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Doğuş Holding Anonim Şirketi and its Subsidiaries Table of Contents Independent Auditors’ Report Consolidated Statement of Financial Position Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Appendix: Supplementary Information - Convenience Translation to US Dollar

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Financial Position As at 31 December 2012 Currency: Thousands of Turkish Lira (“TL”)

The accompanying notes are an integral part of these consolidated financial statements. 1

Notes 31 December

2012 31 December

2011

Assets Property and equipment 15 4,851,755 3,921,875 Intangible assets 16 2,421,421 1,610,044 Investments in debt securities 17 5,667,402 7,815,877 Investments in equity securities 18 139,577 54,554 Accounts receivable 22 908,915 619,676 Banking loans and advances to customers 25 14,390,873 12,650,050 Banking loans and advances to banks 26 1,124,970 1,203,379 Financial assets at fair value through profit or loss 27 78,604 45,526 Investment property 19 2,189,168 1,903,086 Other non-current assets 20 588,081 461,600 Deferred tax assets 14 294,254 157,012 Assets held for sale 7 30,780 30,573

Total non-current assets 32,685,800 30,473,252 Inventories 21 632,733 676,069 Accounts receivable 22 1,251,206 994,242 Due from related parties 40 392,732 256,134 Other current assets 24 3,731,180 2,413,763 Investments in debt securities 17 3,936,825 794,881 Banking loans and advances to customers 25 9,573,341 9,116,509 Banking loans and advances to banks 26 1,128,628 2,444,856 Financial assets at fair value through profit or loss 27 53,508 55,051 Cash and cash equivalents 28 2,635,107 3,679,314 Assets held for sale 7 64,088 66,650

Total current assets 23,399,348 20,497,469 Total assets 56,085,148 50,970,721

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Financial Position (continued) As at 31 December 2012 Currency: Thousands of TL


Notes 31 December

2012 31 December

2011

Equity Paid-in capital 2,055,292 2,055,292 Capital stock held by subsidiaries (94,531) (98,755)Share premium 159,350 159,350 Fair value reserve 247,066 11,912 Translation reserve 34,049 45,446 Hedging reserve (5,571) (8,066)Revaluation surplus 1,101,531 1,060,279 Legal reserves 359,467 284,281 Retained earnings 6,944,576 6,355,054

Total equity attributable to owners of the Company

10,801,229 9,864,793

Non-controlling interests Şahenk Family 104,612 106,621 Others 329,700 243,437

Total non-controlling interests 434,312 350,058

Total equity 29 11,235,541 10,214,851

Liabilities Loans and borrowings 30 6,511,359 5,831,709 Bonds payable 31 953,688 384,019 Subordinated liabilities 32 35,609 266,870 Deposits 35 355,386 404,006 Obligations under repurchase agreements 36 -- 286,123 Accounts payable 37 846,438 886,433 Deferred tax liabilities 14 331,998 200,443 Other non-current liabilities 33 978,068 839,961

Total non-current liabilities 10,012,546 9,099,564

Loans and borrowings 30 4,943,933 4,657,559 Bonds payable 31 513,486 512,203 Subordinated liabilities 32 -- 1,871 Deposits 35 23,026,609 21,629,065 Obligations under repurchase agreements 36 3,378,613 2,525,166 Accounts payable 37 1,057,532 655,724 Due to related parties 40 9,465 6,819 Taxes payable on income 14 92,766 32,589 Other current liabilities 38 1,814,657 1,635,310

Total current liabilities 34,837,061 31,656,306

Total liabilities 44,849,607 40,755,870

Total equity and liabilities 56,085,148 50,970,721

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Comprehensive Income For the Year Ended 31 December 2012 Currency: Thousands of TL


Notes 2012

2011

Revenues 11,000,016 9,929,164

Cost of revenues (8,209,306) (7,377,208)

Gross profit 9 2,790,710 2,551,956

Administrative expenses 10 (1,351,433) (1,189,808)

Selling, marketing and distribution expenses (294,942) (242,626)

Impairment losses, net 11 (297,992) (273,490)

Trading gain, net 27 40,813 176,956

Other income 12 333,862 2,674,216

Other expenses 12 (227,363) (241,575)

Result from operating activities 993,655 3,455,629

Finance income 337,349 349,174

Finance costs (316,836) (640,346)

Net finance income / (costs) 13 20,513 (291,172)

Share of profit of equity accounted investees 53,629 8,003

Profit before income tax 1,067,797 3,172,460

Income tax expense 14 (224,469) (436,552)

Profit for the year 843,328 2,735,908

Other comprehensive income

Revaluation of property and equipment 64,215 (5,335)

Change in fair value of available-for-sale financial assets 284,765 (561,781)

Change in translation reserve (11,397) 42,078

Effective portion of changes in fair value of cash flow hedges 2,495 (207)

Income tax on other comprehensive income 14 (51,484) 102,262

Other comprehensive income / (loss) for the year, net of income tax

288,594 (422,983)

Total comprehensive income for the year 1,131,922 2,312,925

Profit attributable to:

Owners of the Company 744,003 2,691,764

Non-controlling interests 29 99,325 44,144

-Şahenk Family 16,036 8,312

-Others 83,289 35,832

843,328 2,735,908

Total comprehensive income attributable to:

Owners of the Company 1,029,338 2,267,796

Non-controlling interests 102,584 45,129


-Others 86,300 39,069

1,131,922 2,312,925 .

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Changes in Equity For the Year Ended 31 December 2012 Currency: Thousands of TL

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

4

Attributable to owners of the Company

Paid-incapital

Capital stockheld by

subsidiariesShare

premium

Fairvalue

reserveTranslation

reserve Hedging

reserveRevaluation

surplusLegal

reservesRetained earnings Total

Non-controlling

interestsTotal

equity Balances at 1 January 2011 2,055,292 (98,755) 159,350 484,725 3,368 (7,859) 1,086,198 270,507 3,748,970 7,701,796 278,959 7,980,755 Total comprehensive income for the year

Profit for the year -- -- -- -- -- -- -- -- 2,691,764 2,691,764 44,144 2,735,908

Other comprehensive income Net fair value losses from cash flow hedges, net of tax -- -- -- -- -- (279) -- -- -- (279) -- (279) Net fair value losses from available-for-sale portfolio, net of tax -- -- -- (321,412) -- -- -- -- -- (321,412) -- (321,412) Transferred to net income from fair value increases, net of tax -- -- -- (86,507) -- -- -- -- -- (86,507) -- (86,507) Foreign currency translation differences for foreign operations -- -- -- -- 42,488 -- -- -- -- 42,488 -- 42,488 Transferred to retained earnings from revaluation surplus due to partial disposal of proportionately consolidated joint venture -- -- -- -- -- -- (7,700) -- 7,700 -- -- -- Change in joint venture rate in a proportionately consolidated joint venture due to partial disposal -- -- -- (64,894) (410) 72 -- -- -- (65,232) -- (65,232) Change in revaluation surplus, net of tax -- -- -- -- -- -- (18,219) -- 25,193 6,974 985 7,959 Total other comprehensive income -- -- -- (472,813) 42,078 (207) (25,919) -- 32,893 (423,968) 985 (422,983) Total comprehensive income for the year -- -- -- (472,813) 42,078 (207) (25,919) -- 2,724,657 2,267,796 45,129 2,312,925 Transactions with owners, recorded directly in equity Acquisition of non-controlling interests in previously proportionately consolidated joint ventures with change in control (Note 8.9.1 and Note 8.9.2) -- -- -- -- -- -- -- -- -- -- 88,666 88,666 Acquisition of non-controlling interests through business combinations (Note 8.9.3) -- -- -- -- -- -- -- -- -- -- 276 276 Acquisition from non-controlling interests in a consolidated subsidiary (Note 8.9.1) -- -- -- -- -- -- -- -- 197 197 (55,207) (55,010) Adjustment to equity for share transfer of a subsidiary of a proportionately consolidated joint venture -- -- -- -- -- -- -- 4 1,024 1,028 (1,028) -- Change in joint venture rate in a proportionately consolidated joint venture due to partial disposal -- -- -- -- -- -- -- (34,984) -- (34,984) -- (34,984) Dividends paid -- -- -- -- -- -- -- -- (71,040) (71,040) (2,804) (73,844) Transfers -- -- -- -- -- -- -- 48,754 (48,754) -- -- -- Change in non-controlling interests in consolidated subsidiaries -- -- -- -- -- -- -- -- -- -- (3,933) (3,933) Total transactions with owners -- -- -- -- -- -- -- 13,774 (118,573) (104,799) 25,970 (78,829) Balances at 31 December 2011 2,055,292 (98,755) 159,350 11,912 45,446 (8,066) 1,060,279 284,281 6,355,054 9,864,793 350,058 10,214,851

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Changes in Equity (continued) For the Year Ended 31 December 2012 Currency: Thousands of TL

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

5

Attributable to owners of the Company

Paid-incapital

Capital stock

held by subsidiaries

Share premium

Fairvalue

reserveTranslation

reserve Hedging

reserveRevaluation

surplusLegal

reservesRetained earnings Total

Non-controlling

interestsTotal

equity Balances at 1 January 2012 2,055,292 (98,755) 159,350 11,912 45,446 (8,066) 1,060,279 284,281 6,355,054 9,864,793 350,058 10,214,851 Total comprehensive income for the year Profit for the year 744,003 744,003 99,325 843,328

Other comprehensive income Net fair value gain from cash flow hedges, net of tax -- -- -- -- -- 2,495 -- -- -- 2,495 -- 2,495 Net fair value gain from available-for-sale portfolio, net of tax -- -- -- 231,549 -- -- -- -- -- 231,549 -- 231,549 Transferred to net income from fair value increases, net of tax -- -- -- 2,212 -- -- -- -- -- 2,212 -- 2,212 Foreign currency translation differences for foreign operations -- -- -- 1,393 (11,397) -- -- (28) -- (10,032) -- (10,032) Change in revaluation surplus, net of tax -- -- -- -- -- -- 41,252 -- 17,859 59,111 3,259 62,370 Total other comprehensive income -- -- -- 235,154 (11,397) 2,495 41,252 (28) 17,859 285,335 3,259 288,594 Total comprehensive income for the year -- -- -- 235,154 (11,397) 2,495 41,252 (28) 761,862 1,029,338 102,584 1,131,922

Transactions with owners, recorded directly in equity Acquisition of non-controlling interests through business combinations (Note 8.1, Note 8.2, Note 8.5 and Note 8.7) -- -- -- -- -- -- -- -- -- -- 51,478 51,478 Effect of legal merger with a previously consolidated subsidiary (5,264) 5,264 -- -- -- -- -- -- -- -- -- -- Dividends paid -- -- -- -- -- -- -- (122,787) (122,787) (32,445) (155,232) Transfers 5,264 (1,040) -- -- -- -- -- 75,214 (79,438) -- -- -- Change in non-controlling interests in consolidated subsidiaries

without a change in control -- -- -- -- -- -- -- -- 29,885 29,885 (37,363) (7,478) Total transactions with owners -- 4,224 -- -- -- -- -- 75,214 (172,340) (92,902) (18,330) (111,232) Balances at 31 December 2012 2,055,292 (94,531) 159,350 247,066 34,049 (5,571) 1,101,531 359,467 6,944,576 10,801,229 434,312 11,235,541

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Cash Flows For the Year Ended 31 December 2012 Currency: Thousands of TL


Notes 2012 2011 Cash flows from operating activities Profit for the year 843,328 2,735,908 Adjustments for: Impairment losses 11 297,992 273,490 Fair value change in investment property 6 and 12 (180,341) (266,214) Provision for and reversal of employee severance indemnity, net 6 and 33 34,537 41,449 Depreciation and amortisation 15 and 16 307,219 281,928 Technical reserves relating to insurance operations 6 14,735 5,369 Gain on sales of property and equipment 12 (14,938) (17,718) Loss from written-off property and equipment, and inventory 6 and 12 1,417 44,487 Loss from deconstruction process of a hotel building 6 and 12 -- 27,331 Gain on partial sales of proportionately consolidated joint venture 12 -- (2,163,189)

Loss on sale of subsidiaries 12 6,731 -- Fair value gain on trading property transferred to property and equipment 6 and 12 -- (51,830) Gain on sales of investment in equity securities 12 and 18 -- (57,862) Bargain purchase gain recognised on acquisition 8 (5,498) (1,758) Share of profit of equity accounted investees 6 (53,629) (8,003) Change in accrued interest expense, net 6 (2,717) 56,576 Provision for taxes on income 14 396,597 249,793 Deferred tax (credit) / expense 14 (172,128) 186,759 Warranty provision expense 6 and 12 56,600 39,498 1,529,905 1,376,014 Changes in operating assets and liabilities Change in deposits 2,550,827 4,341,604 Change in banking loans and advances to banks 221,726 (655,675) Change in balances with the Central Bank (1,521,391) (1,046,225) Change in banking loans and advances to customers (4,666,678) (7,283,915) Change in financial assets at fair value through profit or loss (29,040) 122,704 Change in other assets 73,407 (135,265) Change in inventories 48,416 (149,425) Change in accounts receivable (520,811) 153,070 Change in due from related parties (136,486) (127,992) Change in obligations under repurchase agreement 739,512 (129,466) Change in accounts payable 329,629 174,953 Change in bonds payable 570,952 948,296 Change in due to related parties 206 (56,589) Change in other liabilities 289,929 343,989 (519,897) (2,123,922) Interest paid (2,181,922) (1,486,649) Interest received 3,377,098 3,027,217 Taxes paid 14 (336,314) (316,652) Warranties paid (51,532) (30,514) Employee termination indemnity paid 33 (9,788) (10,159)Net cash (used in)/provided from operating activities 277,645 (940,679)

Cash flows from investing activities Acquisition from non-controlling interest in a consolidated subsidiary 8 -- (55,010)

Acquisition of jointly controlled entities 8 (369,202) -- Acquisition of subsidiaries 8 (413,019) (266,361) Acquisition of equity accounted investees (20,000) -- Acquisition of additional interest in previously proportionately consolidated joint ventures with change in control

-- (46,873)

Proceeds from partial sale of proportionately consolidated joint venture -- 2,833,275 Proceeds from sales of investment in equity securities -- 77,867

Proceeds from sales of subsidiaries 4,764 -- Acquisitions of investment property 19 (133,918) (76,595) Decrease in investments in debt securities (1,794,063) (324,583) Acquisition of property and equipment and intangible assets 15 and 16 (1,015,014) (975,449) Proceeds from sale of property and equipment 91,969 78,066 Increase in interest in consolidated subsidiaries (39,906) (12,700) Decrease in interest in consolidated subsidiaries 2,543 8,767 Cash flows provided/(used in) investing activities (3,685,846) 1,240,404

Cash flows from financing activities Dividends paid (122,787) (71,040) Change in short-term loans and borrowings, net 611,147 1,741,681 Change in long-term loans and borrowings, net 1,105,561 464,181 Change in subordinated liabilities (233,132) 34,737 Cash flows provided by financing activities 1,360,789 2,169,559

Net increase/(decrease) in cash and cash equivalents (2,047,412) 2,469,284 Cash and cash equivalents at 1 January 5,031,447 2,562,163 Cash and cash equivalents at 31 December 28 2,984,035 5,031,447

Doğuş Holding Anonim Şirketi and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the Year Ended 31 December 2012

7

Notes to the consolidated financial statements

Notes Description Pages1 Reporting entity 82 Basis of preparation 163 Significant accounting policies 184 Determination of fair values 485 Financial risk management 496 Operating segments 657 Assets held for sale 728 Acquisitions of subsidiaries and jointly controlled entities 739 Revenues and cost of revenues 8710 Administrative expenses 8711 Impairment losses, net 8812 Other income/expenses 8813 Net finance income / (costs) 9014 Taxation 9115 Property and equipment 9816 Intangible assets 10017 Investments in debt securities 10618 Investments in equity securities 10719 Investment property 10920 Other non-current assets 11021 Inventories 11022 Accounts receivable 11023 Due from/due to customers for contract work 11124 Other current assets 11225 Banking loans and advances to customers 11326 Banking loans and advances to banks 11527 Financial assets at fair value through profit or loss 11628 Cash and cash equivalents 11729 Capital and reserves 11830 Loans and borrowings 12031 Bonds payable 12332 Subordinated liabilities 12533 Other non-current liabilities 12534 Retirement benefit obligation 12735 Deposits 13136 Obligations under repurchase agreements 13237 Accounts payable 13338 Other current liabilities 13339 Commitments and contingencies 13340 Related party disclosures 13741 Financial instruments 13942 Use of estimates and judgments 15343 Group enterprises 15644 Significant events 15945 Subsequent events 161

Appendix: Supplementary information

Doğuş Holding Anonim Şirketi and its Subsidiaries Notes to Consolidated Financial Statements As at and for the Year Ended 31 December 2012 Currency: Thousands of TL

8

1 Reporting entity

Doğuş Holding Anonim Şirketi (“Doğuş Holding” or “the Company”) was established in 1975 to invest in and coordinate the activities of companies operating in different industries, including banking and finance, automotive, construction, tourism, media, real estate, energy and entertainment and is registered in Turkey.

Doğuş Holding is owned and managed by the members of Şahenk Family. As at 31 December 2012, the principal shareholders and their respective shareholding rates in Doğuş Holding are stated in note 29.

The address of the registered office of Doğuş Holding is as follows:

Huzur Mahallesi, Maslak Ayazağa Caddesi, No: 2 34396 Şişli / İstanbul-Turkey

As at 31 December 2012, Doğuş Holding has 109 (31 December 2011: 81) subsidiaries (“the Subsidiaries”), 58 (31 December 2011: 36) joint ventures (“the Joint Ventures”) and 12 (31 December 2011: 8) associates (“the Associates”) (referred to as “the Group” or “Doğuş Group” herein and after). The consolidated financial statements of Doğuş Group as at and for the year ended 31 December 2012 comprises Doğuş Holding and its subsidiaries and the Group’s interest in associates and jointly controlled entities. As explained in more detail in note 2, Doğuş Holding holds controlling interest directly or indirectly via other companies owned and/or exercising the control over the voting rights of the shares held by the members of Şahenk Family, in all its subsidiaries included in the Group.

The Group operates partnerships and has distribution, management and franchise agreements with internationally recognised brand names, such as Banco Bilbao Vizcaya Argentaria S.A. (“BBVA”), Volkswagen AG, Volkswagen Finance AG, Audi AG, Porsche AG, Bentley Motors Limited, Seat SA, Scania, Krone, Meiller Fahrzeug&Maschinenfabrik-GMBH&Co KG, Lamborghini S.p.A., Thermo King, Hyatt International Ltd., HMS International Hotel GMBH, Emporio Armani, Guccio Gucci Spa, CNBC, Condé Nast New Markets Europe/Africa NC (“Vogue”), Virgin Radio International Limited (“Virgin Radio”), National Geographic Society (“NG-NG Kids”), Nielsen Media Inc., Curtco Robb Media LLC (“Robb Report”), NBC News Digital LLC (“Ntvmsnbc”), Loro Piana, Hublot, Porsche Design, Armani Ristorante, Armani Caffe, GQ-Bar, Toms Deli, Tom Aikens Restaurant, Tom’s Kitchen, Kitchenette, Zuma and Roka.

The number of employees of the Group at 31 December 2012 is approximately 30,250 (31 December 2011: 29,000).

As explained in more detail in note 6, The Group is organised mainly in Turkey under five core operating segments:

Banking and finance Construction Automotive Tourism Others


9

1 Reporting entity (continued)

The subsidiaries, the joint ventures and the associates included in the consolidation scope of Doğuş Holding, their country of incorporation, nature of business and their respective operating segments are as follows:

1.1 Entities in banking and finance segment

Below entities are first consolidated under Türkiye Garanti Bankası Anonim Şirketi (“Garanti Bank”); then proportionately consolidated under the Group in accordance with IAS 31 “Interests in Joint Ventures”.

Joint ventures Nature of business Country of

incorporation Domenia Credit IFN S.A. (“Domenia”) Mortgage Romania

G Netherlands B.V. (“G Netherlands”) Finance The Netherlands

Garanti Bank Banking Turkey

Garanti Bank International NV (“GBI”) Banking The Netherlands

Garanti Bank Moscow (“GB Moscow”) Banking Russia

Garanti Bank S.A. Banking Romania

Garanti Bilişim Teknolojisi ve Ticaret Anonim Şirketi

(“Garanti Bilişim”) (1)

IT services Turkey

Garanti Diversified Payment Rights Finance Company (“Garanti DPR”) Special purpose entity for

securitisation transaction

Turkey

Garanti Emeklilik ve Hayat Anonim Şirketi (“GEHAŞ”) Life insurance Turkey

Garanti Faktoring Hizmetleri Anonim Şirketi (“Garanti Faktoring”) Factoring Turkey

Garanti Filo Yönetimi Hizmetleri Anonim Şirketi (“Garanti Filo”) (1) Fleet management Turkey

Garanti Finansal Kiralama Anonim Şirketi (“Garanti Leasing”) Leasing Turkey

Garanti Hizmet Yönetimi Organizasyon ve Danışmanlık

Anonim Şirketi (“Garanti Hizmet”) (2)

Service activities for fund

management and operations

Turkey

Garanti Holding B.V. Holding company The Netherlands

Garanti Konut Finansmanı Danışmanlık Hizmetleri

Anonim Şirketi (“Garanti Konut”) (2)

Mortgage marketing Turkey

Garanti Kültür Anonim Şirketi (“Garanti Kültür”) (2) Cultural activities Turkey

Garanti Ödeme Sistemleri Anonim Şirketi (“GÖSAŞ”) (2) Credit card operational services

Turkey

Garanti Portföy Yönetimi Anonim Şirketi (“Garanti Portföy”) Fund management Turkey

Garanti Yatırım Menkul Kıymetler Anonim Şirketi

(“Garanti Yatırım”)

Brokerage and investment

banking

Turkey

Garanti Yatırım Ortaklığı Anonim Şirketi

(“Garanti Yatırım Ortaklığı”)

Portfolio management Turkey

Golden Clover Stichting Custody(2) Settlement and custody The Netherlands

Motoractive IFN S.A. (“Motoractive”) Leasing Romania

Ralfi IFN S.A. (“Ralfi”) Consumer finance Romania

Stichting Safekeeping(2) Settlement and custody The Netherlands

Trifoi Real Estate Company(2) Real estate investment Romania

United Custodian(2) Settlement and custody The Netherlands

(1) These companies are subsidiaries of Garanti Bank and are operating in businesses other than banking and/or finance. They are included within the “banking and finance” segment for the purposes of Doğuş Holding’s consolidated financial statements since Garanti Bank owns their controlling interests.

(2) These companies are not consolidated in the accompanying consolidated financial statements as they do not currently have material operations compared to the consolidated performance of the Group.


10


1.2 Entities in construction segment

Below entities are first consolidated under Doğuş İnşaat ve Ticaret Anonim Şirketi (“Doğuş İnşaat”); then consolidated under the Group.

Subsidiaries Nature of business Country of

incorporation Ayson Geoteknik ve Deniz İnşaat Anonim Şirketi (“Ayson”) Drilling Turkey Ayson Sondaj Limited Ukraine (“Ayson Sondaj”) A non-operating company Ukraine Dogus Construction LLC Construction Qatar Doğus Insaat ES Construction Morocco Doğus Maroc SARL Construction Morocco Doğuş EOOD Construction Bulgaria Doğuş İnşaat Construction Turkey Doğuş İnşaat Limited (Ukraine) (“Doğuş İnşaat Limited”) Construction Ukraine Dogus Oman LLC Construction Oman Teknik Mühendislik ve Müşavirlik Anonim Şirketi (“Teknik Mühendislik”)

Civil engineering Turkey


incorporation Doğuş Alarko YDA İnşaat (“Doğuş Alarko”) Construction Turkey Doğuş Polat Adi Ortaklığı (“Doğuş Polat”) Construction Turkey Gülermak-Doğuş Adi Ortaklığı (“Gülermak Doğuş”) Construction Turkey Kazakhistan Joint Venture (“Doğuş Prestige”) Construction Kazakhistan Yapı Merkezi-Doğuş-Yüksel-Yenigün-Belen Adi Ortaklığı (“YMDYYB”)

Construction Turkey

1.3 Entities in automotive segment

Below entities are first consolidated under Doğuş Otomotiv Servis ve Ticaret Anonim Şirketi (“DOAŞ”); then consolidated under the Group.


incorporation DOAŞ Automotive distribution Turkey Doğuş Auto Mısır JS A non-operating company Egypt Doğuş Auto Mısr LLC A non-operating company Egypt D-Auto Suisse SA Automotive retail Switzerland Doğuş Oto Pazarlama ve Ticaret Anonim Şirketi (“Doğuş Oto”) Automotive retail Turkey Doğuş Sigorta Aracılık Hizmetleri Anonim Şirketi (“Doğuş Sigorta”)

Insurance agency Turkey


incorporationKrone-Doğuş Treyler Sanayi ve Ticaret Anonim Şirketi (“Krone Doğuş”) (1)

Production Turkey

Meiller Doğuş Damper Sanayi ve Ticaret Limited Şirketi (“Meiller Doğuş”) (1)

Production Turkey

TÜVTURK Kuzey Taşıt Muayene İstasyonları Yapım ve İşletim Anonim Şirketi (“TÜVTURK Kuzey”) (1)

Vehicle inspection station Turkey

TÜVTURK Güney Taşıt Muayene İstasyonları Yapım ve İşletim Anonim Şirketi (“TÜVTURK Güney”) (1)


TÜVTURK İstanbul Taşıt Muayene İstasyonları Yapım ve İşletim Anonim Şirketi (“TÜVTURK İstanbul”) (1)



11


1.3 Entities in automotive segment (continued)

Associates Nature of business Country of

incorporationLeaseplan Otomotiv Servis ve Ticaret Anonim Şirketi (“Leaseplan”)

Operational leasing Turkey

LPD Holding Anonim Şirketi (“LPD Holding”) Operational leasing TurkeyVDF Faktoring Hizmetleri Anonim Şirketi (“VDF Faktoring”) Factoring Turkey VDF Sigorta Aracılık Hizmetleri Anonim Şirketi (“VDF Sigorta”)

Agency/brokerage Turkey

VDF Servis Holding Anonim Şirketi (“VDF Servis Holding”) Holding company Turkey Volkswagen Doğuş Tüketici Finansmanı Anonim Şirketi (“VDF Tüketici”)

Consumer finance Turkey

Yüce Auto Anonim Şirketi (“Yüce Auto”) Automotive distribution Turkey

(1) These companies are proportionately consolidated joint ventures of Doğuş Holding.

1.4 Entities in tourism segment


incorporationAntur Turizm Anonim Şirketi (“Antur”) Hospitality and travel

agency Turkey

Arena Giyim Sanayi ve Ticaret Anonim Şirketi (“Arena”) Hospitality and cafe TurkeyAnadolu Göcek Marina Turizm Yatırımları Anonim Şirketi (“D Marin Göcek”)

Marina operation Turkey

D Otel Göcek Turizm Yatırımları ve İşletmeciliği Anonim Şirketi (“D Otel Göcek”)

Hospitality Turkey

D Otel Marmaris Turizm İşletmeciliği Ticaret ve Sanayi Anonim Şirketi (“D Otel”)

Hospitality Turkey

Datmar Turizm Anonim Şirketi (“Datmar”) Hospitality Turkey Doğuş Dalaman Marina İşletmeciliği Turizm Ticaret Anonim Şirketi (“Doğuş Dalaman”) (1)

A non-operating company Turkey

Doğuş Didim Marina İşletmeleri ve Ticaret Anonim Şirketi (“Doğuş Didim”)


Doğuş Hoteli d.o.o. (“Doğuş Hoteli”) Hotel management and investment

Croatia

Doğuş Marina Hoteli d.o.o. (“Doğuş Marina Hoteli”) Hotel management Croatia Doğuş Marina Mandalina d.o.o. (“Doğuş Marina ”) Investments company Croatia D Marina İşletmeciliği Turizm ve Yönetim Hizmetleri Anonim Şirketi (“D Marina”)

Marina management Turkey

D Marine Investments Holding Coöperatief U.A. Investments company The Netherlands D Marine Investments Holding B.V. Investments company The Netherlands Doğuş Hoteli Sibenik d.o.o. (“Doğuş Hoteli Sibenik”) A non-operating company Croatia Doğuş Marina Upravljanje d.o.o. (“Doğuş Upravljanje”) Marina management Croatia Doğuş Otel İşletmeciliği ve Yönetim Hizmetleri Anonim Şirketi

(“Doğuş Otel İşletmeciliği”) Hospitality Turkey

Doğuş Perakende Satış, Giyim ve Aksesuar Ticaret Anonim Şirketi (“Doğuş Perakende”)

Retail services Turkey

Doğuş Sibenik Razvitak Marina d.o.o. (“Sibenik Razvitak”) Tourism - construction development

Croatia

Doğuş Sibenik Upravljanje Marina d.o.o. (“Sibenik Upravljanje”) Marina management Croatia Doğuş Turgutreis Marina İşletmeciliği Turizm ve Ticaret Anonim Şirketi (“Doğuş Turgutreis”)



12


1.4 Entities in tourism segment (continued)


incorporationGaranti Turizm Yatırım ve İşletme Anonim Şirketi (“Garanti Turizm”)

Hospitality Turkey

Göktrans Turizm ve Ticaret Anonim Şirketi (“Göktrans Turizm”) Hospitality TurkeyMarina Borik d.o.o (“Marina Borik”) Marina operation Croatia Marina Dalmacija d.o.o (“Marina Dalmacija”) Marina operation Croatia Marina Sibenik d.o.o. (“Marina Sibenik d.o.o.”) (formerly, named

NCP Marina Mandalina d.o.o.) Marina operation Croatia

Şahintur Şahinler Otelcilik Turizm Yatırım İşletmeciliği Anonim Şirketi (“Şahintur”)


Voyager Mediterranean Turizm Endüstrisi ve Ticareti Anonim Şirketi (“Voyager”)

Hospitality Turkey


incorporationAcropolis S.P.A Hospitality Italy Gouvia Marina S.A. Marina operation Greece Lefkas Marina S.A. Marina operation Greece K&G Medmarinas Management S.A. Marina management Greece Zea Marina S.A. Marina operation Greece

(1) Doğuş Dalaman was established to build and operate yachting marina in seaside resort towns in Mediterranean coasts of Turkey. However, Doğuş Dalaman has not yet started its operations and accordingly was noted as non-operating.

1.5 Entities in other segment


incorporation A Yapım Televizyon Programcılık Anonim Şirketi (“A Yapım”) Media Turkey A.L.E. Gıda Turizm ve Ticaret Anonim Şirketi (“A.L.E. Gıda”) Restaurant establishment TurkeyAresta Gıda Ticaret ve Sanayi Anonim Şirketi (“Aresta”) Restaurant establishment Turkey Bal Turizm ve Gıda Pazarlama Anonim Şirketi (“Bal Turizm”) Restaurant establishment Turkey Büke Turizm ve Lokantacılık Ticaret Anonim Şirketi

(“Büke Turizm”) Restaurant establishment Turkey

D Eğlence Bar Restoran İşletmeciliği ve Yatırım Anonim Şirketi (“D Eğlence”)

Establishment and management of restaurants and cafes

Turkey

D Enerji Üretim ve Yatırım Anonim Şirketi (“D Enerji”) Energy Turkey D Et ve Et Ürünleri Gıda Pazarlama Ticaret Anonim Şirketi

(“D Et”) Establishment and

management of restaurants and cafes

Turkey

D Otel Bodrum Sağlıklı Yaşam Hizmetleri Ticaret Anonim Şirketi (“D Otel Bodrum”) (formerly, named Atami Turizm İşletmeciliği ve Ticaret Anonim Şirketi)

Healthcare counseling and hospitality

Turkey

D Koruma ve Güvenlik Hizmetleri Anonim Şirketi (“D Koruma”) Security and protection activities

Turkey

Dafne Yayıncılık Turizm ve Gıda Pazarlama Ticaret Anonim Şirketi (“Dafne Yayıncılık”)

Restaurant and catering Turkey

Doğuş Araştırma Geliştirme ve Müşavirlik Hizmetleri Anonim Şirketi (“Doğuş Arge”)

Investing Turkey

Doğuş Bilgi İşlem ve Teknoloji Hizmetleri Anonim Şirketi (“Doğuş Bilgi İşlem”)

Software development Turkey

Doğuş Cennet Koyu Sağlıklı Yaşam Hizmetleri Ticaret Anonim Şirketi (“Doğuş Cennet Koyu”)


Doğuş Enerji Toptan Elektrik Ticaret Anonim Şirketi (“Doğuş Enerji Toptan”)

Purchasing and selling of electricity

Turkey


13


1.5 Entities in other segment (continued)


incorporationDoğuş Enerji Üretim ve Ticaret Anonim Şirketi (“Doğuş Enerji”) Electricity generation Turkey Doğuş Finance Ukraine A non-operating company Ukraine Doğuş Gayrimenkul Yatırım ve İşletme Anonim Şirketi (“Doğuş Gayrimenkul”)

Real estate development Turkey

Doğuş Gayrimenkul Yatırım Ortaklığı Anonim Şirketi (“Doğuş GYO”)

Real estate investment fund

Turkey

Doğuş Grubu İletişim Yayıncılık ve Ticaret Anonim Şirketi (“Doğuş İletişim”)

Media Turkey

Doğuş International Limited (“Doğuş International”) Construction equipments England Dogus Management Services Limited (“Dogus Management”) Business and financial

investments Dubai

Doğuş Media Group GmbH (“Doğuş Media”) Media Germany Doğuş Nakliyat ve Ticaret Anonim Şirketi (“Doğuş Nakliyat”) A non-operating company Turkey Doğuş SA A non-operating company Switzerland Doğuş Sağlıklı Yaşam ve Danışmanlık Hizmetleri Ticaret Anonim Şirketi (“Doğuş Sağlıklı Yaşam”)

Healthcare counseling Turkey

Doğuş Spor Kompleksi Yatırım ve İşletme Anonim Şirketi (“Doğuş Spor”)

Sports activities Turkey

Doğuş Tarımsal Projeler Araştırma Geliştirme Anonim Şirketi (“Doğuş Tarım”)

Agricultural research and development activities

Turkey

Doğuş Telekomünikasyon Hizmetleri Anonim Şirketi (“Doğuş Telekom”)


Doğuş Turizm Sağlık Yatırımları ve İşletmeciliği Sanayi ve Ticaret Anonim Şirketi (“Doğuş Turizm”)

Real estate development Turkey

Doğuş Video ve Dijital Yayıncılık Anonim Şirketi (“Doğuş Video”)

Producing social websites and digital games

Turkey

Doğuş Yayın Grubu Anonim Şirketi (“Doğuş Yayın Grubu”) Media Turkey Doğuş Yeni İnternet Reklam Pazarlama ve Turizm Hizmetleri

Anonim Şirketi (“Doğuş Yeni”) (formerly, named Doğuş Yeni İnternet Reklam ve Pazarlama Hizmetleri Anonim Şirketi)

Online marketing and advertising

Turkey

Doors Akademi Eğitim ve Danışmanlık Hizmetleri Anonim Şirketi (“Doors Akademi”)

Academy Turkey

Doors Holding Anonim Şirketi (“Doors Holding A.Ş.”) Holding company Turkey Doors Uluslararası Yönetim Danışmanlığı Ticaret Anonim Şirketi

(“Doors Uluslararası Yönetim”) A non-operating company Turkey

Dream International B.V. Investing The Netherlands Dream International Coöperatif U.A. Investing The Netherlands Enformasyon Reklamcılık ve Filmcilik Sanayi ve Ticaret Anonim Şirketi (“Enformasyon”)

Media Turkey

E Elektronik Bahis Oyunları Anonim Şirketi (“E Elektronik”) Lottery Turkey Genoto Otomotiv Pazarlama ve Ticaret Anonim Şirketi (“Genoto”)


HD-E Radyo ve Televizyon Yayıncılığı Anonim Şirketi (“HD-E”)

Media Turkey

HD Yayıncılık ve Medya Hizmetleri Anonim Şirketi (“HD Yayıncılık”)

Media Turkey

Havana Yayıncılık Turizm ve Gıda Pazarlama Ticaret Anonim Şirketi (“Havana Yayıncılık”)

Restaurant, food and beverage production

Turkey


14




incorporationIşıl Televizyon Yayıncılık Anonim Şirketi (“Star TV”) (1) Media Turkey İstinye Park Gayrimenkul Yatırım ve İşletme Anonim Şirketi (“İstinye Park Gayrimenkul”)

Shopping mall administration

Turkey

Kivahan Turizm Ticaret Anonim Şirketi (“Kivahan”) Establishment and management of restaurants and cafes

Turkey

Körfez Havacılık Turizm ve Ticaret Anonim Şirketi (“Körfez Hava”)

Transportation Turkey

Kral Pop Avrupa Radyo ve Televizyon Yayıncılığı Anonim Şirketi (“Kral Pop Avrupa”)

Media Turkey

Kral Pop Medya Hizmetleri Anonim Şirketi (“Kral Pop”) Media Turkey

London Doors Restaurant Group LTD Holding company United Kingdom

Nahita Restoran İşletmeciliği ve Yatırım Anonim Şirketi (“Nahita”)

Establishment and management of restaurants and cafes

Turkey

NTV Avrupa Yayıncılık Anonim Şirketi (“NTV Avrupa”) Media Turkey

NTV Batı Medya Hizmetleri Anonim Şirketi (“NTV Batı”) Media Turkey NTV Radyo ve Televizyon Yayıncılığı Anonim Şirketi (“NTV Radyo”)

Media Turkey

Sititur Turizm Yatırım ve Danışmanlık Hizmetleri Anonim Şirketi (“Sititur”)


Star Avrupa Radyo ve Televizyon Yayıncılığı Anonim Şirketi (“Star Avrupa”) (formerly,named E2 Radyo ve Televizyon Yayıncılığı Anonim Şirketi)

Media Turkey

Star Yapım ve Prodüksiyon Hizmetleri Anonim Şirketi (“Star Yapım”)

Media Turkey

Tag Restaurants Holdings LTD Holding company United Kingdom Tansaş Gıda ve Sanayi Turizm Anonim Şirketi (“Tansaş Gıda”) A non-operating company Turkey The Tom Aikens Group LTD Restaurant establishment United KingdomTom Aikens LTD Restaurant establishment United Kingdom Tom's Kitchen LTD Restaurant establishment United Kingdom Uydu Dijital İnternet Teknolojileri Anonim Şirketi (“Uydu

Dijital”) (formerly, named Doğuş Uydu Haberleşme ve Teknik Hizmetler Anonim Şirketi)

Media Turkey

Yonca Radyo ve TV Yayıncılık Anonim Şirketi (“Yonca Radyo”) Media Turkey


incorporation Aslancık Elektrik Üretim Anonim Şirketi (“Aslancık”) Electricity generation TurkeyAzumi Limited Restaurant United Kingdom Boyabat Elektrik Üretim ve Ticaret Anonim Şirketi (“Boyabat”) Electricity generation Turkey D Tes Elektrik Enerjisi Toptan Satış Anonim Şirketi (“D Tes”) A non-operating company TurkeyDoğuş Planet Elektronik Ticaret ve Bilişim Hizmetleri Anonim Şirketi (“Doğuş Planet”)

E-commerce Turkey

IMG Doğuş Spor Moda ve Medya Hizmetleri ve Ticaret Anonim Şirketi (“IMG Doğuş Spor”)

Establishment and management of sports academies

Turkey

Kanlıca Turizm Sanayi Anonim Şirketi (“Kanlıca Turizm”) Restaurant and hotel Turkey Robata Rest LTD Restaurant establishment United Kingdom Taddeo Trading LTD Restaurant establishment Thailand


15




incorporationTaraneete International LTD Restaurant Hong Kong Time Result International LTD Restaurant Hong Kong Wildfire Entertainment LTD Restaurant United KingdomZuma Bangkok LTD Restaurant Thailand Zuma Club LLC Restaurant Dubai Zuma Japanese Restaurant INC Restaurant United StatesZuma Japanese Restaurant Miami LLC Restaurant United States Zuma Turizm ve Gıda Pazarlama Ticaret Anonim Şirketi

(“Zuma Turizm”) Restaurant Turkey

Associates Nature of business Country of

incorporationAltın Mecralar İnteraktif Medya ve Pazarlama ve Teknoloji Hizmetleri Ticaret Limited Şirketi (“Altın Mecralar”)

E-mail marketing Turkey

Enmoda E Alışveriş ve Ticaret Anonim Şirketi (“Enmoda”) (formerly, named Doğuş E Alışveriş ve Ticaret Anonim Şirketi) (2)

Online shopping Turkey

Hedef Medya Tanıtım Interaktif Medya Pazarlama Anonim Şirketi (“Hedef Medya”)

E-mail marketing Turkey

İstinye Yönetim Hizmetleri Anonim Şirketi (“İstinye Yönetim Hizmetleri”)

Shopping mall administration

Turkey

World Wide Entertainment Medya Ticaret Anonim Şirketi (“World Wide”)

Media Turkey

(1) On 29 June 2012, Kapital Radyo ve Televizyon Yayıncılığı Anonim Şirketi (“Kapital Radyo”) merged with Star TV.

