ANNUAL REPORT - Arçelik A.Ş.

1 ANNUAL REPORTV ehbi KO Honesty, integrity, and superiorbusiness ethics are the foundationsof our business conduct our business based on good intentions, mutualbenefit, and fair treatment in all our relationships. We arecommitted to conforming at all times to the highest ethical andlegal standards. We are a leader in serving our society andsafeguarding the interests of future generations. Protection ofthe environment and promotion of a higher level of environmentalawareness are our duty to both our country and our elik Group's vision of Respects The Globe, RespectedGlobally aims to achieve profitable and sustainablegrowth; to increase market share in its target market;the globe; to reach more consumers in a fast-changingworld with innovative products and services; tosafeguard the future with corporate responsibility.

2 And to integrate and optimize the components of theglobal organization while becoming a global YET RAPORU2016 ANNUAL REPORTC ontentsVision 2 Almanac 2016 4 REPORT of the Board of Directors and Message from the Chairman 6 Message from the General Manager 8 Auditor s REPORT on ANNUAL REPORT 11 Financial Statement Summary 2016 12 Financial Indicators 13 Five-Year Consolidated Financial Review 14 Shareholders 15 Dividends Paid 16 Share Performance 17 Risk Management 18 Brands 22 Global Operational Network 23 International Markets 24 White Goods 25 Consumer Electronics 25 Turkish Market 31 White Goods 31 Consumer Electronics 31 Plants 35 Innovative and Superior Technology 36 Innovative Products 40 Innovative Applications 46 Corporate Governance Principles Compliance REPORT 52 Statement of Compliance with Corporate Governance Principles 52 Environmental Approach to Products and Production 72 Environment-Friendly Products 77 Environment-Friendly Applications 79 Social Responsibility 81 Awards and Achievements in 2016 90 Global Organization 92 Business Excellence 99 Board of Directors 2016 100 Management 2016 102 Agenda 105 Profit Distribution Proposal 106 Amendments to the Articles of Association 107 Independency Statements of Candidates for Independent Members of Board of Directors 108 Dependent Company REPORT 110 Independent Auditor's REPORT 111

3 Consolidated Financial Statements 113 InnovationCorporate GovernanceCorporate ResponsibilityConsolidated Financial Statementsand Independent Auditors ReportThe Target Market; the GlobeGlobal OrganizationSustainable Growth04 JANUARYFEBRUARYMARCHAPRILMAYJUNE Ar elik Refrigerator Plant in Thailand started manufacturing. Beko launched its global Official Partner of Play campaign. Ar elik Creative Industries Application and Research Center (KUAR) was founded with the collaboration of Ar elik and Ko University. Ar elik and Beko launched and web sites to provide detailed information on Special Customer Programs for its partners and special customers. Ar elik manufactured Turkey's first and slimmest 4K Android Ultraslim TV.

4 Ar elik manufactured Selamlique Capsule Turkish Coffee Machine. Grundig collaborated with Food for Soul founded byMassimo Bottura to create awareness of waste food. Grundig presented the home technologies of the future atEurocucina, world's most prestigious design fair. Ar elik attended the World Bank's Dialogue For Climate Action event and signed the Principles of Dialogue For Climate Action . Beko LLC Washing Machine and Refrigerator Plant celebrated its 10th anniversary. Ar elik hosted a grandiose opening ceremony for the new global purchasing center in China. Ar elik held the Global Purchasing Summit in Istanbulwith the attendance of one thousand people.

5 Ar elik introduced HomeWhiz which allows communication of smart devices with white goods and home appliances. Ar elik introduced Unimpaired Products projectwhich includes products and solutions for visually impaired. Ar elik 2015 Sustainability REPORT was issued in compliance with Global Sustainability Initiative's G+ basic application level. Ar elik was listed in Borsa Istanbul Sustainability 201605 Ar elik extended the partnership agreement with LG until 2023 and announced that commercial A/Cs would be manufactured in addition to home A/Cs. Ar elik incorporated Ar elik Pazarlama (ARPAfi) to manage the operations in Turkey more efficiently.

6 Ar elik acquired Dawlance, Pakistan s leading white goods and home appliances manufacturer, with the company's three production plants. Ar elik was a strategic partner of Turkey Design Week organized by the Ministry of Economy and Turkish Exporters Association. Retail Academy was established by Retail Development Directorate to strengthen the position of Ar elik brands at sales points in Turkey. Ar elik introduced Turkey's first Smart Home Assistance . Ar elik was granted with incentives by the Government of Romania for the new Arctic Washing Machine Production Plant. Ar elik held an official opening ceremony for the R&D Center in Cambridge.

7 Beko became the Turkey sponsor of FCBE scola, the official football school of Barcelona Footbal Club. Ar elik was listed in The A List: The CDP Climate Performance Leadership Index . Ar elik is the firstTurkish industrial company to enter this list twice. Ar elik was the only industry company representing Turkey at 2 events organized by the Ministry of Environment & Urban Planning and UNEP in COP Ar elik launched the Collaborative Robot project, a first implementation of human - robot interaction which is an important element of Industry Ar elik manufactured and launched Turkey's first OLED TV. Ar elik attended the IFA Fair in Germany with Beko and Grundig brands and introduced innovative products and technologies.

8 Ar elik Dealers Meeting was held in Antalya with the attendance of more than a thousand dealers from all around Turkey. Professional Grout and Coffee & Spice Grinder designed by Ar elik for hotels, restaurants and caf swere introduced at Istanbul Coffee REPORTA lmanac 201606 Dear Shareholders,I offer you my warmest greetings and hope our meeting toshare the results of the previous year will be productive forall of you know, 2016 was a challenging year in Turkey andall around the world. Political and economic developmentsdeeply affected each area of the business world in differentways and as a result of these developments businessessuffered and continue to suffer to the policies adopted after the crisis, the economicoutlook of the USA was better than for other developedcountries.

9 While the interest rate increase by the FED isconsidered a positive move for the US economy, it is alsoseen as a threat in terms of capital flow to developingcountries. The US presidential election and the new presidenthave put the US in the world spotlight more than of recovery in the European economies in 2015continued into 2016. The chief factors influencing Europe'sgrowth in 2017 are elections in Germany, the Netherlandsand France, political instabilities in other large marketssuch as Italy and Spain, and Japan, growth is still fragile despite the measures the end of stagnation in developing countries, especiallyin Russia and Brazil, the growth rate is expected to increasein the period ahead.

10 Currently China is working on growinglocal demand to balance its growth model based on exportsand investments. The sheer magnitude of its market willensure that China's performance will continue to be asignificant factor in the global of the Board of Directors and Message from the ChairmanAr elik offers products andservices in more than 145countries with 30,000 employeesand manufacturing plants inTurkey, Romania, Russia, China,South Africa, Thailand terms of our domestic economy, it was a year of markedlydifferent phases. In the first half, inflation was low, partlydue to food prices, and growth was moderate; but in thesecond half, security concerns, geopolitical issues and theevents on July 15th created a completely different the US elections, the dollar started to increasein value and funds were diverted from developing , the Turkish lira was among the mostdepreciated currencies in this term, resulting in credit ratinginstitutions degrading Turkey's rating to below suitable forinvestment.