How To Write Down A Group'S Financial Statements

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1 Ac badem Sa k Hizmetleri ve Ticaret Anonim irketi and Its Subsidiaries Convenience Translation into English of Condensed Consolidated Financial Statements as at and for the Six-Month Period Ended 30 June 2011 With Independent Auditors Review Report Thereon

2 Convenience Translation of the Independent Auditor s Review Report As at 30 June 2011 Originally Prepared and Issued in Turkish To the Board of Directors of Ac badem Sa k Hizmetleri ve Ticaret A.. and its subsidiaries, Introduction We have reviewed the accompanying condensed consolidated statement of financial position of Ac badem Sa k Hizmetleri ve Ticaret A.. and its subsidiaries ( the Group ) as at 30 June 2011, and the condensed comprehensive income statement, condensed consolidated statement of changes in shareholders equity, condensed consolidated statement of cash flows for the six month period ended, and a summary of significant accounting policies and other explanatory notes. The Group s management is responsible for the preparation and the fair presentation of these condensed consolidated interim financial statements in accordance with the financial reporting standards of Capital Market Board of Turkey. Our responsibility is to express a conclusion on these consolidated interim financial statements based on our review. Scope of Review We conducted our review in accordance with the auditing standards promulgated by Capital Market Board of Turkey. A review of condensed consolidated interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the auditing standards promulgated by Capital Market Board of Turkey and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements do not give a true and fair view of the financial position of Ac badem Sa k Hizmetleri ve Ticaret A.. and its subsidiaries as at 30 June 2011, and of its financial performance and its cash flows for the six month period then ended in accordance with the financial reporting standards of Capital Market Board of Turkey. stanbul, 25 August 2011 Akis Ba ms z Denetim ve Serbest Muhasebeci Mali Mü avirlik A Özkan Genç stanbul, Turkey Additional paragraph for convenience translation to English: The accompanying financial statements are not intended to present the financial position and results of its operations in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Turkey.

3 Ac badem Sa k Hizmetleri ve Ticaret Anonim irketi and Its Subsidiaries Table of Contents Independent Auditors Review Report Condensed Consolidated Statement of Financial Position Condensed Consolidated Statement of Comprehensive Income Condensed Consoldiated Statement of Changes in Equity Condensed Consolidated Statement of Cash Flows

4 TABLE OF CONTENTS CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 1 CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT 2 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY 3 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW 4 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5-55 PAGE 1 Organization and nature of business 5 2 Basis of presentation of the condensed consolidated financial statements 7 3 Business combination 12 4 Segment reporting 12 5 Tangible assets 15 6 Intangible assets 17 7 Goodwill 18 8 Financial liabilities 19 9 Provisions, contingent assets and liabilities Commitments Equity Financial income Financial expenses Related parties Earnings per share Nature and level of risks arising from financial instruments Financial Instruments fair value disclosures Subsequent events Other matters that significantly affect the financial statements or make the financial statements clear, interpretable, and understandable 54

5 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 1 Organization and Nature of Business Ac badem Sa k Hizmetleri ve Ticaret A.. ( the Company ) was incorporated in 1991 in stanbul, The Company provides health services in thirteen general hospitals (Kad köy, Bak rköy, Kozyata, Fulya, Eski ehir, Bursa, Kocaeli, Maslak, Kayseri, Adana, International Hospital, John F. Kennedy and Göztepe afak) and eight medical centers (Ata ehir, Beylikdüzü, Ba dat, International Etiler, Ac badem Etiler, Uluda Poliklini i, Konur Sa k and Gemt p), center laboratories (Labmed Klinik laboratuarlar, Merkez Patoloji laboratuar, Genetik Tan ve Hücre Tedavi Merkezi, Labvital G da Kontrol Laboratuvar ). In addition to its core business in health care, the Company organizes courses and seminars about first aid, diabetics, smokeless living and infant care. The Company also applies Joint Commission International accredition standards and ISO 9001 Quality Management System standards in its services in order to provide better quality care and security for the patients. Ac badem Sa k Hizmetleri ve Ticaret A.. is subject to Capital Market Board ( CMB ) regulations and its shares have been traded on the stanbul Stock Exchange ( ISE ) since 15 June The head office is located at Fahrettin Kerim Gökay Caddesi, Altunizade Mahallesi, No: 49, Üsküdar- stanbul. As at 30 June 2011 and 31 December 2010 shareholder structure of the Company is as follows: 30 June December 2010 Shareholder s Name Share(%) Share(%) Mehmet Ali Ayd nlar Hatice Seher Ayd nlar Almond Holding Anonim irketi Almond Holding Anonim irketi (Publicly traded) Arma an Özel Yunus Ergüz Osman Morgül Other Individuals Other Public Shares