(2) On 2 April 2012, the Group has sold 75 percent shares of Enmoda which was a previously wholly owned subsidiary. Enmoda is accounted for using the equity method in the accompanying consolidated financial statements starting from 2 April 2012.


16

2 Basis of preparation

(a) Statement of compliance

Doğuş Group entities operating in Turkey maintain their books of account and prepare their statutory financial statements in Turkish Lira (“TL”) in accordance with the Accounting Practice Regulations as promulgated by the Banking Regulatory and Supervision Agency (“BRSA”) applicable to Garanti Bank, Turkish insurance legislation and accounting principles applicable to insurance business, and accounting principles per Turkish Uniform Chart of Accounts and per Capital Market Board of Turkey applicable to entities operating in other businesses.

Doğuş Group’s foreign entities maintain their books of account and prepare their statutory financial statements in accordance with the generally accepted accounting principles and the related legislation applicable in the countries they operate.

The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”).

The consolidated financial statements were authorised for issue by Doğuş Holding’s management on 15 April 2013. The Doğuş Holding’s General Assembly and the other reporting bodies have the power to amend the consolidated financial statements after their issue.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis as adjusted for the effects of inflation that lasted until 31 December 2005, except for the following material items in the consolidated statement of financial position:

derivative financial instruments are measured at fair value, available-for-sale financial assets are measured at fair value, non-derivative financial instruments at fair value through profit and loss are measured at fair value, investment property is measured at fair value, certain tangible assets are measured at fair value.

The methods used to measure the fair values are discussed further in note 4.

(c) Functional and presentation currency

These consolidated financial statements are presented in TL which is Doğuş Holding’s functional currency. All financial information presented in TL has been rounded to the nearest thousand, except when otherwise indicated.

(d) Use of estimates and judgments

The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.


17

2 Basis of preparation (continued)

(d) Use of estimates and judgments (continued)

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:

Note 17 – Investment in debt securities

Note 25 – Banking loans and advances to customers

Note 27 – Financial assets at fair value through profit or loss

Note 35 – Deposits

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

Note 4 – Determination of fair values

Note 14 – Taxation (utilisation of tax losses)

Note 16 – Intangible assets

Note 34 – Retirement benefit obligation

Note 39 – Commitments and contingencies

Note 41 – Financial instruments

(e) Comparative information The accompanying consolidated financial statements are presented comparatively to give a true and fair view of financial performance of the Group.

Certain comparative amounts have been reclassified to conform with the current period’s presentation as summarised below:

Premium receivables, previously classified in current account receivables amounting to TL 578,127 thousand have been classified in non-current account receivables by the same amount as at 31 December 2011.

Premium payables, previously classified in current account payables amounting to TL 568,265 thousand have been classified in non-current account payables by the same amount as at 31 December 2011.

Payables to securities lending market, previously classified in accounts payable amounting to TL 176,706 thousand have been netted-off against receivables from securities lending market, previously classified in accounts receivable by the same amount as at 31 December 2011.

Value Added Tax (“VAT”) receivables previously classified in other current assets amounting to TL 55,225 thousand have been classified in other non-current assets by the same amount as at 31 December 2011.

Indemnification asset, previously classified in current accounts receivable amounting to TL 32,756 thousand have been classified in non-current accounts receivable by the same amount as at 31 December 2011.

Provision for lawsuits previously classified in current liabilities amounting to TL 32,756 thousand have been classified in other non-current liabilities by the same amount as at 31 December 2011.

Construction in progress previously classified in property, plant and equipment amounting to TL 17,676 thousand have been classified in other non-current assets by the same amount as at 31 December 2011.

Assets held for sale, previously classified in other current assets amounting to TL 2,427 thousand have been classified in assets held for sale by the same amount as at 31 December 2011.


18

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

(a) Basis of consolidation

The accompanying consolidated financial statements include the accounts of the parent company, Doğuş Holding, its subsidiaries, joint ventures and associates on the basis set out in sections below. The financial statements of the entities included in the consolidation have been prepared as at the date of the consolidated financial statements.

(i) Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as:

the fair value of the consideration transferred; plus

the recognised amount of any non-controlling interests in the acquiree; plus

if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss.

Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

(ii) Non-controlling interests

For each business combination, the Group elects to measure any non-controlling interests in the acquiree either.

at fair value; or

at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.


19

3 Significant accounting policies (continued)

(a) Basis of consolidation (continued)

(iii) Subsidiaries Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The table below sets out all consolidated subsidiaries and shows shareholding structure of these subsidiaries at 31 December:

Direct and indirect ownership interest held by Doğuş

Holding and its subsidiaries

Ownership interest through shares held by Şahenk Family

Proportion of ownership interest

Proportion of effective interest of Doğuş Holding

and its subsidiaries

2012 2011 2012 2011 2012 2011 2012 2011

A Yapım 100.00 97.00 -- -- 100.00 97.00 99.96 96.93

A.L.E. Gıda 100.00 -- -- -- 100.00 -- 74.25 --

Antur 97.13 97.13 2.86 2.86 99.99 99.99 96.97 96.97

Arena 99.99 99.99 0.01 0.01 100.00 100.00 98.67 98.66

Aresta 60.00 -- -- -- 60.00 -- 59.95 --

Ayson 70.00 70.00 -- -- 70.00 70.00 66.61 66.61

Ayson Sondaj 100.00 100.00 -- -- 100.00 100.00 66.61 66.61

Bal Turizm 100.00 -- -- -- 100.00 -- 74.25 --

Büke Turizm 100.00 -- -- -- 100.00 -- 74.25 --

D-Auto Suisse SA 100.00 100.00 -- -- 100.00 100.00 72.16 72.03

D Eğlence 100.00 -- -- -- 100.00 -- 100.00 --

D Enerji 99.75 99.64 0.25 0.36 100.00 100.00 99.75 99.64

D Et 51.00 -- -- -- 51.00 -- 51.00 --

D Koruma 100.00 -- -- -- 100.00 -- 100.00 --

D Marina 100.00 -- -- -- 100.00 -- 100.00 --

D Marin Göcek 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

D Marine Investment Holding B.V. 100.00 -- -- -- 100.00 -- 99.99 --

D Marine Investment Holding Coöperatief U.A 100.00 -- -- -- 100.00 -- 99.99 --

D Otel 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

D Otel Bodrum 100.00 -- -- -- 100.00 -- 99.89 --

D Otel Göcek 99.35 99.35 0.65 0.65 100.00 100.00 98.90 98.90

Dafne Yayıncılık 100.00 -- -- -- 100.00 -- 74.25 --

Datmar 99.59 99.59 0.41 0.41 100.00 100.00 99.16 99.16

Doğuş Sağlıklı Yaşam 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

DOAŞ 74.35 74.23 -- -- 74.35 74.23 72.15 72.02

Doğuş Arge 92.72 92.72 7.28 7.28 100.00 100.00 92.71 92.71

Doğuş Auto Mısr JS 100.00 100.00 -- -- 100.00 100.00 72.16 72.03

Doğuş Auto Mısr LLC 99.00 99.00 -- -- 99.00 99.00 71.43 71.31

Doğuş Bilgi İşlem 100.00 100.00 -- -- 100.00 100.00 87.19 87.05

Doğuş Cennet Koyu 80.00 -- -- -- 80.00 -- 80.00 --Dogus Construction

LLC 49.00 -- -- -- 49.00 -- 45.31 --

Doğuş Dalaman 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş Didim 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş Enerji 100.00 100.00 -- -- 100.00 100.00 99.75 99.64

Doğuş Enerji Toptan 100.00 -- -- -- 100.00 -- 99.70 --

Doğuş EOOD 100.00 100.00 -- -- 100.00 100.00 92.46 92.46


20



(iii) Subsidiaries (continued)




Proportion of ownership

interest



2012 2011 2012 2011 2012 2011 2012 2011

Doğuş Finance Ukraine 99.00 100.00 -- -- 99.00 100.00 91.54 92.46

Doğuş GYO 91.55 91.55 -- -- 91.55 91.55 87.38 87.38

Doğuş Gayrimenkul 97.52 97.52 2.48 2.48 100.00 100.00 97.52 97.52

Doğuş Hoteli 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş Hoteli Sibenik 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş İletişim 100.00 100.00 -- -- 100.00 100.00 99.96 99.93

Doğuş İnşaat 92.46 92.46 7.54 7.54 100.00 100.00 92.46 92.46

Doğus Insaat ES 100.00 100.00 -- -- 100.00 100.00 92.46 92.46

Doğuş İnşaat Limited 100.00 100.00 -- -- 100.00 100.00 92.46 92.46

Doğuş International 100.00 100.00 -- -- 100.00 100.00 92.71 92.71

Doğuş Management 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş Marina 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş Marina Hoteli 100.00 90.00 -- -- 100.00 90.00 100.00 90.00

Doğus Maroc SARL 100.00 100.00 -- -- 100.00 100.00 92.46 92.46

Doğuş Media 100.00 100.00 -- -- 100.00 100.00 99.96 99.93

Doğuş Nakliyat 89.73 89.73 0.77 0.77 90.50 90.50 89.69 89.69

Dogus Oman LLC 70.00 -- -- -- 70.00 -- 64.72 --

Doğuş Otel İşletmeciliği 100.00 -- -- -- 100.00 -- 99.60 --

Doğuş Oto 100.00 100.00 -- -- 100.00 100.00 73.20 73.08

Doğuş Perakende 100.00 -- -- -- 100.00 -- 99.98 --

Doğuş SA 100.00 100.00 -- -- 100.00 100.00 95.19 95.19

Doğuş Sigorta 99.00 99.00 1.00 1.00 100.00 100.00 87.30 87.25

Doğuş Spor 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş Tarım 100.00 -- -- -- 100.00 -- 100.00 --

Doğuş Telekom 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş Turgutreis 100.00 100.00 -- -- 100.00 100.00 98.18 98.13

Doğuş Turizm 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş Upravljanje 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doğuş Video 100.00 100.00 -- -- 100.00 100.00 99.94 98.67

Doğuş Yayın Grubu 100.00 100.00 -- -- 100.00 100.00 99.96 99.93

Doğuş Yeni 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Doors Akademi 100.00 -- -- -- 100.00 -- 74.25 --

Doors Holding A.Ş. 74.25 -- -- -- 74.25 -- 74.25 --Doors Uluslararası

Yönetim 100.00 -- -- -- 100.00 -- 74.25 --Dream

International B.V. 100.00 -- -- -- 100.00 -- 100.00 --Dream International

Coöperatif U.A. 100.00 -- -- -- 100.00 -- 100.00 --

E Elektronik 100.00 100.00 -- -- 100.00 100.00 99.96 99.93

Enformasyon 100.00 97.00 -- -- 100.00 97.00 99.96 96.93

Garanti Turizm 100.00 100.00 -- -- 100.00 100.00 98.81 98.81

Genoto 100.00 100.00 -- -- 100.00 100.00 99.42 98.47

Göktrans Turizm 100.00 100.00 -- -- 100.00 100.00 99.60 99.60

Havana Yayıncılık 100.00 -- -- -- 100.00 -- 74.25 --

HD-E 100.00 100.00 -- -- 100.00 100.00 99.96 99.93


21



(iii) Subsidiaries (continued)





interest



2012 2011 2012 2011 2012 2011 2012 2011

HD Yayıncılık 100.00 -- -- -- 100.00 -- 99.96 --

İstinye Park Gayrimenkul 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Kivahan 51.00 -- -- -- 51.00 -- 50.94 --

Körfez Hava 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Kral Pop 100.00 100.00 -- -- 100.00 100.00 99.96 99.93

Kral Pop Avrupa 100.00 -- -- -- 100.00 -- 99.96 --

London Doors Restaurant Group LTD 79.00 -- -- -- 79.00 -- 58.66 --

Marina Borik 100.00 -- -- -- 100.00 -- 100.00 --

Marina Dalmacija 100.00 -- -- -- 100.00 -- 100.00 --

Marina Sibenik d.o.o. 100.00 76.00 -- -- 100.00 76.00 100.00 76.00

Nahita 100.00 -- -- -- 100.00 -- 100.00 --

NTV Avrupa 100.00 98.98 -- -- 100.00 98.98 99.96 98.91

NTV Batı 100.00 100.00 -- -- 100.00 100.00 99.96 99.93

NTV Radyo 100.00 97.00 -- -- 100.00 97.00 99.96 96.93

Sibenik Razvitak 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Sibenik Upravljanje 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Sititur 100.00 100.00 -- -- 100.00 100.00 100.00 100.00

Star Avrupa 100.00 -- -- -- 100.00 -- 99.96 --

Star TV 100.00 100.00 -- -- 100.00 100.00 99.96 99.93

Star Yapım 100.00 -- -- -- 100.00 -- 99.96 --

Şahintur 100.00 100.00 -- -- 100.00 100.00 100.00 100.00Tag Restaurants

Holdings LTD 100.00 -- -- -- 100.00 -- 58.66 --

Tansaş Gıda 99.87 90.00 -- -- 99.87 90.00 99.87 90.00

Teknik Mühendislik 99.70 99.70 -- -- 99.70 99.70 98.58 98.58The Tom Aikens

Group LTD 100.00 -- -- -- 100.00 -- 58.66 --

Tom Aikens LTD 100.00 -- -- -- 100.00 -- 58.66 --

Tom's Kitchen LTD 100.00 -- -- -- 100.00 -- 58.66 --

Uydu Dijital 100.00 100.00 -- -- 100.00 100.00 98.68 98.67

Voyager 99.10 99.10 0.90 0.90 100.00 100.00 99.10 99.08

Yonca Radyo 100.00 97.00 -- -- 100.00 97.00 99.96 96.93

(iv) Loss of control

On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.


22



(v) Associates (Equity-accounted investees)

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Investments in associates are accounted for using the equity method and are initially recognised at cost. The cost of investments includes transaction costs.

The consolidated financial statements include the Group’s share of profit and loss and other comprehensive income of associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associates, the carrying amount of that interest, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

The table below sets out the associates and shows the shareholding structure of these associates at 31 December:





interest



2012 2011 2012 2011 2012 2011 2012 2011

Altın Mecralar (1) 99.00 -- -- -- 99.00 -- 39.60 --

Enmoda 23.07 -- -- -- 23.07 -- 23.06 --

Hedef Medya 40.00 -- -- -- 40.00 -- 40.00 --İstinye Yönetim Hizmetleri 42.00 42.00 -- -- 42.00 42.00 42.00 42.00

Leaseplan 100.00 100.00 -- -- 100.00 100.00 38.36 38.31

LPD Holding 49.00 49.00 -- -- 49.00 49.00 38.36 38.31

VDF Faktoring (2) 100.00 100.00 -- -- 100.00 100.00 38.36 38.31

VDF Tüketici 49.00 49.00 -- -- 49.00 49.00 35.63 35.57VDF Servis Holding 49.00 49.00 -- -- 49.00 49.00 38.36 38.31

VDF Sigorta (2) 100.00 100.00 -- -- 100.00 100.00 38.36 38.31

World Wide 30.00 -- -- -- 30.00 -- 29.60 --

Yüce Auto 50.00 50.00 -- -- 50.00 50.00 36.07 36.01

(1) Consolidated under Hedef Medya.

(2) Consolidated under VDF Servis Holding.

(vi) Joint ventures

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Joint ventures are accounted for using the proportionate consolidation method. The consolidated financial statements include the Group’s proportionate share of the enterprises’ assets, liabilities, revenues and expenses with items of a similar nature on a line-by-line basis, from the date that joint control commences until the date that joint control ceases.


23



(vi) Joint ventures (continued)

The table below sets out the joint ventures and shows the shareholding structure of these joint ventures at 31 December:





interest



2012 2011 2012 2011 2012 2011 2012 2011

Acropolis S.P.A 51.00 -- -- -- 51.00 -- 51.00 --

Aslancık 33.33 33.33 -- -- 33.33 33.33 33.25 33.21

Azumi Limited 50.01 -- -- -- 50.01 -- 50.01 --

Boyabat 34.00 34.00 -- -- 34.00 34.00 33.89 33.97

D Tes 25.00 25.00 -- -- 25.00 25.00 25.00 25.00

Doğuş Alarko 37.50 37.50 -- -- 37.50 37.50 34.67 34.67

Doğuş Planet 50.00 -- -- -- 50.00 -- 50.00 --

Doğuş Polat 50.00 50.00 -- -- 50.00 50.00 46.23 46.23

Doğuş Prestige 60.00 -- -- -- 60.00 -- 55.48 --

Domenia 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Garanti Bank 24.23 24.23 0.66 0.66 24.89 24.89 23.95 23.95

Garanti Bank SA 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Garanti Bilişim 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Garanti Faktoring 81.84 81.84 -- -- 81.84 81.84 19.60 19.60

Garanti Filo 100.00 100.00 -- -- 100.00 100.00 23.98 23.98

Garanti Holding B.V. 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Garanti Hizmet 99.40 100.00 -- -- 99.40 100.00 26.09 26.08

Garanti Konut 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Garanti Kültür 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Garanti Leasing 100.00 100.00 -- -- 100.00 100.00 23.98 23.98

Garanti Portföy 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Garanti Yatırım 100.00 100.00 -- -- 100.00 100.00 23.95 23.95Garanti Yatırım

Ortaklığı (1) 0.30 0.30 -- -- 0.30 0.30 0.10 0.10

G Netherlands 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

GBI 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

GB Moscow 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

GEHAŞ 85.00 85.00 -- -- 85.00 85.00 20.33 20.33Golden Clover

Stichting Custody 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Gouvia Marina S.A. (2) 51.00 -- -- -- 51.00 -- 26.01 --

Gülermak Doğuş 50.00 50.00 -- -- 50.00 50.00 46.23 46.23

GÖSAŞ 100.00 99.92 -- -- 100.00 99.92 23.98 23.93

IMG Doğuş Spor 50.00 -- -- -- 50.00 -- 50.00 --

Kanlıca Turizm 49.00 -- -- -- 49.00 -- 36.38 --

K&G Medmarinas Management S.A. 51.00 -- -- -- 51.00 -- 51.00 --

Krone Doğuş 49.00 49.16 -- -- 49.00 49.16 35.63 35.68

Lefkas Marina S.A. (2) 27.00 -- -- -- 27.00 -- 13.77 --

Meiller Doğuş 49.00 49.00 -- -- 49.00 49.00 35.35 35.29

Motoractive 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Ralfi 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Robata Rest LTD 90.00 -- -- -- 90.00 -- 50.01 --


24



(vi) Joint ventures (continued)





interest



2012 2011 2012 2011 2012 2011 2012 2011

Stichting Safekeeping 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

Taddeo Trading LTD 100.00 -- -- -- 100.00 -- 50.01 --Taraneete

International LTD 72.80 -- -- -- 72.80 -- 50.01 --

Time Result International LTD 61.88 -- -- -- 61.88 -- 50.01 --

Trifoi Real Estate Company 100.00 100.00 -- -- 100.00 100.00 23.95 23.95

TÜVTURK Güney 33.33 33.33 -- -- 33.33 33.33 24.05 24.01

TÜVTURK İstanbul 66.40 66.40 -- -- 66.40 66.40 24.05 24.01

TÜVTURK Kuzey 33.33 33.33 -- -- 33.33 33.33 24.05 24.01

United Custodian 100.00 100.00 -- -- 100.00 100.00 23.95 23.95Wildfire Entertainment

LTD. 40.00 -- -- -- 40.00 -- 20.00 --

YMDYYB 26.00 26.00 -- -- 26.00 26.00 24.04 24.04

Zea Marina S.A. (2) 23.00 -- -- -- 23.00 -- 11.73 --

Zuma Bangkok LTD 49.00 -- -- -- 49.00 -- 24.50 --

Zuma Club LLC 66.25 -- -- -- 66.25 -- 41.26 --

Zuma Japanese Restaurant INC 100.00 -- -- -- 100.00 -- 50.01 --

Zuma Japanese Restaurant Miami LLC 90.00 -- -- -- 90.00 -- 50.01 --

Zuma Turizm 90.00 -- -- -- 90.00 -- 57.13 --

(1) Although the ownership rate of Garanti Bank on this company is less than 50 percent, Garanti Bank has the controlling power on the operations and financial policies of this company.

(2) Consolidated under K&G Medmarinas Management S.A.


25



(vii) Special purpose entities

The Group has established special purpose entities (“SPEs”) to accomplish a narrow and well defined objective such as securitisation of particular assets, or the execution of specific borrowing or lending transactions. The Group does not have any direct or indirect shareholdings in these entities. An SPE is consolidated if, based on an evaluation of the substance of its relationship with the Group and the SPE’s risks and rewards, the Group concludes that it controls the SPE. SPEs controlled by the Group were established under terms that impose strict limitations on the decision-making powers of the SPEs’ management and that result in the Group receiving the majority of the benefits related to the SPEs’ operations and net assets, being exposed to risks incident to the SPEs’ activities, and retaining the majority of the residual or ownership risks related to the SPE or their assets.

Garanti DPR is a special purpose entity established for Garanti Bank’s securitisation transactions. The Group does not have any shareholding interest in this company.

(viii) Transactions eliminated on consolidation

Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Accounting in hyperinflationary economies

Until 31 December 2005, the financial statements of the Turkish entities have been restated for the changes in the general purchasing power of the Turkish Lira (“TL”) based on IAS 29 Financial Reporting in Hyperinflationary Economies.

Beginning from January 2006, it was declared that Turkey should be considered a non-hyperinflationary economy under IAS 29. Therefore, IAS 29 has not been applied to the accompanying consolidated financial statements since 1 January 2006.

(c) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments (except on impairment in which case foreign currency differences that have been recognised in other comprehensive income are reclassified to profit or loss), a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or qualifying cash flow hedges to the extent the hedge is effective.


26


(c) Foreign currency (continued)

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to TL at exchange rates at the reporting date. The income and expenses of foreign operations are translated to TL at average exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the foreign operation is a non-wholly-owned subsidiary, then the relevant proportion of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operations is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented within equity in the translation reserve.

(iii) Hedge of net investment in foreign operation

The Group applies hedge accounting to foreign currency differences arising between the functional currency of the foreign operation and the parent entity’s functional currency (TL), regardless of whether the net investment is held directly or through an intermediate parent.

Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in other comprehensive income to the extent that the hedge is effective, and are presented within equity in the translation reserve. To the extent that the hedge is ineffective, such differences are recognised in profit or loss. When the hedged part of net investment is disposed of, the relevant amount in the translation reserve is transferred to profit or loss as a part of the profit or loss on disposal.

(d) Financial instruments

(i) Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.


27


(d) Financial instruments (continued)

(i) Non-derivative financial assets (continued)

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets and loans and receivables and available-for-sale financial assets.

Financial assets at fair value through profit or loss

A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. These include investments and certain purchased loans. Financial assets are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend income, are recognised in profit or loss.

Held to maturity financial assets

If the Group has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held to maturity financial assets are measured at amortised cost using the effective interest method less and impairment losses. Held to maturity financial assets includes certain banking loans and advances to banks and customers and certain debt instruments.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise banking loans and advances to customers and banks, trade and other receivables, including service concession receivables, and due from related parties.

Finance lease receivables

Leases where the entire risks and rewards incident to ownership of an asset are substantially transferred to the lessee are classified as finance leases. A receivable at an amount equal to the present value of the lease payments, including any guaranteed residual value, is recognised. The difference between the gross receivable and the present value of the receivable is unearned finance income and is recognised over the term of the lease using the effective interest rate method. Finance lease receivables are included in banking loans and advances to customers.

Factoring receivables

Factoring receivables are stated at fair value at initial recognition. Subsequent to the initial recognition, factoring transactions are accounted at amortised costs. The carrying amounts of factoring receivables approximate to their fair values since amortisation is taken into account at initial recognition.


28




Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits, balances with Central Bank of Turkey (“CBT”) and other central banks and other liquid assets with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value. Money market placements are classified in banking loans and advances to banks.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories of financial assets. The Group’s investments in certain debt and equity instruments are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(m)) and foreign currency differences on available-for-sale equity instruments (see note 3(c)(i)), are recognised in other comprehensive income and presented within equity in the fair value reserve. When an instrument is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.

Accounting for interest income and expenses for banking and finance segment is discussed in note 3 (p). Accounting for finance income and expenses for segments other than banking and finance is discussed in note 3 (s).

Service concession arrangements

The Group recognises a financial asset arising from a service concession arrangement when it has an unconditional contractual right to receive cash or another financial asset from or at the direction of the grantor for the construction or upgrade services provided. Such financial assets are measured at fair value upon initial recognition. Subsequent to initial recognition the financial assets are measured at amortised cost.

If the Group is paid for the construction services partly by a financial asset and partly by an intangible asset, then each component of the consideration received or receivable is accounted for separately and is recognised initially at the fair value of the consideration received or receivable (see also note 3(f)(ii)).

Other

Other non derivative financial instruments are measured at amortised cost using the effective interest rate method, less any impairment losses (see accounting policy 3(m)).

(ii) Non-derivative financial liabilities

The Group initially recognises debt securities issued, deposits, obligations under repurchase agreements, due to related parties, bonds payable and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.


29



(ii) Non-derivative financial liabilities (continued)

The Group has the following non-derivative financial liabilities: deposits, obligations under repurchase agreements, loans and borrowings, accounts and other payables, subordinated liabilities, bonds payable, due to related parties and liabilities from short-term sales of financial instruments.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

(iii) Derivative financial instruments including hedge accounting

The Group holds derivative financial instruments to hedge its certain risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. All trading derivatives in a net receivable position (positive fair value) as well as options purchased are reported as trading assets. All trading derivatives in a net payable position (negative fair value) as well as options written, are reported as trading liabilities. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Cash flow hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.


30



(iii) Derivative financial instruments, including hedge accounting (continued)

Cash flow hedges (continued)

When the hedged item is a non-financial asset, the amount accumulated in equity is included in the carrying amount of the asset when the asset is recognised. In other cases, the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified in profit or loss.

Separable embedded derivatives

Changes in the fair value of separated embedded derivatives are recognised immediately in profit or loss.

Other non-trading derivatives

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in profit or loss.

(iv) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

Repurchase, disposal and reissue of share capital (Treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share premium.

(e) Property and equipment

(i) Recognition and measurement

The costs of items of property and equipment purchased before 31 December 2005 are restated for the effects of inflation in TL units current at 31 December 2005 pursuant to IAS 29. Property and equipment purchased after this date are recorded at their historical costs. Accordingly, items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any (see accounting policy 3(m)), except as explained below:


31


(e) Property and equipment (continued)

(i) Recognition and measurement (continued)

In 2001, the Group started to reflect the land and buildings at their fair values as appraised by independent third party appraisers. Any increase arising on the revaluation of such land and buildings is credited to other comprehensive income, and presented in revaluation surplus in equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in the carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation surplus relating to a previous revaluation of that asset.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the following:

the cost of materials and direct labour,

any other costs directly attributable to bringing the asset to a working condition for its intended use,

when the Group has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located, and

capitalised borrowing costs.

Cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

Any gain or loss on disposal of an item of property and equipment (calculated as the difference between the net proceeds from disposals and the carrying amount of the item) is recognised, net in profit or loss in “other income” or “other expenses”. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

(ii) Reclassification to investment property

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Property that is being constructed for future use as investment property is accounted for at fair value. Any gain arising on remeasurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the revaluation reserve in equity. Any loss is recognised immediately in profit or loss.

(iii) Subsequent costs

Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred.

(iv) Depreciation

Items of property and equipment are depreciated on a straight-line basis in profit or loss over the estimated useful lives of each component. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.


32


(e) Property and equipment (continued)

(iv) Depreciation (continued)

Items of property and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the assets are complete and ready for use.

The estimated useful lives for the current and comparative years of significant items of property and equipment are are as follows:

Description Year

Buildings 50 Furniture and equipment 4-20 Motor vehicles 5-10

Leasehold improvements are amortised over the periods of the respective leases, also on a straight-line basis.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

Tangible assets purchased before 2005 at Garanti Bank and its subsidiaries are depreciated over their estimated useful lives on a straight line basis from the date of their acquisition. Assets acquired after this date are depreciated based on the declining balance method. For the assets acquired after 1 January 2009, the straight line depreciation method is in use. Expenditures for major renewals and improvement of tangible assets are capitalised and depreciated over the remaining useful lives of the related assets.

(f) Intangible assets

(i) Goodwill

Goodwill that arises upon the acquisition of subsidiaries and joint ventures is presented with intangible assets. For the measurement of goodwill at initial recognition, see note 3(a)(i).

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses (see accounting policy 3(m)). In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment, and any impairment loss is allocated to the carrying amount of the associates as a whole.

(ii) Service concession arrangements

Concession rights acquired by the Group have finite useful lives of 20 years (“TÜVTURK”), 38 years (“D Marin Göcek”), 36 years (“Dalmacija”), 18 years (“Borik”) and 12 years (*) (“Gouvia Marina S.A.”) starting from 15 August 2007, 7 December 2010, 30 April 2012, 30 April 2012 and 31 December 2012 respectively, and are measured at cost less accumulated amortisation. Cost includes borrowing costs directly attributable to the acquisition of the concession rights. The Group capitalises the borrowing costs directly attributable to the acquisition, or construction of a qualifying asset as part of the cost of that asset.

(*) concession period ending in 2024 can be prolonged for 13 years after final decision of regulatory authorities.


33


(f) Intangible assets (continued)

(iii) Broadcasting rights

Broadcasting rights represent terrestrial broadcasting licence of Kral TV and Kral FM which are the intangible assets recognised during the acquisition of commercial and economic assets of Kral TV and Kral FM in 2008 and terrestrial broadcasting licence of Star TV which are the intangible assets recognised during the acquisition of Işıl Televizyon Yayıncılık Anonim Şirketi in 2011. Terrestrial broadcast rights have indefinite useful lives. These rights are tested for impairment annually.

(iv) Brand name

Brand name represents brand name of Ajia, Anjelique, Capri, Da Mario, Gina, Go Mongo, IL Riccio, Kivahan, Kitchenette, Nusr-et, Roka, Tom’s Kitchen, Vogue and Zuma which is related to the intangible asset recognised during the acquisitions in 2012 and Star TV which is related to the intangible asset recognised during the acquisition in 2011. Brand names have indefinite useful lives and are tested for impairment annually.

(v) Content library

The content library of series and movies are related to the intangible assets recognised during the acquisition of Star TV in 2011. Ownership right of these items in the content library belong to Star TV with unlimited transmission. The fair value of the content library on the acquisition date has been determined by an independent external expert. The content library is measured at cost less accumulated amortisation and any accumulated impairment losses. Useful lives of content library are five years period when content library is ready to screen on TV starting.

(vi) Other intangible assets

Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and any accumulated impairment losses (see accounting policy 3(m)).

(vii) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

(viii) Amortisation

Except for goodwill, broadcasting rights and brand name recognised in business combinations, intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are available for use.

Amortisation of service concession rights acquired by the Group is recognised in profit or loss on a straight line basis over their respective concession periods.

Amortisation of content library is based on the fair value of the asset which is acquired through business combination under scope of IFRS 3 “Business Combinations”. The amortisation period for all items in content library are five years period when content library is ready to screen on TV. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

Amortisation of franchise network is based on the fair value of the asset which is acquired through business combination under scope of IFRS 3 “Business Combinations”. The amortisation period for franchise network is ten years period. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.


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(f) Intangible assets (continued)

(viii) Amortisation (continued)

Amortisation of sponsorship is based on the fair value of the asset which is acquired through business combination under scope of IFRS 3 “Business Combinations”. The amortisation period for sponsorship is ten years period. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(g) Securities borrowing and lending business

Investments lent under securities lending arrangements continue to be recognised in the statement of consolidated financial position and are measured in accordance with the accounting policy for the related assets as appropriate. Cash collateral received in respect of securities lent is recognised as liabilities to either banks or customers. Investments borrowed under securities borrowing agreements are not recognised in the consolidated statement of financial position as the related risks and rewards of such securities are not retained. Borrowed securities are recorded under commitments and contingencies. Cash collateral placements in respect of securities borrowed are recognised under loans and advances to either banks or customers depending on the type of counterparty.

(h) Repurchase and resale agreements over investments

Garanti Bank and its subsidiaries enter into purchases of investments under agreements to resell (“reverse repo”) substantially identical investments at a certain date in the future at a fixed price.

Investments purchased subject to commitments to resell them at future dates are not recognised. The amounts paid are recognised in banking loans to either banks or customers. The receivables are shown as collateralised by the underlying security.

Investments sold under repurchase agreements (“repo”) continue to be recognised in the consolidated statement of financial position and are measured in accordance with the accounting policy for the related assets as appropriate. The proceeds from the sale of the investments are reported as “obligations under repurchase agreements”, a liability account.

Income and expenses arising from the repurchase and resale agreements over investments are recognised on an accrual basis over the period of the transactions and are included in “Revenues” or “Cost of revenues”.

(i) Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at fair value with any change therein recognised in profit or loss.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. When an investment property that was previously classified as property and equipment is sold, any related amount included in the revaluation surplus is transferred to retained earnings.

When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.


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(j) Inventories

Inventories are measured at the lower of cost and net realisable value. Except as discussed in the following paragraphs, the cost of inventories is mainly based on the moving weighted average, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Cost of trading goods and trading properties are determined on “specific identification” basis by the entities operating in automotive and construction businesses. Trading properties comprise land and buildings that are held for trading purposes. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(l) Construction contracts in progress

Construction contracts in progress represent the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognised to date (see note 3 (p)(iii)) less progress billings and recognised losses. Cost includes all expenditures related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity.

Construction contracts in progress is presented as part of accounts receivable in the consolidated statement of financial position for all contracts in which costs incurred plus recognised profits exceed progress billings. If progress billings exceed cost incurred plus recognised profits, then the difference is presented as deferred income in the consolidated statement of financial position.

The asset, “Due from customers for contract work” represents revenues recognised in excess of amounts billed. The liability, “Due to customers for contract work” represents billings in excess of revenues recognised.

(m) Impairment

(i) Non-derivative financial assets

A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that the loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

Available-for sale financial assets

Impairment losses on available-for-sale investment securities are recognised by reclassifying the cumulative loss that has been recognised in other comprehensive income, and presented in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from other comprehensive income and recognised in profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in cumulative impairment losses attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss.


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(m) Impairment (continued)


Available-for sale financial assets (continued)

However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

For an investment in unquoted equity instruments carried at cost because their fair value cannot be measured reliably, impairment losses is not be reversed.

Loans and receivables and held-to-maturity investments

The recoverable amounts of banking loans and receivables and held-to-maturity instruments are calculated as the present values of the expected future cash flows discounted at the instruments’ original effective interest rates. Short-term balances are not discounted.

Loans and receivables are presented net of specific and portfolio basis allowances for uncollectibility. Specific allowances are made against the carrying amounts of loans and receivables that are identified as being impaired based on regular reviews of outstanding balances to reduce these banking loans and receivables to their recoverable amounts. In assessing the recoverable amounts of banking loans and receivables, the estimated future cash flows are discounted to their present value. Portfolio basis allowances are maintained to reduce the carrying amount of portfolios of similar banking loans and receivables to their estimated recoverable amounts at the reporting date. The expected cash flows for portfolios of similar assets are estimated based on previous experience and considering the credit rating of the underlying customers and late payments of interest or penalties. Increases in the allowance account are recognised in profit or loss. When a banking loan is known to be uncollectible, all the necessary legal procedures have been completed, and the final loss has been determined, the loan is written off directly. If, in a subsequent period, the amount of impairment loss decreases and the decrease can be linked objectively to an event occurring after the write down, the write-down or allowance is reversed through profit or loss.

Financial assets remeasured to fair value

The recoverable amount of an equity instrument is its fair value. The recoverable amount of debt instruments and purchased loans remeasured to fair value is calculated as the present value of the expected future cash flows discounted at the current market rate of interest.

Where an asset remeasured to fair value is impaired, the write-down is recognised in profit or loss.

If, in a subsequent period, the amount of impairment loss decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through profit or loss.

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets with indefinite lives are tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (“CGU”) exceeds its recoverable amount.


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(m) Impairment (continued)

(ii) Non-financial assets (continued)

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(n) Employee benefits

(i) Defined benefit plan

A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee and his/her dependants will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

Garanti Bank, a jointly controlled entity, has a defined benefit plan (“the Plan”) for its employees namely Türkiye Garanti Bankası Anonim Şirketi Emekli ve Yardım Sandığı Vakfı (“the Fund”). The Fund is a separate legal entity and a foundation recognised by an official decree, providing pension and post-retirement medical benefits to its all its employees entitled to receive such benefits. This benefit plan is funded through contributions of both by the employees and the employer as required by Social Security Law numbered 506 and these contributions are as follows:

2012 Employer % Employee %Pension contributions 15.5 10.0Medical benefit contributions 6.0 5.0 2011 Employer % Employee %Pension contributions 15.5 10.0Medical benefit contributions 6.0 5.0

This benefit plan is composed of a) the contractual benefits of the employees, which are subject to transfer to Social Security Foundation (“SSF”) (“pension and medical benefits transferable to SSF”) (see note 34 (i)) and b) other excess social rights and payments provided in the existing trust indenture but not transferable to SSF and medical benefits provided by Garanti Bank for its constructive obligation (“excess benefits”) (see note 34 (ii)).


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(n) Employee benefits (continued)

(i) Defined benefit plan (continued)

Pension and medical benefits transferable to SSF

As discussed in note 34, Garanti Bank expects to transfer a portion of the obligation of the Fund to SSF. This transfer will be a settlement of that portion of the Fund’s obligation. Final legislation establishing the terms for this transfer was enacted on 8 May 2008. Although the settlement will not be recognised until the transfer is made, Garanti Bank believes that it is more appropriate to measure the obligation as the value of the payment that would need to be made to SSF to settle the obligation at the date of the statement of financial position in accordance with the Temporary Article 20 of the Law No.5754: “Law regarding the changes in Social Insurance and General Health Insurance Law and other laws and regulations” (“the New Law”).

The pension disclosures set out in Note 34, therefore reflect the actuarial assumptions and mortality tables specified in the New Law, including a discount rate of 9.80 percent. The pension benefits transferable to SSF are calculated annually by an independent actuary, who is registered with the Undersecretariat of the Treasury.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are directly charged to profit or loss.

Excess benefits not transferable to SSF

The excess benefits, which are not subject to the transfer, are accounted in accordance with IAS 19, “Employee Benefits”. The obligation in respect of the retained portion of the defined benefit pension plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value by using the projected unit credit method, and any unrecognised past service costs and the fair value of any plan assets are deducted.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are directly charged to profit or loss.

(ii) Reserve for employee severance indemnity

Reserve for employee severance indemnity represents the present value of the estimated future probable obligation of the Group arising from the retirement of the employees and calculated in accordance with the Turkish Labour Law. It is computed and reflected in the consolidated financial statements on an accrual basis as it is earned by serving employees. The computation of the liabilities is based upon the retirement pay ceiling announced by the Government. The ceiling amounts applicable for each year of employment were TL 3.03 thousand and TL 2.73 thousand at 31 December 2012 and 2011, respectively.

IFRSs require actuarial valuation methods to be developed to estimate the entity’s obligation under defined benefit plans. The principal statistical assumptions used in the calculation of the total liability in the accompanying consolidated financial statements at 31 December were as follows:

2012 2011% %

Discount rate 2.18-3.00 4.3-4.7Turnover rate to estimate the probability of retirement 1.0-8.00 1.0-8.00


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(o) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

(i) Warranties

A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

The warranties on automobiles sold by the Group are issued by the main producers (Volkswagen, Audi, Porsche, Seat, Scania, Krone) where the Group acts as an intermediary between the customers and the producer. The claims of customers to the Group are recognised as warranty expense in profit or loss. The Group recognises the amount claimed from the producers as warranty income and offset against warranty expense. The Group incurs the cost that is not paid by the manufacturers. Accordingly, the Group recognises the estimated liability for the difference between possible warranty claims of customers and possible warranty claims from producers based on historical service statistics.

(ii) Onerous contracts

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract (see note 3 (m)(ii)).

(p) Revenue and cost recognition

(i) Banking and finance business

Fees and commission income: Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income, including account servicing fees, investment management fees, sales commission, placement fees and syndication fees, are recognised as the related services are performed. When a loan commitment is not expected to result in the draw-down of a loan, loan commitment fees are recognised on a straight-line basis over the commitment period. Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received.

Interest income and expense: Interest income and expense are recognised on an accrual basis in profit or loss, taking into account the effective yield of the asset or an applicable floating rate. Interest income and expense include the amortisation of any discount or premium or other differences between the initial carrying amount of an interest bearing instrument and its amount at maturity calculated on an effective interest rate basis.

Trading gain/(loss), net: Trading gain/(loss) includes gains and losses arising from disposals of financial assets at fair value through profit or loss and available-for-sale and from trading derivatives.


