. There is no restriction for the stakeholders to transmit the Company’s actions that are contrary to the legislation and unethical to the Company’s Corporate Governance Committee and the Audit Committee.

13. DISCLOSURES TO EMPLOYEES

Some important announcements in the Company and the Company’s management messages are communicated to all employees via e-mail.

14. HUMAN RESOURCES POLICY

The Company’s total number of employees as of 31.12.2012 is 1,954 (2,020, as of 31.12.2011).

When assuming the responsibility of being a global brand, there are priorities we emphasize on as the Company.

• Unconditional customer satisfaction, • Development and training of employees • Conclusion of our efforts with success.

We take our strength, which we have turned into a worldwide success, from the principles we have determined in accordance with our priorities and committed strictly.

The 40-year miracle of DESA is the product of our high performance and quality understanding we have shown at every point.

While the Company aims at having competent human resources considering the future from today, all the employees striving for maintaining the positive image of the Company and our products home and abroad. Creating the brand of personalized products working in the light of these principles and proving its quality and leadership home and abroad, the Company provided its employees with the privilege of being part of a global brand.

We provide our employees with opportunities of specializing, having a career in the sector and rewarding their efforts.

DESA, which ensures its success with the adherence to the principles, plans its future with the awareness that the most important basis is the human resources. With this approach, we summarize our Company’s human resource development philosophy as follows:

“We will train our human resources at every level in-house.”

DESA carries out the training and development activities in-house in order to train and develop its employees in accordance with this philosophy.

The Desa Training System is based on the training and development of its own workforce taking into account the sector specific conditions.

Relations with the employees are carried out by the Human Resources Department of Desa Deri Sanayi ve Ticaret A.S.. Aslı Çetin is the Human Resources Co-ordinator. No complaint on discrimination was received by the Human Resources Department during the year.

15. INFORMATION ON RELATIONS WITH CUSTOMERSAND SUPPLIERS

Desa Deri Sanayi ve Ticaret A.S. works on a customer-oriented basis in all business processes. All the processes are based on customer satisfaction from receipt of order to production, from delivery to after-sales service. Every product is tracked with cards that include all product ID information. Repair and maintenance service, return policy, fulfillment of orders with the highest quality in accordance with terms required by customers, fulfillment of specific customer orders and the implemented CRM policies are the practices to ensure customer satisfaction. In addition, Desa Deri Sanayi ve Ticaret A.S. keeps its relations with the customers updated and develops constantly with its store network reaching a total number of 88 stores opened in 2012.


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16. SOCIAL RESPONSIBILITY

Desa has been attaching importance to support social and cultural activities since its foundation. For this purpose, the Company sponsors various activities. Desa operates in line with the system that it has created within the framework of the Labour Law and Laws on Social Security and Employee Health and Safety. In addition, Desa have the ETI BASE CODE audits performed twice a year by the companies accredited by Sedex system and all the reports are loaded to the Sedex system. Audits are performed on various subjects including quality, environment, management system and SA8000.

The Company observes the sector specific norms on the environment in production under the Environmental Policy and System created by the Company itself. No lawsuit was filed against the Company for damage to the environment during the period. The Company’s code of ethics is available at our website (www.desa.com.tr).

17.1 BOARD OF DIRECTORS

17.1. Board Members

Melih ÇELET - Executive Member - Chairman of the Board of DirectorsBurak ÇELET - Executive Member - General ManagerBurçak ÇELET - Non-executive MemberOsman Tavtay - Independent MemberMehmet Kaan Koz – Independent Member

The Turkish Commercial Code, the Capital Markets Board regulation and the Corporate Governance Principles apply to the election of board members.

17.2. Qualifications of the Board Members

Backgrounds of the Board Members are disclosed to the public at our website and in the annual report.

The minimum qualifications required for election to the Company’s Board of Directors are consistent with the requirements contained in the Communiqué Series: IV, No.

56, amended by the Communiqué Series: IV, No. 57, on Determination and Implementation of Corporate Governance Principles, published by the Capital Markets Board. These criteria are also referred in the Articles of Association. Two candidates have been submitted to the approval of the General Assembly with their independence statements based on the report of the Audit Committee since the candidate committee has been yet established at the date of election of independent Board Members.

Melih ÇELET – ChairmanMelih ÇELET, founded Desa in 1972, graduated from Ankara College in 1968, completed his undergraduate degree at Istanbul University, Faculty of Pharmacy. Melih ÇELET is fluent in English.

Burak ÇELET – Board Member - General ManagerMr. Burak ÇELET graduated from Bogazici University in 1999, with a Bachelor’s degree in Mechanical Engineering. He received an MBA degree in Finance from University of Wisconsin, Madison, in 2001. He obtained a Master of Science degree in Leather Technology from Northampton College in 2002. Mr. Burak ÇELET serves as a Board Member of the United Brands Association, Board Member of the Istanbul Leather and Leather Products Exporters’ Association and Member of the Turquality Working Group of the Istanbul Textile and Apparel Exporters’ Association as well as his General Manager duty at the Company. Mr. Burak ÇELET speaks English and German.

Burçak ÇELET - Board MemberMrs. Burçak ÇELET completed her bachelor’s degree in Industrial Engineering at Yildiz Technical University in 1999. Between 1999 and 2001, she worked as Planning Director at Toys’R’Us. She received her Master of Science degree in Retail Management from University of Surrey in 2002 and she served as Category Director at Joker Maxitoys between 2003 and 2004. Mrs. Burcak ÇELET, who have been serving as CRM and E-Trade Manager as well as a Board Member in the Company since 2004, speaks Italian, English and French.

Mehmet Kaan KOZ - Independent Board MemberMr. Mehmet Kaan KOZ completed his undergraduate education at Bogazici University, Department of Mechanical

Engineering in 1999 that he antered in 1995 after graduating from the German High School. He began his professional career in Arçelik A.S. Research and Technology Development Centre as a member of Koç Holding’s Management Trainee Program in 1999 and then he became the Managing Partner of Anova Ltd. Şti. established in 2003. Mr. KOZ was elected as an independent member for a period of two years with the resolution dated 05.31.2012 taken in the Company’s annual general meeting for the year 2011.

Osman TAVTAY - Independent Board MemberMr. Osman TAVTAY, who completed his bachelor’s degree in Geophysical Engineering at Istanbul Technical University in 1986, served as a Senior Trader at Koç Menkul Değerler between 1996 and 1998 after serving as a Stock Exchange Agent and Expert at Can Menkul Değerler, Piramit Menkul Kıymetler and Ekinciler Yatırım between 1990 and 1996. Mr. TAVTAY, who served as Domestic Operations Director at ABN Amro Yatırım A.S. between 1998 and 2004, was elected as an independent member for a period of two years at the Company’s 2011 annual general meeting dated 05.31.2012.

The Board Members are bound by specific rules to undertake different duties outside the Company.

17.3. Principles for Activities of the Board of Directors

Activities of the Board of Directors are carried out under the provisions of the Turkish Commercial Code and the Articles of Association.

17.4. Number of Meetings of the Board of Directors

The Board of Directors meets where and when necessary. The number of resolutions taken by the Board of Directors increased to 34 with the resolutions taken within the framework of the paragraph 4 of Article 390 of the Turkish Commercial Code No. 6102 in 2012.

17.5. Counter Votes at the Meetings of the Board of Directors

Votes shall be announced as accepted or rejected at the meetings of the Board of Directors. Those who have a counter vote shall write the justification of the decision and

sign. However, no public disclosure has been made in this regard recently as such kind of opposition or difference of opinion has not been declared.

17.6. Participation of the Board Members in the Meetingin Person

The Board Members show attention to the participation in the Board of Directors of the Company in person.

18. THE COMPANY’S MISSION, VISION ANDSTRATEGIC TARGETS

Desa’s mission, vision, targets and ethical values are added to the corporate identity file and published on the Company’s website.

The Board of Directors agrees on and approves the creation of strategic objectives prepared by the managers. Activities are assessed on quarterly, semi-annually, 9 months and annually basis. The strategic objectives for the year 2013 have been established and review of the production targets has been started. Efforts for spread of the targets are ongoing. The next five-year strategic planning process has begun. The actual situation for the year 2012 has been determined by creating all the indicators for financial, customer, process and learning, development targets for all the departments, and the forecast for the year 2013 has been established.

19. RISK MANAGEMENT AND INTERNAL CONTROL MECHANISM

The Company’s risk management includes auditing the financial risk, market risk and operational risk on a regular basis and is carried out periodically by the finance department. The Company’s internal control mechanism is under the responsibility of the Department of Financial Affairs and the Internal Audit Committee.

20. POWERS AND DUTIES OF THE BOARD OF DIRECTORSAND EXECUTIVES

The Board of Directors is responsible and authorized to carry out all the transactions that are outside the duties and powers of the General Assembly and determined by the Turkish Commercial Code, the Company’s Articles of Association and the provisions of other legislation.


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21. ACTIVITY PRINCIPLES OF THE BOARD OF DIRECTORS

The number of meetings of the Board of Directors held during the period is 34, and the meeting agenda are determined in advance. The Board Members participated in the meetings personally, with all the decisions of the Board of Directors were taken unanimously, and no question addressed by the Board Members and reflected in the memorandum of decision was risen. Dates of the Ordinary Meetings of the Board of Directors are determined in advance. The secretariat of the Board of Directors is available.

22. PROHIBITION TO TRADE AND COMPETE WITHTHE COMPANY

The Turkish Commercial Code and the Capital Market regulation shall apply to the prohibition to trade and compete with the Company.

23. CODE OF ETHICS

Code of ethics was created for the Company and employees, and these ethical rules determined were disclosed to the employees with the Human Resources Manual and to the public in accordance with the disclosure policy.

The corporate culture of Desa in compliance with honesty, respect, ethical behavior and the laws and regulations always has been at the forefront.

Aiming at offering a healthy development, universal quality and standards of products and services by ensuring customer satisfaction together with its employees and in this way, becoming a symbol of credibility, continuity and prestige before our country, its customers, shareholders, the companies it exports to, the values of Desa shed light to the path to be followed to achieve these objectives, and these are shared with the public through its website. The ethical values of Desa are the key factors lying behind its success and to achieve the future objectives.

24. NUMBER, STRUCTURE AND INDEPENDENCY OF THE COMMITTEES ESTABLISHED IN THE BOARD OF DIRECTORS

Efforts on Corporate Governance were launched in 2005. The Audit Committee acting under the Board of Directors

was established with resolution of the board of directors numbered 18, dated 26.05.2004.

The Corporate Governance Committee has been established with the resolution of the board of directors numbered 22, dated 19.06.2012 within the framework of the Principles of Corporate Governance in the activity period of the year 2012. The committee established was given the duties and responsibilities for Candidate Nominating Committee, Committee for Early Detection of Risk and Remuneration Committee.

1.24 Audit Committee

The Audit Committee fulfills the duties provided for the audit committee in the Capital Markets Regulation. In this context, the Company’s accounting system performs disclosure of the financial information to the public, independent audit and supervision of the operation and effectiveness of the internal control system of the Company.

Selecting the independent auditing company, preparing independent audit contracts and initiating independent audit process and activities of the independent auditing organization at each step take place under the supervision of the audit committee.

The Audit Committee must submit the annual and interim financial statements to be disclosed to the public to the Board of Directors in writing with its own evaluations by obtaining the views of the responsible executives and independent auditors of the partnership regarding the compliance of the statements with the accounting principles of the partnership, the truth and accuracy, and shall convene at least four times in a year and more frequently if necessary.

The Audit Committee together with the Company’s management are responsible for maintaining the internal and external auditing carefully and ensuring compliance of the records, procedures and reports with the relevant laws, rules and regulations as well as the principles of the CMB and IFRS. This committee consists of non-executive independent members.

Members of the Audit Committee:

Chairman: OSMAN TAVTAYMember: MEHMET KAAN KOZ

24.2 Corporate Governance Committee

The Corporate Governance Committee performs acts to support and assist the Board of Directors by performing efforts for compliance of the Company with the corporate governance principles, determination of the board members and senior executives, assessment of remuneration, reward and performance and career planning, investor relations and public disclosure. The reason for Mehmet Kaan Koz, independent member, is assigned to the both committees is that two of our independent members are assigned to the audit committee due to the requirement that the audit committee must consist of independent members. He carries out these duties because the members of the Corporate Governance Committee must consist of non-executive members.

Corporate Governance Committee Members:Chairman: MEHMET KAAN KOZMember: BURÇAK ÇELET

25. FINANCIAL RIGHTS TO THE BOARDOF DIRECTORS

Rights, interests and fees given to the members of the Board of Directors are applied based on the decisions taken at the General Assembly. No benefit, such as debt, surety, credit and etc., was provided to the Board Members during the reporting period. The financial rights in remuneration provided to the Board of Directors are discussed at the General Assembly, and the public is informed through the meeting minutes. The rights determined are informed not on an individual basis but whether or not they are provided to the executive members or independent members.

2012 Annual Report

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2012 Annual Report

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ANNUAL REPORT

PREPARED BASED ON THE COMMUNIQUE SERIAL: XI, No: 29

I - INTRODUCTION

1. Report Period

This report covers the period of 01.01.2012 - 31.12.2012 of Desa Deri Sanayi ve Ticaret Anonim Şirketi.

2. Name of the Company

Desa Deri Sanayi ve Ticaret Anonim Şirketi

3. Boards in Charge During Report Period

Board of Directors

In accordance with the Ordinary General Assembly Meeting held on 31.05.2012, the following were elected to perform duties as the Board of Directors for a period of two (2) years: Chairman Mr. Melih Çelet, Vice Chairman Mr. Burak Çelet, and Board Members Mrs. Burçak Çelet, Mr. Osman Tavtay and Mr. Mehmet Kaan Koz.

Full Name End of Term Experience (years)

Melih Çelet 31.05.2014 40

Burak Çelet 31.05.2014 20

Burçak Çelet 31.05.2014 13

Osman Tavtay 31.05.2014 25

Mehmet Kaan Koz 31.05.2014 13

Auditors

Mr. Fevzi Şen and Ferhan İhsan Bozdoğan, elected as auditors for the 2011 accounting period, performed their duties until the General Assembly Meeting dated 31.05.2012. In the General Assembly Meeting, Fevzi Sen and Ferhan İhsan Bozdoğan were elected to take office as auditors for the period of one (1) year.

Full Name End of Term

Fevzi Şen 31.05.2013

Ferhan İhsan Bozdoğan 31.05.2013

Audit Committee

Osman Tavtay and Mehmet Kaan Koz, independent members of the Board of Directors of the Company, shall serve as the Audit Committee Members responsible for auditing during the year 2012 accounting period from the date of 31.05.2011 until the next Ordinary General Assembly.

4. Amendments to the Articles of Association during the Period

Articles 10., 12., 13. and 35. of the Articles of Association were amended in the period between 01.01.2012 and 31.12.2012, and these amendments were published in the PDP in detail.

5. Changes in the Capital of the Company During the Period

No change occurred in the Company’s capital in the period between 01.01.2012 and 31.12.2012.

6. Dividends Distributed

No dividend was distributed during the reporting period.

7. Shareholders of the Company and Share Ratios

31 December 2012 31 December 2011 Name Share Share Amount Share Share Amount Melih Çelet 14.92 % 7,343,918 14.92 % 7,343,918

Çelet Holding A.Ş. 54.28 % 26,717,682 54.28 % 26,717,682

Free Float 30.00 % 14,766,591 30.00 % 14,766,591

Other 0.80 % 393,779 0.80 % 393,779

Total 100 % 49,221,970 100 % 49,221,970


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8. Securities Issued During The Period

No capital market instruments were issued.

9. The Company’s Sector and Place in the Sector

Leather was one of the first materials used by mankind to meet their basic needs. In the most primitive ages, leather was primarily used as a covering, but in later ages it was used in times of war as stirrups and quivers, and thus was the material of strategic equipment. According to some sources, the Turks started working with leather some 600 years ago, while other sources place the Turkish people beginning leather making some 2,000 years ago. Despite a difference of opinion about the early history of Turks and leather, it is clear that after Fatih Sultan Mehmet conquered Constantinople, the Ottoman Turks began working in the leather trade in Istanbul. Thus, the leather trade has been an important sector of the Turkish economy since the 15th century, a legacy that continues today.

The leather sector provides net foreign currency income because of its significant operation in the export and tourist markets. As leather is a handcrafted product, it has potential to create employment opportunities on a large scale. While Turkey’s overall export in 2012 was $ 151.9 billion with an increase of 12.6% in the period between January and December 2012, the leather and leather product export in the same period was $ 1,605 million indicating an 8.5% increase. The leather sector is the 10th largest sector in the industrial sectors with its share of 1.52 % in the total employment and through a leather processing capacity of 400 thousand tons annually and 1,200 companies operating in the sector. The share of the sector in the Turkey’s overall export was 1.1% with the export of leather and leather products amounting to $ 1,605 million in the period between January and December of the year 2012.

Export figures of Desa Deri by years and periods are as follows.

EXPORT FIGURES USD 2009 2010 2011 2012

First Period $ 4,387,475.94 $ 7,551,750.93 $ 12,176,551.69 $ 11,762,507.41

Second Period $ 5,301,750.70 $ 7,386,968.90 $ 14,213,462.80 $ 12,707,487.33

Third Period $ 6,054,854.43 $ 11,387,848.73 $ 15,685,481.75 $ 12,014,658.78

Fourth Period $ 8,839,577.28 $ 16,594,590.66 $ 14,133,797.51 $ 13,372,606.54

Total $ 24,583,658.35 $ 42,921,159.22 $ 56,209,293.75 $ 49,857,260.05

The Turkish leather industry ranks the 2nd in the world after Italy with its 22% of the worldwide leather production capacity. Most of the firms in the industry are SMEs.