6 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 1 Organization and Nature of Business (continued) As at 30 June 2011 consolidated subsidiaries comprised the following: - Ac badem Poliklinikleri Anonim irketi ( Ac badem Poliklinikleri ) - Ac badem Labmed Sa k Hizmetleri Anonim irketi ( Ac badem Labmed ) - International Hospital stanbul Anonim irketi ( International Hospital ) - International Hospital Sa k Yat mlar Anonim irketi ( International Hospital Sa k Yat mlar ) - Ac badem Kayseri Hastanesi Anonim irketi ( Ac badem Kayseri ) - Yeni Sa k Hizmetleri ve Ticaret Anonim irketi ( Yeni Sa k ) - Konur Sa k Hizmetleri Anonim irketi ( Konur Sa k ) - Gemt p Özel Sa k Hizmetleri Sanayi ve Ticaret Limited irketi ( Gemt p ) - Ac badem Mobil Sa k Hizmetleri Anonim irketi ( Ac badem Mobil ) As at 31 December 2010 consolidated subsidiaries comprised the following: - Ac badem Poliklinikleri Anonim irketi ( Ac badem Poliklinikleri ) - Ac badem Labmed Sa k Hizmetleri Anonim irketi ( Ac badem Labmed ) - International Hospital stanbul Anonim irketi ( International Hospital ) - International Hospital Sa k Yat mlar Anonim irketi ( International Hospital Sa k Yat mlar ) - Ac badem Kayseri Hastanesi Anonim irketi ( Ac badem Kayseri ) - Konur Sa k Hizmetleri Anonim irketi ( Konur Sa k ) - Ac badem Mobil Sa k Hizmetleri Anonim irketi ( Ac badem Mobil ) Aç klama [o1]: Yeni Sa k n buraya eklenmesi gerekiyor Ac badem Sa k Hizmetleri ve Ticaret Anonim irketi and consolidated subsidiaries are collectively named as Group. Related parties of the Group are listed as following: - Ac badem Holding Anonim irketi ( Ac badem Holding ) - Ac badem Sa k ve Hayat Sigorta Anonim irketi ( Ac badem Sigorta ) - Ac badem Proje Yönetimi Anonim irketi ( Ac badem Proje ) - Aplus Hastane ve Otelcilik Hizmetleri Anonim irketi ( Aplus Otelcilik ) - Ac badem Sa k Yat mlar Holding Anonim irketi ( Ac badem Yat m ) - Almond Holding Anonim irketi ( Almond Holding ) - Abraaj Capital Limited ( Abraaj Capital ) - Akademia Sa k Hizmet ve Sistemleri Yönetim ve Dan manl k Anonim irketi ( Akademia ) - Çaml ca Turizm ve Yatç k Anonim irketi ( Çaml ca Turizm ) - Ac badem Di Sa Hizmetleri Anonim irketi ( Ac badem Di ) - Ac badem E itim ve Sa k Vakf ( Ac badem Vakf ) - Telepati Tan m Hizmetleri Anonim irketi ( Telepati Tan m ) - Çukurova Bilim Laboratuarlar Anonim irketi ( Çukurova Bilim ) - Ac badem Üniversitesi ( Ac badem Üniversite ) - Kerem Ayd nlar Vakf ( Kerem Ayd nlar ) - Ayd nlar Sa k Hizmetleri Limited irketi ( Ayd nlar Sa k ) - BLAB Laboratuvar Hizmetleri Anonim irketi ( BLAB ) Since these organizations are not in relation with the capital of Group, they are not consolidated. 6

