dogus holding ifrs report 31122010 final

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 2010 Currency: Thousands of Turkish Lira (“TL”)

1

Notes 31 December

2010 31 December

2009 (*) 1 January

2009 (*)Assets Property and equipment 14 3,310,288 2,824,971 2,575,568 Intangible assets 15 1,114,392 1,168,344 1,197,110 Investments in debt securities 16 9,067,893 8,207,282 6,800,593 Investments in equity securities 17 73,144 53,584 48,269 Accounts receivable 21 13,741 6,118 62,630 Banking loans and advances to customers 24 12,476,609 8,925,379 8,886,696 Banking loans and advances to banks 25 1,375,606 1,390,257 612,456 Financial assets at fair value through profit or loss 26 108,718 39,821 47,251 Investment property 18 1,528,750 1,218,187 1,052,924 Other non-current assets 19 456,958 475,196 437,970 Deferred tax assets 13 237,683 192,287 165,738 Total non-current assets 29,763,782 24,501,426 21,887,205 Inventories 20 565,144 474,405 774,782 Accounts receivable 21 1,888,425 1,531,052 1,151,907 Due from related parties 39 126,791 10,751 14,998 Other current assets 23 1,549,220 1,263,943 1,127,742 Investments in debt securities 16 3,143,254 3,085,304 1,172,080 Banking loans and advances to customers 24 8,513,765 7,692,659 7,673,470 Banking loans and advances to banks 25 1,591,059 1,864,621 1,806,426 Financial assets at fair value through profit or loss 26 133,554 140,563 29,701 Cash and cash equivalents 27 2,010,936 2,358,320 2,256,649 Total current assets 19,522,148 18,421,618 16,007,755 Total assets 49,285,930 42,923,044 37,894,960

(*) See note 2 (f)

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

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Financial Position As at 31 December 2010 Currency: Thousands of TL

2

Notes 31 December

2010 31 December

2009 (*) 1 January

2009 (*) Equity Paid-in capital 2,055,292 2,010,192 2,010,192 Capital stock held by subsidiaries

(98,755) (53,655) (53,655)Share premium 159,350 159,350 159,350 Fair value reserves 484,725 398,523 36,490 Translation reserve 3,368 46,888 49,421 Hedging reserve (7,859) (8,226) 7,362 Revaluation surplus 1,086,198 1,081,534 1,024,867 Legal reserves 270,507 211,758 193,883 Retained earnings 3,748,970 2,882,502 2,128,251 Total equity attributable to owners of the Company

7,701,796 6,728,866 5,556,161

Non-controlling interests Şahenk Family 100,291 106,751 100,530 Others 178,668 123,681 100,107 Total non-controlling interests 278,959 230,432 200,637

Total equity 28 7,980,755 6,959,298 5,756,798

Liabilities Long-term bank borrowings 29 6,271,098 5,039,922 4,299,548 Subordinated liabilities 30 295,764 289,942 270,246 Deposits 34 385,622 321,814 387,003 Obligations under repurchase agreements 35

-- 47,103 172,771

Deferred tax liabilities 13 155,889 149,954 125,297 Retirement benefit obligations 32 -- -- 31,006 Other non-current liabilities 31 694,754 753,982 646,005 Total non-current liabilities 7,803,127 6,602,717 5,931,876

Subordinated liabilities 30 -- 9,469 16,098 Short-term bank borrowings 33 2,671,315 2,241,507 1,969,524 Short-term portion of long-term bank borrowings 29

1,018,001 1,301,579 1,435,814

Deposits 34 23,429,175 20,347,308 17,031,352 Obligations under repurchase agreements 35

3,548,767 3,207,075 3,197,720

Accounts payable 36 1,141,354 873,612 1,332,582 Due to related parties 39 61,912 3,470 3,695 Taxes payable on income 13 99,279 70,606 39,028 Other current liabilities 37 1,532,245 1,306,403 1,180,473 Total current liabilities 33,502,048 29,361,029 26,206,286

Total liabilities 41,305,175 35,963,746 32,138,162

Total equity and liabilities 49,285,930 42,923,044 37,894,960

(*) See note 2 (f)


Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Comprehensive Income For the Year Ended 31 December 2010 Currency: Thousands of TL

3

Notes 2010

2009

Revenues 8,654,592 7,819,616

Cost of revenues (5,910,319) (5,152,306)

Gross profit 8 2,744,273 2,667,310

Administrative expenses 9 (1,153,172) (1,028,810)

Selling, marketing and distribution expenses (204,878) (143,407)

Impairment losses, net 10 (89,106) (589,438)

Trading gain, net 26 95,746 219,638

Other operating income, net 11 33,081 8,090

Result from operating activities 1,425,944 1,133,383

Finance income 476,239 616,883

Finance expense (581,656) (686,581)

Net finance costs 12 (105,417) (69,698)

Share of profit of equity accounted investees 17,667 5,755

Profit before income tax 1,338,194 1,069,440

Income tax expense 13 (321,423) (267,423)

Profit for the year 1,016,771 802,017

Other comprehensive income

Revaluation of property and equipment (16,570) 87,183

Change in fair value of available-for-sale financial assets 114,201 383,860

Change in translation reserve (43,520) (2,533)

Effective portion of changes in fair value of cash flow hedges 367 (15,588)

Income tax on other comprehensive income 13 3,007 (24,448)

Other comprehensive income for the year, net of income tax 57,485 428,474

Total comprehensive income for the year 1,074,256 1,230,491

Profit attributable to:

Owners of the Company 966,015 782,887

Non-controlling interests 28 50,756 19,130

-Şahenk Family 8,069 7,415

-Others 42,687 11,715

1,016,771 802,017

Total comprehensive income attributable to:

Owners of the Company 1,028,131 1,199,331

Non-controlling interests 46,125 31,160


-Others 39,554 24,257

1,074,256 1,230,491


Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Changes in Equity For the Year Ended 31 December 2010 Currency: Thousands of TL


Attributable to owners of the Company

Capital stock Fair Non-

Paid-in held by Share Translation value Hedging Revaluation Legal Retained controlling Total

capital subsidiaries premium reserve reserve reserve surplus reserves earnings Total interests equity

Balances at 1 January 2009 2,010,192 (53,655) 159,350 49,421 36,490 7,362 1,024,867 193,883 2,128,251 5,556,161 200,637 5,756,798

Total comprehensive income for the year

Profit for the year -- -- -- -- -- -- -- -- 782,887 782,887 19,130 802,017


Net fair value losses from cash flow hedges, net of tax -- -- -- -- -- (15,588) -- -- -- (15,588) -- (15,588)

Net market value gain from available-for-sale portfolio, net of tax -- -- -- -- 399,542 -- -- -- -- 399,542 -- 399,542

Transferred to net income from fair value increases, net of tax -- -- -- -- (37,509) -- -- -- -- (37,509) -- (37,509)

Foreign currency translation differences for foreign operations -- -- -- (2,533) -- -- -- -- -- (2,533) -- (2,533) Change in revaluation surplus, net of tax -- -- -- -- -- -- 56,667 -- 15,865 72,532 12,030 84,562

Total other comprehensive income -- -- -- (2,533) 362,033 (15,588) 56,667 -- 15,865 416,444 12,030 428,474

Total comprehensive income for the year -- -- -- (2,533) 362,033 (15,588) 56,667 -- 798,752 1,199,331 31,160 1,230,491

Transactions with owners, recorded directly in equity Adjustments to retained earnings for a new proportionately consolidated joint venture -- -- -- -- -- -- -- -- (1,647) (1,647) -- (1,647)

Transfers -- -- -- -- -- -- -- 17,875 (17,875) -- (974) (974)

Dividends paid -- -- -- -- -- -- -- -- (24,979) (24,979) (306) (25,285)

Change in non-controlling interests on consolidated subsidiaries -- -- -- -- -- -- -- -- -- -- (85) (85)

Total transactions with owners -- -- -- -- -- -- -- 17,875 (44,501) (26,626) (1,365) (27,991)

Balances at 31 December 2009 2,010,192 (53,655) 159,350 46,888 398,523 (8,226) 1,081,534 211,758 2,882,502 6,728,866 230,432 6,959,298

4

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Changes in Equity (continued) For the Year Ended 31 December 2010 Currency: Thousands of TL

Attributable to owners of the Company

Paid-incapital

Capital stockheld by

subsidiariesShare

premiumTranslation

reserve

Fairvalue

reserveHedging

reserveRevaluation

surplusLegal

reservesRetained earnings Total

Non-controlling

interests Total

equity

Balances at 1 January 2010 2,010,192 (53,655) 159,350 46,888 398,523 (8,226) 1,081,534 211,758 2,882,502 6,728,866 230,432 6,959,298

Total comprehensive income for the year

Profit for the year -- -- -- -- -- -- -- 966,015 966,015 50,756 1,016,771


Net fair value gain from cash flow hedges, net of tax -- -- -- -- -- 367 -- -- -- 367 -- 367

Net fair value gains from available-for-sale portfolio, net of tax -- -- -- -- 146,721 -- -- -- -- 146,721 -- 146,721

Transferred to net income from fair value increases, net of tax -- -- -- -- (60,519) -- -- -- -- (60,519) -- (60,519)

Foreign currency translation differences for foreign operations -- -- -- (43,520) -- -- -- -- -- (43,520) -- (43,520) Change in revaluation surplus, net of tax -- -- -- -- -- -- 4,664 -- 14,403 19,067 (4,631) 14,436

Total other comprehensive income -- -- -- (43,520) 86,202 367 4,664 -- 14,403 62,116 (4,631) 57,485

Total comprehensive income for the year -- -- -- (43,520) 86,202 367 4,664 -- 980,418 1,028,131 46,125 1,074,256

Transactions with owners, recorded directly in equity Increase in capital stock held by subsidiaries 45,100 (45,100) -- -- -- -- -- -- -- -- -- -- Acquisition of non-controlling interests in a consolidated subsidiary without a change in control -- -- -- -- -- -- -- -- (21,120) (21,120) (8,104) (29,224) Adjustment to non-controlling interests for a new subsidiary of

proportionately consolidated joint venture -- -- -- -- -- -- -- -- -- -- 8,303 8,303

Transfers -- -- -- -- -- -- -- 58,749 (58,749) -- (317) (317)

Dividends paid -- -- -- -- -- -- -- -- (34,081) (34,081) (1,259) (35,340)

Change in non-controlling interests in consolidated subsidiaries -- -- -- -- -- -- -- -- -- -- 3,779 3,779

Total transactions with owners -- -- -- -- -- -- -- 58,749 (113,950) (55,201) 2,402 (52,799)

Balances at 31 December 2010 2,055,292 (98,755) 159,350 3,368 484,725 (7,859) 1,086,198 270,507 3,748,970 7,701,796 278,959 7,980,755


5

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Cash Flows For the Year Ended 31 December 2010 Currency: Thousands of TL

6

Notes 2010 2009 Cash flows from operating activities Profit for the year 1,016,771 802,017 Adjustments for: Impairment losses 10 89,106 589,438 Fair value change in investment property 6 and 11 (189,540) (42,743) Provision for and reversal of employee severance indemnity 6 and 31 15,918 11,442 Reversal of retirement benefit obligation 6 and 32 -- (31,006) Depreciation and amortisation 6 241,110 196,023 Technical reserves relating to insurance operations 6 3,719 657 Gain on sales of property and equipment (1,692) (1,750) Gain on sales of investment property -- (413) Loss on partial sale of proportionately consolidated joint venture 24,311 -- Share of profit of equity accounted investees 6 (17,667) (5,755) Change in accrued interest expense/(income), net 6 113,359 59,684 Provision for taxes on income 13 357,278 293,763 Deferred tax benefit 13 (35,855) (26,340) Warranty provision 6 31,154 25,043 1,647,972 1,870,060 Changes in operating assets and liabilities Change in deposits 4,312,506 4,470,319 Change in banking loans and advances to banks (506,779) (922,085) Change in balances with the Central Bank 478,206 98,633 Change in banking loans and advances to customers (6,410,138) (2,762,780) Change in financial assets at fair value through profit or loss (61,521) (119,021) Change in other assets (1,005,453) (338,698) Change in inventories (90,569) 300,377 Change in accounts receivable (364,479) (164,559) Change in due from related parties (116,040) 4,247 Change in obligations under repurchase agreement 481,901 65,613 Change in accounts payable 266,893 (458,970) Change in due to related parties 58,442 (225) Change in other liabilities 87,950 284,047 (1,221,109) 2,326,958 Interest paid (1,584,759) (2,078,457) Interest received 3,195,857 3,768,626 Taxes paid 13 (324,042) (325,070) Dividend paid (34,081) (24,979) Warranties paid (28,550) (26,203) Employee termination indemnity paid 31 (13,744) (7,528)Net cash (used in) / provided from operating activities (10,428) 3,633,347

Cash flows from investing activities Increase in ownership interest in consolidated subsidiaries (34,126) (2,245) Decrease in ownership interest in consolidated subsidiaries 28,225 880 Acquisition of subsidiaries 7 (126,333) -- Acquisition of additional interest in jointly control entities 7 (28,745) -- Proceeds from partial sale of proportionately consolidated joint venture

72,255 -- Acquisitions of investment property 18 (40,003) (32,270) Increase in investments in debt securities (2,085,471) (4,339,422) Acquisition of property and equipment and intangible assets (707,513) (666,089) Proceeds from sale of property and equipment 39,204 58,135 Proceeds from sale of investment property -- 9,481 Cash flows used in investing activities (2,882,507) (4,971,530)

Cash flows from financing activities Change in short-term bank borrowings, net 306,404 455,023 Change in long-term bank borrowings, net 1,670,936 1,135,831 Change in subordinated liabilities (3,647) 13,067 Cash flows provided by financing activities 1,973,693 1,603,921

Net (decrease) / increase in cash and cash equivalents (919,242) 265,738 Cash and cash equivalents at 1 January 3,481,405 3,215,667 Cash and cash equivalents at 31 December 27 2,562,163 3,481,405


Doğuş Holding Anonim Şirketi and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the Year Ended 31 December 2010 Currency: Thousands of TL

7

Notes to the consolidated financial statements

Notes Description Pages1 Reporting entity 82 Basis of preparation 83 Significant accounting policies 144 Determination of fair values 365 Financial risk management 386 Segment reporting 537 Acquisitions 608 Revenues and cost of revenues 629 Administrative expenses 6310 Impairment losses, net 6311 Other operating income, net 6312 Net finance costs 6413 Taxation 6514 Property and equipment 7215 Intangible assets 7416 Investments in debt securities 7717 Investments in equity securities 7918 Investment property 8019 Other non-current assets 8120 Inventories 8121 Accounts receivable 8222 Due from/due to customers for contract work 8323 Other current assets 8324 Banking loans and advances to customers 8525 Banking loans and advances to banks 8726 Financial assets at fair value through profit or loss 8827 Cash and cash equivalents 8928 Capital and reserves 9029 Long-term bank borrowings 9230 Subordinated liabilities 9531 Other non-current liabilities 9632 Retirement benefit obligation 9833 Short-term bank borrowings 10134 Deposits 10235 Obligations under repurchase agreements 10336 Accounts payable 10437 Other current liabilities 10438 Commitments and contingencies 10439 Related party disclosures 10840 Financial instruments 11141 Use of estimates and judgments 12642 Group enterprises 12943 Significant events 13944 Subsequent events 140

Appendix: Supplementary information


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 and energy and is registered in Turkey.

Doğuş Holding is owned and managed by the members of Şahenk Family. As at 31 December 2010, Doğuş Holding has 72 (2009: 63) subsidiaries (the “Subsidiaries”), 42 (2009: 40) joint ventures (the “Joint Ventures”) and 9 (2009: 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 2010 comprises Doğuş Holding and its subsidiaries and the Group’s interest in associates and jointly controlled entities. As explained in more detail in note 42, 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 the 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 General Electric Consumer Finance, 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, ITT Sheraton, Neckerman Reisen, Hyatt International Ltd., HMS International Hotel GMBH, Emporio Armani, Guccio Gucci Spa, CNBC, Condé Nast New Markets Europe/Africa NC (Vogue), Loro Piana, Aldiana GMBH and Starwood Hotel & Resort Worldwide Inc..

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

Eski Büyükdere Caddesi Oycan Plaza No:15 34398 Maslak/ İstanbul-Turkey

The number of employees of the Group at 31 December 2010 is approximately 28,000 (2009: 28,000).

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 Türkiye Garanti Bankası Anonim Şirketi (“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 April 2011. The Doğuş Holding’s General Assembly and the other reporting bodies have the power to amend the consolidated financial statements after their issue.


9

2 Basis of preparation (continued)

(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:

derivative financial instruments are measured at fair value, available-for-sale financial assets are measured at fair value, 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.

(d) Use of estimates and judgments

The preparation of consolidated financial statements in conformity with IFRS 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 estimate is revised and in any future periods affected.

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 16 – Investment in debt securities

Note 24 – Banking loans and advances to customers

Note 26 – Financial assets at fair value through profit or loss

Note 34 – 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 13 – Taxation (utilisation of tax losses)

Note 15 – Intangible assets

Note 32 – Retirement benefit obligation

Note 38 – Commitments and contingencies

Note 40 – Financial instruments


10


(e) Changes in accounting policies

(i) Overview

Starting as of 1 January 2010, in accordance with the change in IFRS, the Group has changed its accounting policies in the following areas:

Accounting for business combinations Accounting for acquisition of non-controlling interests

(ii) Accounting for business combinations

From 1 January 2010 the Group has applied IFRS 3 “Business Combinations” (2008) in accounting for business combinations. The change in accounting policy has been applied prospectively.

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.

Acquisitions on or after 1 January 2010

For acquisitions on or after 1 January 2010, 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 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 preexisting relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, 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 recognised 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.


11


(e) Changes in accounting policies (continued)

(ii) Accounting for business combinations (continued)

Acquisitions before 1 January 2010

For acquisitions before 1 January 2010, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately in profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combinations were capitalised as part of the cost of the acquisition.

See note 7 for the application of the new policy to the business combination that occurred during the year.

(iii) Accounting for acquisitions of non-controlling interests

From 1 January 2010 the Group has applied IAS 27 “Consolidated and Separate Financial Statements” (2008) in accounting for acquisitions of non-controlling interests. The change in accounting policy has been applied prospectively.

Under the new accounting policy, acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on proportionate amount of the net assets of the subsidiary.

Previously, goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction.


12

2 Basis of preparation (continued) (f) 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 year’s presentation as summarised below:

Amount reported Restated amount

Statement of financial position as at 31 December

2008 Effect of

reclassification as at 1 January

2009

Non-current assets Investments in debt securities 7,972,673 (1,172,080) 6,800,593 Accounts receivable -- 62,630 62,630 Banking loans and advances to customers -- 8,886,696 8,886,696 Banking loans and advances to banks -- 612,456 612,456 Financial assets at fair value through profit or loss -- 47,251 47,251 Other non-current assets 827,445 (389,475) 437,970

8,800,118 8,047,478 16,847,596

Current assets Investments in debt securities -- 1,172,080 1,172,080 Accounts receivable 1,214,537 (62,630) 1,151,907 Other current assets 738,267 389,475 1,127,742 Banking loans and advances to customers 16,560,166 (8,886,696) 7,673,470 Banking loans and advances to banks 2,418,882 (612,456) 1,806,426 Financial assets at fair value through profit or loss 76,952 (47,251) 29,701

21,008,804 (8,047,478) 12,961,326 29,808,922 -- 29,808,922

Non-current liabilities Subordinated liabilities 286,344 (16,098) 270,246 Deposits -- 387,003 387,003 Obligations under repurchase agreements -- 172,771 172,771 Other non-current liabilities 545,198 100,807 646,005

831,542 644,483 1,476,025

Current liabilities Subordinated liabilities -- 16,098 16,098 Deposits 17,418,355 (387,003) 17,031,352 Obligations under repurchase agreements 3,370,491 (172,771) 3,197,720 Other current liabilities 1,281,280 (100,807) 1,180,473

22,070,126 (644,483) 21,425,643 22,901,668 -- 22,901,668


13


(f) Comparative information (continued)

Amount reported Restated amount

Statement of financial position as at 31 December

2009 Effect of

reclassification as at 31 December

2009

Non-current assets Investments in debt securities 11,292,586 (3,085,304) 8,207,282 Accounts receivable -- 6,118 6,118 Banking loans and advances to customers -- 8,925,379 8,925,379 Banking loans and advances to banks -- 1,390,257 1,390,257 Financial assets at fair value through profit or loss -- 39,821 39,821 Other non-current assets 1,028,947 (553,751) 475,196

12,321,533 6,722,520 19,044,053

Current assets Investments in debt securities -- 3,085,304 3,085,304 Accounts receivable 1,537,170 (6,118) 1,531,052 Other current assets 710,192 553,751 1,263,943 Banking loans and advances to customers 16,618,038 (8,925,379) 7,692,659 Banking loans and advances to banks 3,254,878 (1,390,257) 1,864,621 Financial assets at fair value through profit or loss 180,384 (39,821) 140,563

22,300,662 (6,722,520) 15,578,142 34,622,195 -- 34,622,195

Non-current liabilities Subordinated liabilities 299,411 (9,469) 289,942 Deposits -- 321,814 321,814 Obligations under repurchase agreements -- 47,103 47,103 Other non-current liabilities 573,125 180,857 753,982

872,536 540,305 1,412,841

Current liabilities Subordinated liabilities -- 9,469 9,469 Deposits 20,669,122 (321,814) 20,347,308 Obligations under repurchase agreements 3,254,178 (47,103) 3,207,075 Other current liabilities 1,487,260 (180,857) 1,306,403

25,410,560 (540,305) 24,870,255 26,283,096 -- 26,283,096


14

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, except as explained in note 2(e), which addresses changes in accounting policies.

(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 The Group has applied the new accounting policy with respect to accounting for business combinations. See note 2(e)(ii) for further details.

(ii) 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 accounting policies of subsidiaries have been changed when it is necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(iii) 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.

(iv) Associates

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 consolidated financial statements include the Group’s share of profit and loss and other comprehensive income, 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 investments, 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.


15

3 Significant accounting policies

(a) Basis of consolidation (continued)

(v) 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.

(vi) 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.

(vii) Loss of control

Upon 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

(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 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, a financial liability designated as a hedge of the net investment in a foreign operation (see (iii) below), or qualifying cash flow hedges, which are recognised in other comprehensive income.


16

3 Significant accounting policies (continued) (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 operation is a non-wholly-owned subsidiary, then the relevant proportionate share 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 transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.


17

3 Significant accounting policies (continued) (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 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. Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group from classifying investment securities as held-to-maturity for the current and the following two financial years. Held to maturity financial assets include 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.

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. Money market placements are classified in banking loans and advances to banks.


18

3 Significant accounting policies (continued) (d) Financial instruments (continued)


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 (q). Accounting for finance income and expenses for segments other than banking and finance is discussed in note 3 (t).

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 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 at which 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 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.


19

3 Significant accounting policies (continued)

(d) Financial instruments (continued)

(ii) Non-derivative financial liabilities (continued)

The Group has the following non-derivative financial liabilities: deposits, obligations under repurchase agreements, borrowings, accounts and other payables, subordinated liabilities, 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.


20


(d) Financial instruments (continued)

(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 recognized 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, property and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses, if any (see accounting policy 3m), except as explained below:

In the first year of application of IAS 29, the construction machineries and equipment owned by a consolidated entity, Doğuş İnşaat ve Ticaret Anonim Şirketi (“Doğuş İnşaat”), were reflected at their replacement costs on the basis of publicly available information on their quoted prices or on the prices of the comparable items as at 31 December 1997; and such replacement costs were adjusted for the effects of inflation in TL units current at 31 December 2005 pursuant to IAS 29. In 2006, Doğuş İnşaat assigned a third party appraisal company to count and evaluate the market prices of its construction machineries and motor vehicles. Based on the report of the appraisal company Doğuş İnşaat adjusted its construction machineries and motor vehicles.