In terms of recorded exports, Turkey exports 6.02% of the worldwide total of exported agricultural- based processed products, which is the second highest foreign exchange-earning sector after textiles. Russia, Italy and Germany weigh in the export of leather and leather products by official figures, and France, Iraq, United Kingdom, Ukraine, Hong Kong and China follow these countries. DESA exports most of its foreign-bound goods to Italy, England, Southern Cyprus, Kazakhstan, Hong Kong and China. In Turkey, the import of leather is mostly to meet the raw leather needs of the ready-to-wear garments sector.

The company was established as a limited company in 1972 and then transformed into a joint-stock company in 1982. The Company is at a notable position within the Turkish leather sector with its turnover in 2012 of TL 238,267,952 and an expert staff of 1954 employees.

DESA has a prominent position both in Turkey and in export countries, playing a lead role with its unique concepts its stores, design and products.

II PERFORMANCE

1. Main Factors Affecting the Business Performance and Financial Activities:

The Company’s value chain and the resulting effects on its performance beginning with the processing of raw leather and ranging from domestic to international wholesale and retail sales points, are as follows:

• Competing international manufacturers and associated pricing strategies,

• Cost of capital in Turkey, and staying above international standards,

• Global economic crisis and the exchange rate policy, combined with the decrease in demand overseas for wholesale exports and political support for increased exports,

• Increases in energy prices and volatility, disallowing the creation of a consistent cost strategy,

• Obligation to reformulate prices for raw material prices, and the resulting currency exchange rate effects of the new price according to price levels,

• National production and industrial policies, lack of character of support for domestic manufacturers with high tax rates,

• In the national market, the reduction of wallet shares of our target customer mass due to the attractive conditions of purchases in other sectors,

• Becoming widespread in the shopping centers across Turkey that are crucial in retail investment, and the effect of the cost structure of these sales channels on the competitive market,

• The increased interest and investment of international ready-made clothing brands in Turkey and the finding place of these low-cost, low-quality products in the market,

Policies Adopted in the Company, Investment and Dividend Policies:

Investment Policies: For the above developments, the Company has continued to implement the following policies in order for the investments in domestic retail to yield the better results;

Employee Training; High-quality training programs are implemented.

Retail Investments; The growth activities in the retail sector continue consistently and effectively by making the necessary assessments in the developing regions and new areas with a new store concept.

Dividend Policy: Beginning in 2009, continuing throughout 2010, 2011 and 2012, and ever supported by the Company’s comprehensive program and Turquality, in 2013, and the ongoing growth and expansion of the target field of retail investments, the DESA brand showed growth, development, in line with the Company’s goal to be a strong, worldwide brand with a powerful financial structure, always taking into consideration the interests of partners and of the Company itself. The Company acts with balanced and sober judgment in accordance with the General Assembly to monitor the dividend distribution policy, and the Company will continue to assess the value added productive investment.


6766

3. Financial Resources andRisk Management Policies:

The Company’s activities provide its finances in two different channels for the accounting period of twelve months in 2012.

Internal Resources: Financial Activities

External Resources: Financial Sector

Risk Management Policies are as follows by the financial resources:

Internal Resources: Financial Activities:

Retail Sales

The majority of our sales pass over retail banking system. Therefore, the risk passes to the finance sector when a sales is made. The Company removes this risk by charging these fees in the next day with appropriate discount rates.

Wholesale Sales:

We have risk a control model covered with letters of guarantee for our domestic wholesale sales. In addition our wholesale prices are connected over with valuable documents such as checks and promissory notes.

Procurement Policies:

For our term debts arising out of purchases, a policy is adopted in order to minimize the difference between period of maturity and sales. In this way, working capital requirements are minimized.

Foreign Currency Liabilities:

In order to prevent the foreign currency liabilities to result in a foreign exchange risk due to domestic and foreign purchases of goods and services, it is attempted to keep the export high and thus, the risk is eliminated.

The risk is also eliminated by forward transactions during the terms in which the coverage ratio is low.

External Resources:

Long-term funding has been established for the long-term investments. The investment loan, obtained with a very favorable terms and conditions, has been granted to be in installments of 6 months in a total of 7 years. 5 installments of this investment loan were paid, and repayment of the loan repayments continues regularly.

For the use of short-term financing resources, the export credits are managed to close them at their maturity dates.

4. Other Considerations that are not Shown in Financial Tables but will be Beneficial to Users

DESA brand was chosen as the brand to be supported under the Turquality program created by the Undersecretariat of Treasury and Foreign Trade. The Turquality Program supports the Company, for the activities carried out abroad without any top monetary limitation in the following rates;

50% of investments in store decoration,

50% of store rents,

50% of expenditure on design and model,

50% of expenditure on brand consultancy,

50% of expenditure on advertising-promotion and catalogue,

50% of expenditure on law and so on,

50% of expenditure on quality certificates,

In this context, the expenses on the ongoing design contract in the UK and brand consulting and the catalogue prepared periodically are funded by Turquality Program by 50%. At the

end of 2011, the program decided to support the Company for a period of another 5 years.

Our factory in Düzce is located in the government-subsidized zone and covered by the Law No. 5084 on Investment and Employment Promotion. The factory is provided with;

Energy Price Discount Support,

Employee Income Tax and Social Security Employer’s Premium Support.

5. Predictions for the Development of the Company:

The main objective of Desa is to transform to a multinational brand well-known with its retailer identity from its identity of a manufacturer.. Desa adopts the following strategies to achieve this goal:

Growth Strategy:

Desa aims to open flagship stores in the major fashion centers, particularly in the United Kingdom, expand and then focus on corner and dealers after the brand is positioned within its five-year vision.

In line with this goal, two flagship stores were opened in the UK.

Two stores, one is located in the UK-London and the other is located in Hampstead and CoventGarden, operate.

Brand Strategy:

Desa will realize the positioning it wishes to capture in the foreign markets by strengthening its brand.

• Creation of brand definition and identity,• Identification of brand strategies and extension of brand, • Development of in-store customer experience and brand communication,

Efficiency / Flexibility Strategy:

Desa will increase productivity and flexibility to create a cost advantage in the coming period with an emphasis on the vertical integration.

6. Investments and Incentives

Developments in Investments:

In the field of retailing, new store openings were evaluated in beginning of the year 2012. In the first quarter of 2012, 4 new stores were opened. In the second quarter, the store in Priene Country AVM in Aydin/Söke was moved to Novada AVM in Aydın/Söke. 3 stores were opened in Goztepe, SamsunLovalet and Movapark Mardin. The stores in Shemall Lara Antalya, PrestigeMall and Sabiha Gokcen Airport were closed due to their relatively low profitability levels.

In the third quarter of 2012, the store in Uskudar Carrefour was closed due to efficiency reason. In the fourth quarter of 2012, Istanbul Cevahir, Konya Kentpark Plaza Desa and Kentpark Samsonite stores were opened.

As a result of these developments, the number of stores was 88 and the area was 16,723 square meters.

Incentives and Usage:

The Law No. 5084 on Encouraging Investments and

Employment / Düzce

The Communiqué No. 2006/4 on branding of Turkish

Products Abroad, Positioning of Turkish-Branded Products

and Supporting the Turquality,

ITKIB Trade Incentive,

Incentive Import


6968

Period 31.12.2012 31.12.2011

Incentive Type TL TL

TURQUALITY 2,278.343 2,346,223

ITKIB Trade Incentive 945,574 1,394,290

ITKIB Trade Incentive 27,079 -

USD USD

Incentive Import 27,557,177 33,141,500

7. Information on Developments of Products and Services

Features of the Production Units:

Çorlu Factory:The Çorlu Factory is referred to as the leather tannery in the Company literature. This facility processes rawhide and produces leather, and also has machine and equipment capabilities.

Istanbul Halkalı Factory:Halkalı facility has machinery and equipment with the capacity to produce ready-made clothing and crafted goods from processed leather.

Düzce Organized Industry Region Factory:Düzce facility has machinery and equipment with the capacity to produce ready-made clothing and crafted goods from processed leather.

Product Name C.U.R Product Name C.U.R Product Name C.U.R Product Name C.U.R

(%) (%) (%) (%)

Year / Category Bag (Qty) C.U.R Accessories(Qty) C.U.R Apparel (Qty) C.U.RTextile(Qty)

K.K.O

(%) (%) (%) (%)

4th Quarter of 2012

264,759 34% 302,612 88% 41,695 35% 8,011 25%

4th Quarter of 2011

291,847 38% 238,837 69% 41,811 35% 2,047 6%

Year / CategorySheep Leather

(Feet)C.U.R

Sheep Fur Leather (Feet)

C.U.RCow Leather

(Feet)C.U.R

(%) (%) (%)

4th Quarter of 2012

2,855,621 29% 7,679 0,23% 139,186 8%

4th Quarter of 2011

2,780,189 28% 207,154 6,14% 1,243,567 73%

Product Name (measurement

unit)


unit)


unit)


unit)


unit)

Year / Category Bag (Qty)Leathercraft

(Qty)Apparel (Qty) Shoes (Pair) Textiles (Qty)

4th Quarter of 2012 432,198 292,456 50,246 327,292 8,294

4th Quarter of 2011

323,543 329,874 53,626 279,710 10,250

Year / CategorySheep Napa Leather (Feet)

Sheep Fur Leather (Feet)

Cow Vidala Suede (Feet)

Wool (Kg)

4th Quarter of 2012 0 0 0 0

4th Quarter of 2011

0 0 0 0


unit)


unit)


unit)


unit)


unit)

Year / Category Bag (TRY/Qty)Accessroies (TRY/Qty)

Apparel (TRY/Qty)

Shoes ((TRY/Pair)

Textile (TRY/Qty)

4th Quarter of 2012

92,292,927 21,633,882 25,848,743 34,591,266 603,689

4th Quarter of 2011

81,164,536 35,138,947 23,109,199 28,215,796 1,685,669

Year / CategorySheep Napa Leather (TRY/

Feet)

Sheep Fur Leather (TRY/

Feet)

Cow Vidala Suede (TRY/

Feet)Wool (TRY/Kg)

4th Quarter of 2012

0 0 0 0

4th Quarter of 2011

0 0 0 0

CAPACITY UTILIZATION RATIOS

SALES QUANTITIES

SALES AMOUNTS


7170

b. Intended Actions, Predictions and Applicable Strategiesto Improve the Financial Structure:

8. Information on Financial Structure

a. Financial Table Summaries and Basic RatesBasic ratios with regard to financial status, profitability and solvency calculated on the basis of financial statements audited independently are as follows:

Financial Table Summary Rates:

Financial Ratios:


unit)


unit)


unit)


unit)


unit)

Year / Category Bag (TRY/Qty)Accesories(TRY/Qty)

Apparel(TRY/Qty)

Shoes(TRY/Pair)

Textile(TRY/Qty)

4th Quarter of 2012 213.54 73.97 514.44 105.69 72.79

4th Quarter of 2011

250.86 106.52 430.93 100.88 164.46

Year / Category

Sheep Napa Leather (TRY/

Feet)

Sheep Fur Leather (TRY/

Feet)

Cow Vidala Suede (TRY/

Feet)Wool (TRY/Kg)

4th Quarter of 2012

0 0 0 0

4th Quarter of 2011

0 0 0 0

TRY Fourth Period of 2012

Fourth Period of 2011

Total Assets 144,055,854 129,250,954

Equity 70,213,275 58,018,748

Net Sales 181,110,537 175,258,719

Domestic Sales 91,255,546 81,119,974

Export 89,854,991 94,139,145

Net Profit ofthe Period

2,828,955 1,264,488

Number of Stores 88 83

Number ofEmployees

1,954 2,020

Ratios Fourth Period of 2012

Fourth Period of 2011

Current ratio 1.55 1.53

Total debt / Total Assets 51% 55%

Equity / Total Assets 49% 45%

Operating Margin 27% 33%

SALES PRICES

The competitiveness of the Company was improved through the sources entered into the Company arising from the public offering made in 2004, as well as following the completion of the Düzce factory investment in 2006. The acquisition of the Çorlu Tannery Factory in the last quarter of 2008 also strengthened the value chain of the business. The acquisition was made with very competitive rates and a debt policy which minimizes the risks arising from raw material procurement were enacted.

On the other hand, cash flow management and derivative instruments are utilized under the risk management policy.The year 2010 was certainly a year that tests the durability of the real sector and our own sector. With our efforts to enhance cost control and our effectiveness, by providing improvements in the application of sales revenue and market share, we attempted to reach our goals.

Use of in-house resources and information to increase the speed and efficiency of all processes, high value-added information, which feeds the data stream, Enterprise Resource Planning System (ERP), preparatory work, license procurement and consulting contracts were all undertaken. The project was implemented, and the system has been used since April 2012.

We anticipate that with developments in the manufacturing countries in the Far East and elsewhere due to their terms of ethics, and with more local price increases, the major international brands especially will continue to weaken our competitive advantages, stable quality, production line, but do not change the orientation of our country. As a reflection of this issue, we will also continue negotiations with major global brands.

As a result of global warming and changes in consumption in our own country, the world’s livestock sector is expected

to continue to be adversely affected in subsequent

years. Accordingly, while a recovery after the economic

crisis especially in the retail sector was experienced, the

contraction in the supply increased the prices in rawhides

demand dramatically. The price increases in the raw leather

market increased our cost and stocks.

DESA is monitoring the largest markets in Italy and England,

and also, in accordance with Turkey’s foreign policy to improve

relations with its neighboring countries, the Company will

also concentrate on the markets in Iraq, Cyprus, Syria and

Azerbaijan to achieve target market strategies in 2013.

Priorities for the period of 2013 include a goal of balancing

export and domestic sales to a ratio of 50-50%, and attaining

the operating capital to support the cash to open DESA

stores in the world’s fashion centers. Also, with own planned

investments, we aim to increase market share and revenues.

We believe that our strategies that have implemented and

planned by the Company’s financial structure and market

share will support to move our financial structure to the

planned targets and increase the Company’s value.

However, with the competition in the retail market, the

elasticity of price in the management of demand must be

in retained in the Company’s market power. To carry this

out successfully, we will create a product structure and size

specifications to meet customer demand. This will be one of

our most important tools to support our Price-Worth Strategy.


7372

9. Research and Development Activities:

In cooperation with an ongoing partnership with TUBITAK, damaged leather surfaces repaired and improved. The Green Leather Production Project is in the design phase.

10. Donations Made in this Period

The Company donated TL 132,730 in the period between 01.01.2012 and 31.12.2012.

III - MANAGEMENT WORKS 1. Senior Managers

2. Employee Change

The number of employees is 1,954 as of December 2012. (December 31, 2011: 2,020)

3. Collective Bargaining Practices

Our Company has no collective bargaining agreement. Staff relations are carried out within the framework of Labor Law.

4. Severance Pay

The amount of severance pay entitled by the employees as of 31.12.2012 is TL 1,838,958. The provision reserved in 2012 is TL 373,259.

5. Employee Benefits

In addition;

Shuttle Service to workplaces, Lunch, Vehicle Allocation,

Personal Accident Insurance for the staff who has vehicle allocation,

Limited Usage Cell Phones,

are granted as well.

IV - DEVELOPMENTS AFTER CLOSURE OF THE ACCOUNTING PERIOD

After the period between 01.01.2012 and 31.12.2012, the store No. 1 in the Kızılay Shopping Centre and the store in Kayseri Armonium Center were closed.

V - PROPOSAL FOR PROFIT DISTRIBUTION

The Company has adopted a dividend distribution to the shareholders taking into consideration utilizing internal and external investment opportunities as well as the shareholders in the market and the Company’s interests in order to consider additional investments to be made abroad and prevent possible effects of a global economic crisis in line with the targets of DESA to grow, develop and become a global company with a strong financial structure in accordance with the Corporate Governance Principles of the Capital Markets Board.

The profit distribution policy is drawn in Articles 29, 30, 31, titled “Profit Distribution”, “Profit Distribution Date” and “Reserve”, of the Articles of Association of the Company in accordance with the Turkish Commercial Code and the relevant provisions of the Capital Markets Board. Privilege is not in question for dividend distribution to shareholders with Group A and B shares representing the capital.

Title Full Name Experience (years)

General Manager Burak Çelet 20

Executive Vice President (Sales and Marketing) Alpaslan Karayalçın 33

Executive Vice President (Financial Affairs) Ayhan Dirbaş 20

Çorlu Factory Manager Nuri Katkat 21

Düzce Factory Manager Gürsu Altıoklar 16

Accounting Manager Ahmet Aslan Özünlü 42

Finance Manager Ayşe Mısırlı 20

Human Resources Director Aslı Çetin 18

Human Resources Manager Hamdi Paramyok 21

Information Technology Manager Dr. Ahmet Taşdelen 26

CRM and E-commerce Manager Burçak Çelet 13

Advertising and Public Relations Manager Abide Turan 9

Investor Relations Specialist Pınar Kaya 6


7574

The Board of Directors shall submit a profit distribution proposal to the General Assembly for the payment of past years’ profits and annual dividend taking into account the Company’s performance in that year, the economic conditions, investments and the Company’s cash flow.

STATEMENT FOR COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES

The amended parts of the Annual Corporate Governance Compliance Report are given below, and the remaining parts are not repeated. A Corporate Governance Compliance Committee was established under the Corporate Governance Principles. The committee established was given the duties and responsibilities for Candidate Nominating Committee, Committee for Early Detection of Risk and Remuneration Committee.

INFORMATION ON GENERAL ASSEMBLY

On the 31.05.2011, within the period of this report, the Ordinary General Assembly for 2011 was held and in which public disclosure of relevant information to the public was required, according to CMB legislation, and was communicated to them through the press. No specific period of time was provided to register the registered shareholders into the share ledger and the relevant provisions of the Turkish Commercial Code were applied.

The annual report for the year 2011 was presented to the shareholders at the Company’s headquarters before the General Assembly. In order to facilitate participation, the Company headquarters were selected as the meeting place, and the General Board’s announcement was published via the Turkey Trade Registry Newspaper, a newspaper published nationwide, and the bulletin of the Istanbul Stock Exchange (Istanbul Stock Exchange).