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(p) Revenue and cost recognition (continued)

(ii) Insurance business

Premium income: For short-term insurance contracts, premiums are recognised as revenue (earned premiums), net of premium ceded to reinsurer firms, proportionally over the period of coverage. The portion of premium received on in-force contracts that relates to unexpired risks at the reporting date is recognised as the reserve for unearned premiums that are calculated on a daily pro-rata basis. Premiums are shown before deduction of commissions and deferred acquisition cost, and are gross of any taxes and duties levied on premiums. For long-term insurance contracts, premiums are recognised as revenue when the premiums are due from the policyholders. Premiums received for long-term insurance contracts with discretionary participation feature (“DPF”) are recognised directly as liabilities.

Unearned premium reserve: Unearned premiums are those proportions of the premiums written in a period that relate to the period of risk subsequent to the reporting date for all short-term insurance policies. In accordance with the incumbent legislation on the computation of insurance contract liabilities, unearned premium reserve set aside for unexpired risks as at the reporting date has been computed on daily pro-rata basis. The change in the provision for unearned premium is recognised in profit or loss in the order that revenue is recognised over the period of risk.

Claims and provision for outstanding claims: Claims are recognised in the period in which they occur, based on reported claims or on the basis of estimates when not reported. The claims provision is the total estimated ultimate cost of settling all claims arising from events, which have occurred up to the end of the accounting period. Full provision is accounted for outstanding claims, including claim settlements reported at the period-end. Incurred but not reported claims (“IBNR”) are also provided for under the provision for outstanding claims.

Liability adequacy test: At each reporting date, asset-liability adequacy tests are performed to ensure the adequacy of the contract liabilities, net of related deferred acquisition cost. In performing these tests, current best estimates of future cash flows are used. Any deficiency is immediately charged to profit or loss.

Income generated from pension business: Revenue arising from asset management and other related services offered by one of the Group’s proportionately consolidated insurance joint venture are recognised in the accounting period in which the service is rendered. Fees consist primarily of investment management fees arising from services rendered in conjunction with the issue and management of investment contracts where the company actively manages the consideration received from its customers to fund a return that is based on the investment profile that the customer selected on origination of the instrument. These services comprise the activity of trading financial assets in order to reproduce the contractual services. In all cases, these services comprise an indeterminate number of acts over the life of the individual contracts.

Mathematical provisions: Mathematical provisions are the provisions recorded against the liabilities of the proportionately consolidated insurance joint venture to the beneficiaries of long-term life, health and individual accident policies based on actuarial assumptions. Mathematical provisions consist of actuarial mathematical provisions for long term insurance contracts, saving portion of the saving life products classified as investment contracts and related profit sharing reserves.

Actuarial mathematical provisions are calculated as the difference between the net present values of premiums written in return of the risk covered by the insurance proportionately consolidated joint venture and the liabilities to policyholders for long-term insurance contracts based on the basis of actuarial mortality assumptions as approved by the Republic of Turkey Prime Ministry Undersecretariat of Treasury, which are applicable for Turkish insurance companies.


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(ii) Insurance business (continued)

Profit sharing reserves are the reserves provided against income obtained from asset backing saving life insurance contracts. These contracts entitle the beneficiaries of those contracts to a minimum guaranteed crediting rate per annum or, when higher, a bonus rate declared by the insurance affiliate from the eligible surplus available to date.

Mathematical provisions are presented under other non-current liabilities in the accompanying consolidated financial statements.

(iii) Construction contracts

Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue is recognised in profit or loss in proportion to the stage of completion of the contract. Contract expenses are recognised as incurred unless they create an asset related to future contract activity.

The stage of completion is assessed by reference to the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognised immediately in profit or loss.

(iv) Commissions

When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commission made by the Group.

(v) Rental income

Rental income from investment property is recognised as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from other property is recognised as other income.

(vi) Service concession arrangements

Inspection revenues and cost of revenues

Inspection revenues constitute fees charged to the customers for services rendered in the Vehicle Inspection Stations (“VIS”) through sub-operators. Such inspection fees are recognised as revenue in profit or loss at the date the service is provided. Until 15 August 2010, the cost of inspection revenues constitutes sub-operators’ share for their sub-operating activities which constitutes 63 percent of the inspection revenues and payments to the State for its share as provided in the Concession Agreement which constitutes 30 percent of the inspection revenues. After 15 August 2010, State share has been increased to 40 percent as provided in the Concession Agreement and consequently, sub-operators’ share has decreased to 53 percent while the Group companies share has remained the same.

Revenues from sub-operation fees and cost of revenues

The sub-operation fees are the payments made by the sub-operators to the Group for their use of the sub-operation rights in the manner and conditions set out in sub-operation agreements. The sub-operation fees are initially recognised as unearned revenue in the consolidated statement of financial position and then transferred to the profit or loss in the periods from the starting date of operations in the VIS until the end of the concession period.


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(vi) Service concession arrangements (continued)

Revenues from sub-operation fees and cost of revenues (continued)

The sub-operation fees constitute a profit margin plus various costs of the Group to prepare the vehicles inspection stations for their intended use. Such costs represent the cost of the concession right paid by the Group and all other relevant expenditures including station construction, testing equipment, preparation of station personnel, setting-up sub-operation systems and related borrowing costs that are altogether considered as the cost of sub-operation fees.

Profit derived from the sub-operation fees is recognised in profit or loss from the starting date of operations in the vehicle inspection stations until the end of the concession period on a straight line basis.

Cost of sub-operation fees including depreciation expense of property and equipment of the vehicle inspection stations that are in operation and the amortisation expense of the concession right, and the related station personnel expenses, among others are recognised as expense in the period in which the economic benefits associated with those cost items are consumed or expired.

(vii) Other businesses

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sale is recognised.

Transfers of risks and rewards vary depending on the individual terms of the contract of sale. Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date.

(viii) Research and development costs

Expenditure on research activities is recognised in profit or loss when incurred.

(ix) Dividend income

Dividend income is recognised on the date that the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

(q) Government grants

Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and that the Group will comply with the conditions associated with the grant and are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognised.


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(r) Leases

(i) Leased assets

Assets held by the Group under leases which transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. At initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Assets held under other leases are classified as operating leases and are not recognised in the Group’s consolidated statement of financial position.

(ii) Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(iii) Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. The following two criteria must be met for a “lease”:

the fulfilment of the arrangement is dependent on the use of a specific asset or assets; and

the arrangement contains a right to use the asset(s).

At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group’s incremental borrowing rate.

(s) Finance income and finance costs

Finance income comprises interest income on funds invested, foreign currency gains, and gains on derivative instruments that are recognised in profit or loss. Interest income is recognised as it accrues, using the effective interest method.

Finance costs comprise interest expense on borrowings, foreign currency losses, and losses on derivative instruments that are recognised in profit or loss.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.

(t) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.


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(t) Income tax (continued)

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries jointly controlled entities and associates to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the reporting date.

In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognised for unused tax losses, tax credits and deductable temporary differences, to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred taxes related to fair value measurement of available for sale assets and cash flow hedges are charged or credited to equity and subsequently recognised in profit or loss together with the deferred gains that are realised.

Deferred taxes related to revaluation surplus reserve are recognised in other comprehensive income in revaluation surplus in equity on a net basis.

(u) Assets held for sale or distribution

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or distribution rather than through continuing use, are classified as held for sale or distribution. Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets and investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.


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(u) Assets held for sale or distribution (continued)

Intangible assets and property and equipment once classified as held for sale or distribution are not amortised or depreciated. In addition, equity accounting of associates ceases once classified as held for sale or distribution.

(v) Indemnification assets

Initial recognition

Indemnification assets are an exception to the recognition and measurement principles of IFRS 3. An acquirer recognises indemnification assets at the same time and measures them on the same basis as the indemnified item, subject to contractual limitations and adjustments for collectibility, if applicable.

The Group has the right to reimburse the provision for litigation and claims brought through the acquisition of Star TV to Alp Görsel İletişim Anonim Şirketi, the previous shareholder of Star TV, when such legal cases end against the favor of the Group and create a possible cash outlow.

Subsequent measurement

Subsequent to initial recognition, the acquirer continues to measure an indemnification asset on the same basis as the related indemnified asset or liability and the revision in measurement of the provision due to the subsequent information will be recognised through the profit or loss in contrary of the effect leading the net effect on the profit or loss be equal to zero whereas the decreasing effect on the asset and liability side on the consolidated statement of financial position will be the same.

The initial and subsequent accounting for indemnification assets recognised at the acquisition date applies equally to indemnified assets and liabilities that are recognised and measured under the principles of IFRS 3 and those that are subject to exceptions to the recognition or measurement principles of IFRS 3.

If the amounts recognised by an acquirer for an indemnified liability and a related indemnification asset recognised at the acquisition date do not change subsequent to the acquisition and ultimately are settled at the amounts recognised in the acquisition accounting, then there will be no net effect on profit or loss providing that those amounts are the same.

(w) Items held in trust

Assets, other than cash deposits held by Garanti Bank and its subsidiaries in fiduciary or agency capacities for its customers and government entities, are not included in the accompanying consolidated statement of financial position, since such items are not under the ownership of Garanti Bank.

(x) Financial guarantees

The financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because of a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Financial guarantee liabilities are initially recognised at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment (when a payment under the guarantee has become probable).


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(y) Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the CEO (“Chief Executive Officer”) and BOD members to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

(z) De-merger/ Spin off

Economically a de-merger represents a division of an entity into separate parts. The result of a de-merger is that the same shareholders own the same group of businesses; the shareholders structure and their ownership interests are identical both before and after the de-merger. In the absence of further guidance in IFRS, the Group has accounted the de-merger via book values.

(µ) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2012, and have not been applied in preparing these consolidated financial statements. The following standards and amendments are expected to affect the consolidated financial statements of the Group:

Amendments to IAS 1 Presentation of Items of Other Comprehensive Income require that an entity present separately the items of other comprehensive income that would be reclassified to profit or loss in the future if certain conditions are met from those that would never be reclassified to profit or loss. The amendments are effective for annual periods beginning on or after 1 July 2012.

IFRS 10 Consolidated Financial Statements supersedes IAS 27 (2008) and SIC-12 Consolidation-Special Purpose Entities and becomes effective for annual periods beginning on or after 1 January 2013. Retrospective application is required.

IFRS 11 Joint Arrangements supersedes IAS 31 and SIC-13 Jointly Controlled Entities-Non-Monetary Contributions by Venturers and becomes effective for annual periods beginning on or after 1 January 2013. The proportionate consolidation method currently applied to the Group’s interests in joint ventures will be prohibited effective from 1 January 2013 and such interests in joint ventures will be accounted through equity method. Retrospective application is required.

IFRS 12 Disclosure of Interests in Other Entities contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities and becomes effective for annual periods beginning on or after 1 January 2013. Retrospective application is required.

IFRS 13 Fair Value Measurement replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance and becomes effective for annual periods beginning on or after 1 January 2013. Retrospective application is required.

IAS 27 Separate Financial Statements (2011) supersedes IAS 27 Consolidated and Separate Financial Statements (2008) and becomes effective for annual periods beginning on or after 1 January 2013.

IAS 28 Investments in Associates and Joint Ventures (2011) supersedes IAS 28 Investments in Associates (2008) and becomes effective for annual periods beginning on or after 1 January 2013.


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(µ) New standards and interpretations not yet adopted (continued)

IFRS 9 Financial Instruments could change the classification and measurement of financial assets and becomes effective for annual periods beginning on or after 1 January 2015. Retrospective application is required.

IAS 19 changes the definition of short-term and other long-term employee benefits (2011) to clarify the distinction between the two. For defined benefit plans, the accounting policy choice for recognition of actuarial gains and losses and corridor method are removed and IAS 19 revised (2011) is effective for annual periods beginning on or after 1 January 2013 with early adoption permitted.

IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities (Amended): The amendments clarify the meaning of ―currently has a legally enforceable right to set-off and also clarify the application of the IAS 32 offsetting criteria to settlement systems which apply gross settlement mechanisms that are not simultaneous. These amendments are to be retrospectively applied for annual periods beginning on or after 1 January 2014.

IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements (Amended): New disclosures would provide users of financial statements with information that is useful in (a) evaluating the effect or potential effect of netting arrangements on an entity‘s financial position and (b) analyzing and comparing financial statements prepared in accordance with IFRSs and other generally accepted accounting standards. The amendments are to be retrospectively applied for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods.

The Group does not plan to adopt these standards early and the extent of the impact has not been determined yet.


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4 Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

(a) Property and equipment

The fair value of property and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably.

The Group reflects land and buildings at their fair values as appraised by independent third party appraisers. The fair values of land and buildings are determined based on the discounted cash flow method, depreciable replacement cost or market prices for similar items.

(b) Intangible assets

The fair values of intangible assets, which comprise the broadcasting rights, concession rights for marina management, customer relationship, content library, franchise network, sponsorship contracts and brand names acquired in business combinations, are based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

(c) Investment property

External, independent valuation companies, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Group’s investment property portfolio every year. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly.

In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows then is applied to the net annual cash flows to arrive at the property valuation.

Valuations reflect, when appropriate; the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities between the Group and the lessee; and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices and when appropriate counter-notices have been served validly and within the appropriate time.

(d) Inventories

The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

(e) Investments in equity and debt securities

The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only.


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4 Determination of fair values (continued)

(f) Trade and other receivables

The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. The fair value is determined for disclosure purposes or when such assets are acquired through a business combination.

(g) Derivatives

The fair values of forward exchange contracts, options and other derivative contracts are based on their listed market prices, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.

Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate.

(h) Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

5 Financial risk management

(a) Overview

The Group has exposure to the following risks from its use of financial instruments:

credit risk liquidity risk market risk operational risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risks, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management framework

Enterprise Risk Management (“ERM”) efforts have been initiated by Doğuş Group since 2006 and these efforts have been executed by Doğuş Holding Risk Management Department. Risk Management activities are conducted by a realistic organizational structure and it is fully supported with the commitment of top level management, so that the Group is pioneer in risk management activities in Turkish business environment.

Group acts proactively in terms of risk management in order to ensure that its business operations in different industries and regions are not adversely affected as a result of market, operational, liquidity and counterparty risks. Risk Management and Internal Audit departments within each sector and at the Group level provide and maintain awareness for different types of risks, including emerging risks, and ensure that appropriate risk management mechanisms are in place.


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5 Financial risk management (continued)

(a) Overview (continued)

Risk management framework (continued)

Downside risks remain significant as a result of renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States. As for Turkey; risks in relation to balance of payment deficit and weak growth are still of great importance. Nevertheless Group, with diverse business operations in different regions and countries, has already been cognizant of its need to monitor and manage those risks and related impacts on its strategic, business and operation decisions.

As for Group’s risk management activities in 2012, it was a successful year in terms of maintaining and improving risk management practices both in group and company levels and enhancing the risk culture group wide. Risk Committee meetings are held on regular basis and valuable and relevant risk information is generated discussed and escalated if deemed necessary.

In 2010, by the Risk and Audit Committee decision, Group companies created their own Risk Management departments. Now, Doğuş Holding Risk Management works even more closely with the Group companies’ Risk Management departments to establish a standardised ERM system and obtain accurate information to assess and evaluate the risk taking processes. In addition to establishing an independent reporting infrastructure for Group companies, group-wide awareness for different types of risks and risk management strategies is ensured by periodical risk roundtables, workshops, dashboards and reports throughout the organization.

ERM is applied in all Group companies so that all risk is managed effectively within the Group in accordance with the defined risk management strategy, framework and the risk model. ERM is implemented based on an internal framework employing internationally accepted standards and best practices from around the world. This framework is customised according to the needs and structure of the Group’s businesses.

ERM activities are executed throughout the Group in the following fields:

Determining risk management standards and policies, Developing group-wide culture and capabilities, Conducting risk analysis of existing and potential investments, Creating an executive reporting channel of new investments, Determining risk levels, limits and action plans, Supporting the implementation of these action plans, Enhancing strategic processes with a risk management approach.

Doğuş Holding’s CEO has the ultimate responsibility for ERM and Doğuş Holding’s Risk Management Department is under the supervision of Doğuş Holding’s CEO and the Risk and Audit Committee which functions under the Board of Directors.

The Risk and Audit Committee is responsible for assessing the risk appetite of the shareholders. Additionally, this committee provides guidance to adjust risk levels where needed. Each sector has its own risk committee.

Furthermore, internal audit activities performed by Doğuş Holding Internal Audit Department are also implemented on a risk-based perspective, and the risk management performance is assessed throughout the organization with well defined key performance indicators.


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Risk management framework (continued)

(b) Risk management framework for the corporate segments

(i) Automotive

DOAŞ’s risk management approach can be defined as minimizing the threats towards the organization, personnel and assets using reasonable, justifiable and clearly documented methods and improving the efficiency of oversight activities. In the frame of this approach, authorised by the Board of Directors, the Corporate Governance Committee ensures that the risk management is handled effectively in a fair, transparent, responsible consistent, and accountable nature and in compliance with the Corporate Governance Committee Directive. The duties and responsibilities of the Early Risk Detection Committee are fulfilled by the Corporate Governance Committee. This group conducts studies towards an effective management of risk by proactively detecting the potential outcomes, which may endanger the presence, development and continuation of the DOAŞ and by putting the necessary precautions and measures into effect.

DOAŞ handles risks based on a stream of principles: define; classify accurately; hedge, ensure the information flow; strengthen the effectiveness of oversight. DOAŞ puts emphasis on defining the risks tangibly and in clarity and in compliance with corporate governance principles.

(ii) Construction

Risk organisation

The Board of Doğuş İnşaat has established a Risk Committee in 2009 to have a better view over risks and implement the enterprise-wide risk management process within the construction group. The Risk Committee shall be accountable to the Board and shall advise the Board on risk management, aiming to manage risks in a more systematic manner and foster a risk culture within the company. The management of the company has the overall responsibility for the establishment and oversight of the risk management framework. In January 2010, Doğuş İnşaat Risk Management Department has been established and assigned to managing risk management processes.

Risk management vision

Risk management vision of Doğuş İnşaat is defined as, identifying and monitoring risks and opportunities that will impact the corporate objectives, managing risks and uncertainties in the most effective and efficient manner and in line with the shareholders’ risk appetite, and proactively implementing the most appropriate response to risk.

Risk policies and procedures

Doğuş İnşaat’s risk management policies and procedures are established to identify and analyse the risks faced by the company, to set up appropriate risk limits and controls, and to monitor risks, responses, and adherence to such limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and Doğuş İnşaat’s activities.

Risks are identified and managed at three levels: i) corporate level ii) business process level and iii) project level. Risks are discussed at monthly Risk Committee meetings with management and monitored by regular reports.


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(b) Risk management framework for the corporate segments (continued)

(iii) Media

The Board of Directors has overall responsibility for establishment and oversight of the Media’s risk management framework. In January 2010, Internal Audit and Risk Management Department was established with the decision of the Board. This will strengthen focus on corporate risk management throughout the Media by developing methodology as well as centralising risk management operations.

(iv) Tourism

Doğuş Tourism Group has started to develop a risk management process to strengthen the internal controls and focus on risk assessment at the strategic level of the business. Within this perspective, Doğuş Tourism Group has selected an internationally accepted internal control model and built a framework to operationalise the selected model in the organisation.

The risk management framework consists of five interrelated components derived from the way management runs the business process: control environment, risk assessment, control activities, information and communication and monitoring.

(v) Real Estate, Energy, Marina and other segments

Doğuş Holding’s Risk Management Department gives support to ensure the application of risk management processes in the Real Estate, Energy, Marina and other businesses.

(c) Risk management framework for the banking and finance segment

Garanti Bank’s Risk Management Strategy is established as part of a maintainable long term, value adding growth strategy. This strategy involves optimal allocation of economic capital to business lines considering the risk-return balance by measuring risks with the methods in compliance with its activities and national regulations and international standards.

Garanti Bank determines the necessary approaches in order to update, revise, apply and manage its policies set for the proper assessment and management of risks considering changes in conditions.

It is the ultimate responsibility of the top management to apply and improve risk management strategies, policies and procedures that are approved by Garanti Bank Board of Directors, to inform the Board of Directors about the important risks Garanti Bank is exposed to, to assess internal control, internal audit and risk reports with regard to Garanti Bank’s departments and to eliminate the risks, deficiencies or defects identified in these departments or to take the necessary precautionary actions to prevent those risks, deficiencies and defects, to participate in the determination of risk limits.

The risk management activities are structured under the responsibility of Garanti Bank’s Board of Directors. The top management is responsible to the Board of Directors for monitoring and managing of risks. Besides, the following departments participate in monitoring of risks coordinately, independent from executive functions; Internal Control, Risk Management, Fraud, Compliance and Internal Audit.

The risks are evaluated on a continuously developing structure that is managed by internationally accepted applications and in compliance with the Bank’s policies and procedures and the international and local regulations.

The risks are also managed through risk mitigations using hedging transactions beside measurement, limitation and capital allocation techniques. The data of Garanti Bank and the market are regularly monitored for better risk monitoring and management. As part of limitation of risks, internal limits are also set beside the legal limits. The possible changes in economic conditions and the risks that can be faced under extraordinary conditions are taken into consideration.


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(c) Risk management framework for the banking and finance segment (continued)

In order to ensure the compliance with the rules altered pursuant to the Articles 23, 29 and 31 of the Turkish Banking Law No. 5411 and the Articles 20, 36, 40, 60 and 71 of Regulation on Internal Systems of Banks published in the Official Gazette dated 28 June 2012, Garanti Bank periodically reviews the current written policies and implementation procedures regarding management of each risk encountered in its activities.

Garanti Bank purchased an integrated software system to place better risk management and Basel II applications in order to support and improve risk management activities. The Basel II application has became mandatory for all the banks operating in Turkey effective from 1 July 2012.

(i) Audit Committee

The Audit Committee consists of two members of the Board of Directors of Garanti Bank who do not have any executive functions. The Audit Committee, which was established to assist the Board of Directors of Garanti Bank in its auditing and supervising activities, is responsible for:

Monitoring the effectiveness and adequacy of Garanti Bank’s internal control, risk management and internal audit systems, operation of these systems and accounting and reporting systems in accordance with applicable regulations and the integrity of resulting information;

Performing the preliminary studies required for the election of independent audit firms and regularly monitoring their activities;

Ensuring that the internal audit functions of subsidiaries are performed in a consolidated and coordinated manner.

(ii) Liquidity Risk Management Committee

The Liquidity Risk Management Committee is responsible for:

Determining the excess liquidity that Garanti Bank holds in foreign currencies; Periodically monitoring the liquidity report and early-warning signals; Determining the stress level of Garanti Bank; monitoring internal and external factors that might

affect Garanti Bank’s liquidity in case of a liquidity crisis; Ensuring that the action plan aligned with the Contingency Funding Plan is properly implemented; Determining measures required by Garanti Bank’s customer confidence, cost of funding and key

liquidity increasing strategies, and ensuring internal communication and coordination with regard to the implementation of committee decisions.

(iii) Other committees

Market, credit and operational sub-risk committees have been established in order to facilitate exchange of information and views with the relevant units of Garanti Bank and to promote the use of risk management and internal audit systems within Garanti Bank.

(iv) Derivative financial instruments

Garanti Bank and its subsidiaries enter into a variety of derivative financial instruments for hedging and risk management purposes. This note describes the derivatives used. Further details of the objectives and strategies in the use of derivatives are set out in the sections of this note on non-trading activities. Details of the nature and terms of derivative instruments outstanding at the reporting dates are set out in Note 41. Derivative financial instruments used include swaps, futures, forwards, options and other similar types of contracts whose values change in response to the changes in interest rates, foreign exchange rates and gold prices. Derivatives are individually negotiated over-the-counter contracts.


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(c) Risk management framework for the banking and finance segment (continued)

(iv) Derivative financial instruments (continued)

A description of the main types of derivative instruments used is set out below:

Swaps

Swaps are over-the-counter agreements to exchange future cash flows based upon agreed notional amounts. Most commonly used swaps are currency swaps. Garanti Bank and its subsidiaries are subject to credit risk arising from the respective counterparties’ failure to perform. Market risk arises from the possibility of unfavorable movements in market rates relative to the contractual rates of the contract.

Futures and forwards

Futures and forward contracts are commitments to either purchase or sell a designated financial instrument, currency, commodity or an index at a specified future date for a specified price and may be settled in cash or another financial asset. Futures are standardised exchange-traded contracts whereas forwards are individually traded over-the-counter contracts. Initial margin requirements for futures are met in cash or other instruments, and changes in the future contract values are settled daily. Therefore credit risk is limited to the net positive change in the market value for a single day. Futures contracts have little credit risk because the counterparties are futures exchanges. Forward contracts result in credit exposure to the counterparty. Futures and forward contracts both result in exposure to market risk based on changes in market prices relative to contracted amounts.

Options

Options are derivative financial instruments that give the buyer, in exchange for a premium payment, the right, but not the obligation, to either purchase from (call option) or sell (put option) to the writer a specified underlying at a specified price on or before a specified date. Garanti Bank enters into foreign exchange, bond, equity index, interest rate options, not only vanilla options but also exotic options. Foreign currency options provide protection against rising or falling currency rates. Garanti Bank as a buyer of over-the-counter options is subject to market risk and credit risk since the counterparty is obliged to make payments under the terms of the contract if Garanti Bank exercises the option. As the writer of over-the-counter options, Garanti Bank is subject to market risk only since it is obliged to make payments if the option is exercised.

(v) Trading activities

Garanti Bank and its subsidiaries maintain active trading positions in non-derivative financial instruments. Most of the trading activities are customer driven. In anticipation of customer demand, an inventory of capital market instruments is carried and access to market liquidity is maintained by quoting bid and offer prices to and trading with other market makers. Positions are also taken in the interest rate, foreign exchange, debt and equity markets based on expectations of future market conditions. These activities constitute the proprietary trading business and enable Garanti Bank and its subsidiaries to provide customers with capital market products at competitive prices. As trading strategies depend on both market-making and proprietary positions, given the relationships between instruments and markets, those are managed in concert to maximise net trading income. Trading activities are managed by type of risk involved and on the basis of the categories of trading instruments held.


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(d) Credit risk

(i) Banking and finance segment

Garanti Bank and its subsidiaries’ counterparty credit exposure at the reporting date from financial instruments held or issued for trading purposes is represented by the fair value of instruments with a positive fair value at that date, as recorded on the consolidated statement of financial position. Notional amounts disclosed in the notes to the consolidated financial statements do not represent the amounts to be exchanged by the parties to derivatives and do not measure the exposure to credit or market risks. The amounts to be exchanged are based on the terms of the derivatives.

The risk that counterparties to trading instruments might default on their obligations is monitored on an ongoing basis. In monitoring credit risk exposure, consideration is given to trading instruments with a positive fair value and to the volatility of the fair value of trading instruments. To manage the level of credit risk, Garanti Bank and its subsidiaries deal with counterparties of good credit standing, enter into master netting agreements whenever possible, and when appropriate, obtain collateral. Master netting agreements provide for the net settlement of contracts with the same counterparty in the event of default.

Garanti Bank and its subsidiaries are subject to credit risk through their trading, lending, hedging and investing activities and in cases where they act as intermediaries on behalf of customers or other third parties or issues guarantees.

Credit risk associated with trading and investing activities is managed through Garanti Bank’s market risk management process.

Garanti Bank and its subsidiaries’ primary exposures to credit risk arise through their loans and advances. The amount of credit exposure in this regard is represented by the carrying amounts of these assets on the consolidated statement of financial position. Garanti Bank developed a statistical-based internal risk rating model for its credit portfolio of corporate/commercial/medium-sized companies. This internal risk rating model has been in use for customer credibility assessment since 2003 and is currently being reviewed and updated. Risk rating has become a requirement for loan applications, and ratings are used both to determine branch managers’ credit authorisation limits and in credit assessment process.

Garanti Bank and its subsidiaries are exposed to credit risk on various other financial assets, including derivative instruments used for hedging and debt investments. The current credit exposure in respect of these instruments is equal to the carrying amount of these assets in the consolidated statement of financial position. In addition, Garanti Bank and its subsidiaries are exposed to off statement of financial position credit risk through guarantees issued (Note 41).

The risk that counterparties to both derivative and other instruments might default on their obligations is monitored on an ongoing basis. To manage the level of credit risk, Garanti Bank and its subsidiaries deal with counterparties of good credit standing, enter into master netting agreements whenever possible, and when appropriate, obtain collateral.

Concentrations of credit risk (whether on or off statement of financial position) that arise from financial instruments exist for groups of counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

Impaired loans

Impaired loans are those which Garanti Bank determines that it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the loan agreement due to lack of assets, high debtness ratio, insufficient working capital and/or equity of the customer.


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(d) Credit risk (continued)

(i) Banking and finance segment (continued)

Allowance for impaired loans

Garanti Bank establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a portfolio-basis loan loss allowance established for groups of homogeneous assets in respect of losses that have been incurred but have not been identified on loans subject to individual assessment for impairment.

Write-off policy

Garanti Bank writes off a receivable balance (and any related allowances for impairment losses) when it is determined that the receivable is uncollectible based on the evidence of insolvency issued by the Court. In cases where any possible collections are negligible comparing to the prospective expenses and costs, such receivables are written off by the decision of the Board of Directors.

Collateral policy

Garanti Bank’s policy is to require suitable collateral to be provided by certain customers prior to the disbursement of approved loans. Garanti Bank and its subsidiaries currently hold collateral against banking loans and advances to customers in the form of mortgage interests over property, other registered securities over assets and guarantees. Collateral generally is not held over banking loans and advances to banks, except when securities are held as part of reverse repurchase and securities borrowing activity. Collateral usually is not held against investment securities, and no such collateral was held at 31 December 2012 and 2011.

(ii) Other corporate segments

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

Accounts receivable

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer of the segments other than banking and finance. The demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate has an influence on credit risk. Since the Group mainly operates in construction, automotive, media, real estate and tourism businesses, geographically the concentration of credit risk for the Group’s entities operating in the mentioned businesses are mainly in Turkey.

Majority of accounts receivable in the automotive business segment is due from dealers. Entities operating under automotive business segment have set an effective control mechanism to follow up and limit the risk for each counter party and obtain letters of guarantee from its dealers against its receivables for vehicle and spare part sales. The companies operating under the segments other than banking and finance segment and automotive segment have set a credit policy under which each new customer is analysed individually for the creditworthiness before each company’s standard payment and delivery terms and conditions are offered.


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(d) Credit risk (continued)

(ii) Other corporate segments (continued)

Accounts receivable (continued)

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are a dealer, tourism agency, retail or end-user customer, geographic location, industry, aging profile, maturity and existence of previous financial difficulties. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of accounts receivable. The component of this allowance is a specific loss component that relates to individually significant exposures.

The Group establishes an allowance for impairment losses that represent its estimate of incurred losses in its receivables portfolio. The Group sets impairment for its receivables if there is objective evidence that the Group will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees and collateral discounted based on the original effective interest rate of the originated receivables at inception.

Guarantees

In general terms, the Group’s policy is to provide guarantees to its Group entities in terms of sureties, letters of guarantee in the nature of the businesses that each entity operates.

(e) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.


Liquidity risk is defined as the risk that Garanti Bank may not be able to fullfil its payment obligations in a timely manner due to the lack of available cash or cash inflows in quality and in quantity to cover the cash outflows in a complete and timely manner due to imbalances in the cash flows of of Garanti Bank and its subsidiaries.

In order to manage the liquidity risk, Garanti Bank and its subsidiaries diversify their funding sources considering their short and long term liquidity requirements, through instruments such as customer deposits, repurchase transactions, bond issuances and foreign borrowings. Besides, in order to secure the maturity match between the assets and liabilities, the strategies for maturity extension of funding, exist. The liquidity needs in different currencies are managed through transactions such as currency swaps. In order to meet the cash outflow requirements during crises periods, high-liquid asset reserves are maintained.

In the context of Turkish Lira and foreign currencies liquidity management, Garanti Bank monitors the cash flows regarding assets and liabilities and forecast the required liquidity in future periods. By monitoring stress conditions, necessary measures shall be taken in line with liquidity needs.

There exists a contingency funding plan that includes the mechanisms to prevent a liquidity risk increase under ordinary operations and liquidity crisis scenarios under various conditions and levels of stress. Available liquid sources are determined by considering the liquidity crisis. As per this plan, the liquidity risk is monitored through possible actions and scenarios at various stress levels of liquidity risks and early warning signals.


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(e) Liquidity risk (continued)


Exposure to liquidity risk

The calculation method used to measure Garanti Bank’s compliance with the liquidity limit is set by BRSA. Currently, this calculation is performed on a bank only basis. In November 2006, BRSA issued a new communiqué on the measurement of liquidity adequacy of banks. The legislation requires the banks to meet minimum 80 percent liquidity ratio of foreign currency assets/liabilities and minimum 100 percent liquidity ratio of total assets/liabilities on a weekly and monthly basis effective from 1 June 2007.

Garanti Bank’s liquidity ratios for 2012 and 2011 are as follows:

2012 First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TLAverage (%) 131.56 139.73 98.80 104.67 2011 First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TLAverage (%) 135.89 148.57 94.32 109.14

Garanti Bank’s banking subsidiary in the Netherlands is not subject to a similar liquidity measurement, however the Dutch Central Bank requires the bank to have a positive liquidity gap, i.e. the liquidity gap should be greater than zero.

Garanti Bank’s banking subsidiary in Russia is subject to three levels of liquidity requirement; instant liquidity of minimum 15 percent, current liquidity of minimum 50 percent and long-term liquidity of maximum 120 percent.

Garanti Bank’s banking subsidiary in Romania calculates the liquidity ratio as a ratio of total effective liquidity in local currency equivalent to total necessary liquidity in local currency equivalent for several individual time buckets (<1 month, 1-3 months, 3-6 months, 6-12 months, >1 year) and each ratio for each bucket should be >1.

(ii) Other corporate segments Typically, the Group entities operating under other corporate segments ensure that they have sufficient cash on demand to meet expected operational expenses in terms of the relevant characteristics of the businesses they operate, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

For the entities operating under automotive business segment, risk of funding current and potential requirements is mitigated by ensuring the availability of adequate number of creditworthy lending parties. Entities operating under automotive business segment, in order to minimise liquidity risk, hold adequate cash and available line of credit (including factoring capacity).


59


(f) Market risk


All trading instruments are subject to market risk, the risk that future changes in market conditions may make an instrument less valuable or more onerous. Those instruments are recognised at fair value, and all changes in market conditions directly affect trading gain/(loss), net. Garanti Bank and its subsidiaries manage their use of trading instruments in response to changing market conditions. Market risks arising from trading transactions are measured by internal risk measurement model using (“VaR”) methodology. In the VaR calculations, trading and available-for-sale portfolios are taken into account. VaR is calculated by three different methods, namely historical simulation, Monte Carlo simulation and parametric method. Garanti Bank takes the historical VaR results as the basis for the internal management of market risk and determination of limits. The calculations made according to other two methods are used for comparison and monitoring purposes. In the VaR calculation, one year historical market data set is used, and 99 percent confidence interval and one-day retention period are taken into account. In order to test the reliability of the VaR model, back tests are performed. Stress tests and scenario analysis are also applied in order to reflect the effects of prospective severe market fluctuations in the VaR calculations.

Internal limits are set as well as legal limits in order to restrict market risk; value at risk limits for trading portfolio, position limits set for trading desks, single transaction limits set for traders and stop-loss limits. Approval, update, monitoring, override and warning procedures of these limits are put into practice and changed with the approval of the Board of Directors of Garanti Bank.

The capital requirement for general market risk and specific risks is calculated using the standard method defined by the “Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks” as set out by the BRSA and reported monthly.

Currency risk

Garanti Bank and its subsidiaries are exposed to currency risk through transactions in foreign currencies and through their investments in foreign operations.

Garanti Bank and its subsidiaries’ main foreign operations are in the Netherlands and Russia. The measurement currencies of these operations are Euro and USD. As the currency in which Garanti Bank presents its consolidated financial statements is TL, the consolidated financial statements are affected by currency exchange rate fluctuations against TL.

Garanti Bank finances a significant portion of its net investment in foreign operations with borrowings in the same currencies as the relevant measurement currencies to mitigate its currency risk. Currency swaps are also used to match the currency of some of its other borrowings to the measurement currencies involved.

Garanti Bank and its subsidiaries’ transactional exposures give rise to foreign currency gains and losses that are recognised in profit or loss. These exposures comprise the monetary assets and monetary liabilities that are not denominated in the measurement currency of Garanti Bank involved.

The short positions in the consolidated statement of financial position of Garanti Bank and its subsidiaries are hedged by currency swaps, forward contracts and other derivatives entered into to manage these currency exposures. In respect of monetary assets and liabilities in foreign currencies that are not economically hedged, Garanti Bank and its subsidiaries ensure that their net exposures are kept to an acceptable level by buying and selling foreign currencies at spot rates when considered appropriate.


60


(f) Market risk (continued)


Interest rate risk

Garanti Bank and its subsidiaries’ operations are subject to the risk of interest rate fluctuations to the extent that interest-earning assets (including investments) and interest-bearing liabilities mature or reprice at different times or in differing amounts. In the case of floating rate assets and liabilities, Garanti Bank and its subsidiaries are also exposed to basis risk, which is the difference in repricing characteristics of the various floating rate indices, such as the deposit rate and libor and different types of interest. Treasury activities are aimed at optimising net interest income, given market interest rate levels consistent with Garanti Bank’s business strategies.

In general, as common in current economic environment, the consolidated financial statements are liability sensitive because its interest-earning assets have a longer duration and reprice slightly less frequently than interest-bearing liabilities. This means that in rising interest rate environments, margins earned will narrow as liabilities reprice. However, the actual effect will depend on a number of factors, including the extent to which repayments are made earlier or later than the contracted dates and variations in interest rate sensitivity within repricing periods and among currencies.

Interest rate derivatives are primarily used to bridge the mismatch in the repricing of assets and liabilities. This is done in accordance with the guidelines established by Garanti Bank’s Assets and Liabilities Management Committee.

Some assets have no defined maturities or interest rate sensitivities and are not readily matched with specific liabilities. Those assets are funded through liability pools based on the assets’ estimated maturities and repricing characteristics.

Part of Garanti Bank’s return on financial instruments is obtained from controlled mismatching of the dates on which interest receivable on assets and interest payable on liabilities are next reset to market rates or, if earlier, the dates on which the instruments mature.

The measurement process of interest rate risk resulting from banking book, is established and managed by Garanti Bank on a bank-only basis to include the interest rate positions defined as banking book and to consider the relevant repricing and maturity data.

Duration gaps, gaps by maturity buckets and sensitivity analysis are used in monitoring of repricing risk resulting from maturity mismatch. In the duration gap analysis, the present values of interest-rate-sensitive asset and liability items are calculated using yield curves developed from market interest rates. In case of instruments with no maturities assigned, the maturity is determined as per interest rate fixing periods and customer behaviours. Such results are supported by sensitivity and scenario analysis applied periodically for possible instabilities in the markets.

The interest rate risk on the interest-rate-sensitive financial instruments of the trading portfolio is evaluated as part of the market risk.


61


(f) Market risk (continued)


Interest rate risk (continued)

Economic value differences resulted from intrest rate instabilities calculated on a bank-only basis for the banking book according to the relevant legislation as per the standard shock method is as follows;

Type of Currency Shocks applied

( +/ - basis points) Gains / Losses (Group share)

Gains / Equity - Losses / Equity(Group share)

TL (+) 500 bps (675,528) (12.92) percentTL (-) 400 bps 661,363 12.65 percentUSD (+) 200 bps 3,588 0.07 percentUSD (-) 200 bps (14,904) (0.28) percentEuro (+) 200 bps (18,333) (0.35) percentEuro (-) 200 bps 19,763 0.38 percentTotal (of negative shocks) 666,222 12.75 percentTotal (of positive shocks) (690,273) (13.20)percent


Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily USD, but also Euro, Swiss Francs (“CHF”), Sterling (“GBP”), Libyan Dinar (“LYD”), Japanese Yen (“JPY”), Croatian Kuna (“HRK”), Romanian Leu (“RON”) and Ukranian Hryvnia (“UAH”). The currencies in which these transactions primarily are denominated are TL, Euro and USD.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

The Group is exposed to currency risk through the impact of rate changes on the translation of foreign currency denominated payables and bank borrowings from financial institutions. Such risk is monitored by the Board of Directors and limited through taking positions within approved limits as well as using derivative instruments where necessary.

To minimise risk arising from foreign currency denominated statement of financial position items, the Group sometimes utilises derivative instruments as well as keeping part of its idle cash in foreign currencies.


62


(g) Operational risk


Operational risk expresses the probability of loss that may arise from the overlook of faults and inconsistency with the established rules due to the deficiencies in Garanti Bank and its subsidiaries’ internal controls, manner of the management and the personnel that are not in coherence with time and conditions, deficiencies in the bank management, faults and problems in information technology systems and disasters such as earthquake, fire, flood or terror attacks.