7 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 2 Basis of presentation of the condensed consolidated financial statements 2.1 Basis of presentation Statement of compliance The Group maintains its book of accounts and prepares its statutory financial statements in TL in accordance with the Turkish Uniform Chart of Accounts promulgated by Capital Markets Board of Turkey ( CMB ), Turkish Commercial Code and Turkish Tax Code. Subsidiaries maintain their records 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 condensed consolidated financial statements of the Group have been prepared in accordance with the accounting and reporting principles issued by CMB ( CMB Financial Reporting Standards ). CMB published Communiqué No: XI-29 Basis for Financial Reporting in the Capital Markets ( Communiqué No: XI-29 ). In Communiqué No: XI-29, CMB determines the principles, procedures and basis for composing financial reports. Communiqué No: XI-29 is effective from the first interim period reporting after 1 January 2008 which supersedes Communiqué No: XI-25 The Accounting Standards in Capital Markets ( Communiqué No: XI-25 ). In accordance with Communiqué No: XI-29, the companies are required to prepare their financial statements in accordance with the International Financial Reporting Standards as accepted the European Union ( EU GAAP ). However, until Turkish Accounting Standards Board ( TASB ) publishes the differences between the European Union accepted International Accounting Standards ( IAS ) and International Financial Reporting Standards ( IFRS ) issued by International Accounting Standards Board ( IASB ), IAS/IFRS has to be applied by the companies. Within the above mentioned scope, Turkish Financial Reporting Standards ( TFRS ) issued by TASB will be applied if there is not inconsistency in the standards applied. As at the date of this report, the differences between EUGAAP and IFRS issued by IASB have not been issued by TASB, the accompanying financial statements have been prepared in accordance with TFRS which are identical to IAS/IFRS to conform with Communiqué No: XI-29. The financial statements and notes to the financial statements have been presented in accordance with the amendments to Communiqué XI- 29 issued by CMB on 17 April 2008 and 9 January 2010, which advises the templates to be used for financial statements and notes to the financial statements. CMB allows the companies to present their interim financial statements in accordance with IAS 34 Interim Financial Statements. As at 30 June 2011, the interim condensed consolidated financial statements of the Group are prepared and presented as condensed financial statements. Notes to financial statements to be prepared in accordance with Communiqué No: XI-29 are summarized or not presented in accordance with IAS 34. The accompanying condensed consolidated financial statements should be taken into consideration together with the consolidated financial statements and accompanying notes for the year ended 31 December Interim financial results do not solely represent the year end financial results. The Group continued to apply the accounting policies and accounting estimates presented in the consolidated financial statements as at 31 December 2010, except reclassifications stated below: Changes presented under the debt provision section in the cash flow statement dated 30 June 2010 related to the forward transaction amounted TL 688,617 and swap transaction amounted TL 246,452 have been classified to other financial liabilities. Swap expense accrual amounting to 4,299,190 as at 30 June 2010 has been classified to other financial liabilities in the financial position table. The accompanying condensed consolidated financial statements of the Group have been approved by the board of directors of the Group on 25 August The general assembly of the shareholders and legal authorities have authority to change the accompanying condensed consolidated financial statements. 7

8 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 2 Basis of presentation of the condensed consolidated financial statements (continued) 2.1 Basis of presentation (continued) Basis of consolidation (i) As at 30 June 2011, the condensed consolidated financial statements comprised the accounts of Ac badem Sa k Hizmetleri ve Ticaret Anonim irketi and its subsidiaries. Subsidiaries The condensed consolidated financial statements include the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities by. (a) having a power over 50% of the voting rights acquired through shareholding interest held either directly or indirectly; (b) or having a power and authority to govern the financial and operating policies of the entity, so as to obtain benefits from its activities, although not having more than 50% of the voting rights. This power to control is evidenced when the Group is able to govern the financial and operating policies of an enterprise so as to benefit from its activities. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. As at 30 June 2011 and 31 December 2010, the subsidiaries in which the Group owns direct or indirect controls their operations and the shareholding interests are given below: Capital share ratio (%) Subsidiary 30 June December 2010 Ac badem Polyclinics Ac badem Labmed International Hospital International Hospital Sa k Yat mlar Ac badem Kayseri Yeni Sa k Konur Sa k Gemt p Ac badem Mobil (ii) As at 30 June 2011 and 31 December 2010, full consolidation method is used to consolidate the financial statements of these subsidiaries. Transaction eliminated on consolidation The balance sheets and income statements of subsidiaries are consolidated by using the full consolidation method and investments in subsidiaries and related share capital reflected in the equity are eliminated. Net assets of the subsidiaries which are not directly and /or indirect under the control of the parent company are reflected as "Non-controlling interest" line of the balance sheet, and the net profit or loss which is not under the control of the parent company, is reflected as Non-controlling interests line in the income statement. Transactions and balances between consolidated companies are eliminated during consolidation. Profit and loss occurred transactions of participation, main partnership and consolidated subsidiaries, were classified/ arranged in accordance with share of main partnership in participation. However, if losses after all these transactions showed the decline of value, then classification/arrangement did not exercise. 8