1. Material Disclosures

Within the twelve-month period of 2012, 12 material disclosures were made and no additional information was requested pursuant to these disclosures. All material disclosures were made timely and therefore, no sanction was imposed on the Company

2. Principles for Activities of the Board of Directors:

The number of meetings of the Board of Directors held during the period is 34, and the meeting agenda are determined in advance. The Board Members participated in the meetings personally, with all the decisions of the Board of Directors were taken unanimously, and no question addressed by the Board Members and reflected in the memorandum of decision was risen. Dates of the Ordinary Meetings of the Board of Directors are determined in advance. The secretariat of the Board of Directors is available.

MELİH ÇELET BURAK ÇELET AYHAN DİRİBAŞChairman General Manager Executive Vice President of Financial Affairs

DESA DERİ SANAYİ VE TİCARET ANONİM ŞİRKETİ

INDEPENDENTLY AUDITED BALANCE SHEET DATED 31ST DECEMBER 2012 (All amounts expressed in “TRY”.)

ASSETS Note ReferencesCurrent Period31st December

2012

Previous Period31st December

2011

Current Assets 107.564.886 100.599.928Cash and Cash Equivalents 6 790.829 227.944

Trade Receivables

- Trade Receivables from Related Parties 10 9.521.054 1.257.436

- Other Trade Receivables 10 5.831.640 12.769.923

Other Receivables

- Receivables from Related Parties 11 - 1.822

- Other Receivables 11 51.367 32.746

Inventories 13 88.294.323 83.723.554

Other Current Assets 26 3.075.673 2.586.503

Fixed Assets 36.490.968 28.651.026

Other Receivables

- Other Receivables from Related Parties - -

- Other Receivables 11 487.985 518.638

Financial Investments 7 2.665.364 2.665.364

Investments Accounted by Equity Method 16 1.883.715 1.220.539

Tangible Fixed Assets 18 30.593.174 23.051.690

Intangible Fixed Assets 19 860.730 940.559

Deferred Tax Assets 35 - 254.236

TOTAL ASSETS 144.055.854 129.250.954


7776


INDEPENDENTLY AUDITED BALANCE SHEET DATED 31ST DECEMBER 2012 (All amounts expressed in “TRY”.)


INDEPENDENTLY AUDITED COMPREHENSIVE INCOME STATEMENT FOR THE PERIOD ENDINGON 31ST DECEMBER 2012 (All amounts expressed in “TRY”.)

EQUITY AND LIABILITIES Note ReferencesCurrent Period31st December

2012

Previous Period31st December

2011

Short Term Liabilities 69.587.389 65.668.119

Financial Liabilities 8 24.963.165 17.389.868

Trade Payables

- Trade Payables to Related parties 10 2.612.227 2.994.271

- Other Trade Payables 10 33.628.917 35.714.228

Other Payables 11 5.213.475 3.979.447

Tax Liability on Current Year 35 758.783 596.065

Accrued expenses 22 1.976.953 4.280.796

Other Short-Term Liabilities

- Liabilities to Related parties 26 138.057 -

- Other Short Term Liabilities 26 295.812 713.444

Long Term Liabilities 4.255.190 5.564.087

Financial Liabilities 8 2.139.120 3.846.890

Other Liabilities 11 62.874 251.498

Reserve for Employee Termination Benefits 24 1.838.958 1.465.699

Deferred Tax Liability 35 214.238 -

SHAREHOLDERS’ EQUITY 70.213.275 58.018.748

Shareholders’ Equity of Parent Company

Share capital 27 49.221.970 49.221.970

Valuation Reserve 27 9.365.572 -

Capital Inflation Adjustments 27 5.500.255 5.500.255

Restricted Reserves from Earnings 27 839.272 735.597

Previous Year Profit/Loss 27 2.457.251 1.296.438

Net Profit/Loss for the current year 27 2.828.955 1.264.488

TOTAL EQUITY AND LIABILITIES 144.055.854 129.250.954

CONTINUING OPERATIONS Note ReferencesCurrent Period

1st January 2012 31st December 2012

Previous Period1st January 2011

31st December 2011

Net Sales 28 181.110.537 175.258.719

Cost of Sales (-) 28 (118.364.106) (105.622.352)

GROSS PROFIT 62.746.431 69.636.367

Marketing, Selling and Distribution Expenses (-) 29 (49.717.912) (45.153.070)

General Administrative Expenses (-) 29 (12.369.043) (12.544.150)

Research and Development Expenses (-) 29 (1.562.146) (2.258.768)

Other Operating Income (+) 31 9.383.626 9.221.323

Other Operating Expenses (-) 31 (3.756.610) (10.069.415)

OPERATING PROFIT/LOSS 4.724.346 8.832.287

Profit/Loss Share on Investments Accountedby Equity Method

16 663.176 157.615

Financial Income 32 8.085.302 3.776.852

Financial Expenses (-) 33 (9.909.538) (10.230.814)

NET PROFIT/(LOSS) BEFORE TAXATION 3.563.286 2.535.940

Taxation on Continuing Operations

- Taxation on Income 35 (758.783) (996.939)

- Deferred Tax 35 24.452 (274.513)


7978


INDEPENDENTLY AUDITED COMPREHENSIVE INCOME STATEMENT FOR THE PERIOD ENDINGON 31ST DECEMBER 2012 (All amounts expressed in “TRY”.)


CASH FLOW STATEMENT FOR THE PERIOD ENDING ON 31ST DECEMBER 2012 WHICH IS NOT INDEPENDENTLY AUDITED (All amounts expressed in “TRY”.)

CONTINUING OPERATIONS Note ReferencesCurrent Period



31st December 2011

CONTINUING OPERATIONS PROFIT/LOSS FOR THE PERIOD 2.828.955 1.264.488

DISCONTINUED OPERATIONS - -

POST-TAX PROFIT/LOSS OF DISCONTINUEDOPERATIONS

2.828.955 1.264.488

PROFIT/LOSS FOR THE PERIOD 2.828.955 1.264.488

Other Comprehensive Income

Change in Fixed Assets Valuation reserve 9.365.572 -

OTHER COMPREHENSIVE INCOME 9.365.572 -

TOTAL COMPREHENSIVE INCOME 12.194.527 1.264.488

PROFIT / LOSS PER SHARE 36 0,000575 0,000257

Note ReferencesCurrent Period



31st December 2011

VERGİ ÖNCESİ DÖNEM KARI / ZARARI 3.563.286 2.535.940

Adjustments 3.864.818 4.939.049

1-Amortization and Depreciation Allowance (+) 18, 19, 30 4.775.103 4.309.951

2-Changes in Provisions (+/-) (910.285) 629.098

3-Other Adjustments (+/-) - -

NET CASH BEFORE CHANGE IN ASSETSand LIABILITIES 7.428.104 7.474.989

Changes in Assets and Liabilities (9.689.310) (2.206.177)

1-(Increase) / Decrease in Trade Receivables 6.938.283 (1.690.812)

2-(Increase) / Decrease in Receivables fromRelated parties

(8.263.618) 870.770

3-(Increase) / Decrease in Other Receivables 12.032 (137.879)

4-(ıncrease) / Decrease in Other Receivablesfrom Related parties

1.822 -

5-(Increase) / Decrease in Inventories (4.570.769) (12.053.688)

6-(Increase) / Decrease in Other Assets (1.509.469) 281.312

7-Increase / (Decrease in Trade Payables (2.085.311) 9.784.248

8-Increase / (Decrease) in Payables to Related parties (382.044) 622.769

9-Increase / (Decrease) in Other Payables 1.045.404 -

10-(Increase) / Decrease in Other Liabilities (417.632) 1.114.042

11-(Increase) / Decrease in Other Liabilitiesto Related parties 138.057 -

12-Tax Payments (596.065) (996.939)


8180


STATEMENT OF CHANGES ON EQUITY FOR THE PERIOD ENDING ON 31ST DECEMBER 2012WHICH NOT INDEPENDENTLY AUDITED(All amounts expressed in TRY.)


CASH FLOW STATEMENT FOR THE PERIOD ENDING ON 31ST DECEMBER 2012 WHICH IS NOT INDEPENDENTLY AUDITED (All amounts expressed in “TRY”.)

Note ReferencesCurrent Period



31st December 2011

NET CASH FROM ACTIVITIES (2.261.206) 5.268.812

Cash from Investing Activities (3.041.436) (6.107.445)

Fixed Asset Investments (-) 18, 19 (2.543.576) (3.737.310)

Fixed Asset Sales (+) 18, 19 165.316 414.776

Financial Asset Purchases - (2.627.296)

Cash provided from (+) / used in (-) Financial Assets Accounted by Equity Method

(663.176) (157.615)

Cash from Financing Activities 5.865.527 149.795

1- Increase / (Decrease) in Financial Payables 5.865.527 149.795

INCREASE / DECREASE IN CASH ANDCASH EQUIVALENTS

562.885 (688.838)

CASH AND CASH EQUIVALENTS AT THEBEGINNING OF THE PERIOD 6 227.944 916.782

CASH AND CASH EQUIVALENTSAT THE END OF THE PERIOD 6 790.829 227.944

Note References Capital

Distinction from Capital Inflation

Adjustments

Valuation Reserve

Balance as of 1st January 2011 49.221.970 5.500.255 -

Transfer from Profit for the Period toPrevious Period Profit

- - -

Net Profit / Loss for the Period - - -

Balance as of 31st December 2011 27 49.221.970 5.500.255 -

Balance as of 1st January 2012 49.221.970 5.500.255 -

Transfer from Previous Period Profit - -

Valuation Reserves of Tangible Fixed Assets Not 18 - - 9.365.572

Net Profit / Loss for the Period - - -

Balance as of 31st December 2012 27 49.221.970 5.500.255 9.365.572

Restricted Reserves from

Earnings

Net Profit / Loss for the Period

Previous Year Profit / Loss Total

Balance as of 1st January 2011 735.597 547.753 748.684 56.754.259

Transfer from Profit for the Period toPrevious Period Profit

- (547.753) 547.753 -

Net Profit / Loss for the Period - 1.264.488 - 1.264.488

Balance as of 31st December 2011 735.597 1.264.488 1.296.437 58.018.747

Balance as of 1st January 2012 735.597 1.264.488 1.296.438 58.018.748

Transfer from Previous Period Profit 103.675 (1.264.488) 1.160.813 0

Valuation Reserves of Tangible Fixed Assets - - - 9.365.572

Net Profit / Loss for the Period - 2.828.955 2.828.955

Balance as of 31st December 2012 839.272 2.828.955 2.457.251 70.213.275


8382

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTSDATED 31ST DECEMBER 2012(All amounts expressed in “TRY” unless otherwise stated.)

NOTE 1 –COMPANY OPERATIONS AND ORGANIZATIONS

1.1. Company Operations

Desa Deri Sanayi ve Ticaret A.Ş. (“the Company”) was established on 29th January 1982 and is engaged in production, sale, export and import of leather garments, bags, shoes and all kind of leather products.

Registered address of the Company is located at Halkalı Cad. No:208 Sefaköy- Küçükçekmece / İstanbul. The Company has three factories located in Çorlu, Düzce and Sefakoy and their addresses are below, Company has also Tuzla Free Zone Branch.

Çorlu Factory: Sağlık Mahallesi Kuzey Caddesi No: 14-24 Çorlu / Tekirdağ Düzce Factory: Organize Sanayi Bölgesi 9. Ada 4-5 Parsel Beyköy / Düzce

Contact details of the Company are as follows: Tel : 0090 212 473 18 00Fax : 0090 212 698 98 12Web : www.desa.com.tr

The Company’s share have been offered to public on 29-30th April 2004 and 30% of them have been being traded at İstanbul Stock Exchange (ISE) since 31st December 2012.

The Company has 1.954 employees as of 31st December 2012 (31st December 2011 - 2.020 Employees).

1.2. Capital Structure

The Company switched to the authorized capital system in 2007 and the upper limit of its authorized capital is 150.000.000 TRY. Its share capital as of 31st December 2012 is 49.221.970 TRY (31st December 2011: 49.221.970.-TRY), which is divided into 4.922.196.986 (31st December 2011: 4.922.196.986) shares where each share has a nominal value of 1 Kr.

Trade names and partnership share of the shareholders of the Company which hold more than 10% of the shares are as follows:

1.3. Affiliates and Subsidiaries

Trade names, areas of activity and registered addresses of affiliates and subsidiaries of the Company are as follows:

Up-to-date total assets and turnovers of the affiliates and the subsidiaries of the Company as of the report date and respective period details are as follows:

31st December 2012 31st December 2011

Name & Surname / Trade Name Share Ratio Share Amount Share Ratio Share Amount

Çelet Holding A.Ş. 54,28% 26.717.682 54,28% 26.717.682

Melih Çelet 14,92% 7.343.918 14,92% 7.343.918

As understood from the table given above, total assets and turnovers of the affiliates and subsidiaries of the Company as of 31st December 2012 are highly low except for Samsonite Seyahat Ürünleri A.Ş. Therefore, financial statements of those affiliates and subsidiaries have not been consolidated with the Company’s financial statements for the same period.

Financial statements dated 31st December 2012 of Samsonite Seyahat Ürünleri A.Ş. which is one of the affiliates of the Company have been consolidated with the financial statements of the Company for the same period by the equity method (Note 16).

Company Operations

Registered Address

31st December 2012

31st December 2011

Affiliates

Marfar Deri San. ve Tic. Ltd. Şti. Textile İstanbul-Turkey 50% 50%

Samsonite Seyahat Ür. A.Ş. Textile İstanbul 40% 40%

Subsidiaries

Leather Fashion Limited Textile Moscow-Russia 100% 100%

Sedesa Deri San. ve Tic. Ltd. Şti. Textile İstanbul-Turkey 99% 99%

Desa International Textile London – UK 100% 100%

Desa SMS Ltd. Textile London – UK 100% 100%

Desa International (UK) Ltd. Textile London – UK 100% 100%

Trade Name of Affiliates and Subsidiaries Total Assets Turnover

Marfar Deri San. ve Tic. Ltd. Şti. (31.12.2012) 3.533 -

Samsonite Seyahat Ürünleri A.Ş (31.12.2012) 7.133.816 21.052.969

Leather Fashion Limited - -

Sedesa Deri San. ve Tic. Ltd. Şti. (30.09.2012) 14.634 -

Desa International Ltd. (31.12.2012) 21.379 GBP -

Desa SMS Ltd. (31.12.2012) 529.718 GBP 254.689 GBP

Desa International (UK) Ltd. (31.12.2012) 194.723 GBP 246.737 GBP


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1.4. Approval of Financial Statements:

Financial statements of the Company were approved by the Board of Directors on 12th March 2013. The General Assembly and certain regulatory boards are authorized to make amendment to financial statements.

NOTE 2 – RULES ON PRESENTATION OF FINANCIAL STATEMENTS

2.1. Basic Principles for Presentation

Principles on Preparation of Financial Statements and Certain Accounting Policies

The Company keeps its accounting records in compliance with the Turkish Code of Commerce and prepares its financial statements submitted to the Capital Market Board (“CMB”) in the format as required by the Capital Market Board.

With “Communique Serial XI, No. 29 on Principles of Financial Reporting in Capital Market”, the Capital Market Board (“CMB”) stipulates principles, procedures and rules on financial reports to be issued by companies and preparation and presentation of such reports to respective authorities. The said Communique entered into force so as to be applicable for first interim financial statements for the fiscal periods starting from 1st January 2008 and upon enforcement of that Communique, “Com-munique Serial XI, No. 25 on Accounting Standards in Capital Market” (“Communique Serial: XI, No: 25”) was abolished. As per the said communique (“Communique Serial: XI, No: 29”), financial statements are required to be issued by companies according to the International Accounting Standards / Financial Reporting Standards (IAS/IFRS) as of 31.03.2008.

The financial statements attached have been issued as per the IAS/IFRS under Communique Serial: XI, No: 29 of the CMB and submitted according to the formats recommended to be used with the announcement made by the CMB on 14th April 2008. As per the amendments to TMS 1 which is applicable for fiscal periods starting on or after 1st January 2009, the bal-ance sheet has been submitted under the title of statement of financial position and profit/loss sections have been submitted in a single comprehensive income statement.

Adjustment of Financial Statements in High Inflation Periods

With a resolution made by the CMB on 17th March 2005, it was announced that inflation accounting practice is not required for companies operating in Turkey and preparing financial statements according to the Financial Reporting Standards of the CMB as of 1st January 2005. Therefore, Standard No. 29 on “Financial Reporting in High Inflation Economies” (“UMS 29”) published by the International Accounting Standards Board (IASB) has not been applied to the attached financial statements starting from 1st January 2005.

Comparative Information and Adjustment of Financial Statements of Previous Periods

Financial statements of the Company are being prepared in comparison with the previous period in order to determine fi-nancial position, performance and cash flow trends of the Company. Financial statements dated 31st December 2012 and

31st December 2011 and notes regarding the financial state-ments, and statements of income, comprehensive income, cash flow and changes in equity for the periods ending on 31st December 2012 and 31st December 2011 are submit-ted comparatively.

2.2. Rules of Consolidation Applied

Subsidiaries

A subsidiary is an enterprise controlled by another enterprise. When investor company incurs is entitled to variable returns due to its relation with such enterprise it has made investment in and it is also able to affect such returns with its power on such enterprise it has made investment in, it is considered that it controls such enterprise invested. Directly or indirectly holding of more than 50% of shares of an enterprise shows that such enterprise in controlled.

Subsidiaries of the Company have not been consolidated because of their low operating volume. Respective subsidiaries have been valued with their fair value and provisions have been reserved for those incurring impairment.

Affiliates

Marfar Deri San. ve Tic. Ltd. Şti., one of the affiliates of the Company has not been consolidated due to its low operating volume. Samsonite Seyahat Ürünleri A.Ş. has been consolidated according to the equity method.