The operational risk items in Garanti Bank are determined in accordance with the definition of operational risk by considering Garanti Bank’s whole processes, products and departments. The control areas are set for operational risks within Garanti Bank and all operational risks are followed by assigning the risks to these control areas. In this context, appropriate monitoring methodology is developed for each control area that covers all operational risks and control frequencies are determined.

Currently, the value at operational risk is calculated according to the basic indicator approach as per the Article 14 of “Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks” as pronounced by BRSA.

The annual gross income is defined as net interest income plus net non-interest income reduced by realised gains/losses from the sale of securities available-for-sale and held-to-maturity, non-recurring gains and income derived from insurance claims. The result is added to risk weighted assets in the capital adequacy calculation.

Capital management – regulatory capital

BRSA sets and monitors capital requirements for Garanti Bank as a whole. The parent company and individual banking operations are directly supervised by their local regulators. In implementing current capital requirements, BRSA requires the banks to maintain a prescribed ratio of minimum 8 percent of total capital to total value at credit, market and operational risks. Garanti Bank and its subsidiaries’ consolidated regulatory capital is analysed into two tiers:

Tier 1 capital, which includes paid-in capital, share premium, legal reserves, retained earnings, translation reserve and non-controlling interest after deductions for goodwill and certain cost items.

Tier 2 capital, which includes qualifying subordinated liabilities, general impairment allowances and the element of the fair value reserve relating to unrealised gain/loss on assets classified as available-for-sale.

Banking operations are categorised as either trading book or banking book, and risk-weighted assets are determined according to specified requirements that seek to reflect the varying levels of risk attached to assets and off-balance sheet exposures. Garanti Bank’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders’ return is also recognised and Garanti Bank recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position. There have been no material changes in the Garanti Bank’s management of capital during the period.

Starting from 1 July 2012, the capital adequacy ratio is calculated within the scope of the “Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (the “Regulation”)”, “Regulation on Credit Risk Mitigation Techniques” and “Regulation on Calculation of Risk Weighted Amounts for Securitisations” published in the Official Gazette no.28337 dated 28 June 2012 and the “Regulation on Equities of Banks” published in the Official Gazette no.26333 dated 1 November 2006.


63


(g) Operational risk (continued)


Capital management – regulatory capital (continued)

In calculation of capital adequacy ratio, the data prepared from accounting records in compliance with the current legislation are used. Such accounting data is included in the calculation of credit and market risks subsequent to their designation as “trading book” and “banking book” according to the Regulation. The items classified as trading book and the items deducted from the equity are not included in the calculation of credit risk. In the calculation of risk weighted assets, the assets subject to amortisation or impairment, are taken into account on a net basis after being reduced by the related amortisations and provisions.

In the calculation of the value at credit risk for the non-cash loans and commitments and the receivables from counterparties in such transactions are weighted after netting with specific provisions that are classified under liabilities and calculated based on the “Regulation on Identification of and Provision against Non-Performing Loans and Other Receivables”. The net amounts are then multiplied by the rates stated in the Article 5 of the Regulation, reduced as per the“Regulation on Credit Risk Mitigation Techniques” and then included in the relevant exposure category defined in the article 6 of the Regulation and weighted as per Appendix-1 of the Regulation.

In the calculation of the value at credit risk for the derivative financial instruments and the credit derivaties classified in banking book, the receivables from counterparties are multiplied by the rates stated in the Appendix-2 of the Regulation, reduced as per the“Regulation on Credit Risk Mitigation Techniques” and then included in the relevant exposure category defined in the article 6 of the Regulation and weighted as per Appendix-1 of the Regulation.

As per the article 5 of the Regulation, the “counterparty credit risk” is calculated for repurchase transactions, securities and commodities borrowing agreements.

Garanti Bank’s and its subsidiaries’ regulatory capital position on a consolidated basis as at 31 December 2012 is as follows:

2012

(*)

Tier 1 capital 4,977,739 Tier 2 capital 475,361 Deductions from capital (40,561) Total regulatory capital 5,412,539 Value at credit, market and operational risks 32,080,677 Capital ratios (%) Total regulatory capital expressed as a percentage of total value at credit, market and operational risks

16.87

Total tier 1 capital expressed as a percentage of total value at credit, market and operational risks

15.52

(*) The amounts are presented in terms of proportionate ownership interest of the Group.

The prior period’s capital adequacy ratio is not presented above as the calculation base has changed to Basel II starting from 1 July 2012 as stated above. The capital ratios as per the previous legislation were 15.76 percent and 14.12 percent, respectively, as at 31 December 2011.


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(g) Operational risk (continued)


Hedging

Due to Garanti Bank and its subsidiaries’ overall interest rate risk position and funding structure, its risk management policies require that it should minimise its exposure to changes in foreign currency rates and manage interest rate, credit risk and market price risk exposure within certain guidelines. Derivative financial instruments are used to manage the potential earnings impact of interest rate and foreign currency movements. Several types of derivative financial instruments are used for this purpose, including interest rate swaps and currency swaps, options, financial futures, forward contracts and other derivatives. The purpose of the hedging activities is to protect Garanti Bank and its subsidiaries from the risk that the net cash inflows will be adversely affected by changes in interest or exchange rates, credit ratings or market prices. Garanti Bank and its subsidiaries enter into transactions to ensure that they are economically hedged in accordance with risk management policies. In the accompanying consolidated financial statements, hedge accounting is applied for the cases where hedge accounting relationship is evidenced.

Garanti Bank enters into various interest rate swap transactions in order to hedge its certain cash flow and fair value exposures on floating/fixed rate assets and liabilities, through converting its floating/fixed rate income/payments into fixed/floating rate income/payments.

There are no outstanding cash flow or fair value hedges as of 31 December 2012.

Garanti Bank has applied fair value hedge accounting for the fixed rate eurobonds issued in 2011 with a total face value of USD 119.8 million (Group share) with maturity of 10 years and maturity date of 20 April 2021 which were priced at 6.375 percent originally and had a coupon rate of 6.25 percent, by designating interest rate swaps with the same face value amount and conditions. On 5 June 2012, Garanti Bank ceased to apply hedge accounting and accordingly fair value calculations for these bonds. The accumulated fair value incurred starting from the date of hedge accounting up to the date on which it was ceased, is amortised.


Due to the Group’s overall interest rate risk position and funding structure, its risk management policies require that it should minimise its exposure to changes in interest rate. Derivative financial instruments are used to manage the potential earnings impact of interest rate and foreign currency movements. Several types of derivative financial instruments are used for this purpose, including interest rate swaps and currency swaps, options, financial futures, forward contracts and other derivatives. The purpose of the hedging activities is to protect the Group from the risk that the net cash inflows will be adversely affected by changes in interest rates.


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6 Operating segments

The Group has five reportable segments, as described below, which are largely organised and managed separately according to nature of products and services provided, distribution channels and profile of customers.

Almost each entity included in the Group operates in one specific industry. Accordingly, all the financial statement components of an entity concerned are considered related only to its specific industry.

The Group’s main business segments are as follows:

Banking and finance: Entities operating in the banking and finance segment are mainly involved in retail banking, insurance, leasing and factoring businesses.

Construction: Entities operating in the construction segment are mainly involved in the constructions of buildings, infrastructure and related civil engineering businesses.

Automotive: Entities operating in the automotive segment are exclusively involved in the importation, distribution and retailing of Volkswagen, Audi, Seat, Porsche, Bentley, Scania, Lamborghini, Krone and Meiller brand motor vehicles and spare parts and after sales services, and vehicle inspection services in Turkey.

Tourism: Entities operating in the tourism segment are involved in hotel and marina investments, hotel management, ticket sales, hotel reservation and tour/conference organisation services.

Others: Entities operating in other operations segment are mainly involved in media, real estate, energy, entertainment and several service businesses. Doğuş Holding is included in the other industrial segment as well.

6.1 Geographical segments

The Group operates principally in Turkey, but also has operations in the Netherlands, Russia, Ireland, Turkish Republic of Northern Cyprus, Malta, Luxembourg, Switzerland, Germany, Romania, Morocco, Ukraine, Bulgaria, Libya, Italy, Greece, United Kingdom, Hong Kong, United States, Oman, Qatar, Dubai, Thailand and Croatia. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

As at and for the years ended 31 December, total geographical sector risk concentrations, both on and off statement of financial position, are presented below:

2012

Banking loans and advances to customers Total assets

Total liabilities

Non-cash loans

Capital expenditure

Turkey 22,351,347 48,397,339 32,555,016 4,359,030 1,367,350 Romania 625,061 1,280,932 340,633 26,541 2,223 The Netherlands 300,156 1,214,408 1,029,527 57,290 683 Malta 161,493 610,204 86,758 843 14 Russia 152,694 412,468 135,728 28,035 155 Switzerland 106,682 177,316 1,039,785 174,468 4,913 USA 85,318 385,358 1,627,004 138,912 630 United Kingdom 48,352 1,624,710 4,272,607 273,225 195,667 Germany 16,235 268,057 1,501,433 53,916 61 Others 116,876 1,714,356 2,261,116 510,768 125,901 23,964,214 56,085,148 44,849,607 5,623,028 1,697,597


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6 Operating segments (continued)

6.1 Geographical segments (continued)

2011

Banking loans and advances to customers Total assets

Total liabilities

Non-cash loans

Capital expenditure

Turkey 20,042,038 40,986,517 28,805,625 4,236,994 1,452,316 Romania 781,961 1,276,670 310,707 54,599 5,307 The Netherlands 228,693 573,543 901,588 76,923 565Malta 150,386 1,346,785 102,736 35 --Switzerland 117,951 120,600 666,240 199,499 -- Russia 111,600 452,611 114,416 23,537 167 United Kingdom 65,726 648,367 1,800,826 164,321 -- USA 61,295 2,008,426 4,125,353 46,390 -- Germany 7,593 535,425 1,331,830 27,142 12Others 199,316 3,021,777 2,596,549 421,781 74,630 21,766,559 50,970,721 40,755,870 5,251,221 1,532,997

6.2 Major customers

As at 31 December 2012 and 2011, there is not any single external customer which comprises more than 10 percent of the Group’s consolidated revenue.


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6.3 Information about the reportable segments

31 December 2012 Banking and

finance Construction Automotive Tourism Others TotalRevenues Total external revenue 4,003,739 845,685 5,494,828 290,121 911,570 11,545,943 Intersegment revenue 8,860 338,239 8,210 17,683 172,935 545,927 Net segment revenue 3,994,879 507,446 5,486,618 272,438 738,635 11,000,016 Gross profit / (loss) 1,983,915 22,071 744,566 56,729 (16,571) 2,790,710Result from operating activities 949,758 (22,348) 349,332 (30,871) (252,216) 993,655Interest income -- 15,694 4,124 1,707 68,600 90,125 Interest expense -- (6,474) (72,477) (11,002) (148,850) (238,803) Share of profit of equity accounted investees -- -- 46,044 -- 7,585 53,629 Income tax (expense)/benefit (213,122) (1,268) (55,793) (3,251) 48,965 (224,469) Profit/(loss) for the year attributable to owners of the Company 834,847 (14,584) 195,610 (34,680) (237,190) 744,00331 December 2012 Other information Segment assets 42,450,061 1,014,417 2,026,027 2,109,710 8,345,356 55,945,571Investments in equity securities 5,851 -- 87,498 13,023 33,205 139,577Total assets 42,455,912 1,014,417 2,113,525 2,122,733 8,378,561 56,085,148Segment liabilities 37,220,870 713,649 1,383,496 475,509 5,056,083 44,849,607Total liabilities 37,220,870 713,649 1,383,496 475,509 5,056,083 44,849,607 31 December 2012 Capital expenditure 85,640 57,934 131,640 380,314 1,042,069 1,697,597Depreciation 58,915 56,707 32,219 58,573 61,822 268,236Non-cash expenses/(income) other than depreciation 323,112 (7,365) 112,110 1,938 (139,250) 290,545


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6.3 Information about the reportable segments (continued)

31 December 2011 Banking and

finance Construction Automotive Tourism Others TotalRevenues Total external revenue 3,589,234 895,901 5,126,197 232,152 405,420 10,248,904Intersegment revenue 7,529 249,575 8,045 13,160 41,431 319,740Net segment revenue 3,581,705 646,326 5,118,152 218,992 363,989 9,929,164 Gross profit 1,798,279 36,728 625,162 62,326 29,461 2,551,956Result from operating activities 1,184,519 (29,374) 253,606 (37,648) 2,084,526 3,455,629Interest income -- 8,791 2,769 320 82,385 94,265Interest expense -- (6,394) (61,559) (17,634) (88,906) (174,493) Share of profit of equity accounted investees 1,784 -- 8,037 -- (1,818) 8,003Income tax (expense)/benefit (226,357) 319 (36,441) 1,301 (175,374) (436,552) Profit/(loss) for the year attributable to owners of the Company 878,480 (52,182) 104,966 (133,378) 1,893,878 2,691,76431 December 2011 Other information Segment assets 38,665,415 1,068,310 1,872,169 1,696,527 7,613,746 50,916,167Investments in equity securities 4,932 -- 46,660 -- 2,962 54,554Total assets 38,670,347 1,068,310 1,918,829 1,696,527 7,616,708 50,970,721Segment liabilities 34,013,692 769,576 1,414,087 411,177 4,147,338 40,755,870Total liabilities 34,013,692 769,576 1,414,087 411,177 4,147,338 40,755,87031 December 2011 Capital expenditure 101,477 47,247 70,515 286,787 1,026,971 1,532,997Depreciation 58,062 67,130 35,368 48,216 48,732 257,508Non-cash expenses/(income) other than depreciation 97,574 51,865 95,726 22,612 (73,201) 194,576


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6.4 Interests in joint ventures

As explained under accounting policy 3a, interests in joint ventures are proportionately consolidated in the accompanying consolidated financial statements.

As at 31 December, the Group’s share in the assets and liabilities of the joint ventures using the proportionate consolidation method is as follows:

2012 Banking

and finance

Construction

Automotive

Tourism

Others

Total assets 42,455,912 142,115 533,747 68,757 1,093,626Total liabilities 37,220,870 58,060 424,359 41,617 726,033

2011 Banking

and finance

Construction

Automotive

Tourism

Others

Total assets 38,670,347 281,251 475,548 -- 661,647Total liabilities 34,013,692 179,271 375,078 -- 434,195

For the years ended 31 December, the Groups’ share in the profit or loss of the joint ventures using the proportionate consolidation method is as follows:

2012 Banking

and finance

Construction

Automotive

Tourism

Others

Profit/(loss) for the year

834,847 (26,662) 14,231 -- 27,892

2011 Banking

and finance

Construction

Automotive

Tourism

Others

Profit/(loss) for the year

878,480 (10,725) (5,939) (369) (41,534)


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6.5 Non-cash (income)/expenses other than depreciation

Non-cash (income)/expenses other than depreciation for the year ended 31 December 2012 were as follows:

2012 Banking

and finance Construction Automotive Tourism Others Total

Provision for loans and lease receivables 329,163 -- -- -- -- 329,163 Warranty provision expense -- -- 56,600 -- -- 56,600 Amortisation of other

intangible assets 3,139 140 22,696 2,126 10,882 38,983 Provision for and reversal of employee severance indemnity 17,947 5,524 3,680 1,057 6,329 34,537

Insurance technical reserves and provisions 14,735 -- -- -- -- 14,735

Provision for doubtful receivables -- -- -- 21 7,583 7,604 Impairment in property and equipment 838 -- 26 -- 2,795 3,659

Loss from written-off property and equipment, and inventory -- 1,417 -- -- -- 1,417

Written-off non-current receivables -- -- -- -- 899 899

Fair value change in investment property (8,523) -- -- 575 (172,393) (180,341)

Recoveries of loan and lease receivables losses (53,342) -- -- -- -- (53,342)Reversal of impairment in

property and equipment (5,305) -- -- -- -- (5,305)Accrued interest and other

accruals (17,022) (14,446) 25,613 (1,509) 4,647 (2,717)Recoveries of doubtful

receivables -- -- -- (114) (683) (797)Others 41,482 -- 3,495 (218) 691 45,450 323,112 (7,365) 112,110 1,938 (139,250) 290,545


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6.5 Non-cash (income)/expenses other than depreciation (continued)

Non-cash (income)/expenses other than depreciation for the year ended 31 December 2011 were as follows:

2011 Banking

and finance Construction Automotive Tourism Others Total

Provision for loans and lease receivables 193,507 -- -- -- -- 193,507 Written-off non-current

receivables -- -- -- -- 145,307 145,307 Accrued interest and other

accruals (24,319) 3,575 22,975 (1,917) 56,262 56,576 Loss from written-off property

and equipment, and inventory -- 44,487 -- -- -- 44,487 Provision for and reversal of

employee severance indemnity 24,814 3,718 6,208 1,065 5,644 41,449 Warranty provision expense -- -- 39,498 -- -- 39,498 Impairment in property and

equipment -- -- 8,389 2,919 22,780 34,088 Loss from deconstruction process

of a hotel building -- -- -- 27,331 -- 27,331 Provision for general banking risk 27,216 -- -- -- -- 27,216 Amortisation of other intangible assets 3,274 85 18,225 394 2,442 24,420

Provision for doubtful receivables -- -- 592 427 7,323 8,342 Insurance technical reserves and provisions 5,369 -- -- -- -- 5,369 Fair value change in investment property -- -- -- (7,382) (258,832) (266,214)Recoveries of loan and lease receivables losses (134,095) -- -- -- -- (134,095)Fair value gain on trading

property transferred to property and equipment -- -- -- -- (51,830) (51,830)

Reversal of impairment in property and equipment (11,386) -- -- -- -- (11,386)Recoveries of doubtful

receivables -- -- (161) (225) (1,037) (1,423)Others 13,194 -- -- -- (1,260) 11,934 97,574 51,865 95,726 22,612 (73,201) 194,576


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7 Assets held for sale

7.1 Non-current portion of assets held for sale

As at 31 December, non-current portion of assets held for sale comprised the following:

2012 2011Non-current assets held for sale 30,780 30,573 30,780 30,573

As at 31 December 2012, TL 30,780 thousand (31 December 2011: TL 30,573 thousand) of the tangible assets held for sale is comprised of foreclosed real estate acquired by Garanti Bank against its impaired receivables. Such assets are required to be disposed of within three years following their acquisitions according to the Turkish Banking Law. This three-year period can be extended by a legal permission from the regulators. In case of real estate held for sale, this requirement is valid only if the legal limit on the size of the real estate portfolio that a bank can maintain is exceeded. Currently, as Garanti Bank is within this legal limit, it is not subject to the above requirement.

Impairment losses provided on real estate held for sale were determined based on the appraisals of independent appraisal firms. As at 31 December 2012, real estate held for sale has been impaired by TL 3,524 thousand (31 December 2011: TL 2,870 thousand).

As at 31 December 2012, the rights of repurchase on various tangible assets held for sale amounted to TL 1,272 thousand (31 December 2011: TL 1,502 thousand).

7.2 Disposal group held for sale

At 31 December, the disposal group comprised the following assets:

2012 2011Property and equipment (*) 60,608 64,223Other (**) 3,480 2,427 64,088 66,650

(*) On 22 November 2011, the Group and Diana Otel Yatırımları ve İşletmeciliği Anonim Şirketi (“Diana Otel”) signed a pre-share sales agreement. According to this agreement, the Group has decided to sell its shares in Datmar, one of tourism segment subsidiaries, to Diana Otel. Following the commitment of the Group’s management, two touristic premises located in Side, Antalya, namely Aldiana Side (a holiday village) and Paradise Side Beach (an apart hotel) have been presented as a disposal group held for sale in the accompanying consolidated financial statements. Before classification as held for sale, assets in the disposal group have been measured in accordance with applicable IFRSs.

As at 31 December 2012, property and equipment classified as held for sale comprise buildings amounting to TL 59,171 (31 December 2011: TL 61,538 thousand), furniture and equipment amounting to TL 1,419 (31 December 2011: TL 2,654 thousand) and motor vehicles amounting to TL 18 thousand (31 December 2011:31 thousand).

(**) Other comprised of the apartments, villas and flats obtained through barter transactions with construction companies in exchange for advertising service provided from Doğuş Yayın Grubu.

Cumulative income recognised in other comprehensive income

As at 31 December 2012, accompanying consolidated financial statements comprise revaluation surplus, net of tax amounting to TL 25,936 thousand related with disposal group related with Datmar classified as held for sale (31 December 2011: TL 25,936 thousand).


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8 Acquisitions of subsidiaries and jointly controlled entities

8.1 Acquisition of Kivahan

According to share transfer agreement dated 13 April 2012, the Group has decided to purchase 51 percent of shares at Kivahan Turizm Ticaret Anonim Şirketi. On 17 April 2012, the share transfer was finalised and the Group obtained control by acquiring 51 percent of shares and voting rights in Kivahan.

Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values.

Under IFRS 3, brand name, Kivahan, amounting to TL 1,677 thousand has been recognised as an intangible asset arising from the acquisition of Kivahan.

The fair value of the brand name acquired is based on the Multi-period Excess Earnings Method.

The following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date:

Consideration transferred Cash paid 3,619Total consideration 3,619

Identifiable assets acquired and liabilities assumed Property and equipment 408Intangible assets 1,775Accounts receivable 97Inventories 42Other current assets 71Cash and cash equivalents 35Accounts payable (87)Loans and borrowings (63)Due to related parties (221)Other current liabilities (213)Deferred tax liabilities (335)Total net identifiable assets 1,509

Goodwill

Goodwill has been recognised as a result of the acquisition as follows:

Total consideration transferred 3,619Non-controlling interests based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 739Less: Value of net identifiable assets (1,509)Goodwill 2,849 Cash consideration transferred 3,619Cash and cash equivalents acquired (35)Net cash outflow arising on acquisition 3,584

Goodwill reflects the deal rationale of the Group’s ambition to become a major player in domestic market and acquire strong brand names.


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8 Acquisitions of subsidiaries and jointly controlled entities (continued)

8.2 Acquisition of D Et

With the share transfer agreement dated 17 April 2012, the Group purchased 51 percent of shares of D Et ve Et Ürünleri Gıda Pazarlama Anonim Şirketi from CNG Turizm Gıda İthalat İhracat Limited Şirketi and the Group obtained control and 51 percent voting rights in D Et.


Under IFRS 3, brand name, Nusr-et, amounting to TL 17,207 thousand has been recognised as an intangible asset arising from the acquisition of D Et.

The fair value of the brand name acquired is based on the Multi-period Excess Earnings Method.


Consideration transferred Cash paid 10,755Consideration payable 11,104Total consideration 21,859 Identifiable assets acquired and liabilities assumed Property and equipment 91Intangible assets 17,215Inventories 6Other current assets 699Cash and cash equivalents 740Accounts payable (76)Due to related parties (12)Other current liabilities (140)Deferred tax liabilities (3,344)Total net identifiable assets 15,179

Goodwill


Total consideration transferred 21,859Non-controlling interests based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 7,438Less: Value of net identifiable assets (15,179)Goodwill 14,118 Cash consideration transferred 10,755Cash and cash equivalents acquired (740)Net cash outflow arising on acquisition 10,015

Goodwill reflects the deal rationale of the Group’s ambition to become a major player in domestic market and acquire strong brand names.


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8.3 Acquisition of Marina Dalmacija d.o.o and Marina Borik d.o.o

According to share purchase agreement dated 20 April 2012, the Group has decided to purchase 100 percent of shares in Marina Dalmacija d.o.o. and Marina Borik d.o.o. from International Seaport AG. On 30 April 2012, the share transfer was finalised and the Group obtained control by acquiring 100 percent of shares and voting rights in Marina Dalmacija d.o.o and Marina Borik d.o.o..


Under IFRS 3, intangible assets recognised arising from the acquisition of Dalmacija and Borik are stated below:

Concession rights 43,246Customer relationship 3,733Total intangible assets recognised on acquisition 46,979

The fair value of above mentioned intangible assets arising from the acquisition has been determined upon completion of an independent valuation. The fair value of the concession rights acquired is based on the Multi-period Excess Earnings Method. The fair value of the customer relationship acquired is based on Greenfield Approach.


Consideration transferred Cash paid 130,009Total consideration 130,009Identifiable assets acquired and liabilities assumed Property and equipment 62,562Intangible assets 47,002Other non-current assets 353Accounts receivable 4,420Inventories 43Cash and cash equivalents 3,009Accounts payable (1,731)Loans and borrowings (33,353)Taxes payable on income (136)Other current liabilities (12,394)Deferred tax liabilities (13,992)Total net identifiable assets 55,783 Goodwill Goodwill has been recognised as a result of the acquisition as follows:

Total consideration transferred 130,009Less: Value of net identifiable assets (55,783)Goodwill 74,226

Cash consideration transferred 130,009Cash and cash equivalents acquired (3,009)Net cash outflow arising on acquisition 127,000


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8.3 Acquisition of Marina Dalmacija d.o.o and Marina Borik d.o.o (continued)

Goodwill reflects the deal rationale of the Group’s ambition to become a leading player in Croatian marina market in order to create a chain of marinas in all Mediterranean Region with D-Marine Brand.

8.4 Acquisition of Acropolis S.P.A

According to share purchase agreement dated 13 December 2012, the Group purchased 51 percent of shares of Acropolis S.P.A. from Mr. Antonio Cacace and the Group has a proportionately consolidated joint venture with a portion of effective interest of 51 percent.

Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values and have been determined on a provisional basis.

Under IFRS 3, intangible assets recognised arising from the acquisition of Acropolis are stated below:

Brand name Capri 3,645IL Riccio 977

Total intangible assets recognised on acquisition 4,622

The fair value of above mentioned intangible assets arising from the acquisition has been determined provisionally pending completion of an independent valuation.

The fair value of the brand name acquired is based on Relief from Royalty Method.

The following summarises the major classes of consideration transferred and the proportionately recognised amounts of assets acquired and liabilities assumed at the acquisition date:


Identifiable assets acquired and liabilities assumed Property and equipment 97,657Intangible assets 4,956 Investments in equity securities 65 Other non-current assets 1,650 Accounts receivable 255 Inventories 2,311 Other current assets 790 Cash and cash equivalents 591 Other non-current liabilities (446)Accounts payable (2,077)Loans and borrowings (21,975)Due to related parties (1,619)Other current liabilities (2,560)Deferred tax liabilities (11,528)Total net identifiable assets 68,070


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8.4 Acquisition of Acropolis S.P.A (continued)

Goodwill



Cash consideration transferred 84,867Cash and cash equivalents acquired (591)Net cash outflow arising on acquisition 84,276

Acropolis is the first overseas hotel investment of the Group and is seen as an important step towards the enlargement of the Group’s hotel portfolio. Group’s reputation in the European Region, which has arisen initially from the marina business, increased the Group’s willingness to be more active in the hotel management as well. Goodwill associated with this transaction is understood to be related to the Group’s willingness to be actively involved in new markets of interest.

8.5 Acquisition of Doors Holding A.Ş.

On 14 November 2012, the Group signed a share purchase agreement to acquire 74.25 percent shares of Doors Holding A.Ş. On 26 December 2012, the share transfer was finalised and the Group obtained control and 74.25 percent voting rights in Doors Holding A.Ş.


Under IFRS 3, intangible assets recognised arising from the acquisition of Doors Holding A.Ş. are stated below:

Brand names Kitchenette 60,443Da Mario 13,804Vogue 11,483Gina 11,341Tom’s Kitchen 9,884Anjelique 9,645Ajia 483

Sponsorship contracts 62,747Kitchenette franchise network 6,913Total intangible assets recognised on acquisition 186,743



The fair value of the sponsorship contracts and franchise network acquired are based on the Multi-period Excess Earnings Method.


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8.5 Acquisition of Doors Holding A.Ş. (continued)


Consideration transferred Cash paid 270,936Consideration receivable (6,890)Total consideration 264,046

Identifiable assets acquired and liabilities assumed Property and equipment 38,461Intangible assets 187,775Deferred tax assets 541Other non-current assets 287Accounts receivable 3,488Inventories 3,876Due from related parties 182Other current assets 4,760Cash and cash equivalents 3,264Other non-current liabilities (1,482)Accounts payable (12,181)Loans and borrowings (19,341)Due to related parties (194)Other current liabilities (11,826)Taxes payable on income (214)Deferred tax liabilities (37,995)Total net identifiable assets 159,401

Goodwill


Total consideration transferred 264,046Non-controlling interests based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 41,046Less: Value of net identifiable assets (159,401)Goodwill 145,691 Cash consideration transferred 270,936Cash and cash equivalents acquired (3,264)Net cash outflow arising on acquisition 267,672

The goodwill is mainly attributable to the synergies of the Group and the prospective market share expected to be gained by acquiring the strong brands of its major rivals in the market and reflects the deal rationale of the Group’s ambition to penetrate a promising domestic market and acquire strong brand names which are engaged in offering high-end fine dining and after dinner entertainment services to A and B customers in top locations.


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8.6 Acquisition of Azumi Limited

On 20 November 2012, the Group signed a share purchase agreement to purchase 50.01 percent of shares of Azumi Limited. The Group has a proportionately consolidated joint venture with a portion of effective interest of 50.01 percent.


Under IFRS 3, intangible assets recognised arising from the acquisition of Azumi Limited are stated below:

Brand name Zuma 154,422Roka 37,780




The following summarises the major classes of consideration transferred and the proportionately recognised amounts of assets acquired and liabilities assumed at the acquisition date:

Consideration transferred Cash paid 283,720Consideration receivable (13,790)Total consideration 269,930

Identifiable assets acquired and liabilities assumed Property and equipment 5,640 Intangible assets 192,202 Other non-current assets 5,703 Accounts receivable 906Inventories 1,395 Due from related parties 3,845Other current assets 824Cash and cash equivalents 12,256 Other non-current liabilities (371)Accounts payable (2,450)Due to related parties (402)Other current liabilities (4,729)Taxes payable on income (526)Deferred tax liabilities (42,475)Total net identifiable assets 171,818


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8.6 Acquisition of Azumi Limited (continued)

Goodwill



Cash consideration transferred 283,720Cash and cash equivalents acquired (12,256)Net cash outflow arising on acquisition 271,464

The goodwill is mainly attributable to the operational synergies, prospective market share expected to be gained and growth path in the international markets by acquiring the strong brands.

8.7 Acquisition of Aresta

On 16 October 2012, the Group signed a share purchase agreement to purchase 60 percent of shares in Aresta Gıda. On 5 December 2012, the share transfer was finalised and the Group obtained control and 60 percent voting rights in Aresta Gıda.


Under IFRS 3, intangible assets recognised arising from the acquisition of Aresta Gıda is stated below:

Brand name Go Mongo 6,509





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8.7 Acquisition of Aresta (continued)



Identifiable assets acquired and liabilities assumed Property and equipment 753Intangible assets 6,577Other non-current assets 11Accounts receivable 56Inventories 156Other current assets 139Cash and cash equivalents 459Loans and borrowings (399)Accounts payable (558)Other current liabilities (556)Deferred tax liabilities (1,001)Total net identifiable assets 5,637

Goodwill


Total consideration transferred 5,207Non-controlling interest based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 2,255Less: Value of net identifiable assets (5,637)Goodwill 1,825

Cash consideration transferred 5,207Cash and cash equivalents acquired (459)Net cash outflow arising on acquisition 4,748

The goodwill is mainly attributable to the operational synergies of Group and the prospective market share expected to be gained by acquiring the strong brands of its major rivals in the market. Goodwill reflects the deal rationale of Group’s ambition to acquire a strong brand name which is engaged in Pan Asian gastronomy concepts and cuisines that are new to the Turkish market.

8.8 Acquisition of K&G Medmarinas Management S.A.

According to share purchase agreement dated 31 December 2012, the Group purchased 51 percent of shares of K&G Medmarinas Management S.A. from Kiriacoulis Mediterranean Cruises Shipping S.A and the Group has a proportionately consolidated joint venture with a portion of effective interest of 51 percent.



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8.8 Acquisition of K&G Medmarinas Management S.A. (continued)

Under IFRS 3, intangible assets recognised arising from the acquisition of KG Med Marinas is stated below:

Concession rights (“Gouvia”) 5,969Customer relationship (“Gouvia”) 1,825Total intangible assets recognised on acquisition 7,794


The fair value of the customer relationship acquired is based on the Multi-period Excess Earnings Method.

The fair value of the concession rights acquired is based on Greenfield Approach.



Identifiable assets acquired and liabilities assumed Property and equipment 11,713 Intangible assets 7,796 Investments in equity securities 5,054 Other non-current assets 15Accounts receivable 2,670 Other current assets 837 Cash and cash equivalents 809 Other non-current liabilities (616)Accounts payable (2,889)Taxes payable on income (415)Other current liabilities (3,437)Deferred tax liabilities (1,768)Total net identifiable assets 19,769

Bargain purchase gain

Bargain purchase gain has been recognised as a result of the acquisition as follows:

Total consideration transferred 14,271Less: Value of net identifiable assets (19,769)Bargain purchase gain (5,498) Cash consideration transferred 14,271Cash and cash equivalents acquired (809)Net cash outflow arising on acquisition 13,462

The bargain purchase gain arising from the difference between consideration transferred and the recognised amounts of identifiable assets acquired and liabilities assumed at the acquisition date is recognised under other income in profit or loss.


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8.9 Acquisition in 2011

8.9.1 Acquisition of additional interests in Doğuş GYO

According to share purchase agreement dated 12 November 2010, the Group decided to purchase shares with nominal value of TL 23,914 thousand in Doğuş-GE Gayrimenkul Yatırım Ortaklığı Anonim Şirketi (“Doğuş GE”), which was previously a proportionately consolidated joint venture with a proportion of effective interest of 30.05 percent held by the Group, representing 25.5 percent of the share capital from General Electric Capital Corporation for a consideration of USD 27,885 thousand (equivalent to TL 42,876 thousand). On 3 January 2011, the share transfer was finalised with a closing agreement and the Group obtained control by acquiring the additional 25.5 percent of shares in Doğuş GE.

The following summarises the major classes of consideration transferred and identifiable assets acquired and liabilities assumed at the acquisition date:

Consideration transferred Cash paid 42,876Total consideration 42,876 Identifiable assets acquired and liabilities assumed Investment property 6,505Property and equipment 104,822Intangible assets 7Other non-current assets 332Accounts receivable 10Other current assets 1,146Cash and cash equivalents 10,560Accounts payable (618)Other current liabilities (326)Total net identifiable assets 122,438

Bargain purchase gain

Bargain purchase gain has been recognised as a result of the acquisition as follows:

Total consideration transferred 42,876Non-controlling interest based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquiree 77,804Less: Value of net identifiable assets (122,438)Bargain purchase gain (1,758) Cash consideration transferred 42,876Cash and cash equivalents acquired (10,560)Net cash outflow arising on acquisition 32,316

The bargain purchase gain arising from the difference between consideration transferred and the recognised amounts of identifiable assets acquired and liabilities assumed at the acquisition date is recognised under other income in profit or loss.


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8.9.1 Acquisition of additional interests in Doğuş GYO (continued)

Subsequent to this transaction, in February 2011, the Group has purchased further additional shares from the publicly traded shares in İstanbul Stock Exchange with a total nominal value of TL 29,577 thousand representing 31.54 percent of the share capital of Doğuş GE for a total consideration of TL 55,010 thousand. Under IFRS 3, acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill was recognised as a result. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Accordingly the effect of this transaction was recognised as an equity transaction in the accompanying consolidated financial statements.

Group's ownership interest at 3 January 2011 97,234Effect of increase in Group’s ownership interest (Note 29.4) 55,207Retained earnings (197)The Group’s ownership interest after the transaction 152,244

8.9.2 Acquisition of additional interests in Marina Sibenik d.o.o.

According to share purchase agreement dated 20 June 2011, the Group decided to purchase shares with a nominal value of HRK 36 thousand (equivalent to Euro 5 thousand and TL 24 thousand) in Marina Sibenik d.o.o., which was previously a proportionately consolidated joint venture with a proportion of effective interest of 40 percent held by the Group, representing 36 percent of the share capital from an individual shareholder for a consideration of Euro 7,200 thousand (equivalent to TL 16,914 thousand). On 7 July 2011, the share transfer was finalised and the Group obtained control by acquiring the additional 36 percent of shares in Marina Sibenik d.o.o.

The following summarises the major classes of consideration transferred and the recognised amounts of identifiable assets acquired and liabilities assumed at the acquisition date:

Consideration transferred Cash paid 16,914Total consideration 16,914 Identifiable assets acquired and liabilities assumed Property and equipment 48,245Intangible assets 47Other non-current assets 23Accounts receivable 2,290Due from related parties 1,351Inventories 23Cash and cash equivalents 2,357Accounts payable (1,926)Due to related parties (1,496)Other current liabilities (137)Loans and borrowings (17,616)Deferred tax liabilities (6,013)Total net identifiable assets 27,148


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8.9.2 Acquisition of additional interests in Marina Sibenik d.o.o. (continued)

Goodwill


Total consideration transferred 16,914Non-controlling interest based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 10,862Less: Value of net identifiable assets (27,148)Goodwill 628 Cash consideration transferred 16,914Cash and cash equivalents acquired (2,357)Net cash outflow arising on acquisition 14,557

8.9.3 Acquisition of Star TV

On 17 October 2011, the Group and Doğan Yayın Holding Anonim Şirketi (“Doğan Yayın”) signed a share purchase agreement. According to this agreement, the Group decided to purchase total 391,500 thousand shares in Işıl Televizyon Yayıncılık Anonim Şirketi (“Star TV”) representing share capital with a total nominal value of TL 391,500 thousand from Doğan Yayın for a consideration of USD 327,000 thousand. Upon approval of Competition Board and other regulatory authorities, on 3 November 2011, the share transfer was finalised with a closing agreement. Accordingly, Radio and Television Supreme Council (“RTÜK”) approved the share transfer.

Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values and were determined on a provisional basis as at 31 December 2011. Based on revision works on the independent valuation report regarding the fair value of intangible assets of Işıl TV during the current year, the goodwill amount has been depreciated by TL 845 thousand.

Under IFRS 3, intangible assets recognised arising from the acquisition of Star TV are stated below:

“Star TV” brand name 232,429Broadcasting license 140,407Content library (movies and series) 20,365Total intangible recognised on acquisition 393,201

The fair value of above mentioned intangible assets arising from the acquisition has been determined upon completion of an independent valuation.


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8.9.3 Acquisition of Star TV (continued)


Consideration transferred Cash paid 267,481Notes payable (Note 37) 328,753Total consideration 596,234 Identifiable assets acquired and liabilities assumed Property and equipment 10,422Intangible assets 394,011Accounts receivables 39,624Other current and non-current assets 12,614Inventories 4,140Cash and cash equivalents 1,120Accounts payable (15,221)Loans and borrowings (13,520)Other current and non-current liabilities (44,072)Deferred tax liabilities (16,788)Total net identifiable assets 372,330

Goodwill


Total consideration transferred 596,234Non-controlling interests based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquiree 276Less: Value of net identifiable assets (372,330)Less: Indemnification asset (*) (32,756)Goodwill 191,424 Cash consideration transferred 267,481Cash and cash equivalents acquired (1,120)Net cash outflow arising on acquisition 266,361

(*) The Group has the right to reimburse the provision for litigation and claims brought through the acquisition of Star TV to Alp Görsel İletişim Anonim Şirketi, the previous shareholder of Star TV, when such legal cases end against the favor of the Group and create a possible cash outlow.

The goodwill is mainly attributable to the synergies expected to be achieved from integrating Star TV into the Group’s existing media business.


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9 Revenues and cost of revenues

For the years ended 31 December, revenues and cost of revenues of banking and finance segment and other corporate segments were as follows:

2012 2011Banking and finance segment Banking operations: Interest income 3,306,207 2,876,917Interest expense (1,771,813) (1,542,616)Fees and commission income 616,914 646,548Fees and commission expense (224,079) (212,673)Net operating income 1,927,229 1,768,176Insurance operations: Technical gain 71,758 58,240Technical loss (15,072) (28,137)Net technical gain 56,686 30,103Gross profit for banking and finance segment 1,983,915 1,798,279Other corporate segments Net revenues 7,005,137 6,347,459Cost of revenues (6,198,342) (5,593,782)Gross profit for other industrial segments 806,795 753,677Total gross profit 2,790,710 2,551,956

10 Administrative expenses

For the years ended 31 December, general and administrative expenses comprised the following:

2012 2011Personnel expenses 706,318 639,568Depreciation and amortisation 169,621 143,586Rent expenses 66,037 67,824Taxes and duties other than taxes on income 56,054 47,210Telecommunication expenses 44,637 38,528Insurance expenses 36,865 21,613Electronic data processing expenses 26,264 27,563Provision for employee severance indemnity 24,063 41,648Consultancy expenses 22,048 32,945Utility expenses 22,016 17,612Gasoline expenses 10,698 10,240Research and development expenses 6,675 7,152Stationery expenses 8,898 5,318Others 151,239 89,001 1,351,433 1,189,808


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11 Impairment losses, net

For the years ended 31 December, impairment losses, net comprised the following:

2012 2011Provision for banking loans and lease receivables (Note 25) 329,163 193,507Provision for doubtful receivables (Note 22) 7,604 8,342Impairment in property and equipment (Note 15) 3,659 34,088Written-off non-current receivables 899 145,307Provision for general banking risk -- 27,216Recoveries of provision for banking loans and lease receivables (Note 25) (53,342) (134,095)Reversal of impairment on property and equipment (Note 15) (5,305) (11,386)Recoveries of doubtful receivables (Note 22) (797) (1,423)Other provisions 16,111 11,934 297,992 273,490

12 Other income/expenses

12.1 Other income

For the years ended 31 December, other income comprised the following:

2012 2011Fair value gain on investment property (Note 19) 184,001 266,214Rental income 30,854 3,317Gain on sale of property and equipment 19,768 19,017Bargain purchase gain recognised on acquisition (Note 8) 5,498 1,758Gain on partial disposal of proportionately consolidated joint venture (*) -- 2,163,189Gain on sales of investment in equity securities (Note 18) -- 57,862Fair value gain on trading property transferred to property and equipment -- 51,830Others 93,741 111,029 333,862 2,674,216

(*) On 1 November 2010, Doğuş Holding and BBVA signed a share purchase agreement. On 22 March 2011, according to this agreement, 26,418,840,000 shares in Garanti Bank representing 6.29 percent of the share capital of Garanti Bank owned by Doğuş Holding was transferred to BBVA for a consideration of USD 2,067 million including USD 5 million late payment interest (equivalent to TL 3,243,467 thousand). The approvals of BRSA, Capital Market Board, Republic of Turkey Prime Ministry Undersecretariat of Treasury, The Central Bank of Spain, The Dutch Central Bank, The National Bank of Romania and European Commission have been obtained between the period of 1 November 2010 and 22 March 2011.