21


(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 cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. 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.

The gain and loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognised net within “other operating income, net” in profit or loss. 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

The cost of replacing a component of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred.

(iv) Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.


22


(e) Property and equipment (continued)

(iv) Depreciation (continued)

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment. 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.

The estimated useful lives for the current and comparative periods 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 capitalized 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 included in intangible assets. For the measurement of goodwill at initial recognition, see note 2(e)(ii).

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 an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the associates.

(ii) Service concession arrangements

Concession rights acquired by the Group have finite useful lives of 20 years and 38 years starting from 15 August 2007 and 7 December 2010 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.

(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. Terrestrial broadcast rights have indefinite useful lives. These rights are tested for impairment annually.


23


(f) Intangible assets (continued)

(iv) 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 accumulated impairment losses (see accounting policy 3(m)).

(v) 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.

(vi) Amortisation

Amortisation is based on the cost of an asset less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

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

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. Cash collateral placements in respect of securities borrowed are recognised under banking loans and advances to either banks or customers. Income and expenses arising from the securities borrowing and lending business are recognised on an accrual basis over the period of the transactions and are included in “Revenues” or “Cost of revenues”.

(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”.


24


(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.

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.

(j) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon 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.

Other leases are operating leases and, except for investment property, the leased assets are not recognised on the Group’s consolidated statement of financial position.

(k) 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 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 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.


25


(m) Impairment

(i) Non-derivative financial assets

A financial asset not carried 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 indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets (including equity securities) 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 impairment provisions 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 in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. 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 may 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.


26


(m) Impairment (continued)


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. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (“CGU”) exceeds its estimated recoverable amount.

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 that cannot be tested individually 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 CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested 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.

The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated. 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 units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. 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.


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(n) Non-current 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. 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 cost to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to 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 and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

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.

(o) 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 Memur ve Müstahdemleri 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 qualified employees. 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: 2010 Employer % Employee %Pension contributions 15.5 10.0Medical benefit contributions 6.0 5.0 2009 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 32(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 32(ii)).


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3 Significant accounting policies (continued) (o) Employee benefits (continued))

(i) Defined benefit plan (continued)

Pension and medical benefits transferable to SSF

As discussed in Note 32, 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 32, 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 2.52 thousand and TL 2.37 thousand at 31 December 2010 and 2009, respectively.

International Financial Reporting Standards 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:

2010 2009 % % Discount rate 4.66 5.92 Turnover rate to estimate the probability of retirement 1.0-9.00 1.0-8.52


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(p) 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 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.

(q) 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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(q) 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 associate 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.


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(ii) Insurance business (continued)

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 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.

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 in profit or loss 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 subleased 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 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.


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(vi) Service concession arrangements (continued)

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 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. 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 have opened and the amortization 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.


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(r) 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.

(s) 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. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfillment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset. 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.

(t) 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 recognized 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.


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(u) 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.

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 and jointly controlled entities 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, based on the laws that have been enacted or substantively enacted by the reporting date.

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 on a net basis.

(v) 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.

(w) 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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(x) 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.

(y) 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.

(z) 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 2010, 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:

IFRS 9 “Financial Instruments” is the first standard issued as part of a wider project to replace IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply. The amendment is effective for annual periods beginning on or after 1 January 2013, although entities are permitted to adopt it earlier. Prior periods need not be restated if an entity adopts the standard for reporting periods beginning before 1 January 2012. The Group is currently in the process of evaluating the potential effect of this amendment.


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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. When 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 value of intangible assets, which comprise the broadcasting rights, concession rights for marina management and customer relationship acquired in a business combination, is 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.


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4 Determination of fair values (continued)

(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.

(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 acquired in 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.


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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

Corporate Risk Management efforts have been initiated by Dogus 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.

In 2010, there have been some fundamental changes in the Turkish business environment, the government and regulatory authorities have become major determinants for market conditions and structural regulations are approved such as the new Turkish Commercial Code which is announced in 2011 and will become effective from 1 July 2012. Considering these developments, the importance of an advanced risk management and corporate governance systems has increased.

Among all the key institutional responsibilities, Doğuş Holding Risk Management Department coordinates and monitors the risk management application within the Group through corporate risk management, and identifies investor and shareholder risk preference. The Group’s risk management function provides advice and guidance to the Group’s business on best practice in risk management and control systems.

Each Group company also has the capability of managing its own risks (both financial and non-financial) by their own risk management teams and defined risk management processes. Doğuş Holding Risk Management Department works closely with the Group Risk Management departments to establish a standardized Enterprise Risk Management (“ERM”) system and obtain accurate information to assess and evaluate the risk taking processes.

Corporate Risk Management 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 of a company, sector or group, 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 Corporate Risk Management and Doğuş Holding’s Risk Management Department is under the supervision of Doğuş Holding’s CEO and Risk Management Committee of the Board of Directors.

Shareholder risk preference is determined and conveyed by the Risk Management Committee to ensure that risks are managed at appropriate levels.


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5 Financial risk management (continued) (b) Risk management framework for the corporate segments

(i) Automotive

Corporate Risk Management, which was established to define the uncertainties affecting Doğuş Otomotiv Servis ve Ticaret Anonim Şirketi (“DOAŞ”); to manage the DOAŞ’s risk-taking profile and provide reasonable assurance to reach its corporate goals; has an effective structure, which is influenced by employees, top management and the Board of Directors and utilised in terms of setting strategies and applied throughout the organization. The Risk Management Committee, an ancillary to and appointed with full responsibility by the Board of Directors is tasked with advising on and coordinating the risk management praxis. Risks that are handled in terms of likelihood, impact and process are classified as financial, operational, strategic and external risks. The Board of Directors and Audit and Risk Committee are briefed by Executive Board Presidency within the context of Risk Management by means of which all the risks that are monitored as per their contents by the related departments and General Directorate of Financial and Administrative Affairs. The department systematically audits and monitors processes and control activities corresponding to own targets defined which rely upon the audit plan that is risk-based and annually approved by the Board of Directors. The Audit and Risk Committee, constituted from the members of the Board of Directors and the Executive Committee, acts in compliance with the Audit and Risk Committee Charter. The Committee assists the Board of Directors’ oversight role in accounting, auditing, internal control system and financial reporting applications.

(ii) Construction

Risk organization

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 analyze 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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5 Financial risk management (continued) (b) Risk management framework for the corporate segments (continued)

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 centralizing risk management operations.

Tourism

In 2010, 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 organization.

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.

Real Estate, Energy and Marina

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


41

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

Developing risk management policies and strategies, and controlling these functions are among the responsibilities of Garanti Bank Board of Directors. Consequently, the Risk Management Department, which carries out the risk management activities and works independently from executive activities, report directly to the Board of Directors of Garanti Bank.

Garanti Bank’s Board of Directors monitors the effectiveness of the risk management system through the audit committee, other related committees and senior management.

The senior management is responsible for applying risk policies, principles and application procedures approved by the board of directors, ensuring timely and reliable reporting to the Board of Directors about the important risks identified, assessing internal control, internal audit and risk reports prepared for departments and either eliminating risks, deficiencies or defects identified in these departments or taking the necessary precautions to prevent those and participating in determination of risk limits.

Garanti Bank’s risk management policy is established on its maintainable long term, value adding growth strategy. This policy is measuring risks with the methods in compliance with its activities and international standards, and optimal allocation of economic capital to business lines considering the risk-return balance.

The Risk Management System consists of all the mechanisms related to establishment of standards, information flow, determination of the compliance with standards, decision making and applications processes; which were put into practice by the Board of Directors of Garanti Bank in order to monitor, control and change when deemed necessary the risk-return structure and the future cash flows of Garanti Bank and its subsidiaries and the quality and the level of related activities.

The risks are measured with the internationally accepted methodologies in compliance with local and international regulations, Garanti Bank’s structure, policy and procedures. The risks are assessed in a continuously developing manner. Garanti Bank, through its training and management standards and procedures, aims to manage those risks effectively. At the same time, studies for compliance with the international banking applications, such as Basel II, are carried out.

In order to ensure compliance with the rules altered pursuant to the Articles 23, 29 and 31 of the Banking Law No. 5411 and the Articles 36 and 43 of Regulation on Internal Systems within the Banks, dated 1 November 2006, Garanti Bank periodically reviews the current written policies and implementation procedures regarding management of each risk encountered in its activities.

Garanti Bank has purchased an integrated software system to place better risk management and Basel II applications in order to support and improve risk management activities. Garanti Bank aims to establish the Basel II applications in line with the BRSA’s roadmap.


42

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

(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) 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.

(iii) 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 40. 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. 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.


43

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

(iii) Derivative financial instruments (continued)

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 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.

(iv) 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 maximize net trading income. Trading activities are managed by type of risk involved and on the basis of the categories of trading instruments held.

(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.


44

5 Financial risk management (continued) (d) Credit risk (continued)

(i) Banking and finance segment (continued)

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. 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 40).

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.

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.


45



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 2010 and 2009.

Approximately 71 percent (2009: 72 percent) of the outstanding performing loans are collateralised. Guarantees and letters of credit are also subject to strict credit assessments before being provided. The agreements specify monetary limits to Garanti Bank and its subsidiaries’ obligations. The extent of collateral held for performing guarantees and letters of credit is approximately 83 percent (2009: 78 percent).

(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 in which the segments other than banking and finance entities operate. 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 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 segments are 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.

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.


46


(ii) Other corporate segments (continued)

Accounts receivable (continued)

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 arises in the general funding of Garanti Bank and its subsidiaries’ activities and in the management of positions. It includes both the risk of being unable to fund assets at appropriate maturities and rates and the risk of being unable to liquidate an asset at a reasonable price and in an appropriate time frame.

Garanti Bank’s approach to managing liquidity is to ensure, as for 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 Garanti Bank’s reputation. Funds are raised using a broad range of instruments including deposits, syndications, securitisations, bonds issuance, other funding sources and share capital. This enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of funds. Garanti Bank strives to maintain a balance between continuity of funding and flexibility through the use of liabilities with a range of maturities. Liquidity risk is continuously assessed through identifying and monitoring changes in funding required for meeting business goals and targets set in terms of the overall strategy. In addition, a portfolio of liquid assets is held as a part of Garanti Bank’s liquidity risk management strategy.

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.


47

5 Financial risk management (continued) (e) Liquidity risk (continued)


Exposure to liquidity risk

Garanti Bank’s liquidity ratios for 2010 and 2009 are as follows:

2010 First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TLAverage (%) 123.99 203.09 89.16 129.40

2009 First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TLAverage (%) 140.51 175.51 99.52 117.84 Garanti Bank’s banking subsidiary in the Netherlands is subject to a similar liquidity measurement, however the Dutch Central Bank does not impose limits, rather monitors the banks’ overall liquidity position to ensure there is no significant deterioration in the liquidity of banks operating in the Netherlands.

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 effective liquidity to necessary liquidity which should be over 1 for each defined maturity band.

(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 minimize liquidity risk, hold adequate cash and available line of credit (including factoring capacity).

(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. The instruments are recognised at fair value, and all changes in market conditions directly affect trading gain.

Garanti Bank and its subsidiaries manage their use of trading instruments in response to changing market conditions.


48

5 Financial risk management (continued) (f) Market risk (continued)


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.


49



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 optimizing net interest income, given market interest rate levels consistent with Garanti Bank’s business strategies.

Asset-liability risk management activities are conducted in the context of Garanti Bank’s sensitivity to interest rate changes. 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 indefinite 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 interest rate risk of the statement of financial position is monitored with methods such as static duration, gap and sensitivity analysis.


50



Interest rate risk (continued)

As a part of the duration-gap analysis, Garanti Bank-only sensitivity analysis for a +/-1 point change in the present values of interest sensitive statement of financial position items excluding trading and available-for-sale portfolios and for a +/-5 point change in the foreign currency exchange rates used for foreign currency position and derivative transactions is provided in the table below:

31 December 2010 31 December 2009 Sensitivity analysis for TL interest rates:

Stress applied Change in

portfolio value Change in

portfolio value (+) 1 % (37,608) (22,571) (-) 1 % 38,627 22,736

Sensitivity analysis for FC interest rates:

Stress applied Change in

portfolio value Change in

portfolio value (+) 1 % (69,815) (43,382) (-) 1 % 77,117 48,775

Sensitivity analysis for FX rates:

Stress applied Change in foreign

exchange result Change in foreign exchange result

(+) 5 % (3,035) 3,216 (-) 5 % 9,378 6,710

There are internal limits set to manage interest rate risk for non-trading portfolios approved by the board of directors. The structural interest rate risk limit is calculated based on the present value change in interest rate sensitive assets and liabilities, except trading portfolio, resulting from stress test applied as predefined point increase for interest rates. The single transaction limits are defined for asset-liability management dealers.

The consolidated value at market risks as at 31 December calculated as per the statutory consolidated financial statements of Garanti Bank and its subsidiaries prepared for BRSA reporting purposes within the scope of “Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks” published in Official Gazette no.26333 dated 1 November 2006, are as follows:

2010 2009 Average Highest Lowest Average Highest Lowest Interest rate risk 1,115,381 1,223,507 977,637 1,256,045 1,486,870 1,110,197 Common share risk 66,874 74,878 58,730 40,582 58,711 30,018 Currency risk 206,543 269,571 142,162 97,291 142,115 65,251 Option risk 115,609 149,499 68,664 108,667 177,737 36,979 Total value at risk 1,504,407 1,717,455 1,247,193 1,502,585 1,865,433 1,242,445


51



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”), Bulgarian Leva (“BVL”), 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 minimize 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.

(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.


52

5 Financial risk management (continued) (g) Operational risk (continued)


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-statement of financial position 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.

Garanti Bank and its individually regulated operations have complied with externally imposed capital requirements throughout the period.

Hedging

Due to Garanti Bank and its subsidiaries’ overall interest rate risk position and funding structure, its risk management policies require that it should minimize 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.

In prior periods, Garanti Bank entered into various interest rate swap transactions in order to hedge its certain cash flow exposures primarily on floating rate assets and liabilities, through converting its floating rate income/payments into fixed rate income/payments. The following table includes certain characteristics of such swap transactions outstanding as at 31 December 2010:

Notional amount Fixed payer

rate % Floating payer rate % Fixed payment

frequency Maturity USD 16.6 million 3.35 3 month libor + 0.40 Quarterly 2012


53

5 Financial risk management (continued)

(g) Operational risk (continued)


In January 2009, Garanti Bank has exercised eleven interest rate swap transactions held for cash flow risk management of the prior periods before their maturities. Garanti Bank has recognised a total income amounting Euro 10,980 thousand and USD 4,837 thousand (equivalent of TL 30,474 thousand in total) collected on the same transaction dates as per the related agreements under trading gain in the accompanying consolidated financial statements.


Due to the Group’s overall interest rate risk position and funding structure, its risk management policies require that it should minimize 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.

6 Segment reporting

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 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 and several service businesses. Doğuş Holding is included in the other industrial segment as well.


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6 Segment reporting (continued)

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 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: 2010

Banking loans and advances to

customers Total assets Total liabilities Non-cash

loans Capital

expenditure Turkey 19,331,172 43,312,172 29,885,552 3,951,483 792,724 Romania 868,237 1,047,576 234,350 16,216 18,310 The Netherlands 284,850 527,369 819,271 74,046 499 Malta 109,782 333,771 482,006 53 -- Switzerland 106,855 166,997 349,518 160,170 3,126 Russia 78,294 434,990 89,394 15,807 10,321 United Kingdom 53,168 1,718,479 3,926,039 63,482 -- USA 25,166 476,874 1,868,807 225,815 -- Germany 3,555 406,151 1,302,329 28,407 37 Others 129,295 861,551 2,347,909 362,299 -- 20,990,374 49,285,930 41,305,175 4,897,778 825,017

2009

Banking loans and advances to

customers Total assets Total liabilities Non-cash

loans Capital

expenditure Turkey 15,370,450 37,041,652 24,169,697 3,781,504 560,332 Romania 707,948 1,247,255 624,982 57,415 11,527 The Netherlands 145,144 349,941 907,623 47,098 1,140 Russia 145,129 295,831 81,517 20,497 8,867 Malta 45,106 364,641 99,330 472 -- Switzerland 31,162 86,048 197,906 54,250 21,365 USA 13,217 255,115 2,342,360 227,275 -- United Kingdom 9,798 1,761,526 3,984,786 82,373 -- Germany 2,957 480,295 1,051,469 24,672 236 Others 147,127 1,040,740 2,504,076 327,387 62,622 16,618,038 42,923,044 35,963,746 4,622,943 666,089


55


6.2 Business segments

31 December 2010 Banking and

finance Construction Automotive Tourism Others Total Revenues Total external revenue 3,850,282 645,738 3,689,203 208,552 334,875 8,728,650 Intersegment revenue 4,851 24,044 6,388 13,571 25,204 74,058 Net segment revenue 3,845,431 621,694 3,682,815 194,981 309,671 8,654,592

Gross profit 2,082,469 64,850 509,494 31,590 55,870 2,744,273 Result from operating activities 1,255,080 37,639 219,629 (72,531) (13,873) 1,425,944 Interest income 723 3,722 3,724 659 17,741 26,569 Interest expense (687) (6,292) (45,903) (20,313) (81,585) (154,780) Share of profit of equity accounted investees 3,016 -- 14,227 -- 424 17,667 Income tax expense (261,842) (12,001) (44,524) 4,857 (7,913) (321,423) Profit/(loss) for the year attributable to owners of the Company 1,035,458 19,135 105,953 (91,524) (103,007) 966,015 31 December 2010 Other information Segment assets 41,022,748 1,212,757 1,546,512 1,494,482 3,936,287 49,212,786 Investments in equity securities 24,131 -- 39,861 -- 9,152 73,144 Total assets 41,046,879 1,212,757 1,586,373 1,494,482 3,945,439 49,285,930 Segment liabilities 35,843,896 950,070 1,157,396 434,889 2,918,924 41,305,175 Total liabilities 35,843,896 950,070 1,157,396 434,889 2,918,924 41,305,175 31 December 2010 Capital expenditure 118,400 81,591 37,078 387,268 200,680 825,017 Depreciation 61,104 44,742 27,385 46,955 35,022 215,208 Non-cash (income)/expenses other than depreciation 150,132 15,499 23,357 52,136 (151,506) 89,618


56


6.2 Business segments (continued)

31 December 2009 Banking and

finance Construction Automotive Tourism Others Total Revenues Total external revenue 4,164,507 681,939 2,372,296 167,741 479,206 7,865,689 Intersegment revenue 4,722 8,640 4,308 6,141 22,262 46,073 Net segment revenue 4,159,785 673,299 2,367,988 161,600 456,944 7,819,616

Gross profit 2,133,963 67,020 328,114 33,011 105,202 2,667,310 Result from operating activities 1,051,344 37,814 95,681 (31,409) (20,047) 1,133,383 Interest income 3,453 11,506 7,494 381 18,540 41,374 Interest expense (1,976) (3,006) (52,628) (10,815) (130,991) (199,416) Share of profit of equity accounted investees 2,787 -- 2,968 -- -- 5,755 Income tax expense (246,936) (4,674) (13,149) 5,006 (7,670) (267,423) Profit/(loss) for the year attributable to owners of the Company 859,069 36,531 27,076 (36,463) (103,326) 782,887 31 December 2009 Other information Segment assets 35,426,792 1,183,397 1,330,561 1,207,860 3,720,850 42,869,460 Investments in equity securities 21,270 -- 26,991 -- 5,323 53,584 Total assets 35,448,062 1,183,397 1,357,552 1,207,860 3,726,173 42,923,044 Segment liabilities 31,112,609 918,646 1,079,624 466,684 2,386,183 35,963,746 Total liabilities 31,112,609 918,646 1,079,624 466,684 2,386,183 35,963,746 31 December 2009 Capital expenditure 121,307 130,932 67,236 86,125 260,489 666,089 Depreciation 58,723 23,343 22,362 40,294 25,850 170,572 Non-cash (income)/expenses other than depreciation 573,579 19,534 44,822 6,791 (6,760) 637,966


57

6 Segment reporting (continued) 6.2 Business segments (continued)

Two of the Group’s proportionately consolidated joint ventures Aslancık Elektrik Üretim Anonim Şirketi (“Aslancık”) and Boyabat Elektrik Üretim ve Ticaret Anonim Şirketi (“Boyabat”) and two of the Group’s consolidated subsidiaries D Enerji Üretim ve Yatırım Anonim Şirketi (“D Enerji”) and Doğuş Enerji Üretim ve Ticaret Anonim Şirketi (“Doğuş Enerji”), previously presented as entities operating in construction segment, have been reclassified to others segment due to the change in the format of the reporting of operating segments of the Group’s management. Certain comparative amounts have been re-presented to conform to the current period’s presentation, which is explained below:

Total assets of these companies previously presented under construction segment amounting to TL 137,173 thousand were re-presented under others segment as at 31 December 2009.

Total liabilities of these companies previously classified under construction segment amounting to 102,073 thousand were re-presented under others segment as at 31 December 2009.

For the year ended 31 December 2009, segment profit for the year attributable to the owners of these companies previously presented under construction segment amounting to TL 4,774 thousand were re-presented under others segment.

6.3 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:

2010 Banking

and finance

Construction

Automotive

Tourism

Other

Total assets 41,046,879 468,473 499,792 29,351 282,782Total liabilities 35,843,896 326,928 398,718 12,834 150,222

2009 Banking

and finance

Construction

Automotive

Tourism

Other

Total assets 35,447,692 438,586 453,369 25,520 142,589Total liabilities 31,112,516 328,314 391,220 12,512 80,073

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:

2010 Banking

and finance

Construction

Automotive

Tourism

Other

Profit/(loss) for the year

1,035,458 15,614 438 (4,668) (868)

2009 Banking

and finance

Construction

Automotive

Tourism

Other

Profit/(loss) for the year

859,152 38,917 (225) 1,938 7,127


58

6 Segment reporting (continued) 6.4 Non-cash (income)/expenses other than depreciation

Non-cash (income)/expenses other than depreciation for the year ended 31 December 2010 were as follows:

Banking and

finance Construction Automotive Tourism Others Total Provision for loans 242,113 -- -- -- -- 242,113 Accrued interest and other accruals 95,372 14,268 (30,228) 4,527 29,420 113,359 Impairment in tangible assets -- -- -- 42,552 -- 42,552 Warranty provision -- -- 31,154 -- -- 31,154 Amortisation of other intangible assets 3,671 -- 19,731 283 2,217 25,902 Provision for and reversal of employee severance indemnity 2,406 1,231 2,453 5,612 4,216 15,918 Insurance technical reserves and provisions 3,719 -- -- -- -- 3,719 Provision for doubtful receivables -- -- 247 110 2,144 2,501 Recoveries of loan losses (195,137) -- -- -- -- (195,137)Fair value change in investment property -- -- -- -- (189,540) (189,540)Reversal of impairment in tangible assets (3,008) -- -- (256) -- (3,264)Recoveries of doubtful receivables -- -- -- (692) (718) (1,410)Others 996 -- -- -- 755 1,751 Total 150,132 15,499 23,357 52,136 (151,506) 89,618


59


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

Non-cash (income)/expenses other than depreciation for the year ended 31 December 2009 were as follows:

Banking

and finance Construction Automotive Tourism Others Total

Provision for loans 597,458 -- -- -- -- 597,458 Provision for general banking risks 99,759 -- -- -- -- 99,759 Accrued interest and other accruals 33,351 15,708 (3,070) 2,658 11,037 59,684 Impairment in value of goodwill 38,772 -- -- -- -- 38,772 Warranty provision -- -- 25,043 -- -- 25,043 Amortisation of other intangible assets 2,668 -- 21,793 383 607 25,451 Impairment in tangible assets 67 256 -- -- 14,630 14,953 Provision for and reversal of employee severance indemnity (438) 3,570 573 2,369 5,368 11,442 Provision for doubtful receivables 1,147 -- 483 1,672 2,392 5,694 Insurance technical reserves and provisions 657 -- -- -- -- 657 Recoveries of loan losses (179,149) -- -- -- -- (179,149)Fair value change in investment property -- -- -- -- (42,743) (42,743)Reversal of defined benefit obligations (31,006) -- -- -- -- (31,006)Reversal of impairment in tangible assets (7,693) -- -- -- (987) (8,680)Recoveries of doubtful receivables (66) -- -- (291) (393) (750)Others 18,052 -- -- -- 3,329 21,381 Total 573,579 19,534 44,822 6,791 (6,760) 637,966


60

7 Acquisitions

7.1 Acquisition of subsidiaries

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

According to share transfer agreement dated 27 October 2009, the Group decided to purchase Kartal Otel Marmaris Turizm İşletmeciliği Ticaret ve Sanayi Anonim Şirketi (“Kartal Otel”) from Turkon Holding Anonim Şirketi. On 4 March 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 Kartal Otel. On 10 March 2010, Kartal Otel changed its legal name as D Otel Marmaris Turizm İşletmeciliği Ticaret ve Sanayi Anonim Şirketi.

