The art of service... ANNUAL REPORT 2010

Transcription

1 The art of service... ANNUAL REPORT 2010

2 TAV Airports employees whose photographs are featured in the Annual Report 2010 Özlem Akşahin Tav Istanbul, Executive Assistant Suna Gürer Tav Security, Human Resources Supervisor Tahsin Atalar Tav Istanbul, BHS Maintenance Technician Yasemin Enç Tav Airports, Executive Assistant Özlem Gümüş Havaş, Passenger Services Officer Mustafa Yolasığmaz Tgs, Ramp Worker Baiba Urtane North Hub Services (NHS), Business Lounge Executive Neriman Aslan AtÜ, Product Representative Öner Erdoğan Bta, Waiter Yunus Özcan TAV Operations Services, Passport Card Operation Officer Nilhan Kolay TAV Operations Services, CIP Officer Seda Osten TAV Operations Services, Commercial Affairs Assistant Specialist Seyhan Kahraman Tav Security, Security Guard Semra Hacı Tav Security, Security Guard

3 A human being enriched with art is a refined, crystal clear individual. Fearing or avoiding art is a refusal to achieve such refinement or clarity. Dance is a person s conduct of his or her own body, just like a maestro conducts an orchestra. Dance is a person s composition of his or her movements like a musical piece. Dance is the reflection of the music of a person s spirit in his or her movements. If people are laughing or crying; getting excited or thinking of similar things at the same time, besides setting the butterflies in their hands free at the same time; then that is a shrine. The Fisherman of Halicarnassus, Cevat Şakir, used to say Hello when he came across a friend, and HELLO as he took leave. In reality, we try to construct a large part of our lives around the emotions we feel in the text above. That is because creating is a process. Especially in performing arts And in collective arts... I could not believe it at first when TAV Airports requested a project like this from us. First and foremost, I was so happy to feel that we were not all alone. When the photo shoots were conducted with professional people who were proficient in their jobs, and as we found harmony with TAV Airports employees, who we were able to convince to pose for us in front of the camera and who really impressed us with their performance and enthusiasm; the only logical outcome was a project that we all cared about and valued. I hope that the excitement we felt came across in the snapshots. With my love to all my friends with whom I shared a common excitement Tan Sağtürk Ballet Dancer and Choreographer Tan Sağtürk Academy

4 TABLE OF CONTENTS TAV AT A GLANCE 4 Who We Are 8 What We Do 12 Where We Operate 14 How 2010 Unfolded 22 Outlook for 2011 ASSESSMENTS 28 Board of Directors Message 30 CEO s Message 32 Strategy and Objectives 34 Operational and Financial Performance 38 Investor Relations and Stock Performance 42 Risk Management 44 Human Resources REVIEW OF OPERATIONS IN Airport Operations istanbul Atatürk Airport Ankara Esenboğa Airport izmir Adnan Menderes Airport Antalya Gazipaşa Airport georgıa, Tbilisi Airport georgıa, batumı Airport tunısıa, monastır and enfıdha ınternatıonal Airports MAcedonıa, skopje and ohrıd aırports 82 Service Companies ground Handling servıces Duty Free food and beverage Services operations Services information Technology Services private Security Services 118 Marketing Activities 119 Internal Audit 120 Sustainability and the Environment 122 Corporate Social Responsibility (csr) REPORTS AND FINANCIAL INFORMATION 126 Corporate Governance Principles complıance report 143 Board of Directors and Senior Management 154 Committees 155 Agenda for the Ordinary General Assembly meetıng 156 Statutory Auditors Report 157 Statement of Responsibility 159 Consolidated Financial Statements and Independent Auditors Report 259 Glossary QR codes have been embedded on certain pages of this report in order to allow you to obtain more comprehensive information on TAV Airports and its subsidiaries via new mobile technologies. After installing the QR Code Reader on your mobile device, you can direct its camera towards the code image on the page to be directed to the web site which will offer you further information on the topic. For example, the QR code on this page allows you to easily access the TAV Airports Investor Relations web page (http//ir.tav.aero).

5 Proud and happy to have attained the target of 10 airports in 10 years it had set for itself in 2000, TAV Airports new target is to increase the number of passengers it serves at its exemplary, contemporary airports with its art of service approach to 100 million by 2020.

6 4 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Who We Are Strategy Our Strategy Generating value through organic & inorganic growth Our Priorities Keeping cost increase below revenue growth (operational leverage effect) Adding new airports to our portfolio in the target region consisting of Europe, Russia and the Commonwealth of Independent States, Baltic Nations and Georgia, Middle East, Africa and India Expanding into countries outside our target region through management service contracts Increasing the income of subsidiaries operating in the services industry (duty free, food & beverage, IT, ground handling and security) Expanding the services network: Also undertaking commercial activities in airports not operated by TAV Aiports Enhancing productivity: Increasing commercial income, expanding commercial areas and increasing penetration The Focus Point Integrated services model, offering complementary services through a wide range of business lines Joint ventures that facilitate the optimization of resource utilization and resource allocation Investment opportunities in niche markets of the developing economies Seizing upon opportunities involving airports with significant growth potential and Public-Private Partnership (PPP) projects We grow by rapidly adapting to the developments in the aviation industry and pioneering the industry. In order to leverage the sustainable foundation we have built to continue with our long-term, healthy, profitable and smart growth; we are constantly competing against ourselves. In the period ahead, we will continue to forge ahead with our quick and effective decision-making capability in order to maintain our domestic market leadership and reinforce our international market position. Our objective is to raise the number of passengers that we serve from around 48 million in 2010 to 100 million within the next ten years.

7 5 TAV AIrports HoldIng Annual Report 2010 Shareholder Structure Shareholder Number of Shares (1) Share (%) Tepe İnşaat Sanayi A.Ş. 94,664, Akfen Holding A.Ş. 94,886, Sera Yapı Endüstrisi ve Ticaret A.Ş. 15,139, Non-float 12,775, Free-float 145,816, Total 363,281, (1) As of December 31, 2010 Founding Shareholders Tepe İnşaat Sanayi A.Ş. is an experienced and distinguished construction company that carries out its operations ranging from infrastructure to construction with an integrated approach, and employs its experience on an international scale. 26.1% Akfen Holding A.Ş. is a conglomerate that positions itself as a business development company and that is active particularly in infrastructure investments but also operates in the construction seaport, energy and real estate investment industries. 26.1% Sera Yapı Endüstrisi ve Ticaret A.Ş. undertakes construction projects in Turkey, Middle East and North Africa. 4.2% Established in 1997 in Istanbul as a joint venture of Tepe Group and Akfen Group, TAV Airports commenced its operations by completing the construction of the Istanbul Atatürk Airport International Terminal in only 22 months. Making new achievements ever since, the Company represented Turkey in the best manner by becoming a global brand in both airport construction and operation. The Holding underwent restructuring in 2006 in line with its strategic objectives. The operation and construction services were reorganized under TAV Havalimanları Holding A.Ş. (TAV Airports) and TAV İnşaat (TAV Construction) as two separate holding companies. TAV Airports, Turkey s leading airport operator according to the 2010 passenger statistics of the Turkish State Airports Authority (DHMİ), continues to enhance its position and pursue sustainable growth with operations on three continents. Other Shareholders Free-float 40.1% Non-float 3.5%

8 6 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Who We Are Organizational Structure Airport Operations Istanbul Atatürk Airport Ankara Esenboğa Airport Izmir Adnan Menderes Airport/ International Terminal Antalya Gazipaşa Airport Georgia, Tbilisi Airport Georgia, Batumi Airport Tunisia, Monastir Airport Tunisia, Enfidha Airport Macedonia, Skopje Airport Macedonia, Ohrid Airport Service Companies Ground Handling: Havaş, TGS and NHS Duty Free: ATÜ Food & Beverage Services: BTA Operations Services: TAV Operations Services Co. Information Technology Services: TAV IT Security Services: TAV Security TAV Airports increased the number of passengers it serves by 13% to approximately 48 million in 2010, further strengthening its presence in the Balkans and in Europe by commencing operations at the Skopje and Ohrid Airports in Macedonia. Handling approximately 420 thousand flights in conjunction with its subsidiaries, TAV Airports continues to increase its global recognition, prestige and brand value with new investments. TAV Airports provides an unparalleled flight experience to its customers with its subsidiary operating companies that strive to meet every need -from ground handling services and duty free shops to personal services and security- that can be expected from an airport, and earns more than half of its consolidated income from such nonaviation activities. Shareholder Value Shares of TAV Airports are traded on the Istanbul Stock Exchange since February 23, In 2010 TAV Airports shares gained 58%, making them the third best performer in the ISE 30 Index. Capital Increases Year Amount % Capital (TL) ,093, ,281, ,187,500 As of Year-end 2010 Closing price TL 7.48 Market Capitalisation USD 1.8 billion Free Float 44% 2010 Highest price of the share TL 8.15 Lowest price of the share TL 4.68 Annual return 58% Average daily trading volume USD 12 million Note: The average daily trading volume is the average for The effective free float is 40%.

9 7 TAV AIrports HoldIng Annual Report Years of TAV in Figures Revenue (*) ( million) EBITDA (*) ( million) Number of passengers (million) Average number of employees 17, , , , , (*) Excludes construction revenue and expenses, but includes guaranteed passenger revenue from the airports operated in Ankara and Izmir.

10 8 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION What We Do Airport Operations Turkey Georgia 100% Istanbul Atatürk Airport 66% (*) Tbilisi Airport 100% Ankara Esenboğa Airport 60% (*) Batumi Airport 100% Izmir Adnan Menderes International Terminal 100% antalya Gazipaşa Airport (1) Tunisia 67% Monastir Airport (2) Macedonia 100% Skopje Airport (3) 100% 67% Enfidha Airport (2) Ohrid Airport (3) (1) The agreement for the Gazipaşa Airport was signed on January 7, (2) TAV Airports assumed the operation of the Monastir Airport on January 1, The Enfidha Airport is operated by TAV Airports since December (3) TAV Airports assumed the operation of the airport on March 1, (*) Pursuant to the agreement reached on March 25, 2011, TAV Airports will increase its shareholding to 76%.

11 9 TAV AIrports HoldIng Annual Report 2010 Duty Free food & beverage servıces (5) ATÜ 50% ATÜ is Turkey s largest duty free store chain. It carries out its operations jointly with Unifree, a subsidiary of the German company Heinemann, the leading global travel retailer. ATÜ holds a diversified operations portfolio spanning a large geography consisting of Turkey, Georgia, Tunisia, Macedonia and Latvia. BTA 67% BTA operates in a vast geographic region comprised of Turkey, Georgia, Tunisia, Macedonia and Latvia, offering catering services at 144 locations with a seating capacity for 12,500 people at the airports it is active in. In addition, BTA operates the 131-room Istanbul Airport Hotel and supplies bakery products to various chains in Turkey. Revenue (*) million Revenue (*) 75.0 million (*) Before the elimination of sales revenue. (100% of the revenue of ATÜ is taken.)