In addition, on 1 November 2010, Doğuş Holding and BBVA signed a shareholders’ agreement which was effective from the date of completion of aforementioned share purchase agreement. This new shareholders’ agreement replaced the previously signed shareholders’ agreement between GE Araştırma Müşavirlik Anonim Şirketi and Doğuş Holding dated 22 December 2005. According to the new shareholders’ agreement, Doğuş Holding and BBVA are the two equal joint venturers of Garanti Bank.

Gain arising from this share sale transaction amounting to TL 2,163,189 thousand (after partial disposal of goodwill previously recognised as a result of acquisition of 4.65 percent shares from GE Araştırma Müşavirlik Anonim Şirketi in Garanti Bank in December 2007) was recognised under other income in profit or loss in the accompanying consolidated financial statements.


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12 Other income/expenses (continued)

12.1 Other income (continued)

Following this share sale transaction, the proportion of effective interest of Doğuş Holding and its subsidiaries in Garanti Bank decreased to 23.95 percent from 30.24 percent. Items in the consolidated statement of comprehensive income of Garanti Bank has been proportionately consolidated with the previous effective interest of 30.24 percent till this share sale date in the accompanying consolidated statement of comprehensive income for the year ended 31 December 2011.

12.2 Other expenses

For the years ended 31 December, other expenses comprised the following:

2012 2011Loss from written-off property and equipment, and inventory (*) (1,417) (44,487)Fair value loss on investment property (Note 19) (3,660) --Loss on sale of property and equipment (4,830) (1,299)Warranty provision expense (56,600) (39,498)Provision expense for technical reserves related to

insurance operations (14,735) (10,901)After sales services expense (12,426) (9,435)Loss on sales of subsidiaries (**) (6,731) (545)Loss from deconstruction process of a hotel building (***) (Note 15) -- (27,331)Others (126,964) (108,079) (227,363) (241,575)

(*) For the year ended 31 December 2011, loss from written-off property and equipment and inventory comprised loss arising from written-off property and equipment of Doğuş İnşaat with a net carrying value of TL 24,891 thousand and inventory amounting to TL 19,596 thousand due to the suspension of the construction project in Libya.

(**) This amount comprised of sale of four subsidiaries (“N Radyo, İkibinondokuz, VYG Radyo and N Spor) with broadcasting licenses by TL 5,442 thousand and loss on control of Enmoda by 75 percent by TL 1,289 thousand.

(***) In 2011, D Otel applied a plan for the renovation to change its concept to a luxury class hotel. Based on this plan, some parts of the Hotel Building were displaced. The Company obtained a valuation report where replacement cost method is used. Per this report, TL 27,331 thousand displacement cost was recognised in other expense in profit or loss.


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13 Net finance income / (costs)

For the years ended 31 December, net finance costs comprised the following:

Recognised in profit or loss 2012 2011Finance income Foreign exchange gains 247,224 254,909Interest income on bank deposits 81,353 86,387Interest income on trading securities 3,092 2,250Other interest and similar items 5,680 5,628Total finance income 337,349 349,174Finance expense Foreign exchange losses (78,033) (465,853)Interest expense on borrowings (191,037) (128,968)Other interest and similar items (47,766) (45,525)Total finance expense (316,836) (640,346)Net finance income / (costs) recognised in profit or loss 20,513 (291,172)

Interest income and interest expense recognised in profit or loss amounts included in finance income and finance expense relate only to the segments other than banking and finance since such amounts are reflected in “revenues” and “cost of revenues” in the results of the “banking and finance segment”.

Recognised in other comprehensive income Change in fair value of available- for-sale financial assets 5,847 3,658Change in translation reserve (10,347) 49,620Effective portion of changes in fair value of cash flow hedges 2,402 (562)Income tax on other comprehensive income (1,169) (732)Finance income / (expense) recognised in other

comprehensive income, net of tax (3,267) 51,984 Attributable to: Owners of the Company (2,991) 50,238 Non-controlling interests (276) 1,746Finance income / (expense) recognised in other

comprehensive income, net of tax (3,267) 51,984

Above mentioned finance income and finance expense recognised in other comprehensive income relate only to the segments other than banking and finance.


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14 Taxation

In Turkey, corporate income tax is levied at the rate of 20 percent (31 December 2011: 20 percent) on the statutory corporate income tax base, which is determined by modifying accounting income for certain exclusions and allowances for tax purposes. According to the Corporate Tax Law, 75 percent of the capital gains arising from the sale of tangible assets and investments owned for at least two years are exempted from corporate tax on the condition that such gains are reflected in the equity until the end of the fifth year following the sale. The remaining 25 percent of such capital gains are subject to corporate tax.

There is also a withholding tax on the dividends paid and is accrued only at the time of such payments. The withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15 percent. In applying the withholding tax rates on dividend payments to the non-resident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account. Appropriation of retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.

The transfer pricing law is covered under Article 13 “disguised profit distribution via transfer pricing” of the Corporate Tax Law. The General Communiqué on disguised profit distribution via transfer pricing dated 18 November 2007 sets details about implementation. If a tax payer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm’s length basis, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as a tax deductable for corporate income tax purposes.

In Turkey, the tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provision for taxes shown in the consolidated financial statements reflects the total amount of taxes calculated on each entity that are included in the consolidation.

Under the Turkish taxation system, tax losses can be carried forward to be offset against future taxable income for up to five years. Tax losses cannot be carried back.

In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns within four months following the close of the accounting year to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.

Investment allowance

The Temporary Article 69 added to the Income Tax Law no.193 with the Law no.5479, which became effective starting from 1 January 2006, upon being promulgated in the Official Gazette no.26133 dated 8 April 2006, stating that taxpayers can deduct the amount of the investment allowance exemption which they are entitled to according to legislative provisions effective at 31 December 2005 (including rulings on the tax rate) only from the taxable income of 2006, 2007 and 2008. Accordingly, the investment incentive allowance practice was ended as at 1 January 2006. At this perspective, an investment allowance which cannot be deducted partially or fully in three years time was not allowed to be carried forward to the following years and became unavailable as at 31 December 2008. On the other side, the Article 19 of the Income Tax Law was annulled and the investment allowance practice was ended as at 1 January 2006 with effectiveness of the Article 2 and the Article 15 of the Law no.5479 and the investment allowance rights on the investment expenditures incurred during the period of 1 January 2006 and 8 April 2006 became unavailable.


92

14 Taxation (continued)

Investment allowance (continued)

However, on 15 October 2009, the Turkish Constitutional Court decided to cancel the clause no.2 of the Article 15 of the Law no.5479 and the expressions of “2006, 2007, 2008” in the Temporary Article 69 related to investment allowance mentioned above that enables effectiveness of the Law as at 1 January 2006 rather than 8 April 2006, since it is against the Constitution. Accordingly, the time limitations for the investment allowances carried forward that were entitled to prior to mentioned date and the limitations related with the investment expenditures incurred between the issuance date of the Law promulgated and 1 January 2006 were eliminated. According to the decision of Turkish Constitutional Court, cancellation related with the investment allowance became effective with promulgation of the decision on the Official Gazette and the decision of the Turkish Constitutional Court was promulgated in the Official Gazette no.27456 dated 8 January 2010.

According to the decision mentioned above, the investment allowances carried forward to the year 2006 due to the lack of taxable income and the investment allowances earned through the investments started before 1 January 2006 and continued after that date constituting economic and technical integrity will be used not only in 2006, 2007 and 2008, but also in the following years. In addition, 40 percent of investment expenditures that are realised between 1 January 2006 and 8 April 2006, within the context of the Article 19 of the Income Tax Law will have the right for investment allowance exemption. New treatment on investment incentive was introduced by the Law no. 6009 “Law on the Amendment of the Income Tax Law and Certain Laws and Decree Laws” which was promulgated in the Official Gazette on 1 August 2010. As per the new regulation, the investment allowances that cannot be benefited and transferred to future periods due to insufficient income level of the relevant year, can be used without any year limitation, however the investment allowance amount to be considered in the determination of taxable income, will not exceed 25 percent of the income of the relevant year.

The Article 5 of the Law no. 6009 regarding investment allowance exemption for taxation and the cancelation of the article was promulgated in the Official Gazette no. 28208 dated 18 February 2012. Accordingly, taxpayers are allowed to benefit from the investment incentive without any limitation.

Tax applications for foreign branches of Garanti Bank

Turkish Republic of Northern Cyprus

According to the Corporate Tax Law of the Turkish Republic of Northern Cyprus no.41/1976 as amended, the corporate earnings (including foreign corporations) are subject to a 10 percent (31 December 2011: 10 percent) corporate tax and 15 percent (31 December 2011: 15 percent) income tax. This tax is calculated based on the income that the taxpayers earn in an accounting period. Tax base is determined by modifying accounting income for certain exclusions and allowances for tax purposes. The corporations cannot benefit from the rights of offsetting losses, investment incentives and amortisation unless they prepare and have certified their statements of financial position, statements of comprehensive income and accounting records used for tax calculations by an auditor authorised by the Ministry of Finance. In cases where it is revealed that the earnings of a corporation were not subject to taxation in prior years or the tax paid on such earnings are understated, additional taxes can be charged in the next 12 years following the related taxation period. The corporate tax returns are filed in the tax administration office in April following the end of the accounting year to which they relate. The corporate taxes are paid in two equal instalments in May and October.


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Tax applications for foreign branches of Garanti Bank (continued)

Malta

The corporate earnings are subjected to a 35 percent (31 December 2011: 35 percent) corporate tax. This rate is determined by modifying accounting income for certain exclusions and allowances for tax purposes. The earnings of the foreign corporations’ branches in Malta are also subject to the same tax rate that the resident corporations in Malta are subject to. The earnings of such branches that are transferred to their head offices are not subject to an additional tax. The prepaid taxes are paid in April, August and December in the related years. The prepayments can be deducted from the annual corporate tax calculated for the whole year earnings. The excess part of the corporate tax that is not covered by such prepayments is paid to the tax office in September.

Luxembourg

The corporate earnings are subject to a 21 percent (31 December 2011: 21 percent) corporate tax. This rate is determined by modifying accounting income for certain exclusions and allowances for tax purposes. An additional 5 percent of the calculated corporate tax is paid as a contribution for unemployment insurance fund. 3 percent of the taxable income is paid as municipality tax addition to corporate tax, the municipalities have right to increase this rate up to 200-350 percent. The municipality commerce tax is currently 9 percent of the taxable income. The tax returns do not include any tax payable amounts. The tax calculations are done by the tax office and the amounts to be paid are declared to tax authorities through official letters called Note. The amounts and the payments dates of prepaid taxes are determined and declared by the tax office at the beginning of the taxation period. The corporations whose head offices are outside Luxembourg, are allowed to transfer the rest of their net income after tax following the allocation of 5 percent of it for legal reserves, to their head offices.

Tax applications for foreign subsidiaries and joint ventures of the Group

The Netherlands

In the Netherlands, corporate income tax is levied at the rate of 20 percent (31 December 2011: 20 percent) for tax profits up to Euro 200,000 and 25 percent (31 December 2011: 25 percent) for the excess part over this amount on the worldwide income of resident companies, which is determined by modifying accounting income for certain exclusions and allowances for tax purposes for the related year. A unilateral decree for the avoidance of double taxation provides relief for resident companies from Dutch tax on income, such as foreign business profits derived through a permanent establishment abroad, if no tax treaty applies. There is an additional dividend tax of 5 percent computed only on the amounts of dividend distribution at the time of such payments. Under the Dutch taxation system, tax losses can be carried forward for nine years to offset against future taxable income. Tax losses can be carried back to one prior year. Companies must file their tax returns within nine months following the end of the tax year to which they relate, unless the company applies for an extension (normally an additional nine months). Tax returns are open for five years from the date of final assessment of the tax return during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. The corporate income tax rate for the Germany branch of Garanti Bank is 30 percent (31 December 2011: 30 percent).

Romania

The applicable corporate tax rate in Romania is 16 percent (31 December 2011: 16 percent). The taxation system in Romania is continuously developing and is subject to varying interpretations and constant changes, which may become rarely retroactive. In Romania, tax periods remain open for tax audits for seven years. Tax losses can be carried forward to offset against future taxable income for seven years.


94


Tax applications for foreign subsidiaries and joint ventures of the Group (continued)

Russia

The applicable tax rate for current and deferred tax for Garanti Bank’s consolidated subsidiary in Russia is 20 percent (2 percent federal and 18 percent regional) ( 31 December 2011: 20 percent). The taxation system in the Russian Federation is relatively new and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are often unclear, contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open for a longer period.

Egypt

As at 31 December 2012, enacted corporation tax rate is 20 percent (31 December 2011: 20 percent) for the subsidiaries registered in Egypt according to local tax law.

Switzerland

As at 31 December 2012, enacted corporation tax rate is 22.8 percent (31 December 2011: 22.8 percent) for the subsidiaries registered in Switzerland according to local tax law.

Ukraine

As at 31 December 2012, enacted corporation tax rate is 25 percent (31 December 2011: 25 percent) for the subsidiaries registered in Ukraine according to local tax law.

Morocco

The applicable corporate tax rate in Morocco is 35 percent (31 December 2011: 35 percent). Tax losses can be carried forward to offset against future taxable income for five years. Where the loss includes a claim for depreciation, that portion can be carried forward for indefinitely.

Italy

As at 31 December 2012, enacted corporation tax rate is 31.4 percent for the joint ventures registered in Italy according to local tax law.

Greece

As at 31 December 2012, enacted corporation tax rate is 20 percent for the joint ventures registered in Greece according to local tax law.

United Kingdom

As at 31 December 2012, enacted corporation tax rate is 24 percent for the joint ventures registered in the United Kingdom according to local tax law.

14.1 Income tax expense

Tax recognised in profit or loss

Income tax expense for the years ended 31 December comprised the following items:

2012 2011Current corporation and income taxes 396,597 249,793 Deferred tax (credit) / expense (172,128) 186,759 Total income tax expense 224,469 436,552


95


14.1 Income tax expense (continued)

Tax recognised in other comprehensive income

Tax recognised in other comprehensive income for the years ended 31 December comprised the following items:

2012 2011Income tax (expense) / credit on available-for-sale financial assets (49,639) 88,968Income tax (expense) / credit on revaluation of land and buildings (Note 29.3) (1,845) 13,294Total income tax (expense) / credit recognised in other comprehensive income (51,484) 102,262

Reconciliation of effective tax rate

The reported income tax expense for the years ended 31 December are different than the amounts computed by applying statutory tax rate to profit before tax as shown in the following reconciliation:

2012 2011 Amount % Amount % Reported profit before taxation 1,067,797 3,172,460 Taxes on reported profit per statutory tax rate (213,559) (20.00) (634,492) (20.00)Permanent differences: Disallowable expenses (13,771) (1.29) (83,918) (2.65) Tax exempt income 18,528 1.74 342,367 10.79 General banking provision -- -- (5,443) (0.17)Current year losses for which no deferred tax asset was recognised (33,756) (3.16) (41,297) (1.30)Reversal of previously recognised tax losses (17,718) (1.66) (17,448) (0.55)Effect of different tax rates applied 44,163 4.14 43,330 1.37 Others, net (8,356) (0.78) (39,651) (1.25)Income tax expense (224,469) (21.01) (436,552) (13.76)

14.2 Taxes payable on income

In accordance with the tax legislation in Turkey, tax payments that are made in advance during the year are being deducted from the total final tax liability of the fiscal year. Accordingly, the taxation charge on income is not equal to the final tax liability appearing on the consolidated statement of financial position.

Taxes payable on income as at 31 December comprised the following:

2012 2011Taxes on income 224,469 436,552Add: Taxes carried forward 32,589 99,279Add: Current taxes recognised in other comprehensive income (106) 6,268Add: Deferred taxes on taxable temporary differences 172,128 (186,759)Less: Corporation taxes paid in advance (336,314) (316,652)Less: Change in joint venture rate in a proportionately consolidated joint venture due to partial disposal -- (6,099)Taxes payable on income 92,766 32,589


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14.3 Deferred tax assets and liabilities

Deferred tax is provided in respect of taxable temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except for the differences relating to goodwill not deductible for tax purposes and the initial recognition of assets and liabilities which affect neither accounting nor taxable profit.

Unrecognised deferred tax assets and liabilities

As at 31 December 2011, deferred tax assets amounting to TL 164,026 thousand (31 December 2011: TL 205,032 thousand) have not been recognised with respect to the statutory tax losses carried forward and deductible temporary differences amounting to TL 158,453 thousand and TL 5,573 thousand, respectively (31 December 2011: TL 163,325 thousand and TL 41,707 thousand, respectively). Such losses carried forward expire until 2017. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.

Recognised deferred tax assets and liabilities

Deferred tax assets and deferred tax liabilities at 31 December are attributable to the items detailed in the table below:

2012 2011 Assets Liabilities Assets LiabilitiesRevaluation on land and buildings -- (63,636) -- (61,791)Provisions 66,318 -- 57,408 --Effect of percentage of completion method 66,223 (72,174) 36,554 (72,294)Employee severance indemnity and short term employee benefits 27,299 -- 20,531 --Pro-rata basis depreciation expense -- (11,934) -- (29,864)Fair value gain from investment property -- (113,753) -- (90,765)Valuation difference of financial assets and liabilities 8,944 -- 11,279 --Investment incentives 789 -- 417 --Intangible assets -- (76,315) -- (16,788)Other temporary differences 50,319 (38,280) 48,138 (9,792)Subtotal 219,892 (376,092) 174,327 (281,294)Tax losses carried forward 118,456 -- 63,536 --Total deferred tax assets/(liabilities) 338,348 (376,092) 237,863 (281,294)Set off of tax (44,094) 44,094 (80,851) 80,851Deferred tax assets/(liabilities), net 294,254 (331,998) 157,012 (200,443)

According to the Tax Procedural Law in Turkey, statutory losses can be carried forward maximum for five years. Consequently, 2017 is the latest year for recovering the deferred tax assets arising from such tax losses carried forward. The Group management forecasted to generate taxable income during 2013 and the years thereafter and based on this forecast, it has been assessed as probable that the deferred tax assets resulting from tax losses carried forward in the amount of TL 592,280 thousand (31 December 2011: TL 317,680 thousand) will be realisable; hence, such realisable deferred tax assets in the amount of TL 118,456 thousand (31 December 2011: TL 63,536 thousand) are recognised in the consolidated financial statements.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the currency income taxes relate to the same fiscal authority.


97


14.3 Deferred tax assets and liabilities (continued)

Movements in temporary differences during the year

Movements in deferred tax assets / (liabilities) were as follows:

Balance1 January 2012

Recognised inprofit or loss

Recognised in other comprehensive income

Acquired through business combinations Other

Balance 31 December 2012

Revaluation on land and buildings (61,791) -- (1,845) -- -- (63,636) Provisions 57,408 8,910 -- -- -- 66,318 Effect of percentage of completion method (35,740) 29,789 -- -- -- (5,951) Employee severance indemnity 20,531 6,768 -- -- -- 27,299 Fair value gain from investment property (90,765) (22,988) -- -- -- (113,753) Pro-rata basis depreciation expense (29,864) 53,512 -- (35,582) -- (11,934) Valuation difference on financial assets and liabilities 11,279 47,304 (49,639) -- -- 8,944 Investment incentives 417 372 -- -- -- 789 Intangible assets -- -- -- (76,315) -- (76,315) Other temporary differences 21,558 (6,459) -- -- (3,060) 12,039 Tax losses carried forward 63,536 54,920 -- -- -- 118,456 Total deferred tax assets/(liabilities) (43,431) 172,128 (51,484) (111,897) (3,060) (37,744)

Balance

1 January 2011 Recognised inprofit or loss

Recognised in other comprehensive income

Acquired through business combinations

Effect of change in joint venture rate

Balance 31 December 2011

Revaluation on land and buildings (75,085) -- 13,294 -- -- (61,791) Provisions 42,084 22,954 -- -- (7,630) 57,408 Effect of percentage of completion method (14,729) (21,011) -- -- -- (35,740) Employee severance indemnity 18,542 3,281 -- -- (1,292) 20,531 Fair value gain from investment property (45,330) (45,435) -- -- -- (90,765) Pro-rata basis depreciation expense (8,342) (22,393) -- -- 871 (29,864) Valuation difference on financial assets and liabilities 21,563 (95,504) 88,968 -- (3,748) 11,279 Intangible assets -- -- -- (16,788) -- (16,788) Investment incentives 3,616 (2,447) -- -- (752) 417 Other temporary differences 3,953 45,782 -- (6,013) (5,376) 38,346 Tax losses carried forward 135,522 (71,986) -- -- -- 63,536 Total deferred tax assets 81,794 (186,759) 102,262 (22,801) (17,927) (43,431)


98

15 Property and equipment

Movements of property and equipment and related accumulated depreciation during the year ended 31 December 2012 were as follows:

Cost 1 January Additions Acquired through

business combinations Disposals

Transfer to investment

property (*)

Transfer from investment

property (**) Transfers

(***)

Effects of movements in

exchange rates

Netrevaluation

change 31 December Land and buildings 2,624,784 101,374 195,670 (8,266) (41,651) 54,690 779,227 (3,089) 76,445 3,779,184 Furniture and equipment 1,059,531 130,291 51,493 (96,546) -- -- 142,488 (4,769) -- 1,282,488 Leasehold improvements 465,084 42,655 35,323 (5,664) -- -- 32,757 (774) -- 569,381 Motor vehicles 248,192 96,211 1,484 (47,447) -- -- 339 (355) -- 298,424 Construction in progress 843,805 598,781 3,474 (7,938) -- -- (954,811) (1,736) -- 481,575 Others 10,906 9,469 606 (5,472) -- -- -- (137) -- 15,372 Total cost 5,252,302 978,781 288,050 (171,333) (41,651) 54,690 -- (10,860) 76,445 6,426,424

Less: Accumulated depreciation 1 January

Currentyear

charge Acquired through

business combinations Disposals


property

Transfer from investment

property Transfers


exchange rates

Netrevaluation

change 31 December Buildings 420,930 54,514 24,499 (668) (7,902) -- -- 497 12,230 504,100 Furniture and equipment 626,493 133,961 25,577 (74,303) -- -- -- (2,440) -- 709,288 Leasehold improvements 159,611 42,984 17,898 (3,695) -- -- -- (833) -- 215,965 Motor vehicles 72,008 36,335 1,277 (14,852) -- -- -- (386) -- 94,382 Others 7,208 442 381 (784) -- -- -- 26 -- 7,273 Total accumulated depreciation 1,286,250 268,236 69,632 (94,302) (7,902) -- -- (3,136) 12,230 1,531,008 Net book value 3,966,052 -- 218,418 (77,031) (33,749) 54,690 -- (7,724) 64,215 4,895,416 Less: Impairment in value (44,177) (3,659) (1,133) 5,305 -- -- -- 3 -- (43,661) Net carrying value 3,921,875 217,285 (33,749) 54,690 -- (7,721) 64,215 4,851,755

(*) Garanti Bank’s certain land and buildings with a total net carrying value of TL 33,749 thousand were transferred to investment property.

(**) Transfer from investment property includes a building which is used by Group companies with a total net carrying value of TL 54,690 thousand.

(***) Transfer is mainly comprised of Energy and Tourism investments amounting to TL 652,732 thousand and TL 260,949 thousand respectively.


99

15 Property and equipment (continued)

Movements of property and equipment and related accumulated depreciation during the year ended 31 December 2011 were as follows:

Cost 1 January Additions

Acquired through business

combinations Disposals

(*)

Effect of change in

joint venture rate


property (**)

Transfer from

investment property (***)

Transfer to asset held for

sale

Transfer from trading

property (****) Transfers

Effects of movements in exchange

rates

Netrevaluation

change 31

December Land and buildings 2,863,726 38,659 104,822 (49,328) (87,730) (175,788) 27,220 (92,894) 68,415 55,242 10,339 (137,899) 2,624,784 Furniture and equipment 1,154,821 163,286 19,008 (90,786) (75,315) (117,299) -- (30,770) -- 18,385 18,201 -- 1,059,531 Leasehold improvements 416,184 40,466 44,515 (21,039) (23,373) -- -- -- -- 6,104 2,227 -- 465,084 Motor vehicles 232,057 68,074 3 (40,854) (15,284) -- -- (1,195) -- 127 5,264 -- 248,192 Construction in progress 281,359 644,369 4,850 (2,201) (2,497) -- -- -- -- (82,707) 632 -- 843,805 Others 7,446 628 -- (17) -- -- -- -- -- 2,849 -- -- 10,906 Total cost 4,955,593 955,482 173,198 (204,225) (204,199) (293,087) 27,220 (124,859) 68,415 -- 36,663 (137,899) 5,252,302

Less: Accumulated depreciation 1 January

Current year

charge



Effect of change in

joint venture rate


property

Transfer from

investment property

Transfer to asset held for

sale

Transfer from

trading property Transfers

Effects of movements in exchange

rates

Netrevaluation

change 31

December Buildings 644,689 54,475 -- (6,954) (21,424) (87,476) -- (31,356) -- 1,530 10 (132,564) 420,930 Furniture and equipment 740,237 123,102 8,875 (49,424) (55,800) (117,299) -- (25,230) -- (1,672) 3,704 -- 626,493 Leasehold improvements 141,577 45,800 832 (16,441) (12,123) -- -- -- -- (307) 273 -- 159,611 Motor vehicles 60,997 33,924 2 (18,819) (4,450) -- -- (1,131) -- -- 1,485 -- 72,008 Others 6,736 207 -- (17) -- -- -- -- -- 449 (167) -- 7,208 Total accumulated depreciation 1,594,236 257,508 9,709 (91,655) (93,797) (204,775) -- (57,717) -- -- 5,305 (132,564) 1,286,250 Net book value 3,361,357 -- 163,489 (112,570) (110,402) (88,312) 27,220 (67,142) 68,415 -- 31,358 (5,335) 3,966,052 Less: Impairment in value (68,745) (34,088) -- 11,386 3,723 42,552 -- 2,919 -- -- (1,924) -- (44,177) Net carrying value 3,292,612 163,489 (106,679) (45,760) 27,220 (64,223) 68,415 -- 29,434 (5,335) 3,921,875

(*) Disposals include property and equipment of Doğuş İnşaat with a net carrying value of TL 24,891 thousand which were written off due to the suspension of the project in Libya and property and equipment of a company in tourism segment with a net carrying value of TL 27,331 thousand which were written off due to the deconstruction process of a hotel building.

(**) A hotel building -together with its furniture and equipments- of one of the subsidiary in the tourism segment with a total net carrying value of TL 45,760 thousand was transferred to investment property.

(***) Transfer from investment property includes a building which is used by Group companies with a total net carrying value of TL 27,220 thousand.

(****) A land of one of the subsidiary in the other segment which is previously classified as trading property with a total net carrying value of TL 68,415 thousand was transferred to land and buildings.


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15 Property and equipment (continued)

The Group’s land and buildings are revalued for the purpose of the consolidated financial statements. Independent third party appraisers conduct the appraisals periodically on the basis of fair market value. As at 31 December 2012, the revaluation surplus, net of non-controlling interests and deferred taxes, amounting to TL 1,101,531 thousand including the fair value differences of investment and trading properties till the date of the use of property change from property and equipment and land and buildings and the fair value differences of property and equipment until reclassified as asset held for sale (31 December 2011: TL 1,060,279 thousand) was recognised in other comprehensive income, and presented in “revaluation surplus” account within the equity.

Had there been no revaluation on land and buildings, the balances of land and buildings as at 31 December would have been as follows:

Historical cost Accumulated depreciation Net Book Value31 December 2012 2,895,812 (286,627) 2,609,18531 December 2011 1,625,126 (205,919) 1,419,207

16 Intangible assets

At 31 December, intangible assets comprised the following:

2012 2011Goodwill 1,136,573 784,856Intangible assets other than goodwill 1,284,848 825,188

2,421,421 1,610,044

16.1 Goodwill

The movements in goodwill were as follows:

2012 2011Balance at the beginning of the year 784,856 677,437Acquisition during the year (Note 8) 353,618 192,052Disposals (*) -- (94,507)Adjustments for currency translation (1,901) 9,874 Balance at the end of the year 1,136,573 784,856

(*) Disposal of goodwill amounting to TL 94,507 thousand for the year ended 31 December 2011 is related to the partial disposal of the interest in a proportionately consolidated joint venture, Garanti Bank (See note 12.1).


101

16 Intangible assets (continued)

16.1 Goodwill (continued)

At 31 December, goodwill comprised the following:

Company Acquisition

costNet asset

fair valuePurchase

date

Sharesacquired

%Groupshare

Cumulative adjustment

for currency translation

Cumulative impairment in value of

goodwillCumulative

disposal

31 December 2012

net amount

31 December 2011

net amount

Garanti Bank (Note 12.1) 789,884 7,215,640 Dec. 2007 4.65 335,527 -- -- (94,507) 359,850 359,850 Star TV (Note 8.9.3) 596,234 405,110 Nov.2011 99.93 404,810 -- -- -- 191,424 191,424 Doors Holding A.Ş.(Note 8.5) 264,046 159,401 Dec.2012 74.25 118,355 -- -- -- 145,691 -- Azumi (Note 8.6) 269,930 343,636 Dec.2012 50.01 171,818 -- -- -- 98,112 -- NTV Radyo 98,877 12,081 Apr. 2004 97.00 11,719 -- -- -- 87,158 87,158 Dalmacija (Note 8.3) 127,175 53,399 Apr. 2012 100.00 53,399 466 -- -- 74,242 -- G Netherlands 159,049 61,685 Dec. 2007 49.90 30,781 26,850 (38,772) (78,633) 37,713 39,187 Enformasyon 40,091 10,783 Jul. 2003 70.00 7,548 -- -- -- 30,100 30,100 Doğuş İnşaat 89,076 1,491,894 Dec. 2006 4.10 61,093 -- -- -- 27,983 27,983 Garanti Holding B.V. 27,844 39,960 Dec. 2010 30.24 12,084 2,327 -- -- 18,087 18,796 Acropolis (Note 8.4) 84,867 133,470 Dec. 2012 51.00 68,070 (33) -- -- 16,764 -- D Marin Göcek 54,867 40,369 Dec. 2010 100.00 40,369 -- -- -- 14,498 14,498 D Et (Note 8.2) 21,859 15,179 Apr. 2012 51.00 7,741 -- -- -- 14,118 -- Star TV (*) (formerly, named as

Kapital Radyo) 9,246 72 Dec. 2007 97.00 70 -- -- -- 9,176 9,176 G Netherlands -- (43,392) May.2010 6.08 (2,637) 533 -- -- 3,170 3,321 Kivahan (Note 8.1) 3,619 1,509 Apr. 2012 51.00 770 -- -- -- 2,849 -- DOAŞ 2,735 -- Dec. 2006 50.00 -- -- -- -- 2,735 2,735 Aresta (Note 8.7) 5,207 5,637 Dec.2012 60.00 3,382 -- -- -- 1,825 -- Marina Sibenik d.o.o. (Note 8.9.2) 16,914 45,239 Jul. 2011 36.00 16,286 -- -- -- 628 628 Borik (Note 8.3) 2,834 2,384 Apr. 2012 100.00 2,384 -- -- -- 450 -- 30,143 (38,772) (173,140) 1,136,573 784,856

(*) Kapital Radyo merged with Star TV on 29 June 2012.


102


16.1 Goodwill (continued)

Impairment testing for goodwill

The recoverable amount of goodwill related with Garanti Bank and DOAŞ are determined based on their quoted share prices.

The valuations of the fair value of equities of NTV Radyo, Enformasyon and Kapital Radyo are performed internally. The income approach (discounted cash flow method) is used to determine the fair value of equities. 5-year business plan prepared by management is used for valuation of NTV Radyo and Enformasyon.

The valuation of the fair value of equity for G Netherlands and Garanti Holding B.V. is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of G Netherlands and Garanti Holding B.V.. six-year business plan prepared by management is used for valuation.

The valuation of the fair value of equity for Doğuş İnşaat is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of Doğuş İnşaat. 7-year business plan prepared by management is used for valuation.

The valuation of the fair value of equity for D Marin Göcek is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of D Marin Göcek. 35-year business plan prepared by management is used for valuation.

The valuation of the fair value of equity for Marina Sibenik d.o.o. is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of Marina Sibenik d.o.o.. 26-year business plan prepared by management is used for valuation.

The valuation of the fair value of equity for Star TV is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of Star TV. 10-year business plan prepared by management is used for valuation.

The fair value of Acropolis, Aresta, Azumi, Doors and KG Med Marinas have been determined provisionally pending completion of an independent valuation.

Key assumptions used in discounted cash flow projections

Key assumptions used in calculation of recoverable amounts are average discount rates and terminal growth rates. These assumptions are as follows:

Discount rate Terminal growth rateD Marin Göcek 9.00 percent --Doğuş İnşaat 8.30 percent 2.00 percentEnformasyon 12.00 percent 3.00 percentG Netherlands 12.00 percent 2.75 percentGaranti Holding B.V. 12.50 percent 2.75 percentKapital Radyo 12.15 percent 4.00 percentMarina Sibenik d.o.o. 7.36 percent --NTV Radyo 12.86 percent 3.00 percentStar TV 12.89 percent 4.00 percent

Discount rates used in discounted cash flows are the weighted average cost of capital (“WACC”) of the relevant entities.

As a result of the impairment testing on entity basis, no impairment loss is recognised during the year ended 31 December 2012.


103


16.2 Intangible assets other than goodwill

Movements of intangible assets other than goodwill and related accumulated amortisation during the year ended 31 December 2012 were as follows:

Cost 1

January Additions




exchange rates 31

December Concession rights 274,023 351 49,217 323,591

Concession rights-TÜVTURK (a) 253,569 351 -- -- -- 253,920 Concession rights-D Marin Göcek (b) 20,454 -- -- -- -- 20,454 Concession rights-Gouvia Marina (l) -- -- 5,969 -- -- 5,969 Concession rights- Dalmacija and Borik (e) -- -- 43,246 -- -- 43,246

Customer relationship 1,890 5,558 -- -- 7,448Customer relationship-D Marin Göcek (b) 1,890 -- -- -- -- 1,890 Customer relationship-Dalmacija and Borik (e) -- -- 3,733 -- -- 3,733 Customer relationship-Gouvia Marina (l) -- -- 1,825 -- -- 1,825

Brand name 232,429 -- 339,300 -- -- 571,729 Brand name - Star TV (d) 232,429 -- -- -- -- 232,429 Brand name - Nusr-et (f) -- -- 17,207 -- -- 17,207 Brand name - Kivahan (g) -- -- 1,677 -- -- 1,677 Brand name – Go Mongo (k) -- -- 6,509 -- -- 6,509 Brand name- Kitchenette (i) -- -- 60,443 -- -- 60,443 Brand name-Da Mario (i) -- -- 13,804 -- -- 13,804 Brand name- Gina (i) -- -- 11,341 -- -- 11,341 Brand name- Vogue (i) -- -- 11,483 -- -- 11,483 Brand name- Anjelique (i) -- -- 9,645 -- -- 9,645 Brand name- Ajia (i) -- -- 483 -- -- 483 Brand name- Tom's Kitchen (i) -- -- 9,884 -- -- 9,884 Brand name-Zuma (j) -- -- 154,422 -- -- 154,422 Brand name-Roka (j) -- -- 37,780 -- -- 37,780 Brand name-Capri (h) -- -- 3,645 -- -- 3,645 Brand name- IL Riccio (h) -- -- 977 -- -- 977

Broadcasting rights 281,128 -- -- (1,485) -- 279,643 Broadcasting rights –A Yapım (c) 140,721 -- -- (1,485) -- 139,236 Broadcasting rights-Star TV (d) 140,407 -- -- -- -- 140,407

Content library (movies and series) - Star TV (d) 20,365 -- -- -- -- 20,365

Franchise Network - Kitchenette (i) -- -- 6,913 -- -- 6,913

Sponsorship contract (i) -- -- 62,747 -- -- 62,747

Other intangible assets 99,638 35,882 1,565 (1,295) (269) 135,521 Total cost 909,473 36,233 465,298 (2,780) (269) 1,407,955

Less: Accumulated amortisation 1

January

Current year

amortisation




exchange rates 31

December Concession rights 45,107 19,871 -- -- -- 64,978

Concession rights-TÜVTURK (a) 44,569 18,507 -- -- -- 63,076 Concession rights-D Marin Göcek (b) 538 538 -- -- -- 1,076 Concession rights- Dalmacija and Borik (e) -- 826 -- -- -- 826

Customer relationship 86 237 -- -- -- 323 Customer relationship-D Marin Göcek (b) 86 86 -- -- -- 172 Customer relationship-Dalmacija and Borik (e) -- 151 -- -- -- 151

Content library (movies and series) - Star TV (d) -- 4,073 -- -- -- 4,073

Other intangible assets 39,092 14,802 -- (221) 60 53,733 Total accumulated amortisation 84,285 38,983 -- (221) 60 123,107 Net carrying value 825,188 465,298 (2,559) (329) 1,284,848


104


16.2 Intangible assets other than goodwill (continued)

Movements of intangible assets other than goodwill and related accumulated amortisation during the year ended 31 December 2011 were as follows:

Cost 1 January Additions




exchange rates 31

December Concession rights 274,023 -- -- -- -- 274,023 Concession rights-TÜVTURK (a) 253,569 -- -- -- -- 253,569 Concession rights-D Marin Göcek (b) 20,454 -- -- -- -- 20,454

Customer relationship-D Marin Göcek (b) 1,890 -- -- -- -- 1,890

Brand name - Star TV (d) -- 232,429 -- -- 232,429

Broadcasting rights 140,721 -- 140,407 -- -- 281,128 Broadcasting rights - A Yapım (c) 140,721 -- -- -- -- 140,721 Broadcasting rights - Star TV (d) -- -- 140,407 -- -- 140,407

Content library (movies and series) - Star TV (d) -- -- 20,365 -- -- 20,365

Other intangible assets 79,188 19,967 1,205 (188) (534) 99,638 Total cost 495,822 19,967 394,406 (188) (534) 909,473

Less: Accumulated amortisation 1 January Current year amortisation




exchange rates 31

December Concession rights 31,157 13,950 -- -- -- 45,107 Concession rights -TÜVTURK (a) 31,157 13,412 -- -- -- 44,569 Concession rights -D Marin Göcek (b) -- 538 -- -- -- 538

Customer relationship -D Marin Göcek (b) -- 86 -- -- -- 86

Other intangible assets 27,710 10,384 347 (24) 675 39,092 Total accumulated amortisation 58,867 24,420 347 (24) 675 84,285 Net carrying value 436,955 394,059 (164) (1,209) 825,188


105


16.2 Intangible assets other than goodwill (continued)

(a) The partnership established by the Group, Akfen Holding Anonim Şirketi and TÜV-SÜD Teknik Güvenlik ve Kalite Denetim Ticaret Limited Şirketi, obtained the right to tender vehicle inspection services for 20 years as at 20 December 2004. Following the completion of taking the advice of 1st Circuit of State, the Concession Agreement, regarding the privatisation of vehicle inspection services with the Privatisation Administration was signed on 15 August 2007, and TÜVTURK Kuzey and TÜVTURK Güney have started their operations. In 2009, Akfen Holding Anonim Şirketi transferred its shares to Test Taşıt Muayene İstasyonları Yapım ve İşletim Anonim Şirketi. As at 31 December 2012, 194 vehicle inspection stations are operating in 81 cities.