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 75,787

Total consideration 75,787 Identifiable assets acquired and liabilities assumed Property and equipment 79,787Intangible assets 41Inventories 140Other current assets 4,137Deferred tax liabilities (467)Accounts payable (487)Other current liabilities (5,500)Employee severance indemnity (364)Total net identifiable assets 77,287

Negative goodwill

Negative goodwill has been recognised as a result of the acquisition as follows:

Total consideration transferred 75,787Less: Value of net identifiable assets (77,287)Negative goodwill (1,500)

The bargain purchase gain arising from the difference between consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date is recognised under other operating expense, net in profit or loss.


61

7 Acquisitions (continued)

7.1 Acquisition of subsidiaries (continued)

7.1.2 Acquisition of Anadolu Göcek Marina Turizm Yatırımları Anonim Şirketi (“D Marin Göcek”)

According to share transfer agreement dated 27 October 2009, the Group has 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.

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, customer relationships amounting to TL 1,890 thousand and concession rights amounting to TL 20,454 thousand have been recognised as intangible assets arising from the acquisition of D Marin Göcek.

The fair value of the customer relationships and concession rights 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 54,867

Total consideration 54,867 Identifiable assets acquired and liabilities assumed Property and equipment 15,318Intangible assets 22,358Deferred tax assets 1,066Inventories 30Accounts receivable 1,609Cash and cash equivalents 4,321Accounts payable (362)Other current liabilities (3,795)Employee severance indemnity (176)Total net identifiable assets 40,369

Goodwill

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

Total consideration transferred 54,867Less: Value of net identifiable assets (40,369)Goodwill 14,498

Cash consideration transferred 54,867Cash and cash equivalents acquired (4,321)Net cash outflow arising on acquisition 50,546


62

7 Acquisitions (continued)

7.2 Acquisition of additional interests in jointly control entities

On 27 May 2010, Doğuş Holding has sold its interest in D Netherlands Holding B.V. (“D Netherlands”), established in the Netherlands, presenting 100 percent ownership, at a price of Euro 53.5 million to its proportionately consolidated joint venture Garanti Bank. D Netherlands is the shareholder of Doğuş GE B.V. directly, and GE Garanti Bank S.A., Motoractive IFN S.A. (“Motoractive”), Ralfi IFN S.A. (“Ralfi”) and Domenia Credit IFN S.A.(“Domenia”), all resident in Romania, indirectly through Doğuş GE B.V..

Subsequent to this transaction, Garanti Bank has participated in Doğuş GE B.V.’s Euro 71.7 million capital increase by restricting the other shareholder and purchased an additional 20.1 percent share (equivalent to 6.08 percent share adjusted for the percentage ownership held by the Group) in Doğuş GE B.V.. The difference between consideration transferred on transaction and net asset value of 6.08 percent share of Doğuş GE B.V. amounting to Euro 1,372 thousand (equivalent to TL 2,637 thousand) has been recognised as goodwill in consolidated financial statements of the Group.

As per the decisions made at the Board of Directors’ meeting of D Netherlands held on 16 December 2010; Leasemart Holding B.V. (“Leasemart”), a Netherlands-based company, was acquired by D Netherlands from GE Capital Corporation for a consideration of Euro 46.4 million (equivalent to Euro 14,028 thousand adjusted for the percentage ownership held by the Group). The difference between consideration transferred and net asset value of Leasemart on the transaction date amounting to Euro 7,691 thousand (equivalent to TL 15,760 thousand) has been recognised as goodwill in consolidated financial statements of the Group. Following these share purchase transactions, the percentage of shares owned indirectly by the Group in Doğuş GE B.V. increased to 30.24 percent.

8 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:

2010 2009Banking and finance segment Banking operations: Interest income 3,109,725 3,435,748Interest expense (1,521,452) (1,776,377)Fees and commission income 679,861 676,873Fees and commission expense (232,893) (242,943)Net operating income 2,035,241 2,093,301Insurance operations: Technical gain 55,845 47,165Technical loss (8,617) (6,503)Net technical gain 47,228 40,662Gross profit for banking and finance segment 2,082,469 2,133,963Other corporate segments Net revenues 4,809,161 3,659,830Cost of revenues (4,147,357) (3,126,483)Gross profit for other industrial segments 661,804 533,347Total gross profit 2,744,273 2,667,310


63

9 Administrative expenses

For the years ended 31 December, general and administrative expenses comprised the following:

2010 2009Personnel expenses 642,966 552,353Depreciation and amortisation 125,180 111,094Rent expenses 63,298 48,228Taxes and duties other than taxes on income 47,549 51,554Telecommunication expenses 47,236 42,392Electronic data processing expenses 26,853 28,478Utility expenses 22,190 19,715Insurance expenses 21,561 20,484Provision for employee severance indemnity 15,950 12,694Gasoline expenses 11,523 10,147Research and development expenses 10,172 7,763Stationery expenses 5,704 6,029Others 112,990 117,879Administrative expenses 1,153,172 1,028,810

10 Impairment losses, net

For the years ended 31 December, impairment losses, net comprised the following:

2010 2009Provision for banking loans (Note 24) 242,113 597,458Impairment in tangible assets (Note 14) 42,552 14,953Provision for doubtful receivables (Note 21) 2,501 5,694Provision for general banking risk -- 99,759Impairment in value of goodwill (Note 15) -- 38,772Recoveries of provision for banking loans (Note 24) (195,137) (179,149)Reversal of impairment on tangible assets (Note 14) (3,264) (8,680)Recoveries of doubtful receivables (Note 21) (1,410) (750)Other provisions / (recoveries) 1,751 21,381Impairment losses, net 89,106 589,438

11 Other operating income, net

For the years ended 31 December, other operating income, net comprised the following:

2010 2009Fair value change in investment property (Note 18) 189,540 42,743Warranty expense (31,154) (25,043)Other income/(expense), net (125,305) (9,610)Total other operating income, net 33,081 8,090


64

12 Net finance costs

For the years ended 31 December, net finance costs comprised the following:

Recognised in profit or loss 2010 2009Finance income: Foreign exchange gains 449,670 575,509Interest income on bank deposits 13,779 30,969Interest income on trading securities 4,438 2,101Other interest and similar items 8,352 8,304Total finance income 476,239 616,883Finance expense: Foreign exchange losses (426,876) (487,165)Interest expense on borrowings (119,399) (158,018)Other interest and similar items (35,381) (41,398)Total finance expense (581,656) (686,581)Net finance costs recognised in profit or loss (105,417) (69,698) Recognised in other comprehensive income Change in fair value of available- for-sale financial assets (7,008) (5,293)Change in translation reserve 5,284 (1,090)Effective portion of changes in fair value of cash flow hedges 160 3,501Income tax on other comprehensive income 1,402 1,059Finance expense recognised in other comprehensive income, net of tax (162) (1,823) Attributable to: Owners of the Company (183) (1,777) Non-controlling interests 21 (46)Finance expense recognised in other comprehensive income, net of tax (162) (1,823)

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”.

Interest income and interest expense recognised in other comprehensive income included in finance income and finance expense relate only to the segments other than banking and finance.


65

13 Taxation In Turkey, corporate income tax is levied at the rate of 20 percent (2009: 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.


66

13 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. The Article 5 of the Law regulates the amount of investment incentive to be benefited in calculating the corporate tax base after the cancellation of the clause no.2 of the Article of the Law no. 5479. According to the Law no. 6009, the taxpayers are allowed to benefit from the investment incentive stemming from the periods before the promulgation of the Law no. 5479 up to 25 percent of the taxable income of the respective tax period.

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 (2009: 10 percent) corporate tax and 15 percent (2009: 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 authorized 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 installments in May and October.

Malta

The corporate earnings are subjected to a 35 percent (2009: 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.


67

13 Taxation (continued) Tax applications for foreign branches of Garanti Bank (continued)

Luxembourg

The corporate earnings are subjected to a 21 percent (2009: 21 percent) corporate tax. This rate is determined by modifying accounting income for certain exclusions and allowances for tax purposes. An additional 4 percent of the calculated corporate tax is paid as a contribution for unemployment insurance fund. The municipality commerce tax, which is currently 7.5 percent of the taxable income, is also paid every year. The tax returns are examined by the authorized bodies, and in case of detected mistakes, the amount of the taxes to be paid are revised. The amounts and the payment 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 (2009: 20 percent) for tax profits up to Euro 200,000 and 25.5 percent (as at 1st of January 2011, the corporate income tax rate decreased to 25 percent) (2009: 25.5 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 the prior year only. 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 has been calculated using the nominal tax rate of 25.5 percent (2009: 25 percent) over the Dutch taxable income and 30 percent (2009: 30 percent) over the local taxable income of Germany branch.

Romania

The applicable corporate tax rate in Romania is 16 percent (2009: 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 five years. Tax losses can be carried forward to offset against future taxable income for seven years.

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-in some locations 4.5 percent regional) (2009: 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.


68

13 Taxation (continued)

Tax application for other foreign subsidiaries and joint ventures of the Group (continued)

Egypt

As at 31 December 2010, enacted corporation tax rate is 20 percent for the subsidiaries registered in Egypt according to local tax law (2009: 20 percent).

Switzerland

As at 31 December 2010, enacted corporation tax rate is 22.8 percent for the subsidiaries registered in Switzerland according to local tax law (2009: 22.8 percent).

13.1 Income tax expense recognised in profit or loss

The taxation charge for the years ended 31 December comprised the following items:

2010 2009Current corporation and income taxes 357,278 293,763Deferred tax (35,855) (26,340)Total income tax expense 321,423 267,423

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:

2010 2009 Amount % Amount %Reported profit before taxation 1,338,194 1,069,440 Taxes on reported profit per statutory tax rate (267,639) (20.00) (213,888) (20.00)Permanent differences: Disallowable expenses (11,816) (0.88) (5,549) (0.52) Tax exempt income 17,893 1.34 1,569 0.15 General banking provision -- -- (19,952) (1.87) Investment incentive (*) -- -- 10,563 0.99Current year losses for which no deferred tax

asset was recognised (17,623) (1.32) (10,318) (0.96)Reversal of previously recognised tax losses (35,435) (2.65) (1,550) (0.14)Effect of different tax rates applied (6,299) (0.47) (28,625) (2.68)Others, net (504) (0.04) 327 0.02Income tax expense (321,423) (24.02) (267,423) (25.01)

(*) As per the annulment decision of the Turkish Constitutional Court, some of the subsidiaries of the Group are subject to investment allowance ruling and can use their available allowances to reduce their taxable corporate income without any time limitations. Accordingly, a deferred tax asset amounting TL 3,616 thousand is recorded in the accompanying consolidated financial statements as at 31 December 2010 (2009: TL 10,563 thousand) considering the fact that those subsidiaries may use their right of deducting investment allowances from their corporate income in the future.

Income tax recognised in other comprehensive income

2010 2009Revaluation of land and buildings (Note 28.3) 31,006 (2,621)Available-for-sale financial assets (27,999) (21,827)Total income tax credit / (expense) recognised in other comprehensive income 3,007 (24,448)


69

13 Taxation (continued) 13.2 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:

2010 2009Taxes on income 321,423 267,423Add: Taxes carried forward 70,606 39,028Add: Current taxes recognised in other comprehensive income (4,563) 62,885Add: Deferred taxes on taxable temporary differences 35,855 26,340Less: Corporation taxes paid in advance (324,042) (325,070)Taxes payable on income 99,279 70,606

13.3 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 2010, deferred tax assets amounting to TL 123,565 thousand (2009: TL 83,809 thousand) have not been recognised with respect to the statutory tax losses carried forward and deductible temporary differences amounting to TL 73,954 thousand and TL 49,611 thousand, respectively (2009: TL 39,519 thousand and TL 44,290 thousand, respectively). Such losses carried forward expire until 2015. 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:

2010 2009 Assets Liabilities Assets LiabilitiesRevaluation on land and buildings -- (75,085) -- (106,091)Provisions 42,084 -- 28,484 --Effect of percentage of completion method 22,895 (37,624) 24,843 (17,860)Employee severance indemnity and short term employee benefits 18,542 -- 14,196 --Pro-rata basis depreciation expense -- (8,342) -- (20,811)Fair value gain from investment property -- (45,330) -- (15,500)Valuation difference of financial assets and liabilities 21,563 -- 8,551 --Investment incentives 3,616 -- 10,563 --Other temporary differences 42,195 (38,242) 38,688 (54,949)Subtotal 150,895 (204,623) 125,325 (215,211)Tax losses carried forward 135,522 -- 132,219 --Total deferred tax assets/(liabilities) 286,417 (204,623) 257,544 (215,211)


70


13.3 Deferred tax assets and liabilities (continued)

Recognised deferred tax assets and liabilities (continued)

According to the Tax Procedural Law in Turkey, statutory losses can be carried forward maximum for five years. Consequently, 2015 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 2011 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 677,610 thousand (2009: TL 661,095 thousand) will be realisable; hence, such realisable deferred tax assets in the amount of TL 135,522 thousand (2009: TL 132,219 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 deferred income taxes relate to the same fiscal authority.

The following amounts as at 31 December determined after appropriate offsetting are shown in the consolidated financial position: 2010 2009 Gross Offsetting Net Gross Offsetting Net

Deferred tax assets 286,417 (48,734) 237,683 257,544 (65,257) 192,287Deferred tax liabilities (204,623) 48,734 (155,889) (215,211) 65,257 (149,954)Deferred tax assets, net 81,794 -- 81,794 42,333 -- 42,333


71


13.3 Deferred tax assets and liabilities (continued)

Movements in temporary differences during the year

Movements in deferred tax assets / (liabilities) were as follows:

Balance1 January

2009 Recognised in

profit or loss

Recognisedin other

comprehensive income

Balance31 December

2009 Recognised in

profit or loss

Recognisedin other

comprehensive income

Acquired in business

combinations

Balance 31 December

2010 Revaluation on land and buildings (103,470) -- (2,621) (106,091) -- 31,006 (75,085) Provisions 27,318 1,166 -- 28,484 13,600 -- -- 42,084 Effect of percentage of completion method (1,334) 8,317 -- 6,983 (21,712) -- -- (14,729) Employee severance indemnity 16,158 (1,962) -- 14,196 4,346 -- -- 18,542 Fair value gain from investment property (6,729) (8,771) -- (15,500) (29,830) -- -- (45,330) Pro-rata basis depreciation expense (5,050) (15,761) -- (20,811) 12,469 -- -- (8,342) Valuation difference on financial assets and liabilities 10,322 20,056 (21,827) 8,551 41,011 (27,999) -- 21,563 Investment incentives -- 10,563 -- 10,563 (6,947) -- -- 3,616 Other temporary differences (2,609) (13,652) -- (16,261) 19,615 -- 599 3,953 Tax losses carried forward 105,835 26,384 -- 132,219 3,303 -- -- 135,522 Total deferred tax assets/(liabilities) 40,441 26,340 (24,448) 42,333 35,855 3,007 599 81,794


14 Property and equipment Movements of property and equipment and related accumulated depreciation during the year ended 31 December 2010 were as follows:

Cost 1 January Additions (*) Disposals

Transfer to investment

property (**)

Transfer from investment

property (***) Transfers

Effects of movements in

exchange rates

Netrevaluation

decrease 31 December Land and buildings 2,563,331 333,150 (8,063) (56,767) 44,985 3,197 3,530 (19,637) 2,863,726 Furniture and equipment 977,396 95,372 (32,371) -- -- 115,431 (1,007) -- 1,154,821 Leasehold improvements 398,049 35,351 (13,003) -- -- (4,655) 442 -- 416,184 Motor vehicles 133,035 110,113 (14,460) -- -- 3,463 (94) -- 232,057 Construction in progress 214,273 217,819 (10,695) (3,760) -- (118,765) 163 -- 299,035 Others 7,282 72 (22) -- -- 114 -- -- 7,446 Total cost 4,293,366 791,877 (78,614) (60,527) 44,985 (1,215) 3,034 (19,637) 4,973,269

Less: Accumulated depreciation 1 January

Currentyear

charge Disposals

Transfer to investment

property


property Transfers


exchange rates

Netrevaluation

decrease 31 December Buildings 617,365 48,559 (3,116) (15,150) -- -- 98 (3,067) 644,689 Furniture and equipment 661,293 100,258 (21,214) -- -- -- (100) -- 740,237 Leasehold improvements 108,494 43,461 (9,588) -- -- (1,215) 425 -- 141,577 Motor vehicles 45,090 22,881 (7,184) -- -- -- 210 -- 60,997 Others 6,687 49 -- -- -- -- -- -- 6,736 Total accumulated depreciation 1,438,929 215,208 (41,102) (15,150) -- (1,215) 633 (3,067) 1,594,236 Net book value 2,854,437 -- (37,512) (45,377) 44,985 -- 2,401 (16,570) 3,379,033 Less: Impairment in value (29,466) (42,552) 3,264 -- -- -- 9 -- (68,745) Net carrying value 2,824,971 (45,377) 44,985 -- 2,410 (16,570) 3,310,288

(*) A portion of the additions amounting to TL 95,105 thousand during the year 2010 represented the tangible assets acquired through business combination.

(**) Transfer to investment property includes property with a total net book value of TL 41,617 thousand and construction in progress transferred to investment property amounting to TL 3,760 thousand.

(***) Transfer from investment property includes a shopping mall which is used by Group companies with a total net book value of TL 44,985 thousand.

72


14 Property and equipment (continued)

Movements of property and equipment and related accumulated depreciation during the year ended 31 December 2009 were as follows:

Cost 1 January Additions Disposals

Transfer to investment and trading

properties(*)


property Transfers


exchange rates

Net revaluation

increase 31 December Land and buildings 2,445,430 112,063 (29,099) (220,227) 14,209 48,292 (893) 193,556 2,563,331 Furniture and equipment 858,876 138,813 (23,734) -- -- 5,615 (2,174) -- 977,396 Leasehold improvements 235,951 86,828 (8,202) -- -- 82,667 805 -- 398,049 Motor vehicles 96,588 61,927 (25,634) -- -- -- 154 -- 133,035 Construction in progress 170,462 249,457 (2,928) (75,117) -- (128,088) 487 -- 214,273 Others 8,589 10,038 (2,859) -- -- (8,486) -- -- 7,282 Total cost 3,815,896 659,126 (92,456) (295,344) 14,209 -- (1,621) 193,556 4,293,366

Less: Accumulated depreciation 1 January

Currentyear

charge Disposals

Transfer to investment and trading properties


property Transfers


exchange rates

Net revaluation

increase 31 December Buildings 469,528 50,263 (4,954) (802) -- 493 (169) 103,006 617,365 Furniture and equipment 596,558 75,622 (6,143) -- -- 4 (4,748) -- 661,293 Leasehold improvements 82,732 31,436 (5,830) -- -- (497) 653 -- 108,494 Motor vehicles 44,414 13,112 (16,386) -- -- -- 3,950 -- 45,090 Others 9,306 139 (2,758) -- -- -- -- -- 6,687 Total accumulated depreciation 1,202,538 170,572 (36,071) (802) -- -- (314) 103,006 1,438,929 Net book value 2,613,358 -- (56,385) (294,542) 14,209 -- (1,307) 90,550 2,854,437 Less: Impairment in value (37,790) (14,953) 8,680 17,999 -- -- (35) -- (26,099) Less: Revaluation of building

transferred to investment property -- -- -- -- -- -- -- (3,367) (3,367)

Net carrying value 2,575,568 (276,543) 14,209 -- (1,342) 87,183 2,824,971

A portion of the additions amounting to TL 27,032 thousand during the year 2009 represented the tangible assets of a newly consolidated subsidiary of Garanti Bank.

(*) Transfer to investment and trading property includes property with a total net book value of TL 113,527 thousand transferred to investment property and property with a total net book value of TL 163,016 thousand transferred to trading property which are residential buildings.

73


74

14 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 2010, the revaluation surplus, net of non-controlling interest and deferred taxes, amounting to TL 1,086,198 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 (2009: TL 1,081,534 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 2010 1,771,106 (298,952) 1,472,15431 December 2009 1,461,294 (294,905) 1,166,389

15 Intangible assets

At 31 December, intangible assets comprised the following:

2010 2009Goodwill 677,437 734,763Concession rights (a) 222,412 235,824Broadcasting rights (b) 140,721 140,721Concession rights acquired through business combination (c) 20,454 --Customer relationship acquired through business combination (c) 1,890 --Other intangible assets, net 51,478 57,036

1,114,392 1,168,344

(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 TÜVTÜRK Kuzey Taşıt Muayene İstasyonları Yapım ve İşletim Anonim Şirketi (“TÜVTÜRK Kuzey”) and TÜVTÜRK Güney Taşıt Muayene İstasyonları Yapım ve İşletim Anonim Şirketi (“TÜVTÜRK Güney”) have started their operations. As at 31 December 2010, 193 vehicle inspection stations in 81 cities have started their operations.

(b) 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.