12 10 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION What We Do Ground Handling Other Havaş 65% Turkey s leading ground handling services company with a 65% (1) market share, Havaş provides continuous traffic, ramp and cargo services to around 200 airlines at 22 airports in Turkey. Revenue (*) million TGS (2) 50% Turkish Ground Services (TGS) renders ground handling services at Istanbul s Atatürk and Sabiha Gökçen, Ankara s Esenboğa, Izmir s Adnan Menderes airports, as well as at the airports of Antalya and Adana. TAV Operations Services 100% TAV Operations Services provides commercial space allocation, CIP and travel agency services. Revenue 30.1 million TAV IT 99% TAV IT provides airport information technology services such as FIDS and FMS. Revenue 9.7 million Revenue (*) 39.8 million nhs 50% North Hub Services (NHS) provides ground handling services at the Riga and Helsinki airports. Revenue (*) 2.8 million TAV Security 67% (**) TAV Security is a security services provider at Istanbul Atatürk, Ankara Esenboğa, Izmir Adnan Menderes and Antalya Gazipaşa airports. Revenue 8.6 million (1) Calculated according to the number of flights catered to in (2) TGS commenced operations on January 1, (*) Calculated in proportion to the ownership stake in the proportionally consolidated companies prior to the elimination of sales revenue. (50% of TGS and NHS) (**)TAV Airports has concluded an agreement to increase its shareholding to 100% on March 25, 2011.

13 11 TAV AIrports HoldIng Annual Report 2010

14 12 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Where We Operate bir bakışta tav Macedonia THOUSAND TAV S 2010 PASSENGER TRAFFIC 12.8 THOUSAND TAV S 2010 COMMERCIAL FLIGHT TRAFFIC Tunisia 3.9 MILLION TAV S 2010 PASSENGER TRAFFIC 31.8 THOUSAND TAV S 2010 COMMERCIAL FLIGHT TRAFFIC 416 THOUSAND TAV S TOTAL COMMERCIAL FLIGHT TRAFFIC

15 13 TAV AIrports HoldIng Annual Report 2010 Georgia THOUSAND TAV S 2010 PASSENGER TRAFFIC 18.7 THOUSAND TAV S 2010 COMMERCIAL FLIGHT TRAFFIC Turkey 42.0 MILLION TAV S 2010 PASSENGER TRAFFIC THOUSAND TAV S 2010 COMMERCIAL FLIGHT TRAFFIC 47.6 MILLION TAV S TOTAL PASSENGER TRAFFIC

16 14 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION How 2010 Unfolded SOARING PASSENGER TRAFFIC Passenger Traffic and Growth Rate Passenger Traffic in Turkey (million) International Domestic Passenger Traffic Growth Rate in Turkey (%) Passenger Traffic of TAV Airports (million) International Domestic TAV Passenger Traffic Growth Rate (%) Number of Airports Operated by TAV Source: DHMİ SURPASSING THE WORLD AVERAGES Passenger Traffic Growth 2009 (%) TAV World Europe Fraport Aeroports de Paris BAA Aena Schiphol 3 (3) (6) (3) (5) (5) (8) (8) 2010 (%) TAV World Europe Fraport Aeroports de Paris BAA Aena Schiphol (3) 6 4 Source: ACI

17 15 TAV AIrports HoldIng Annual Report 2010 MISSION ACCOMPLISHED: 10 AIRPORTS IN 10 YEARS Setting itself the target of operating 10 airports in 10 years in 2000, TAV accomplished this target by commencing operation in two more airports during the year. Beginning to operate Tunisia s Enfidha Airport in late 2009 and Macedonia s Skopje and Ohrid airports in March 2010, the Company continues to seek new investment opportunities as part of its inorganic growth strategy. Focusing on new projects in its target region in 2010, TAV is also expanding its operation map with new investments in other service areas such as ground handling and duty free. THE HIGHEST CORPORATE GOVERNANCE RATING SCORE As a result of the RiskMetrics Group s (ISS) latest rating report, TAV s Corporate Governance Rating Score was raised from 8.5 in 2009 to 9 in As a company that embraced compliance with corporate governance principles as an indispensable part of its corporate culture, TAV came first in the category of Companies with the Highest Corporate Governance Rating in the Corporate Governance Awards, organized for the first time during the Corporate Governance Summit.

18 16 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION fınancıal ındıcators Summary Income Stratement ( ) Construction Revenue 284,491,359 41,627,967 Operating Revenue 608,927, ,906,389 Construction Expenditure (271,354,562) (41,410,646) Operating Expenses (509,485,854) (632,373,203) Net Operating Profit 112,578, ,750,515 Net Financial Expenses (59,467,933) (57,284,470) Profit/(Loss) Before Tax 53,110,607 63,466,045 Income Tax Benefit/(Expense) (1,645,831) (11,826,115) Net Profit/(Loss) 51,464,776 51,639,930 Profit/(Loss) Attributable to Minority Interests 941,643 1,859,405 EBITDA 136,666, ,077,771 EBITDAR 280,287, ,716,617 Summary Cash Flow Statement ( ) Net Cash Generated from Operating Activities 209,677, ,290,587 Net Cash Generated from/(used in) Investment Activities (284,941,050) 35,896,039 Net Cash Generated from/(used in) Financing Activities 86,166,944 (374,240,555) Summary Balance Sheet ( ) Cash, Cash Equivalents and Securities 34,010,922 32,442,373 Restricted Bank Balances 313,849, ,444,797 Total Assets 1,923,116,435 2,039,474,431 Financial Liabilities 1,288,663,264 1,236,322,769 Total Liabilities 1,510,117,420 1,499,088,978 Shareholders Equity 412,999, ,385,453 Net Debt 940,802, ,435,599

19 17 TAV AIrports HoldIng Annual Report 2010 Operating Revenue ( ) Net Profit ( ) 752,906, ,639, ,927, ,464, EBITDA ( ) EBITDAR ( ) 180,077, ,077, ,666, ,287, Net Cash Generated from Operating Activities ( ) Total Assets ( ) 336,290, ,039,474, ,677, ,923,116, Shareholders Equity ( ) Net Debt ( ) 540,385, ,435, ,999, ,802,

20 18 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Operational Indicators Passenger Traffic (1) January - December Change % Istanbul Atatürk Airport 29,812,888 32,145,619 8 International 18,396,050 20,344, Domestic 11,416,838 11,800,999 3 Ankara Esenboğa Airport (2) 6,084,404 7,759, International 1,094,270 1,325, Domestic 4,990,134 6,433, Izmir Adnan Menderes Airport International Terminal (3) 1,667,455 2,127, Monastir & Enfidha Airports (4) 3,781,256 3,916,977 4 Tbilisi Airport (5) 702, , Batumi Airport (6) 69,282 88, Skopje & Ohrid Airports (7) 636, , TAV Airports Total 42,117,999 47,585, International 25,684,626 29,302, Domestic 16,433,488 18,282, Source: Turkish State Airports Authority (DHMİ), Civil Aviation Administration of Georgia, TAV Tunisie and TAV Macedonia Note: January-December 2010 DHMİ data are provisional. Transfer passengers are included in DHMİ figures. (1) Arriving and departing passenger totals, excluding transit passengers. (2) Operation commenced on October 16, 2006 under the TAV Airports corporate structure. (3) International Terminal only; operation commenced on September 13, 2006 under the TAV Airports corporate structure. (4) Operation commenced on January 1, 2008 under the TAV Airports corporate structure (including Enfidha). (5) The new terminal commenced operation on February 7, (6) Operation commenced on May 26, 2007 (includes Hopa Terminal). (7) Operating right was acquired by TAV on March 1, 2010.

21 19 TAV AIrports HoldIng Annual Report 2010 ıstanbul ATATÜRK AIRPORT PASSENGER TRAFFIC ankara ESENBOĞA AIRPORT PASSENGER TRAFFIC 32,145, ,759, ,812, ,084, IZMIR adnan menderes AIRPORT INTERNATIONAL TERMINAL PASSENGER TRAFFIC MONASTIR & ENFIDHA AIRPORTS PASSENGER TRAFFIC 2,127, ,916, ,667, ,781, TBILISI AIRPORT PASSENGER TRAFFIC BATUMI AIRPORT PASSENGER TRAFFIC 821, , , , SKOPJE & OHRID AIRPORTS PASSENGER TRAFFIC TAV aırports TOTAL PASSENGER TRAFFIC 725, ,585, , ,117,

22 20 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Operational Indicators Commercial Flight Traffic (1) January - December Change % Istanbul Atatürk Airport 265, ,704 3 International 169, ,817 5 Domestic 95,816 94,887 (1) Ankara Esenboğa Airport (2) 51,281 63, International 10,131 11, Domestic 41,150 51, Izmir Adnan Menderes Airport International Terminal (3) 13,145 16, Monastir & Enfidha Airports (4) 30,393 31,801 5 Tbilisi Airport (5) 13,842 16, Batumi Airport (6) 1,806 2, Skopje & Ohrid Airports (7) 12,793 12,798 0 TAV Airports Total (8) 376, , International 237, , Domestic 138, ,666 7 Source: Turkish State Airports Authority (DHMİ), Civil Aviation Administration of Georgia, TAV Tunisie and TAV Macedonia Note: January-December 2010 DHMİ data are provisional. (1) Commercial flights only. (2) Operation commenced on October 16, 2006 under the TAV Airports corporate structure. (3) International Terminal only; operation commenced on September 13, 2006 under the TAV Airports corporate structure. (4) Operation commenced on January 1, 2008 under the TAV Airports corporate structure (including Enfidha). (5) The new terminal commenced operation on February 7, (6) Operation commenced on May 26, 2007 (includes Hopa Terminal). (7) Operating right was acquired by TAV on March 1, (8) TAV 2009 traffic data do not include the passenger traffic and flight traffic data from Macedonia.

23 21 TAV AIrports HoldIng Annual Report 2010 tav aırports Total Commercial Flight Traffic 416, ,

24 22 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Outlook for WORLD PASSENGER TRAFFIC IN THE LAST DECADE (million) 5,093 4,796 4,882 4,796 4,381 4,170 3,912 3,531 3,471 3,478 3, International Air Transport Association (IATA) stated that it expects Available Seat Kilometers (ASK) to grow by an average of 5.3% annually between 2009 and 2014, whereas International Civil Aviation Organization (ICAO) predicts 4.7% growth from 2010 to According to forecasts by Boeing, one of the largest aircraft manufacturers in the world, the European aviation industry will constitute 1.9% of the European economy between 2009 and Over the same period, Boeing predicts a 4.4% annual growth rate in the world passenger traffic. Another major aircraft manufacturer, Airbus, predicts an average ASK growth rate of 4.8% between 2010 and Source: ACI

25 23 TAV AIrports HoldIng Annual Report 2010 ADVANTAGES OF THE TURKISH AVIATION INDUSTRY Market conditions conducive to growth The sixth largest economy in Europe th The 16 largest economy in the world Growth trend above the sector average Young population and intensive service basin The second largest population in Europe THE TURKISH AVIATION INDUSTRY CONTINUES ITS RAPID EXPANSION In 2010, the number of companies active in the civil aviation sector rose to 155 and the total turnover of the sector to USD 12 billion. The Turkish aviation industry continues to add to its long list of accomplishments and takes decisive strides towards raising the number of aircrafts to 750 from 350 today, and passenger traffic to 350 million from 100 million today, by 2023, when we will be celebrating the 100 th anniversary of the Republic. TURKEY S DECADE OF ACCOMPLISHMENTS Turkey Total Passenger Traffic (million) International Domestic Number of Airports Number of Aircrafts TAV S DECADE OF ACCOMPLISHMENTS Ten-Year Annual Average Growth (%) Growth (%) Number of Airports Operated Passenger Traffic (million) Revenue (USD million) 145 1,

26 24 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Milestones 1997 TAV was founded and it was awarded the tender for the Istanbul Atatürk Airport ATÜ, which was established as a TAV Airports venture to provide duty free shopping services, was incorporated into the TAV corporate structure; BTA, which provides food and beverage services, was established TAV began operating the Istanbul Atatürk Airport International Terminal primeclass CIP Service was launched BTA began operating the Istanbul International Airport Hotel. TAV assumed construction and operation of the Esenboğa Airport Domestic and International Terminals. TAV İşletme Hizmetleri (TAV Operations Services) was founded TAV Airports was awarded the tender to operate the Atatürk Airport International and Domestic Terminal Buildings, Parking Garage and General Aviation Terminal for 15 and a half years. 60% of Havaş shares were acquired. Construction and operation of the Izmir Adnan Menderes International Terminal was assumed by TAV. TAV Bilişim Hizmetleri A.Ş. (TAV IT) was founded and the information technology services developed during the course of construction and operation of airport terminals were consolidated under this company. TAV was awarded the tender for the Tbilisi International Airport in Georgia Operation and construction services were restructured under TAV Havalimanları Holding A.Ş. (TAV Airports) and TAV İnşaat (TAV Construction) as two separate holding companies. Izmir Adnan Menderes Airport International Terminal commenced service. Esenboğa Airport Domestic and International Terminal commenced operation. TAV Özel Güvenlik Hizmetleri A.Ş. (TAV Security) was founded and the private security services developed during the course of construction and operation of the airport terminals were consolidated under this company.