9 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 2 Basis of presentation of the condensed consolidated financial statements (continued) 2.1 Basis of presentation (continued) New standards and interpretations adopted in 2011 that have no effect on the Group s financial statements As of June 30, 2011, IASB ("International Accounting Standards Committee") of IAS1 "Presentation of Financial Statements" published in the two changes. The first change is related to change fixed date of 1 January 2004 and first transition date to IFRS. It eliminates the necessity of implementing derecognition of transactions for the companies that apply IFRS for the first time, before the date of transition to IFRS. Amendment will be effective for financial statements prepared after 1 January 2011 and will have no effect on the Group's financial statements. The second change is described in standards and interpretations were not in effect in 2011section. IFRS 7 Financial Instruments is amended to add an explicit statement that the interaction between qualitative and quantitative disclosures better enables users to evaluate an entity s exposure to risks arising from financial instruments. The amendment is effective for annual periods beginning on or after 1 January 2011 and it is not expected impact on the financial statements. IFRIC 13 Customer Loyalty Programmes - Fair Value of Award Credit amended to state that the fair value of award credits takes into account the amount of discounts or incentives that otherwise would be offered to customers that have not earned the award credits. The amendment is effective for annual periods beginning on or after 1 January 2011 and it is not expected to impact on the financial statements. IAS 34 Interim Financial Reporting - Significant Events and Transactions A number of examples have been added to the list of events or transactions that require disclosure under IAS 34. The amendment is effective for annual periods beginning on or after 1 January 2011 and it is not expected impact on the financial statements. The revised IAS 24 Related Party Disclosures amends the definition of a related party and modifies certain related party disclosure requirements government-related entities. The main changes to IAS 24 are: A partial exemption from the disclosure requirements for transactions between a governmentcontrolled reporting entity and that government or other entities controlled by that government; and Amendments to the definition of a related party. IASB agreed that the partial exemption from the disclosure requirements should be required to be made retrospectively, because this should result in a reduction of 'clutter' in the footnotes and an identification of better information about the nature and extent of significant transactions with the government. In addition, IASB agreed that the definition of a related party should also be applied retrospectively from the effective date. In addition, the Board agreed that an entity should be permitted to adopt the partial exemption for government-controlled entities before the effective date even if it does not adopt the amended definition of related party until a later date. IAS 27 Consolidated and Separate Financial Statements Transition requirements for amendments made as a result of IAS 27 (2008) to IAS 21, IAS 28 and IAS 31 Consequential amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures (as a result of prior amendments to IAS 27) to be applied prospectively, except for the amendments to IAS 28 and IAS 31 that solely are the result of renumbering in IAS 27 (2008). The amendment is effective for annual periods beginning on or after 1 January 2011 and it is not expected to have any impact on the financial statements. 9

10 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 2 Basis of presentation of the condensed consolidated financial statements (continued) 2.1 Basis of presentation (continued) New standards and interpretations not yet adopted as at 30 June 2011 The Company has applied all the standards issued by IASB and all the interpretations issued by IASB s International Financial Reporting Interpretation Committee ( IFRIC ) which are effective as at 30 June Some new standards, amendments to standards and interpretations which are not effective as at 30 June 2011 have not been applied during the preparation of the accompanying condensed consolidated financial statements. As at 20 December 2010, the International Accounting Standards Board (IASB) issued two narrow amendments to IFRS 1. The first amendment is disclosed in New standards and interpretations adopted in 2011 that have no effect on the Company s financials. The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. The amendment is effective for annual periods beginning on or after 1 July 2011 and it is not expected to have any impact on the financial statements. IFRS 7 Financial Instruments is amended to will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitisations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The amendment is effective for annual periods beginning on or after 1 July 2011 and it is not expected to have any impact on the financial statements. The amendment is effective for annual periods beginning on or after 1 July 2011 and it is not expected to have any impact on the financial statements. IFRS 9 Financial Instruments has been issued on November 2009, by the IASB as the first step in its 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: amortized 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 them earlier prior periods need not be restated if an entity adopts the standard for reporting periods beginning before 1 January The International Accounting Standards Board (IASB) has issued amendments to IAS 12 Income Taxes as at 31 December The amendments set out in Deferred Tax: Recovery of Underlying Assets, result from proposals published for public comment in an exposure draft in September. IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally be through sale. As a result of the amendments, SIC-21 Income Taxes Recovery of Revalued Non-Depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC-21, which is accordingly withdrawn. The amendment is effective for annual periods beginning on or after 1 January 2012 and it is not expected to have any impact on the financial statements. IFRS 10 Consolidated Financial Statements standard is effective for annual periods beginning on or after 1 January 2013 and are applied on a modified retrospective basis. This new Standard may be adopted early, but IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities should be also adopted early. IFRS 11 Joint Arrangements standard is effective for annual periods beginning on or after 1 January 2013 and are applied on a modified retrospective basis. This new Standard may be adopted early, but IFRS 10 10