(b) According to share transfer agreement dated 27 October 2009, the Group decided to purchase D Marin Göcek from Turkon Holding Anonim Şirketi. On 7 December 2010, the share transfer was finalised with a closing agreement and the Group obtained control by acquiring 100 percent of shares and voting rights in D Marin Göcek. Under IFRS 3, customer relationships amounting to TL 1,890 thousand and concession rights amounting to TL 20,454 thousand were recognised as intangible assets arising from the acquisition of D Marin Göcek at the date of acquisition.

(c) Following the tender organised by Saving Deposits Insurance Fund on 18 June 2008; the transfer of the commercial and economic assets of Kral TV and Kral FM to A Yapım Televizyon Programcılık Anonim şirketi (“A Yapım”), a consolidated entity operating in media business, was started and Competition Authority approvals were obtained. Radio Television Supreme Council approved the process and A Yapım took over Kral TV and Kral FM on 16 October 2008 and recognised the amounts paid as broadcasting rights under intangible assets.

(d) See note 8.9.3.

(e) See note 8.3.

(f) See note 8.2.

(g) See note 8.1.

(h) See note 8.4.

(i) See note 8.5.

(j) See note 8.6.

(k) See note 8.7.

(l) See note 8.8.


106

17 Investments in debt securities

At 31 December, debt securities available-for-sale and held-to-maturity comprised the following:

2012 2011

Facevalue

Carryingvalue

Interest rate

range % Latest

maturity

Carrying

value Debt and other instruments available for-sale:

Government bonds indexed to consumer price index

2,155,645 3,117,981 2-12 2022 2,665,191

Government bonds in TL 1,825,103 1,944,443 8-16 2022 1,131,962 Government bonds at floating rates (a) 1,890,928 1,942,643 8-10 2018 1,599,561 Discounted government bonds in TL 1,045,453 1,022,852 6-11 2013 887,295 Bonds issued by financial institutions 797,251 826,641 1-14 2022 246,987 Bond issued by foreign governments 229,228 251,148 4-11 2019 212,197 Bonds issued by corporations (b) 78,749 81,883 4-11 2022 634,024 Euro bonds 61,415 72,998 5-12 2041 81,086 Others 7,130 6,081 Total securities available for-sale 9,267,719 7,464,384 Debt and other instruments held-to- maturity: Government bonds at floating rates (a) 212,615 218,152 9 2014 219,537 Euro bonds (c) 104,626 105,773 7-8 2034 378,102 Government bonds in TL 6,302 6,302 8 2014 485,316 Bonds issued by financial institutions 3,282 4,538 5 2013 -- Bonds issued by corporations 647 572 12 2014 -- Total held to maturity portfolio 335,337 1,082,955Accrued interest income 1,171 63,419 Total held-to-maturity portfolio 336,508 1,146,374 Total investments in debt securities 9,604,227 8,610,758

Current investments in debt securities 3,936,825 794,881 Non-current investments in debt securities 5,667,402 7,815,877 9,604,227 8,610,758

(a) The interest rates applied on these securities are floating quarterly based on interest rates of government bond bids of the government.

(b) Bonds issued by corporations include credit linked notes with a total face value of USD 102,054 thousand (31 December 2011: USD 102,586 thousand) and carrying value amounting to TL 183,372 thousand (31 December 2011: TL 194,132 thousand).

(c) As per the legislation on capital adequacy (Basel II) effective from 1 July 2012, the risk weighting of securities in foreign currencies issued by the Turkish Treasury increased from 0 percent to 100 percent. Accordingly, in the current period, Garanti Bank sold a part of its Eurobonds with a total face value of USD 142,655 thousand from its held-to-maturity portfolio as per the exception granted by IAS 39 for the sale of securities originally classified under the securities held-to-maturity in cases where the regulatory capital requirement increases.


107

17 Investments in debt securities (continued)

Interest income from debt and other fixed or floating instruments is reflected in interest on securities, whereas gains and losses arising from changes in the fair values of available-for-sale assets are deferred as a separate component of equity.

There are no impairment losses provided on investment securities as at 31 December 2012 (31 December 2011: TL 29).

At 31 December 2012, government bonds and treasury bills include securities pledged under repurchase agreements with customers amounting to TL 3,687,302 thousand (31 December 2011: TL 3,012,448 thousand).

The following table summarises the securities that were deposited as collaterals with respect to various banking, insurance and asset management transactions:

31 December 2012 31 December 2011

Face

valueCarrying

value Face

value Carrying

valueCollateralised to foreign banks 3,134,268 3,538,633 2,672,988 2,849,424Deposited at Istanbul Stock Exchange 1,868,032 2,314,888 1,512,702 1,691,420Deposited at central banks for repurchase transactions 392,260 456,979 694,363 808,920Deposited at Central Bank of Turkey (“CBT”) for interbank transactions 296,366 316,602 422,304 462,014Deposited at Clearing Bank (“Takasbank”) 43,342 52,831 37,899 46,881Deposited at CBT for foreign currency money market transactions 23,950 24,197 23,950 24,188Others 9,112 7,431 5,758,218 6,713,242 5,364,206 5,890,278

18 Investments in equity securities

At 31 December, the Group held equity investments in the following companies:

2012 2011

Equity accounted investees Carrying

value% of

ownershipCarrying

value % of

ownershipVDF Tüketici 45,343 49.00 30,996 49.00LPD Holding 33,314 49.00 3,587 49.00Hedef Medya 21,012 40.00 -- --VDF Servis Holding 11,129 49.00 6,772 49.00Yüce Auto 8,541 50.00 8,193 50.00Zea Marina S.A. 3,865 11.69 -- --Enmoda 3,592 25.00 -- --Lefkas 1,188 13.59 -- --Other equity investments Adriatic Croatia International Club d.d. 7,905 6.92 -- --IMKB Takas ve Saklama Bankası Anonim Şirketi (“Takasbank”) 2,865 1.40 2,865 1.40Garanti Konut 750 23.95 750 23.85Others 73 1,391 Total 139,577 54,554


108

18 Investments in equity securities (continued)

Equity participations other than Adriatic Croatia which is a listed company, do not have a quoted market price in an active market and other methods of reasonably estimating their values would be inappropriate and impracticable, accordingly they are stated at cost, adjusted for the effects of inflation until 31 December 2005.

80 percent shares of a previously consolidated subsidiary, Garanti Sigorta Anonim Şirketi, owned by Garanti Bank were sold to Eureko BV on 21 June 2007. After the sale, the remaining 20 percent was reclassified to investments in equity accounted investees and accounted under equity method of accounting. Subsequent to this sale, at 1 October 2007 the legal name of the company was changed as Eureko Sigorta. On 31 May 2011, in accordance with the shareholders' agreement dated 21 June 2007, Garanti Bank has decided to use the option regarding sale of its 20 percent shares in Eureko Sigorta to Eureko B.V. and signed a share purchase agreement with Eureko B.V.. Following the receipt of legal approvals required under the agreement, the related shares have been transferred for a consideration of Euro 16,765 thousand. Gain amounting to TL 22,222 thousand related to this sale has been recognised under other income in profit or loss in the accompanying consolidated financial statements for the year ended 31 December 2011.

On 3 June 2011, the Group sold its investments in Doğan TV Yayıncılık Anonim Şirketi and DTV Haber Görsel ve Yayıncılık Anonim Şirketi for a consideration of TL 40,000 thousand and a gain of TL 35,640 thousand related to this sale has been recognised under other income in profit or loss in the accompanying consolidated financial statements.

The Group has sold 75 percent shares of Enmoda which was previously wholly owned subsidiary, on 2 April 2012. Enmoda is accounted for using the equity method in the consolidated financial statements starting from 2 April 2012.

The summary financial information for equity accounted investees, not adjusted for the percentage ownership held is presented below:

2012

Total assets Equity

Property, equipment and

intangible assets Profit / (loss) for

the yearVDF Tüketici 2,341,190 92,536 5,653 29,278LPD Holding 460,519 72,948 3,672 60,201 VDF Servis Holding 130,771 22,714 1,707 8,893Yüce Auto 82,280 17,062 950 2,684Zea Marina S.A. 54,544 25,042 30,131 1,792Lefkas 27,524 14,896 22,222 (731)Hedef Medya 7,060 5,916 1,327 2,527Enmoda 7,059 885 1,522 (3,859)Total 3,110,947 251,999 67,184 100,785


109

18 Investments in equity securities (continued)

2011

Total assets Equity

Property, equipment and

intangible assets Profit / (loss) for

the yearVDF Tüketici 1,735,771 63,258 4,451 15,168LPD Holding 391,126 12,747 1,495 (6,266)VDF Servis Holding 101,376 13,821 1,317 5,383Yüce Auto 61,472 16,510 450 2,493Total 2,289,745 106,336 7,713 16,778

Garanti Konut was established as per the decision made during the Board of Directors meeting of Garanti Bank on 15 September 2007 to provide consultancy and outsourcing services to banks, housing finance and mortgage finance companies. Its legal registration process was completed on 3 October 2007. Garanti Bank owns 100 percent of the company shares. Share capital of Garanti Konut amounting to TL 750 thousand in total (the Group’s interest amounting to TL 180 thousand) is paid. This company is not consolidated in the accompanying consolidated financial statements as it does not currently have material operations compared to the consolidated performance of the Group; instead it is recorded under investments in equity participations and measured at cost.

At the Garanti Bank’s Board of Directors meeting held on 3 June 2009, it was decided to participate in the capital increase of Kredi Garanti Fonu Anonim Şirketi (“Kredi Garanti”) by TL 4,000 thousand (the Group’s interest amounting to TL 1,209 thousand) and to subscribe for future capital increases up to TL 4,000 thousand (the Group’s interest amounting to TL 1,209 thousand) in restructuring of the company to build a three-shareholder structure including the Turkish Union of Chambers and Commodity Exchanges (“TOBB”), the Small and Medium Size Enterprises Development Organization (“KOSGEB”) and the banks. As per this decision, Garanti Bank paid TL 2,000 thousand (the Group’s interest amounting to TL 605 thousand) of its capital commitment of TL 4,000 thousand at 15 October 2009 for the capital increase of Kredi Garanti decided on 11 September 2009. The remaining balance was paid in two tranches in July 2011 and September 2012, by TL 1,000 thousand (the Group’s interest amounting to TL 240 thousand) each.

19 Investment property

As at 31 December, the movements in investment property were as follows:

2012 2011Balance at 1 January 1,903,086 1,528,750Additions 133,918 76,595Transfer from trading property -- 6,482Transfer from property and equipment (Note 15) 33,749 45,760Acquired through business combinations (Note 8.9.1) -- 6,505Transfer to property and equipment (Note 15) (54,690) (27,220)Effects of movements in exchange rates (7,236) Fair value changes recognised in profit or loss (Note 12) 180,341 266,214Balance at 31 December 2,189,168 1,903,086

The Group obtained independent appraisal reports for each item of investment properties and stated them at their fair values.


110

20 Other non-current assets

At 31 December, other non-current assets comprised the following:

2012 2011Value Added Tax (“VAT”) receivables 171,392 125,234Prepaid expenses and similar items 84,152 76,633Derivative financial assets 81,854 83,027Other advances given 65,174 37,810Progress billings 39,027 46,586Advances given for property and equipment 31,637 35,235Others (*) 114,845 57,075 588,081 461,600

(*) As at 31 December 2012, others include cash retensions amounting to TL 35,506 thousand (31 December 2011: TL 51,705 thousand).

21 Inventories

At 31 December, inventories comprised the following:

2012 2011Goods in transit 243,286 363,476Trading goods 189,686 136,473Spare parts 71,626 66,931Raw materials (*) 46,519 40,834Trading property, net of impairment 34,010 28,943Other inventory 47,606 39,412 632,733 676,069

(*) As at 31 December 2012 and 2011, raw materials are mainly composed of construction materials in various construction projects of Doğuş İnşaat.

22 Accounts receivable

At 31 December, accounts receivable comprised the following:

2012 2011Premiums receivable 816,886 578,127Factoring receivables 438,430 298,735Trade receivables 389,764 256,270Due from customers for contract work (Note 23) 218,226 212,305Doubtful receivables 154,221 155,625Contracts receivable 136,382 152,611Others (*) 162,158 116,291Total accounts receivable 2,316,067 1,769,964Allowance for doubtful receivables (155,946) (156,046)Accounts receivable, net 2,160,121 1,613,918 Current accounts receivable 1,251,206 994,242Non–current accounts receivable 908,915 619,676 2,160,121 1,613,918

(*) As at 31 December 2012, other receivables includes indemnification asset amounting to TL 19,215 thousand (31 December 2011: TL 32,756 thousand) and cash consideration receivables from Azumi Limited and Doors Holding A.Ş. amounting to TL 20,680 thousand.


111

22 Accounts receivable (continued)

Movements in the allowance for doubtful receivables during the years ended 31 December were as follows:

2012 2011Balance at the beginning of the year 156,046 115,189Provision for the year 7,604 8,342Acquired through business combinations 215 9,896Recoveries (797) (1,423)Exchange rate differences on foreign currency balances (7,122) 24,042Balance at the end of the year 155,946 156,046

At 31 December 2012, the Group held letters of guarantee amounting to TL 23,484 thousand (31 December 2011: TL 22,649 thousand) as collateral against its receivables.

The Group’s exposure to credit and currency risks and impairment losses related to account receivables are disclosed in Note 41.

23 Due from/due to customers for contract work

At 31 December, the details of uncompleted contracts were as follows:

2012 2011Total costs incurred on uncompleted contracts 3,067,389 3,322,609Estimated earnings/(costs) 331,156 437,617Total estimated revenue on uncompleted contracts 3,398,545 3,760,226Less: Billings to date (3,203,528) (3,585,445)Net amounts due from customers for contract work 195,017 174,781

Due from customers for contract work and due to customers for contract work were included in the accompanying consolidated statement of financial position under the following captions:

2012 2011Due from customers for contract work (Note 22) 218,226 212,305Due to customers for contract work (Note 37) (23,209) (37,524) 195,017 174,781


112

24 Other current assets

At 31 December, other current assets comprised the following:

2012 2011Reserve deposits at central banks 3,231,281 1,709,890Taxes and funds to be refunded 187,624 130,937Derivative financial assets 91,176 169,724Prepaid expenses and similar items 66,321 96,041Advances given for inventory 41,178 76,271Others 113,600 230,900 3,731,180 2,413,763

Reserve deposits at central banks

At 31 December 2012, reserve deposits at the Central Bank of Turkey are kept as minimum reserve requirement. These funds are not available for the daily business of Garanti Bank and its subsidiaries. As required by the Turkish Banking Law, these reserve deposits are calculated on the basis of liabilities in TL, foreign currencies and gold taken at the rates determined by the Central Bank of Turkey. The reserve deposits do not earn interest.

The reserve deposits at the Central Bank of the Netherlands, as required by the Dutch Banking Law, are calculated as 1 percent on all customer deposits with an original maturity less than 2 years and 1 percent on bank deposits of non-EU banks with an original maturity less than 2 years.

Garanti banks operating in Romania are obliged to keep minimum reserve requirements in accounts held with Romanian Central Bank (“NBR”). The reserve requirements are to be held in RON for RON liabilities and in Euro or USD for foreign currency liabilities. Currently, in line with stipulations of related legislation in force, the rates for reserve requirements are 15 percent for RON denominated liabilities with a remaining maturity less than 2 years and 20 percent for foreign currency denominated liabilities with an remaining maturity less than 2 years excluding Romanian banks’ fundings (31 December 2011: 15 percent for RON and 25 percent for foreign currency). The interest rates paid by the NBR to banks for reserve requirements are subject of permanent update, currently the rates are 1.30 percent for RON reserves, 0.56 percent for Euro reserves and 0.50 percent for USD reserves.

The reserve deposits at the Central Bank of Russia are not available for the daily business, as required by the Russian Banking Law, these reserve deposits are calculated on the basis of Russian Ruble (“RUB”) and foreign currency liabilities taken at the rates determined by the Central Bank of Russia. In accordance with the current legislation, the reserve deposit rates for RUB and foreign currency liabilities legal entities-nonresidents, including banks-nonresident (RUB and foreign currency liabilities) are 5.5 percent (31 December 2011: 5.5 percent), individuals (RUB and foreign currency liabilities) and other liabilities are 4.0 percent (31 December 2011: 4.0 percent).


113

25 Banking loans and advances to customers

At 31 December, outstanding loans were as follows:

2012 2011 Consumer loans 8,159,674 6,898,738Service sector 2,135,105 2,098,814Energy 1,808,645 1,498,618Construction 1,547,342 1,368,165Transportation and logistics 1,143,323 1,028,575Food 968,667 1,109,975Textile 887,205 833,615Metal and metal products 831,475 936,813Tourism 786,924 587,412Transportation vehicles and sub-industry 639,291 698,815Financial institutions 537,402 515,142Agriculture and stockbreeding 495,623 438,068Data processing 460,194 541,453Chemistry and chemical product 390,724 328,970Electronic, optical and medical equipment 294,487 181,389Stone, rock and related products 261,626 264,997Mining 248,078 286,297Machinery and equipment 238,201 205,091Durable consumption 141,588 277,740Plastic products 135,526 122,056Paper and paper products 85,327 98,974Others 938,766 614,302Total performing loans 23,135,193 20,934,019Non-performing loans and lease receivables (Note 41.2) 725,753 529,110Total gross loans 23,860,946 21,463,129Finance lease receivables, net of unearned income 624,278 593,681Accrued interest income on loans and lease receivables 296,409 305,574Allowance for possible losses on loans and

lease receivables (Note 41.2) (817,419)

(595,825)Banking loans and advances to customers, net 23,964,214 21,766,559 Short-term banking loans and advances to customers 9,573,341 9,116,509Long-term banking loans and advances to customers 14,390,873 12,650,050 23,964,214 21,766,559

As at 31 December 2012, interest rates on loans granted to customers range between 1 percent - 53 percent (31 December 2011: 1 percent - 53 percent) per annum for the foreign currency loans and 2 percent - 23 percent (31 December 2011: 1 percent - 26 percent) per annum for the TL loans.


114

25 Banking loans and advances to customers (continued)

The provision for possible losses is comprised of amounts specifically identified as being impaired and non-performing loans and advances and a further portfolio-basis amount considered adequate to cover the residual inherent risk of loss present in the lending relationships presently performing in accordance with agreements made with borrowers. The amount of the portfolio basis allowance is TL 141,712 thousand (31 December 2011: TL 94,737 thousand).

Movements in the allowance for possible losses on loans and lease receivables during the years ended 31 December were as follows:

2012 2011Balance at the beginning of the year 595,825 743,285Provision for the year 329,163 193,507Write-offs (49,949) (68,065)Effect of change in joint venture rate -- (138,807)Recoveries (53,342) (134,095)Exchange rate difference on foreign currency balances (4,278) --Balance at the end of the year 817,419 595,825

The finance lease receivables are secured by way of the underlying assets. At 31 December, banking loans and advances to customers included the following finance lease receivables:

2012 2011Finance lease receivables, net of unearned income 624,278 593,681Add: Non-performing lease receivables 66,844 62,329Less: Allowance for possible losses from finance lease receivables (26,789) (22,359)Finance lease receivables, net 664,333 633,651Accrued interest on lease receivables 4,220 3,459 Analysis of finance lease receivables, gross Due within 1 year 270,299 246,324Due between 1 and 5 years 472,349 432,189Due after 5 years 25,280 52,543Finance lease receivables, gross 767,928 731,056Unearned income (103,595) (97,405)Finance lease receivables, net 664,333 633,651 Analysis of finance lease receivables, net Due within 1 year 244,223 210,758Due between 1 and 5 years 399,567 377,384Due after 5 years 20,543 45,509Finance lease receivables, net 664,333 633,651


115

26 Banking loans and advances to banks

At 31 December, banking loans and advances to banks comprised the following:

2012 2011

TL

Foreigncurrency Total

Total

Loans and advances-demand: Domestic banks 132 269 401 953 Foreign banks 35,051 361,963 397,014 628,269 35,183 362,232 397,415 629,222Loans and advances-time: Domestic banks 128,743 321,590 450,333 409,498 Foreign banks 452,020 940,726 1,392,746 2,596,772 580,763 1,262,316 1,843,079 3,006,270Total loans and advances-demand and time 615,946 1,624,548 2,240,494 3,635,492Placements at money markets 240 -- 240 1,629Accrued interest income 5,009 7,855 12,864 11,114Total loans and advances to banks 621,195 1,632,403 2,253,598 3,648,235 Short - term loans and advances to banks 1,128,628 2,444,856Long - term loans and advances to banks 1,124,970 1,203,379 2,253,598 3,648,235

At 31 December 2012, interest rate range was ranging between 1 percent - 6 percent per annum (31 December 2011: 1 percent - 15 percent) and 5 percent - 13 percent per annum (31 December 2011: 5 percent - 13 percent) for foreign currency time deposits and TL time deposits, respectively.

At 31 December 2012, deposits at foreign banks included blocked accounts of TL 1,378,576 thousand (31 December 2011: TL 1,911,743 thousand) held against the securitisations, funding and insurance business of Garanti Bank.


116

27 Financial assets at fair value through profit or loss

At 31 December, financial assets at fair value through profit or loss comprised the following:

2012 2011

Debt and other instruments at fair value

Facevalue

Carryingvalue

Interest rate

range % Latest

maturity Carrying

valueDiscounted government bonds in TL 21,213 20,568 5-11 2013 12,692Government bonds in TL 16,259 17,203 6-16 2022 16,610Gold -- 10,146 -- -- 19,253Bonds issued by financial institutions 7,670 7,805 5-10 2022 --Investment fund -- 7,671 -- -- 7,315Bonds issued by corporations 4,023 4,092 2-13 2018 11,762Eurobonds 2,972 3,566 5-12 2041 9,906Government bonds – floating 2,097 2,149 6-11 2018 2,631Government bonds – consumer price index 1,015 1,362 2-12 2022 18,401Others 166 212 74,728 98,782Loans held at fair value 53,212 --Listed shares 4,172 1,795Total 132,112 100,577 Current financial assets at fair value through profit or loss 53,508 55,051Non-current financial assets at fair value through profit or loss 78,604 45,526Total 132,112 100,577

Income from debt and other instruments held at fair value is reflected in profit or loss as interest income on securities. Gains and losses arising from trading of financial assets at fair value through profit or loss are recorded in net trading gains/ (losses). Gains and losses from derivative financial instruments and changes in fair value of other trading instruments are reflected in net trading gains/(losses) including the effective portion of fair value hedges, whereas, gains and losses arising from changes in the effective portion of the fair value of cash flow hedges are reflected as a separate component of equity.

Net gain from trading of financial assets is comprised of the following:

2012 2011Derivative transactions (105,356) 98,087Fixed/floating securities 146,169 78,869Trading gain, net 40,813 176,956

As at 31 December 2012, financial assets at fair value through profit or loss amounting to TL 53,623 thousand (31 December 2011: TL 882 thousand) are blocked against asset management operations and securitisations.

As at 31 December 2012, government bonds and treasury bills include securities pledged under repurchase agreements with customers amounting to TL 4,746 thousand (31 December 2011: TL 488).

For the year ended 31 December 2012, the impairment losses for the financial assets at fair value through profit or loss is TL 2 thousand (31 December 2011: TL 587 thousand).


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28 Cash and cash equivalents

At 31 December, cash and cash equivalents comprised the following:

2012 2011Cash at banks 1,550,266 2,854,818Balances with central banks excluding reserve deposits 780,450 571,503Cash at branches of the Group banks 301,947 249,939Other liquid assets and cheques 767 1,906Cash on hand 1,677 1,148Total cash and cash equivalents 2,635,107 3,679,314

At 31 December, cash and cash equivalents disclosed in the consolidated statement of cash flows comprised the following:

2012 2011Cash at banks 1,550,266 2,854,818Loans and advances to banks and balances with central banks excluding reserve deposits with original maturity periods of less than three months 1,129,378 1,923,636Cash at branches of the Group banks 301,947 249,939Other liquid assets and cheques 767 1,906Cash on hand 1,677 1,148Cash and cash equivalents in the statement of cash flows 2,984,035 5,031,447


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29 Capital and reserves

29.1 Paid in capital

As at 31 December 2012, the share capital of Doğuş Holding amounted to TL 2,055,292 thousand ( 31 December 2011: TL 2,055,292 thousand) in the consolidated financial statements.

The paid-in capital of Doğuş Holding comprises 856,027,050 shares (31 December 2011: 856,027,050 shares) of TL 1 each.

At 31 December, the shareholding structure of Doğuş Holding based on the number of shares is presented below:

2012 2011

Thousands

of shares %Thousands

of shares %Ferit Şahenk 278,383 32.52 276,671 32.32Filiz Şahenk 260,534 30.44 258,932 30.25Deniz Şahenk 148,053 17.30 147,143 17.19Doğuş Arge 87,873 10.27 87,183 10.18Garanti Turizm 40,098 4.68 39,851 4.66DOAŞ 31,575 3.69 31,381 3.67Doğuş Yeme İçme (*) -- -- 5,264 0.61Doğuş Sigorta 4,618 0.54 4,589 0.54Antur 3,848 0.45 3,824 0.45Doğuş Turizm 770 0.09 765 0.09Others 275 0.02 424 0.04 856,027 100.00 856,027 100.00

(*) On 24 July 2012, one of Doğuş Group’s consolidated subsidiary, Doğuş Yeme İçme, merged with Doğuş Holding. After the merger, the nominal share capital of Doğuş Holding has decreased by TL 5,264 thousand. On 24 July 2012, retained earnings amounting to TL 5,264 thousand has been transferred to share capital and the corresponding shares have been distributed to the existing shareholders of Doğuş Holding proportionally.

29.2 Legal reserves

The legal reserves are generated by annual appropriations amounting to 5 percent of income disclosed in the Group’s statutory accounts until it reaches 20 percent of paid-in share capital (first legal reserve). Without limit, a further 10 percent of dividend distributions in excess of 5 percent of paid-in capital is to be appropriated to increase legal reserves (second legal reserve). The legal reserves are restricted and are not available for distribution as dividend unless they exceed 50 percent of share capital. In the consolidated financial statements, total legal reserves, net of non-controlling interests is TL 359,467 thousand as at 31 December 2012 (31 December 2011: TL 284,281 thousand).


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29 Capital and reserves (continued)

29.3 Revaluation surplus

For the years ended 31 December, the movements of revaluation surplus were as follows:

2012 2011Balance at the beginning of the year 1,060,279 1,086,198Revaluation increase / (decrease) in land and buildings (Note 15) 64,215 (5,335)Transfer to retained earnings due to partial disposal of a proportionately consolidated joint venture -- (7,700)Deferred taxes on revaluation surplus (1,845) 13,294Non-controlling interest portion of revaluation changes, net of deferred taxes (3,259) (985)Depreciation effect on revaluation surplus of prior year (17,859) (25,193)Balance at the end of the year 1,101,531 1,060,279

29.4 Non-controlling interests

For the years ended 31 December, movements of the non-controlling interests were as follows:

2012 2011Balance at the beginning of the year 350,058 278,959Acquisition of non-controlling interests in previously proportionately consolidated joint ventures with change in control (Note 8.9.1 and Note 8.9.2) -- 88,666Acquisition of non-controlling interests through business

combinations (Note 8.1, Note 8.2, Note 8.5, Note 8.7 and Note 8.9.3) 51,478 276Acquisition from non-controlling interests in a consolidated subsidiary (Note 8.9.1) -- (55,207)Adjustment to non-controlling interests for share transfer of a subsidiary of a proportionately consolidated joint venture -- (1,028)Release of non-controlling interests through dividend distribution (32,445) (2,804)Effect of share capital increase 2,543 8,767Change in non-controlling interest in consolidated subsidiaries (39,906) (12,700)Non-controlling interest of changes in revaluation surplus 3,259 985Non-controlling interest of profit for the year 99,325 44,144Balance at the end of the year 434,312 350,058

29.5 Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. Garanti Bank had applied net investment hedge accounting for the exchange rate differences on the net investment risks on its foreign subsidiaries and its related financial liabilities denominated in foreign currencies in the previous periods. Garanti Bank prospectively discontinued this application as of 1 January 2009 within the framework of IFRIC 16 Comment on Hedges of a Net Investment in a Foreign Operation, effective for annual periods beginning on or after 1 October 2008.


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30 Loans and borrowings

At 31 December, loans and borrowings comprised the following:

2012 2011Non-current liabilities Long term bank borrowings 6,416,278 5,800,088Finance lease liabilities 95,081 31,621 6,511,359 5,831,709 Current liabilities Short-term portion of long term bank borrowings 1,701,439 1,879,951Short-term bank borrowings 3,203,049 2,756,208Finance lease liabilities 39,445 21,400

4,943,933 4,657,559

As at 31 December, the Group's total bank borrowings and finance lease liabilities are as follows:

2012 2011Bank borrowings 11,320,766 10,436,247Finance lease liabilities 134,526 53,021

11,455,292 10,489,268

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity risk, see Note 41.

Terms and debt repayment schedule

At 31 December, the terms and conditions of outstanding loans and borrowings were as follows:

2012 Nominal Year of Face Carrying

Currency interest rate maturity value amount Secured bank borrowings USD (Libor+1.21-5.35) 2.98-6.87 2013-2025 3,257,242 3,323,790 Secured bank borrowings Euro (Euribor+3.00-4.50) 2.97-7.00 2013-2022 604,623 608,619 Unsecured bank borrowings USD (Libor+1.95-5.35) 1.00-7.88 2013-2019 3,339,085 3,285,358 Unsecured bank borrowings Euro (Euribor+0.13-4.70) 1.00-13.28 2013-2016 2,155,728 2,143,590 Unsecured bank borrowings Other 2.73-13.95 2013-2018 1,958,587 1,959,409 Finance lease liabilities USD 5.00-8.00 2013 64,430 64,537 Finance lease liabilities Euro 2.00-11.00 2014-2016 20,194 19,850 Finance lease liabilities Other 1.00-18.00 2013-2016 49,927 50,139 11,449,816 11,455,292

2011

Nominal Year of Face Carrying Currency interest rate maturity Value amount

Secured bank borrowings USD (Libor+1.21-6.25) 2.20-6.56 2012-2025 5,605,538 5,616,978 Secured bank borrowings Euro (Euribor+0.13-4.50) 1.00-5.00 2012-2022 2,261,249 2,265,336 Secured bank borrowings Other 2.72-13.99 2012-2018 1,832,727 1,851,290 Unsecured bank borrowings USD (Libor+1.45-2.15) 2.06-5.56 2012-2016 366,108 367,685 Unsecured bank borrowings Euro (Euribor+2.50-4.70) 3.19-5.30 2012-2016 295,607 299,776 Unsecured bank borrowings Other 14.50-15.00 2012 33,832 35,182 Finance lease liabilities USD 6.09-11.07 2012-2015 2,748 2,748 Finance lease liabilities Euro 3.91-12.42 2012-2015 6,782 6,540 Finance lease liabilities Other 4.50-15.05 2012-2015 43,696 43,733 10,448,287 10,489,268


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30 Loans and borrowings (continued)

The present value of the redemption schedules of the Group's bank borrowings and finance lease liabilities according to original maturities as at 31 December are as follows:

2012 20112012 -- 4,657,5592013 4,943,933 1,248,2392014 1,177,907 852,872 2015 and over 5,333,452 3,730,598 11,455,292 10,489,268

In December 2012, one of Garanti Bank’s consolidated subsidiaries signed a loan agreement with European Fund for Southeast Europe (“EFSE”) in the amount of Euro 5.99 million with a maturity of five years for the financing of micro and small enterprises.

In November 2012, Garanti Bank signed a loan agreement with European Bank for Reconstruction and Development (“EBRD”) (“EBRD-V”) in the amount of USD 14.37 million with a maturity of five years for the financing of the women entrepreneurs.

In August 2012, Garanti Bank completed a securitization (the “DPR Securitisation-XIV”) transaction by issuance of certificates, a tranche of USD 95.8 million with 14 years maturity, granted directly by Overseas Private Investment Corporation (“OPIC”) to finance credit needs of small and medium size enterprises (“SMEs”) across Turkey.

In December 2011, Garanti Bank signed a credit agreement with European Bank for Reconstruction and Development (“EBRD”) (“EBRD-IV”) for a loan in the amount of Euro 9.58 million with a maturity of five years for financing of SMEs in agribusiness.

In June 2011, Garanti Bank completed a securitisation (the “DPR Securitisation-XIII”) transaction, arranged by SMBC Nikko Securities America Inc., WestLB AG and Wells Fargo Securities LLC in the amount of USD 53.9 million with five years maturity and by Standard Chartered Bank in the amount of Euro 12 million with five years maturity.

In December 2010, Garanti Bank completed a securitisation (the “DPR Securitisation-XII”) transaction, with the involvement of European Investment Bank (“EIB”) in the amount of Euro 18 million with 12 years maturity, by European Bank for Reconstruction and Development (“EBRD”) in the amount of Euro 18 million with 12 years maturity, by West LB in the amount of Euro 24 million with five years maturity.

In September 2010, Garanti Bank signed a loan agreement with EBRD (EBRD-III) in the amount of Euro 12 million which consists of 2 tranches for the financing of SMEs. The first tranche in the amount of Euro 4.8 million with five years maturity has been financed by EBRD while the second tranche in the amount of Euro 7.2 million with one year maturity by Standard Chartered Bank.

In June 2010, Garanti Bank drew a second loan tranche worth of USD 14.4 million (equivalent of Euro 12 million) with a maturity of 12 years, within the Euro 35.9 million framework agreement signed with EIB (EIB I) on 25 November 2009. The fund will be used for the financing of the investment and working capital needs of SMEs located in Turkey. In December 2009, Garanti Bank had been granted another funding by EIB again for the financing of SME loans in the amount of USD 35.4 million (equivalent of Euro 24 million) with a maturity of 12 years.

In May 2010, Garanti Bank signed a credit agreement with EBRD (EBRD-II) for a loan in the amount of USD 14.4 million which consists of two tranches. The loan, which is funded directly by EBRD with the 5-year tranche of USD 11.5 million and by the Clean Technology Fund which is established by the International Bank for Reconstruction and Development (the World Bank) in consultation with other international financial institutions, developed and developing countries and development partners, with the 15-year tranche of USD 2.9 million, will be utilised for the financing of the energy efficiency needs of the small sized enterprises.


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In December 2009, Garanti Bank signed a credit agreement with Overseas Private Investment Corporation (OPIC) for a facility for the financing of SMEs in the amount of USD 24 million with a maturity of 10 years.

In November 2009, Garanti Bank signed a credit agreement with EBRD (EBRD-I) for a facility of Euro 12 million. The facility, which is comprised of 3 tranches, will be on lent to small-sized enterprises. Euro 5.6 million of the facility is funded from EBRD’s own sources and has a maturity of five year while Euro 3.5 million of the facility is funded by the Netherlands Development Finance Company (FMO) with a maturity of three years. Euro 2.9 million of the facility is provided by a group of 6 banks from 4 countries with a maturity of one year.

In August 2008, Garanti Bank completed a securitisation (the “DPR Securitisation-IX”) transaction by issuance of certificates; a tranche of Euro 48 million with 10 years maturity from EIB.

In June 2007, Garanti Bank completed a securitisation (the “DPR Securitisation-VIII”) transaction by issuance of certificates; three tranches of USD 132 million with 10 years maturity wrapped by Ambac Assurance Corp., Financial Guaranty Insurance Corp. and XL Capital Assurance and a tranche of USD 12 million with 8 years maturity and no financial guarantee.

In January 2007, Garanti Bank borrowed TL 104.2 million from Deutsche Bank AG, London with a maturity of ten years at 12.93 percent annual fixed interest rate through a secured financing transaction. Accordingly, Garanti Bank pledged USD 71.9 million of cash collateral to Deutsche Bank AG, London. Subsequently, Garanti Bank has entered into two more secured financing transactions with the same counterparty under the same collateral conditions and borrowed in total TL 63.7 million in two separate transactions on 28 June and 3 July 2007 with maturity of 10 years for each and pledged USD 24 million of cash collateral for each. The funding costs are 11.30 percent and 11.35 percent, respectively. The cash collaterals earn annually USD libor floating interest rate.

In December 2006, Garanti Bank completed a securitisation (the “DPR Securitisation-VII”) transaction by issuance of certificates: USD 95.8 million tranche with a maturity of 10 years and USD 24 million tranche with a maturity of eight years. Both of the series were issued on an unwrapped basis.

In May 2006, Garanti Bank completed a securitisation (the “DPR Securitisation-VI”) transaction by issuance of certificates: Euro 71.9 million with a guarantee issued by MBIA Insurance Corp. with maturity of five years, USD 71.9 million with no financial guarantee and a maturity of seven years and USD 53.9 million with a guarantee issued by Ambac Assurance Corporation with maturity of 10 years.

In November 2005, Garanti Bank completed a securitisation (the “DPR Securitisation-V”) transaction by issuance of certificate: USD 36 million with a guarantee issued by CIFG Inc. with a maturity of seven years, USD 59.9 million with a guarantee issued by XL Capital Assurance with a maturity of eight years and USD 29.9 million with no financial guarantee and a maturity of 8 years. The XL Capital Assurance wrapped tranche was refinanced by the issuance of unwrapped notes in April 2009, with the maturity profile of the new series being kept identical to the refinanced series.

In September 2005, Garanti Bank completed a securitisation (the “DPR Securitisation-IV”) transaction by issuance of certificate: USD 35.9 million with a guarantee issued by Financial Guaranty Insurance Corp. with a final maturity of 7 years, USD 35.9 million with a guarantee issued by Financial Security Assurance with a final maturity of eight years, USD 39.5 million with a financial guarantee issued by Assured Guaranty Corporation with a final maturity of 8 years, USD 26.3 million with a financial guarantee issued by Radian Asset Assurance Incorporation with a final maturity of 7 years, USD 6 million with no financial guarantee and a final maturity of 7 years.

In May 2005, Garanti Bank completed a securitisation (the “DPR Securitisation-III”) transaction by issuance of certificate: USD 71.9 million with a guarantee issued by MBIA Insurance Corporation, a final maturity of 8 years.


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The DPR securitisation is a way of securitising Garanti Bank’s payment orders created via SWIFT MT 103 or similar payment orders in terms of USD, Euro and GBP accepted as derived primarily from Garanti Bank’s trade finance and other corporate businesses and paid through foreign depository banks.

Finance lease liabilities

As at 31 December 2012, finance lease liabilities are payable as follows:

2012 Future minimum lease

payments Interest Present value of minimum

lease paymentsLess than one year 47,640 (8,195) 39,445Between one and five years 110,098 (15,017) 95,081

157,738 (23,212) 134,526

As at 31 December 2011, finance lease liabilities are payable as follows:

2011Future minimum lease

payments Interest Present value of minimum

lease paymentsLess than one year 27,434 (6,034) 21,400Between one and five years 37,379 (5,758) 31,621

64,813 (11,792) 53,021

31 Bonds payable

At 31 December, bonds payable comprised the following:

2012 2011 Latest Interest Carrying Carrying maturity rates % value value Bonds payable of TL 501 million 2013 6.3-8.7 456,353 489,595 Bonds payable of USD 180 million 2022 5.25 313,158 -- Bonds payable of USD 144 million 2017 4.00 251,029 --Bonds payable of USD 120 million 2021 6.25 209,057 221,371 Bonds payable of USD 72 million 2016 3 month libor+2.5 121,027 129,761 Bonds payable of TL 30 million 2013 9.06 27,957 --Bonds payable of TL 18 million 2014 8.46 17,292 -- Bonds payable of TL 18 million 2013 6.71 16,350 -- Bonds payable of TL 12 million 2013 7.57 11,546 Bonds payable of TL 24 million -- 22,427 1,423,769 863,154 Accrued interest on bonds payable 43,405 33,068 1,467,174 896,222

Short-term bonds payable 513,486 512,203 Long-term bonds payable 953,688 384,019 1,467,174 896,222

The total face value of the bonds and bills issued by Garanti Bank in domestic market reached to TL 501 million as at 31 December 2012. The issuances are authorised by the Turkish Capital Markets Board.

In December 2012, one of Garanti Bank’s consolidated subsidiaries issued bills with a total face value of TL 18,561 thousand, interest rate of 6.71 percent and a maturity of 178 days.


124

31 Bonds payable (continued)

In October 2012, one of Garanti Bank’s consolidated subsidiaries issued bills with a total face value of TL 11,975 thousand, interest rate of 7.57 percent and a maturity of 189 days.

In September 2012, Garanti Bank issued USD 180 million 10-year fixed-rate notes with a maturity date of 13 September 2022 and a coupon rate of 5.25 percent and USD 144 million 5-year fixed-rate notes with a maturity date of 13 September 2017 and a coupon rate of 4.00 percent in the international markets.

In July 2012, one of Garanti Bank’s consolidated subsidiaries issued bills with a total face value of TL 29,938 thousand, interest rate of 9.06 percent and a maturity of 178 days.

In May 2012, one of Garanti Bank’s consolidated subsidiaries issued two-year-floating-rate notes with a total face value of TL 18,490 thousand, a maturity date of 8 May 2014 and a coupon rate of 11.30 percent in domestic market.