27 25 TAV AIrports HoldIng Annual Report TAV Airports shares were floated. Tbilisi International Airport s new passenger terminal commenced service. Batumi International Airport commenced operation. TAV Airports was awarded the tender for the Monastir Habib Bourguiba and Enfidha Zine El Abidine Ben Ali International Airports in Tunisia. 40% minority shares of Havaş were acquired. Havaş became a wholly-owned subsidiary of TAV Airports. TAV Airports became 100% owner of TAV Izmir and TAV Esenboğa. TAV Airports was awarded the tender for the operation of the Antalya Gazipaşa Airport. The Hopa Terminal operated by Havaş commenced service TAV Airports increased its issued capital by TL 121 million. TAV Gazipaşa commenced operation at the Antalya Gazipaşa Airport. The Enfidha Airport investment was completed. Agreement was reached for the sale of Havaş shares to HSBC (28%) and İş Private Equity (7%). Havaş acquired a 50% equity stake in TGS. IFC (International Finance Corporation), a World Bank establishment, acquired a 15% equity stake in TAV Tunisie TAV Airports assumed operation of Tunisia s Monastir Habib Bourguiba International Airport. TAV Gazipaşa Yatırım-Yapım ve İşletme A.Ş. (TAV Gazipaşa) was founded to operate the Antalya Gazipaşa Airport. TAV Airports was awarded the tender for the operation of the Alexander the Great International Airport in Macedonia s capital Skopje and St. Paul the Apostle International Airport in Ohrid, as well as the construction of the Shtip Cargo Airport, of which TAV Airports also retains optional rights to operate. The related concession contracts were signed. Havaş was awarded the tender for a 50%- shareholding partnership in TGS (Turkish Ground Services Co.), a subsidiary of Turkish Airlines.

28 26 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Highlights from 2010 TAV Airports assumed the operation of Macedonia s Skopje and Ohrid airports for 20 years. A memorandum of understanding was signed for the construction and operation of the new terminal building at Latvia s Riga Airport. TAV Airports and Latvia s leading airline company Air Baltic decided to become equal partners in this joint venture. TAV Airports was awarded the tender for the operation of duty free, catering and other commercial spaces at Latvia s Riga Airport. The sale of 18% minority shares of TAV Tunisie SA to Pan African Infrastructure Development Fund was completed. Antalya Gazipaşa Airport was upgraded from the 2C category to the 3C category. The operation of five service points (Kantin, Beerport, Kokpit Cafe, Kokpit Brasserie and İç Hatlar Botanik Cafe) at the Istanbul Atatürk Airport Domestic Terminal was assumed by BTA as of July 1, The sale of the minority shares of Havaş to HSBC and İş Private Equity was completed. A memorandum of understanding was signed with the Indonesia-based company Sigma Group/PT Wira Cipta Sukses and the Indonesian Government for cooperation on potential airport projects in this country. TAV signed a Global Training Center agreement with Airports Council International (ACI), whose membership includes more than 1,600 airports from around the world. Havaş acquired a 50% equity stake in North Hub Services (NHS), a provider of ground handling services at Latvia s Riga Airport. TAV Airports Corporate Governance Rating Score was raised from 83.3 (8.5) in 2009 to The expansion project of the Istanbul Atatürk Airport s Domestic and International Terminals was completed. TAV Operations Services launched the TAV Passport Card, which offers many services and privileges at the airports operated by TAV.

29 27 TAV AIrports HoldIng Annual Report 2010 DEVELOPMENTS IN Tender for commercial spaces in Riga awarded to TAV 8 7 NHS share purchase agreement Memorandum of understanding signed with Air Baltic Memorandum of understanding signed with the Indonesian Government 6 Corporate Governance Rating Score raised 5 Operations of the Skopje and Ohrid Airports

30 28 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Board of Directors Message Operational performance solidified by financial achievements Esteemed Shareholders, Across the world and in Turkey, the airport operation industry continues to expand rapidly against the backdrop of the global crisis. Today s major airports have become crucial hubs for business, commerce, information exchange and leisure activities with the shopping malls, art galleries, hotels and recreational areas located in the airport premises as well as neighboring congress, trade and fair centers. According to the February 2011 issue of ACI World Report, passenger traffic increased by 6.2% across the world in According to the forecasts of the Turkish Ministry of Transport, passenger traffic in Turkey is expected to grow by an annual compound rate of 10% from 2010 to Having expanded its know-how and vision beyond the national borders and gained rightful recognition in the global arena, TAV Airports added to its list of accomplishments in In the first quarter of 2010, the Holding assumed the operation of Macedonia s Skopje and Ohrid Airports for a period of twenty years. With the commencement of operations in Macedonia, TAV Airports now operates a total of 10 airports, including those in the three major cities of Turkey. As of January 1, 2011, the Holding assumed the operation of duty free, catering and other commercial areas at Latvia s Riga Airport for a period of 10 years. Havaş s acquisition of a 50% equity stake in NHS, which provides ground handling services at Latvia s Riga Airport, was one of the most significant developments of the year. Launching activities first in Riga, and then in Finland s capital Helsinki as of July 1, 2010, NHS aims to become the largest ground handling company in Northern Europe. The Holding s subsidiary TAV IT, which was awarded two tenders in Turkey and one tender in Saudi Arabia during the year, expanded its services and experience beyond TAV Airports for the first time. In addition, TAV Airports signed a memorandum of understanding for the construction and operation of the new terminal building at Riga Airport and decided to establish a joint venture with Air Baltic for this project. The Holding s other important initiatives in pursuit of its inorganic growth targets were participation in the Medina Airport tender and the memorandum of understanding signed with the Indonesian government. Another important development of 2010 was the sale of an equity stake in Havaş to HSBC and İş Private Equity, as well as the sale of minority shares in TAV Tunisie to Pan African Infrastructure Development Fund. The funds generated from these divestitures served to strengthen the financial position of the Holding. The Antalya Gazipaşa Airport, for which the Holding holds the operation rights until 2034, was upgraded from the 2C (small airport) category to the 3C (mediumsized airport) category. Designed as a boutique airport serving the tourism potential of its region, Gazipaşa Airport had its runway expanded from 1,825 meters to 2,000 meters in The Holding continued to add financial and managerial achievements on top of its superior airport operation performance, and became the third best performing stock in the ISE 30 Index in In addition to continuing to rise in the list of best managed companies in Turkey, TAV Airports also had its Corporate Governance Rating Score raised to 9 and positioned itself at the top of the ISE by this measure. As the innovative force of its industry, TAV Airports will continue to register new accomplishments in the period ahead with its entrepreneurial spirit. The Holding s most important asset is its employees passion for success and superior performance. TAV Airports will continue to create value for Turkey and for its shareholders while maintaining its sustainable growth approach and robust financial structure.

31 29 TAV AIrports HoldIng Annual Report 2010 Ali Haydar Kurtdarcan Vice Chairman of the Board of Directors Dr. M. Sani Şener Member of the Board of Directors, President & CEO Hamdi Akın Chairman of the Board of Directors

32 30 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CEO S MESSAGE We attained our target of 10 airports in 10 years. Esteemed Shareholders, As the world economy grew by 5% in 2010, Turkey achieved an economic growth rate of 8.9% and became one of the best-managed countries during the global crisis. As the aviation industry s center of gravity shifts east, it is becoming clear that the industry is recovering much more quickly than expected. According to ACI data, world passenger traffic increased by 6.2% over the previous year in The airport operation sector requires companies to race against time and display a significant coordination capacity commensurate with the volume of circulation has been a particularly challenging year for the sector. Operators maintained their superior performance despite extraordinary factors such as the volcano eruption in Iceland that sent clouds of ash across entire Europe, massive strikes especially in Europe, unfavorable weather conditions in North America and Europe, and political instability in North Africa. From TAV Airports perspective, these adverse developments were exacerbated by the closure of Atatürk Airport s third runway from March 8 th to June 30 th, 2010 due to expansion and repair work. It was especially significant and meaningful for TAV Airports to continue to increase its passenger traffic and attain double-digit growth in 2010 in the face of such adverse conditions. Turkey proved its strong potential in the aviation industry with the 103 million passengers it reached in The country has a young population and a dynamic market, which inspire optimism for the future of the industry. Forecasts call for the passenger traffic to grow by an average of 10% per year to reach 350 million in 2023 and the number of aircraft to reach 750, from 347 today, over the same period. TAV Airports, one of the most important airport operators in the region, continues to invest in accordance with this rapid growth and potential. In 2010, TAV stood out as an unshakeable company that has proven the sustainability of its success. The Holding continues on its path of combining the right strategies with qualified human resources with the same excitement and determination as ever. Commencing operation at the Skopje and Ohrid airports in Macedonia in the first quarter of 2010, TAV reached its target of 10 airports in 10 years. The Holding s next target is to increase total passenger traffic, which grew by 13% in 2010 to reach 48 million, to 100 million within the next ten years. The Holding s double digit growth in passenger traffic, its focus on the growth of service companies, and the operational achievements of its various joint ventures allowed EBITDA growth to outpace increase in revenue. As a result of the completion of the construction work and the commencement of operations in Tunisia, the free cash flow increased from minus 102 million in 2009 to 217 million in The key to success in the airport operation industry is the sharing of experience and know-how. We have always stated that TAV Airports is not just a workplace, but also a school for its employees. With this mission in mind, we continue to bring up highly qualified human resources, a crucial element for the sector. Airports Council International (ACI) designated Istanbul Atatürk Airport as the 11 th training center for the Global Training Hubs it operates across the world. As of year-end 2010, TAV Airports employs around 18 thousand people, including its subsidiaries. In 2010, the Holding created new employment opportunities for 8,049 people. The Holding s airports and subsidiaries continued to receive many national and international awards this year. Undoubtedly, the most meaningful achievement among these was the first place TAV Airports took in the ISE Corporate Governance Index with its rating score, in only the fourth year of its initial public offering. Raising its Corporate Governance Rating score

33 31 TAV AIrports HoldIng Annual Report 2010 from 8.5 in 2009 to 9 in 2010, the Holding was deemed worthy of the Company with the Highest Corporate Governance Rating Score award at the Corporate Governance Awards. We believe that sustainable growth is possible only if social responsibility awareness and respect for the environment are coupled with financial success. In this respect, we continued our efforts to ensure that all operating companies of the Holding are equipped with environmentally friendly technologies. In addition, in line with our belief that Turkey s future will be shaped by art, culture and education, we organized scores of events and sponsored many projects throughout the year. We will continue to add to our accomplishments in the coming decades by offering our customers high quality services while also being mindful of the society and the environment we live in. I would like to express my deepest gratitude to all TAV employees who made this outcome possible, to you, our business partners, who trusted us and believed in the future of TAV, to our customers, and to all of our social and economic stakeholders. Dr. M. Sani Şener Member of the Board of Directors, President & CEO