11 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 2 Basis of presentation of the condensed consolidated financial statements (continued) 2.1 Basis of presentation (continued) New standards and interpretations not yet adopted as at 30 June 2011 (continued) Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities should be also adopted early. The standard describes the accounting for joint ventures and joint operations with joint control. Among other changes introduced, under the new standard, proportionate consolidation is not permitted for joint ventures. The Company does not expect that this standard will have a significant impact on the financial position or performance of the Company. IFRS 12 Disclosure of Interests in Other Entities standard is effective for annual periods beginning on or after 1 January 2013 and are applied on a modified retrospective basis. This new Standard may be adopted early, but IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements should be also adopted early. IFRS 12 includes all of the disclosures that were previously in IAS 27 Consolidated and Separate Financial Statements related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 Interests in Joint Ventures and IAS 28 Investment in Associates. These disclosures relate to an entity s interests in subsidiaries, joint arrangements, associates and structured entities. Under the new standard it is expected that more comprehensive disclosures will be given for interests in other entities. Revised IFRS 13 Fair Value Measurement provides guidance on how to measure fair value under IFRS but does not change when an entity is required to use fair value. It is a single source of guidance under IFRS for all fair value measurements. The new standard also brings new disclosure requirements for fair value measurements. IFRS 13 is effective for annual periods beginning on or after 1 January 2013 and will be adopted prospectively. Early application is permitted. The new disclosures are only required for periods beginning after IFRS 13 is adopted that is, comparative disclosures for prior periods are not required. The Company is in the process of assessing the impact of the new standard on the financial position or performance of the Company. IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. A new definition of control is introduced, which is used to determine which entities are consolidated. This is a principle based standard and require preparers of financial statements to exercise significant judgment. The Company does not expect that this standard will have a significant impact on the financial position or performance of the Company. It will be effective from 1 January 2013 or for annual periods beginning after that date. Amended IAS 19 Employee Benefits standard is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted. With very few exceptions retrospective application is required. Numerous changes or clarifications are made under the amended standard. Among there numerous amendments, the most important changes are removing the corridor mechanism and making the distinction between short-term and other long-term employee benefits based on expected timing of settlement rather than employee entitlement. The Company is in the process of assessing the impact of the new standard on the financial position or performance of the Company. The amendments to IAS 1 Presentation of Financial Statements are effective for annual periods beginning on or after 1 July The amendments to IAS 1 change only the grouping of items presented in other comprehensive income. Items that could be reclassified to profit or loss at a future point in time would be presented separately from items which will never be reclassified. IAS 28 Investments in Associates and Joint Ventures (2011) has taken place of IAS 28 (2008) and it will be effective on 1 January 2013 or for annual periods beginningafter that date. 11

12 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 3 Business combinations Konur Sa k One of the Group s subsidiaries Ac badem Poliklinikleri acquired over 35% of the shares of Konur Sa k from other third party shareholders based on the board of directors decision dated 9 March 2011 and has increased its shares to 85%. The agreed amount to be paid for this acquisition is amounting to USD 945,000. Goodwill arising on the acquisition of shares is presented in the retained earnings/ (accumulated loss) in accordance with revised IFRS 3. (Note:7) Yeni Sa k Based on the board of directors decision taken at 28 April 2011, 99.90% of the shares of Yeni Sa k, which owns and operates Göztepe afak Hospital in Göztepe ditrict of stanbul John F. Kennedy Hospital ( JFK ) in Bahçelievler district of stanbul has been acquired. The agreed amount for the acquisition of these shares is amounting to USD 28,239,250 and the payments will be done from the end of the 11st month following the the actual share transfer with the installments of USD 1,000,000. The price has been determined with the mutual discussions and negotiations. Goodwill arising from the acquisition of shares are shown in the note 7. Gemt p Konur Sa k, which is subsidiary of Ac badem Poliklinikleri has acquired 58% shares of Gemt p Özel Sa k Hizmetleri which operates in Gemlik/Bursa district for outpatient. The amount paid for the acquisition is amounting to TL 14,500. Since the amount is negligible for the condensed consolidated financial statements, no goodwill amount has been booked. The condensed consolidated financial statements of Ac badem Poliklinikleri as at 30 June 2011, which are consolidated to accompanying condensed consolidated financial statements of the Group, include the condensed consolidated financial statements of Konur Sa k and Gemt p. 4 Segment reporting The Group s main business activity consists of inpatient, outpatient and emergency care services. The Group sales are allocated as inpatients, outpatients and hospital branches. All Group sales have been realized in domestic basis; accordingly no geographical classification has been presented. As at 30 June 2011, composition of sales and cost of sales of the Group is as follows: According to the type of treatment 1 January - 30 June 2011 Type of Treatment Number of Patient Net Revenue Revenue Ratio (%) Cost of Revenue Gross Profit Inpatients 87, ,658, (227,374,407) 62,283,850 Outpatients 1,249, ,970, (155,275,353) 48,694,751 1,336, ,628, (382,649,760) 110,978,601 1 April - 30 June 2011 Type of Treatment Number of Patient Net Revenue Revenue Ratio (%) Cost of Revenue Gross Profit Inpatients 45, ,611, (120,359,638) 30,252,224 Outpatients 616,838 97,670, (74,378,124) 23,292, , ,282, (194,737,762) 53,544,744 12