(c) See note 7.1.2


75

15 Intangible assets (continued)

At 31 December, goodwill comprised the following:

Company Type of

purchase Acquisition

cost Net asset

fair value Purchase

date

Shares acquired

% Groupshare

Cumulative adjustment

for currency translation

Cumulative Impairment in value of

goodwill Disposal

31 December 2010

Net amount

31 December 2009

Net amount

Garanti Bank Cash 789,884 7,215,640 Dec. 2007 4.65 335,527 -- -- -- 454,357 454,357

Doğuş GE B.V. Cash 159,049 61,685 Dec. 2007 49.90 30,781 21,995 (38,772) (78,633) 32,858 123,254

Doğuş GE B.V. Cash -- (43,392) May.2010 6.08 (2,637) 175 -- -- 2,812 --

Leasemart Holding B.V. Cash 27,844 39,960 Dec. 2010 30.24 12,084 -- -- -- 15,760 -- D Marin Göcek Cash 54,867 40,369 Dec. 2010 100.00 40,369 -- -- -- 14,498 -- NTV Radyo ve Televizyon Yayıncılığı Anonim Şirketi (“NTV Radyo”) Cash 98,877 12,081 Apr. 2004 97.00 11,719 -- -- -- 87,158 87,158 Enformasyon Reklamcılık ve Filmcilik Sanayi ve Ticaret Anonim Şirketi (“Enformasyon”) Cash 40,091 10,783 Jul. 2003 70.00 7,548 -- -- -- 30,100 30,100 Doğuş İnşaat ve Ticaret Anonim Şirketi (“Doğuş İnşaat”) Cash 89,076 1,491,894 Dec. 2006 4.10 61,093 -- -- -- 27,983 27,983 Kapital Radyo ve Televizyon Yayıncılığı Anonim Şirketi (“Kapital Radyo”) Cash 9,246 72 Dec. 2007 97.00 70 -- -- -- 9,176 9,176 DOAŞ Cash 2,735 -- Dec. 2006 50.00 -- -- -- -- 2,735 2,735 22,170 (38,772) (78,633) 677,437 734,763


76

15 Intangible assets (continued)

The movements in goodwill were as follows:

2010 2009Balance at the beginning of the year 734,763 772,073Acquisition during the year 33,070 --Disposals (78,633) --Impairment in value of goodwill -- (38,772)Adjustments for currency translation (11,763) 1,462Balance at the end of the year 677,437 734,763

Disposal of goodwill amounting to TL 78,633 thousand is related to the decrease in the ownership interest in Doğuş GE B.V. (a proportionately consolidated joint venture). On 27 May 2010, Doğuş Holding has sold its interest in D Netherlands (the parent Company of Doğuş GE B.V.) to its proportionately consolidated joint venture, Garanti Bank, and this transaction has resulted in a reduced ownership interest in Doğuş GE B.V..

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. 6-year business plan prepared by management is used for valuation of NTV Radyo and Enformasyon, 10-year business plan prepared by management is used for valuation of Kapital Radyo.

The valuation of the fair value of equity for Doğuş GE 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 Doğuş GE B.V.. 8-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. 6-year business plan prepared by management is used for 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 rateDoğuş GE B.V. 12.00 percent 5.00 percentNTV Radyo 14.15 percent 3.00 percentEnformasyon 13.00 percent 3.00 percentDoğuş İnşaat 8.31 percent 2.00 percentKapital Radyo 8.25 percent 1.50 percent

Discount rates used in discounted cash flows are the weighted average cost of capital (“WACC”) of the entities.

As a result of the impairment testing on entity basis, no impairment loss is recognised as at 31 December 2010.


77

16 Investments in debt securities

At 31 December 2010, 2009 and 1 January 2009, debt securities available-for-sale and held-to-maturity comprised the following:

31 December 2010

31 December 2009

1 January 2009

Facevalue

Carryingvalue

Interest rate

range % Latest

maturity

Carrying

value

Carrying

value Debt and other instruments available for-sale:

Government bonds indexed to consumer price index 2,328,914 3,261,574 8-30 2020 1,941,050 44,459 Government bonds at floating rates (a) 2,691,956 2,822,681 8-10 2017 2,963,818 2,196,937 Treasury bills in TL 1,512,352 1,473,559 6-8 2011 801,047 -- Bonds issued by corporations (b) 870,617 896,832 2-12 2034 651,260 611,273 Government bonds in TL 570,052 640,741 7-23 2020 562,189 786,346 Discounted government bonds in TL 539,384 509,807 8-13 2012 1,326,969 1,416,256 Bonds issued by financial institutions 316,016 334,081 3-16 2025 270,732 208,512 Euro bonds 218,784 254,831 5-12 2040 300,399 206,594 Bond issued by foreign governments 203,048 203,850 4-11 2021 99,428 688 Government bonds in foreign currency -- -- -- -- 84,902 123,849 Others 30,867 33,268 25,320 Total securities available for-sale 10,428,823 9,035,062 5,620,234 Debt and other instruments held-to-

maturity: Government bonds in TL 932,984 876,645 14-18 2012 923,876 926,309 Government bonds at floating rates (a) 409,418 422,535 9-25 2014 810,845 825,798 Euro bonds 387,873 389,090 7-8 2036 428,418 497,472 Others -- 11,644 12,016 Total held to maturity portfolio 1,688,270 2,174,783 2,261,595 Accrued interest income 94,054 82,741 90,844 Total held-to-maturity portfolio 1,782,324 2,257,524 2,352,439 Total investments in debt securities 12,211,147 11,292,586 7,972,673

Current investments in debt securities 3,143,254 3,085,304 1,172,080 Non-current investments in debt securities 9,067,893 8,207,282 6,800,593 12,211,147 11,292,586 7,972,673

(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 220,920 thousand (31 December 2009: USD 266,864 thousand and Euro 151 thousand; 1 January 2009: USD 270,620 thousand and Euro 355 thousand) and carrying value amounting to TL 339,979 thousand (31 December 2009: TL 403,792 thousand; 1 January 2009: TL 419,874 thousand).


78

16 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 effective portion of the fair value of cash flow hedges and available-for-sale assets are deferred as a separate component of equity.

There is no additional impairment loss on investment securities as at 31 December 2010 (2009: TL 888 thousand).

As at 31 December 2010, government bonds and treasury bills include securities pledged under repurchase agreements with customers amounting to TL 3,715,407 thousand (31 December 2009: TL 3,337,180 thousand; 1 January 2009: TL 3,518,010 thousand).

The following table summarizes securities that were deposited as collaterals with respect to various banking, insurance and asset management transactions:

2010 2009

Facevalue

Carrying value

Facevalue

Carryingvalue

Deposited at Istanbul Stock Exchange 2,035,551 2,604,057 722,588 844,883Collateralised to foreign banks 2,065,925 2,220,526 2,821,169 2,934,622Deposited at central banks for repurchase transactions 492,596 500,027 415,391 445,292Deposited at Central Bank of Turkey (“CBT”) for interbank transactions 174,858 182,799 172,545 180,868Deposited at CBT for foreign currency money market transactions 154,526 160,707 304,477 327,233Deposited at Clearing Bank (“Takasbank”) 19,989 20,445 16,219 17,041Others 10,539 14,946 5,699,100 4,764,885


79

17 Investments in equity securities

At 31 December, the Group held equity investments in the following companies:

2010 2009

Equity accounted investees: Carrying

value % of

ownership Carrying

value % of

ownership Volkswagen Doğuş Tüketici

Finansmanı Anonim Şirketi (“VDF Tüketici”) 23,571 49.00 21,285 49.00 Eureko Sigorta Anonim Şirketi (“Eureko Sigorta”) 18,218 6.05 15,290 6.05 LPD Holding Anonim Şirketi (“LPD Holding”) 9,658 49.00 -- 49.00 Yüce Auto Anonim Şirketi (“Yüce Auto”) 7,088 50.00 3,627 50.00 VDF Servis Holding Anonim Şirketi (“VDF Servis

Holding”) 4,194 49.00 3,138 49.00 Other equity investments IMKB Takas ve Saklama Bankası Anonim Şirketi (“Takasbank”) 3,617 1.76 3,616 1.76 Doğan TV Yayıncılık Anonim Şirketi 1,767 0.29 1,767 0.29 DTV Haber Görsel ve Yayıncılık Anonim Şirketi 2,593 5.19 2,593 5.19 Garanti Konut Finansmanı Danışmanlık Hizmetleri

Anonim Şirketi (“Garanti Konut”) 750 30.12 750 30.23 Others 1,688 -- 1,518 -- Total 73,144 53,584

Takasbank and other equity participations 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 (“Garanti Sigorta”), 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. As at 31 December 2010, the investment in Eureko Sigorta amounts to TL 18,218 thousand (2009: TL 15,290 thousand) and Group’s share of net income is TL 2,987 thousand (2009: TL 2,788 thousand) for the year then ended.

The summary financial information for equity accounted investees, not adjusted for the percentage ownership held is presented below:

2010

Total assets Equity

Property, equipment and

intangible assets Profit for the

year

VDF Tüketici 1,096,714 48,090 2,358 4,651Eureko Sigorta 684,688 301,223 14,790 49,376LPD Holding 308,184 19,013 837 22,439Yüce Auto 57,323 15,176 464 8,413VDF Servis Holding 28,261 8,438 1,069 2,048

Total 2,175,170 391,940 19,518 86,927


80

17 Investments in equity securities (continued)

2009

Total assets Equity

Property, equipment and

intangible assets Profit/(loss) for

the yearVDF Tüketici 1,094,220 43,439 2,699 6,395 Eureko Sigorta 563,506 252,898 13,691 46,609 LPD Holding 242,791 (3,438) 1,085 14,364Yüce Oto 39,034 7,254 263 332 VDF Servis Holding 12,344 6,403 1,354 (599)Total 1,951,895 306,556 19,092 67,101

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 227 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 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.

18 Investment property

As at 31 December, the movement in investment property was as follows: 2010 2009Balance at 1 January 1,218,187 1,052,924Transfer from property and equipment (Note 14) 45,377 113,527Transfer to property and equipment (Note 14) (44,985) (14,209)Fair value change recognised in profit or loss (Note 11) 189,540 42,743Additions (*) 120,631 32,270Disposals -- (9,068)Balance at 31 December 1,528,750 1,218,187

The Group obtained independent appraisal reports for each item of investment properties and stated them at their fair values.

(*) A portion of additions amounting to TL 80,628 thousand represents transfers from advances given for investment property purchases in 2010. Additions amounting to TL 40,003 thousand represent various additions of land, buildings and construction in progress held for rental income.


81

19 Other non-current assets

At 31 December 2010, 2009 and 1 January 2009, other non-current assets comprised the following:

31 December 2010

31 December 2009

1 January 2009

Long-term trade and other receivables 124,343 122,294 138,840Prepaid expenses and similar items 73,193 69,464 85,220Advances given for property and equipment 59,799 170,201 90,169Progress billings 46,364 39,734 30,418Accrued exchange gain on derivatives 43,998 11,313 36,719Assets held for sale 33,218 28,926 27,424Others 76,043 33,264 29,180 456,958 475,196 437,970

TL 31,459 thousand (31 December 2009: TL 24,544 thousand; 1 January 2009: TL 22,473 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 2010, real estate held for sale has been impaired by TL 3,891 thousand (31 December 2009: TL 2,986 thousand; 1 January 2009: 1,432 TL thousand).

As at 31 December 2010, the rights of repurchase on various tangible assets held for sale amounted to TL 1,903 thousand (31 December 2009: TL 986 thousand; 1 January 2009: 4,144 TL thousand).

20 Inventories

At 31 December, inventories comprised the following:

2010 2009Goods in transit 296,478 182,066Trading goods 107,448 113,159Trading property, net of impairment 45,038 56,008Spare parts 43,687 44,061Raw materials (*) 42,486 26,729Finished goods 5,330 1,352Other inventory 24,677 51,030 565,144 474,405

(*) As at 31 December 2010, raw materials are mainly composed of construction materials in various construction projects of Doğuş İnşaat.


82

21 Accounts receivable

At 31 December 2010, 2009 and 1 January 2009, accounts receivable comprised the following:

31 December

201031 December

2009 1 January

2009 Premiums receivable 578,613 421,207 282,817Factoring receivables 436,857 256,359 196,974Due from customers for contract work (Note 22) 295,157 239,545 112,354Trade receivables 278,642 224,271 191,517Contracts receivable 239,821 309,168 292,991Doubtful receivables 115,446 113,332 110,092Forfeiting receivables -- 46,829 107,459Other 72,819 39,645 30,425Total accounts receivable 2,017,355 1,650,356 1,324,629Allowance for doubtful receivables (115,189) (113,186) (110,092)Accounts receivable, net 1,902,166 1,537,170 1,214,537

Current accounts receivable 1,888,425 1,531,052 1,151,907Non–current accounts receivable 13,741 6,118 62,630 1,902,166 1,537,170 1,214,537

Movements in the allowance for doubtful receivables during the years ended 31 December were as follows: 2010 2009Balance at the beginning of the year 113,186 110,092Provision for the year 2,501 5,694Acquired through business combinations 981 --Recoveries (1,410) (750)Exchange rate differences on foreign currency balances (69) (1,850)Balance at the end of the year 115,189 113,186

At 31 December 2010, the Group held letters of guarantee amounting to TL 64,055 thousand (31 December 2009: TL 100,602 thousand; 1 January 2009: TL 76,533 thousand) as collateral for its receivables.

The Group’s exposure to credit and currency risks and impairment losses related to account receivables are disclosed in Note 40.


83

22 Due from/due to customers for contract work

At 31 December, the details of uncompleted contracts were as follows: 2010 2009Total costs incurred on uncompleted contracts 2,355,426 1,690,011Estimated earnings/(costs) 251,349 234,579Total estimated revenue on uncompleted contracts 2,606,775 1,924,590Less: Billings to date (2,357,820) (1,711,343)Net amounts due from / (due to) customers for contract work 248,955 213,247

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: 2010 2009Due from customers for contract work (Note 21) 295,157 239,545Due to customers for contract work (Note 36) (46,202) (26,298) 248,955 213,247

23 Other current assets

At 31 December 2010, 2009 and 1 January 2009, other current assets comprised the following:

31 December 2010

31 December 2009

1 January 2009

Reserve deposits at central banks 1,112,734 634,528 535,895Prepaid expenses and similar items 78,003 165,934 109,542Accrued exchange gain on derivatives 99,235 182,903 208,787Taxes and funds to be refunded 119,099 108,952 110,839Others 140,149 171,626 162,679 1,549,220 1,263,943 1,127,742

Reserve deposits at central banks

At 31 December 2010, 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 TL and foreign currency liabilities taken at the rates determined by the Central Bank of Turkey. In accordance with the current legislation, the reserve deposit rates for TL and foreign currency liabilities are 6 percent and 11 percent, respectively (31 December 2009: 5 percent and 9 percent; 1 January 2009: 6 percent and 9 percent). The reserve deposits do not earn interest as of 31 December 2010 (31 December 2009: 5.20 percent; 1 January 2009 12 percent). As of the reporting date, reserve deposits rates for TL liabilities vary from 5 percent to 12 percent depending on maturities of liabilities.

The reserve deposits at the Central Bank of the Netherlands, as required by the Dutch Banking Law, are calculated as 2 percent on all customer deposits with an original maturity less than 2 years and 2 percent on bank deposits of non-EU banks with an original maturity less than 2 years.


84

23 Other current assets (continued)

Reserve deposits at central banks (continued)

The 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 25 percent for foreign currency denominated liabilities with an remaining maturity less than 2 years excluding Romanian banks’ fundings (31 December 2009: 15 percent for RON and 25 percent for foreign currency; 1 January 2009: 18 percent for RON and 30 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 1.56 percent for RON reserves, 0.88 percent for EUR reserves and 0.49 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 (“RUR”) 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 RUR and foreign currency liabilities legal entities-nonresidents, including banks-nonresident (RUR and foreign currency liabilities), individuals (RUR and foreign currency liabilities) and other liabilities are 2.5 percent (31 December 2009: 2.5 percent for banks-nonresident (RUR and foreign currency liabilities), individuals (RUR) and other liabilities (RUR and foreign currency liabilities); 1 January 2009: banks-nonresident (RUR and foreign currency liabilities) 0.5 percent, individuals (RUR) 0.5 percent, other liabilities (RUR and foreign currency liabilities) 0.5 percent).


85

24 Banking loans and advances to customers At 31 December 2010, 2009 and 1 January 2009, outstanding loans were as follows:

31 December

201031 December

2009 1 January

2009

Consumer loans 6,751,691 5,395,354 5,205,360

Service sector 2,151,827 1,597,327 1,441,475

Energy 1,620,060 1,224,144 1,085,963

Construction 1,173,433 784,352 846,665

Transportation and logistics 1,063,193 843,048 855,731

Metal and metal products 1,060,734 637,836 526,452

Food 1,025,562 743,610 585,207

Textile 843,481 579,199 624,777

Transportation vehicles and sub-industry 679,346 654,333 724,839

Financial institutions 421,357 361,564 591,170

Tourism 408,258 450,995 412,233

Data processing 384,217 384,401 369,355

Agriculture and stockbreeding 338,196 232,314 222,306

Stone, rock and related products 281,021 195,804 194,999

Chemistry and chemical product 273,812 217,145 242,925

Durable consumption 244,291 234,754 289,583

Mining 225,775 120,140 120,240

Machinery and equipment 216,508 214,395 203,576

Electronic, optical and medical equipment 182,054 170,549 164,818

Plastic products 124,671 88,083 98,566

Paper and paper products 98,470 84,058 93,240

Others 688,723 692,310 660,671

Total performing loans 20,256,680 15,905,715 15,560,151 Non-performing loans and lease receivables (Note 40.2) 772,044 821,991 430,739

Total gross loans 21,028,724 16,727,706 15,990,890

Finance lease receivables, net of unearned income 457,302 414,123 603,513Accrued interest income on loans and lease receivables 247,633 242,779 349,404Allowance for possible losses on loans and lease receivables (743,285) (766,570) (383,641)

Banking loans and advances to customers, net 20,990,374 16,618,038 16,560,166

Short-term banking loans and advances to customer 8,513,765 7,692,659 7,673,470

Long-term banking loans and advances to customer 12,476,609 8,925,379 8,886,696

20,990,374 16,618,038 16,560,166

As at 31 December 2010, interest rates on loans granted to customers range between 1 percent-53 percent (31 December 2009: 1 percent-24 percent; 1 January 2009: 2 percent-30 percent) per annum for the foreign currency loans and 1 percent-32 percent (31 December 2009: 7 percent-32 percent; 1 January 2009: 14 percent-35 percent) per annum for the TL loans.


86

24 Banking loans and advances to customers (continued)

The finance lease receivables are secured through the underlying assets. At 31 December 2010, 2009 and 1 January 2009, banking loans and advances to customers included the following finance lease receivables:

31 December 2010

31 December 2009

1 January 2009

Finance lease receivables, net of unearned income 457,302 414,123 603,513Add: Non-performing lease receivables 92,602 67,901 30,696Less: Allowance for possible losses from finance lease receivables (32,839) (19,916) (4,568)Finance lease receivables, net 517,065 462,108 629,641Accrued interest on lease receivables 3,004 3,810 6,186 Analysis of finance lease receivables, gross Due within 1 year 253,169 235,334 325,665Due between 1 and 5 years 300,366 285,346 384,017Due after 5 years 39,635 15,217 18,231Finance lease receivables, gross 593,170 535,897 727,913Unearned income (76,105) (73,789) (98,272)Finance lease receivables, net 517,065 462,108 629,641 Analysis of finance lease receivables, net Due within 1 year 217,213 196,950 274,163Due between 1 and 5 years 263,412 250,940 338,940Due after 5 years 36,440 14,218 16,538Finance lease receivables, net 517,065 462,108 629,641

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 85,719 thousand (2009: TL 103,096 thousand).

Movements in the allowance for possible losses on loans and lease receivables during the years ended 31 December are as follows:

2010 2009Balance at the beginning of the year 766,570 383,641Provision for the year 242,113 597,458Write-offs (20,572) (41,512)Effect of change in joint venture rate (38,968) --Recoveries (195,137) (179,149)Exchange rate difference on foreign currency (10,721) 6,132Balance at the end of the year 743,285 766,570


87

25 Banking loans and advances to banks

At 31 December 2010, 2009 and 1 January 2009, banking loans and advances to banks comprised the following:

31 December 2010

31 December 2009

1 January 2009

TL

Foreigncurrency Total

Total TotalLoans and advances-demand: Domestic banks 311 664 975 1,697 866 Foreign banks 42,859 361,061 403,920 256,524 294,834 43,170 361,725 404,895 258,221 295,700Loans and advances-time: Domestic banks 255,193 701,798 956,991 628,781 584,248 Foreign banks 693,119 899,281 1,592,400 2,044,918 1,506,368 948,312 1,601,079 2,549,391 2,673,699 2,090,616Total loans and advances to banks 991,482 1,962,804 2,954,286 2,931,920 2,386,316Placements at money markets 614 -- 614 302,300 12,255Accrued interest income 6,464 5,301 11,765 20,658 20,311 998,560 1,968,105 2,966,665 3,254,878 2,418,882 Short term loans and advances to banks 1,591,059 1,864,621 1,806,426Long term loans and advances to banks 1,375,606 1,390,257 612,456 2,966,665 3,254,878 2,418,882

At 31 December 2010, almost all time deposits were short-term, maturing within one year, with interest rates ranging between 1 percent - 9 percent (31 December 2009: 0 percent - 12 percent; 1 January 2009: 1 percent - 11 percent) per annum for foreign currency time deposits and 3 percent - 10 percent (31 December 2009: 5 percent - 26 percent; 1 January 2009: 15 percent - 23 percent) per annum for TL time deposits.

At 31 December 2010, deposits at foreign banks included blocked accounts of TL 1,775,822 thousand (31 December 2009: TL 1,321,581 thousand; 1 January 2009: TL 586,071 thousand) held against the securitisations, funding and insurance business of Garanti Bank.


88

26 Financial assets at fair value through profit or loss

At 31 December 2010, 2009 and 1 January 2009, financial assets at fair value through profit or loss comprised the following:

31 December 2010

31 December 2009

1 January 2009

Debt and other instruments at fair value

Facevalue

Carryingvalue

Interest rate

range %Latest

maturity Carrying

valueCarrying

valueDiscounted government bonds in TL 76,610 71,687 6-9 2012 99,469 1,098Government bonds – consumer price index 33,335 41,523 9-40 2020 1,199 --Government bonds – floating 29,437 30,783 8-21 2017 3,609 --Gold -- 24,450 -- -- 33,201 7,545Government bonds in TL 25,234 24,688 6-19 2020 18,390 37,237Treasury bills in TL 19,460 19,277 5-8 2011 2,719 --Investment fund -- 7,351 -- -- 7,039 6,686Bonds issued by corporations -- -- -- -- -- 16,317Others -- 15,198 -- -- 14,751 8,065 234,957 180,377 76,948Listed shares -- 7,315 7 4Total 242,272 180,384 76,952 Current financial assets at fair value through profit or loss 133,554 140,563 29,701Non-current financial assets at fair value through profit or loss 108,718 39,821 47,251Total 242,272 180,384 76,952

Income from debt and other instruments held at fair value is reflected in profit or loss as interest income. Gains and losses arising on derivative financial instruments and changes in fair value of other trading instruments are reflected in trading gain, net, 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:

2010 2009Fixed/floating securities 76,664 126,049Derivative transactions 19,082 93,589Trading gain, net 95,746 219,638

As at 31 December 2010, financial assets at fair value through profit or loss amounting of TL 30 thousand (31 December 2009: TL 27 thousand; 1 January 2009: TL 27 thousand) are blocked against asset management operations.


89

27 Cash and cash equivalents

At 31 December, cash and cash equivalents comprised the following:

2010 2009Balances with central banks excluding reserve deposits 1,257,597 1,445,478Cash at banks 468,740 660,351Cash at branches of the Group banks 276,495 241,114Other liquid assets and cheques 7,179 10,361Cash on hand 925 1,016Total cash and cash equivalents 2,010,936 2,358,320

At 31 December, cash and cash equivalents disclosed in the consolidated statement of cash flows comprised the following:

2010 2009Loans and advances to banks and balances with central banks excluding reserve deposits with original maturity periods of less than three months 1,808,824 2,568,563Cash at banks 468,740 660,351Cash at branches of the Group banks 276,495 241,114Other liquid assets and cheques 7,179 10,361Cash on hand 925 1,016Cash and cash equivalents in the statement of cash flows 2,562,163 3,481,405


90

28 Capital and reserves

28.1 Paid in capital

As at 31 December 2010, the nominal share capital of Doğuş Holding amounted to TL 2,055,292 thousand (2009: TL 2,010,192 thousand) in the consolidated financial statements. On 22 April 2010, Doğuş Holding has increased its share capital to TL 2,055,292 thousand by in kind capital contribution amounting to TL 45,100 thousand.