34 32 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION STRATEGY AND OBJECTIVES TAV continues to constantly create value in line with its growth strategy. A global player in the industry with competent human resources and operations encompassing a vast geography both in Turkey and abroad, TAV implements the right strategies at the right time. TAV displayed a noticeable growth performance even during the global crisis and continues to sharpen its competitive edge in the sector by duly taking advantage of opportunities. TAV s growth strategy consists of increasing traffic at the airports that it already operates while taking advantage of opportunities for the construction and operation of new airports in Turkey and abroad. Thanks to its extensive network of airports and comprehensive airport operations and services, the Company will continue to benefit from economies of scale and economies of scope. In addition, in order to further reinforce its growth strategy, TAV Airports will continue to pursue long-term strategic partnerships at both the local and regional levels. A Unique Business Model TAV conducts its activities with a unique business model. As part of this model, the Company s subsidiaries provide a diverse range of services that complement airport operations including ground handling, duty free retailing, food & beverage, IT and security services. TAV stepped up its efforts to further enhance the value it creates by strengthening the integration between business lines and redefining and redesigning the relationships among its subsidiary companies. In order to take full advantage of this integrated model, the Company will continue to reinforce the connectivity among these business lines and increase the synergy among them. With the goal of increasing overall efficiency and productivity, TAV will also continue to undertake initiatives to improve its business and operational processes and to increase the number of passengers it caters to as well as enhancing its commercial productivity. TAV s general strategy is based on creating value via organic and inorganic growth, and increasing the revenue of its subsidiaries active in the fields of duty free, food & beverage, IT, ground handling and security. Organic growth is achieved through an increase in the passenger traffic of the airports currently operated by TAV. While the Holding s revenues grow in parallel with the soaring passenger traffic, expenditures increase relatively slower since airport operation is mainly a business with fixed costs. Thus the Holding takes advantage of an operational leverage effect and generates higher EBITDA. Inorganic growth, on the other hand, comes about with investments in airport and business operations. The Holding continues to add new airports to its portfolio in its target region consisting of Europe, Russia and the Commonwealth of Independent States, Baltic Nations and Georgia, Middle East, Africa and India. In addition, the Holding also aims to expand into countries outside of its target region via consulting contracts. This approach envisions contracts where TAV experts experienced in airport operations will assume various positions in the management of airports outside of the Holding s target region. The Holding continues to expand its commercial revenue via its service companies, which account for a large share of its total revenues. TAV s subsidiaries are active in duty free retailing, food & beverage, IT, security and ground handling. Each new investment in the field of airport operation serves the purpose of expanding the service network of the subsidiaries. The subsidiaries also offer services in some locations where the Holding is not in charge of the airport operation. For example, TAV Airports was awarded a tender for operating the duty free,

35 33 TAV AIrports HoldIng Annual Report 2010 food & beverage and other commercial areas at Latvia s Riga Airport in Another example is the operations of North Hub Services, which is a Havaş subsidiary that strives to become the largest ground handling company in Northern Europe. Increasing profitability and service diversity of the existing companies is just as important as making new investments. The Holding continues to open new stores, develop new products, and increase the business intensity of its commercial activities via modernization efforts and innovative approaches. In 2010, the passenger traffic grew by 13%. TAV Airports commenced operation at the Skopje and Ohrid airports while taking inorganic growth initiatives by signing memoranda of understanding with Air Baltic and the Indonesian government. The Holding s subsidiaries also made growth-oriented investments including the share purchase agreement with Latvia-based NHS to deliver ground handling services and the assumption of commercial activities at Riga Airport s existing terminal. In the coming period, TAV will continue to focus on new airport projects and establish new companies, and to devise effective strategies to modernize the existing airports in order to boost their productivity and profitability. Proud and pleased to have attained the target of 10 airports in 10 years it had set for itself in 2000, TAV Airports new target is to increase its passenger traffic to 100 million by 2020.

36 34 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION OPERATIONAL AND FINANCIAL PERFORMANCE TAV generated a net profit of 52 million in the year ended December 31, OPERATIONAL PERFORMANCE While analyzing the Company s operational performance, construction income and expenses were excluded while guaranteed passenger income from airports operated in Ankara and Izmir were included. In 2010 passenger traffic at the airports operated by TAV Airports increased by 13% over the previous year to reach 47.6 million. According to the Turkish State Airports Authority (DHMİ) statistics, which are inclusive of transit passengers, passenger traffic at the Istanbul Atatürk Airport International Terminal grew by 11% in 2010 to 20.3 million. The Company s adjusted revenue, calculated by including guaranteed passenger income from airports operated in Ankara and Izmir, increased by 23%, from 640 million in 2009 to 785 million in The share of aviation income (including ground handling income and guaranteed passenger income from the Ankara and Izmir airports) rose to 45% of total income during this period, up from 43% in Aviation income constituted the largest share of total income due in part to the commencement of operation of TGS in the beginning of 2010, while duty free sales revenue was the second largest item in the Company s total revenues with a 31% share. Adjusted EBITDA rose 27% in 2010 to 212 million (EBITDA margin: 27%), up from 167 million in Adjusted EBITDAR increased by 10% in 2010 to 342 million, but it underperformed the growth in EBITDA. The primary reason for this was the decline in concession rent payments as a result of exchange rate movements. Net profit rose from 51 million in 2009 to 52 million in Due to 9 million in income generated from the sale of 15% of TAV Tunisie shares to IFC in 2009, as well as the positive 13 million difference between construction revenue and expenditure owing to IFRIC (International Financial Reporting Interpretations Committee) practice, the net profit figures of 2009 and 2010 are not directly comparable. The completion of the airport construction in Tunisia and the commencement of operations raised the free cash flow from minus 102 million in 2009 to 217 million in As a result of organic and inorganic growth, adjusted revenue rose 23% in 2010 to 785 million from 640 million in Most of the Company s revenue is denominated in foreign currency (euros and US dollars). In 2010, the Company s aviation income (including ground handling) constituted 45% of its total operating income, whereas non-aviation income made up the remaining 55%. Adjusted aviation income (excluding ground handling) increased from 162 million in 2009 to 202 million in Pursuant to the IFRIC 12 Practice, guaranteed passenger income of 15.1 million from the Ankara Esenboğa Airport and 17 million from the Izmir Adnan Menderes Airport were not included in aviation income in the income statement prepared in accordance with the IFRS during this period. The adjusted aviation income figures presented in this report are inclusive of these guaranteed passenger income. Sales of duty free goods increased by 17% in 2010 to 166 million from 142 million in 2009 thanks to the increase in passenger traffic. Duty free sales, which were negatively impacted by the limits put in place by the Undersecretariat of Customs in October 2009, made a positive contribution to the revenue growth in the last quarter of the year after the duty free limits were revised as of the beginning of September of this year. Average duty free spending per passenger declined by 2% to 14.5 in 2010 from 14.7 in 2009 due in large part to the increased number of transfer/transit passengers after the operations

37 35 TAV AIrports HoldIng Annual Report 2010 in Macedonia and Tunisia commenced. Spending per passenger rose 3% from 15.7 to 16.3 in 2010 despite the 13% year-on-year increase in the international transit passenger traffic at Istanbul Atatürk Airport. Ground handling income rose 34% in 2009 to 152 million, up from 113 million in The start of operations of TGS in Istanbul, Ankara, Izmir, Antalya and Adana contributed to the income. During the same period, the number of aircrafts served by Havaş (excluding TGS) increased by 13% to 109 thousand. TGS took over the Turkish Airlines ramp operations at the Istanbul Atatürk Airport from Havaş as of the beginning of 2010 and the number of flights served increased from 87 thousand in 2009 to 134 thousand in Concession fees from duty free sales increased by 14% in 2010 to 78 million from 68 million in Income from food and beverage services was up from 38 million in 2009 to 48 million in 2010 for a 25% increase. Other income increased by 20% in 2010 to 139 million from 116 million in Operating expenses rose by 24% in 2010 to 632 million from 509 million in This was due primarily to the increases in personnel and depreciation and amortization expenses. Concession rent expenses declined by 10% in 2010 to 130 million as a result of the drop in rent payments made for the Istanbul Atatürk Airport. Concession rent expenses consist primarily of rent payments made to the Turkish State Airports Authority (DHMİ) pursuant to Atatürk Airport s lease agreement ( 117 million), and rent payments ( 10 million) made to the Tunisian Civil Aviation and Airports Authority (OACA) for the Monastir Airport, which the Company began operating on January 1, 2008 and for the Enfidha Airport, which commenced service on December The cost of duty free inventory sold increased by 17% over the previous year to 65 million. The cost of food and beverage inventory sold, which was 14 million in 2009, rose 19% to 16 million in Personnel expenses were up from 153 million in 2009 to 219 million in 2010, for a 43% increase. This increase was a result of the commencement of operations at TGS, NHS, TAV Macedonia and Enfidha Airport, and the takeover of BTA s service points at the Atatürk Airport s Domestic Terminal. The average number of employees was higher by 44% over the same period. The cost of services outsourced increased by 23% to 42 million in 2010, up from 34 million in This outsourced services expense item is comprised of the consolidated operating expenses of ATÜ, BTA, TAV Operations Services and Havaş. Amortization and depreciation expenses grew to 60 million in 2010, up 60% from 37 million in 2009, due to the start of operations at Tunisia s Enfidha Airport. Other operating expenses rose 39% to 100 million in 2010 from 72 million in Adjusted operating profit (excluding construction income and expenses, including guaranteed passenger income) increased from 130 million in 2009 to 153 million in 2010, corresponding to an increase of 17%. Adjusted EBITDA reached 212 million in 2010, up 27% from 167 million in Adjusted EBITDAR (adjusted EBITDA before concession rent payments) rose 10% in 2010 to 342 million from 311 million in Net finance costs dropped from 60 million in 2009 to 57 million in Total tax benefit (expense) consists of deferred taxes and corporate taxes. TAV s tax expense rose from 10 million in 2009 to 33 million in 2010, a large share of which accrued to TAV Istanbul. Net profit rose from 51 million in 2009 to 52 million in ( million) Net cash generated from operating activities Tangible fixed asset purchases (79.8) (52.5) Airport operation concession inflows (38.0) (259.0) Intangible fixed asset purchases (1.0) (0.6) Free Cash Flow (FCF) (102.4)