Accounting for affiliates of the Company has been made according to the equity sharing method. These enterprises are such enterprises where the Company usually holds 20% to 50% of voting rights or on which the Company has an important effect although it does not have the authority to control activities of such enterprise. Affiliates are shown in the balance sheet by adding changes in share of the Company in net assets of the affiliates which have occurred following purchase to their costs and by deducting provision for impairment, if any. Income statements reflect contribution of the affiliates of the Company to operating results.

Unrealized profits arising from transactions between the Company and its affiliate have been adjusted in proportion to share of the Company in respective affiliate, and for unrealized losses, transactions have been adjusted in they do not show such transferred asset have incurred an impairment.

2.3. Amendments to Accounting Policies

The Company has implemented its accounting policies in keeping with the previous year. Significant amendments to the accounting policies and significant accounting errors identified are applied retrospectively and financial statements of previous periods are reissued.

2.4. Amendments to and Errors in Accounting Estimates

For preparation of financial statements, the company management is required to make assumptions and estimations that will affect asset and liability amounts reported and determine potential liabilities and commitments as of balance sheet date and income and expense amounts as of reporting period. Realized results can be different from estimates. Estimates are regularly reviewed, and in case of significant deviations, necessary adjustments are made and reflected into income statements of such period of their realization.

2.5. New and Revised International Financial Reporting Standards

Accounting policies taken as basis for preparation of the financial statements for the fiscal period ending on 31st December 2012 have been implemented in keeping with those used in the previous year, apart from new and revised standards which are applicable as from 1st January 2012 as summarized below and the IFRIC interpretations. Effects of those standards and interpretations on financial position and performance of the Company are explained in respective paragraphs.


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a) New and revised standards affecting presentation and note disclosures of the Company:

Not available.

b) New and revised standards affecting financial performance and/or balance sheet of the Company:

Not available.

c) New standards, amendments and interpretations applicable as from 1st January 2012 are as follows:

IAS 12 Income Taxes – Recovery of Base Assets (Amendment)

Amendments to IAS 12 are applicable for annual accounting periods starting on or after 1st January 2012. As per IAS 12, deferred tax associated with an asset is required to be calculated depending on whether book value of such asset has been recovered or not as the result of its use or sale. In case an asset is recorded using the fair value method as specified in IAS 40 Investment Properties Standard, it may be a difficult and subjective decision to determine whether book value has been recovered through use or sale of such asset. This amendment to the standard has solved the issue practically by telling to select the estimation that the asset is to be recovered by means of selling. This amendment has no effect on the financial position or performance of the Company.

IFRS 7 (Amendments) Presentation – Transfer of Financial Assets

The amendments to IFRS 7 are applicable for annual accounting periods starting on or after 1st July 2011. The amendments to IFRS 7 impose note liabilities regarding transactions involving transfer of financial assets. Such amendments have been made to present more transparently the risks incurred when transferor of a financial asset still maintains its effect on such asset although transfer of such

asset completed. Such amendments also require additional disclosures in case financial asset transfers are not equally distributed to respective period. The amendments to IFRS 7 have had no significant effect on notes of the Company. However if the Company makes any financial asset transfer transaction of another kind in future, notes for such transfers can be affected.

d) Standards published but not entered into force and not put into practice earlier are as follows:

New standards, interpretations and amendments published as of approval date of financial statements but not entered into force yet for current reporting period and not put into practice earlier by the Company are given below. The Company shall make necessary amendments that will affect its financial statements and notes following enforcement of new standards and interpretations unless otherwise specified.

Improvements to the IFRS

The IASC has published Annual IFRS improvements for the period of 2009-2011 containing amendments to existing standards. Necessary but non-urgent amendments are made under annual improvements. The amendments are applicable for annual accounting periods starting on and after 1st January 2013. Earlier application is allowed as long as necessary disclosures given. The Company has been evaluating the effects of the project on its financial position and performance.

UFRS 1 Uluslararası Finansal Raporlama Standartlarının İlk Uygulaması:

IFRS 1 First Application of International Financial Reporting Standards:IFRS 1 has clarified allowing of repeated application and recognition of borrowing costs for certain qualifying assets.

IAS 1 Presentation of Financial Statements: Liabilities concerning comparative financial statement details have been clarified.

IAS 16 Tangible Fixed Assets: It has been clarified that spare parts and maintenance

equipment meeting the definition of tangible fixed asset are not inventories.

IAS 32 Financial Instruments – Presentation: It has been clarified that tax effects of distributions to shareholders are required to be accounted under IAS 12. The amendment removes existing liabilities in IAS 32 and requires accounting of all kind of income tax arising from distributions made to shareholders by companies according to provisions of IAS 12.

IAS 34 Interim Financial Reporting: Reporting by segments for total assets for interim periods has been clarified in keeping with requirements in IFRS 8 Operating Segments Standard.

IAS 1 Presentation of Financial Statements – Presentation of Other Comprehensive Income Statement Items (Amendment)

It is applicable for annual accounting periods starting on or after 1st July 2012 and earlier application is allowed. The amendments made are changing only classification of items included in other comprehensive income statement. Other comprehensive income items are divided into two groups as per the amendments to IAS 1: (a) items which are not to be reclassified as profit or loss later and (b) items to be classified as profit or loss later when certain conditions are provided. Taxes on other comprehensive income items shall be distributed in the same way and the amendments in question have not made any change in disclosures on presentation of other comprehensive income items prior taxation or after deduction of tax. These amendments can be applied retrospectively. Apart from the amendments related to the abovementioned presentation, application of the amendments to IAS 1 has no impact on profit or loss, other comprehensive income and total comprehensive income. The amendments are affecting the rules of presentation only and it is anticipated that they will have no effect on financial position or performance of the Company.

IAS 19 Employee Benefits (Amendment)

The standard is applicable for annual accounting periods starting on or after 1st January 2013 and earlier application is allowed. It will be applied retrospectively save for some exceptions.

Many issues have been clarified or changed in practice with this amendment to the standard. The most important ones amongst many changes are removal of benefit obligation range mechanism practice and determination of short- and long-term employee benefits segregation based on estimated payment date of liability instead of the principle of entitlement by personnel. The Company has been evaluating the effects of the revised standard on its financial position and performance.

IAS 27 Separate Financial Statements (Amendment)

The Standard is applicable for annual accounting periods starting on or after 1st January 2013 and earlier application is allowed. As the result of publication of IFRS 10 and IFRS 12, the IASC has also made some amendments to IAS 27. As the result of these amendments, IAS 27 now only covers accounting of subsidiaries, jointly controlled entities and affiliates in separate financial statements. Transition provisions of those amendments are same as IFRS 10. It is anticipated that the said amendment will have no effect on financial position or performance of the Company.

IAS 28 Investments in Associates and Joint Ventures (Amendment)

The standard is applicable for annual accounting periods starting on or after 1st January 2013 and earlier application is allowed. As the result of publication of IFRS 11 and IFRS 12, the IASC has also made some amendments to IAS 28 and changed the title of the standard as IAS 28 Investments in Associates and Joint Ventures. With those amendments, accounting by equity method is required for business ventures in addition to associates. Transition provisions of those amendments are same as IFRS 11. It is anticipated that the standard in question will have no effect on financial position or performance of the Company.

IAS 32 Financial Instruments: Presentation – Netting of Financial Assets and Liabilities (Amendment)

The amendment clarifies the meaning of the wording “availability of an existing legal right for netting of accounted amounts” and the application area of IAS 32 netting principle in settlement systems which do not synchronously take place and where payments are made gross (such as clearing offices).


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The amendments are applicable for annual accounting periods starting on or after 1st January 2014, and earlier application is allowed. It is anticipated that the standard in question will have no effect on financial position or performance of the Company.

IFRS 7 Financial Instruments: Disclosures – Netting of Financial Assets and Liabilities (Amendment)

These disclosures provide financial statement users with useful information for:

i) evaluation of effects and possible effects of netted transactions on financial position of the company and

ii) comparison and analysis of financial statements issued according to the IFRS and other generally-accepted accounting principles. The amendments are applicable for annual accounting periods starting on or after 1st January 2013 retrospectively and interim periods in such accounting periods. The amendments are affecting only the disclosure principles and it is anticipated that they will have no effect on financial position or performance of the Company.

IFRS 9 Financial Instruments – Classification and Disclosure

With the amendment made in December 2011, the new standard shall be applicable for annual accounting periods starting on or after 1st January 2015. Earlier application of the standard is allowed. The first stage of IFRS 9 Financial Instruments standard stipulates new provisions on measurement and classification of financial assets and liabilities. The amendments to IFRS 9 shall mainly affect classification and measurement of financial assets and measurement of financial liabilities which are classified as those measured by reflecting fair value difference to profit or loss, and they require presentation of credit risk-related part of fair value differences of such financial liabilities in other comprehensive income statement. The company has been evaluating the effects of the standard on its financial position and performance.

IFRS 10 Consolidated Financial Statements

The standard is applicable for annual accounting periods

ending on or after 1st January 2014 and the amendments shall be applied retrospectively with some individual arrangements. Earlier application is allowed on the condition of simultaneous application of the standards of IFRS 11 Joint Arrangements and IFRS 12 Disclosures of Interests in Other Entities.

It has taken the place of consolidation-related part of IAS 27 Consolidated and Separate Financial Statements. It is a principle-based standard which leaves a larger space for financial statement issuers to decide. A new “control” definition has been provided, which is to be used to determine which entities would be consolidated. According to IFRS 10, the only basis for consolidation is control. Furthermore, IFRS 10 redefines the control so as to include the following three elements: (a) having power on the entity invested, (b) incurring variable returns due to its relation with the entity invested, and (c) being able to use its power on the entity invested to affect the amount of returns to be obtained. It is anticipated that the standard in question will have no effect on financial position or performance of the Company.

IFRS 11 Joint Arrangements

The standard is applicable for annual accounting periods ending on or after 1st January 2013 and the amendments shall be applied retrospectively with some arrangements. Earlier application is allowed on the condition of simultaneous application of the standards of IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosures of Interests in Other Entities. IFRS 11 has taken the place of IAS 31 Interests in Joint Ventures. IFRS 11 explains how joint agreements jointly controlled by two or more parties are required to be classified. Upon publication of IFRS 11, IFRIC 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers interpretation have been revoked. Under IFRS 11, joint agreements are classified as joint activities or joint ventures depending on contractual rights and liabilities of respective parties. On the other hand, there are three types of joint agreements under IAS 31, including jointly-controlled entities, jointly-controlled assets and jointly-controlled activities. In addition, joint ventures under IFRS 11 are required to be accounted using equity method while jointly-controlled ventures

under IAS 31 can be accounted wither by equity method or proportionate consolidation method. It is anticipated that the standard in question will have no effect on financial position or performance of the Company.

IFRS 12 Disclosures of Investments in Other Entities

The standard is applicable for annual accounting periods ending on 1st January 2013 and the amendments shall be applied retrospectively with some arrangements. Earlier application is allowed on the condition of simultaneous application of the standards of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements. IFRS 12 contains all disclosures related to Condensed consolidated financial statements formerly included in IAS 27 Consolidated and Separate Financial Statements standard as well as all note disclosures required to be provided for associates, joint ventures, subsidiaries and structural entities formerly included in IAS 31 Interests in Joint Ventures and IAS 28 Investments in Associates. The new standard contains more note disclosures regarding investments in other entities compared to applicable standards in general. It is anticipated that the standard n question will have no effect on financial position or performance of the Company.

IFRS 13 Fair Value Measurement

The standard is applicable for annual accounting periods ending on or after 1st January 2013 and shall be applied retrospectively. Earlier application is allowed. The new standard explains how fair value shall be measured under the IFRS, but imposes no change in when fair value can be used and/or is required to be used. It is a guide for all fair value measurements. The new standard also imposes additional disclosure obligations concerning fair value measurements. New disclosures are required to be provided only as from the period when IFRS 13 entered into force – which means, any disclosure comparative to previous periods is not required. The Company is anticipating that the standard will have no significant effect on its financial position or performance, but application of the new standard will result in more comprehensive notes regarding financial statements.

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

It shall enter into force for fiscal periods starting on or after 1st January 2013 and earlier application is allowed. Companies shall be required to fulfill requirements of this interpretation for stripping costs incurred in the production phase as from the beginning of the period which is comparatively presented. The interpretation clarifies when and under which conditions excavations will be accounted as an asset and how such accounted asset will be measured for first recognition and subsequent periods. This interpretation is not applicable for the Company and it is anticipated that it will have no effect on financial position or performance of the Company.

2.6. Summary of Important Accounting Policies

a) Cash and Cash Equivalents

Cash means the cash money and demand deposit in the enterprise while cash equivalents mean short-term and highly-liquid funds and investments which can be easily converted into cash and which have an insignificant conversion risk in terms of value (checks, type-b liquid funds, receivables from reverse repo transactions, deposits with a term less than 3 months, public debt instruments with a due date closer than 3 months, receivables from money markets etc.). (Note 6)

b) Financial Investments

Classification: Financial Investments are classified in financial statements as “Financial Assets at Fair Value through Profit/Loss”, “Financial Instruments to be Held until Maturity date” and “Available-for-Sale Financial Assets”. Financial Assets at Fair Value through Profit/Loss mean financial assets held in order to be sold soon and make profit; Financial Assets to be Held until Maturity date mean financial assets which contain fixed or determinable payments which the enterprise intends and is able to keep until maturity date; which have a fixed maturity date and of which fair value is reflected to profit/loss during first accounting by the enterprise, or which are not classified as available-for-sale financial assets; and Available-for-Sale Financial Assets mean financial assets which are defined as available-for-sale by the enterprise or


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which are to be held until maturity date or which are not defined as financial assets at fair value through profit/loss. Valuation: A financial asset or liability is valued at its “fair value” during first recognition of it. Fair value at first recognition is the ‘acquisition cost’ of that financial asset. Financial assets are valued at their ‘fair value’ on balance sheet date for subsequent periods (effective interest method for financial assets to be held until maturity date). Fair value of a financial asset traded in an active market (stock exchange) is its ‘Stock Exchange Price’.

Unquoted equity financial assets which cannot be presented at its fair value as its fair value cannot be determined accurately are valued by deducting, if any, provision for impairment from the sum of their book value and acquisition cost.

Profit or loss incurred related to a financial asset or financial liability which is classified as “at fair value through profit/loss” is recognized as profit/loss. Profit and loss incurred related to available-for-sale financial assets (except for impairment losses and foreign exchange gains or losses) is recognized in equity until such financial assets are excluded from balance sheet. In case of exclusion from respective financial assets from balance sheet, gains and losses recognized in equity formerly are transferred to profit/loss. Interests calculated using effective interest method are recognized in profit/loss. In case the enterprise is entitled to get respective payment, dividends arising from available-for-sale equity instruments are recognized in profit/loss. (Note 7)

c) Trade Receivables

Trade receivables mean receivables from customers in return for sale of commodities or services within the framework of main activities. Short-term receivables without a fixed interest rate are shown at their original invoice value in case accrued interest effect is not very significant. In case accrued interest effect is significant, it is shown by deducting provision for doubtful receivables from effective interest rate and discounted net realizable value.

Provisions for doubtful receivables are reserved considering amount of uncollectible debts, securities taken in return for them, past experiences of the Company Management and economic conditions. If doubtful receivables are fully or partially collected following reserving provision for doubtful receivables, such amount collected is deducted from provision for doubtful receivables and recorded in other operating revenues. For determination of net realizable value, effective interest method is used and for domestic sales, interest rate for government debt securities suitable for term of receivable is taken as basis while for export sales, Libor rate is taken as basis.

d) Impairment in Financial Assets

Financial assets or financial asset groups other than financial assets at fair value through profit or loss are evaluated on each balance sheet date to determine whether there is any indicator showing that they have incurred impairment. In case of a neutral indicator that respective financial asset has incurred any impairment due to occurrence of one or more events following first recognition of such financial asset and negative effect of such event on reliably estimated future cash flows of such financial asset or asset group. Impairment amount for credits and receivables is the difference between book value and current value which is calculated by discounting estimated future cash flows at effective interest rate of financial asset.

For all financial assets other than trade receivables where book value is reduced by using a reserve account, impairment is directly deducted from book value of respective financial asset. In case of failure to collect trade receivable, such amount is deducted from reserve account and written off. Changes in reserve account are recognized in income statement.

e) Related Parties

For the purpose of financial statements, shareholders, important executive personnel and members of the Board of Directors, their families and entities, associates and ventures controlled by or affiliated to the same, and group companies are considered and defined as related parties.

f) Revenue

Revenues are measured at fair value of the charge received or to be received and deducted as much as estimated customer returns, discounts and other similar provisions.

Sale of goods

Revenue obtained from sale of goods is recognized when the following conditions are fulfilled:

- The Company transfers all significant risks and gains related to ownership to the buyer; the Company has no ongoing administrative participation associated to ownership or no effective control on goods sold; income amount is measured reliably; economic benefits related to the transaction can flow to the entity; and costs arising from the transaction are measured reliably.

Service delivery

Revenue from any service delivery agreement is recognized according to completion stage of such agreement.

Dividend and interest income

Dividend income from share investments is recorded when shareholders are entitled to receive dividend. Interest income are accrued in respective period based on effective interest rate which brings estimated cash inflows expected to be obtained for life from remaining principal balance and respective financial asset to net book value of such asset.

Rental income

Rental income: Rental income from real estates is recognized using the straight-line method during respective rental agreement.

g) Inventories

Inventories are valued at either net realizable value or cost amount, whichever is lower. Elements constituting the cost included in inventories are material, workmanship

and general production expenses. Cost is calculated by the weighted average method. Net realizable value is the value obtained by deducting estimated sales closing cost and estimated sales costs required for selling from estimated sales price occurring during ordinary course of business. (Note 13)

h) Tangible Fixed Assets

Tangible fixed assets are shown in financial statements at their net value remaining after deduction of accumulated depreciations from their book value. Depreciation is calculated by the straight-line depreciation method using pro rata temporis principle at useful life of the tangible fixed asset.