The paid-in capital of Doğuş Holding comprises 856,027,050 shares (2009: 820,000,000 shares) of TL 0.001 each.

At 31 December, the shareholding structure of Doğuş Holding based on the number of shares is presented below:

2010 2009

Thousands

of shares %Thousands

of shares %Ferit Şahenk 276,671 32.32 276,671 33.74Filiz Şahenk 258,932 30.25 258,932 31.58Deniz Şahenk 147,143 17.19 147,143 17.94Doğuş Araştırma Geliştirme ve Müşavirlik Hizmetleri AŞ (“Doğuş Arge”) 87,183 10.18 87,183 10.63Garanti Turizm Yatırım ve İşletme

Anonim Şirketi (“Garanti Turizm”) 39,851 4.66 -- --DOAŞ 31,381 3.67 31,381 3.83Doğuş Hava Taşımacılığı Anonim Şirketi (“Doğuş Hava”) 5,264 0.61 5,264 0.64Doğuş Sigorta Aracılık Hizmetleri Anonim Şirketi (“Doğuş Sigorta”) 4,589 0.54 4,589 0.56Antur Turizm Anonim Şirketi (“Antur”)

3,824 0.45 3,824 0.47

Lasaş Lastik Sanayi ve Ticaret Anonim Şirketi -- -- 3,824 0.47Doğuş Turizm Sağlık Yatırımları ve İşletmeciliği Sanayi ve Ticaret Anonim Şirketi (“Doğuş Turizm”) 765 0.09 765 0.09Others 424 0.04 424 0.05 856,027 100.00 820,000 100.00

28.2 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 amounted to TL 270,507 thousand as at 31 December 2010 (2009: TL 211,758 thousand).


91

28 Capital and reserves (continued)

28.3 Revaluation surplus

For the years ended 31 December, the movements of revaluation surplus were as follows:

2010 2009Balance at the beginning of the year 1,081,534 1,024,867Revaluation (decrease) / increase in land and buildings (16,570) 87,183Deferred taxes on revaluation surplus 31,006 (2,621)Non-controlling interest portion of revaluation changes, net of deferred taxes 4,631 (12,030)Depreciation effect on revaluation surplus of prior year (14,403) (15,865)Balance at the end of the year 1,086,198 1,081,534

28.4 Non-controlling interests

For the years ended 31 December, movements of the non-controlling interests were as follows:

2010 2009Balance at the beginning of the year 230,432 200,637Sales to non-controlling interests 28,225 1,004Effect of a newly consolidated subsidiary of a proportionately consolidated joint venture 8,303 --Release of non-controlling interests through dividend distribution (1,259) (306)Effect of share capital increase (1,409) 182Purchases from non-controlling interests (31,458) (2,245)Non-controlling interest of changes in revaluation surplus (4,631) 12,030Non-controlling interest of profit for the year 50,756 19,130Balance at the end of the year 278,959 230,432

28.5 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.


92

29 Long-term bank borrowings

At 31 December, long-term borrowings comprised the following:

2010 2009

Interestrate (%)

Original amount inthousand

Long-term borrowings

Long-termborrowings

USD 0.5-8.15 2,644,748 4,088,781 4,102,671 Euro 1.00-5.30 866,532 1,775,610 1,204,896 Others 3.75-13.00 1,328,113 951,447 Total long-term bank borrowings 7,192,504 6,259,014 Accrued interest expenses 96,595 82,487 Total 7,289,099 6,341,501 Less: Short-term portion of long-term bank borrowings including accrued interest expenses (1,018,001) (1,301,579)Total 6,271,098 5,039,922

In December 2010, Garanti Bank completed a securitization (the “DPR Securitization-XII”) transaction, granted by European Investment Bank (“EIB”) in the amount of Euro 22.7 million with 12 years maturity, by European Bank for Reconstruction and Development (“EBRD”) in the amount of Euro 22.7 million with 12 years maturity, by West LB in the amount of Euro 30.2 million with 5 years maturity.

In September 2010, Garanti Bank signed a loan agreement with EBRD (EBRD-III) in the amount of Euro 15.1 million which consists of 2 tranches for the financing of SMEs. The first tranche in the amount of Euro 6 million with 5 years maturity has been financed by EBRD while the second tranche in the amount of Euro 9.1 million with 1 year maturity by Standard Chartered Bank.

In June 2010, Garanti Bank drew a second loan tranche worth of USD 18.1 million (equivalent of Euro 15.1 million) with a maturity of 12 years, within the Euro 45.4 million framework agreement signed with EIB 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 44.6 million (equivalent of Euro 30.2 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 18.1 million which consists of two tranches. The loan, which is funded directly by EBRD with the 5-year tranche of USD 14.5 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 3.6 million, will be utilized for the financing of the energy efficiency needs of the small sized enterprises.

In December 2009, Garanti Bank signed a credit agreement with Overseas Private Investment Corporation for a facility for the financing of SMEs in the amount of USD 30.24 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 15.1 million. The facility, which is comprised of 3 tranches, will be on lent to small-sized enterprises. Euro 7.1 million of the facility is funded from EBRD's own sources and has a maturity of 5 year while Euro 4.4 millions of the facility is funded by the Netherlands Development Finance Company with a maturity of 3 years. Euro 3.6 million of the facility is provided by a group of 6 banks from 4 countries with a maturity of 1 year.


93

29 Long-term bank borrowings (continued)

In August 2008, Garanti Bank completed a securitization (the “DPR Securitization-IX”) transaction by issuance of certificates; a tranche of Euro 60.5 million with 10 years maturity from European Investment Bank.

In June 2007, Garanti Bank completed a securitization (the “DPR Securitization-VIII”) transaction by issuance of certificates; three tranches of USD 166.3 million with 10 years maturity wrapped by Ambac Assurance Corp., Financial Guaranty Insurance Corp. and XL Capital Assurance and a tranche of USD 15.12 million with 8 years maturity and no financial guarantee.

In January 2007, Garanti Bank borrowed TL 131.5 million from Deutsche Bank AG, London with a maturity of 10 years at 12.93 percent annual fixed interest rate through a secured financing transaction. Accordingly, Garanti Bank pledged USD 90.7 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 80.44 million in two separate transactions on 28 June and 3 July 2007 with maturity of 10 years for each and pledged USD 30.2 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 securitization (the “DPR Securitization-VII”) transaction by issuance of certificates: USD 120.96 million tranche with a maturity of 10 years and USD 30.2 million tranche with a maturity of 8 years. Both of the series were issued on an unwrapped basis.

In May 2006, Garanti Bank completed a securitization (the “DPR Securitization-VI”) transaction by issuance of certificates: Euro 91 million with a guarantee issued by MBIA Insurance Corp. with a maturity of 5 years, USD 91 million with no financial guarantee and a maturity of 7 years and USD 68 million with a guarantee issued by Ambac Assurance Corp. with a maturity of 10 years.

In November 2005, Garanti Bank completed a securitization (the “DPR Securitization-V”) transaction by issuance of certificate: USD 45 million with a guarantee issued by CIFG Inc. with a maturity of 7 years, USD 76 million with a guarantee issued by XL Capital Assurance with a maturity of 8 years and USD 38 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 securitization (the “DPR Securitisation-IV”) transaction by issuance of certificate: USD 45 million with a guarantee issued by Financial Guaranty Insurance Corp. with a final maturity of 7 years, USD 45 million with a guarantee issued by Financial Security Assurance with a final maturity of 8 years, USD 50 million with a financial guarantee issued by Assured Guaranty Corp. with a final maturity of 8 years, USD 33 million with a financial guarantee issued by Radian Asset Assurance Inc. with a final maturity of 7 years, USD 8 million with no financial guarantee and a final maturity of 7 years.

In May 2005, Garanti Bank completed a securitization (the “DPR Securitisation-III”) transaction by issuance of certificate: USD 91 million with a guarantee issued by MBIA Insurance Corp., a final maturity of 8 years.

The DPR securitization is a way of securitizing 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.


94

29 Long-term bank borrowings (continued)

Terms and debt repayment schedule

The redemption schedules of long-term and short-term portion of long-term bank borrowings at 31 December are summarised below:

2010 20092010 -- 1,301,5792011 1,018,001 1,079,2782012 1,788,482 384,6892013 and over 4,482,616 3,575,955Balance at the end of the year 7,289,099 6,341,501

At 31 December, the terms and conditions of outstanding short-term and long-term bank borrowings were as follows:

2010 Nominal Year of Face Carrying Currency interest rate Maturity value amount Secured USD (Libor+1.21-5.75) 0.5-8.15 2012-2020 4,362,465 4,336,022 Secured Euro (Euribor+1.95-4.70) 1.00-8.00 2011-2020 2,067,073 2,068,758 Secured Other 3.00-10.73 2011 1,949,732 2,006,893 Unsecured USD (Libor+1.45-5.50) 3.00-6.30 2011-2020 599,332 585,333 Unsecured Euro (Euribor+0.13-4.50) 3.81-4.50 2011-2020 686,999 685,626 Unsecured Other 3.00-14.98 2011-2017 270,792 277,782 9,936,393 9,960,414

2009 Nominal Year of Face Carrying Currency interest rate Maturity value amount Secured USD (Libor+1.32-5.75) 2.26-8.25 2010-2020 4,132,966 4,141,900 Secured Euro (Euribor+0.90-6.25) 1.00-7.87 2010-2020 1,657,007 1,632,080 Secured Other (Bubor+ 1.85) 3.16-12.37 2010 1,317,544 1,318,362 Unsecured USD (Libor+0.60.5-50) 1.26-14.00 2010-2017 623,812 622,338 Unsecured Euro (Euribor+0.13-7.85) 3.80-10.68 2010-2016 555,617 554,111 Unsecured Other 3.75-17.00 2010-2014 313,229 314,217 8,600,175 8,583,008


95

30 Subordinated liabilities

At 31 December 2010, 2009 and 1 January 2009, subordinated liabilities comprised the following:

31 December 2010 31 December

2009 1 January

2009

Latest Interest Carrying Carrying Carrying Maturity rates % value Value Value Subordinated debt of USD 151 million 2017 6.95 229,663 224,907

229,219

Subordinated debt of Euro 15 million 2021 Euribor+3.5 30,807 32,319 --

Subordinated bonds payable of Euro 9 million 2016 Euribor+1.5 18,484 19,391

19,182 Subordinated deposit 2016 4.42-7 9,558 15,351 30,695 288,512 291,968 279,096 Accrued interest on subordinated liabilities 7,252 7,443

7,248

Total 295,764 299,411 286,344

Short-term subordinated liabilities -- 9,469 16,098 Long-term subordinated liabilities 295,764 289,942 270,246 Total 295,764 299,411 286,344

On 23 February 2009, Garanti Bank obtained a 12-year subordinated loan of Euro 15 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 obtained a 10-year subordinated fixed-rate note of USD 151 million due February 2017 with a repayment option for Garanti Bank at the end of the fifth year. The fixed rate notes with Political Risk Insurance provided by Steadfast (a subsidiary of Zurich American Insurance Company) received a rating of Baa1 by Moody’s Investors Service and priced at par to yield 6.95 to investors for the first 5 years and then 7.95 percent annually.

On 29 September 2006, one of the Group’s joint ventures issued its first floating rate note for Euro 9 million, Euro-denominated lower tier-2 capital, priced at 99.30, arranged by Deutsche Bank and traded on the alternative market in Frankfurt.

As at 31 December 2010, remaining subordinated deposits of the proportionately consolidated banking joint ventures in the Netherlands amounted to Euro 5 million (equivalent of TL 9,558 thousand) (31 December 2009: Euro 7 million, equivalent of TL 15,356 thousand; 1 January 2009: Euro 14.5 million, equivalent of TL 30,695 thousand).


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31 Other non-current liabilities

At 31 December 2010, 2009 and 1 January 2009, other non-current liabilities comprised the following:

31 December

2010 31 December

2009 1 January

2009 Long-term advances received 309,488 433,456 452,046Provision for general banking risks 108,864 108,828 9,066Accrued exchange losses on derivatives 73,720 28,168 43,618Technical reserves relating to insurance operations 41,821 38,880

37,353

Reserve for severance payments 41,257 38,543 34,629Unearned income 33,602 26,357 31,539Lease obligations 7,510 16,749 8,019Others 78,492 63,001 29,735 694,754 753,982 646,005

As at 31 December 2010, advances received include long-term portion of the upfront sub-operation fees amounting to TL 230,359 (31 December 2009: TL 241,506 thousand; 1 January 2009: TL 274,570 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 2010.

As at 31 December 2010, a general provision amounting to TL 108,864 thousand (31 December 2009: TL 108,828 thousand; 1 January 2009: TL 9,066 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 for general banking risks in prior years.

31.1 Technical reserves relating to insurance operations

2010 2009Reserve for unearned premiums, net Gross 29,858 24,469Reinsurers’ share (13,917) (9,957) 15,941 14,512Provision for claims, net Gross 6,513 6,153Reinsurers’ share (2,713) (2,977) 3,800 3,176Life mathematical reserves 22,080 21,192 41,821 38,880


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31 Other non-current liabilities (continued)

31.2 Reserve for severance payments

For the years ended 31 December, the movements in the reserve for severance payments were as follows:

2010 2009Balance at the beginning of the year 38,543 34,629Provision for the year 15,950 12,694Acquired through business combinations 540 --Reversal of employee severance indemnity (32) (1,252)Paid during the year (13,744) (7,528)Balance at the end of the year 41,257 38,543

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:

2010 2009Discount rate 4.66% 5.92%Interest rate 10% 11%Expected rate of salary/limit increase 5.10% 4.80%The range of turnover rate to estimate the probability retirement 1.0-9.0% 1.0-8.52%

The computation of the liability is predicated upon retirement pay ceiling announced by the Government. As at 31 December 2010, the ceiling amount was TL 2.52 thousand (2009: TL 2.37 thousand).


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32 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, will occur within three years from the enactment of the New Law in May 2008. 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 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 will 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.


99

32 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.

At 19 June 2008, Cumhuriyet Halk Partisi (“CHP”) has applied to the Constitutional Court for the cancellation of various articles of the Law including the first paragraph of the provisional Article 20. As at the issuing date of the accompanying consolidated financial statements, there is not any published ruling of the Constitutional Court regarding this application.

Garanti Bank obtained an actuarial report dated 18 January 2011 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 will be required to be paid to transfer the obligation at 31 December 2010.

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.

The pension benefits are calculated annually, as per the calculation as at 31 December 2010, the present value of funded obligations amount to TL 20,711 thousand (2009: TL 34,286 thousand) and the fair value of the planned assets amount to TL 308,564 thousand (2009: TL 252,772 thousand).

2010 2009Present value of funded obligations - Pension benefits transferable to SSF (obligation measured at the expected transfer amount) (95,505) (87,057) - Medical benefits transferable to SSF (obligation measured at the expected transfer amount) 80,554 57,897 - General administrative expenses (5,760) (5,126) (20,711) (34,286)Fair value of plan assets 308,564 252,772Asset surplus in the plan (*) 287,853 218,486

(*)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:

2010 2009Cash and due from banks 222,880 22,014Securities 56,124 201,208Land and buildings 29,560 29,550 308,564 252,772

(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.


100



(ii) Excess benefits not transferable to SSF (continued)

At 31 December, asset surplus on present value of defined benefit obligation is as follows:

2010 2009Present value of defined benefit obligation - Pension (73,274) (56,982) - Health (62,068) (63,315)Fair value of plan assets (*) 287,854 218,486Asset surplus over present value of defined benefit obligation 152,512 98,189

(*) Plan assets are composed of asset surplus in the plan explained in section (i).

As per the actuarial calculation performed as at 31 December 2010 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 152,512 thousand (2009: TL 98,189 thousand) remains. However, Garanti Bank’s management, acting prudently, did not consider the health premium surplus amounting TL 80,554 thousand (2009 TL 57,897 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 2010. The provision amounting to TL 31,006 thousand that was charged fully as expense in prior years was reversed in the accompanying consolidated financial statements as at 31 December 2009.

2010 2009Asset surplus over present value of defined benefit

obligation 152,512 98,189Net present value of medical benefits and health premiums

transferable to SSF (80,554) (57,897)Present value of defined benefit obligation 71,958 40,292

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 2010 and 2009 are as follows:

2010 2009Total contribution payment 38,898 34,692 38,898 34,692

Principal actuarial assumptions used at 31 December are as follows:

2010 2009Discount rates 10.00 10.86-8.42Inflation rates 5.10 6.90-4.80Future real salary increase rates 1.5 1.5Medical cost trend rates 24.70-2.80 20.50-6.80Future pension increase rates 5.10 6.90-4.80

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:

2010 Percentage of change in defined benefit obligation

Assumption change Pension benefits % Medical benefits % Overall %Discount rate +1% (11.6) (14.3) (12.8)Discount rate -1% 14.5 18.5 16.3Medical inflation +10% of CPI -- 9.0 4.1Medical inflation -10% of CPI -- (7.8) (3.6)

2009 Percentage of change in defined benefit obligation

Assumption change Pension benefits % Medical benefits % Overall %Discount rate +1% (11.1) (12.5) (11.3)Discount rate -1% 13.8 15.8 14.1Medical inflation +10% of CPI -- 7.7 4.1Medical inflation -10% of CPI -- (6.7) (3.5)

33 Short-term bank borrowings

At 31 December, short-term bank borrowings comprised the following:

2010 2009Foreign banks 1,845,455 1,419,921Domestic banks 821,228 813,522 2,666,683 2,233,443Accrued interest expenses 4,632 8,064 2,671,315 2,241,507

As at 31 December 2010, short-term bank borrowings included various promissory notes amounting to TL 65,195 thousand in total with latest maturity of 2011 (2009: TL 56,008 thousand with latest maturity of 2010).

As at 31 December 2010, short-term bank borrowings included two one-year syndicated loan facilities to be utilized for general trade finance purposes including export and import contracts in two tranches of (i) USD 35,361 thousand and Euro 186,603 thousand, with the rates of Libor + 1.5 percent and Euribor + 1.5 percent per annum with the participation of 41 banks from 17 different countries, (equivalent of TL 433,954 thousands) and (ii) USD 95,679 thousand and Euro 155,283 thousand with the rates of Libor + 1.2 percent and Euribor + 1.2 percent per annum with the participation of 49 banks from 18 countries (equivalent of TL 461,820 thousands).


102

34 Deposits

At 31 December 2010, 2009 and 1 January 2009, deposits comprised the following:

31 December

201031 December

2009 1 January

2009Banking deposits from banks 849,141 827,800 640,446Banking customer deposits 22,965,656 19,841,322 16,777,909 23,814,797 20,669,122 17,418,355 Short-term deposits 23,429,175 20,347,308 17,031,352Long-term deposits 385,622 321,814 387,003 23,814,797 20,669,122 17,418,355

34.1 Banking deposits from banks

At 31 December 2010, 2009 and 1 January 2009, banking deposits from banks comprised the following:

31 December

201031 December

2009 1 January

2009 Payable on demand 282,381 480,390 284,702Term deposits 565,435 346,458 352,988 847,816 826,848 637,690Accrued interest expenses 1,325 952 2,756 849,141 827,800 640,446

At 31 December 2010, banking deposits from banks include both TL accounts in the amount of TL 423,424 thousand (31 December 2009: TL 257,890 thousand; 1 January 2009: TL 165,620 thousand) and foreign currency denominated accounts in the amount of TL 424,392 thousand (31 December 2009: TL 568,958 thousand; 1 January 2009: TL 472,070 thousand). As at 31 December 2010, interest rates applicable to TL bank deposits and foreign currency bank deposits varied within ranges of 4 percent - 9 percent and 1 percent - 12 percent (31 December 2009: 3 percent - 16 percent and 1 percent - 8 percent; 1 January 2009: 13 percent - 22 percent and 1 percent - 8 percent), respectively.

34.2 Banking customer deposits

At 31 December 2010, 2009 and 1 January 2009, banking customer deposits comprised the following:

31 December 2010

31 December 2009

1 January 2009

Demand Time Total Total TotalForeign currency 2,337,927 7,576,936 9,914,863 9,025,008 8,078,268Saving 735,856 7,343,118 8,078,974 6,298,087 5,503,027Commercial 935,184 3,485,756 4,420,940 4,117,454 2,592,808Public and other 315,599 139,032 454,631 326,452 490,958 4,324,566 18,544,842 22,869,408 19,767,001 16,665,061Accrued interest expenses 26 96,222 96,248 74,321 112,848 4,324,592 18,641,064 22,965,656 19,841,322 16,777,909

At 31 December 2010, interest rates applicable to TL deposits and foreign currency deposits varied between 5 percent - 11 percent (31 December 2009: 3 percent - 18 percent; 1 January 2009: 13 percent - 24 percent) and 1 percent - 12 percent (31 December 2009: 1 percent - 11 percent; 1 January 2009: 1 percent -11 percent), respectively.


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35 Obligations under repurchase agreements

The proportionately consolidated financial joint ventures 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-earning assets, depending on the prevailing interest rates.

At 31 December 2010, 2009 and 1 January 2009, assets sold under repurchase agreements are as follows:

31 December 2010 Carrying

value

Fair valueof underlying

assets

Carrying amount of corresponding

liabilities

Range ofrepurchase

dates Repurchase

price Investments in debt securities 3,715,407 3,724,957 3,548,767 Jan’11-May’11 3,550,706 3,715,407 3,724,957 3,548,767 3,550,706 Current portion of obligations 3,548,767 Non-current portion of obligations -- 3,548,767 31 December 2009 Investments in debt securities 3,337,180 3,400,450 3,254,178 Jan’10-Feb’11 3,294,754

3,337,180 3,400,450 3,254,178 3,294,754 Current portion of obligations 3,207,075 Non-current portion of obligations 47,103 3,254,178

1 January 2009 Investments in debt securities 3,518,010 3,548,012 3,370,491 Jan’09-Feb’11 3,410,480

3,518,010 3,548,012 3,370,491 3,410,480 Current portion of obligations 3,197,720 Non-current portion of obligations 172,771 3,370,491

As at 31 December 2010, accrued interest on obligations under repurchase agreements amounting to TL 7,688 thousand (31 December 2009: TL 17,886 thousand; 1 January 2009: TL 18,577 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 2010, the maturities of the obligations varied from one day to five months and interest rates varied between 1 percent - 5 percent (31 December 2009: 2 percent - 11 percent, with maturities varying from one day to fourteen months; 1 January 2009: 3 percent - 17 percent, with maturities varying from one day to twenty six months).


104

36 Accounts payable

At 31 December, accounts payable comprised the following:

2010 2009Payables to insurance and reinsurance companies 562,625 408,190Trade payables 512,276 399,768Due to customers for contract work (Note 22) 46,202 26,298Notes payable 1,170 21,039Others 19,081 18,317 1,141,354 873,612

37 Other current liabilities

At 31 December 2010, 2009 and 1 January 2009, other current liabilities comprised the following:

31 December

201031 December

2009 1 January

2009Blocked accounts against expenditures of card holders 843,517 671,076

548,562

Other interest and expense accruals 142,229 124,892 115,879Accrued exchange losses on derivatives 105,332 77,217 140,349Withholding taxes and duties payable 87,447 76,131 117,716Import deposits and advances received 87,415 177,448 47,699Short-term employee benefits 57,610 37,996 46,840Transfer orders 24,602 19,492 20,185Blocked accounts 13,328 12,036 10,747Lease obligations 9,787 11,594 3,288Unearned income 3,090 1,109 1,000Others 157,888 97,412 128,208 1,532,245 1,306,403 1,180,473

38 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.