38 36 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION OPERATIONAL AND FINANCIAL PERFORMANCE Consolidated Cash Flow Summary Net cash generated from operating activities TAV Airports generated 336 million of cash from its operating activities in 2010, whereas it had generated 210 million in Cash generated from operating activities before working capital rose from 293 million in 2009 to 340 million in Net cash generated from investment activities In 2010, TAV Airports generated 36 million of cash from operations. This increase was due to the start of operations in Tunisia and the resulting decrease in investment expenditure, as well as the cash obtained from the sale of minority shares in Havaş ( 102 million) and Tunisia ( 40 million). Net cash generated from financing activities Cash flows from financing activities are generally related to borrowings from banks, project finance loans and their repayments. TAV Airports, which has a 65% ownership share in the newly established Havaş Holding, borrowed approximately 60 million in the acquisition of Havaalanları Yer Hizmetleri (Havaş). The cash generated from the sale of Havaş shares to Havaş Holding was used to pay down debt at the Holding level. In 2009, there was a cash inflow of 86 million due to financing activities. The portion of the project finance loan secured for the Tunisia Enfidha Airport investment that was drawn down, as well as the cash inflow from the rights issue ( 57 million) were included in this figure. Free Cash Flow Free cash flow (net cash generated from operations - cash used in investments) in 2010 was 217 million, up from minus 102 million in Net Debt As a result of the cash generated by the sale of an 18% equity stake in TAV Tunisie, total debt at the Holding level fell from 200 million at year-end 2008 to 35 million as of December 31, The consolidated debt for 2010 stood at 822 million as of December 31, ( million) Revenues EBITDA EBITDA Margin (%) Net Debt (Cash) Airports Istanbul Ankara Izmir Tunisia Gazipaşa 0.0 (1.2) a.d. 16 Tbilisi & Batumi Macedonia Service Companies ATÜ (50%) BTA (3) Havaş Other 60.7 (4.6) a.d. 32 Total Eliminations (155.3) (1.5) - - Consolidated

39 37 TAV AIrports HoldIng Annual Report 2010

40 38 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION INVESTOR RELATIONS AND STOCK PERFORMANCE The third best performing stock in ISE 30 in TAV Airports strives to increase shareholder value through investor relations practices at international standards. The Investor Relations Department of TAV Airports was established in September 2006, prior to the Company s initial public offering. The Department has been operating with an expanded role since the public offering in February Acting as a transparent, two-way bridge between investors and the Company, TAV Investor Relations Department aspires to disclose all information about TAV Airports to the public in the most accurate, timely and complete manner. Armed with the awareness of its responsibility to serve as a gateway to TAV Airports for investors and all other stakeholders, the Investor Relations Department shares the most accurate information and data about the Company in the most transparent and prompt manner on the Public Disclosure Platform (PDP). The Department posts these announcements on its web site at and updates the information on the PDP as well as on its web site as changes occur. The Holding won first place in the categories of Best Investor Relations CEO, Best Investor Relations CFO and Best Investor Relations Officer at the Investor Relations Awards, organized jointly by Thomson Reuters and Acclaro for the second year in Turkey. In addition, in the Turkey Investor Relations Awards 2010, TAV Airports received prizes in the categories of Investor Relations Web Site and Investor Relations Department. In 2010, TAV Investor Relations attended a total of 13 road shows and conferences, eight of which were abroad, and had face-to-face meetings with over 400 investors, shareholders and analysts in regards to the Holding s operations, performance and other developments. In addition, pursuant to the Capital Markets Law, 34 material disclosures were issued in 2010 to the PDP in order to inform shareholders and the public; these disclosures were also posted on the Company s web site, which was overhauled to become more interactive. Stock Performance The Company s shares are traded on the ISE since February 23, 2007 under the ticker TAVHL. The year s low was TL 4.68 and the year s high was TL 8.15 for TAV Airports shares, which became the third best performing stock in the ISE 30 in TAVHL share price gained 58% in 2010, and yielded returns well above the ISE 100 and ISE 30 indices, which rose by 25% and 21%, respectively. The daily average trading volume of the shares was USD 12 million and according to the Central Registry Agency data, percentage held by foreign investors stands at 83% as of December 31, Price Performance of TAVHL Shares (TL) Share Change (%) TAVHL

41 39 TAV AIrports HoldIng Annual Report 2010 Subcategories Weight Score Rating Shareholders Public Disclosure and Transparency Stakeholders Board of Directors Total Corporate Governance Rating The international corporate governance rating agency RiskMetrics Group (ISS), which is authorized by the Capital Markets Board (CMB) to conduct corporate governing rating activities in Turkey in accordance with the CMB s Corporate Governance Principles, issued its second Corporate Governance Rating Report for TAV Airports in In its second year of assessment, TAV Airports increased its rating score from 8.5 to 9. TAV Airports, which had joined the index in the third position last year, ranked first in its second year. In this respect, according to the CMB s guidelines on the issue; the weighted assessment results in the subcategories of Shareholders, Public Disclosure and Transparency, Stakeholders, and Board of Directors are as shown above. Profit Distribution Policy The Company s profit distribution policy does not a allow for any privileges. The Company determines its profit distribution decisions according to the provisions of the Turkish Commercial Code, Capital Markets Law, CMB resolutions and regulations, taxation laws, other related legislation, as well as its Articles of Association. One of the main objectives of the Company is to ensure that the profit distribution policy is continued except in special cases such as investment and funding requirements of the Company s and its subsidiaries long-term growth, as well as extraordinary economic developments. All information and data about TAV Airports can be found on the web site under the Investor Relations Department section. In addition, information regarding shares, financial reports, the General Assembly and other related matters can be obtained from the Department through the contact information provided below. Phone: / Fax: Website:

42 40 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION INVESTOR RELATIONS AND STOCK PERFORMANCE TAV received five awards at Turkey Investor Relations Awards. Thomson Reuters and Acclaro / May 2010 Best Investor Relations CEO, Best Investor Relations CFO, Best Investor Relations Officer, Best Investor Relations Website and Best Investor Relations Team at the Turkey Investor Relations Awards 2010 organized jointly by Thomson Reuters and Acclaro in Turkey. TKYD / January 2011 In the Corporate Governance Awards Ceremony organized for the first time by the Corporate Governance Association of Turkey (TKYD), TAV Airports received prizes in the categories of Company with the Highest Corporate Governance Rating Score and Company with the Highest Board of Directors Score. Mercury / February 2011 TAV Airports Annual Report 2009 received a Silver award for its content and design at the 24 th International Mercury Awards in the category of Annual Reports/ Overall Presentation that is organized to promote excellence in public relations and corporate communications. League of American Communication Professionals (LACP) / March 2011 TAV Airports Annual Report 2009 ranked 10 th among 50 annual reports in the 2009/10 Vision Awards held by the League of American Communication Professionals and received a Platinum award for its content and design in the category of Annual Reports / Overall Presentation. World Finance / March 2011 TAV Airports was designated by the World Finance Magazine as the company with the Best Corporate Governance in Turkey. Interactive Media Awards (IMA) / March 2011 The Investor Relations Website received the IMA Outstanding Achievement Award in the Transportation & Investor Relations categories.

43 41 TAV AIrports HoldIng Annual Report Relative Maximum Market Capitalization: Price (USD) USD 2,626 million Minimum Market Capitalization: USD 402 million Source: ISE TAVHL (USD) Relative to ISE Millions (Number of Shares) % Source: Central Registry Agency (CRA). % Held by Foreign Investors Total Float

44 42 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION RISK MANAGEMENT TAV is one of the first Turkish companies to launch the Enterprise Risk Management (ERM) practice. Enterprise Risk Management In 2010, TAV Airports completed the project to form its Enterprise Risk Management (ERM) structure, which was launched in December Under this structure, ERM commenced operation as a Coordination Department that reports directly to the Finance Director, while the CEO was designated as the ultimate responsible authority for ERM at the Holding. The new draft Turkish Commercial Code has been completed, and is expected to take effect in Well aware that public companies will be required to establish risk monitoring committees on the level of Board of Directors, TAV completed the necessary preparation and structuring for monitoring risks and reporting them to the management prior to this legal obligation, thus demonstrating the importance that it attaches to its shareholders and the share value. As a result of the ERM project undertaken with the assistance of an independent audit company, TAV Airports identified 269 risks which might arise from the activities of the companies and subsidiaries under the Holding umbrella. Following the assessment of these risks by executives, around 60 risks were deemed necessary for monitoring by the senior management and were reported to the CEO and to the Board of Directors. The risk inventory will be revised on an annual basis in the coming period and the reports will be updated. After the ERM structuring is completed in all Group companies, the Holding will launch the Control Self-Assessment (CSA) initiative, which encompasses the analysis of operational processes, testing and evaluation of the functioning of the current controls in the process flows by the authorized employees, and the improvement and redesign of the controls according to the results. As a result, the relation between macro level risks and operational process risks will be revealed and the error and loss rates in the processes will be minimized. The Holding s Internal Audit function will increase its productivity and effectiveness thanks to the reports that will be generated as a result of this initiative. Enterprise Risk Management Approach and Risk Assessment Method The Holding s risk management approach can be defined as integrated risk management. Under the coordination of TAV Airports ERM Department, all Group companies and operations are encompassed by this risk management approach. In contrast to the conventional risk management method, which evaluates the risks in various business units separately; the Holding aims to implement a risk management which can oversee the general risks of the Company, puts the general interest of the Company before that of the business unit the risk is stemming from, and functions in a continuous manner. At TAV Airports, risk management is synonymous with being able to visualize opportunities and threats at the same time, and to correctly determine the cost of it and accurately price it when taking a risk. The Holding evaluates risks according to two criteria, that is, by posing the following questions: What is the probability or the frequency of materialization of a risk? What would be the impact if it materializes? The Holding classifies risks under the categories of strategic, financial, operational and legal/compliance and assesses the impact of the risk not only in financial terms, but also along the dimensions of service continuity, prestige, loss of customers and legal/regulatory effect. The Holding determines the methodology, while the executive or the business unit that carries the risk undertakes self-assessment. If, as a result of this assessment, a certain risk is deemed

45 43 TAV AIrports HoldIng Annual Report 2010 Prioritization Identification & Measurement CONTINUITY Identification & Measurement Prioritization Corporate Performance Action HOLDING ERM Risk Reduction TERMINAL ENTERPRISES & SERVICE COMPANIES Action Monitoring & Reporting Efficient Use of Resources Monitoring & Reporting to be higher than the targeted level despite allocated resources and managerial capabilities, the department carrying the risk determines an action plan and designates a deadline and an officer to bring the risk down to the targeted level. The Legal Framework for Enterprise Risk Management The expansion of regulations and the increase in sanctions/obligations in response to the recent global economic crises pushed the financial institutions, which have pioneered in this field due to the very nature of their business, as well as real sector companies to adopt enterprise risk management practices at a greater scope. The draft Turkish Commercial Code approved by the Turkish Grand National Assembly in early 2011 requires companies, starting with publicly traded firms, to implement enterprise risk management functions and report the risks periodically to the management. However, unlike audit, risk management is not a regulated function yet. One reason for this is the fact that risk management is an unbounded issue that needs to be developed with the awareness of companies. Nevertheless, COSO (The Committee of Sponsoring Organizations of the Treadway Commission) and ISO attempt to offer a general framework of and establish standards for enterprise risk management. TAV s Main Distinction in Enterprise Risk Management TAV is among the first corporations to initiate ERM practices in Turkey and the key to its success in this area is the support of its senior management for the ERM structure. Since the structure is relatively new, it has not been assessed by an independent rating agency, and accordingly has yet to receive a certificate or a rating score. However, after the completion of the integration of the Holding s recent ERM system to Group companies and the completion of at least a full cycle, the Holding will make applications to be rated. It is predicted that an adequate rating score for the functioning of TAV s Enterprise Risk Management will naturally have a positive effect on its borrowing costs.