13 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 4 Segment Reporting (continued) According to the type of treatment (continued) 1 January - 30 June 2010 Type of Treatment Number of Patient Revenue Revenue Ratio (%) Cost of Revenue Gross Profit Inpatients 46, ,342, (162,453,016) 42,889,757 Outpatients 1,011, ,446, (121,615,061) 36,831,714 1,058, ,789, (284,068,077) 79,721,471 1 April - 30 June 2010 Type of Treatment Number of Patient Revenue Revenue Ratio (%) Cost of Revenue Gross Profit Inpatients 24, ,358, (84,768,927) 20,589,507 Outpatients 542,950 80,401, (62,076,996) 18,324, , ,760, (146,845,923) 38,914,254 According to the hospital locations 1 January - 30 June 2011 stanbul Other than Istanbul Total Revenues 365,058, ,570, ,628,361 Cost of revenue (-) (261,150,727) (121,499,033) (382,649,760) Gross Profit / (Loss) 103,907,396 7,071, ,978,601 Operating expenses (46,419,621) Other operating income/expense (net) 1,102,788 Financial income/expense (net) (46,808,581) Tax expense (6,116,018) Net profit / (Loss) for the period 12,737,169 13

14 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 4 Segment Reporting (continued) According to the hospital location (continued) 1 April - 30 June 2011 Istanbul Other than Istanbul Total Revenues 182,041,241 66,241, ,282,506 Cost of revenue (-) (131,645,585) (63,092,177) (194,737,762) Gross Profit / (Loss) 50,395,656 3,149,088 53,544,744 Operating expenses (27,167,301) Other operating income/expense (net) (1,673,904) Financial income/expense (net) (39,678,562) Tax expense 1,784,362 Net profit / (Loss) for the period (13,190,661) 1 January - 30 June 2010 Istanbul Other than Istanbul Total Revenues 280,857,006 82,932, ,789,548 Cost of revenue (-) (200,129,817) (83,938,260) (284,068,077) Gross Profit / (Loss) 80,727,189 (1,005,718) 79,721,471 Operating expenses (41,449,264) Other operating income/expense (net) 1,754,847 Financial income/expense (net) (24,764,580) Tax expense (3,546,635) Net profit / (Loss) for the period 11,715,839 1 April - 30 June 2010 Istanbul Other than Istanbul Total Revenues 141,612,257 44,147, ,760,177 Cost of revenue (-) (102,014,667) (44,831,256) (146,845,923) Gross Profit / (Loss) 39,597,590 (683,336) 38,914,254 Operating expenses (25,579,041) Other operating income/expense (net) 1,321,909 Financial income/expense (net) (18,242,644) Tax expense (1,968,711) Net profit/ (Loss) for the period (5,554,233) 14

15 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 5 Tangible assets For the six months perioed ended 30 June 2011, movement in the tangible assets is as follows: Cost Land Buildings Machinery and equipment Motor vehicles Furniture and fixtures Financial leased tangible assets Leasehold improvements Other tangible assets Construction in progress Total Balances at 1 January ,645, ,523, ,741,728 4,388,225 77,213, ,483, ,253, ,536 2,249, ,062,515 Additions 2,134, ,692 8,014, ,561 3,073,585 3,181,935 6,199, ,646,424 28,989,787 Additions from acquisition of a new subsidiary ,462, ,434, ,276, ,173,032 Disposals (676,516) (293,536) (486,940) -- (15,896,639) -- (26,746) (17,380,377) As at 30 June ,780, ,065, ,541,727 4,292,250 82,234, ,665, ,832, ,536 7,869, ,844,957 Accumulated depreciation 1 January ,841, ,476,593 2,373,310 48,112,446 36,076,951 62,016,019 78, ,975,839 Charge for the period -- 2,084,465 12,058, ,007 4,083,056 10,702,101 8,707,076 10, ,011,787 Additions from acquisition of a new subsidiary , , , ,000 Disposals (489,760) (209,854) (482,684) -- (3,097,903) (4,280,201) Closing balance as at 30 June ,926, ,152,837 2,529,463 51,743,221 46,779,052 67,634,686 89, ,854,425 Net book value as at 30 June ,990,532 As at 30 June 2011, tangible assets have been insured to the extent of TL 873,789,468 (31 December 2010: TL 848,276,863). As at 30 June 2011, tangible assets are pledged to the extent of TL 268,762,923 (31 December 2010: TL 254,881,290). As at 30 June 2011 and 31 December 2010, the Company utilizes tangible assets which have nil net book value on its accounts. (30 June 2011 Cost: TL 206,253,587, Accumulated Depreciation: TL 206,253,587; 31 December 2010 Cost: TL 184,658,966; Accumulated Depreciation: TL 184,658,966). 15