38.1 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 2010 2009Obtained from banks and given to government organisations 471,433 586,830Given to suppliers 456,236 564,073Given to banks 33,239 32,373Given to customs administrations 14,458 7,719Given to others 149,406 161,150Total letters of guarantee 1,124,772 1,352,145Sureties given 55,748 49,065


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38 Commitments and contingencies (continued)

38.1 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 329,106 thousand (2009: TL 339,096 thousand) and tangible assets at an amount of TL 458,389 thousand (equivalent of USD 134,600 thousand and Euro 122,150 thousand) (2009: TL 397,094 thousand, equivalent of USD 134,600 thousand and Euro 90,000 thousand) as collateral. In terms of the related borrowing agreements, one of the tourism segment consolidated subsidiaries’ profit from hotels has been attached.

38.2 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:

2010 2009 Letters of guarantee 3,641,214 3,601,684Letters of credit 1,175,773 983,565Acceptance credits 49,625 37,694Other guarantees and endorsements 17,160 -- 4,883,772 4,622,943

As at 31 December 2010, commitments for unused credit limits for credit cards, overdrafts, cheques and loans to customers, and commitments for “credit linked notes” amount approximately to TL 7,105,480 thousand (2009: TL 5,554,332 thousand) in total.

As at 31 December 2010, commitments for the derivative transactions carried out on behalf of customers in the Turkish Derivatives Exchange amounted to TL 153,621 thousand (2009: TL 147,234 thousand) in total.

As at 31 December 2010, 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 9,328,333 thousand (2009: TL 7,153,384 thousand), approximately 96 percent of which are due within a year.


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38.2 Banking and finance segment (continued)

The following tables summarize 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.

Notional amount with remaining life of

31 December 2010 Up to 1month

1 to 3months

3 to 6months

6 to 12 months

Over 1year Total

Interest rate derivatives Interest rate options -- -- 985,824 -- -- 985,824 Purchases -- -- 492,912 -- -- 492,912 Sales -- -- 492,912 -- -- 492,912Interest rate swaps 8,194 39,440 9,781 6,556 3,654 67,625 Purchases 3,949 4,815 4,383 3,460 2,266 18,873 Sales 4,245 34,625 5,398 3,096 1,388 48,752Interest rate futures -- 27,579 -- -- -- 27,579 Purchases -- 27,579 -- -- -- 27,579 Sales -- -- -- -- -- --Other derivatives Securities, shares and index options 1,771 144,500 44,004 23,536 3,688 217,499 Purchases 1,001 83,691 22,002 11,367 1,844 119,905 Sales 770 60,809 22,002 12,169 1,844 97,594Other forward contracts 92,811 62,008 43,617 -- -- 198,436 Purchases 72,207 27,821 15,448 -- -- 115,476 Sales 20,604 34,187 28,169 -- -- 82,960Currency derivatives Spot exchange contracts 353,491 -- -- -- -- 353,491 Purchases 170,687 -- -- -- -- 170,687 Sales 182,804 -- -- -- -- 182,804Forward exchange contracts 432,466 127,460 147,098 110,781 68,731 886,536 Purchases 332,234 97,792 58,827 26,758 32,724 548,335 Sales 100,232 29,668 88,271 84,023 36,007 338,201Currency/cross currency swaps 1,825,338 671,546 771,139 777,284 316,424 4,361,731 Purchases 684,741 125,509 336,464 515,295 91,930 1,753,939 Sales 1,140,597 546,037 434,675 261,989 224,494 2,607,792Options 747,287 705,836 469,899 277,883 23,839 2,224,744 Purchases 432,646 376,066 240,419 140,384 21,995 1,211,510 Sales 314,641 329,770 229,480 137,499 1,844 1,013,234Foreign currency futures 165 4,703 -- -- -- 4,868 Purchases 165 3,605 -- -- -- 3,770 Sales -- 1,098 -- -- -- 1,098Subtotal purchases 1,697,630 746,878 1,170,455 697,264 150,759 4,462,986 Subtotal sales 1,763,893 1,036,194 1,300,907 498,776 265,577 4,865,347 Total of transactions 3,461,523 1,783,072 2,471,362 1,196,040 416,336 9,328,333


107



Notional amount with remaining life of

31 December 2009 Up to 1month

1 to 3months

3 to 6months

6 to 12 months

Over 1 year Total

Interest rate derivatives Interest rate options -- -- 30,316 -- 1,034,204 1,064,520 Purchases -- -- 30,316 -- 517,102 547,418 Sales -- -- -- -- 517,102 517,102 Interest rate swaps 1,772 3,751 1,383 31,832 206 38,944 Purchases 1,284 3,479 612 2,157 206 7,738 Sales 488 272 771 29,675 -- 31,206Interest rate futures -- 10,636 -- -- -- 10,636 Purchases -- 907 -- -- -- 907 Sales -- 9,729 -- -- -- 9,729Other derivatives Securities, shares and index options 522 -- 4,797 1,813 -- 7,132 Purchases 522 -- 2,550 -- -- 3,072 Sales -- -- 2,247 1,813 -- 4,060Other forward contracts 93,133 30,124 4,254 -- -- 127,511 Purchases 37,343 16,896 4,254 -- -- 58,493 Sale 55,790 13,228 -- -- -- 69,018Currency derivatives Spot exchange contracts 298,518 -- -- -- -- 298,518 Purchases 176,362 -- -- -- -- 176,362 Sales 122,156 -- -- -- -- 122,156Forward exchange contracts 418,308 86,872 102,229 45,783 35,317 688,509 Purchases 276,279 47,133 40,294 32,188 12,094 407,988 Sales 142,029 39,739 61,935 13,595 23,223 280,521Currency/cross currency swaps 1,904,771 546,888 391,560 161,305 163,731 3,168,255 Purchases 1,413,770 188,766 293,393 155,921 151,570 2,203,420 Sales 491,001 358,122 98,167 5,384 12,161 964,835Options 845,894 374,326 292,797 252,461 -- 1,765,478 Purchases 642,705 152,144 102,802 104,483 -- 1,002,134 Sales 203,189 222,182 189,995 147,978 -- 763,344Foreign currency futures -- 1,264 157 -- -- 1,421 Purchases -- 1,264 157 -- -- 1,421 Sales -- -- -- -- -- --Subtotal purchases 2,548,265 410,589 474,378 294,749 680,972 4,408,953 Subtotal sales 1,014,653 643,272 353,115 198,445 552,486 2,761,971 Total of transactions 3,562,918 1,053,861 827,493 493,194 1,233,458 7,170,924


108



The breakdown of such commitments outstanding at 31 December, by type, is as follows:

2010 2009 Purchase Sale Purchase SaleCurrency swap agreements for hedging purposes 1,688,008 2,567,970 2,123,693 962,446Interest rate and foreign currency options 1,146,127 1,479,578 904,932 1,219,840Spot foreign currency transactions 170,687 182,804 176,362 122,156Forward agreements for customer

dealing activities 269,199 291,957

126,632 240,053Forward rate agreements, foreign currency and interest rate futures 31,349 1,098

2,329 9,729

Options for customer dealing activities 678,200 124,163 647,693 64,664Forward agreements for hedging purposes 279,136 46,243 281,356 40,469Forward agreements for gold trading 115,476 82,960 58,492 69,018Currency swap agreements for customer dealing activities 65,931 39,823

79,727 2,389

Interest rate swap agreements 18,873 48,751 7,737 31,207 4,462,986 4,865,347 4,408,953 2,761,971

38.3 Commitments and contingencies applicable to the business segments

As at 31 December 2010, commitment for uncalled capital of subsidiaries amounted to TL 116,576 thousand (2009: TL 14,814 thousand).

39 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. These transactions were carried out on an arm’s-length basis during the normal course of business.


109

39 Related party disclosures (continued) 39.1 Related party balances

At 31 December 2010, 31 December 2009 and 1 January 2009 the Group had the following balances outstanding from its related parties:

31 December 2010 Joint Ventures Other TotalAccounts receivable 398 -- 398 Due from related parties 7,669 119,122 126,791 Banking loans and advances to customers 275 -- 275 Cash and cash equivalents 230,797 -- 230,797 Long-term borrowings 27,820 -- 27,820 Other non-current liabilities 10,873 -- 10,873 Short-term bank borrowings 28,251 -- 28,251 Short-term portion of long-term borrowings 9,659 -- 9,659 Deposits 28 76,112 76,140 Accounts payable 61 -- 61 Due to related parties 18,341 43,571 61,912 Letters of guarantee 182,495 2,550 185,045

31 December 2009 Joint Ventures Other TotalOther non-current assets 55 -- 55Accounts receivable 6,693 -- 6,693Due from related parties 288 10,463 10,751Banking loans and advances to customers 216 -- 216Cash and cash equivalents 273,480 -- 273,480Long-term borrowings 16,054 -- 16,054Other non-current liabilities 41,960 -- 41,960Short-term bank borrowings 49,141 -- 49,141Short-term portion of long-term borrowings 13,848 -- 13,848Deposits 489 68,401 68,890Accounts payable 894 -- 894Due to related parties 1,737 1,733 3,470Letters of guarantee 219,328 3,440 222,768

1 January 2009 Joint Ventures Other Total Other non-current assets 2 -- 2 Accounts receivable 80 -- 80 Due from related parties 56 14,942 14,998 Banking loans and advances to customers 2,411 -- 2,411 Cash and cash equivalents 212,332 -- 212,332 Long-term borrowings 40,266 -- 40,266 Other non-current liabilities 4,837 -- 4,837 Short-term bank borrowings 12,261 -- 12,261 Short-term portion of long-term borrowings 19,334 -- 19,334 Deposits 323 46,299 46,622 Accounts payable 11,761 -- 11,761 Due to related parties 497 3,198 3,695 Letters of guarantee 97,483 2,213 99,696


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39 Related party disclosures (continued) 39.2 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:

2010 Joint Ventures Other TotalRevenues 29,168 3,542 32,710 Cost of revenues (361) -- (361)General and administrative expenses (1,969) -- (1,969)Selling, marketing and other distribution expenses (302) -- (302)Net financing costs 1,251 (3,620) (2,369)Other expense, net (721) -- (721) 2009 Joint Ventures Other TotalRevenues 22,670 5,161 27,831 Cost of revenues (306) -- (306)General and administrative expenses (1,390) -- (1,390)Selling, marketing and other distribution expenses (8) -- (8)Net financing costs (19) (5,512) (5,531)Other expense, net (698) -- (698)

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 2010 (2009: None).

39.3 Transactions with key management personnel

On a consolidated basis, key management costs included in general and administrative expenses for the years ended 31 December 2010 and 2009 amounted to TL 97,438 thousand and TL 81,631 thousand, respectively.


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40 Financial instruments

40.1 Liquidity risk

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:

31 December 2010

Monetary assets Up to 1month

1 to 3months

3 to 12months

Over 1 year Total

Turkish Lira Investments in debt securities 714,832 568,660 1,584,014 7,571,082 10,438,588 Other non-current assets -- -- -- 223,589 223,589 Accounts receivable 279,108 857,230 106,850 4,410 1,247,598 Due from related parties -- -- 125,656 -- 125,656 Other current assets 135,191 92,325 80,129 -- 307,645 Banking loans and advances to banks 276,932 22,027 155,334 544,266 998,559 Banking loans and advances to customers 2,733,073 1,406,009 1,030,846 5,497,499 10,667,427 Financial assets at fair value through profit or loss 59,078 17,099 30,959 97,909 205,045 Cash and cash equivalents 1,035,565 12,903 -- -- 1,048,468 Total TL monetary assets 5,233,779 2,976,253 3,113,788 13,938,755 25,262,575 Foreign Currencies Investments in debt securities 21,518 4,138 250,092 1,496,811 1,772,559 Other non-current assets -- -- -- 233,369 233,369 Accounts receivable 46,681 132,882 465,674 9,331 654,568 Due from related parties 25 564 546 -- 1,135 Other current assets 1,142,670 21,304 77,601 -- 1,241,575 Banking loans and advances to banks 587,992 118,894 429,880 831,340 1,968,106 Banking loans and advances to customers 382,688 782,948 2,178,201 6,979,110 10,322,947 Financial assets at fair value through profit or loss 24,115 -- 2,303 10,809 37,227 Cash and cash equivalents 941,579 20,889 -- -- 962,468 Total foreign currency monetary assets 3,147,268 1,081,619 3,404,297 9,560,770 17,193,954 Total monetary assets 8,381,047 4,057,872 6,518,085 23,499,525 42,456,529


112

40 Financial instruments (continued)

40.1 Liquidity risk (continued)

31 December 2010

Monetary liabilities Up to 1month

1 to 3months

3 to 12 months

Over 1 year Total

Turkish Lira Long-term borrowings -- -- -- 1,198,925 1,198,925 Other non-current liabilities -- -- -- 445,818 445,818 Short-term and short-term portion of long-term bank borrowings 526,129 68,064 473,124 -- 1,067,317 Deposits 11,790,825 1,301,074 168,197 56,982 13,317,078 Obligations under repurchase agreements 3,078,609 47,372 -- -- 3,125,981 Accounts payable 109,143 51,556 568,356 -- 729,055 Due to related parties -- -- 58,691 -- 58,691 Other current liabilities 1,112,276 17,114 122,321 -- 1,251,711 Total TL monetary liabilities 16,616,982 1,485,180 1,390,689 1,701,725 21,194,576 Foreign Currencies Long-term bank borrowings -- -- -- 5,072,173 5,072,173 Subordinated liability -- -- -- 295,764 295,764 Other non-current liabilities -- -- -- 248,936 248,936 Short-term and short-term portion of long-term bank borrowings 404,455 218,944 1,998,600 -- 2,621,999 Deposits 7,714,921 1,529,962 924,196 328,640 10,497,719 Obligations under repurchase agreements 140,724 203,309 78,753 -- 422,786 Accounts payable 77,194 251,319 83,786 -- 412,299 Due to related parties -- -- 3,221 -- 3,221 Other current liabilities 32,355 72,598 175,581 -- 280,534 Total foreign currency monetary liabilities 8,369,649 2,276,132 3,264,137 5,945,513 19,855,431 Total monetary liabilities 24,986,631 3,761,312 4,654,826 7,647,238 41,050,007 Liquidity position/(gap) (16,605,584) 296,560 1,863,259 15,852,287 1,406,522


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31 December 2009

Monetary assets Up to 1month

1 to 3months

3 to 12 months

Over 1 year Total

Turkish Lira Investments in debt securities 11,502 470,172 2,247,048 6,767,809 9,496,531 Other non-current assets -- -- -- 142,683 142,683 Accounts receivable 138,221 650,366 147,869 3,744 940,200 Due from related parties -- -- 10,751 -- 10,751 Other current assets 105,332 249,953 27,187 -- 382,472 Banking loans and advances to banks 559,783 112,466 146,963 577,393 1,396,605 Banking loans and advances to customers 2,957,645 829,516 833,578 3,314,656 7,935,395 Financial assets at fair value through profit or loss 13,819 2,677 87,802 29,545 133,843 Cash and cash equivalents 1,250,086 16,968 -- -- 1,267,054 Total TL monetary assets 5,036,388 2,332,118 3,501,198 10,835,830 21,705,534 Foreign Currencies Investments in debt securities 81,258 45,872 229,452 1,439,473 1,796,055 Other non-current assets -- -- -- 332,513 332,513 Accounts receivable 102,813 107,786 383,997 2,374 596,970 Other current assets 728,082 110,284 43,105 -- 881,471 Banking loans and advances to banks 451,640 348,360 245,409 812,864 1,858,273 Banking loans and advances to customers 572,497 788,991 1,710,432 5,610,723 8,682,643 Financial assets at fair value through profit or loss 14,997 6,050 15,218 10,276 46,541 Cash and cash equivalents 1,065,611 25,655 -- -- 1,091,266 Total foreign currency monetary assets 3,016,898 1,432,998 2,627,613 8,208,223 15,285,732 Total monetary assets 8,053,286 3,765,116 6,128,811 19,044,053 36,991,266


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31 December 2009

Monetary liabilities Up to 1month

1 to 3months

3 to 12 months

Over 1year Total

Turkish Lira Long-term borrowings -- -- -- 936,092 936,092 Subordinated liabilities -- -- -- -- -- Other non-current liabilities -- -- -- 591,944 591,944 Short-term and short-term portion of long-term bank borrowings 541,512 11,417 56,322 -- 609,251 Deposits 9,608,648 1,109,139 52,506 170,343 10,940,636 Obligations under repurchase agreements 2,965,569 112 125,955 45,408 3,137,044 Accounts payable 69,235 84,093 408,584 -- 561,912 Due to related parties -- -- 2,037 -- 2,037 Other current liabilities 594,612 15,673 420,672 -- 1,030,957 Total TL monetary liabilities 13,779,576 1,220,434 1,066,076 1,743,787 17,809,873 Foreign Currencies Long-term bank borrowings -- -- -- 4,103,830 4,103,830 Subordinated liability 3,428 3,979 2,062 289,942 299,411 Other non-current liabilities -- -- -- 178,554 178,554 Short-term and short-term portion of long-term bank borrowings 453,505 276,782 2,203,548 -- 2,933,835 Deposits 8,109,036 822,277 645,702 151,471 9,728,486 Obligations under repurchase agreements 115,439 -- -- 1,695 117,134 Accounts payable 41,245 226,978 43,477 -- 311,700 Due to related parties -- -- 1,433 -- 1,433 Other current liabilities 46,879 42,986 169,065 -- 258,930 Total foreign currency monetary liabilities 8,769,532 1,373,002 3,065,287 4,725,492 17,933,313 Total monetary liabilities 22,549,108 2,593,436 4,131,363 6,469,279 35,743,186 Liquidity position/(gap) (14,495,822) 1,171,680 1,997,448 12,574,774 1,248,080


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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 2010

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 2,374,435 (2,505,056) (259,888) (97,959) (846,838) (996,158) (304,213)Unsecured bank borrowings 1,548,743 (1,665,975) (334,366) (98,179) (561,765) (489,560) (182,105)Finance lease liabilities 17,296 (19,375) (12,411) (3,705) (3,248) (11) --Accounts payable 498,495 (500,642) (464,208) (36,434) -- -- -- Derivative financial

liabilities

Forward contracts -- -- -- -- -- -- -- Interest rate swap used for hedging 9,522 (18,170) (2,167) (2,120) (3,941) (8,402) (1,540) 4,448,491 (4,709,218) (1,073,040) (238,397) (1,415,792) (1,494,131) (487,858)

31 December 2009

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 2,383,024 (2,550,759) (464,674) (93,688) (302,741) (1,297,619) (392,037)Unsecured bank borrowings 1,490,666 (1,504,036) (898,162) (322,937) (162,777) (109,420) (10,740)Finance lease liabilities 28,343 (27,556) (9,582) (8,230) (9,315) (429) --Accounts payable 389,954 (387,549) (197,826) (189,723) -- -- -- Derivative financial

liabilities

Forward contracts 813 (5,589) (404) (404) (809) (2,426) (1,546)Interest rate swap used for hedging 7,634 (14,103) (2,044) (1,351) (2,915) (5,222) (2,571) 4,300,434 (4,489,592) (1,572,692) (616,333) (478,557) (1,415,116) (406,894)


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Contractual maturity analysis of liabilities of Garanti Bank and its subsidiaries 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 as per their earliest likely contractual maturities.

31 December 2010

Carrying

amount

Nominal principaloutflows Demand

Up to 1 month

1-3 months

3-12 months

1-5 years

More than5 years

Deposits 23,814,797 23,717,199 4,608,697 14,860,161 2,799,709 1,069,322 327,967 51,343 Obligations under repurchase agreements 3,548,767 3,541,080 -- 3,213,651 248,786 78,643 -- --Bank borrowings 6,037,236 5,961,469 -- 601,369 190,504 1,935,301 2,176,838 1,057,457 Subordinated liabilities 295,764 288,512 -- -- -- 2,428 286,084 Total financial liabilities 33,696,564 33,508,260 4,608,697 18,675,181 3,238,999 3,083,266 2,507,233 1,394,884

31 December 2009

Carrying amount

Nominal principaloutflows Demand

Up to 1 month

1-3 months

3-12 months

1-5 years

More than5 years

Deposits 20,669,122 20,593,808 4,279,312 13,335,067 1,935,572 723,026 288,411 32,420Obligations under repurchase agreements 3,254,178 3,236,291 -- 3,069,915 111 120,920 45,345 --Bank borrowings 4,709,318 4,635,796 -- 351,837 96,351 1,299,678 1,766,499 1,121,431Subordinated liabilities 299,411 291,967 -- 4,381 4,540 547 2,636 279,863Total financial liabilities 28,932,029 28,757,862 4,279,312 16,761,200 2,036,574 2,144,171 2,102,891 1,433,714

40.2 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:

2010 2009Cash and cash equivalents* 2,010,011 2,357,304Accounts receivable 1,902,166 1,537,170Due from related parties 126,791 10,751Banking loans and advances to customers and banks 23,957,039 19,872,916Investments in debt securities 12,211,147 11,292,586Financial assets at fair value through profit or loss 242,272 180,384Other current assets** 1,352,118 989,057Other non-current assets** 323,968 226,434 42,125,512 36,466,602

(*) Cash on hand is excluded from cash and cash equivalents.

(**) Non-financial instruments such as advances given, taxes and funds to be refunded, prepaid expenses and advances given are excluded from other current assets and other non-current assets.


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40.2 Credit risk (continued)

Exposure to credit risk for segments other than banking and finance

The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was as follows:

2010 2009Contract receivables 545,783 540,342Retailers 123,306 124,629Advertising agencies 95,990 51,297End-users 52,060 48,307Tourism agencies -- 1,896Other 69,557 46,304 886,696 812,775

The maximum exposure to credit risk for trade receivables at the reporting date by geographic concentration was as follows:

Carrying amount 2010 2009Turkey 490,903 490,465Libya 132,536 162,027Euro zone 106,096 103,427Ukraine 78,955 --Morocco 979 25,414Other 77,227 31,442 886,696 812,775

Impairment losses

The aging of trade receivables at the reporting date was:

2010 2010 2009 2009 Gross Impairment Gross ImpairmentNot past due 584,151 (2,042) 560,934 (155)Past due 0-30 days 32,432 -- 45,577 (40)Past due 31-120 days 69,571 (192) 19,125 (1,569)Past due 121-365 days 303,115 (105,531) 292,759 (105,176)More than one year 12,616 (7,424) 7,566 (6,246)Total 1,001,885 (115,189) 925,961 (113,186)


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Exposure to credit risk for banking and finance segment

Banking loans and advances given to

customers 2010 2009Individually impaired 772,044 821,991Allowance for impairment (657,566) (647,973)Carrying amount 114,478 174,018 Collectively impaired -- 228,199Allowance for impairment (85,719) (118,597)Carrying amount (85,719) 109,602 Past due but not impaired 368,734 178,396 368,734 178,396 Neither past due nor impaired 20,370,916 16,095,639Loans with renegotiated terms 221,965 60,383Carrying amount 20,592,881 16,156,022 Total carrying amount 20,990,374 16,618,038

At 31 December 2010 and 2009, 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. Risk rating has become a requirement for loan applications, and ratings are used both to determine branch managers’ 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. The small and micro-size enterprises, consumer loans and credit card portfolios are not included in this table as they are subject to different rating scorings on a product basis.