46 44 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION HUMAN RESOURCES TAV created new employment opportunities for a total of 8,049 people in TAV Airports has adopted principle of managing its human capital, the key to its success, in accordance with an equal opportunity principle at international standards, striving to become a company preferred by its employees. In addition, the Company embraced it as an indispensable component of its corporate governance approach to become a pioneer in the sector, in Turkey and in the world with its integrated human resources practices. At TAV, Human Resources Department plans its operations in parallel with the Holding s business strategies so as to provide strategic support to all departments in improving business results, to nourish and promote a high performance culture and to create value for all stakeholders. TAV s human capital strategy has been structured in accordance with a corporate learning approach. As a pioneer and leader of airport operations in Turkey, TAV Airports positions it as one of its main strategies to streamline the acquired information, experience and know-how, and to spread this across all levels of the Company. In order to standardize human resources practices across the Company and to ensure that overseas facilities are integrated with the TAV culture, critical processes such as orientation, performance management and employee satisfaction have begun to be implemented in the overseas facilities in Again in 2010, TAV Macedonia s Human Resources Department was established and efforts for the development of corporate processes were stepped up. TAV Airports shares its corporate vision, mission, values and ethical principles with the employees through classroom trainings as part of the orientation process, as well as other development programs, the corporate portal and internal publications. In 2010, Corporate Values training was launched across the Company with the participation of employees from all levels of the echelon so as to ensure the adoption of TAV values by all employees. Performance Management In the performance management process, the Company s and its departments annual strategic objectives and business plans are shared with the employees. The employees views on the objectives and the business plans are considered as valuable feedback by the management and are integrated into the system. Executives are responsible for tracking employees performance, assessing their competencies, identifying their strong traits and areas for improvement, improving the staff via training, applications, transfer of know-how and on-the-job training, as well as guiding and monitoring their development plans. In this respect, each department of TAV functions as a training and development center. The executives, who are in a sense development and training officers expected to set an example for their staff with their personality and knowledge, are supported via managerial skills trainings. Following the performance evaluation meetings, both the managers and the employees fill out a survey where they can share their views on the process. Focus on Employee Satisfaction At TAV, in addition to quality of service, the relationship between the managers and their staff, as well as the strong interaction between employee satisfaction and engagement have a crucial effect on customer loyalty and sustained profitability. Well aware that competitive edge and success stem largely from the human resources, TAV Airports takes heed of employees viewpoints. For this purpose, Employee Satisfaction, one of the major factors that affects employee motivation and performance, is measured and reported annually. Employee Satisfaction score increased by five points over the previous year to reach 86 out of 100 in The results were presented to the senior management in the form of detailed and comparative reports and were also shared with the employees via the corporate portal.

47 45 TAV AIrports HoldIng Annual Report 2010 In 2010 opinion-sharing meetings were launched in order to conduct face-to-face conversations with employees and learn about their satisfaction levels, career and development plans, opinions about and expectations from the Company and the human resources practices, and to get to know them better. Taking into consideration the suggestions for the improvement of the work environment, The Company constructed the TAV Administration Building that increases teamwork, cooperation and transparency, and the administrative staff moved into their new offices in Contribution to Employment In 2010, TAV created employment opportunities for a total of 8,049 people and offered 780 interns the chance to learn about professional life and gain experience. In its overseas investments, TAV Airports establishes organizations where, for the most part, the local population is employed in order to support the development of the local community. TAV operates 10 airports in four countries spread across a vast geography and employs people from numerous nations working in harmony on the basis of common values, ethical principles and mission. TAV also offers rich internship opportunities to ensure that students, who constitute the potential workforce of the future, learn about professional life and the aviation sector, assess themselves, and gain awareness on professional life and skills. To support the cooperation between the academic and business circles and to increase employment in the sector, priority is given to students from civil aviation departments of universities. The performance of interns is evaluated by the managers of the related departments and Human Resources Department and the ones deemed successful are offered positions at the Company. To this end, Professionals of the Future Internship Program was initiated in 2010 and the interns who completed the program successfully and embraced the corporate culture were invited to work at the Holding after their graduation. Training and Development Initiatives TAV Airports carries out its efforts to become the international aviation industry s company school with its corporate learning approach under the TAV Academy umbrella, which is the Company s corporate development center, and supports personal and professional development through comprehensive programs. TAV Academy supports the management with its international training experience by offering choices that meet the current and potential skills expected from the human resources. Areas of development identified by performance evaluation meetings and demands received during the year are analyzed by the TAV Academy and the development program catalogue is updated each year. Demands for training are received via information systems and participation is reported automatically. Between January and December of 2010, TAV Academy administered 409 days (379.5 days of which by TAV Academy instructors) of training on 92 different subjects with 7,975 participants. In 2010 a total of 406 employees from TAV Tunisie, TAV Macedonia and TAV Georgia participated in TAV Academy s Customer-Oriented Service, Performance Management and Intercultural Management Skills development programs that are conducted in order to integrate TAV corporate culture in the business conduct of the employees of TAV s overseas subsidiaries and to support their development. TAV Academy Becomes a Global Training Center Established in 1991 in order to organize programs and conferences across the world in line with the principle of

48 46 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION HUMAN RESOURCES A company whose intellectual capital inspires admiration in its sector contributing to excellent management and operation of airports, Airports Council International (ACI) Global Training Hub launched its 11 th global training center at the Istanbul Atatürk Airport. The collaboration between TAV Academy and ACI had started in March 2008 with the Aviation English Operational program, and became official with the Global Training Center cooperation agreement signed in September Up until now, a total of 166 Turkish and foreign aviation industry staff, most of whom are senior executives, participated in the programs administered jointly by the TAV Academy and the ACI. The choice of the uniquely positioned city of Istanbul as the new ACI development hub means that the ACI training of aviation industry employees especially from Europe, Asia, Middle East and North Africa will be hosted by TAV Airports and the TAV Academy. Corporate Mentoring Under the TAV Airports Corporate Mentoring Program that was designed within the framework of TAV s development and back-up plans in accordance with the corporate vision and strategic targets, senior executives and TAV Academy consultants mentor to a total of 46 employees consisting of mid-level managers and graduates of the Airport Operations Management Trainee Development Program. The program s objective is to transfer the corporate heritage, know-how and personal experiences to the high-potential, upwardbound managers and management trainees of TAV, to ensure the continuity of intellectual capital and corporate learning, and to support the professional career development of the employees. Number of Employees Average Tenure Tenure- Age Sex Marital Status Average Age Male % Female % Single % TAV Istanbul 2, TAV Esenboğa TAV Izmir TAV Tunisie TAV Gazipaşa TAV Georgia TAV Macedonia Havaş 9, ATÜ 1, BTA 1, TAV Holding TAV Operations Services TAV IT TAV Security TOTAL 18, Married %

49 47 TAV AIrports HoldIng Annual Report 2010

50 Airport Operations

51

52 Özlem Akşahin, Tav Istanbul, Executive Assistant

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54 52 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Istanbul Atatürk Airport Istanbul s gateway to the world International Terminal Expiration of operation January Passenger traffic 20,344, Commercial flight traffic 178,817 Domestic Terminal Expiration of operation January Passenger traffic 11,800, Commercial flight traffic 94,887 Total Traffic 2010 Passenger traffic 32,145, Commercial flight traffic 273,704 Source: State Airports Authority (DHMİ) Istanbul Atatürk Airport, which is the starting point of the Turkish aviation history, is not only the Turkish airport with the highest passenger traffic, but also one of Europe s most commended major airports. Also the first airport operated by TAV Airports, Istanbul Atatürk Airport represents Turkey s modern face. As one of the major metropolitan areas of the world, Istanbul attracts an increasing number of people due to its large population and high tourism and commercial potential. Consequently, it is an indispensable requirement to expand the Airport at the same rate while preserving its healthy, sustainable and high quality services. The Airport is also a center of attraction for transit flights. The Development and Expansion Project continues at full speed at the Airport s passenger terminals to respond to this soaring potential. Investments for a Sustainable Future Thanks to the project that entered 2010 in its final phase, the number of passenger bridges was increased from 9 to 12 at the Domestic Terminal, and from 23 to 26 at the International Terminal. The project yielded 18,770 square meters of additional indoor space. At the International Terminal, Remote-Bus lounges with four boarding gates were constructed for aircrafts that park in uncovered spaces. The current VIP lounge was modernized and expanded. 46 more rooms were added to the Airport Hotel s existing 85 rooms. In addition to the duty free and commercial areas, new CIP lounges ranging between 315 square meters and 500 square meters are being launched for the airlines that conveyed their need for them. In addition to the

55 53 TAV AIrports HoldIng Annual Report 2010 The improvement of the passenger terminals that was undertaken as part of the Development and Expansion Project initiated last year at the Istanbul Atatürk Airport is completed. Thanks to the project that entered 2010 in its final phase, the number of passenger bridges was increased from 9 to 12 at the Domestic Terminal, and from 23 to 26 at the International Terminal ,812,888 32,145, Total Passenger Traffic

56 54 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Istanbul Atatürk Airport Flights to 219 destinations from the International Terminal and to 38 destinations from the Domestic Terminal existing 7,076-vehicle multi-storey car park, 36 bus parks and a 161-vehicle VIP car park; a 1,034-vehicle, 28,300 square-meter outdoor car park was also put in service. Istanbul Atatürk Airport started to cater to eight more airlines in 2010; the International Terminal served 219 destinations and the Domestic Terminal served 38. Seven airlines that operate at the International Terminal increased their passenger traffic by more than 100%. The Baggage Handling System, one of the investments launched in 2010, features measures to facilitate baggage transfers. In order to offer an operational solution for the soaring baggage volume that grew by around 15-22% within the last two years, three new baggage transfer lines were added to the two existing lines. As a result, capacity increased by 200% while the capacity of the automatic baggage sorting unit rose by 88%. As part of the security investments, new EDS devices were installed on the itinerary of the baggage loaded at transfer lines for automatic sorting. Parking Area and Vehicle Capacity Indoor Car Park 180,000 m² 7,076 vehicles Outdoor Car Park 28,578 m² 1,034 vehicles Duty Free Area and Number of Stores Store Area 6,204 m² Number of Stores 25 Catering Area and Capacity Catering Areas 16,254 m² Number of Check-in Counters International Domestic Passport Counters Departures Floor Arrivals Floor Number of Bridges International Domestic Number of Bus Gates Departures Floor Arrivals Floor 16 8 Number and Specifications of Runways 17R/35L 3,000x45 m 05/23 2,600x60 m 17/35R 3,000X45 M

57 55 TAV AIrports HoldIng Annual Report 2010 Highly Commended Award, th European Route Development Forum, Routes The Best Airport Operator of the Year, 2010 Quality in Tourism-Skalite 2010 Awards Center of Attraction for Transit Flights, The 50 Best Travel Destinations Awards, Monocle Magazine The Second Best Airport of Southern Europe, 2009 Skytrax World Airport Awards Highly Commended Award, th World Route Development Forum, Routes Second Best Airport, Europe s Most Comfortable International Terminal, 2002 Deutsche Aeroconsult Engineering Academy Award, 2002 ACEC-American Council of Engineering Companies (TAV was the first Turkish company to receive this award.) Safest Airport in the Middle East and Balkans, 2001 USA Federal Aviation Administration (FAA)

58 Suna Gürer, Tav Security, Human Resources Supervisor

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60 58 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Ankara Esenboğa aırport Turkey s protocol and diplomacy gateway International Terminal Expiration of operation May Passenger traffic 1,325, Commercial flight traffic 11,742 Domestic Terminal Expiration of operation May Passenger traffic 6,433, Commercial flight traffic 51,643 Total Traffic 2010 Passenger traffic 7,759, Commercial flight traffic 63,385 Having achieved an exemplary accomplishment in its sector with Istanbul Atatürk Airport, TAV applied its experience in airport operation to the the Ankara Esenboğa Airport in The Airport commenced operation one year before the set deadline and it has now become the new and modern face of Ankara thanks to its unique architectural design. Designated Best Airport in 2009 by ACI Europe, Ankara Esenboğa Airport also has a strategic significance as Turkey s protocol and diplomacy gateway. Fast and Effective Operations, Impeccable Security Ankara Esenboğa Airport also has the distinction of being the only airport in Turkey to combine domestic and international terminals under a single roof. Its architectural characteristics shorten the distances covered by passengers and facilitate very fast and effective operations at the Airport. Ankara Esenboğa Airport has a total terminal area of 182 thousand square meters and is equipped with the latest technological security systems, such that each baggage loaded on the aircraft is scanned by the Explosive Detection System (EDS) and goes through a very extensive security check. In 2010, Ankara Esenboğa Airport catered to 32 airlines. The International Terminal hosted flights to 43 destinations and the Domestic Terminal to 30 destinations. ACI Europe, 2009 Best Airport Source: State Airports Authority (DHMİ) With the objective of becoming a hub in the Middle East and Eastern Europe, the Airport continues efforts to increase the number of flights, particularly international routes. Providing information to all state and private companies in the city about developments in direct flights, TAV shares the rapid progress of the Airport with all residents of Ankara.