Useful lives taken as basis for calculation of depreciation and depreciation rates applied are as follows:

Tangible assets are examined to determine any potential impairment and as the result of such examination, if book value of tangible fixed asset is more than its recoverable amount, its book value is deducted to its recoverable value by reserving provision. Recoverable value is either net cash flows from current use of or net sales price of respective tangible fixed asset, whichever is higher.

Profits and losses incurred due to disposal of tangible assets are included in other operating income and expense accounts.

Type of Tangible Asset

Useful Life (Year)

Depreciation Rate

Buildings 40 2,5%

Machinery Equipment

5 - 20 5% - 20%

Fixtures 5 - 20 5% - 20%

Vehicles 5 - 20 5 - 20

Special Costs 5 - 10 20 %-10%


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Expenses arising from replacement of any part of tangible fixed assets can be activated if they increase future economic benefit of respective asset with repair and maintenance costs. All other expenses are recognized in expense items in income statements as they are incurred. (Note 18)

i) Intangible Fixed Assets

Intangible fixed assets include information systems acquired, royalties, computer software and development costs. Intangible fixed assets are recorded at their acquisition cost and depreciated using the straight-line depreciation method at their estimated useful life for a time period not exceeding 15 years from their date of acquisition. As brands have a limitless life, depreciation cannot be reserved for them. In case of no impairment, book value of intangible fixed assets is brought to their recoverable value. (Note 19)

j) Provisions, Contingent Assets and Liabilities

Provisions are recognized when the company has a legal or structural liability existing as of balance sheet date and coming from past, it is possible for economically-beneficial resources to be provided to fulfill the liability and liability amount can be reliably estimated.

Any asset and liability; which can be confirmed through actualization of one or more uncertain future event arising from past events and of which existence is not under full control of the enterprise; is not included in financial statements. Such assets and liabilities are disclosed in notes as “contingent liabilities and assets”. (Note 22)

k) Government Grants and Aids

All government grants including non-monetary government grants which are followed with their fair value are reflected into financial statements when there is a reasonable assurance regarding that necessary conditions for obtaining them are fulfilled by the company and necessary conditions for the company to get such grant will occur. Government grants are reflected into financial statements as revenue systematically during the periods of respective expenses so as to be matched to expenses aimed to be recovered with such grants. (Note 21)

l) Employee BenefitsReserve for employee termination benefits indicates the estimated current value of total amount of potential future liabilities of the Company that may arise in case any personnel retires, is dismissed, is called for military service or dies after completing minimum one year service as per the Turkish Labor Law. (Note 24)

m) Borrowing Cost

Credits are recorded on the day of their receipt with their value obtained after deducting transaction expenses from the credit amount received. Credits are followed in future days in the consolidated financial statements with their discounted value calculated by the effective interest method. Difference between the credit amount received (excluding transaction expenses) and repayment value is recognized on the accrual basis during the credit period in the consolidated income statement.

In case of such assets which require a significant time to be ready for use and sale, interest expenses which can be directly associated with its purchase, production or manufacturing are added to its cost until such asset becomes ready for use or sale. All other financing expenses are directly recorded as expense in the period of their occurrence.

n) Leasing

Tangible fixed assets acquired by leasing are activated at their fair value after deduction of tax advantages or incentives at the beginning of the leasing period or then discounted value of minimum rent payments, whichever is lower. Principal rent payments are presented as liability and decreased as they are paid. Interest payments are recognized as expense in the income statement during the leasing period. Tangible fixed assets acquired by leasing contracts are subject to depreciation during useful life of such assets.

o) Foreign Exchange Transactions

Foreign exchange transactions taking place within the period have been converted at exchange rates applicable on date of such transaction. Foreign currency-based monetary assets and liabilities have been converted at exchange rates applicable on the balance sheet date. Exchange gains or losses arising from conversion of foreign currency-based monetary assets and liabilities have been reflected in the income statement as income or expense.

p) Tax Assets and Liabilities

Tax Liability consists of the sum of current-year tax and deferred taxes.

Current-Year Tax: Current-year tax is calculated over taxable part of the period profit. Taxable profit is different from the profit included in the income statement as it excludes items which can be taxable or deductible from tax in other years or items which is not taxable or deductible from tax. Current tax liability of the Company has been calculated using the tax rate legalized or significantly legalized as of the balance sheet date.

Deferred Tax: Deferred tax assets and liabilities are calculated over temporary differences between book values of assets and liabilities in financial statements and their tax value. For calculation of deferred tax, tax rates applicable as of the balance sheet date are used as per applicable tax legislation. While deferred tax liabilities are calculated for all temporary taxable differences, deferred tax assets consisting of deductible temporary differences are calculated on the condition that it is highly possible to benefit from such differences by obtaining taxable profit in future. Such assets and liabilities cannot be recognized if they arise from inclusion of any temporary difference related to

transactions not affecting trade or financial profit/loss, goodwill or other assets and liabilities into the financial statements for the first time (except for mergers).

Book value of a deferred tax asset is reviewed on each balance sheet date. Book value of a deferred tax asset is decreased as much as it is not possible to get financial profit at a level that will allow obtaining benefit a certain or whole part of it.

Deferred tax assets and liabilities are set off in case there is a legal right regarding offset of current tax assets and current tax liabilities or such assets and liabilities are associated with the income tax collected by the same tax authority or the company has the intention to make payment by netting its current tax assets and liabilities.

Current and Deferred Period Tax: Current tax and deferred tax for the period is recognized as expense or income in the income statement, save for those associated with the items recognized directly as receivable or payable in the equity (in this case deferred tax of respective items are also directly recognized in the equity) or those arising from first recording of company mergers. (Note 35)

r) Profit/Loss per Share

Profit/loss per share is determined by dividing net profit/loss included in the income statement by weighted average number of existing shares within the period.

Companies in Turkey can increase their capital by distributing shares (“bonus share”) to existing shareholders at the ratio of their share from previous period profit and equity inflation adjustment differences account. While calculating profit/loss per share, such bonus shares are considered issued shares. Therefore,


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weighted average number of shares used in calculation of profit/loss per share is obtained by retrospectively applying the issue of bonus shares.

There is no bonus share distributed by the Company within the year.

s) Events after the Balance Sheet Date

Events after the balance sheet date cover all events between the balance sheet date and authorization date for publication of the balance sheet even if they occur after public disclosure of any profit announcement or other selected financial information.

In case of any event requiring adjustment after the balance sheet date, the Company adjusts amounts included in the financial statement according to such new situation.

t) Derivatives and Embedded Derivatives

Derivatives of the Company consist of forward exchange contracts. While such derivatives provide an effective protection for the Company against economic risks, they are recognized as trading derivatives in the financial statements as they do not meet the necessary requirements in terms of risk accounting as per IAS 39 “Recognition of financial instruments”.

Trading derivatives are reflected into the financial statements with their cost value first and then valued at their reasonable value in the periods following their recognition. Any profit and loss arising from any change in reasonable value of such instruments are associated with the income statement as income or expense.

Forward exchange contracts are valued at their market price or discounted cash flows. Derivatives of which

reasonable value is positive are recognized in other assets in the balance sheets while negative ones are in other liabilities. (Note 39)

u) Financial Instruments and Hedging

The Company is exposed to various financial risks due to its activities. Such risks are credit risk, liquidity risk and market (exchange rate and interest rate). General hedging program of the Company is to focus on minimizing potential negative effects of variability of financial markets on financial performance of the Company.

Credit Risk: It consists of deposits kept at banks and customers exposed to credit risk including outstanding receivables and guaranteed operations.

Liquidity Risk: Generally, it is the risk of having no cash at hand or cash inflow sufficient to recover cash outflows fully and in a timely manner as the result of the instability of cash flows of the company. It can occur related to the market or related to funding.

Market-related liquidity risk: It means the potential loss occurring when the company fails to enter into the market as required, close out or getting out of its positions with a proper price, in sufficient amounts and quickly due to shallow market structure for some products and obstructions and divisions in the markets.

Funding-Related Liquidity Risk: It means the possibility of potential failure to fulfill the funding liability with a reasonable cost due to instabilities in cash inflows and outflows and maturity-related cash flow inconsistencies.

Market Risk: For in- and off-balance sheet positions, it is the possibility of incurring loss due to risks resulted from interest, exchange difference and share price changes arising from fluctuations in financial markets.

Interest Rate and Exchange Rate Risk: It is the risk of impairment of an asset or a financial instrument due to changes in the exchange rate or interest rates. Such risk is usually managed by keeping such assets affected from interest and exchange rate changes at hand for a short term.

v) Cash Flow Table

In the cash flow table, cash flows for the period are reported in three categories including main, investment and financing activities. Cash and cash equivalents included in the cash flow table cover cash and bank deposits as well as securities of which maturity is equal to or shorter than 3 months.

y) Netting

Financial assets and liabilities are presented net in case necessary legal right is available, there is intention to clearly determine such assets and liabilities or acquisition of assets and fulfillment of liabilities take place simultaneously.

z) Continuity of Business

The Company has prepared its financial statements according to the going concern concept. The Company targets to increase its turnover and profitability by using its liability and equity balance in the most efficient way and by opening new stores. In parallel with this policy, total equity of the Company is TL 70.213.275 as of 31st December 2012.

NOTE 3 – COMPANY MERGERS

Unavailable. (31st December 2011 - Unavailable)

NOTE 4 – JOINT VENTURES

Unavailable. (31st December 2011 - Unavailable)

NOTE 5 – REPORTING BY SEGMENTS

Since the Company has only one main activity area and carried out its activities in Turkey, reporting has not been made by segments. (31st December 2011 - Unavailable)


9796

NOTE 6 – CASH AND CASH EQUIVALENTS

Details of cash and cash equivalents are as follows as of 31st December 2012 and 31st December 2011:

There is no blocked account in bank deposits of the company as of 31st December 2012. (31st December 2011: Unavailable)

NOTE 7 – FINANCIAL INVESTMENTS

a) Short-Term Financial Investments

Unavailable. (31st December 2011- Unavailable)

b) Long-Term Financial Investments

All long-term financial investments are available-for-sale financial assets and consist of unlisted securities. Since Desa International Limited and Leather Fashion Limited which are subsidiaries as of 3st December 2012 and not consolidated due to their low turnover have lost their equities, impairment is calculated at the amount given in assets and presented in Financial Investments account.


Cash 221.550 165.406

- TRY 211.609 149.091

- USD 4.062 2.407

- EUR 5.877 13.908

- GBP 2 -

Banks 572.092 101.887

Demand Deposit

- TRY 542.223 79.973

- USD 5.183 6.268

- EUR 7.099 7.949

- GBP 17.584 7.697

- CHF 3

Barter Checks (2.813) (39.349)

-TRY (2.813) (39.349)

Total 790.829 227.944


Long-Term Securities 33 33

GSD Holding A.Ş. 33 33

Affiliates 10.000 10.000

Marfar Deri San. ve Tic. Ltd. Şti. 40.000 40.000

Associations Capital Subscription (-) (30.000) (30.000)

Subsidiaries 2.655.331 2.655.331

Leather Fashion Limited 6.871 6.871

Provision for Impairment of Leather Fashion Limited (-) (6.871) (6.871)

Sedesa Deri San. ve Tic. Ltd. Şti. 21.164 21.164

Desa International Ltd. 3.100.203 3.100.203

Provision for Impairment of Desa International (-) (3.100.203) (3.100.203)

Desa SMS Ltd. 1.709.405 1.709.405

Desa International (UK) Ltd. 924.762 924.762

Subsidiaries Capital Subscription (-) - -

Total 2.665.364 2.665.364


Bank Loans 24.291.474 17.338.785

Credit Card Debts 671.691 51.083

Leasing Payables (Net) - -

Toplam 24.963.165 17.389.868

NOTE 8 – FINANCIAL LIABILITIES

a) Details of Short-Term Financial Liabilities are as follows:


9998

aa) Details of short-term bank loans are as follows:

ab) Details of short-term leasing payables are as follows:

ba) Details of long-term bank loans are as follows:

bb) Details of long-term leasing payables are as follows:

There is no long-term leasing payable as of 31st December 2012. (31st December 2011 – Unavailable).

NOTE 9 – OTHER FINANCIAL LIABILITIES


NOTE 10 – TRADE RECEIVABLES AND PAYABLES

a) Short-Term Trade Receivables

aa) Receivables from Related parties

(*)There is no short-term leasing debt. (31st December 2011 – Unavailable).

b) Details of Long-Term Leasing Payables are as follows:


Currency Unit Amount in Foreign Currency Amount in TRY

Effective Interest %

Amount in Foreign Currency Amount in TRY

Effective Interest %

USD 4.037.819 7.197.816 4,57 – 5,37 2.826.546 5.339.062 6,04 - 6,76

EURO 3.544.685 8.336.035 4,93 – 5,07 3.539.236 8.649.185 4,50 - 6,71

TRY - 8.757.623 8,06 – 15,32 - 3.350.538 12,47-16,08

Total 24.291.474 17.338.785


Currency Unit Amount

in Foreign Currency

Amount in TRY Effective Interest %

Amount in Foreign Currency

Amount in TRY Effective Interest %

USD 1.200.000 2.139.120 4,79 2.036.577 3.846.890 4,51

Toplam 2.139.120 3.846.890


Leasing Payables 5 5

Deferred Leasing Debt Costs ( - ) (5) (5)

Leasing Debt ( Net ) (*) - -


Partners 476.205 354.543

Çelet Holding 476.205 354.543

Group Companies 9.050.177 912.091

Adesa Deri 8.090.894 293.720

Sedesa Deri 169 1.307

Desa International 57.405 24.645

Marfar Deri 23.721 21.314

Yapı Çimento 5.010 4.145

Desa İnternational UK Ltd 165.779 148.866

Desa SMS 707.199 418.094

Deferred Financing Income/Expense (-) (5.328) (9.198)

Provision for Doubtful Receivables - -

Total 9.521.054 1.257.436


Bank Loans 2.139.120 3.846.890

Leasing Payables (Net) - -

Total 2.139.120 3.846.890


101100

Movement table for doubtful receivables from related parties is as follows: Aging of doubtful trade receivables for which a provision is reserved is as follows.

b) Short-Term Trade Payables

ba) Trade Payables to Related parties

bc) Long-term trade payables

There is no long-term trade payable. (31st December 2011 – Unavailable).

bb) Other Trade Payables

ab) Other Trade Receivables

Movement table of provision for doubtful receivables is as follows:


Beginning of the Period - 1.609.015

Provision reserved within the Period /Adjustment (+) - -

Provision Collected within the Period (-) - -

Provision Removed from Records (-) - (1.609.015)

End of the Period - -


Receivables overdue up to 90 days - 92.914

Receivables overdue longer than 90 days - -

Receivables overdue longer than 180 days (797.217) 615.628

End of the Period (797.217) 708.542

Group Companies 31st December 2012 31st December 2011

Samsonite Seyahat Ürünleri 2.624.292 2.329.365

Serga Deri 11.398 20.554

Other Related Parties

Marshall Farmer - 684.248

Subtotal 2.635.690 3.034.167

Deferred Financing Income (-) (23.463) (39.896)

Total 2.612.227 2.994.271


Suppliers 20.502.586 24.275.983

Notes and Bills Payable 13.342.090 11.815.458

Subtotal 33.844.676 36.091.441

Deferred Financing Income (-) (215.759) (377.213)

Total 33.628.917 36.714.228


Accounts Receivable 2.998.247 9.630.684

Doubtful Trade Receivables 797.217 708.542

Credit Card Receivables 2.901.162 3.247.361

Subtotal 6.696.626 13.586.587

Provision for Doubtful Trade Receivables (-) (797.217) (708.542)

Deferred Financing Expense (-) (5.405) (70.478)

Rediscount of Credit Card Receivables (-) (62.364) (37.644)

Trade Receivables ( Net ) 5.831.640 12.769.923


Beginning of the Period (708.542) (1.122.613)

Provision reserved within the Period /Adjustment (+) (118.251) (92.914)

Provision Collected within the Period (-) 29.576 175.141

Provision Removed from Records/Adjustment (-) - 331.844

End of the Period (797.217) (708.542)


103102

NOTE 11 – OTHER RECEIVABLES AND PAYABLES

a) Other Short-Term Receivables

aa) Other Receivables from Related parties

d) Other Long-Term Liabilities

NOTE 12 – RECEIVABLES OR PAYABLES FROM FINANCIAL ACTIVITIES

Unavailable.(31st December 2011 – Unavailable.)

NOTE 13 – INVENTORIES

Details of inventories are as follows:

Total insurance amount on inventories is 83.809.405 TRY. (31st December 2011 – 70.052.646 TRY)

NOTE 14 – BIOLOGICAL ASSETS


NOTE 15 – ASSETS RELATED TO ONGOING CONSTRUCTION CONTRACTS


ab) Other Receivables

b) Other Long-Term Receivables

c) Other Short-Term Payables


Receivables from Shareholders - 1.822

Total - 1.822


Matured, Deferred or Restructured Taxes and Other Liabilities 62.874 251.498

Total 62.874 251.498


Raw Materials and Supplies 35.767.782 45.078.782

Semi-finished goods 7.645.421 2.712.386

Finished Goods 30.623.036 26.227.265

Goods 13.236.081 9.704.321

Other Inventories 1.022.003 800

Total 88.294.323 83.723.554


Receivables from Tax Office 37.186 30.892

Deposits and Guarantees Given 1.880 1.854

Receivable from Personnel 12.301 -

Total 51.367 32.746


Deposits and Guarantees Given 487.985 506.337

Receivable from Personnel - 12.301

Total 487.985 518.638


Taxes and Funds Payable 859.622 1.600.432

Social Security Premiums Payable 1.125.386 2.011.199

Payables to Personnel 3.033.654 173.003

Matured, Deferred or Restructured Taxes and Other Liabilities 194.813 194.813

Toplam 5.213.475 3.979.447


105104

NOTE 16 – INVESTMENTS VALUED BY EQUITY METHOD

As of 31st December 2012;

NOTE 18 – TANGIBLE FIXED ASSETS

The Company has no internally-generated tangible fixed asset.

a) Movements of tangible fixed assets as of 31st December 2012 are as follows:

(*)3.515.615 TRY of the lands and parcels balance and 6.342.883 TRY of the buildings balance is arising from the valua-tion made in December 2012. (See Note 27/c).