In August 2011, one of Garanti Bank’s consolidated subsidiaries issued bills with a total face value of TL 23,950 thousand, interest rate of 8.75 percent and a maturity 179 days. Such bills matured in January 2012.

In April 2011, Garanti Bank issued USD 120 million 10-year fixed-rate notes with a maturity date of 20 April 2021 and coupon rate of 6.25 percent and USD 72 million 5-year floating-rate notes with a maturity date of 20 April 2016 and a coupon rate of 3-month libor + 2.50 percent in the international markets.

Garanti Bank and/or its consolidated subsidiaries repurchased some of the Group’s own Turkish Lira securities with a total face value of TL 42,432 thousand ( 31 December 2011: TL 98,423 thousand) and foreign currency securities with a total face value of TL 5,477 thousand ( 31 December 2011: TL 4,482 thousand), and netted off such securities in the accompanying consolidated financial statements as at 31 December 2012.


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32 Subordinated liabilities

At 31 December, subordinated liabilities comprised the following:

2012 2011 Latest Interest Carrying Carrying Maturity rates % value value Subordinated debt of Euro 12 million 2021 Euribor+3.5 27,794 28,999 Subordinated deposits 2021 4.42-7.00 7,386 9,516 Subordinated debt of USD 120 million -- 223,323 35,180 261,838 Accrued interest on subordinated liabilities 429 6,903 35,609 268,741

Short-term subordinated liabilities -- 1,871 Long-term subordinated liabilities 35,609 266,870 35,609 268,741

As at 31 December 2012, subordinated deposits obtained by one of Garanti Bank’s consolidated subsidiaries amounted approximately to Euro 3 million (equivalent of TL 7,386 thousand) ( 31 December 2011: Euro 4 million, equivalent of TL 9,516 thousand).

On 23 February 2009, Garanti Bank obtained a 12-year subordinated loan of Euro 12 million due March 2021 from Proparco (Societe de Promotion et de Participation pour la Cooperation Economique SA), a company of the French Development Agency Group, with an interest of Euribor+3.5 percent and a repayment option for Garanti Bank at the end of the seventh year.

On 5 February 2007, Garanti Bank had obtained a 10-year subordinated fixed-rate notes of USD 120 millions due in February 2017 with a repayment option for Garanti Bank at the end of the fifth year. Garanti Bank repaid this debt benefiting from its early repayment option on 6 February 2012 following the necessary permissions received from the BRSA.

33 Other non-current liabilities

At 31 December, other non-current liabilities comprised the following:

2012 2011 Deferred income 275,467 234,126Long-term advances received 154,584 112,007Derivative financial liabilities 144,486 124,055Provision for general banking risks 107,775 107,775Reserve for severance payments 92,128 67,379Insurance business related provisions 52,932 38,197Provision for non-cash loans 41,241 30,666Others (*) 109,455 125,756 978,068 839,961

As at 31 December 2012, advances received include long-term portion of the upfront sub-operation fees amounting to TL 199,208 (31 December 2011: TL 213,926 thousand) due to the collections in cash from the sub-operators of TÜVTURK Kuzey and TÜVTURK Güney for the vehicle inspection stations that were opened before 31 December 2012.

As at 31 December 2012, a general provision amounting to TL 107,775 thousand (31 December 2011: TL 107,775 thousand) is provided by Garanti Bank in line with conservatism principle considering the circumstances which may arise from any changes in economy or market conditions under the name of provision for general banking risks.

(*) As at 31 December 2012, others include indemnification liability amounting to TL 19,215 thousand (31 December 2011: TL 32,756 thousand).


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33 Other non-current liabilities (continued)

33.1 Insurance business related provisions

2012 2011Reserve for unearned premiums, net Gross 27,152 25,404Reinsurers’ share (4,752) (11,589) 22,400 13,815Provision for claims, net Gross 13,261 6,030Reinsurers’ share (3,153) (2,014) 10,108 4,016Life mathematical reserves 20,424 20,366 52,932 38,197

33.2 Reserve for severance payments

For the years ended 31 December, the movements in the reserve for severance payments were as follows:

2012 2011Balance at the beginning of the year 67,379 41,257Provision for the year (Note 10) 38,676 41,648Acquired through business combinations -- 404Reversal of employee severance indemnity (4,139) (199)Paid during the year (9,788) (10,159)Effect of change in joint venture rate -- (5,572)Balance at the end of the year 92,128 67,379

The reserve has been calculated by estimating the present value of future probable obligation of the Group arising from the retirement of the employees.

Statistical valuation methods were developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly, the following statistical assumptions were used in the calculation of the total liability:

2012 2011 % %Discount rate 2.18-3.0 4.3-4.7Interest rate 6.95-8.5 9-10Expected rate of salary/limit increase 6.2 6.5The range of turnover rate to estimate the probability retirement 1.0-8.0 1.0-8.0

The computation of the liability is predicated upon retirement pay ceiling announced by the Government. As at 31 December 2012, the ceiling amount was TL 3.03 thousand ( 31 December 2011: TL 2.73 thousand).


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34 Retirement benefit obligation

Defined benefit plan

As a result of the changes in legislation described below, Garanti Bank will transfer a substantial portion of its pension liability under defined benefit plan (“the Plan”) to SSF. This transfer, which will be a settlement of Garanti Bank’s obligation in respect of the pension and medical benefits transferable to SSF, was originally set to be within three years from the enactment of the New Law in May 2008, however, has been postponed for two years as per the decision of the Council of Ministers published on 9 April 2011 as further explained below. The actual date of the transfer has not been specified yet. However, in its financial statements for the year ended 31 December 2007, Garanti Bank has modified the accounting required by IAS 19 “Employee Benefits” as Garanti Bank believes that it is more appropriate to measure the obligation, in respect of the benefits that will be transferred to SSF, at the expected transfer amount prior to the date on which the transfer and settlement will occur. The expected transfer amount is calculated based on the methodology and actuarial assumptions (discount rate and mortality tables) prescribed in the New Law. As such, this calculation measures the liability to be transferred at the expected settlement amount i.e., the expected value of the payment to be made to SSF to assume that obligation.

The obligation with respect to the excess benefits is accounted for as a defined benefit plan under IAS 19.

(i) Pension and medical benefits transferable to SSF

As per the provisional Article no.23 of the Turkish Banking Law no.5411 as approved by the Turkish Parliament on 19 October 2005, pension funds which are in essence similar to foundations are required to be transferred directly to SSF within a period of three years. In accordance with the Banking Law, the actuarial calculation of the liability (if any) on the transfer should be performed regarding the methodology and parameters determined by the commission established by Ministry of Labor and Social Security. Accordingly, Garanti Bank calculated the pension benefits transferable to SSF in accordance with the Decree published by the Council of Ministers in the Official Gazette no. 26377 dated 15 December 2006 (“the Decree”) for the purpose of determining the principles and procedures to be applied during the transfer of funds. However, the said Article was vetoed by the President and at 2 November 2005 the President initiated a lawsuit before the Turkish Constitutional Court in order to rescind certain paragraphs of the provisional article no.23.

Garanti Bank obtained an actuarial report regarding its obligations at 31 December 2006. This report, which was dated 12 February 2007, is from an actuary, who is registered with the Undersecretariat of the Treasury regarding this Fund in accordance with the Decree. Based on this Decree, the actuarial statement of financial position of the Fund has been prepared using a discount rate of 10.24 percent and the CSO 1980 mortality table. Based on the actuarial report, the assets of the plan exceed the amount that would be required to be paid to transfer the obligation at 31 December 2006. In accordance with the existing legislation at 31 December 2006, the pension and medical benefits within the social security limits were subject to transfer and the banks were not required to provide any excess social rights and payments.

On 22 March 2007, the Turkish Constitutional Court reached a verdict with regards to the suspension of the execution of the first paragraph of provisional article no.23 of the Turkish Banking Law, which requires the transfer of pension funds to SSF, until the decision regarding the cancellation thereof is published in the Official Gazette. The Constitutional Court stated in its reasoned ruling published in the Official Gazette numbered 26731, dated 15 December 2007 that the reason behind this cancellation was the possible loss of antecedent rights of the members of pension funds. Following the publication of the verdict, the Grand National Assembly of Republic of Turkey (“Turkish Parliament”) worked on the new legal arrangements by taking the cancellation reasoning into account. At 17 April 2008, the New Law has been accepted by the Turkish Parliament and the New Law has been enacted at 8 May 2008 following its publishing in the Official Gazette no 26870.


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34 Retirement benefit obligation (continued)

Defined benefit plan (continued)

(i) Pension and medical benefits transferable to SSF (continued)

In accordance with the New Law, members of the funds established in accordance with the Social Security Law should be transferred to SSF within three years following its enactment date. The transfers are to take place within the three-year period starting from 1 January 2008. Subsequently, the transfer of the contributors and the persons receiving monthly or regular income and their right-holders from such funds established for employees of the banks, insurance and reinsurance companies, trade chambers, stock markets and unions that are part of these organisations subject to the provisional article 20 of the Social Security Law no.506 to the SSF, has been postponed for two years. The decision was made by the Council of Ministers on 14 March 2011 and published in the Official Gazette no. 27900 dated 9 April 2011 as per the decision of the Council of Ministers, numbered 2011/1559, and as per the letter no. 150 of the Ministry of Labor and Social Security dated 24 February 2011 and according to the provisional article 20 of the Social Security and Public Health Insurance Law no.5510.

On 19 June 2008, Cumhuriyet Halk Partisi had applied to the Constitutional Court for the cancellation of various articles of the Law including the first paragraph of the provisional Article 20. At the meeting of the Constitutional Court on 30 March 2011, it was decided that the article 73 and the first paragraph of the provisional Article 20 added to the law no. 5510 are not contradictory to the Constitutional Law, and accordingly the dismissal of the cancellation request has been denied with the majority of votes.

Garanti Bank obtained an actuarial report dated 27 December 2012 from an independent actuary reflecting the principles and procedures on determining the application of transfer transactions in accordance with the New Law. The actuarial statement of financial position of the Fund has been prepared using a discount rate of 9.80 percent and the CSO 1980 mortality table, and the assets of the plan exceed the amount that would be required to be paid to transfer the obligation at 31 December 2012.

Garanti Bank’s obligation in respect of the pension and medical benefits transferable to SSF has been determined as the value of the payment that would need to be made to SSF to settle the obligation at the reporting date in accordance with the related article of the New Law.

The pension disclosures set out below therefore reflect the methodology and actuarial assumptions specified in the New Law. This calculation measures the benefit obligation at the expected transfer amount i.e., the estimated amount Garanti Bank will pay to SSF to assume this portion of the obligation.


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(i) Pension and medical benefits transferable to SSF (continued)

The pension benefits are calculated annually, as per the calculation as at 31 December 2012, the present value of funded obligations amount to TL 26,640 thousand (2011: TL 21,739 thousand) and the fair value of the planned assets amount to TL 354,246 thousand (2011: TL 295,505 thousand).

2012 2011Present value of funded obligations - Pension benefits transferable to SSF (obligation measured at the expected transfer amount) (109,705) (90,138) - Medical benefits transferable to SSF (obligation measured at the expected transfer amount) 88,549 73,198 - General administrative expenses (5,484) (4,799) (26,640) (21,739)Fair value of plan assets 354,246 295,505Asset surplus in the plan (*) 327,606 273,766

(*) Asset surplus in this plan will be used as plan assets of the excess benefit plan.

At 31 December, plan assets consist of the following:

2012 2011Securities 216,912 261,506Cash and due from banks 113,882 8,374Land and buildings 23,356 23,411Other 96 2,214 354,246 295,505

(ii) Excess benefits not transferable to SSF

The other social rights and payments representing benefits in excess of social security limits are not subject to transfer to SSF. Therefore these excess benefits are accounted as an ongoing defined benefit plan.

At 31 December, asset surplus on present value of defined benefit obligation is as follows:

2012 2011Present value of defined benefit obligation - Pension (102,090) (63,351) - Health (25,667) (33,017)Fair value of plan assets (*) 327,606 273,766Asset surplus over present value of defined benefit obligation 199,849 177,398

(*) Plan assets are composed of asset surplus in the plan explained in section (i).


130



(ii) Excess benefits not transferable to SSF (continued)

As per the actuarial calculation performed as at 31 December 2012 as detailed above, the asset surplus over the fair value of the plan assets to be used for the payment of the obligations also fully covers the benefits not transferable and still a surplus of TL 199,849 thousand (2011: TL 177,398 thousand) remains. However, Garanti Bank’s management, acting prudently, did not consider the health premium surplus amounting TL 88,549 thousand ( 31 December 2011 TL 73,198 thousand) as stated above that resulted from the present value of medical benefits and health premiums transferable to SSF. However, despite this treatment, there is no excess obligation that needs to be provided against as at 31 December 2012.

2012 2011Asset surplus over present value of defined benefit obligation 199,849 177,398Net present value of medical benefits and health premiums transferable to SSF (88,549) (73,198)Present value of defined benefit obligation 111,300 104,200

The pension benefits are calculated annually by an independent actuary. Expenses recognised regarding this benefit plan in profit or loss for the years ended 31 December 2012 and 2011 are as follows:

2012 2011Total contribution payment 36,646 32,926 36,646 32,926

Principal actuarial assumptions used at 31 December are as follows:

2012 2011Discount rates (*) 6.97 9.52Inflation rates (*) 4.67 5.06Future real salary increase rates 1.5 1.5

Medical cost trend rates 40 percent

above inflation 40 percent

above inflationFuture pension increase rates (*) 4.67 5.06

(*) As at 31 December, the above mentioned rates are effective rates, whereas the rates applied for the calculation differ according to the employees’ years in service.

Assumptions regarding future mortality are based on published statistics and mortality tables. The average life expectancy of an individual retiring at age 60 is 17 for males, and at age 58 for females is 23.


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(ii) Excess benefits not transferable to SSF (continued)

The sensitivity analysis of defined benefit obligation of excess liabilities at 31 December is as follows:

2012 Percentage of change in defined benefit obligation

Assumption change Pension benefits % Medical benefits % Overall %Discount rate +1% (15.1) (16) (15.3)Discount rate -1% 16.8 20.9 17.7Medical inflation +10% of CPI -- 8.7 1.7Medical inflation -10% of CPI -- (8.0) (1.6)

2011Percentage of change in defined benefit obligation

Assumption change Pension benefits % Medical benefits % Overall %Discount rate +1% (11.9) (13.7) (12.5)Discount rate -1% 14.9 17.4 15.8Medical inflation +10% of CPI -- 8.0 2.7Medical inflation -10% of CPI -- (7.3) (2.5)

35 Deposits

At 31 December, deposits comprised the following:

2012 2011 Banking deposits from banks 1,337,317 741,686Banking customer deposits 22,044,678 21,291,385 23,381,995 22,033,071 Short-term deposits 23,026,609 21,629,065Long-term deposits 355,386 404,006 23,381,995 22,033,071

35.1 Banking deposits from banks

At 31 December, banking deposits from banks comprised the following:

2012 2011 Payable on demand 317,958 198,156Term deposits 1,017,640 541,294 1,335,598 739,450Accrued interest expenses 1,719 2,236 1,337,317 741,686

At 31 December 2012, banking deposits from banks include both TL accounts in the amount of TL 247,218 thousand (31 December 2011: TL 161,274 thousand) and foreign currency denominated accounts in the amount of TL 1,088,380 thousand (31 December 2011: TL 578,176 thousand). As at 31 December 2012, interest rates applicable to TL bank deposits and foreign currency bank deposits varied within ranges of 3 percent - 10 percent and 1 percent - 7 percent (31 December 2011: 6 percent - 13 percent and 1 percent - 8 percent), respectively.


132

35 Deposits (continued)

35.2 Banking customer deposits

At 31 December, banking customer deposits comprised the following:

2012 2011 Demand Time Total TotalForeign currency 2,401,238 7,352,921 9,754,159 9,403,287Saving 849,014 7,113,469 7,962,483 7,247,186Commercial 941,652 2,492,442 3,434,094 3,750,114Gold and other precious metal 550,112 17,796 567,908 --Public and other 177,679 65,152 242,831 787,335 4,919,695 17,041,780 21,961,475 21,187,922Accrued interest expenses 17 83,186 83,203 103,463 4,919,712 17,124,966 22,044,678 21,291,385

At 31 December 2012, interest rates applicable to TL deposits and foreign currency deposits varied between 4 percent - 14 percent (31 December 2011: 6 percent - 13 percent) and 1 percent - 11 percent (31 December 2011: 1 percent - 8 percent), respectively.

36 Obligations under repurchase agreements

The Group’s proportionately consolidated joint ventures in banking and finance segment raise funds by selling financial instruments under agreements to repay the funds by repurchasing the instruments at future dates at the same price plus interest at a predetermined rate. Repurchase agreements are commonly used as a tool for short-term financing of interest-bearing assets, depending on the prevailing interest rates. At 31 December, assets sold under repurchase agreements are as follows:

2012 Carrying

value

Fair valueof underlying

assets

Carrying amountof corresponding

liabilities

Range of repurchase

dates Repurchase

price

Investments in debt securities 3,687,302 3,687,302 3,374,001 Jan’13-Oct’13 3,384,627 Financial assets at fair value through profit or loss 4,746 4,746 4,612 Jan’13 4,612 3,692,048 3,692,048 3,378,613 3,389,239 Current portion of obligations 3,378,613 Non-current portion of obligations -- 3,378,613

2011

Investments in debt securities 3,012,448 3,014,193 2,810,808 Jan’12-May’14 2,833,787 Financial assets at fair value through profit or loss 488 488 481 Jan’12 481

3,012,936 3,014,681 2,811,289 2,834,268Current portion of obligations 2,525,166 Non-current portion of obligations 286,123 2,811,289

As at 31 December 2012, accrued interest on obligations under repurchase agreements amounting to TL 3,720 thousand (31 December 2011: TL 5,966 thousand) is included in the carrying amount of the corresponding liabilities. In general, the carrying values of such assets are more than the corresponding liabilities due to the margins set between parties, since such funding is raised against assets collateralised. The proceeds from the sales of securities under repurchase agreements are treated as liabilities and recorded as obligations under repurchase agreements. As at 31 December 2012, the maturities of the obligations varied from one day to 10 months and interest rates varied between 1 percent - 7 percent (31 December 2011: 1 percent - 13 percent, with maturities varying from one day to twenty nine months).


133

37 Accounts payable

At 31 December, accounts payable comprised the following:

2012 2011Trade payables 614,712 536,069Payables to insurance and reinsurance companies 810,206 568,643Notes payable (*) 313,879 339,431Due to customers for contract work (Note 23) 23,209 37,524Others 141,964 60,490 1,903,970 1,542,157 Current portion of accounts payable 1,057,532 655,724Non-current portion of accounts payable 846,438 886,433 1,903,970 1,542,157

(*) As at 31 December 2012, consideration payable arising from the acquisition of Star TV amounting to USD 176,000 thousand (equivalent of TL 328,753 thousand using the official exchange rate prevailing on the acquisition date) is included in the notes payable (See note 8.9.3).

38 Other current liabilities

At 31 December, other current liabilities comprised the following:

2012 2011Blocked accounts against expenditures of card holders 946,172 807,385Withholding taxes and duties payable 165,951 127,157Expense accruals 127,733 83,845Import deposits and advances received 125,871 72,961Derivative financial liabilities 82,744 182,323Other short term provisions 81,640 65,278Short-term employee benefits 60,250 49,422Deferred income 59,750 38,667Transfer orders 24,479 42,393Blocked accounts 4,416 16,491Others 135,651 149,388 1,814,657 1,635,310

39 Commitments and contingencies

Commitments and contingent liabilities are discussed separately for “segments other than banking and finance” and “banking and finance segment” in the following paragraphs.

39.1 Segments other than banking and finance

Commitments and contingent liabilities arising in the ordinary course of business for the entities operating in the “segments other than banking and finance” comprised the following items as at 31 December:

Letters of guarantee 2012 2011Given to suppliers 692,287 675,899Obtained from banks and given to government organisations 715,973 661,878Given to banks 108,428 164,952Given to customs administrations 4,510 14,913Given to others 86,104 111,526Total letters of guarantee 1,607,302 1,629,168Sureties given 73,271 68,739


134

39 Commitments and contingencies (continued)

39.1 Segments other than banking and finance (continued)

The Group, as a guarantor, has given its equity holdings in some group companies with a total nominal amount of TL 518,020 thousand (31 December 2011: TL 524,110 thousand) and property equipment at an amount of TL 838,107 thousand (equivalent of USD 239,600 thousand, Euro 145,000 thousand and TL 70,000 thousand) (31 December 2011: TL 622,812 thousand, equivalent of USD 134,600 thousand and Euro 122,150 thousand and TL 70,056 thousand) as collateral. In terms of the related borrowing agreements, one of the tourism segment consolidated subsidiaries’ profit from hotels has been attached.

Litigation and claims

On 27 April 2010, Doğuş İnşaat and its consortium partners (together as the Consortium) terminated the Marmaray CR1 Contract with DLH General Directorate of the Ministry of Transportation (later changed as the Ministry of Transportation Maritime and Communication). The Group had recognised TL 15,405 thousand loss from the contract in cost of sales in 2010. On 13 July 2010, the Consortium submitted a Request for Arbitration to the International Chamber of Commerce (“ICC”) Secretariat, thereby commencing arbitration against DLH seeking for a relief for its termination and the recovery of its losses in connection with the Contract.

39.2 Banking and finance segment

In the ordinary course of banking and finance activities, the entities included in the “banking and finance segment” undertake various commitments and incur certain contingent liabilities that are not presented in the consolidated financial statements, including letters of guarantee, acceptance credits and letters of credit.

At 31 December, commitments and contingent liabilities comprised the following items:

2012 2011Letters of guarantee 4,007,267 3,625,169Letters of credit 1,427,227 1,485,756Acceptance credits 172,655 123,474Other guarantees and endorsements 15,879 16,822 5,623,028 5,251,221

As at 31 December 2012, commitments for unused credit limits for credit cards, overdrafts, cheques and loans to customers, and commitments for “credit linked notes” amounted approximately to TL 6,695,308 thousand (31 December 2011: TL 6,585,184 thousand) in total.

As at 31 December 2012, commitments for the derivative transactions carried out on behalf of customers in the Turkish Derivatives Exchange amounted to TL 106,175 thousand (31 December 2011: TL 87,245 thousand) in total.

As at 31 December 2012, the securies acquired under security borrowing transactions include shares with a total market value of TL 4,910 thousand (31 December 2011: Euro 56,369 thousand and TL 3,603 thousand), and a total carrying value of TL 4,910 thousand (31 December 2011: TL 176,706 thousand) (31 December 2011: with a latest maturity of July 2028 for eurobonds).

As at 31 December 2012, commitments for purchases and sales of foreign currencies under spot, forwards, swaps, future rate agreements, options and forward agreements for gold trading amounted to TL 12,867,231 thousand (31 December 2011: TL 10,509,375 thousand), approximately 94 percent of which are due within a year.


135


39.2 Banking and finance segment (continued)

The following tables summarise the contractual amounts of the forward exchange, swap, futures and options contracts, showing the details of the remaining periods to maturity. Foreign currency amounts are translated at rates ruling at the reporting date. Monetary items denominated in a foreign currency are economically hedged using foreign currency derivative contracts. All gains and losses on foreign currency contracts are recognised in profit or loss, except for contracts of cash flow hedges as stated above.

31 December 2012 Notional amount with remaining life of

Up to 1month

1 to 3months

3 to 6months

6 to 12 months

Over 1 year Total

Interest rate derivatives Interest rate options -- -- 84,754 236,250 123,924 444,928 Purchases -- -- 42,377 118,125 61,962 222,464 Sales -- -- 42,377 118,125 61,962 222,464Interest rate swaps 28 1,909 574 1,859 167,513 171,883 Purchases 12 1,201 512 797 74,941 77,463 Sales 16 708 62 1,062 92,572 94,420Interest rate futures -- -- -- -- -- -- Purchases -- -- -- -- -- -- Sales -- -- -- -- -- --Other derivatives Securities, shares and index options 7,153 9,465 42,348 208 -- 59,174 Purchases 3,571 4,311 20,549 104 -- 28,535 Sales 3,582 5,154 21,799 104 -- 30,639Other forward contracts 6,283 3,219 3,668 4,545 884 18,599 Purchases 5,161 3,219 3,219 4,545 884 17,028 Sales 1,122 -- 449 -- -- 1,571Other future contracts -- 12,564 20,055 8,648 -- 41,267 Purchases -- 126 -- -- -- 126 Sales -- 12,438 20,055 8,648 -- 41,141Other swap contracts 546,781 2,518 5,539 9,641 1,580 566,059 Purchases 96,852 1,581 2,809 2,555 793 104,590 Sales 449,929 937 2,730 7,086 787 461,469Currency derivatives Spot exchange contracts 701,903 -- -- -- -- 701,903 Purchases 550,667 -- -- -- -- 550,667 Sales 151,236 -- -- -- -- 151,236Forward exchange contracts 572,644 200,031 141,600 170,808 62,424 1,147,507 Purchases 343,307 115,863 108,244 76,780 35,059 679,253 Sales 229,337 84,168 33,356 94,028 27,365 468,254Currency/cross currency swaps 3,418,374 422,913 342,857 866,650 305,561 5,356,355 Purchases 1,573,899 187,518 289,863 691,876 183,739 2,926,895 Sales 1,844,475 235,395 52,994 174,774 121,822 2,429,460Options 2,213,363 784,696 675,362 556,702 122,794 4,352,917 Purchases 1,114,460 406,787 360,472 274,021 59,498 2,215,238 Sales 1,098,903 377,909 314,890 282,681 63,296 2,137,679Foreign currency futures -- 6,639 -- -- -- 6,639 Purchases -- -- -- -- -- -- Sales -- 6,639 -- -- -- 6,639Subtotal purchases 3,687,929 720,606 828,045 1,168,803 416,876 6,822,259 Subtotal sales 3,778,600 723,348 488,712 686,508 367,804 6,044,972 Total of transactions 7,466,529 1,443,954 1,316,757 1,855,311 784,680 12,867,231


136


39.2 Banking and finance segment (continued)

31 December 2011 Notional amount with remaining life of

Up to 1month

1 to 3months

3 to 6months

6 to 12 months

Over 1 year Total

Interest rate derivatives Interest rate options -- -- -- -- 212,881 212,881 Purchases -- -- -- -- 212,881 212,881 Sales -- -- -- -- -- --Interest rate swaps 12,385 30,593 18,787 4,685 48,870 115,320 Purchases 7,210 8,187 9,202 2,024 23,268 49,891 Sales 5,175 22,406 9,585 2,661 25,602 65,429Interest rate futures -- 120 -- -- -- 120 Purchases -- 15 -- -- -- 15 Sales -- 105 -- -- -- 105Other derivatives Securities, shares and index options 14,559 10,975 6,195 8,961 2,690 43,380 Purchases 12,506 6,327 5,229 6,870 1,345 32,277 Sales 2,053 4,648 966 2,091 1,345 11,103Other forward contracts 55,017 13,472 2,542 113 -- 71,144 Purchases 7,623 3,236 229 -- -- 11,088 Sales 47,394 10,236 2,313 113 -- 60,056Currency derivatives Spot exchange contracts 363,714 -- -- -- -- 363,714 Purchases 146,597 -- -- -- -- 146,597 Sales 217,117 -- -- -- -- 217,117Forward exchange contracts 587,089 180,172 141,552 216,652 62,261 1,187,726 Purchases 319,465 124,905 116,488 86,749 42,472 690,079 Sales 267,624 55,267 25,064 129,903 19,789 497,647Currency/cross currency swaps 1,469,744 1,704,647 754,547 640,664 325,618 4,895,220 Purchases 544,855 201,473 338,173 413,982 91,341 1,589,824 Sales 924,889 1,503,174 416,374 226,682 234,277 3,305,396Options 963,053 673,680 794,584 1,021,894 151,209 3,604,420 Purchases 549,084 334,889 453,291 511,836 75,510 1,924,610 Sales 413,969 338,791 341,293 510,058 75,699 1,679,810Foreign currency futures -- 15,450 -- -- -- 15,450 Purchases -- 1,280 -- -- -- 1,280 Sales -- 14,170 -- -- -- 14,170Subtotal purchases 1,587,340 680,312 922,612 1,021,461 446,817 4,658,542 Subtotal sales 1,878,221 1,948,797 795,595 871,508 356,712 5,850,833 Total of transactions 3,465,561 2,629,109 1,718,207 1,892,969 803,529 10,509,375


137


39.3 Commitments and contingencies applicable to the business segments

As at 31 December 2012, commitment for uncalled capital of subsidiaries amounted to TL 37,017 thousand (31 December 2011: TL 148,645 thousand).

40 Related party disclosures

For the purpose of the consolidated financial statements, the shareholders, key management personnel and the Board members, and in each case, together with their families and companies controlled by/affiliated with them; and associates, investments and joint ventures are considered and referred to as the related parties. A number of transactions are entered into with the related parties in the normal course of business. Most of the related party activity is eliminated at consolidation and the remaining activity is not material to the Group.

40.1 Related party balances

At 31 December, the Group had the following balances outstanding from its related parties:

2012 Joint Ventures Other TotalAccounts receivable 15 -- 15Other non-current assets 3,814 -- 3,814Due from related parties 208 392,524 392,732Cash and cash equivalents 110,952 -- 110,952Long-term borrowings 199,232 -- 199,232Short-term bank borrowings 79,385 -- 79,385Deposits -- 104,929 104,929Accounts payable 25 -- 25Due to related parties 1,232 8,233 9,465Letters of guarantee 73,014 -- 73,014 2011 Joint Ventures Other TotalOther non-current assets 70 -- 70Accounts receivable 141 -- 141Due from related parties 2,646 253,488 256,134Banking loans and advances to customers 1,708 -- 1,708Cash and cash equivalents 942,597 -- 942,597Long-term borrowings 293,880 -- 293,880Other non-current liabilities 83,914 -- 83,914Short-term bank borrowings 10,208 -- 10,208Short-term portion of long-term borrowings 1,444 -- 1,444Deposits -- 83,967 83,967Accounts payable 42 -- 42Due to related parties 869 5,950 6,819Letters of guarantee 210,432 -- 210,432


138

40 Related party disclosures (continued)

40.2 Related party transactions

For the years ended 31 December, the revenues earned and expenses incurred by the Group in relation to transactions with its related parties as summarised below:

2012 Joint Ventures Other TotalRevenues 40,731 6,651 47,382Cost of revenues (398) -- (398)Administrative expenses (2,089) -- (2,089)Selling, marketing and distribution expenses (442) -- (442)Net finance income / (costs) 13,785 (5,916) 7,869Other income 558 -- 558Other expenses (3,047) -- (3,047)

2011 Joint Ventures Other TotalRevenues 36,791 4,295 41,086Cost of revenues (448) -- (448)Administrative expenses (2,412) -- (2,412)Selling, marketing and distribution expenses (378) -- (378)Net finance income / (costs) 37,780 (3,778) 34,002Other income 208 -- 208Other expenses (427) -- (427)

No impairment losses have been recorded against balances outstanding during the year with related parties and no specific allowance has been made for impairment losses on balances with the related parties as at 31 December 2012 ( 31 December 2011: None).

40.3 Transactions with key management personnel

On a consolidated basis, key management costs included in general and administrative expenses for the year ended 31 December 2012 amounted to TL 138,617 thousand (31 December 2011: TL 114,297 thousand).


139

41 Financial instruments

41.1 Liquidity risk

As at 31 December, the following tables provide an analysis of monetary assets and monetary liabilities of the Group into relevant maturity groupings based on the remaining periods to repayment:

2012

Monetary assets Up to 1month

1 to 3months

3 to 12months

Over 1 year Total

Turkish Lira Investments in debt securities 5,985 226,768 3,674,878 4,691,864 8,599,495 Other non-current assets -- -- -- 455,759 455,759 Accounts receivable 355,614 195,498 218,121 825,950 1,595,183 Due from related parties 337,915 132 715 -- 338,762 Other current assets 111,568 161,705 71,695 -- 344,968 Banking loans and advances to banks 100,569 16,435 132,645 371,546 621,195 Banking loans and advances to customers 3,644,602 1,287,086 1,534,206 6,866,829 13,332,723 Financial assets at fair value through profit or loss 11,889 2,061 28,645 69,721 112,316 Cash and cash equivalents 473,557 17,939 1,603 -- 493,099Total TL monetary assets 5,041,699 1,907,624 5,662,508 13,281,669 25,893,500 Foreign Currencies Investments in debt securities 7,314 6,742 15,138 975,538 1,004,732 Other non-current assets -- -- -- 132,322 132,322 Accounts receivable 99,906 87,415 294,652 82,965 564,938 Due from related parties 565 383 53,022 -- 53,970 Other current assets 3,298,781 61,908 25,523 -- 3,386,212 Banking loans and advances to banks 528,231 87,973 262,775 753,424 1,632,403 Banking loans and advances to customers 486,785 835,433 1,785,229 7,524,044 10,631,491 Financial assets at fair value through profit or loss 10,913 -- -- 8,883 19,796 Cash and cash equivalents 1,991,229 211 150,568 -- 2,142,008 Total foreign currency monetary assets 6,423,724 1,080,065 2,586,907 9,477,176 19,567,872 Total monetary assets 11,465,423 2,987,689 8,249,415 22,758,845 45,461,372


140

41 Financial instruments (continued)

41.1 Liquidity risk (continued)

2012

Monetary liabilities Up to 1month

1 to 3months

3 to 12months

Over 1 year Total

Turkish Lira Loans and borrowings 518,745 119,277 531,833 798,588 1,968,443 Bonds payable 187,249 77,153 249,084 17,486 530,972 Other non-current liabilities -- -- -- 740,794 740,794 Deposits 10,393,658 1,459,671 78,722 673 11,932,724 Obligations under repurchase agreements 2,882,567 75 50,317 -- 2,932,959 Accounts payable 137,115 103,217 172,644 773,371 1,186,347 Due to related parties 6,466 857 1,610 -- 8,933 Other current liabilities 1,277,454 36,049 161,256 -- 1,474,759 Total TL monetary liabilities 15,403,254 1,796,299 1,245,466 2,330,912 20,775,931 Foreign Currencies Loans and borrowings 585,730 590,325 2,598,023 5,712,771 9,486,849 Bonds payable -- -- -- 936,202 936,202 Subordinated liabilities -- -- -- 35,609 35,609 Other non-current liabilities -- -- -- 237,274 237,274 Deposits 8,733,672 1,140,596 1,220,290 354,713 11,449,271 Obligations under repurchase agreements 140,865 136,371 168,418 -- 445,654 Accounts payable 68,844 137,536 438,176 73,067 717,623Due to related parties 532 -- -- -- 532 Other current liabilities 142,529 64,888 132,481 -- 339,898 Total foreign currency monetary liabilities 9,672,172 2,069,716 4,557,388 7,349,636 23,648,912 Total monetary liabilities 25,075,426 3,866,015 5,802,854 9,680,548 44,424,843 Liquidity (gap)/position (13,610,003) (878,326) 2,446,561 13,078,297 1,036,529


141



2011

Monetary assets Up to 1month

1 to 3months

3 to 12months

Over 1 year Total

Turkish Lira Investments in debt securities 46,421 527,690 186,533 6,533,462 7,294,106 Other non-current assets -- -- -- 343,841 343,841 Accounts receivable 22,955 295,459 41,109 615,647 975,170 Due from related parties -- -- 256,037 -- 256,037 Other current assets 242,195 137,483 95,674 -- 475,352 Banking loans and advances to banks 89,446 13,496 73,091 432,401 608,434 Banking loans and advances to customers 2,987,799 1,191,091 1,585,817 5,531,421 11,296,128 Financial assets at fair value through profit or loss 13,980 7,901 12,639 34,986 69,506 Cash and cash equivalents 567,416 17,866 -- -- 585,282 Total TL monetary assets 3,970,212 2,190,986 2,250,900 13,491,758 21,903,856 Foreign Currencies Investments in debt securities 409 -- 33,828 1,282,415 1,316,652 Other non-current assets -- -- -- 117,759 117,759 Accounts receivable 86,839 250,747 297,133 4,029 638,748 Due from related parties 28 52 17 -- 97 Other current assets 1,780,617 84,736 73,058 -- 1,938,411 Banking loans and advances to banks 1,834,454 127,249 307,120 770,978 3,039,801Banking loans and advances to customers 572,107 1,070,590 1,709,105 7,118,629 10,470,431 Financial assets at fair value through profit or loss 19,945 -- 586 10,540 31,071 Cash and cash equivalents 3,064,275 29,757 -- -- 3,094,032 Total foreign currency monetary assets 7,358,674 1,563,131 2,420,847 9,304,350 20,647,002 Total monetary assets 11,328,886 3,754,117 4,671,747 22,796,108 42,550,858


142



2011

Monetary liabilities Up to 1month

1 to 3months

3 to 12months

Over 1 year Total

Turkish Lira Loans and borrowings 427,068 17,145 380,961 1,080,977 1,906,151 Bonds payable 183,743 -- 328,460 -- 512,203 Other non-current liabilities -- -- -- 712,666 712,666 Deposits 9,536,513 1,574,532 282,125 459 11,393,629 Obligations under repurchase agreements 1,997,508 73 -- -- 1,997,581 Accounts payable 11,035 2,826 38,163 568,265 620,289 Due to related parties -- -- 5,850 -- 5,850 Other current liabilities 945,498 14,812 371,744 -- 1,332,054 Total TL monetary liabilities 13,101,365 1,609,388 1,407,303 2,362,367 18,480,423 Foreign Currencies Loans and borrowings 222,908 553,783 3,055,694 4,750,732 8,583,117 Bonds payable -- -- -- 384,019 384,019 Subordinated liability 63 680 1,128 266,870 268,741 Other non-current liabilities -- -- -- 127,295 127,295 Deposits 7,969,343 1,078,899 1,187,653 403,547 10,639,442 Obligations under repurchase agreements 236,629 290,956 -- 286,123 813,708 Accounts payable 516,972 60,880 25,848 318,168 921,868 Due to related parties -- -- 969 -- 969 Other current liabilities 45,596 71,101 186,559 -- 303,256 Total foreign currency monetary liabilities 8,991,511 2,056,299 4,457,851 6,536,754 22,042,415 Total monetary liabilities 22,092,876 3,665,687 5,865,154 8,899,121 40,522,838 Liquidity (gap)/position (10,763,990) 88,430 (1,193,407) 13,896,987 2,028,020


143



Segments other than banking and finance

The following tables are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements:

31 December 2012

Carrying

amount Contractual

cash flows 6 months

or less 6-12

months 1-2 years 2-5 years More than

5 years Non-derivative financial liabilities

Secured bank borrowings 3,932,409 (4,375,981) (295,555) (228,420) (515,353) (1,729,428) (1,607,225)Unsecured bank borrowings 1,190,251 (1,197,178) (828,610) (48,248) (188,528) (53,417) (78,375)Finance lease liabilities 134,526 (157,738) (32,447) (22,406) (35,021) (44,202) (23,662)Accounts payable 1,027,713 (947,199) (623,075) (315,254) (5,399) (3,471) -- Derivative financial liabilities

Interest rate swap used for hedging 9,393 (9,380) (1,601) (1,518) (2,669) (3,592) -- 6,294,292 (6,687,476) (1,781,288) (615,846) (746,970) (1,834,110) (1,709,262)

31 December 2011

Carrying

amount Contractual

cash flows 6 months

or less 6-12

months 1-2 years 2-5 years More than

5 years Non-derivative financial liabilities

Secured bank borrowings 3,907,636 (4,500,683) (575,436) (888,080) (568,269) (1,264,268) (1,204,630)Unsecured bank borrowings 702,642 (725,268) (103,947) (169,649) (283,695) (167,977) -- Finance lease liabilities 53,021 (64,813) (11,347) (10,174) (19,281) (24,011) -- Accounts payable 945,729 (949,934) (312,662) (315,326) (318,168) (3,778) -- Derivative financial liabilities

Forward contracts 2,989 (14,495) (14,495) -- -- -- -- Interest rate swap used for hedging 12,571 (15,676) (2,276) (2,175) (3,894) (6,993) (338) 5,624,588 (6,270,869) (1,020,163) (1,385,404) (1,193,307) (1,467,027) (1,204,968)


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Contractual maturity analysis of liabilities of Garanti Bank and its subsidiaries, based on their proportionate interest, according to remaining maturities

The remaining maturities table of the contractual liabilities includes the undiscounted future cash outflows for the principal amounts of Garanti Bank and its subsidiaries’ financial liabilities, based on their proportionate interest, as per their earliest likely contractual maturities.