61 59 TAV AIrports HoldIng Annual Report 2010 Considered to be one of the most modern and secure airports in Europe, Ankara Esenboğa Airport strives to become a hub in the Middle East and Eastern Europe. Ankara Esenboğa Airport also has a strategic significance as Turkey s protocol and diplomacy gateway ,084,404 7,759, Total Passenger Traffic Parking Area and Vehicle Capacity car park 108,000 m² 4,069 vehicles Duty Free Area and Number of Stores Store Area 2,387 m² Number of Stores 7 Catering Area and Capacity Catering Area 5,200 m² Passport Counters Departures Floor Arrivals Floor Number of Bridges 18 Number of Bus Gates 10 Number and Specifications of Runways 2 2RWY runways 03/21 3,750x45, 3,750x60 m Number of Check-in Counters International Domestic In addition, the Airport has two large-scale baggage counters.

62 60 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Izmir Adnan Menderes Airport The gateway to the Aegean... International Terminal Expiration of operation January Passenger traffic 2,127, Commercial flight traffic 16,149 Parking Area and Vehicle Capacity Indoor Car Park 69,168 m² 2,237 vehicles Duty Free Area and Number of Stores Store Area 2,403 m² Number of Stores 11 Catering Area and Capacity Catering Area 6,119 m² Number of Check-in Counters 66 Passport Counters Departures Floor Arrivals Floor Number of Bridges 9 Number of Bus Gates 8 Number and Specifications of Runways 34R 16L 3,240x45 m 34L 16R 3,240x45 m Boasting great tourism potential together with its hinterland, Izmir is Turkey s third largest city, well-known for its natural beauty and modern disposition. Izmir also stands out as the commercial and artistic hub of the Aegean Region. Completed by TAV Airports eight months ahead of schedule, Izmir Adnan Menderes Airport s International Terminal commenced service on September 13, TAV constructed this new Terminal that was needed desperately by the tourism sector on a 118 thousand square-meter lot. TAV also assumed the operation of the Terminal in order to provide impeccable services in a safe and exquisite environment, and as such makes diligent efforts to solidify the well-earned image of this city, also known as the Aegean Region s gateway to the world. Soaring Passenger Traffic The International Terminal, which serves 69 airlines, hosted flights to a total of 88 destinations in The total passenger traffic and number of flights rose well above expectations. In parallel with the rising passenger numbers, aviation income and non-aviation income both increased significantly. Despite the spike in operational traffic, effective use of resources translated into an increase in customer satisfaction, and the targets set for 2010 were exceeded. The double-digit growth in passenger traffic in 2010 signified an important step forward on the path to transforming Izmir Adnan Menderes Airport into the hub of the Aegean. The Holding continues to increase its flight connections by adding new airlines. Source: State Airports Authority (DHMİ)

63 61 TAV AIrports HoldIng Annual Report 2010 The double-digit growth in passenger traffic in 2010 signified an important step forward on the path to transforming Izmir Adnan Menderes Airport into the hub of the Aegean. The International Terminal, which serves 69 airlines, hosted flights to a total of 88 destinations in ,667,455 2,127, Total Passenger Traffic ACI Europe, 2010 ACI Eco-Innovation Award Doha Aviation Summit, 2009 The Most Environmentally- Friendly Airport of the Year European Steel Design Award, 2007 European Steel Design Award Turkish Construction and Steelwork Association (TUCSA) Izmir Adnan Menderes Airport International Terminal and Car Park project won first place among implemented structures. Aegean Region Chamber of Industry (EBSO), 2008 Special Environmental Award Aegean Region Chamber of Industry (EBSO), 2009 Special Jury Award

64 Tahsin Atalar, Tav Istanbul, BHS Maintenance Technician

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66 64 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Antalya Gazipaşa Airport A boutique airport at the heart of the tourism region Expiration of operation July 2034 Distance between antalya Gazipaşa Airport and some major tourist destinations (km) Alanya 40 Anamur 80 Manavgat 95 Side 105 Beldibi 135 Silifke 140 Serik/Belek 143 Kundu 170 Kemer 219 Kumluca 269 TAV Airports was awarded the tender for the operation of the Antalya Gazipaşa Airport, located in the Gazipaşa municipality of Antalya, considered to be the tourism capital of Turkey, in August TAV Airports retains the right to operate this facility for 25 years pursuant to the contract signed on January 4, The Airport aims to serve the area s great tourism potential, especially from Eastern Europe and the Commonwealth of Independent States. Gazipaşa is a center of attraction where many foreigners buy real estate and is preferred particularly by German tourists. The Airport is an important air transport hub for the tourism region that encompasses districts on the eastern side of Antalya, including Alanya. An international boutique airport with 2,144 square meters of terminal usage area, the Antalya Gazipaşa Airport became the new transportation hub of the Eastern Mediterranean, with an annual capacity of 500,000 passengers thanks to its existing infrastructure. The runway of the airport was expanded from 1,825 meters to 2,000 meters thanks to the diligent efforts of TAV Airports. Antalya Gazipaşa Airport also counts a 136x76 meter apron space, which covers 14,200 square meters and has the capacity to accommodate three aircrafts simultaneously. Antalya Gazipaşa Airport also has a 150-vehicle car park. Antalya Gazipaşa Airport, a significant step in the Company s objective of continuous growth and expansion, is the first domestic airport that TAV Airports will be operating in its entirety, except for air traffic control services. TAV Airports is applying its experience and expertise in airport operations gained from the Antalya Gazipaşa Airport toward building and improving boutique airports in Turkey and in the surrounding region, and to create new international flight destinations. By expanding the existing runway, the Company is aiming to transform the Antalya Gazipaşa Airport, where commercial flights began in July 2009, into an international hub serving Alanya and the surrounding region.

67 65 TAV AIrports HoldIng Annual Report 2010 Parking Area and Vehicle Capacity Car Park 4,400 m² 150 vehicles Duty Free Area and Number of Stores Store Area 94 m² Number of Stores 2 Catering Area and Capacity Catering Area 57 m² Number of Check-in Counters 8 Passport Counters Departures Terminals Arrivals Terminals 2 3 Departures Gates Arrivals Gates 1 1 Number and Specifications of Runways PCN 77/R/X/T 2,000 x 30 m

68 66 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Georgia, Tbilisi Airport TAV s first project outside of Turkey Expiration of operation February Passenger traffic 821, Commercial flight traffic 16,470 Emerging Markets Airport Awards, 2010 The best airport in the region of Russia, The Caucasus, Eastern Europe and Baltic States Operated by TAV Urban Georgia LLC. (TAV Georgia) since October 31, 2005, after the construction of the new passenger terminal which commenced operations on February 7, 2007, Tbilisi International Airport was improved to a level that represents the strategic significance of Georgia. The Tbilisi International Airport is not only the main entry and exit point of the capital, a city of 1.5 million people, but of the country as a whole. Tbilisi International Airport is also the Holding s first project abroad. The Tbilisi International Airport Terminal is a product of contemporary and functional design and is equipped with advanced technology; the terminal was designed to provide the best route for passengers and their baggage from the parking lot to the departure gates. In addition, its flexible architectural structure allows for expansion in the future without interrupting the existing operations. With its functional, contemporary spaces, the terminal building is equipped with the most advanced systems, with a special focus on passenger comfort and efficiency of terminal operations. The Tbilisi International Airport provides safe landing, takeoff and maneuvering space for aircraft with an expanded runway and recently built apron areas and taxi routes. At the Tbilisi International Airport, where TAV Airports applied its experience in the aviation sector to boost the development of Georgia s civil aviation sector and to contribute to the Georgian economy; all operations inside and outside the terminal, ground handling services, operations and maintenance services, duty free as well as regular retail shops and catering services, are administered by TAV Airports with a comprehensive and integrated approach. Note: TAV Airports has concluded an agreement to increase its shareholding to 76% on March 25, 2011.

69 67 TAV AIrports HoldIng Annual Report 2010 At the Tbilisi International Airport, where TAV Airports boosted the development of Georgia s civil aviation sector and contributed to the Georgian economy; all operations inside and outside the terminal, ground handling services, operations and maintenance services, duty free as well as regular retail shops and catering services, are administered by TAV Airports with a comprehensive and integrated approach , , Tbilisi Airport Total Passenger Traffic Parking Area and Vehicle Capacity car park 750 m² 370 vehicles Duty Free Area and Number of Stores Store Area 294 m² Number of Stores 3 Catering Area and Capacity Catering AreA 1,100 m² Number of Check-in Counters 24 Passport Counters Departures Floor Arrivals Floor Number of Bridges 3 Number of Bus Gates 4 CIP Area Arrivals-Departure 488 m 2 Number and Specifications of Runways 13R / 31L 3,000x45 m

70 Yasemin Enç, Tav Airports, Executive Assistant

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72 70 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Georgia, Batumi Airport Our gateway to the Black Sea and the Caucasus Expiration of operation August Passenger traffic 88, Commercial flight traffic 2,276 Parking Area and Vehicle Capacity 100 vehicles Duty Free Area and Number of Stores store area 64 m² Number of Stores 1 Catering Area and Capacity Catering Area 65 m² Number of Check-in Counters 6 Passport Counter Departures Floor Arrivals Floor 4 4 Number of Bus Gates 4 Number and Specifications of Runways 13/31 2,500x45 m The Batumi International Airport, too, has been operated by TAV Airports since The Airport is located in Batumi, the major tourism hotspot of Georgia thanks to its stunning beauty and five-star hotels. Breaking new ground in the region, the Batumi International Airport is an airport used jointly by Turkey and Georgia. This cooperation plays a significant role in the development of the region, as well as reinforcing strong ties between the two countries. Operated by TAV Batumi Operations, LLC (TAV Batumi), with its new runway, taxi route, apron and terminal building; the Batumi International Airport caters to passengers needs with advanced technology and functional design. The Airport s flexibility allows for the future expansion to accommodate anticipated growth in passenger traffic. In 2010, the IT investment to upgrade the Airport s check-in system was completed, as a result of which it became possible to undertake faster and healthier operations in the face of soaring passenger traffic. Record Increase in Passenger Traffic In 2010, the domestic flight traffic in Georgia increased due to the establishment of a new national airline company. Direct flights between Russia and Georgia, interrupted due to the 2008 war between the two nations, resumed as of June In the final quarter of 2010, three more airlines added Tbilisi to their flight destinations. Source: Civil Aviation Administration of Georgia Note: TAV Airports has concluded an agreement to increase its shareholding to 76% on March 25, 2011.