NOTE 18 – TANGIBLE FIXED ASSETS

Total insurance amount on fixed assets is 88.201.687 TRY as of 31st December 2012.

NOTE 17 – INVESTMENT PROPERTIES

Unavailable. (31st December 2011 – Unavailable)

Capital amount of Samsonite Seyahat Ürünleri San. ve Tic. A.Ş., affiliate of which financial statements are consolidated by the company by the equity method is 3.850.000 TRY while participation value of the company is 1.539.980 TRY. Balance sheet value of the affiliate valued by the equity method is 1.883.715 TRY.

Capital amount of Samsonite Seyahat Ürünleri San. ve Tic. A.Ş., affiliate of which financial statements are consolidated by the company by the equity method is 3.850.000 TRY while participation value of the company is 1.539.980 TRY. Balance sheet value of the affiliate valued by the equity method is 1.220.539 TRY.

Summarized financial details of Samsonite Seyahat Ürünleri San. ve Tic. A.Ş. are as follows:

As of 31st December 2011;

Place Share

PercentageCost Value

Parent Company’s Profit/Loss

Parent Company’s Previous Period

Profit/Loss

Net Value

Samsonite Sey. Ürünleri A.Ş. Türkiye % 39,99 1.539.980 663.176 (319.441) 1.883.715

Cost 01.01.2012 Entry ExitTransfer /

AdjustmentValuation Surplus

31.12.2012

Lands and Parcels 1.394.385 - - - (*)3.515.615 4.910.000

Buildings 7.947.768 - - (7.460) (*)6.342.883 14.283.191

Machinery, Equipment 4.536.290 32.279 - 148.864 - 4.717.433

Vehicles 1.108.302 - - - - 1.108.302

Fixtures 11.307.492 1.199.823 (86.525) - - 12.420.790

Special Costs 15.513.601 1.194.776 (98.267) 1.607.693 - 18.217.803

Construction in Progress 1.599.483 - - (1.599.483) - -

Total 43.407.321 2.426.878 (184.792) 149.614 9.858.498 55.657.519

Accumulated Depreciation 01.01.2012 Entry Exit Transfer / Adjustment

Valuation Surplus 31.12.2012

Buildings (1.012.380) (225.911) - - - (1.238.291)

Machinery, Equipment (2.447.771) (420.797) - (43.210) - (2.911.778)

Vehicles (718.201) (123.329) - - - (841.530)

Fixtures (6.658.113) (1.278.896) 7.731 - - (7.929.278)

Special Costs (9.519.166) (2.636.047) 11.745 - - (12.143.468)

Total (20.355.631) (4.684.980) 19.476 (43.210) (25.064.345)

Net Value 23.051.690 30.593.174

Place Share Percentage Cost Value

Parent Company’s Profit/Loss

Parent Company’s Previous Period

Profit/Loss

Net Value

Samsonite Sey. Ürünleri A.Ş. Türkiye % 39,99 1.539.980 157.615 (477.056) 1.220.539

Samsonite Seyahat Ürünleri A.Ş. 31st December 2012 31st December 2011

Total assets 6.728.160 6.085.683

Total liabilities (2.018.811) (3.034.297)

Net assets 4.709.349 3.051.386

Net profit / loss 1.657.962 394.040

Share amount from net profit / loss of the affiliate (39,99%) 663.176 157.615

Share in Profit / Loss of the Investment Valued by Equity Method 663.176 157.615


107106

b) Movements of tangible fixed assets as of 31st December 2011 are as follows:

Total insurance amount on fixed assets is 85.688.353 TRY as of 31st December 2011.

NOTE 19 – INTANGIBLE FIXED ASSETS

The Company has no internally-generated intangible fixed asset.

a) Movements of intangible fixed assets as of 31st December 2012 are as follows:

b) Movements of intangible fixed assets as of 31st December 2011 are as follows:

NOTE 20 - GOODWILL



Adjustment31.12.2011

Lands and Parcels 1.394.385 - - - 1.394.385

Buildings 7.772.715 167.593 - 7.460 7.947.768

Machinery, Equipment 4.339.217 197.073 - - 4.536.290

Fixtures 9.422.896 2.054.546 (169.950) - 11.307.492

Vehicles 1.171.180 - (62.878) - 1.108.302

Special Costs 14.292.266 1.318.098 (89.303) (7.460) 15.513.601

Construction in Progress 426.603 1.340.473 (167.593) - 1.599.483

Total 38.819.262 5.077.783 (489.724) - 43.407.321


Adjustment31.12.2012

Rights 1.167.928 115.948 - (148.864) 1.135.012

Total 1.167.928 115.948 - (148.864) 1.135.012

Accumulated Depreciation

Rights (227.369) (90.123) - 43.210 (274.282)

Total (227.369) (90.123) - 43.210 (274.282)

Net Value 940.559 860.730

Cost 01.01.2011 Entry Exit Transfer /Adjustment 31.12.2011

Rights 1.167.928 - - - 1.167.928

Total 1.167.928 - - - 1.167.928

Accumulated Depreciation

Rights (123.058) (104.311) - - (227.369)

Total (123.058) (104.311) - - (227.369)

Net Value 1.044.870 940.559

Accumulated Depreciation 01.01.2011 Entry Exit Transfer /Adjustment 31.12.2011

Buildings (862.605) (155.185) - 5.410 (1.012.380)

Machinery, Equipment (2.083.501) (365.181) - 911 (2.447.771)

Fixtures (5.593.366) (1.225.367) 160.620 - (6.658.113)

Vehicles (610.021) (152.815) 43.677 958 (718.201)

Special Costs (7.233.090) (2.307.093) 17.908 3.109 (9.519.166)

Total 16.382.583 (4.245.641) 222.205 10.388 (20.355.631)

Net Value 22.436.679 23.051.690


109108

NOTE 21 – GOVERNMENT GRANTS AND AIDS

a) The Company has got Inward Processing Licenses. The Company has made an import of 27.557.177 USD as of 31st December 2012 under those licenses and benefited from VAT incentive related to those purchases. (31st December 2011 – 33.141.500 USD).

b) Turquality incentive of 945.574 TRY has been collected during the year under Communique No. 2006/4 on Brandization of Turkish Products at Abroad, Adoption of Turkish Product Image and Support of Turquality and it has been entitled to benefit from an incentive in the amount of 1.020.299 TRY. (Amount collected as of 31st December 2011 is 1.394.290 TRY.)

c) Income taxes of minimum-wage workers employed in Düzce factory in the Organized Industrial Zone provide exemption from payment of SSK premiums under Law No. 5084 on Making Amendments to Certain Laws by Encouragement of Investments and Employment. The Company has benefited from an incentive of 924.928 TRY as of 31st December 2012. (31st December 2011 – 1.082.286 TRY)d) The amount corresponding to five-point part of employer’s share from disability old-age and death insurance premiums of insured employers are paid by the Treasury under sub-clause (ı) added to first clause of Article 81 of Social Securities and General Health Insurance Law No. 5510. In this context, the five-point part of the Company’s employer’s share applicable for workers in Çorlu factory, Sefaköy factory and stores and recorded as revenue as of 31st December 2012 is 1.353.415 TRY. (31st December 2011: 1.263.938 TRY)

NOTE 22 – PROVISIONS, CONTINGENT ASSETS AND LIABILITIES

a) Accrued expenses

aa) Provisions for doubtful receivables are disclosed in Note 10 and reserve for employee termination benefits in Note 24.

ab) Details of provisions for short-term liabilities are as follows:

b) Guarantees Received and Given

ba) Details of mortgages, guarantees and warrants received by the Company are as follows:

bb) Details of off-balance sheet liabilities which are not included in liabilities are as follows:

(*)The Company has given mortgage bonds of 10.695.600 TRY (6.000.000 USD) as a guarantee for credits used via the factory in Çorlu. (31st December 2011: 11.333.400 TRY (6.000.000 USD)


Accrued Wages - 2.178.210

Provision for Lawsuits 230.682 534.319

Other Accrued Expenses 5.504 162.090

Provision for Leaves 1.740.767 1.406.177

Total 1.976.953 4.280.796


Letters of Guarantee 398.000 708.689

TRY 398.000 668.000

EURO - 40.689

Guarantee Checks 80.000 80.000

TRY 80.000 80.000

Sureties 410.000 310.000

TRY 410.000 310.000

Total 888.000 1.098.689


Letters of Guarantee Given 6.814.366 4.423.037

TRY 3.997.657 1.722.313

USD 999.578 796.995

EURO 1.817131 11.903.729

Sureties Given - 755.560

USD - 755.560

Warrants Given - 71.250

TRY - 71.250

Motgage Bond (*) 10.695.600 11.333.400

USD 10.695.600 11.333.400

Deposits Given 30 30

TRY 30 30

Total 17.509.996 16.583.277


111110

bc) The Company’s guarantee/pledge/mortgage position table is as follows as of 31st December 2012 and 31st December 2011.

Ratio of other GPMs given by the Company to the equity of the Company is 0.00004% as of 31st December 2012.(31st December 2011: 1.42%)

bd) Forward exchange and option contracts;

The Company has no forward exchange or option contract as of 31st December 2012. (31st December 2011 – The Company has no forward exchange and option contract.)

NOTE 23 - COMMITMENTS


NOTE 24 – EMPLOYEE BENEFITS

As per laws of the Republic of Turkey, the Company is obliged to pay employee termination benefits to each employee that has retired completing minimum one year service time after 25-year working life (for women – age 58; for men – age 60); has been dismissed; has been called for military service; or has passed away.

Such benefits must be in the amount of one-month wage for ach service year and such amount has been limited to 3.033,98 (31st December 2011: 2.731,85 TRY) as of 31st December 2012.

The liability to pay employee termination benefits are not legally subject to any funding. Reserve for employee termination benefits is calculated by estimating current value of future potential liability amount arising from retirement of the Company personnel. IAS 19 (“Employee Benefits”) provides that liabilities of a company shall be developed using the actuarial valuation methods under defined benefit pension plans. In this context, actuarial assumptions used in calculation of total liabilities are given below:

GPMs given by the Company 31st December 2012 31st December 2011

A. Total Amount of GPMs given on behalf of its own Legal Entity 17.509.966 15.756.437

B. Total Amount of GPMs given in favor of Ventures included in Full Consolidation - -

C. Total Amount of GPMs given to Guarantee Liability of Other 3rd Parties for purposes of carrying out Ordinary Business Activities

- 826.810

D. Total Amount of Other GPMs Given 30 30

1) Total Amount of GPMs given in favor of the Parent Company - -

2) Total Amount of GPMs given in favor of Other Group Companies not included in Items B and C

- -

3) Total Amount of GPMs given in favor of 3rd Parties not included in Item C 30 30

Toplam 17.509.996 16.583.277


Purchase Order Advances 617.981 274.024

Accrued Turquality Incentive Income (*) 1.020.299 -

Other VAT 33.484 1.061.440

Work Advances 927.517 1.137.701

Prepaid Expenses for Future Expenses 824.635 405.007

Personnel Advances 10.446 30.736

Accrued Income - 108.805

Provision for Doubtful Work Advance Receivables (313.851) (313.851)

Deferred VAT - -

Provision for Doubtful Purchase Order Advance Receivables (98.541) (131.441)

Other Miscellaneous Current Assets 53.703 14.082

Total 3.075.673 2.586.503


Beginning of the Period 1.465.699 1.083.295

Increase within the Period 373.259 382.404

End of the Period 1.838.958 1.465.699

Main assumption is that maximum liability amount for each service year would increase in parallel with the inflation. Therefore, discount rate applied indicates the real rate expected after adjustment of future inflation impacts. For this reason, as of 31st December 2012, provisions in the attached financial statements are calculated by estimating current value of potential future liability that would arise from retirement of employees. Provisions on the balance sheet date have been calculated using the real discount rate obtained as 4.66% (31st December 2011: 4.66%) according to the assumptions of an annual inflation of 5.10% (31st December 2011: 5.10%) and of a discount rate of 10.00% (31st December 2011: 10.00%). Estimated rate of employee termination benefits which are not to be paid and to remain with the Company due to voluntary employee withdrawal has also been taken into account. Upper limit of the employee termination benefits is revised semi-annually.

Movements of the reserve for employee termination benefits within the period are as follows:

NOTE 25 – PENSION PLANS


NOTE 26 – OTHER ASSETS AND LIABILITIES

a) Details of other current assets are as follows:

(*) See Note 21/b


113112

b) Other fixed assets: Unavailable. (31st December 2011 – Unavailable)

c) Details of other short-term liabilities are as follows:

ca) Other Liabilities from Related parties

cb) Other Liabilities


Adesa Deri 138.057 -

Total 138.057 -


Advances Received 277.637 695.796

Other Advances 14.580 17.648

Stock Count and Delivery Surpluses 3.595 -

Total 295.812 713.444


Primary Legal Reserves 839.272 735.597

Total 839.272 735.597

Total Surplus Deferred Tax Impact Revaluation Surplus (Net)

Factory Land 3.515.615 (175.781) 3.339.834

Factory and Office Building 6.342.883 (317.145) 6.025.738

Total 9.858.498 (492.926) 9.365.572


Melih Çelet 14,92% 7.343.918 14,92% 7.343.918

Çelet Holding A.Ş. 54,28% 26.717.682 54,28% 26.717.682

Public Part (*) 30,00% 14.766.591 30,00% 14.766.591

Other 0,80% 393.779 0,80% 393.779

Toplam 100,00% 49.221.970 100,00% 49.221.970


Share capital 49.221.970 49.221.970

Intangible Fixed Assets Revaluation Surplus 9.365.572 -

Inflation Adjustment Differences of Capital Accounts 5.500.255 5.500.255

Reserves on Retained Earnings 839.272 735.597

Previous Period Profit/Loss 2.457.251 1.296.438

Net Profit/Loss for the Period 2.828.955 1.264.488

Equity 70.213.275 58.018.748

NOTE 27 - EQUITY

a) Equity Details

Equity of the Company as of 31st December 2012 is 70.213.275 TRY (31st December 2011 – 58.018.748 TRY) and its details are as follows:

b) Share capital

The Company has switched to authorized capital system in 2007 and the upper limit of authorized capital is 150.000.000 TRY. Its share capital is 49.221.970 TRY (31st December 2011: 49.221.970 TRY), which is divided into 4.922.196.986 (31st December 2011: 4.922.196.986) shares with each share having a nominal value of 1 Kr.

4 (Four) members of the Board of Directors and auditors are elected amongst the candidates to be nominated by Group (A) shareholders. In Ordinary and Extraordinary General Meetings, Group (A) shareholders have 50 voting rights for 1 share while other shareholders have 1 voting right for 1 share. There is no preference share in financial terms.

Share capital amount issued on 31st December 2012 and 31st December 2011 are as follows at their book value:

c) Tangible Fixed Asset Revaluation Surplus

The tangible fixed asset revaluation surplus of 9.365.572 TRY has resulted from the revaluation of the factory building on 3rd December 2012 and its details are as follows: (Note 18/a)

d) Inflation Adjustment Difference for Capital Accounts

Inflation adjustment difference for capital accounts is 5.500.255 TRY as of 31st December 2012. (31st December 2011: 5.500.255 TRY)

e) Reserves on Retained Earnings

(*) The share at the rate of 6.79% of 3.340.886 TRY included in the public part belongs to Çelet Holding A.Ş.