16 Notes to the Condensed Consolidated Financial Statements Amounts expressed in Turkish Lira ( TL ) unless otherwise stated 5 Tangible assets (continued) For the year ended 31 December 2010, the movement in tangible assets is as follows: Cost Land Buildings Machinery and equipment Motor vehicles Furniture and fixtures Financial leased tangible assets Leasehold improvements Other tangible assets Construction in progress Total Balances at 1 January ,766, ,814, ,811,244 3,118,203 68,284,501 81,499, ,167, ,536 25,930, ,955,328 Additions from acquisition of a new subsidiary ,368 77, , , ,665,830 Additions 11,879,632 1,709,133 6,344,514 1,238,025 4,717,402 17,771,669 14,897, ,845,645 91,403,282 Disposals (2,463,145) (98,432) (99,266) (627,478) (2,291,552) -- (280,630) (5,860,503) Transfer (*) ,709,747 53,128 3,604,697 18,840,215 27,937, (56,246,487) (101,423) As at 31 December ,645, ,523, ,741,728 4,388,225 77,213, ,483, ,253, ,536 2,249, ,062,514 Accumulated depreciation Balances at 1 Jan ary ,687, ,580,106 1,797,643 39,861,937 19,165,151 45,861,195 57, ,011,332 Additions from acquisition of a new subsidiary ,548 25, , , ,283 Charge for the period -- 4,154,184 25,273, ,295 7,887,346 17,392,554 15,977,811 21, ,278,798 Disposals (2,389,633) (22,311) (80,675) (480,754) (46,201) (3,019,574) Closing balance as at 31 December ,841, ,476,593 2,373,310 48,112,446 36,076,951 62,016,019 78, ,975,839 Net book value as at 31 December ,086,675 (*)Tangible assets amounting to TL 101,423 has been transferred to other intangible assets. 16

17 5 Tangible assets (continued) Construction in progress 30 June 2011 Project Expenditure Amount Total Cost of Project Ac badem Ankara Hospital 3,559,126 20,000,000 Ac badem Bodrum Hospital 4,309,918 20,000,000 7,869,044 40,000,000 Ac badem Ankara Hospital According to the agreement dated July 23, 2010, Group has a project located in Ankara, Cankaya, Dikmen district which is an hospital project on approximately 10,000 m 2 covered area with 16 floors. The Company will acquire medical device and equipment and the construction of the building will be completed by subcontractor firms. The hospital is expected to accept its patients in Ac badem Bodrum Hospital Group has a hospital project on 11,500 m 2 closed area in Ortakent district located in Bodrum, Mu la. This hospital is expected to accept its patients in Intangible assets For the six-months period ended 30 June 2011, movement in the intangible assets is as follows: Rights Other intangible assets Total Cost 1 January ,428,831 5,424,893 7,853,724 Additions from acquisition of a new subsidiary 199, , ,107 Additions 2,610, ,200 2,768,400 Disposals (800) -- (800) As at 30 June ,237,642 5,791,789 11,029,431 Accumulated Amortization 1 January ,353,963 3,455,903 4,809,866 Additions from acquisition of a new subsidiary 10, ,755 Charge for the period 108, , ,584 Disposals (44) (44) 1,473,642 3,605,519 5,079,161 Net book value as at 30 June ,950,270 17

18 6 Intangible Assets (continued) For the year ended 31 December 2010, movement in the intangible assets is as follows: Rights Other intangible fixed assets Total Cost 1 January ,041,462 4,737,282 6,778,744 Additions 315, , ,254 Additions from acquisition of a new subsidiary 61,058 2,245 63,303 Transfer 10,809 90, ,423 Closing balance as at 31 December ,428,831 5,424,893 7,853,724 Accumulated Amortization 1 January ,173,011 3,146,573 4,319,584 Charge for the period 146, , ,521 Additions from acquisition of a new subsidiary 34, ,761 1,353,963 3,455,903 4,809,866 Net book value as at 31 December ,074,868 1,968,990 3,043,858 At 30 June 2011 and 31 December 2010, the Company has intangible assets in use which have nil net book value on its accounts. (30 June 2011 Cost: TL 4,027,103, Accumulated Amortization: TL 4,027,103, 31 December 2010 Cost: TL 3,900,693, Accumulated Amortization: TL 3,900,693). 7 Goodwill As at 30 June 2011 and 31 December 2010 the goodwill comprised the acquisitions shown below: 30 June December 2010 Yeni Sa k 46,417, International Hospital 39,292,955 39,292,955 Ac badem Policlinics 6,234,605 6,234,605 Konur Sa k 1,547,107 1,547,107 93,491,924 47,074,667 18