31 December

2010

31 December

2009% %

Above Average 50 45Average 44 47Below Average 6 8 100 100


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40.2 Credit risk (continued))

Sectoral and geographical concentration of impaired loans for banking and finance segment

An analysis of concentrations of non-performing loans and lease receivables is shown below:

2010 2009Consumer loans 384,474 468,781Textile 59,711 70,268Transportation vehicles and sub-industries 47,855 6,855Construction 35,238 40,991Metal and metal products 33,232 15,113Agriculture and stockbreeding 30,878 23,986Food 24,731 26,125Service sector 24,322 18,530Transportation and logistics 23,963 11,569Chemistry and chemical products 19,106 23,017Paper and paper products 9,656 5,971Tourism 9,349 8,698Durable consumption 8,660 16,126Energy 3,996 4,994Others 56,873 80,967Total non-performing loans and finance lease receivables 772,044 821,991

2010 2009Turkey 673,519 751,769Romania 69,537 60,803Ukraine 15,041 --Switzerland 5,937 333Russia 4,264 4,625Brazil 2,446 3,048Others 1,300 1,413Total non-performing loans and finance lease receivables 772,044 821,991

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.


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The breakdown of performing cash and non-cash loans and advances to customers by type of collateral is as follows:

2010 2009Cash loans Secured loans: 15,049,554 11,927,660 Secured by mortgages 5,292,173 4,227,426 Secured by government institutions or government securities 770,113 648,601 Secured by cash collateral 390,885 303,681 Guarantees issued by financial institutions 66,859 83,105 Other collateral (pledge on assets, corporate and personal

guarantees, promissory notes) 8,529,524 6,664,847Unsecured loans 6,101,285 4,648,537Total performing loans and finance lease receivables 21,150,839 16,576,197 Non-cash loans Secured loans: 4,136,187 3,603,783 Secured by cash collateral 276,456 177,502 Secured by mortgages 533,629 498,757 Guarantees issued by financial institutions 10,264 22,410 Other collateral (pledge on assets, corporate and personal

guarantees, promissory notes) 3,315,838 2,905,114Unsecured loans 761,591 1,019,160Total non-cash loans (Note 6.1) 4,897,778 4,622,943

An estimate of the fair value of collateral held against non-performing loans and receivables is as follows:

2010 2009Promissory notes and surety 178,646 187,232Mortgages 176,222 217,900Pledge assets 103,961 102,062Cash collateral 408 958Unsecured 312,807 313,839 772,044 821,991

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.


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40.3 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:

2010 2009Fixed rate instruments Financial assets 448,337 610,339Financial liabilities (775,559) (836,834)Interest rate swap, fixed leg (96,090) (96,466) (423,312) (322,961)

Variable rate instruments Financial assets -- 47,651Financial liabilities (3,147,620) (2,591,978)Interest rate swap, variable leg 96,090 96,466 (3,051,530) (2,447,861)

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 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 2009.

Profit or loss Equity 100 bp 100 bp 31 December 2010 increase decrease increase DecreaseVariable rate instruments 8,024 (8,024) 3,794 (3,994)Cash flow sensitivity (net) 8,024 (8,024) 3,794 (3,994) Profit or loss Equity 100 bp 100 bp 31 December 2009 increase Decrease increase DecreaseVariable rate instruments 941 (941) 3,311 (4,620)Cash flow sensitivity (net) 941 (941) 3,311 (4,620)


122


40.3 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:

2010

USD% Euro% TL% Other

currencies% Assets Banking loans and advances to banks 1.00-5.00 1.00-7.00 6.00-10.00 1.00-9.00 Debt and other fixed or floating income instruments 6.00-14.00 3.00 11.00 -- Banking loans and advances to customers 1.00-11.00 1.00-14.00 6.00-24.00 1.00-36.00 Liabilities Deposits

Foreign currency 1.00-7.00 1.00-8.00 -- 1.00-12.00 Bank 1.00-5.00 1.00-5.00 4.00-7.00 1.00-7.00 Saving -- -- 5.00-9.00 -- Commercial -- -- 5.00-9.00 -- Public and other deposits -- -- 9.00 --

Obligations under repurchase agreements 1.00-2.00 1.00 7.00 4.00 Bank borrowings 0.50-8.15 1.00-8.00 7.00-14.98 3.00-10.00 2009

USD% Euro% TL% Other

currencies% Assets Banking loans and advances to banks 4.41-8.00 1.00-7.00 7.00-11.00 3.00-12.00 Debt and other fixed or floating income instruments 6.00-13.00 4.00 14.00 -- Banking loans and advances to customers 3.00-17.00 1.00-17.00 7.00-27.00 1.00-23.00 Liabilities Deposits

Foreign currency 1.00-8.00 2.00-8.00 -- 2.00-11.00 Bank 0-8.00 1.00-7.00 7.00 3.00-6.00 Saving -- -- 3.00-14.00 -- Commercial -- -- 3.00-16.00 -- Public and other deposits -- -- 9.00 --

Obligations under repurchase agreements 5.00 -- 7.00 5.00-8.00 Bank borrowings 1.26-14.00 1.00-10.68 7.00-17.00 3.00-21.94

(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.


123



(ii) Currency risk (continued)

At 31 December, the currency risk exposures of the Group in TL thousand equivalents are as follows:

2010

USD Euro

Other currencies Total

Foreign currency monetary assets Investments in debt securities 1,358,943 364,637 48,979 1,772,559Other non-current assets 157,753 27,413 48,203 233,369Accounts receivable 483,433 75,776 95,359 654,568Due from related parties -- -- 1,135 1,135Other current assets 522,827 631,731 87,017 1,241,575Banking loans and advances to banks and customers 7,716,973 4,165,290 408,790 12,291,053Financial assets at fair value through profit or loss 5,527 5,680 26,020 37,227Cash and cash equivalents 580,351 359,939 22,178 962,468Total foreign currency monetary assets 10,825,807 5,630,466 737,681 17,193,954Foreign currency monetary liabilities Long-term bank borrowings 3,485,652 1,570,083 16,438 5,072,173Subordinated liabilities 236,574 59,190 -- 295,764Other non-current liabilities 241,599 4,906 2,431 248,936Short-term bank borrowings 789,453 950,223 1,995 1,741,671Short-term portion of long-term bank borrowings 646,250 234,078 -- 880,328Deposits 5,806,373 4,187,769 503,577 10,497,719Obligations under repurchase agreements 358,934 31,058 32,794 422,786Accounts payable 29,057 299,988 83,254 412,299Due to related parties -- -- 3,221 3,221Other current liabilities 115,378 61,938 103,218 280,534Total foreign currency monetary liabilities 11,709,270 7,399,233 746,928 19,855,431Gross statement of financial position

exposure (883,463) (1,768,767) (9,247) (2,661,477)Off balance sheet exposure (1,413,390) 546,782 113,007 (753,601)Net exposure (2,296,853) (1,221,985) 103,760 (3,415,078)


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(ii) Currency risk (continued)

2009

USD Euro

Other currencies Total

Foreign currency monetary assets Investments in debt securities 1,440,684 250,459 104,912 1,796,055Other non-current assets 209,746 106,093 16,674 332,513Accounts receivable 419,453 73,858 103,659 596,970Other current assets 651,475 155,023 74,973 881,471Banking loans and advances to banks and customers 6,086,336 4,033,537 421,043 10,540,916Financial assets at fair value through profit or loss 17,318 12,934 16,289 46,541Cash and cash equivalents 526,912 524,143 40,211 1,091,266Total foreign currency monetary assets 9,351,924 5,156,047 777,761 15,285,732Foreign currency monetary liabilities Long-term bank borrowings 3,342,426 761,404 -- 4,103,830Subordinated liabilities 231,693 67,718 -- 299,411Other non-current liabilities 55,332 66,734 56,488 178,554Short-term bank borrowings 616,015 957,033 66,150 1,639,198Short-term portion of long-term bank borrowings 805,797 460,815 28,025 1,294,637Deposits 5,043,242 4,267,815 417,429 9,728,486Obligations under repurchase agreements 47,598 -- 69,536 117,134Accounts payable 25,608 209,441 76,651 311,700Due to related parties 1,433 -- -- 1,433Other current liabilities 116,669 64,214 78,047 258,930Total foreign currency monetary liabilities 10,285,813 6,855,174 792,326 17,933,313Gross statement of financial position

exposure (933,889) (1,699,127) (14,565) (2,647,581)Off Balance Sheet exposure (726,543) 1,128,095 35,374 436,926Net exposure (1,660,432) (571,032) 20,809 (2,210,655)

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) equity and profit or loss 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 2009.

Equity Profit or loss31 December 2010 USD (9,080) (220,605)Euro (2,436) (119,763)Others (327) 10,70331 December 2009 USD (6,617) (159,427)Euro (1,150) (55,953)Others (482) 2,563

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.

40.4 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 on 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.


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40.4 Fair value information (continued)

As at 31 December 2010, the fair value of banking loans and advances to customers was TL 20,915,544 thousand (2009: TL 16,758,811 thousand), whereas the carrying amount was TL 20,990,374 thousand (2009: TL 16,618,038 thousand).

As at 31 December 2010, the fair value of investment in debt securities was TL 12,374,432 thousand (2009: TL 11,471,164 thousand), whereas the carrying amount was TL 12,211,147 thousand (2009: TL 11,292,586 thousand).

The table below analyses financial instruments carried at fair value, by valuation method:

2010 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss 238,164 3,582 526 242,272 Accrued exchange gains on derivatives 451 142,782 -- 143,233 Debt and other instruments available-for-sale 9,610,584 77,235 741,004 10,428,823 Financial assets at fair value 9,849,199 223,599 741,530 10,814,328 Accrued losses on derivatives 6,967 171,774 311 179,052 Financial liabilities at fair value 6,967 171,774 311 179,052 2009 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss 140,367 2,364 37,653 180,384 Accrued exchange gains on derivatives 45,403 148,704 109 194,216 Debt and other instruments available-for-sale 8,433,279 115,799 485,984 9,035,062 Financial assets at fair value 8,619,049 266,867 523,746 9,409,662 Accrued losses on derivatives 41,242 63,941 202 105,385 Financial liabilities at fair value 41,242 63,941 202 105,385

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)

41 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).


127

41 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.


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41 Use of estimates and judgments (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 29.


129

42 Group enterprises The consolidated financial statements aggregate financial information from the following entities:

42.1 Entities in banking and finance segment

The entities first consolidated under Garanti Bank; then proportionately consolidated under the Group in accordance with IAS 31 “Interests in Joint Ventures”:

Name Nature of business Garanti Bank Banking Garanti Bank International NV (“GBI”) Banking Garanti Bank Moscow (“GB Moscow”) Banking Garanti Bilişim Teknolojisi ve Ticaret Anonim Şirketi (“Garanti Bilişim”)(a) IT services Garanti Diversified Payment Rights Finance Company (“Garanti DPR”) Special purpose entity for

securitisation transaction Eureko Sigorta Insurance Garanti Emeklilik ve Hayat Anonim Şirketi (“GEHAŞ”) Life insurance Garanti Faktoring Hizmetleri Anonim Şirketi (“Garanti Faktoring”) Factoring Garanti Filo Yönetimi Hizmetleri Anonim Şirketi (”Garanti Filo) (a) Fleet management Garanti Finansal Kiralama Anonim Şirketi (“Garanti Leasing“) Leasing Garanti Hizmet Yönetimi Organizasyon ve Danışmanlık Anonim Şirketi (“Garanti Hizmet”)

Service activities for fund management and operations

Garanti Konut Finansmanı Danışmanlık Hizmetleri Anonim Şirketi (“Garanti Konut”) (b) Mortgage marketing Garanti Kültür Anonim Şirketi (“Garanti Kültür”) (a) Cultural activities Garanti Ödeme Sistemleri Anonim Şirketi (“GÖSAŞ”) Credit card operational services Garanti Portföy Yönetimi Anonim Şirketi (“Garanti Portföy”) Fund management Garanti Yatırım Menkul Kıymetler Anonim Şirketi (“Garanti Yatırım”) Brokerage and investment banking Garanti Yatırım Ortaklığı Anonim Şirketi (”Garanti Yatırım Ortaklığı”) Portfolio management T-2 Capital Finance Company (”T-2 Capital”) Special purpose entity for

subordinated debt transactions

(a) 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.

(b) As explained in Note 17, this company is not consolidated in the accompanying consolidated financial statements as it does not currently have material operations comparing to the consolidated performance of the Group.


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42 Group enterprises (continued)

42.1 Entities in banking and finance segment (continued)

The entities first consolidated under D Netherlands; then proportionately consolidated under the Garanti Bank in accordance with IAS 31 “Interests in Joint Ventures”:

Name Nature of business D Netherlands Holding company Doğuş GE B.V. Finance Domenia (c) Mortgage Garanti Bank S.A. (c) Banking Ralfi (c) Consumer Finance Leasemart Holding company Motoractive (c) Leasing

(c) These companies are subsidiaries of Doğuş GE B.V. and are operating in banking and finance segment. They are included within the banking and finance segment for the purpose of Doğuş Holding’s consolidated financial statements since Doğuş GE B.V. owns their controlling interests. Doğuş GE B.V. is a consolidated subsidiary of Garanti Bank.

42.2 Entities in construction segment

Name Nature of business Ayson Geoteknik ve Deniz İnşaat Anonim Şirketi (“Ayson”) Drilling Ayson Hydro Gradenje d.o.o. (“Ayson Hydro”) A non-operating company Ayson Sondaj Limited Ukraine (“Ayson Sondaj”) A non-operating company Dogus Insaat ES Construction Dogus Insaat d.o.o. A non-operating company Dogus Maroc SARL Construction Doğuş Alarko YDA İnşaat (“Doğuş Alarko”) Construction Doğuş EOOD Construction Doğuş Hoteli Sibenik d.o.o. (“Doğuş Hoteli Sibenik”) Construction development Doğuş International Limited (“Doğuş International”) Construction equipments Doğuş İnşaat Construction Doğuş İnşaat Limited (Ukraine) (“Doğuş İnşaat Limited”) A non-operating company Doğuş Koray Romania (“Doğuş Koray”) A non-operating company Doğuş Mandalina Razvitak d.o.o. (“Doğuş Mandalina Razvitak”) Construction development Doğuş Polat Adi Ortaklığı (“Doğuş Polat”) Construction Doğuş Poland SP. Z.O.O. (“Doğuş Poland”) A non-operating company Doğuş Sibenik Razvitak Marina d.o.o. (“Sibenik Razvitak”) Construction development Gülermak-Doğuş Adi Ortaklığı (“Gülermak Doğuş”) Construction Kazakhistan Joint Venture (“Doğuş Prestige”) Construction Yapı Merkezi-Doğuş-Yüksel-Yenigün-Belen Adi Ortaklığı (“YMDYYB”) Construction Teknik Mühendislik ve Müşavirlik Anonim Şirketi (“Teknik Mühendislik”) Civil engineering


131

42 Group enterprises (continued) 42.3 Entities in automotive segment

First consolidated under DOAŞ; then consolidated under the Group.

Name Nature of business

DOAŞ Automotive distributionDoğuş Auto Mısır JS A non-operating company Doğuş Auto Mısr LLC A non-operating company D-Auto Suisse SA Automotive retail Doğuş Oto Pazarlama ve Ticaret Anonim Şirketi (“Doğuş Oto”) Automotive retail Doğuş Sigorta Insurance agency Krone-Doğuş Treyler Sanayi ve Ticaret Anonim Şirketi (“Krone Doğuş”) (d) Production Leaseplan Otomotiv Servis ve Ticaret Anonim Şirketi (“Leaseplan”) Operational leasing LPD Holding Operational leasing Meiller Doğuş Damper Sanayi ve Ticaret Limited Şirketi (“Meiller Doğuş”) (d) Production TÜVTURK Kuzey (d) Vehicle inspection station TÜVTURK Güney (d) Vehicle inspection station TÜVTURK İstanbul (d) Vehicle inspection station VDF Faktoring Hizmetleri Anonim Şirketi (“VDF Faktoring”) Factoring VDF Sigorta Aracılık Hizmetleri Anonim Şirketi (“VDF Sigorta”) Agency/brokerage VDF Servis Holding Holding company VDF Tüketici Consumer finance Yüce Auto Automotive distribution

(d) These companies are proportionately consolidated joint ventures of Doğuş Holding. 42.4 Entities in tourism segment

Name Nature of business Antur Hospitality and travel agency Arena Giyim Sanayi ve Ticaret Anonim Şirketi (“Arena”) Hospitality, clothing, retail

and cafe D Marin Göcek Marina management D Otel Hospitality Datmar Turizm Anonim Şirketi (“Datmar”) Hospitality Doğuş Dalaman Marina İşletmeleri Turistik ve Ticaret Anonim Şirketi (“Doğuş Dalaman”) (e)

A non-operating company

Doğuş Didim Marina İşletmeleri ve Ticaret Anonim Şirketi (“Doğuş Didim”) Marina Doğuş Hoteli d.o.o. (“Doğuş Hoteli”) Hotel management Doğuş Marina Mandalina d.o.o. (“Doğuş Marina ”) Marina management Doğuş Marina Upravljanje d.o.o. (“Doğuş Marina Upravljanje”) Marina management Doğuş Sibenik Upravljanje Marina d.o.o. (“Sibenik Upravljanje”) Marina management Doğuş Turgutreis Marina İşletmeleri Turistik ve Ticaret Anonim Şirketi (“Doğuş Turgutreis”) Marina management Garanti Turizm Hospitality Göktrans Turizm ve Ticaret Anonim Şirketi (“Göktrans Turizm”) Hospitality NCP Marina Mandalina d.o.o. (“NCP Marina Mandalina”) Marina NCP Hoteli d.o.o. (“NCP Hoteli”) Hotel management Şahintur Şahinler Otelcilik Turizm Yatırım İşletmeciliği Anonim Şirketi (“Şahintur”)

A non-operating company

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

Hospitality

(e) 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 operations and accordingly was noted as non-operating.


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42.5 Entities in other segment

Name Nature of business A Yapım Media Aslancık Electricity generation Boyabat Electricity generation Cappadocia Investments Limited (“Cappadocia”) A non-operating company D Enerji Energy DAF Araştırma Geliştirme Anonim Şirketi (“DAF”) Lottery DG Finance Holding BV (“DG Finance”) A non-operating company DO-ÇA Tekstil Temizleme ve Ticaret Anonim Şirketi (“DO-ÇA”) Dry cleaning D Tay Sağlıklı Yaşam ve Danışmanlık Hizmetleri Ticaret Anonim Şirketi (“D Tay”) Healthcare counseling D Tes Elektrik Enerjisi Toptan Satış A.Ş. (“D Tes”) Energy Doğuş Arge Investing Doğuş Enerji Energy Doğuş Finance Ukraine A non-operating company Doğuş Gayrimenkul Yatırım ve İşletme Anonim Şirketi (“Doğuş Gayrimenkul”) Real estate development Doğuş-GE Gayrimenkul Yatırım Ortaklığı Anonim Şirketi (“Doğuş-GE”) Real estate investment fund Doğuş Grubu İletişim Yayıncılık ve Ticaret Anonim Şirketi (“Doğuş İletişim”) Media Doğuş Hava A non-operating company Genoto Otomotiv Pazarlama ve Ticaret Anonim Şirketi (“Genoto”) A non-operating company Doğuş Investment A non-operating company Doğuş Luxembourg S.á.r.l. (“Doğuş Lux”) A non-operating company Doğuş Nakliyat ve Ticaret Anonim Şirketi (“Doğuş Nakliyat”) A non-operating company Doğuş SA A non-operating company Doğuş Spor ve Sağlık Hizmetleri Anonim Şirketi (“Doğuş Spor”) Sports activities Doğuş Telekomünikasyon Hizmetleri Anonim Şirketi (“Doğuş Telekom”) A non-operating company Doğuş Turizm Real estate development Doğuş Uydu Haberleşme ve Teknik Hizmetler Anonim Şirketi (“Doğuş Uydu”) Media Doğuş Yayın Grubu Anonim Şirketi (“Doğuş Yayın Grubu”) Media Enformasyon Media E Elektronik Bahis Oyunları Anonim Şirketi (“E Elektronik”) Lottery İkibinondokuz Radyoculuk ve Sanat Organizasyonu Ticaret Anonim Şirketi (“2019 Radyo”) Media İstinye Yönetim Hizmetleri Anonim Şirketi (“İstinye Yönetim Hizmetleri”) Shopping mall administration İstinye Park Gayrimenkul Yatırım ve İşletme Anonim Şirketi (“İstinye Park Gayrimenkul”) Shopping mall administration Kapital Radyo Media Körfez Havacılık Turizm ve Ticaret Anonim Şirketi (“Körfez Hava”) Transportation Makro San. Mam. İmalat ve Pazarlama Limited Şirketi (“Makro”) A non-operating company N Radyo Televizyon ve Yayıncılık Anonim Şirketi (“N Radyo”) Media NTV Avrupa Yayıncılık Anonim Şirketi (“NTV Avrupa”) Media NTV Radyo Media Sititur Turizm Yatırım ve Danışmanlık Hizmetleri Anonim Şirketi (“Sititur”) A non-operating company Tansaş Gıda ve Sanayi Turizm Anonim Şirketi (“Tansaş Gıda”) A non-operating company Yonca Radyo ve TV Yayıncılık Anonim Şirketi (“Yonca Radyo”) Media


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42.6 Foreign subsidiaries and jointly controlled entities

All subsidiaries and joint ventures are registered in Turkey except for the following companies:

Name Country of incorporation Ayson Hydro Croatia Ayson Sondaj Ukraine Cappadocia United Kingdom Domenia Romania DG Finance The Netherlands Doğuş GE B.V. The Netherlands Doğuş Auto Mısr JS Egypt Doğuş Auto Mısr LLC Egypt Doğuş EOOD Bulgaria Doğuş Finance Ukraine Ukraine Doğuş Hoteli Croatia Doğuş Hoteli Sibenik Croatia Doğuş Investment Ukraine Dogus İnsaat ES Morocco Dogus Insaat d.o.o. Croatia Dogus İnsaat Limited Ukraine Doğuş International United Kingdom Doğuş Lux Luxembourg Doğuş Mandalina Razvitak Croatia Doğuş Marina Croatia Doğuş Marina Upravljanje Croatia Dogus Maroc SARL Morocco Doğuş Prestige Kazakhistan Doğuş Poland Poland Doğuş SA Switzerland D Netherlands The Netherlands D-Auto Suisse SA Switzerland GB Moscow Russia GBI The Netherlands GE Garanti Bank S.A. Romania Leasemart The Netherlands Motoractive Romania NCP Hoteli Croatia NCP Marina Mandalina Croatia Ralfi Romania Sibenik Upravljanje Croatia Sibenik Razvitak Croatia


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42.7 Subsidiaries

The table below sets out all the Subsidiaries and shows their shareholding structure at 31 December 2010:

Name

Direct and indirectownership interestby Doğuş Holding

and itssubsidiaries

Ownershipinterest through

shares held byŞahenk Family

Proportionof

ownershipinterest

Proportion of effective interest of

Doğuş Holding and its

subsidiaries

Proportion ofeffective

interest ofŞahenk Family

Proportionof effective

interest

A Yapım 97.00 -- 97.00 96.87 0.13 97.00

Antur 96.38 3.60 99.98 96.18 3.80 99.98

Arena 99.98 0.02 100.00 97.78 2.18 99.96

Ayson 70.00 -- 70.00 66.61 3.39 70.00

Ayson Hydro 100.00 -- 100.00 66.61 3.39 70.00

Ayson Sondaj 100.00 -- 100.00 66.61 3.39 70.00

Cappadocia 100.00 -- 100.00 100.00 -- 100.00

D Enerji 99.85 0.15 100.00 99.85 0.15 100.00

D Otel 100.00 -- 100.00 100.00 -- 100.00

Datmar 99.57 0.43 100.00 98.98 0.96 99.94

D Tay 98.60 -- 98.60 98.60 -- 98.60

DG Finance 100.00 -- 100.00 100.00 -- 100.00

DOAŞ 73.78 -- 73.78 71.56 2.21 73.77

DO-ÇA 87.27 12.73 100.00 85.55 14.40 99.95

Doğuş Arge 92.70 7.30 100.00 92.69 7.31 100.00

Doğuş Auto Mısr JS 100.00 -- 100.00 71.57 2.21 73.78

Doğuş Auto Mısr LLC 99.00 -- 99.00 70.86 2.19 73.05

Doğuş Dalaman 100.00 -- 100.00 100.00 -- 100.00

Doğuş Didim 100.00 -- 100.00 100.00 -- 100.00

Doğuş Enerji 100.00 -- 100.00 99.84 0.15 99.99

Doğuş EOOD 100.00 -- 100.00 92.46 7.54 100.00

Doğuş Gayrimenkul 97.52 2.48 100.00 97.52 2.48 100.00

Doğuş Finance Ukraine 100.00 -- 100.00 100.00 -- 100.00

Doğuş Hava 100.00 -- 100.00 100.00 -- 100.00

Doğuş Hoteli 100.00 -- 100.00 100.00 -- 100.00

Doğuş Hoteli Sibenik 100.00 -- 100.00 100.00 -- 100.00

Doğuş Investment 100.00 -- 100.00 99.92 0.08 100.00

Doğuş İletişim 100.00 -- 100.00 99.86 0.14 100.00

Doğuş İnşaat 92.46 7.54 100.00 92.46 7.54 100.00

Dogus Insaat d.o.o. 100.00 -- 100.00 92.46 7.54 100.00

Dogus Insaat ES 100.00 -- 100.00 92.46 7.54 100.00

Doğuş İnşaat Limited 100.00 -- 100.00 92.46 7.54 100.00

Doğuş International 100.00 -- 100.00 92.69 7.31 100.00

Doğuş Lux 100.00 -- 100.00 100.00 -- 100.00

Doğuş Mandalina Razvitak 100.00 -- 100.00 92.46 7.54 100.00

Doğuş Marina 100.00 -- 100.00 100.00 -- 100.00

Doğuş Marina Upravljanje 100.00 -- 100.00 100.00 -- 100.00

Dogus Maroc SARL 100.00 -- 100.00 92.46 7.54 100.00

D Marin Göcek 100.00 -- 100.00 100.00 -- 100.00

Doğuş Nakliyat 89.73 0.77 90.50 89.69 0.81 90.50

Doğuş Poland 100.00 -- 100.00 92.46 7.54 100.00


135


42.7 Subsidiaries (continued)

Name


and itssubsidiaries



Proportionof

ownershipinterest



subsidiaries




interest

Doğuş Oto 100.00 -- 100.00 72.64 2.13 74.77

Doğuş SA 100.00 -- 100.00 95.18 3.44 98.62

Doğuş Sigorta 99.00 1.00 100.00 87.06 1.93 88.99

Doğuş Spor 100.00 -- 100.00 100.00 -- 100.00

Doğuş Telekom 100.00 -- 100.00 100.00 -- 100.00

Doğuş Turgutreis 100.00 -- 100.00 97.58 2.40 99.98

Doğuş Turizm 100.00 -- 100.00 100.00 -- 100.00

Doğuş Uydu 100.00 -- 100.00 98.63 0.17 98.80

Doğuş Yayın Grubu 100.00 -- 100.00 99.86 0.14 100.00

D-Auto Suisse SA 100.00 -- 100.00 71.59 2.22 73.81

Enformasyon 97.00 -- 97.00 96.87 0.13 97.00

E Elektronik 100.00 -- 100.00 99.86 0.14 100.00

Garanti Turizm 100.00 -- 100.00 98.78 0.83 99.61

Göktrans Turizm 100.00 -- 100.00 99.22 0.76 99.98

Genoto 100.00 -- 100.00 98.44 0.77 99.21

Istinye Park Gayrimenkul 100.00 -- 100.00 100.00 -- 100.00

Kapital Radyo 98.89 -- 98.89 98.75 0.14 98.89

Körfez Hava 100.00 -- 100.00 100.00 -- 100.00

Makro 100.00 -- 100.00 99.95 0.04 99.99

N Radyo 97.00 -- 97.00 96.86 0.13 96.99

NTV Avrupa 98.98 -- 98.98 98.84 0.14 98.98

NTV Radyo 97.00 -- 97.00 96.87 0.13 97.00

Sibenik Upravljanje 100.00 -- 100.00 100.00 -- 100.00

Sibenik Razvitak 100.00 -- 100.00 100.00 -- 100.00

Sititur 100.00 -- 100.00 100.00 -- 100.00

Şahintur 100.00 -- 100.00 100.00 -- 100.00

Tansaş Gıda 90.00 -- 90.00 90.00 -- 90.00

Teknik Mühendislik 99.70 -- 99.70 98.58 1.12 99.70

Voyager 99.08 0.92 100.00 99.06 0.94 100.00

Yonca Radyo 97.00 -- 97.00 96.87 0.13 97.00

2019 Radyo 97.00 -- 97.00 96.87 0.13 97.00


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42.8 Joint ventures

The table below sets out the Joint Ventures and shows the shareholding structure at 31 December 2010:

Name


and itssubsidiaries



Proportionof

ownershipinterest



subsidiaries




interest

Aslancık 33.33 -- 33.33 33.28 -- 33.28

Boyabat 34.00 -- 34.00 33.98 0.03 34.01

D Netherlands 100.00 -- 100.00 30.24 0.28 30.52

DAF 33.33 -- 33.33 33.33 -- 33.33

D Tes 25.00 -- 25.00 25.00 -- 25.00

Doğuş Alarko 37.50 -- 37.50 34.67 2.83 37.50

Doğuş Polat 50.00 -- 50.00 46.23 3.77 50.00

Doğuş-GE 33.96 -- 33.96 30.05 0.02 30.07

Doğuş GE B.V. 100.00 -- 100.00 30.24 0.28 30.52

Doğuş Koray 50.00 -- 50.00 46.23 3.77 50.00

Doğuş Prestige 60.00 -- 60.00 55.48 4.52 60.00

Domenia 100.00 -- 100.00 30.24 0.28 30.52

Garanti Bank 30.52 -- 30.52 30.24 0.28 30.52

Garanti Bilişim 100.00 -- 100.00 30.24 0.28 30.52

Garanti DPR (a) -- -- -- -- -- --

Garanti Faktoring 81.84 -- 81.84 24.75 0.23 24.98

Garanti Filo 100.00 -- 100.00 29.94 0.28 30.22

Garanti Hizmet 100.00 -- 100.00 32.18 0.27 32.45

Garanti Konut 100.00 -- 100.00 30.24 0.28 30.52

Garanti Kültür 100.00 -- 100.00 30.24 0.28 30.52

Garanti Leasing 100.00 -- 100.00 29.94 0.28 30.22

Garanti Yatırım Ortaklığı (b) 0.30 -- 0.30 0.12 -- 0.12

Garanti Portföy 100.00 -- 100.00 30.24 0.28 30.52

Garanti Yatırım 100.00 -- 100.00 30.24 0.28 30.52

GBI 100.00 -- 100.00 30.24 0.28 30.52

GB Moscow 100.00 -- 100.00 30.24 0.28 30.52

Garanti Bank SA 100.00 -- 100.00 30.24 0.28 30.52

GEHAŞ 85.00 -- 85.00 25.68 0.28 25.96

Gülermak Doğuş 50.00 -- 50.00 46.23 3.77 50.00

GÖSAŞ 99.92 -- 99.92 30.21 0.28 30.49

Krone Doğuş 48.95 -- 48.95 35.30 1.06 36.36

Leasemart 100.00 -- 100.00 30.24 0.28 30.52

Meiller Doğuş 49.00 -- 49.00 35.07 1.08 36.15

Motoractive 100.00 -- 100.00 30.24 0.28 30.52

NCP Hoteli 62.50 -- 62.50 62.50 -- 62.50

NCP Marina Mandalina 40.00 -- 40.00 40.00 -- 40.00

Ralfi 100.00 -- 100.00 30.24 0.28 30.52

TÜVTURK Kuzey 33.33 -- 33.33 23.86 0.74 24.60

TÜVTURK Güney 33.33 -- 33.33 23.86 0.74 24.60


137


42.8 Joint ventures (continued)

Name


and its subsidiaries



Proportionof

ownershipinterest



subsidiaries




interest

TÜVTURK İstanbul 66.40 -- 66.40 23.86 0.74 24.60

T-2 Capital (a) -- -- -- -- -- --

YMDYYB 26.00 -- 26.00 24.04 1.96 26.00

(a) Garanti DPR and T-2 Capital are special purpose entities established for Garanti Bank’s securitisation and subordinated debt transactions, respectively. The Group does not have any shareholding interest in these companies.

(b) 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.

42.9 Associates

The table below sets out the associates and their shareholding structure at 31 December 2010:

Name


and its Subsidiaries



Proportionof

ownershipinterest



Subsidiaries




interestEureko Sigorta 20.00 -- 20.00 6.05 0.06 6.11İstinye Yönetim Hizmetleri 42.00 -- 42.00 42.00 -- 42.00Leaseplan 100.00 -- 100.00 38.14 0.85 38.99LPD Holding 49.00 -- 49.00 38.14 0.85 38.99VDF Faktoring (a) 100.00 -- 100.00 38.14 0.85 38.99VDF Tüketici 49.00 -- 49.00 35.35 1.06 36.41VDF Servis Holding 49.00 -- 49.00 38.14 0.85 38.99VDF Sigorta (a) 100.00 -- 100.00 38.14 0.85 38.99Yüce Auto 50.00 -- 50.00 35.78 1.11 36.89

(a) Consolidated under VDF Servis Holding.


138


The major changes in Group enterprises during the year ended 31 December 2010 are summarised in the following paragraphs:

Establishment of new entities

On 12 April 2010, Doğuş Yayın has established NTV Avrupa Yayıncılık Anonim Şirketi.

On 15 April 2010, Doğuş Turizm has established İstinye Park Gayrimenkul Yatırım ve İşletme Anonim Şirketi.

On 13 September 2010, Doğuş Holding has established D Tay Sağlıklı Yaşam ve Danışmanlık Hizmetleri Ticaret Anonim Şirketi.

Change in structure/ title

In January 2010, IGY Marina Mandalina Upravljanje d.o.o. has changed its legal name as “Doğuş Sibenik Upravljanje Marina d.o.o.”.

In January 2010, IGY Marina Mandalina Razvitak d.o.o. has changed its legal name as “Doğuş Sibenik Razvitak Marina d.o.o.”.

In January 2010, IGY Mandalina Hoteli d.o.o. has changed its legal name as “Doğuş Hoteli Sibenik d.o.o.”.

In December 2010, Sititur Turizm Temizlik Taşımacılık Organizasyon Bilgisayar Danışmanlık Yapı has changed its legal name as “Sititur Turizm Yatırım ve Danışmanlık Hizmetleri Anonim Şirketi”.

In December 2010, GE Garanti Bank S.A. has changed its legal name as “Garanti Bank S.A.”

Liquidation of entities

On 11 March 2010, liquidation of Marina Services Holding B.V. was finalised.

On 31 May 2010, liquidations of Garanti Fund Management Company Limited and Garanti Financial Services Plc. were finalised.

On 6 October 2010 liquidation of COIBV was finalised.

Ayson Hydro, Cappadocia, Doğuş Auto Mısr LLC, Doğuş Auto Mısır JS, Doğuş İnşaat d.o.o., , Doğuş Lux, Doğuş Prestige, DG Finance, DAF, Doğuş Mandalina Razvitak and Makro are under liquidation as at the reporting date.


139

43 Significant events

43.1 Vogue Turkey Magazine and Vogue Turkey Internet Portal were launched on February 2010.

43.2 Doğuş Enerji, a subsidiary of D Enerji, obtained an electricity generation license for 49 years. The details of the licence is summarised below:

Validity period 49 years Project name Artvin dam and hydroelectric power plant project Contractor Doğuş İnşaat (100 percent) Facility completion date 31 December 2015-preconstruction 24 months,

construction 60 months

43.3 According to the share transfer agreement dated 27 October 2009, the Group decided to purchase Kartal Otel Marmaris Turizm İşletmeciliği Ticaret ve Sanayi Anonim Şirketi (“Kartal Otel”) from Turkon Holding for a consideration of Euro 38 million. On 4 March 2010, the share transfer is finalised with a closing agreement. On 10 March 2010, Kartal Otel changed its legal name as D Otel Marmaris Turizm İşletmeciliği Ticaret ve Sanayi Anonim Şirketi.

43.4 On 6 May 2010, Göktrans has purchased a land in İstanbul for a consideration TL of 208,000 thousand.

43.5 On 25 May 2010, Doğuş Holding has sold one of its subsidiaries, D Netherlands, for a consideration of Euro 53,500 thousand to its proportionately consolidated joint venture, Garanti Bank.

43.6 On 29 May 2010, Garanti Bank S.A. has acquired all the assets and liabilities (except for the fiscal receivables/payables) of Garanti Bank International N.V. Romania Branch. The assets and liabilities transfer to the Garanti Bank S.A. has been performed based on a signed document called Business Transfer Agreement for a price of Euro 34,000 thousand.

43.7 On 22 July 2010, Voyager and Fine Otel Turizm İşletmecilik Anonim Şirketi (“Fine Otel”) signed a rent agreement for ten years from 1 January 2011 to 31 December 2020. According to the agreement, servitude right of the land in Antalya, on which the hotel is built and the property on this land are transferred to Fine Otel for one of its brands names, Rixos, for use. Starting from 1 January 2011, the Group has classified its property, the hotel building, as investment property.

43.8 Doğuş İnşaat repaid its loan amounting to TL 69,000 thousand on 30 July 2010.

As part of its plan to improve liquidity, Doğuş İnşaat utilised a long-term loan with 2 year grace period for an amount of USD 80,000. The loan was fully used to repay short-term loans.

43.9 On 9 August 2010, a protocol related to construction of Artvin Dam was signed between Doğuş İnşaat and Doğuş Enerji.

43.10 On 3 September 2010, Gebze Shopping Mall owned by Doğuş Gayrimenkul has started its operations.

43.11 According to share transfer agreement dated 27 October 2009, the Group has decided to purchase Anadolu Göcek Marina Turizm Yatırımları Anonim Şirketi from Turkon Holding Anonim Şirketi for a consideration of Euro 27 million. On 7 December 2010, the share transfer has been finalised with a closing agreement.


140

44 Subsequent events

44.1 At the meeting of Garanti Bank’s board of directors held on 22 October 2010, it has been resolved to issue TL denominated bank bonds and/or debentures up to an amount of TL 3,000,000 thousands in various maturities in the domestic market. Accordingly, the related approvals were received, and the issuance of TL denominated bank bonds amounting TL 1,000,000 thousands with one-year maturity and annual compound interest rate of 7.68091 percent started on 24 January 2011 and was completed on 31 January 2011.

44.2 According to share purchase agreement dated 12 November 2010, Doğuş Holding agreed to purchase shares with nominal value of 23,913,900 TL in Doğuş-GE representing 25.5 percent of the share capital from General Electric Capital Corporation for a consideration of USD 28,000 thousand. On 3 January 2011, the purchase price has been paid to the General Electric Capital Corporation and shares have been transferred to Doğuş Holding.

On 21 March 2011, Doğuş-GE Gayrimenkul Yatırım Ortaklığı Anonim Şirketi has changed its legal name as “Doğuş Gayrimenkul Yatırım Ortaklığı Anonim Şirketi”.

44.3 At 24 February 2011, an agreement has been signed between Doğuş Yayın Grubu and Saving Deposit Insurance Fund for the acquisition of “Radyo 5” .This acquisition is being reviewed by Saving Deposit Insurance Fund in terms of competition.

44.4 On 9 March 2011, Doğuş E Alışveriş ve Ticaret Anonim Şirketi has been established. The area of operation of the entity is private online shopping.

44.5 The “N101” radio channel brand has been changed to “Kapital” brand and the content of broadcast has been changed from Turkish to foreign content.

44.6 On 1 November 2010, Doğuş Holding and Banco Bilbao Vizcaya Argentaria S.A. (“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 has been transferred to BBVA for a consideration of USD 2,067 million including 5 million late payment interest. The approvals of BRSA, CMB, 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, Doguş Holding and BBVA signed a shareholders’ agreement which was effective from the date of completion of aforementioned share purchase agreement. This new shareholders’ agreement has replaced the previously signed shareholders’ agreement between GE Araştırma Müşavirlik A.Ş. and Doğuş Holding dated 22 December 2005. According to the new shareholders’ agreement with BBVA , after five years period starting from the date of this new agreement, BBVA has the right to purchase additional 1 percent of shares held by Doğuş Holding in Garanti Bank for the average price of the last 30 days’ quoted prices.

44.7 Doğuş İnşaat, due to the unrest in Libya that started in February 2011 and still continues as of the date of the audit report, decided to suspend its operations in Sirte-Libya (Al Tahady University project) based on the force majeure article of the Contract (article 36) and evacuated its personnel. The carrying value of the camp buildings, furniture, machinery and equipment and inventory is USD 29.8 million and its receivables from the employer amount to USD 16.5 million (USD 20.3 million including cash retentions), whereas its payables to the employer due to the advances received amount to USD 60.1 million. Ultimate outcome of the unrest cannot presently be still determined.

Appendix I Doğuş Holding Anonim Şirketi and its Subsidiaries Supplementary Information Convenience Translation to US Dollar 31 December 2010

141

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 1.5460 TL/USD prevailing on 31 December 2010. For the prior year’s consolidated financial statements, USD amounts are translated from TL consolidated financial statements using the official TL exchange rate of 1.5057 TL/USD prevailing on 31 December 2009. For the consolidated financial statements as at 1 January 2009, USD amounts are translated from TL consolidated financial statements using the official TL exchange rate of 1.5057 TL/USD. Such translation should not be construed as a representation that the TL amounts have been converted into USD pursuant to the requirements of IFRS 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 2010 Amounts translated into thousands of USD for convenience purposes only

142

31 December

2010 31 December

2009 1 January

2009Assets Property and equipment 2,141,195 1,876,184 1,703,080 Intangible assets 720,823 775,947 791,582 Investments in debt securities 5,865,390 5,450,808 4,496,854 Investments in equity securities 47,312 35,587 31,918 Accounts receivable 8,888 4,063 41,414 Banking loans and advances to customers 8,070,252 5,927,727 5,876,279 Banking loans and advances to banks 889,784 923,329 404,983 Financial assets at fair value through profit or loss 70,322 26,447 31,244 Investment property 988,842 809,050 696,240 Other non-current assets 295,574 315,598 289,605 Deferred tax assets 153,741 127,706 109,593 Total non-current assets 19,252,123 16,272,446 14,472,792 Inventories 365,552 315,073 512,320 Accounts receivable 1,221,491 1,016,837 761,692 Due from related parties 82,012 7,140 9,917 Other current assets 1,002,083 839,439 745,713 Investments in debt securities 2,033,153 2,049,083 775,031 Banking loans and advances to customers 5,506,963 5,109,025 5,074,040 Banking loans and advances to banks 1,029,146 1,238,375 1,194,489 Financial assets at fair value through profit or loss 86,387 93,354 19,640 Cash and cash equivalents 1,300,735 1,566,262 1,492,197 Total current assets 12,627,522 12,234,588 10,585,039 Total assets 31,879,645 28,507,034 25,057,831

Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Financial Position As at 31 December 2010 Amounts translated into thousands of USD for convenience purposes only

143

31 December

2010 31 December

2009 1 January

2009 Equity Paid-in capital 1,329,426 1,335,055 1,329,228 Capital stock held by subsidiaries

(63,878) (35,635) (35,479)Share premium 103,072 105,831 105,369 Fair value reserves 313,535 264,676 24,129 Translation reserve 2,179 31,140 32,679 Hedging reserve (5,083) (5,463) 4,868 Revaluation surplus 702,586 718,293 677,688 Legal reserves 174,972 140,638 128,204 Retained earnings 2,424,948 1,914,393 1,407,294 Total equity attributable to owners of the Company

4,981,757 4,468,928 3,673,980

Non-controlling interest Şahenk Family 64,871 70,898 66,475 Others 115,568 82,142 66,195 Total non-controlling interest 180,439 153,040 132,670

Total equity 5,162,196 4,621,968 3,806,650

Liabilities Long-term bank borrowings 4,056,338 3,347,229 2,843,052 Subordinated liabilities 191,309 192,563 178,699 Deposits 249,432 213,730 255,904 Obligations under repurchase agreements

-- 31,283 114,244 Deferred tax liabilities 100,834 99,591 82,852 Retirement benefit obligations -- -- 20,503 Other non-current liabilities 449,388 500,752 427,167 Total non-current liabilities 5,047,301 4,385,148 3,922,421

Subordinated liabilities -- 6,289 10,645 Short-term bank borrowings 1,727,888 1,488,681 1,302,337 Short-term portion of long-term bank borrowings

658,474 864,434 949,424 Deposits 15,154,706 13,513,521 11,261,887 Obligations under repurchase agreements

2,295,451 2,129,956 2,114,475 Accounts payable 738,263 580,203 881,162 Due to related parties 40,047 2,305 2,443 Taxes payable on income 64,217 46,892 25,807 Other current liabilities 991,102 867,637 780,580 Total current liabilities 21,670,148 19,499,918 17,328,760

Total liabilities 26,717,449 23,885,066 21,251,181

Total equity and liabilities 31,879,645 28,507,034 25,057,831

Appendix I.2 Doğuş Holding Anonim Şirketi and its Subsidiaries Consolidated Statement of Comprehensive Income For the Year Ended 31 December 2010 Amounts translated into thousands of USD for convenience purposes only

144

2010

2009

Revenues 5,598,054 5,193,343

Cost of revenues (3,822,975) (3,421,868)

Gross profit 1,775,079 1,771,475

Administrative expenses (745,907) (683,277)

Selling, marketing and distribution expenses (132,521) (95,243)

Impairment losses, net (57,636) (391,471)

Trading gain, net 61,931 145,871

Other operating income, net 21,398 5,373

Result from operating activities 922,344 752,728

Finance income 308,046 409,698

Finance expense (376,233) (455,987)

Net finance costs (68,187) (46,289)

Share of profit of equity accounted investees 11,428 3,822

Profit before income tax 865,585 710,261

Income tax expense (207,906) (177,607)

Profit for the year 657,679 532,654


Revaluation of property and equipment (10,718) 57,902

Change in fair value of available-for-sale financial assets 73,869 254,938

Change in translation reserve (28,150) (1,682)

Effective portion of changes in fair value of cash flow hedges 236 (10,353)

Income tax on an other comprehensive income 1,945 (16,237)

Other comprehensive income for the year, net of income tax 37,182 284,568

Total comprehensive income for the year 694,861 817,222

Profit attributable to:




-Others 27,611 7,780

657,679 532,654

Total comprehensive income attributable to:




-Others 25,582 16,109

694,861 817,222

dogus holding ifrs report 31122010 final

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