31 December 2012

Carrying

amount

Nominal principaloutflows Demand

Up to 1 month

1-3months

3-12 months

1-5 years

More than 5 years

Deposits 23,381,995 23,296,938 5,237,475 13,842,519 2,584,800 1,281,535 345,778 4,831Obligations under repurchase agreements 3,378,613 3,374,892 -- 3,021,723 134,961 218,208 -- --Bonds payable 1,467,174 1,423,770 -- 186,172 77,153 248,881 394,806 516,758Bank borrowings 6,198,106 6,122,753 -- 715,079 380,075 2,313,080 1,961,595 752,924Subordinated liabilities 35,609 35,180 -- -- -- -- 16,545 18,635Total financial liabilities 34,461,497 34,253,533 5,237,475 17,765,493 3,176,989 4,061,704 2,718,724 1,293,148 31 December 2011

Carrying amount

Nominal principaloutflows Demand

Up to 1 month

1-3months

3-12 months

1-5 years

More than 5 years

Deposits 22,033,071 21,927,342 4,868,952 12,635,572 2,582,116 1,441,986 358,691 40,025Obligations under repurchase agreements 2,811,289 2,805,323 -- 2,230,151 290,198 -- 284,974 --Bonds payable 896,222 863,154 -- 183,562 -- 328,460 134,000 217,132Bank borrowings 5,825,969 5,755,548 -- 479,264 296,944 2,144,279 1,980,660 854,401Subordinated liabilities 268,741 261,837 -- 61 658 1,091 3,842 256,185Total financial liabilities 31,835,292 31,613,204 4,868,952 15,528,610 3,169,916 3,915,816 2,762,167 1,367,743

41.2 Credit risk

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows:

2012 2011Cash and cash equivalents (*) 2,633,430 3,678,166Accounts receivable 2,160,121 1,613,918Due from related parties 392,732 256,134Banking loans and advances to customers and banks 26,217,812 25,414,794Investments in debt securities 9,604,227 8,610,758Financial assets at fair value through profit or loss 132,112 100,577Other current assets (**) 3,436,057 2,110,514Other non-current assets (**) 235,726 186,688 44,812,217 41,971,549

(*) Cash on hand is excluded from cash and cash equivalents.

(**) Non-financial instruments such as advances given, taxes and funds to be refunded, VAT receivables and prepaid expenses and similar items are excluded from other current assets and other non-current assets.


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41.2 Credit risk (continued)

Exposure to credit risk for segments other than banking and finance

The maximum exposure to credit risk for account receivables at the reporting date by type of customer was as follows:

2012 2011Contract receivables 356,677 359,254Advertising agencies 202,112 128,142End-users 144,017 157,956Retailers 69,896 37,933Tourism agencies 1,868 857Other 51,046 53,312 825,616 737,454

The maximum exposure to credit risk for account receivables at the reporting date by geographic concentration was as follows:

Carrying amount 2012 2011Turkey 562,475 323,214Libya 153,024 163,116Ukraine 84,765 147,959Euro zone 1,808 88,695Morocco 248 9,449Other 23,296 5,021 825,616 737,454

Impairment losses

The aging of account receivables at the reporting date was:

2012 2011 Gross Impairment Gross ImpairmentNot past due 524,142 -- 415,075 (516)Past due 0-30 days 95,128 -- 53,766 (1,799)Past due 31-120 days 12,599 -- 7,379 (1,441)Past due 121-365 days 85,134 -- 259,514 (597)More than one year 264,559 (155,946) 157,766 (151,693)Total 981,562 (155,946) 893,500 (156,046)


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Exposure to credit risk for banking and finance segment

Banking loans and advances to customers 2012 2011 Individually impaired 725,753 529,110 Allowance for impairment (675,707) (501,088)Carrying amount 50,046 28,022 Portfolio basis allowance (141,712) (94,737) (141,712) (94,737) Past due but not impaired 287,965 217,749 287,965 217,749 Neither past due nor impaired 23,041,514 21,089,935 Loans with renegotiated terms 726,401 525,590 Carrying amount 23,767,915 21,615,525 Total carrying amount 23,964,214 21,766,559

At 31 December 2012 and 2011, Garanti Bank has no allowance for loans and advances to banks.

Garanti Bank developed a statistical-based internal risk rating model for its credit portfolio of corporate/commercial/medium-size companies. This internal risk rating model has been in use for customer credibility assessment since 2003 and is currently being reviewed and updated. Risk rating has become a requirement for loan applications, and ratings are used both to determine credit authorization limits and in credit assessment process.

The concentration table of the cash and non-cash loans for Garanti Bank according to the risk rating system for its customers defined as corporate, commercial and medium-size enterprises is presented below.

31 December 2012 31 December 2011

% %Above average 40 46Average 53 49Below average 7 5 100 100


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Sectoral and geographical concentration of impaired loans for banking and finance segment

An analysis of concentrations of non-performing loans and lease receivables at the reporting date is shown below:

2012 2011Consumer loans 309,228 257,047Transportation vehicles and sub-industries 61,721 22,467Service sector 60,107 24,322Textile 48,619 41,764Construction 35,029 21,232Metal and metal products 32,084 31,785Transportation and logistics 27,649 8,994Food 24,432 17,877Agriculture and stockbreeding 19,697 18,580Durable consumption 8,962 6,976Paper and paper products 8,621 7,444Tourism 8,079 6,325Energy 5,305 9,361Chemistry and chemical products 5,230 3,651Others 70,990 51,285Total non-performing loans, factoring and finance lease receivables 725,753 529,110 2012 2011Turkey 586,959 428,927Romania 92,885 71,285Ukraine 15,993 16,700England 11,922 --Others 17,994 12,198

Total non-performing loans and finance lease receivables 725,753 529,110

Past due but not impaired loans for banking and finance segment

These are loans where contractual interest or principal payments are past due but the Group believes that impairment is not appropriate on the basis of the level of collateral available and the customer’s current activities, assets and financial position.

An estimate of the fair value of collateral held against non-performing loans and receivables at the reporting date is as follows:

2012 2011Mortgages 162,033 88,442Promissory notes 151,474 66,880Pledge assets 75,515 40,947Cash collateral 2,629 249Unsecured 334,102 332,592 725,753 529,110

The amounts reflected in the tables above represent the maximum accounting loss that would be recognised at the reporting date if counterparties failed completely to perform as contracted and any collateral or security proved to be of no value. The amounts, therefore, greatly exceed expected losses, which are included in the allowance for uncollectibility.


148


41.3 Market risk

(i) Interest rate risk

Profile

As at 31 December, the interest rate profile of the Group’s interest-bearing financial instruments other than banking and finance segment was as follows:

2012 2011Fixed rate instruments Financial assets 1,186,421 2,660,753Financial liabilities (810,264) (718,731)Interest rate swap, fixed leg (75,290) (103,728) 300,867 1,838,294 Variable rate instruments Financial liabilities (4,446,922) (3,944,568)Interest rate swap, variable leg 75,290 103,728 (4,371,632) (3,840,840)

Cash flow sensitivity analysis for variable rate instruments for segments other than banking and finance segment

A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. This analysis is performed on the same basis for 2011.

Profit or loss Equity 100 bp 100 bp 31 December 2012 increase decrease increase decreaseVariable rate instruments 9,500 (9,746) 509 (577)Cash flow sensitivity (net) 9,500 (9,746) 509 (577) Profit or loss Equity 100 bp 100 bp 31 December 2011 increase decrease increase decreaseVariable rate instruments 2,256 (2,280) 4,149 (4,327)Cash flow sensitivity (net) 2,256 (2,280) 4,149 (4,327)


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41.3 Market risk (continued)

(i) Interest rate risk (continued)

The following table indicates the effective interest rates by major currencies for the major components of the consolidated statements of financial position of the Group for the years ended 31 December:

2012

USD % Euro % TL % Other

currencies % Assets Banking loans and advances to banks 1.00-6.00 1.00-5.00 5.00-13.00 1.00-6.00 Debt and other fixed or floating income

instruments 2.00-12.00 3.00-7.00 4.00-16.00 3.00-10.00 Banking loans and advances to customers 1.00-14.00 1.00-14.00 2.00-23.00 1.00-53.00 Liabilities Deposits

Foreign currency 1.00-7.00 1.00-7.00 -- 1.00-8.00 Bank 1.00-4.00 1.00-5.00 5.00-7.00 1.00-7.00Saving -- -- 4.00-12.00 -- Commercial -- -- 4.00-12.00 -- Public and other deposits -- -- 8.00 --

Obligations under repurchase agreements 1.00-2.00 1.00-5.00 4.00-6.00 6.00-7.00 Bonds payable 3.00-6.25 -- 6.30-9.06 -- Loans and borrowings 1.00-8.00 1.00-13.28 1.00-18.00 2.73-13.95 2011

USD % Euro % TL % Other

currencies % Assets Banking loans and advances to banks 1.00-4.00 1.00-6.00 6.00-13.00 1.00-6.00 Debt and other fixed or floating

income instruments 2.00-11.00 3.00-8.00 6.00-21.00 7.00-11.00 Banking loans and advances to customers 1.00-19.00 2.00-14.00 1.00-26.00 1.00-53.00 Liabilities Deposits

Foreign currency 1.00-7.00 1.00-8.00 -- 1.00-8.00 Bank 1.00-4.00 1.00-5.00 5.00-10.00 1.00-7.00 Saving -- -- 6.00-11.00 -- Commercial -- -- 6.00-11.00 -- Public and other deposits -- -- 10.00 --

Obligations under repurchase agreements 1.00-3.00 1.00-2.00 5.00-11.00 6.00 Bonds payable 6.00 -- 8.00 -- Loans and borrowings 2.07-11.05 0.01-12.27 9.00-16.51 2.72-6.00

(ii) Currency risk

The Group is exposed to currency risk through transactions in foreign currencies and through its investment in foreign operations.

Main foreign operations of the banking and finance segment are in the Netherlands, Romania and Russia. The measurement currencies of these operations are Euro, RON and USD. As the currency in which the Group presents its consolidated financial statements is TL, the consolidated financial statements are affected by currency exchange rate fluctuations against TL.


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(ii) Currency risk (continued)

At 31 December, the currency risk exposures of the Group in TL thousand equivalents are as follows:

2012

USD EuroOther

currencies TotalForeign currency monetary assets Investments in debt securities 594,024 364,615 46,093 1,004,732Other non-current assets 82,048 36,804 13,470 132,322Accounts receivable 354,701 141,840 68,397 564,938Due from related parties 46,836 2,933 4,201 53,970Other current assets 1,322,920 1,248,773 814,519 3,386,212Banking loans and advances to banks and customers 7,762,725 4,083,853 417,316 12,263,894Financial assets at fair value through profit or loss 8,025 1,625 10,146 19,796Cash and cash equivalents 1,454,624 639,228 48,156 2,142,008Total foreign currency monetary assets 11,625,903 6,519,671 1,422,298 19,567,872Foreign currency monetary liabilities Loans and borrowings 6,673,685 2,772,059 41,105 9,486,849Bonds payable 936,202 -- -- 936,202Subordinated liabilities -- 35,609 -- 35,609Other non-current liabilities 99,182 102,032 36,060 237,274Deposits 6,228,353 4,180,388 1,040,530 11,449,271Obligations under repurchase agreements 332,455 76,507 36,692 445,654Accounts payable 432,154 264,118 21,351 717,623Due to related parties -- -- 532 532Other current liabilities 108,552 132,804 98,542 339,898Total foreign currency monetary liabilities 14,810,583 7,563,517 1,274,812 23,648,912Gross statement of financial position exposure (3,184,680) (1,043,846) 147,486 (4,081,040)

Off balance sheet exposure 454,034 (168,388) 17,157 302,803

Net exposure (2,730,646) (1,212,234) 164,643 (3,778,237)


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2011

USD EuroOther

currencies TotalForeign currency monetary assets Investments in debt securities 886,653 383,349 46,650 1,316,652Other non-current assets 30,869 31,930 54,960 117,759Accounts receivable 297,737 215,840 125,171 638,748Due from related parties -- -- 97 97Other current assets 110,914 1,423,495 404,002 1,938,411Banking loans and advances to banks and customers 8,515,829 4,336,442 657,961 13,510,232Financial assets at fair value through profit or loss 10,023 1,825 19,223 31,071Cash and cash equivalents 2,532,220 526,791 35,021 3,094,032Total foreign currency monetary assets 12,384,245 6,919,672 1,343,085 20,647,002Foreign currency monetary liabilities Loans and borrowings 5,987,411 2,571,652 24,054 8,583,117Bonds payable 384,019 -- -- 384,019Subordinated liabilities 229,595 39,146 -- 268,741Other non-current liabilities 80,385 10,175 36,735 127,295Deposits 5,374,816 4,179,255 1,085,371 10,639,442Obligations under repurchase agreements 720,664 54,183 38,861 813,708 Accounts payable 364,312 495,691 61,865 921,868Due to related parties 20 9 940 969Other current liabilities 155,412 33,455 114,389 303,256Total foreign currency monetary liabilities 13,296,634 7,383,566 1,362,215 22,042,415Gross statement of financial position exposure (912,389) (463,894) (19,130) (1,395,413)Off balance sheet exposure (131,884) (416,719) 168,101 (380,502)Net exposure (1,044,273) (880,613) 148,971 (1,775,915)

For the purposes of the evaluation of the table above, the figures represent the TL equivalent of the related hard currencies.


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Sensitivity analysis

A 10 percent weakening of TL against the above currencies at 31 December would have increased (decreased) profit or loss before tax and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2011.

Equity Profit or loss 31 December 2012 USD (1,910) (271,155)Euro (1,172) (120,051)Others (148) 16,612 31 December 2011 USD (169) (104,258)Euro (73) (87,988)Others (9) 14,906

A 10 percent of strengthening of TL against the above currencies at 31 December would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

41.4 Fair value information

Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale of liquidation, and is best evidenced by a quoted market price.

The estimated fair values of financial instruments have been determined using available market information by the Group, and where it exists, using appropriate valuation methodologies. However, judgment is necessarily required to interpret market data to determine the estimated fair value. Turkey has shown signs of an emerging market and has experienced a significant decline in the volume of activity in its financial market. While the management of the Group has used available market information in estimating the fair values of financial instruments, the market information may not be fully reflective of the value that could be realised in the current circumstances.

Management has estimated that the fair values of certain financial assets and financial liabilities are not materially different than their recorded values except for loans and advances to customers and investment securities. These financial assets and financial liabilities include loans and advances to banks, obligations under repurchase agreements, loans and advances from banks, and other short-term assets and liabilities that are of a contractual nature. Management believes that the carrying amounts of these particular financial assets and liabilities approximate their fair values, partially due to the fact that it is a practice to renegotiate interest rates to reflect current market conditions.


153


41.4 Fair value information (continued)

As at 31 December 2012, the fair value of banking loans and advances to customers was TL 23,813,544 thousand (31 December 2011: TL 21,598,381 thousand), whereas the carrying amount was TL 23,964,214 thousand (31 December 2011: TL 21,766,559 thousand).

As at 31 December 2012, the fair value of investment in debt securities was TL 9,628,368 thousand (31 December 2011: TL 8,666,628 thousand), whereas the carrying amount was TL 9,604,227 thousand (31 December 2011: TL 8,610,758 thousand).

The table below analyses financial instruments carried at fair value as at 31 December, by valuation method:

2012 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss 77,889 53,212 1,011 132,112 Derivative financial assets 1,383 171,647 -- 173,030 Debt and other instruments available-for-sale 8,726,197 3,588 537,934 9,267,719Financial assets at fair value 8,805,469 228,447 538,945 9,572,861 Derivative financial liabilities -- 227,230 -- 227,230Financial liabilities at fair value -- 227,230 -- 227,230 2011 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss 91,505 49 9,023 100,577 Derivative financial assets 1,188 251,563 -- 252,751 Debt and other instruments available-for-sale 6,071,525 -- 1,392,859 7,464,384 Financial assets at fair value 6,164,218 251,612 1,401,882 7,817,712 Derivative financial liabilities 23 306,355 -- 306,378 Financial liabilities at fair value 23 306,355 -- 306,378

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly (as prices) or indirectly (derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

42 Use of estimates and judgments

Management discussed with the Audit Committee the development, selection and disclosure of the Group’s critical accounting policies and estimates, and the application of these policies and estimates. These disclosures supplement the commentary on basis of preparation (see note 2(d)).

Key sources of estimation uncertainty

Allowance for credit losses

Assets accounted for at amortised cost are evaluated for impairment on a basis described in accounting policy note 3(m).


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42 Use of estimates and judgments (continued)

Key sources of estimation uncertainty (continued)

Allowance for credit losses (continued)

The specific counterparty component of the total allowances for impairment applies to claims evaluated individually for impairment and is based upon management’s best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgment about counterparty’s financial situation and the net realisable value of any underlying collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by the credit risk function.

Portfolio-basis assessed impairment allowances cover credit losses inherent in portfolios of claims with similar economic characteristics when there is objective evidence to suggest that they contain impaired claims, but the individual impaired items cannot yet be identified. A component of portfolio-basis assessed allowances is for country risks. In assessing the need for collective loan loss allowances, management considers factors such as credit quality, portfolio size, concentrations, and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on how well these estimate future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances.

Determining fair values

The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in significant accounting policies and Note 4. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

Critical accounting judgments in applying the Group’s accounting policies

Critical accounting judgments made in applying the Group’s accounting policies include:

Financial asset and liability classification

The Group’s accounting policies provide scope for assets and liabilities to be designated on inception into different accounting categories in certain circumstances:

In classifying financial assets or liabilities as “trading”, the Group has determined that it meets the description of trading assets and liabilities set out in accounting policy 3(d) financial instruments.

In designating financial assets or liabilities at fair value through profit or loss, the Group has determined that it has met one of the criteria for this designation set out in accounting policy 3(d) financial instruments.

In classifying financial assets as held-to-maturity, the Group has determined that it has both the positive intention and ability to hold the assets until their maturity date as required by accounting policy 3(d) financial instruments.


155

42 Use of estimates and judgments (continued)

Critical accounting judgments in applying the Group’s accounting policies (continued)

Securitisations

In applying its policies on securitised financial assets, the Group has considered both the degree of transfer of risks and rewards on assets transferred to another entity and the degree of control exercised by the Group over the other entity:

When the Group, in substance, controls the entity to which financial assets have been transferred, the entity is included in these consolidated financial statements and the transferred assets are recognised in the Group’s consolidated statement of financial position.

When the Group has transferred financial assets to another entity, but has not transferred substantially all of the risks and rewards relating to the transferred assets, the assets are recognised in the Group’s consolidated statement of financial position.

When the Group transfers substantially all the risks and rewards relating to the transferred assets to an entity that it does not control, the assets have been derecognised from the Group’s consolidated statement of financial position.

Details of the Group’s securitisation activities are given in Note 30.


156

43 Group enterprises

The major changes in Group enterprises during the year ended 31 December 2012 are summarised in the following paragraphs:

Establishment of new entities

On 5 January 2012 Doğuş Holding has established Doğuş Cennet Koyu Sağlıklı Yaşam Hizmetleri Ticaret Anonim Şirketi. The area of operation of the entity was healthcare counseling and hospitality, but at the reporting date it is a non operating company.

On 24 January 2012, Doğuş Yayın Grubu has established Star Yapım ve Prodüksiyon Hizmetleri Anonim Şirketi. The area of operation of the entity is producing radio and television programs.

On 14 February 2012, Doğuş Holding has established D Marine Investments Holding Coöperatief U.A. in the Netherlands. The area of operation of the entity is marina management.

On 15 February 2012, Doğuş Holding has established D Marine Investments Holding B.V. in the Netherlands. The area of operation of the entity is marina management.

On 29 February 2012, Doğuş Holding has established Doğuş Perakende Satış, Giyim ve Aksesuar Ticaret Anonim Şirketi. The area of operation of the entity is retail services.

On 12 March 2012, Doğuş Holding has established Nahita Restoran İşletmeciliği ve Yatırım Anonim Şirketi. The area of operation of the entity is establishment and management of restaurants and cafes.

On 13 March 2012, Doğuş Yayın Grubu has established HD Yayıncılık ve Medya Hizmetleri Anonim Şirketi. The area of operation of the entity is radio and television broadcasting activities.

On 17 April 2012, Doğuş Holding has established D Marina İşletmeciliği Turizm ve Yönetim Hizmetleri Anonim Şirketi. The area of operation of the entity is marina management.

On 15 May 2012, Doğuş Yayın Grubu has established VYG Radyo ve Televizyon Yayıncılık Anonim Şirketi. The area of operation of the entity is producing radio and television programs.

On 15 May 2012, Doğuş Yayın Grubu has established N Spor Radyo ve Televizyon Yayıncılık Anonim Şirketi. The area of operation of the entity is producing sport radio and television programs.

On 16 May 2012, Doğuş Yayın Grubu has established Doğuş Video ve Dijital Yayıncılık Anonim Şirketi. The area of operation of the entity is producing social websites and digital games.

On 22 May 2012, Doğuş Yayın Grubu has established Kral Pop Avrupa Radyo ve Televizyon Yayıncılığı Anonim Şirketi. The area of operation of the entity is producing radio and television programs.

On 20 June 2012, Doğuş Holding and SK Planet Co. Ltd. have jointly established Doğuş Planet Elektronik Ticaret ve Bilişim Hizmetleri Anonim Şirketi. The area of operation of the entity is e-commerce.

On 25 June 2012, Doğuş Group has established Doğuş Enerji Toptan Elektrik Ticaret Anonim Şirketi. The area of operation of the entity is purchasing and selling of electricity.


157

43 Group enterprises (continued)

Establishment of new entities (continued)

On 19 July 2012, Doğuş İnşaat has established Dogus Construction LLC in the Qatar. The area of operation of the entity is construction.

On 15 August 2012, Doğuş İnşaat has established Dogus Oman LLC in the Oman. The area of operation of the entity is construction

On 15 August 2012, Doğuş Holding has established D Eğlence Bar Restoran İşletmeciliği ve Yatırım Anonim Şirketi. The area of operation of the entity is establishment and management of restaurants and cafes.

On 27 September 2012, Doğuş Holding has established Doğuş Tarımsal Projeler Araştırma Geliştirme Hizmetleri Anonim Şirketi. The area of operation of the entity is research and development activities of agricultural products.

On 2 October 2012, Doğuş Holding has established Doğuş Otel İşletmeciliği ve Yönetim Hizmetleri Anonim Şirketi. The area of operation of the entity is hotel management.

On 9 October 2012, Doğuş Holding has established IMG Doğuş Spor Moda ve Medya Hizmetleri ve Ticaret Anonim Şirketi. The area of operation of the entity is sports activities.

On 27 November 2012, Group has established Dream International Coöperatif U.A. in the Netherlands. The area of operation of the entity is investing.

On 28 November 2012, Group has established Dream International B.V. in the Netherlands. The area of operation of the entity is investing.

On 14 December 2012, Doğuş Holding has established D Koruma ve Güvenlik Hizmetleri Anonim Şirketi. The area of operation of the entity is security and protection activities.

Change in structure/ title

On 3 April 2012, Doğuş Yeni İnternet Reklam ve Pazarlama Hizmetleri Anonim Şirketi has changed its legal name as “Doğuş Yeni İnternet Reklam Pazarlama ve Turizm Hizmetleri Anonim Şirketi”.

On 3 April 2012, Doğuş E Alışveriş ve Ticaret Anonim Şirketi has changed its legal name as “Enmoda E Alışveriş ve Ticaret Anonim Şirketi”.

On 2 May 2012, Atami Turizm İşletmeciliği ve Ticaret Anonim Şirketi has changed its legal name as “D Otel Bodrum Sağlıklı Yaşam Hizmetleri Ticaret Anonim Şirketi”.

On 16 May 2012, E2 Radyo ve Televizyon Yayıncılığı Anonim Şirketi has changed its legal name as “Star Avrupa Radyo ve Televizyon Yayıncılığı Anonim Şirketi”.

On 17 August 2012, Doğuş Uydu Haberleşme ve Teknik Hizmetler Anonim Şirketi has changed its legal name as “Uydu Dijital İnternet Teknolojileri Anonim Şirketi”.


158

43 Group enterprises (continued)

Liquidation of entities

On 10 January 2012, liquidation of Doğuş Investment was finalised.

On 6 February 2012, Garanti Bank has ended its operations with T-2 Capital Finance Company, one of its special purpose entities.

On 14 May 2012, liquidation of Doğuş Mandalina Razvitak was finalised.

On 27 June 2012, liquidation of Doğuş İnşaat d.o.o. was finalised.

On 24 September 2012, liquidation of Doğuş Poland was finalised.

On 1 October 2012, liquidation of Ayson Hydro Gradenje d.o.o was finalised.

Doğuş Auto Mısr LLC, Doğuş Auto Mısır JS, Doğuş Finance Ukraine and Doğuş Prestige are under liquidation as at 31 December 2012.

Sale of subsidiaries

Four subsidiaries of Doğuş Yayın Grubu, N Radyo, İkibinondokuz, VYG Radyo and N Spor, were sold to Frekans Radyo ve Televizyon Yayıncılık Anonim Şirketi (“Frekans”) on 25 December 2012. The share purchase and sales agreement have been signed between Doğuş Yayın Grubu and Frekans on 25 December 2012.

Mergers

On 29 June 2012, Kapital Radyo merged with Star TV.

On 24 July 2012, Doğuş Yeme İçme merged with Doğuş Holding.


159

44 Significant events

44.1 Garanti Bank won the tender for Turkish Airlines Frequent Flyer Program Miles&Smiles Co-Branded Credit Card dated 16 January 2012 and accordingly, Garanti Bank and Türk Hava Yolları Anonim Ortaklığı (“THY”) signed an agreement on 6 April 2012 to cooperate for 5 years on this matter.

44.2 On 25 January 2012, Doğuş Holding and SK Planet Co. Ltd. have signed a memorandum of understanding to establish new internet partnership in the field of e-commerce. On 6 December 2012, Group and Solaris Partners Pte has applied to the Turkish Competition Authority to establish a jointly control entity, Doğuş SK Girişim Sermayesi Yatırım Ortaklığı Anonim Şirketi.

44.3 At the meeting of Garanti Bank’s Board of Directors held on 14 July 2011, it has been resolved to issue TL denominated bank bills up to an amount of TL 239,500 thousand (Group share) in various maturities in the domestic market. Accordingly, the related approvals were obtained, and the issuance of TL denominated bank bills amounting TL 155,675 thousand (Group share) with 176-days maturity and annual compound interest rate of 10.98 percent, and TL 83,825 thousand (Group share) with 92-days maturity and annual compound interest rate of 10.96 percent was started on 23 January 2012 and completed on 26 January 2012.

44.4 On 6 February 2012, Garanti Bank has repaid the subordinated debt of USD 120 million (Group share) obtained on 5 February 2007 with a maturity of ten years and interest rate of 6.95 percent, using the repayment option. The necessary permissions were obtained from BRSA.

44.5 It was announced on 14 February 2012 that Garanti Bank has applied to BRSA and CMB for the issuance of bank bonds and/or debentures in TL currency with varying maturity dates, up to the aggregate amount of TL 1,198 million (Group share). In this regard, BRSA notified that the application for the issuance of bank bonds and/or debentures in TL currency up to the aggregate amount of TL 1,198 million (Group share), including all unmatured and domestically issued TL denominated bonds in the amount of TL 599 million (Group share) has been approved.

44.6 On 17 February 2012, the Turkish Constitutional Court decided to cancel the Article 5 of the Law no. 6009 regarding investment allowance exemption for taxation and the cancelation of the article was promulgated in the Official Gazette no. 28208 dated 18 February 2012. Accordingly, taxpayers are allowed to benefit from the investment incentive without any limitation.

44.7 On 15 March 2012, Doğuş Group has acquired 97 percent shares of Atami Turizm İşletmeciliği ve Ticaret Anonim Şirketi. The closing agreement regarding the acquisition has been signed on 15 March 2012. The ultimate aim of the Group in the acquisition is to renovate the hotel building to be used for healthcare and hospitality.

44.8 Dogus Management Services Limited and Abraaj General Partner VIII Limited have entered into a Capital Commitment and Subscription Agreement (Abraaj Buyout Fund IV) dated 19 March 2012 for investment purposes.

44.9 On 21 March 2012, a sales agreement has been signed between the Group and Vipindirim Elektronik Hizmetler ve Ticaret Anonim Şirketi regarding the sale of 75 percent ownership rights of Doğuş E Alışveriş ve Ticaret Anonim Şirketi, which is the Company for the Internet portal “enmoda”, a portal for private online shopping.

44.10 The Group management has decided to take the necessary actions regarding the sales of two touristic premises located in Side, Antalya, namely Aldiana Side (a holiday village) and Paradise Side Beach (an apart hotel).

44.11 On 24 February 2012, Doğuş Holding and Doğuş Arge have entered into a share purchase and sale agreement to buy 40 percent of the shares of Hedef Medya and its subsidiary Altın Mecralar. By the approval of Competition Board, the closing has been realised on 4 April 2012.


160

44 Significant events (continued)

44.12 The Group has entered into a distribution agreement with Hublot and franchise agreement with Porsche Design, on 9 July 2012 and 10 July 2012, respectively.

44.13 On 16 July 2012, advance payment amounting to Euro 54,698 thousand has been made by Istanbul Municipality for the construction of Üsküdar-Ümraniye-Çekmeköy Metro and electromechanical works to Doğuş İnşaat.

44.14 Doğuş İnşaat has been awarded for the construction of Konya-Akşehir-Afyon Road by The Republic of Turkey General Directorate of Highways. The construction contact has been signed on 10 July 2012. Significant terms of the project are as follows:

Customer: Republic of Turkey General Directorate of Highways Contract value: TL 86,225 thousand Doğuş İnşaat share: 100 percent Date of contract: 10 July 2012 Date of completion: March 2014

44.15 On 24 July 2012, Doğuş Holding has repaid its five year club loan amounting to USD 300 million on its maturity.

44.16 At the meeting of the Garanti Bank’s Board of Directors held on 18 July 2012, it has been resolved to issue USD denominated eurobonds up to an amount of USD 359,250 thousand (Group share) in various maturities in the foreign market. Accordingly, the related approvals were obtained, and the issuance of USD denominated bonds amounting to USD 143,700 thousand (Group share) due 13 September 2017 with an annual compound interest rate of 4.175 percent and a coupon rate of 4.00 percent, and USD 179,625 thousand (Group share) due on 13 September 2022 with an annual compound interest rate of 5.375 percent and a coupon rate of 5.25 percent have been completed as of 7 September 2012.

44.17 On 5 September 2012, Doğuş Holding has obtained a dual-tranche club loan with three years maturity amounting to USD 160 million and Euro 75 million. The proceeds of the term loan will be used for general financing purposes.

44.18 Garanti Bank’s representative office in Moscow has ceased to operate effective from 1 October 2012 following the permission of the related authorities in this country.

44.19 At the Board of Directors’ meeting of Garanti Bank held on 11 October 2012, the following resolutions has been taken;

Increasing the paid-in capital of Garanti Holding BV operating in the Netherlands by Euro 4.7 million (Group share) and,

Granting a secondary subordinated loan amounting to Euro 2.4 million (Group share) to Garanti Bank SA (a subsidiary of Garanti Holding BV) operating in Romania.

44.20 Regulation about procedures regarding with the listing process of frequency lines of Terrestrial Broadcasts” prepared with the aim of performing of frequency plans, licensing of all terrestrial broadcasts and determination of bidding during the process were put in effect with the publication of official gazette dated 9 November 2012.

In accordance with the regulation, type of broadcasting license, technical information and number of frequency line will be announced through the Trade Registry upon approval by RTUK under basis of frequency plans. The life of broadcasting license will be limited to the ten years’ duration.


161

44 Significant events (continued)

44.21 On 21 November 2012, Uydu Dijital İnternet Teknolojileri Anonim Şirketi (“Uydu Dijital”) and World Wide Entertainment Medya Ticaret Anonim Şirketi (“World Wide”) have jointly established a new partnership agreement. According to this agreement, Uydu Dijital has purchased total 270 thousand shares in World Wide representing share capital with a total nominal value of TL 270 thousand (equivalent to 30 percent share).

44.22 On 23 November 2012, Garanti Bank has signed a syndicated loan agreement with 1 year maturity, comprising two separate tranches in the amount of USD 73,886 thousand (Group share) and Euro 147,412 thousand (Group share) in London. The loan which will be used for trade finance purposes has been executed with commitments received from 37 banks from 18 countries. The all-in cost has been realised as Libor+1.25 percent and Euribor+1.25 percent, respectively.

44.23 On 7 December 2012, Group, D Marine Investments Holding BV, Latsis Group and Lamda Development SA have signed a joint venture agreement for the partnership at Flisvos Marina in Athens. The share transfer has not been finalised and the closing agreement has not been signed as at the reporting date.

45 Subsequent events 45.1 As a result of the investigation of the Turkish Competition Board initiated based on its decision no.

11-55/1438-M dated 2 November 2011, the Turkish Competition Board imposed an administrative fine with its summary decision dated 8 March 2013, amounting to TL 213,385 thousand (the Group share TL 38,329 thousand) against the economic group composed of Garanti Bank, GÖSAŞ and Garanti Konut with an option to pay 75 percent of such administrative fine which is TL 160,038 thousand (the Group share TL 38,329 thousand) in accordance with the Article 17 of the Law on Misdemeanors no. 5326 with the right to appeal to Ankara Administrative Courts, on the ground that the Article 4 of the aforementioned Law was violated. The full decision of the Turkish Competition Board has not been notified yet.

45.2 On 21 March 2013, Antur has established Alantur Turizm ve Ticaret Anonim Şirketi. The area of operation of the entity is hotel management.

45.3 On 21 March 2013, Nahita has acquired 70 percent of shares of Mezzaluna Gıda İşletmecilik Sanayi ve Ticaret Anonim Şirketi.

45.4 At Board of Directors Meeting held on 22 March 2013, Doğuş Gayrimenkul has decided to transfer Gebze Center AVM to Doğuş GYO through partial de-merger.

45.5 On 28 March 2013, Doğuş Holding and Solaris Partners Pte have jointly established Doğuş SK Girişim Sermayesi Yatırım Ortaklığı Anonim Şirketi.

45.6 On 3 April 2013, Doğuş Holding has acquired 70 percent of shares of Vitapark Spor Turizm Hizmet İnşaat ve Ticaret Anonim Şirketi.

45.7 On 9 April 2013, Garanti Bank and Fibabanka Anonim Şirketi (“Fibabanka”) have signed an agreement in order to let Fibabanka to benefit from Bonus Credit Card Program, which is created and operated by Garanti Bank, and to issue Bonus Credit Cards. Within the context of such agreement, Fibabanka will be able to issue Bonus Credit Cards by using the name “Bonus” together with its own name and logo, and market to its customers.


162

45 Subsequent events (continued)

45.8 As a result of the inspections held by the Istanbul Large-Scale Taxpayers Office of the Tax Inspection Board regarding the banking and insurance transaction tax (BITT), it was claimed that the payments made under the name of “service fee” by Garanti Bank’s contracted merchants to an institution other than Garanti Bank itself in the years 2007, 2008, 2009 and 2010, should have been collected by Garanti Bank, because of this application Garanti Bank undercalculated the BITT, and accordingly, the tax audit reports for the relevant years were prepared.

The tax audit report and tax/penalty notifications for the year 2007 were sent to Garanti Bank. The audit reports for other years are also expected to be notified. The total tax assessment including fines for the years 2007, 2008, 2009 and 2010 is estimated to be approximately at the level of TL 8,694 thousand (Group share). In accordance with the conciliation provisions of the Tax Procedure Law, Garanti Bank has reached an agreement to pay the fined tax assessment in the amount of TL 3,165 thousand (Group share) following the negotiations with Large Taxpayers Office Commission of Conciliation and legal process for this issue has been finalised on 12 April 2013.

45.9 Doğuş İnşaat has given the lowest price in the tender of Tokat Niksar Road Project of which the terms are described below. The process to sign the contract with the employer is currently underway.

Customer: Republic of Turkey General Directorate of Highways Contract value: TL 326,900 thousand Doğuş İnşaat share: 50 percent Type: 49 km road project Duration: 830 days

Appendix I

Doğuş Holding Anonim Şirketi and its Subsidiaries Supplementary Information Convenience Translation to US Dollar 31 December 2012

163

The US Dollar ("USD") amounts shown in the consolidated statement of financial position and consolidated statement of comprehensive income on the following pages have been included solely for the convenience of the reader.

For the current year’s consolidated financial statements, USD amounts are translated from TL consolidated financial statements using the official TL exchange rate of 1.7826 TL/USD prevailing on 31 December 2012. For the prior year’s consolidated financial statements, USD amounts are translated from TL consolidated financial statements using the official TL exchange rate of 1.8889 TL/USD prevailing on 31 December 2011. Such translation should not be construed as a representation that the TL amounts have been converted into USD pursuant to the requirements of IFRSs or Generally Accepted Accounting Principles in the United States of America or in any other country.

Appendix I.1

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Financial Position As at 31 December 2012 Amounts translated into thousands of USD for convenience purposes only

164

31 December

2012 31 December

2011

Assets Property and equipment 2,721,729 2,076,275 Intangible assets 1,358,365 852,371 Investments in debt securities 3,179,290 4,137,793 Investments in equity securities 78,300 28,881 Accounts receivable 509,882 328,062 Banking loans and advances to customers 8,072,968 6,697,046 Banking loans and advances to banks 631,084 637,079 Financial assets at fair value through profit or loss 44,095 24,102 Investment property 1,228,076 1,007,510 Other non-current assets 329,901 244,375 Deferred tax assets 165,070 83,124 Assets held for sale 17,267 16,186

Total non-current assets 18,336,027 16,132,804 Inventories 354,950 357,917 Accounts receivable 701,899 526,360 Due from related parties 220,314 135,600 Other current assets 2,093,111 1,277,866 Investments in debt securities 2,208,474 420,817 Banking loans and advances to customers 5,370,437 4,826,359 Banking loans and advances to banks 633,136 1,294,328 Financial assets at fair value through profit or loss 30,017 29,144 Cash and cash equivalents 1,478,238 1,947,861 Assets held for sale 35,952 35,285

Total current assets 13,126,528 10,851,537 Total assets 31,462,555 26,984,341

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Financial Position (continued) As at 31 December 2012 Amounts translated into thousands of USD for convenience purposes only

165

31 December

2012 31 December

2011

Equity Paid-in capital 1,152,974 1,088,089 Capital stock held by subsidiaries (53,030) (52,282) Share premium 89,392 84,361 Fair value reserve 138,599 6,306 Translation reserve 19,101 24,060 Hedging reserve (3,125) (4,270) Revaluation surplus 617,935 561,321 Legal reserves 201,653 150,501 Retained earnings 3,895,757 3,364,421

Total equity attributable to owners of the Company

6,059,256 5,222,507

Non-controlling interests Şahenk Family 58,685 56,446 Others 184,955 128,878

Total non-controlling interests 243,640 185,324

Total equity 6,302,896 5,407,831

Liabilities Loans and borrowings 3,652,731 3,087,357 Bonds payable 534,998 203,303 Subordinated liabilities 19,976 141,283 Deposits 199,364 213,884 Obligations under repurchase agreements -- 151,476 Accounts payable 474,833 469,285 Deferred tax liabilities 186,244 106,116 Other non-current liabilities 548,675 444,683

Total non-current liabilities 5,616,821 4,817,387

Loans and borrowings 2,773,439 2,465,752 Bonds payable 288,055 271,165 Subordinated liabilities -- 991 Deposits 12,917,429 11,450,614 Obligations under repurchase agreements 1,895,329 1,336,845 Accounts payable 593,253 347,146 Due to related parties 5,310 3,610 Taxes payable on income 52,040 17,253 Other current liabilities 1,017,983 865,747

Total current liabilities 19,542,838 16,759,123

Total liabilities 25,159,659 21,576,510

Total equity and liabilities 31,462,555 26,984,341

Appendix I.2

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement Comprehensive Income For the Year Ended 31 December 2012 Amounts translated into thousands of USD for convenience purposes only

166

2012

2011

Revenues 6,170,771 5,256,585

Cost of revenues (4,605,243) (3,905,558)

Gross profit 1,565,528 1,351,027

Administrative expenses (758,125) (629,895)

Selling, marketing and distribution expenses (165,456) (128,448)

Impairment losses, net (167,167) (144,788)

Trading gain, net 22,895 93,682

Other income 187,289 1,415,753

Other expenses (127,546) (127,892)

Result from operating activities 557,418 1,829,439

Finance income 189,245 184,856

Finance costs (177,738) (339,005)

Net finance income / (costs) 11,507 (154,149)

Share of profit of equity accounted investees 30,085 4,237

Profit before income tax 599,010 1,679,527

Income tax expense (125,922) (231,114)

Profit for the year 473,088 1,448,413

Other comprehensive income

Revaluation of property and equipment 36,023 (2,824)

Change in fair value of available-for-sale financial assets 159,747 (297,412)

Change in translation reserve (6,393) 22,276

Effective portion of changes in fair value of cash flow hedges 1,400 (110)

Income tax on other comprehensive income (28,881) 54,138

Other comprehensive income for the year, net of income tax 161,896 (223,932)

Total comprehensive income for the year 634,984 1,224,481

Profit attributable to:




-Others 46,722 18,970

473,088 1,448,413

Total comprehensive income attributable to:




-Others 48,413 20,682

634,984 1,224,481

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