19 7 Goodwill (continued) Konur Sa k One of the Group s subsidiaries Ac badem Poliklinikleri has acquired 35% of the shares of Konur Sa k from other third party shareholders based on the board of directors decision dated 9 March 2011 and has increased its shares to 85%. The agreed amount to be paid for this acquisition is amounting to USD 945,000. Goodwill arising on the acquisition of shares is presented in the retained earnings/ (accumulated loss) in accordance with revised IFRS June 2011 Acquisition cost 1,493,100 Subsidiaries equity (additional 35.00%) (534,782) Goodwill (9 March 2011) 958,318 Goodwill net book value 958,318 Yeni Sa k Based on the board of directors decision taken at 28 April 2011, 99.90% of the shares of Yeni Sa k which owns and operates Göztepe afak Hospital in Göztepe district of stanbul and John F. Kennedy Hospital ( JFK ) in Bahçelievler district of stanbul has been acquired. The agreed amount for the acquisition of these shares is amounting to USD 28,239,250 and the payments will be done from the end of the 11st month following the the actual share transfer with the installments of USD 1,000,000. The price has been determined with the mutual discussions and negotiations. Goodwill arising from the acquisition of shares are shown in the following table. 30 June 2011 Acquisition cost 47,823,972 Subsidiaries equity ( 99,90%) (1,406,715) Goodwill (31 May 2011) 46,417,257 Goodwill net book value 46,417,257 Gemt p Konur Sa k which is a subsidiary of Ac badem Poliklinikleri has acquired 58% shares of Gemt p Özel Sa k Hizmetleri which operates in Gemlik/Bursa district for outpatient. The amount paid for the acquisition is amounting to TL 14,500. Since the amount is negligible for the condensed consolidated financial statements, no goodwill amount had been booked. The condensed consolidated financial statements of Ac badem Poliklinikleri as at 30 June 2011, which are consolidated to accompanying condensed consolidated financial statements of the Group, include the condensed consolidated financial statements of Konur Sa k and Gemt p. 8 Financial liabilities As at 30 June 2011 and 31 December 2010, short term financial liabilities comprised the following: June December 2010 Short term bank borrowings and short term portion of long term bank borrowings 78,582,848 77,722,338 Financial lease liabilities (net) 18,758,817 14,080,748 97,341,665 91,803,086

20 8 Financial liabilities (continued) As at 30 June 2011 and 31 December 2010, long term financial liabilities comprised the following: 30 June December 2010 Long term bank borrowings 285,914, ,198,560 Financial lease liabilities (net) 89,703,941 83,729, ,618, ,928,404 Bank borrowings As at 30 June 2011, the details of short term bank borrowings comprised the following: Bank name Type Curreny type Original currency Interest rate (%) 30 June 2011 Garanti Bankas Operations TL 16,636, ,636,000 Garanti Bankas Tax TL 3,033, ,033,805 Bankas Operations TL 3,000, ,000,000 Bankas Operations TL 344, ,850 Garanti Bankas Tax TL 327, ,610 Garanti Bankas Operations TL 320, ,000 Garanti Bankas Tax TL 292, ,311 Garanti Bankas Operations TL 280, ,000 Vak fbank Tax TL 242, ,607 Garanti Bankas Tax TL 231, ,279 Garanti Bankas Tax TL 182, ,395 Garanti Bankas Tax TL 159, ,185 Bankas Operations TL 90, ,171 Denizbank Operations TL 7, ,820 TEB Vehicle Loan TL 6, ,028 Bankas Investment USD 2,043, ,330,879 28,484,940 Short term portion of long term bank borrowings Bank name Currency type Collateral Original currency amount Interest rate(%) 30 June 2011 Garanti Bankas USD Yes 25,943,351 Libor ,292,851 Bayerische Hypovereinsbank AG EURO Yes 1,577,063 Euribor ,704,838 Vak fbank USD Yes 2,515,163 Libor ,100,219 50,097,908 78,582,848 20