115114


Profit/Loss for the year 2011 1.160.813 -

Other Adjustments (472) (472)

Profit/Loss for the year 2010 547.753 547.753

Profit/Loss for the year 2009 (5.747.104) (5.747.104)

Profit/Loss for the year 2008 (3.798.035) (3.798.035)

Transfer to Legal Reserves from Profit for the year 2007 (76.001) (76.001)

Profit for the year 2007 6.142.057 6.142.057

Transfer to Legal Reserves from Profit for the year 2006 (259.051) (259.051)

Adjustment of Provision for Taxation for the year 2006 (6.511.000) (6.511.000)

Adjustment of Provision for Taxation for the year 2007 (541.655) (541.655)

Transfer to Capital (4.921.970) (4.921.970)

Profit for the year 2006 3.455.472 3.455.472

Previous Period Profit/Loss for 2006 and before 13.006.444 13.006.444

Previous Period Profit /Loss 2.457.251 1.296.438

1st January 201231st December 2012


Domestic Sales 148.145.968 87.874.014

Export Sales 90.084.869 95.155.524

Other Income 37.115 51.273

Gross Sales 238.267.952 183.080.811

Returns (-) (7.735.476) (6.985.742)

Sales Discounts (-) (48.965.186) (650.821)

Discounts ( - ) (456.753) (185.529)

Net Sales 181.110.537 175.258.719

Cost of Sales ( - ) (118.364.106) (105.622.352)

Real Operating Income (Net) 62.746.431 69.636.367



Marketing, Sales and Distribution Expenses (49.717.912) (45.153.070)

General Administrative Expenses (12.369.043) (12.544.150)

Research and Development Expenses (1.562.146) (2.258.768)

Total (63.649.101) (59.955.988)



Personnel Expenses (16.098.951) (13.840.149)

Real Estate Rental Expenses (16.714.129) (14.027.465)

Electricity, Water and Gas Expenses (1.575.861) (1.486.236)

Advertising Expenses (3.588.325) (4.544.491)

Transportation Expenses (464.195) (392.548)

Cargo and Travel Expenses (2.116.066) (1.464.746)

Depreciation Expenses (3.032.699) (2.789.980)

Bank Charge Expenses (2.537.304) (2.832.864)

Phone, Fax and Data Line (237.005) (177.293)

Maintenance & Repair Insurance Expenses (503.503) (517.504)

Taxes and Other Duties (461.492) (588.615)

Shelf, Sign and Press Expenses (350.340) (911.118)

Product, Repair and Export Duty Expenses (485.433) (667.744)

Employee Benefits (74.011) (102.710)

Other (1.478.598) (809.607)

Total (49.717.912) (45.153.070)

f) Previous Period Profit / Loss

NOT 28 – SALES AND COST OF SALES

NOTE 29 – OPERATING EXPENSES

a) Details of Marketing, Sales and Distribution Expenses are as follows:


117116

b) Details of general administrative expenses are as follows:

NOTE 30 – OTHER EXPENSES BASED ON THEIR NATURE

Distribution of significant expense items based on their nature is as follows:

c) Details of research and development expenses are as follows:




Depreciation Expenses (1.006.699) (948.257)

Rental Expenses (766.819) (716.875)

Non-deductible Expenses (239.083) (837.041)

Consultancy Expenses (675.041) (2.188.952)

Bank Charges and Commissions - (169.225)

Travel and Transport Expenses (440.214) (626.390)

Taxes and Other Legal Duties (157.901) (138.173)

Insurance, Repair & Maintenance Expenses (168.264) (188.136)

Communication Expenses (144.409) (147.598)

Utility and Fuel Oil Expenses (388.914) (212.926)

Stationery and Advertising Expenses (82.531) (139.304)


Other (581.642) (171.139)

Total (12.369.043) (12.544.150)



Charge Expenses (57.635.868) (44.286.427)

For Production Cost (32.664.791) (22.696.488)

For General Management (7.703.481) (5.893.302)

For Marketing, Sales and Distribution (16.098.951) (13.840.149)

For Research and Development (1.168.645) (1.856.488)

Depreciation Expenses (4.775.103) (4.309.952)

For Production Cost (735.705) (571.715)

For General Management (1.006.699) (948.257)

For Marketing, Sales and Distribution (3.032.699) (2.789.980)

Total (62.410.971) (48.596.379)




Electricity, Water and Gas Expenses (15.107) (19.253)

Travel Expenses (29.083) (2.752)

Representation and Entertainment Expenses (47.871) (42.927)

Maintenance and Repair Expenses (3.898) (5.173)


Design and Modeling Expenses (224.158) (286.270)

Other (71.148) (22.845)

Total (1.562.146) (2.258.768)


119118



Subsidy (SSK and Withholding) 2.278.343 2.346.223

Subsidy (Turquality and ITKIB) 1.992.944 1.394.290

Damages Income 864.922 193.882

Cargo Logistics Service Income 810.973 -

Expense Contribution Income 589.447 -

Provisions No Longer Required (Terminated Provisions for Doubtful Receivables and Lawsuits)

437.353 3.282.603

Rental Income 376.295 330.588

Cancelled Import 149.386 409.111

Advertising and Marketing Support Contribution Fee 35.131 -

Settlement Deviations 27.925 -

Reclamation Income 649 91.896

Price Differences - 21.886

Income from Fixed Asset Sales - 44.610

Sample Income - 171.581

Repair Income - 134.092

Other 1.820.258 800.561

Total 9.383.626 9.221.323



Idle Capacity Losses (2.585.537) (5.695.728)

Fixed Asset and Inventory Depreciation (658.736) -

Provision Expenses (234.168) (3.340.169)

Previous Period Expenses (21.599) (5.644)

Sales Premium Commission (212.959) (277.022)

Loss from Fixed Asset Sales - (1.008)

Waived Receivables - (126.906)

6111 Md.6/1-3 Corporate Tax Basis Increase - (565.871)

Other (43.611) (57.067)

Total (3.756.610) (10.069.415)



Exchange Profit 7.701.438 3.290.415

Deferred Finance Income 356.542 469.926

Interest Income 27.322 16.511

Total 8.085.302 3.776.852

NOTE 31 – OTHER OPERATING INCOME / EXPENSES

a) Details of other operating income are as follows:

b) Details of other operating income are as follows:

NOT 32 – FINANCIAL INCOME

NOTE 33 – FINANCIAL EXPENSES



Exchange Loss (5.925.223) (4.275.184)

Credit Interest Expense (1.715.320) (1.536.386)

Credit Exchange Difference (391.831) (812.697)

Deferred Finance Expense (490.385) (336.481)

Credit Card / Letter of Guarantee Commission Expenses (490.345) (134.662)

İ Import/Export Expenses (242.609) (3.125.352)

Other Financial Expenses (653.825) (10.052)

Toplam 9.909.538 (10.230.814)


121120

Tax expense in income statement 1st January 201231st December 2012


Provision for current corporate tax (758.783) (996.939)

Deferred tax income / (expense) 24.452 (274.513)

Total tax income / (expense) 734.331 (1.264.488)

Tax income / (expense) for continuing operations 734.331 (1.264.488)

Tax income / (expense) for discontinued operations - -

Total tax income / (expense) 734.331 (1.264.488)

Current Tax Liability1st January 2012

31st December 20121st January 2011

31st December 2011

Provision for Current Corporate Tax 758.783 996.939

Prepaid taxes and funds - (400.874)

Total Tax Asset / (Liability) 758.783 596.065

Total TemporaryDifferences

31st December 2012

Deferred TaxAsset/Liability

31st December 2012

Total TemporaryDifferences

31st December 2012

Deferred TaxAsset/Liability

31st December 2012

Rediscount of Accounts Receivable 5.405 1.081 70.478 14.096

Rediscount of Receivables from Related parties 5.328 1.066 9.198 1.840

Rediscount of Credit Cards 62.364 12.473 37.644 7.529

Provision for Doubtful Receivables 985.013 197.003 933.081 186.616

Provision for Leaves 1.740.766 348.153 1.406.176 281.235

Reserve for Employee Termination Benefits 1.838.958 367.792 1.465.699 293.140

Provision for Liabilities/Expenses 232.121 46.424 535.452 107.090

Provision for Financial Investments Impairment

3.107.074 621.415 3.107.074 621.415

Deferred Tax Asset 7.977.029 1.595.407 7.564.802 1.512.961

Rediscount of Payables to Suppliers (68.133) (13.627) (116.390) (23.278)

Rediscount of Debt Bonds (147.626) (29.525) (260.822) (52.164)

Rediscount of Payables to Related parties (23.463) (4.693) (39.896) (7.979)

Fixed Assets Depreciation (5.324.072) (1.064.814) (5.876.522) (1.175.304)

Fixed Assets Increment (9.858.498) (492.926) - -

Accrued Income (1.020.299) (204.060) - -

Deferred Tax Liability (16.442.091) (1.809.645) (6.293.630) (1.258.725)

Deferred Tax Asset (Net) (214.238) 254.236

NOTE 34 – FIXED ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

(31st December 2011 – Unavailable)

NOTE 35 – TAX ASSETS AND LIABILITIES

In Turkey, corporate tax rate is 20%. (2011: 20%) This rate is applied to the tax basis to be obtained by adding non-deductible expenses as per tax laws to business income of entities and by deducting exemptions (such as affiliation privilege) and discounts (such as R&D and Grants and Aids) provided in tax laws.

Corporate tax returns are delivered to respective tax office from first day of the fourth month following the end of the fiscal period to the evening of the twenty fifth day. Such tax return is paid in a lump until the end of the month when such return is delivered. On the other hand, tax auditing authorities can audit accounting records within five years and tax amounts to be paid can be changed in case of identification of any faulty transaction.

Corporate Taxpayers calculate an advance tax at 20% (20% for the fiscal year 2011) over their financial profit for each three-month period to set off it against corporate tax of current taxation period and declare such amount until 14th day of the second month following such period and pay it until the evening of 17th day.

As per Turkish tax legislation, financial losses presented in the statement can be deducted from company profit for the period being limited to maximum 5 years. However, financial losses may not be set off against previous period profits.

As per Corporate Tax General Communique Serial No. 50, since earnings from activities in free zones are not considered securities income under Article 75/4 of the Income Tax Law provided that it is verified that such earnings have been

The Company has a deferred tax asset of 171.602 TRY for the current period (31st December 2011: deferred tax asset of 254.236 TRY) with the following details:

brought to Turkey as foreign currency, they are excluded from Corporate Tax and Company withholding tax basis.

No other tax is paid if profit is not distributed.

A tax withholding at 15% is applied by full taxpayers over dividends distributed to limited taxpayers other than those

obtaining dividend through a business or a permanent

representative in Turkey or to limited taxpayers exempted

from corporate tax and specified in sub-clauses (1), (2) and

(3) of Clause 2 of Article 75 of the Income Tax Law. Addition

of profit to capital is not deemed profit distribution.


123122

Deferred Tax Asset / Liability Movements 31st December 2012 31st December 2011

Opening balance as of 1st January 254.236 528.749

Deferred tax income / (expense) 24.452 (274.513)

Deferred tax for revaluation surplus (Note 27/c) (492.926) -

Closing balance as of 31st December (214.238) 254.236

Profit per share 31st December 2012 31st December 2011

Net profit / (loss) for the period 2.828.955 1.264.488

Weighted average number of ordinary shares issued(Each 1 Kr) 4.922.196.986 4.922.196.986

Profit/(loss) per share from continuing and discontinued operations

0,000575 0,000257

Net profit / (loss) for the period 2.828.955 1.264.488

Minus: Profit from discontinued operations during the year

Net income for the period for calculation of profit per share from continuing operations

2.828.955 1.264.488

Profit / (loss) per share from continuing operations 0,000575 0,000257

Profit from discontinued operations within the period -

Diluted profit / (loss) per share 0,000575 0,000257

Profit / (loss) per share from continuing operations 0,000575 0,000257

Profit per share from discontinued operations - -

NOTE 36 – EARNINGS PER SHARE

NOTE 37 – AFFILIATE DISCLOSURES

a) Transactions with Related parties:

Earnings per share as specified in the income statement has been found by dividing net profit for the current period by weighted average number of shares available in the market throughout the period.

Companies in Turkey can increase their capital by means of “bonus share” distribution to their existing shareholders from accumulated earnings and revaluation funds. Such “bonus share” distributions are considered issued share in calculation of earnings per share. Accordingly, weighted

average number of shares used in such calculations has been found by calculating retrospective effects of share distributions.

Profit per share calculations have been made by dividing net profit by weighted average number of shares issued.

There is no financially preference share. Accordingly, profit/loss per share based on share groups is as follows:

Details of purchase and sale transactions with related parties are as follows:


Group Company Purchases Sales Purchases Sales

Adesa Deri - 83.711.805 3.830 416.056

Samsonite Seyahat Ürünleri 6.507.657 - 5.659.060 2.303.248

Çelet Holding - - - 74.400

Desa International (UK) Ltd 143.437 299.407 356.447 397.852

Desa SMS Ltd 177.426 249.618 373.544 481.052

Serga - - 10.954 -

Yapı Çimento - - - 600

Marshall Farmer - - 830.990 -

Melih Çelet - - - -

Mehmet Çelet - - - -

Burcu Çelet Özden - - - -

Perabayt Bilişim Pazarlama Dış Tic A.Ş. - - - -

Total 6.828.520 84.260.830 7.234.825 3.673.208


125124

b) Interest and rent etc. received from and paid to related parties:

c) Benefits to Top Management:

NOTE 38 – NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS

Total wage and other similar benefits to top management is 1.209.649 TRY as of 31st December 2012(31st December 2011 – 1.050.880 TRY)

38.1.1. Credit risks incurred are as follows by financial instrument types:

As of 31st December 2012

(*) In determination of the amounts given, elements increasing credit reliability such as securities received have not been taken into account.

Main risks arising from financial instruments are credit risk, liquidity risk, market risk, and interest rate and exchange risk.

38.1. Credit Risk: Credit risk consists of deposits kept at banks and customers exposed to credit risk including outstanding receivables and guaranteed transactions. Risk control evaluates credit quality of the customer considering financial position and past experiences of the customer and other factors. The Company management corresponds to such risks by limiting average risk for counterparty in every agreement and taking security if required. The management is not expecting any loss due to nonperformance of the parties.


Rents paid to group companies 10.444 10.388

Rents paid to partners 757.290 627.519

Service fees paid to group companies 749.838 100.046

Total Paid 1.517.572 737.953

Office rent taken from partners 14.400 -

Services invoiced to partners 60.000 -

Office rent taken from related parties 338.674 305.897

Services invoiced to related parties 1.886.020 1.997.352

Office rent taken from group companies 9.600 24.000

Interest income collected from group companies 23.323 16.344

Expenses invoiced to group companies 134 71.723

Total Collected 2.332.151 2.415.316

31.12.2012

Receivables

Deposit in Banks

Trade Receivables Other Receivables

Related Party Other Party Related Party Other Party

Maximum credit risk incurred as of reporting date ( A+B+C+D+E) (1)

9.521.054 5.831.640 - 51.367 572.092

- Guaranteed part of maximum risk through security etc.

- 888.000 - - -

A. Net book value of financial assets undue or not impaired

9.521.054 5.831.640 - 51.367 572.092

- Guaranteed part throughsecurity etc.

- 888.000 - - -

B. Book value of financial assets of which conditions have been

re-discussed, otherwise which would be considered overdue or impaired (2)

- - - - -

C. Net book value of assets overdue, but not impaired (3)

- - - - -


- - - - -

D. Net book values ofimpaired assets

- - - - -

- Overdue (gross book value) - 797.217 - - -

- Impairment (-) - (797.217) - - -

- Guaranteed part of net value through security etc.

- - - - -

- Undue (gross book value) - - - - -

- Impairment (-) - - - - -


- - - - -

E. Elements involvingoff-balance sheet credit risk

- - - - -


127126

(*) In determination of the amounts given, elements increasing credit reliability such as securities received have not been taken into account.

38.1.2. Details and fair values of securities taken for receivables are as follows:

Total amount of securities taken by the Company for its receivables is 888.000 TRY as of 31st December 2012. (Total amount of securities taken for its receivables as of 31st December 2011 is 1.098.689 TRY.)

38.1.3. Disclosures on credit quality of financial assets undue or not impaired as well as financial assets of which conditions have been re-discussed, otherwise which would be considered overdue or impaired:

The Company has no financial asset of which conditions have been re-discussed, otherwise would be considered overdue or impaired. There is no problem with collection of financial assets undue and not impaired and collection time of trade receivables varies from 15 to 120 days approximately. (31st December 2011 – Unavailable)

38.1.4. Disclosures on which factors have been taken into account for determination of provision for impairment reserved for impaired financial assets:

Since Desa International Limited and Leather Fashion which are subsidiaries as of 31st December 2012 and not consolidated due to their low turnover have lost their equity, impairment at the amount included in the assets (3.107.074 TRY) has been calculated and presented in the Financial Investments account.

38.1.5. Aging table of financial assets overdue, but not impaired:


38.1.6. Assets acquired by the Company by taking possession of guarantees kept as an assurance or using other elements increasing credit reliability:- Nature and book value;


- In case such assets cannot be converted into cash currently, approach of the enterprise regarding disposal of or use of such assets in business activities:


38.2. Liquidity Risk: Liquidity risk is the possibility for the Company to fail to fulfill its net funding liabilities. Occurrence of events resulting in decrease in fund resources such as disruptions in markets or decrease of credit rating creates the liquidity risk. The Company was exposed to the liquidity risk as of 31st December 2012 and 31st December 2011. The Company is planning to carry out the liquidity management by extending maturity time of trade receivables and giving weight to raw material stocks instead of purchase of new raw materials.

38.2.1. Distribution of derivatives and non-derivatives based on their remaining maturity time is as follows:

The following table has been prepared without discounting liabilities of the Company and based on the earliest due dates. Interests to be paid over such liabilities have been included in the following table. Maturity time of trade payables is approximately 90 days. (31st December 2011 – 120 Days)

31.12.2011

Receivables

Deposit in Banks

Trade Receivables Other Receivables

Related Party Other Party Related Party Other Party

Maximum credit risk incurred as of reporting date ( A+B+C+D+E) (1)

1.257.436 12.769.923 1.822 32.746 101.887

- Guaranteed part of maximum risk through security etc.

- 1.098.689 - - -

A. Net book value of financial assets undue or not impaired

1.257.436 12.769.923 1.822 32.746 101.887


- 1.098.689 - - -

B. Book value of financial assets of which conditions have been

re-discussed, otherwise which would be considered overdue or impaired (2)

- - - - -

C. Net book value of assets overdue, but not impaired (3)

- - - - -


- - - - -

D. Net book values ofimpaired assets

- - - - -

- Overdue (gross book value) - - - - -

- Impairment (-) - - - - -


- - - - -

- Undue (gross book value) - 708.542 - - -

- Impairment (-) - (708.542) - - -


- - - - -

E. Elements involvingoff-balance sheet credit risk

- - - - -

As of 31st December 2011


129128

Maturities as per agreement Book value

Total cash out-flows as per agreement

(=I+II+III+IV)

Less than 3 months (I)

Between 3-12 months

(II)

Between 1-5 years

(III)

More than 5 years (IV)

Non-Derivative Financial Liabilities

69.053.647 69.053.647 41.953.029 24.898.624 2.201.994

Bank Loans 27.102.285 27.102.285 4.454.141 20.509.024 2.139.120 -

Bond issues - - - - - -

Leasing liabilities - - - - - -

Trade Payables 36.241.144 36.241.144 31.977.293 4.263.851 -

Other Payables 5.276.349 5.276.349 5.087.726 125.749 62.874 -

Other Liabilities 433.869 433.869 433.869 - - -

Derivative Financial Liabilities

Derivative Cash Inflows - - - - - -

Derivative Cash Outflows - - - - - -

31.12.2012 Equivalent in

TRY (Functional Currency)

USD Euro CHF GBP NOK

1.Trade Receivables 9.810.128 11.258 2.722.834 17 1.179.719 -

2a. Monetary Financial Assets (including Cash and Bank Accounts)

39.817 5.188 5.519 2 6.126 -

2b. Non-Monetary Financial Assets - - - - - -

3.Other 299.274 75.938 51.998 4.842 11.222 -

4.Current Assets (1+2+3) 10.149.219 92.384 2.780.351 4.861 1.197.067 -

5.Trade Receivables - - - - - -

6a. Monetary Financial Assets - - - - - -


7.Other - - - - - -

8.Fixed Assets (5+6+7) - - - - - -

9.Total assets (4+8) 10.149.219 92.384 2.780.351 4.861 1.197.067 -

10.Trade Payables (12.910.543) (2.566.067) (2.852.219) (104.517) (464.700) (287.601)

11.Financial Liabilities (15.533.851) (4.037.819) (3.544.685) - - -

12a. Other Monetary Liabilities (75.717) (42.476) - - - -

12b.Other Non-Monetary Liabilities (157.918) (50.166) (20.031) - (7.450) -

13.Short-Term Liabilities (10+11+12)

(28.678.029) (6.696.528) (6.416.935) (104.517) (472.150) (287.601)

14.Trade Payables -

15.Financial Liabilities (2.139.120) (1.200.000) - - - -

16a. Other Monetary Liabilities - - - - - -

Maturities as per agreement Book value

Total cash out-flows as per agreement

(=I+II+III+IV)

Less than 3 months (I)

Between 3-12 months

(II)

Between 1-5 years

(III)

More than 5 years (IV)

Non-Derivative Financial Liabilities

64.889.651 64.889.651 47.437.919 13.353.344 4.098.388

Bank Loans 21.236.758 21.236.758 4.036.524 13.353.344 3.846.890 -

Bond issues - - - - - -

Leasing liabilities 5 5 5 - - -

Trade Payables 38.708.499 38.708.499 38.708.499 - - -

Other Payables 4.230.945 4.230.945 3.979.447 - 251.498 -

Other Liabilities 713.444 713.444 713.444 - - -

Derivative Financial Liabilities - - - - - -

Derivative Cash Inflows - - - - - -

Derivative Cash Outflows - - - - - -

Current Period: 38.3. Market Risk: For in- and off-balance sheet positions, it is the possibility of incurring loss due to risks resulted from interest, exchange difference and share price changes arising from fluctuations in financial markets.

38.3.1. Exchange Risk: Exchange risk means the effects that may arise from exchange rate movements in case of assets, liabilities and off-balance sheet liabilities in foreign currency.

Previous Period:

31st December 2012

31st December 2011

(*)Equivalent in Turkish Lira of respective export and import amounts are given in the buying exchange rate of the CBT on 31st December 2012.


131130

31.12.2012 Equivalent in



16b. Other Non-Monetary Liabilities

- - - - - -

17. Long-Term Liabilities (14+15+16)

(2.139.120) (1.200.000) - - - -

18.Total Liabilities (13+17) (30.817.149) (7.896.528) (6.416.935) (104.517) (472.150) (287.601)

19. Net Asset / (Liability) Position of Off-Balance Sheet Derivatives in

Foreign Currency (19a-19b)- - - - - -

19a. Amount of Off-Balance Active Derivatives in Foreign Currency

- - - - - -

19b. Amount of Off-Balance Passive Derivatives in Foreign Currency

- - - - - -

20. Net Asset/(Liability) Position in Foreign Currency (9-18+19)

(20.667.930) (7.804.144) (3.636.584) (99.656) 724.917 (287.601)

21. Monetary Items Net Asset / (Liability) Position in

Foreign Currency (IFRS 7.B23 (=1+2a+5+6a-10-11-12a-14-15-

16a)

(20.967.204) (7.880.082) (3.688.582) (104.498) 713.695 (287.601)

22. Total Fair Value of Financial Instruments Used for Currency

Hedging- - - - - -

23. Amount of Hedged Part of Foreign Currency Assets

- - - - - -

24. Amount of Hedged Part of Foreign Currency Liabilities

- - - - - -

25.Export 88.875.552 49.857.260 - - - -

26.Import 55.733.643 31.265.367 - - - -

31st December 2011Equivalent in



1. Trade Receivables 2.176.363 85.901 126.216 - 584.730 -

2a. Monetary Financial Assets (including Cash and Bank Accounts)

38.255 4.596 8.950 - 2.640 -

2b. Non-Monetary Financial Assets 172.560 43.174 27.281 - 8.344 -

3.Other 2.417 245 484 - 264 -

4.Current Assets (1+2+3) 2.389.595 133.916 162.931 - 595.979 -

5.Trade Receivables - - - - - -

6a. Monetary Financial Assets - - - - - -


7.Other 18.382 9.477 - - 165 -

8.Fixed Assets (5+6+7) 18.382 9.477 - - 165 -

9.Total Assets (4+8) 2.407.978 143.393 162.931 - 596.144 -

10.Trade Payables 19.132.062 1.530.844 4.255.470 144.351 631.497 11.826.873

11.Financial Liabilities 12.219.466 2.812.192 2.826.548 - - -

12a. Other Monetary Liabilities 27.036 368 988 - 8.203 -


- - - - - -

13.Short-Term Liabilities (10+11+12)

(31.378.565) (4.343.404) (7.083.005) (144.351) (639.699) (11.826.873)

14.Trade Payables - - - - - -

15.Financial Liabilities (3.846.890) (2.036.577) - - - -

16a. Other Monetary Liabilities - - - - - -


- - - - - -

17. Long-Term Liabilities (14+15+16)

(3.846.890) (2.036.577) - - - -

18.Total Liabilities (13+17) (35.225.455) (6.379.981) (7.083.005) (144.351) (639.699) (11.826.873)




133132

31st December 2011Equivalent in



19. Net Asset / (Liability) Position of Off-Balance Sheet Derivatives in Foreign

Currency (19a-19b)- - - - - -

19a. Amount of Off-Balance Active Derivatives in Foreign Currency

- - - - - -

19b. Amount of Off-Balance Passive Derivatives in Foreign Currency

- - - - - -

20. Net Asset/(Liability) Position in Foreign Currency (9-18+19)

(32.817.477) (6.236.588) (6.920.073) (144.351) (43.556) (11.826.873)

21. Monetary Items Net Asset / (Liability) Position in Foreign Currency (IFRS 7.B23 (=1+2a+5+6a-10-11-12a-14-15-16a)

(33.010.837) (6.289.485) (6.947.839) (144.351) (52.329) (11.826.873)

22. Total Fair Value of Financial Instruments Used for Currency

Hedging- - - - - -

23. Amount of Hedged Part of Foreign Currency Assets

- - - - - -

24. Amount of Hedged Part of Foreign Currency Liabilities - - - - - -

25.Export 106.173.735 56.209.294 - - - -

26.Import 68.165.004 36.087.143 - - - -

Exchange Rate Sensitivity Analysis Table Profit / Loss Equity

Current Period Appreciation of

Foreign CurrencyDepreciation of

Foreign CurrencyAppreciation of

Foreign CurrencyDepreciation of

Foreign Currency

In case of 10% change in USD exchange rate:

1- Net asset/liability in USD (1.391.167) 1.391.167 - -

2- Amount protected from USD risk (-)

3- USD Net Effect (1+2) (1.391.167) 1.391.167 - -

In case of 10% change in Euro exchange rate:

4- Net asset/liability in Euro (855.215) 855.215 - -

5- Amount protected from Euro risk (-)

6- Euro Net Effect (4+5) (855.215) 855.215 - -

In case of 10% change in Swiss Franc exchange rate:

7- Net asset/liability in Swiss Franc (19.363) 19.363 - -

8-- Amount protected from Swiss Franc risk (-)

9- - Swiss Franc Net Effect (7+8) (19.363) 19.363 - -

In case of 10% change in British Pound exchange rate:

10- Net asset/liability in British Pound 208.109 (208.109) - -

11- Amount protected from British Pound risk (-)

12- British Pound Net Effect (10+11) 208.109 (208.109) - -

In case of 10% change in Norwegian Krone exchange rate:

13- Net asset/liability in Norwegian Krone (9.157) 9.157 - -

14- Amount protected from Norwegian Krone risk (-)

15- Norwegian Krone Net Effect (10+11) (9.157) 9.157 - -

TOTAL (3+6+9+12+15) (2.066.793) 2.066.793 - -


Exchange rate sensitivity analysis tables as of 31st December 2012 and 31st December 2011 are as follows:31st December 2012


135134

Exchange Rate Sensitivity Analysis Table Profit / Loss Equity

Current Period Appreciation of Foreign Currency

Depreciation of Foreign Currency

Appreciation of Foreign Currency

Depreciation of Foreign Currency

In case of 10% change in USD exchange rate:

1- Net asset/liability in USD (1.178.029) 1.178.029 - -

2- Amount protected from USD risk (-)

3- USD Net Effect (1+2) (1.178.029) 1.178.029 - -

In case of 10% change in Euro exchange rate:

4- Net asset/liability in Euro (1.691.128) 1.691.128 - -

5- Amount protected from Euro risk (-)

6- Euro Net Effect (4+5) (1.691.128) 1.691.128 - -

In case of 10% change in Swiss Franc exchange rate:

7- Net asset/liability in Swiss Franc (28.960) 28.960 - -

8-- Amount protected from Swiss Franc risk (-)

9- - Swiss Franc Net Effect (7+8) (28.960) 28.960 - -

In case of 10% change in British Pound exchange rate:

10- Net asset/liability in British Pound (12.705) 12.705 - -

11- Amount protected from British Pound risk (-)

12- British Pound Net Effect (10+11) (12.705) 12.705 - -

In case of 10% change in Norwegian Krone exchange rate:

13- Net asset/liability in Norwegian Krone (370.926) 370.926 - -

14- Amount protected from Norwegian Krone risk (-)

15- Norwegian Krone Net Effect (10+11) (370.926) 370.926 - -

TOTAL (3+6+9+12+15) (3.281.748) 3.281.748 - -

31st December 201238.3.1. Interest Risk: Fluctuations in financial instrument prices due to changes in market interest rates require the Company to cope with interest rate risk. Sensitivity of the Company to interest rate risk is related to inconsistency of maturities of asset and liability accounts. This risk is managed by meeting the assets affected from interest changes with the same type of liabilities.

Incase interest rates on reporting date are more than 1% and all other variables are fixed, interest expenses from floating interest credits of the Company increase by 14.110 TRY.

38.4 Sensitivity Analysis for Other Risks:

Unavailable. (31st December 2011: Unavailable.)

Interest Position Table

Current Period Previous Period

Financial Assets

Assets at fair value through profit/loss - -

Available-for-sale financial assets - -

Financial Liabilities 16.671.391 13.704.885

Floating Rate Financial Instruments

Financial Assets - -

Financial Liabilities 10.430.894 7.531.873


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39.1. Financial Instrument Categories

NOTE 39 – FINANCIAL INSTRUMENTS (FAIR VALUE DISCLOSURES AND DISCLOSURES UNDERHEDGE ACCOUNTING)

Other financial

assets presented at

amortized cost

Credits and receivables

Available-for-sale financial

assets

Financial instruments of

which fair value difference is presented in income statement

Other financial liabilities

presented at amortized

cost

Book value

Market value Note

31.12.2012

Financial Assets

Cash and cash equivalents 790.829 - - - - 790.829 790.829 6

Trade receivables - 15.352.694 - - - 15.352.694 15.352.694 10

Financial investments - - 2.665.364 - - 2.665.364 2.665.364 7,16

Financial Liabilities

Financial Payables - - - - 27.102.285 27.102.285 27.102.285 8

Trade Payables - - - - 36.241.144 36.241.144 36.241.144 10

Other financial

assets presented at

amortized cost

Credits and receivables

Available-for-sale financial

assets

Financial instruments of

which fair value difference is presented in income statement

Other financial liabilities

presented at amortized

cost

Book value

Market value Note

31.12.2011

Financial Assets

Cash and cash equivalents 227.944 - - - - 227.944 227.944 6

Trade receivables - 14.027.359 - - - 14.027.359 14.027.359 10

Financial investments - - 2.665.364 - - 2.665.364 2.665.364 7,16

Financial Liabilities

Financial Payables - - - - 21.236.758 21.236.758 21.236.758 8

Trade Payables - - - - 38.708.499 38.708.499 38.708.499 10

a) Fair Value

Fair value is the amount occurring when an asset changes hands between a knowledgeable buyer and a knowledgeable seller in a mutual bargain environment or when a debt is paid.

Financial assets are valued at their “Fair Value” for periods following their inclusion in the balance sheet.

Fair value of financial assets is determined by the company management using current market information and proper valuation methods. However, it is necessary to use estimations in interpretation of market data to determine fair value. Accordingly, estimations provided may fail to give the real value that the company would be able to get in current market transactions.

Fair value of publicly-traded shares is their “Stock exchange price”.

It is deemed that book value of cash and cash equivalents, short-term trade receivables and payables is close to their fair value.

Financial instruments in foreign currency are valued at period-end rate and therefore their fair value gets close to their book value.

Since affiliates and subsidiaries of the Company are not traded in an active market, their fair value could not be measured reliably. The Company does not intend to dispose of such financial instruments in the short term.

b) Hedge Accounting

Hedge accounting requires inclusion of hedging instruments (future contracts, option, forward and swaps) and hedged items (exchange rate in financial statements, liabilities subject to interest and interest risk, and performance bonds subject to the same impacts and not included in financial statements) to financial statements as profit or loss by netting any change in their fair value to each other.

There are three type of hedging relationships:

- Fair value hedging- Cash flow hedging- Net investment hedging (in Foreign affiliates)

NOTE 40 – EVENTS AFTER THE BALANCE SHEET DATE

a) Under the sales policy followed by the Company management, efforts to increase the turnover will be continued in the future periods and it is being planned to open new stores at home and abroad. In this context, meetings related to stores to be opened following the balance sheet date are being continued.

NOTE 41 – OTHER ISSUES SIGNIFICANTLY AFFECTING THE FINANCIAL STATEMENTS AND REQUIRED TO BE DISCLOSED FOR FINANCIAL STATEMENTS TO BE CLEAR, INTERPRETABLE AND UNDERSTANDABLE

a) Financial tables of the Company have been prepared so as to include incomes and expenses of the Company’s branch operating in Tuzla.

b) Accounting software; which is a certain part of Corporate resource management (ERP) project studies started in 2011 for purposes of completion of existing business processes in the areas of accounting, financing, human resources and budget planning of the Company in a shorter time and establishment of the information system which will enable the management to make all kind of managerial decisions in the quickest way; has been put into practice on 1st April 2012 and project and system development and application studies are being continued under the Corporate Management principles.

2012 Annual Report

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DESA DERİ SANAYİ ve TİCARET A.Ş.

Headquarter and Production FacilityHalkalı Cad. No: 208 34295 Sefaköy İstanbul TürkiyeT. (0212) 473 18 00 (pbx) F. (0212) 698 98 12 - 697 57 96

Çorlu TanneryTabakhaneler Mevkii Kuzey Cad. 2. Sok. No: 14 Çorlu TürkiyeT. (0282) 686 31 39 - 40 F. (0282) 686 40 11

Düzce Facility1. Organize Sanayi Bölgesi 250 Ada 4 Parsel Beykoz Düzce TürkiyeT. (0380) 553 73 01 (7hat) F. (0380) 553 73 08

DESA CiddeKing Abdulaziz St. Red Sea Mall No:14 / F Jeddah Saudi ArabiaT. 00 966 221 500 94 95

Desa Information444DESA - 444 33 72www.desa.com.tr - [email protected]

AdanaDesa SeyhanDesa Real

AnkaraDesa MigrosDesa CepaDesa PanoraDesa OptimumDesa KentparkDesa ArmadaDesa Kızılay

AntalyaDesa DeepoDesa Migros

AydınDesa Söke

AfyonDesa İkbal

BalıkesirDesa Susurluk

BoluDesa Highway

BilecikDesa Bozöyük

BursaDesa KoruparkDesa Anatolium

DenizliDesa Forum

EskişehirDesa NeoDesa Espark

GaziantepDesa CaddeDesa SankoparkDesa Real

İskenderunDesa PrimeMall

İstanbulDesa Ataköy GalleriaDesa Beylikdüzü MigrosDesa BeyoğluDesa CapitolDesa Nişantaşı Abdi İpekçiDesa ProfiloDesa SuadiyeDesa OliviumDesa FabrikaDesa MetrocityDesa Maltepe CarrefourDesa İçerenköy CarrefourDesa Carousel AVM

Desa İdealtepeDesa AstoriaDesa Kartal M1 TepeDesa NautilusDesa PalladiumDesa İstinye ParkDesa OptimumDesa ViaportDesa Ataköy PlusDesa AkbatıDesa Ataköy KonaklarıDesa ToriumDesa Marmara ForumDesa ArenaparkDesa AirportDesa StarCityDesa ForumDesa GöztepeDesa BuyakaDesa Cevahir

İzmirDesa OptimumDesa EgsDesa AgoraDesa ForumDesa SelwayDesa Bornova

KayseriDesa KayseriparkDesa Forum

KonyaDesa KulecityDesa Konya Kentpark

MalatyaDesa Park

MardinDesa Movapark

MersinDesa Forum

SamsunDesa Lovalet

TekirdağDesa Çorlu AvantajDesa Orion AVM

Desa GoDesa Go MuğlaDesa Go MarmarisDesa Go AlanyaDesa Go OrduDesa Go Şanlıurfa

LondraDesa Covent GardenDesa Hampstead

Suudi ArabistanDesa Cidde

2012 Annual Report

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2012 Annual Report

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