73 71 TAV AIrports HoldIng Annual Report 2010 Breaking new ground in the region, the Batumi International Airport is an airport used jointly by Turkey and Georgia. This cooperation plays a significant role in the development of the region, as well as reinforcing strong ties between the two countries ,282 88, batumı Airport Total Passenger Traffic As of year-end 2010, TAV Georgia serves 24 airlines scheduled flights. During the year, a total of 257 different airlines organized flights; 2 domestic and 26 international destinations were served with scheduled flights. Including chartered flights, the total number of destinations reached 222. TAV Batumi, on the other hand, served a total of 25 airlines that fly to one domestic destination and 62 international destinations, four of which are scheduled flights. In order to respond to the traffic that continued its upward trend throughout 2010, TAV Georgia and TAV Batumi focused on employee training; the companies also took effective measures for occupational safety. Aiming to transform the Tbilisi Airport into a prominent hub in the Caucasus region, TAV Georgia also strives to increase its share of technical and cargo flight revenues in the short term.

74 72 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Tunisia, Monastir and Enfidha International Airports The secret paradises of the Mediterranean... Tunisia, Monastir International Airport Expiration of operation May 2047 Tunisia, Enfidha International Airport Expiration of operation May 2047 Monastir and Enfidha Total Traffic 2010 Passenger traffic 3,916, Commercial flight traffic 31,801 As one of the principal tourism destinations in North Africa, Tunisia ranks among the most preferred destinations in the Mediterranean thanks to its natural and cultural heritage. Throughout the public unrest of early 2011, the airspace of the Monastir and Enfidha Airports operated by TAV Tunisie SA remained open and no security problems occurred. With its vast experience in risk management, TAV Airports successfully managed this process and contributed to the safe evacuation of the tourists in the country. After the crisis ended, Tunisia reopened its doors to tourists and life returned to normal. High Potential for Passenger and Cargo Traffic TAV Airports holds the right of operation of the two Tunisian airports for 40 years. Except for air traffic control, all operations at the Monastir International Airport, which is located merely two hours away from many European capitals, are being administered by TAV Tunisie SA (TAV Tunisie), a wholly-owned subsidiary of TAV Airports. The Enfidha International Airport, on the other hand, is located 65 kilometers from the Monastir International Airport and has the potential to become one of the major air travel hubs in Africa and is a crucial facility for Tunisia s tourism industry due to its proximity to major tourist destinations. Source: Tunisian Civil Aviation and Airports Authority (OACA)

75 73 TAV AIrports HoldIng Annual Report 2010 In 2010, Monastir International Airport was designated Best Airport in Africa at the Emerging Market Airports Awards. With its 28 thousand square-meter terminal usage area, Monastir International Airport served over 63 airlines flying to 82 different destinations in ,781,256 3,916, Monastir and Enfidha International Airports Total passenger traffic Featuring a terminal usage area of 28 thousand square meters, Monastir International Airport served to over 63 airlines flying to 82 different destinations in The Enfidha International Airport, on the other hand, worked together with 38 airlines serving a total of 61 destinations, with its 90 thousand square meters of terminal usage area. In addition, TAV Tunisie reached agreements with many prominent airlines and tourism agencies of the region to increase the traffic at Enfidha. As a result of intensive marketing efforts, ground handling contracts were signed with nearly 30 airlines, and an agreement was reached with the world s leading cargo operator DHL for the operation of the cargo center at Enfidha. It is predicted that the deep sea port being constructed in the region will boost cargo traffic. Major investments of 2010 at Enfidha were the procurement of the equipment necessary to ensure highly secure and safe operations at international standards, and the commencement of the construction of the trigeneration system. On September 23, 2010, Enfidha International Airport received an airport certificate documenting its compliance with civil airport operation regulations. In addition, efforts were initiated to complete all infrastructure, systems and criteria required to obtain the ISO 9001 Quality Management System certification for both airports.

76 Suna Gürer, Tav Security, Human Resources Supervisor

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78 76 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Tunisia, Monastir and Enfidha International Airports Parking Area and Vehicle Capacity Enfidha car park 130,000 Monastır car park 13,077 Duty Free Area and Number of Stores Enfidha 1,930 m² / 6 stores Monastır 1,431 m² / 3 stores Catering Area and Capacity enfidha 9 sales points / 950 m² Monastır 7 sales points / 1,019 m² Number of Check-in Counters Enfidha Monastır Enfidha Passport Counters Departures Floor Arrivals Floor Monastir Passport Counters Departures Floor Arrivals Floor Enfidha Number of Bridges 18 Number of Bus Gates EnfIdha Monastır 3 12 Enfidha Number and Specifications of Runways PCN: 104 3,300 x 60 m; asphalt Monastir Number and Specifications of Runways PCN: 45 2,950 x 45 m; asphalt Awards Received by TAV Tunisie Airports Catering to Emerging Markets, Awards 2010 Monastir Airport, the Best Airport in Africa Africa Investor Infrastructure Awards, 2008 Developer of The Year Award: In the same context, TAV Tunisie SA was a finalist for the Public-Private Partnership of the Year category, and TAV Airports was a finalist in the Sponsor of the Year category. Euromoney Project Finance Magazine, 2008 Deal of the Year Project Finance of the Year award

79 77 TAV AIrports HoldIng Annual Report 2010

80 78 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Macedonia, Skopje and Ohrid Airports Gateways from the Balkans into the European Union Macedonia, Skopje Airport 2010 Passenger traffic 681, Commercial flight traffic 12,161 Macedonia, Ohrid Airport 2010 Passenger traffic 43, Commercial flight traffic 637 Taking an important step in its target region of Europe, TAV Airports assumed for a period of 20 years the operation of two international airports located in Macedonia, a country expected to join the European Union in the near future whose citizens can already travel to the European Union without the Schengen Visa. Consequently, the Holding attained its target of 10 airports in 10 years. The airports are located in the two most important transportation hubs of the country; namely Skopje which has deep historical connections with Turkey and stills harbors large populations of Turks and Albanians, as well as Ohrid, a city on the Mediterranean. Ongoing Improvement and Development Investments TAV Airports assumed the operation of the Alexander the Great Airport in Macedonia s capital Skopje, along with Ohrid St. Paul the Apostle International Airport, on March 1, 2010, and kick started investments to improve and expand the airports. TAV Macedonia DOOEL plans to increase Source: TAV Macedonia the passenger traffic and service quality of the facilities with the completion of the modernization and technical infrastructure works, and has already made great accomplishments in its short period of operation. ATÜ and BTA completely renovated the restaurants and shops that they took over and increased product diversity, whereas revenue was augmented significantly with the expansion of advertisement spaces and the organization of the car park services. In line with the objective of increasing the number of flights of the existing airlines catered to and getting new airlines to launch service, Bora Jet started to offer flights from Bursa to Skopje. An agreement was reached with Corendon Airlines to begin flights between Amsterdam and Ohrid as of the summer of As of year-end 2010, 11 airlines offer scheduled flights and seven airlines offer chartered flights from Alexander the Great Airport. Ohrid is also the location of Lake Ohrid, considered to be one of Europe s oldest lakes and declared a World Heritage site by UNESCO. From Ohrid s St. Paul the Apostle Airport, three airlines offer scheduled flights and 12 airlines offer chartered flights. While In 2010, three new airlines started flights, there are regular flights to 14 destinations from Skopje and to three destinations from Ohrid. TAV set out with the objective of making Skopje one of the prominent hubs in the Balkans. After the completion of the buildings included in the investment projects, TAV plans to conduct its operations from these buildings, which are equipped with modern infrastructures, by March 2011 in Ohrid, and by the last quarter of 2011 in Skopje.

81 79 TAV AIrports HoldIng Annual Report 2010 By assuming the operation of two international airports in Macedonia for twenty years, TAV Airports attained its target 10 airports in 10 years. The airports are located in the two most important transportation hubs of the country; namely Skopje which has deep historical connections with Turkey, and Ohrid, a city on the Mediterranean , , Skopje and Ohrid Airports Total Passenger Traffic Parking Area and Vehicle Capacity Skopje car park 334 vehicles Ohrid car park 230 vehicles / 11,000 m² Duty Free Area and Number of Stores Skopje 90 m² / 2 stores Ohrid 20 m² / 1 stores Catering Area and Capacity Skopje 350 m² Ohrid 90 m² Number of Check-in Counters Skopje ohrid 8 4 Skopje Passport Counters Departures Floor Arrivals Floor 4 4 Ohrid Passport Counters Departures Floor Arrivals Floor 3 3 Number of Bus Gates Skopje ohrid 2 2 Skopje Number and Specifications of Runways Code E / ILS CAT I 2,450 m Ohrid Number and Specifications of Runways Code E / ILS CAT I 2,550 m

82 Yasemin Enç, Tav Airports, Executive Assistant

83

84 Service Companies

85 TAV HAVALİMANLARI HOLDİNG 2010 FAALİYET RAPORU

86

87 Özlem Gümüş, Havaş, Passenger Services Officer

88 86 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Ground Handling servıces Havaş The unrivaled leader in ground handling Havaş Revenue million EBITDA 25.5 million Number of flights served 108,796 TAV s Ownership share 65% Havaş, Turkey s leading ground handling company, offers world-class services with its extensive equipment assets and technological infrastructure. Havaş is organized to meet all airport ground handling needs of its airline customers, and constantly improves its service quality and continues to grow in a healthy manner. Havaş, which has received many awards from the world s leading airline companies, is also Turkey s oldest ground handling company. Havaş is the continuation of the Ground Handling and Catering Company founded as a state enterprise in The catering services division was spun off as a separate company in 1987, whereas the ground handling services division continued its operations under the Havaş name as the most experienced ground handling services company in Turkey. Havaş provides passenger and baggage transactions, ramp, aircraft cleaning, load control and communications, cargo, flight operation, transportation, representation and monitoring services. In order to deliver better, higher quality and faster service to its customers, Havaş also provides import warehousing services. Its warehouse capacity is approximately 1,500 tons/day. Robust Corporate Culture, Successful Results Through its training policies that go beyond the minimum legal requirements, Havaş managed to make quality awareness an indispensable part of corporate culture. Its experienced staff and the synergy created with the TAV Group are the key factors distinguishing Havaş from its rivals. In 2010, Havaş catered to 200 airlines offering scheduled and chartered flights in a total of 22 airports. Havaş also signed agreements with 25 new airlines that recently entered the market and added British Airways and Aeroflot to its customer portfolio of its warehouse business. The Company provides passenger transportation services between the airport and the city center at the Istanbul Atatürk, Sabiha Gökçen, Ankara, Izmir, Antalya, Bodrum, Dalaman, Çorlu, Gaziantep, Hatay, Hopa, İzmit, Konya, Malatya, Trabzon, Samsun and Şanlıurfa airports, as well as parking services at the Bodrum Airport. Havaş has also been operating the Hopa Passenger Terminal since December The Hopa Terminal is connected to the Batumi International Airport, operated by TAV Airports, and provides an easy travel option to the Eastern Black Sea region due to its proximity to the area. Havaş prioritizes the environment in all of its operations and was designated Green Company by Directorate General of Civil Aviation (SHGM) on May 21, 2010 in recognition of its practices at the Milas Bodrum Airport. In mid-2010, Havaş launched efforts for the implementation of the Safety Management System. The planned system will function like a security manual against apron accidents and occupational accidents. The project is planned to be completed by March In addition, by year-end 2011 tractor and aircraft tractor

89 87 TAV AIrports HoldIng Annual Report 2010 Swiss International Air Lines, February and April 2010 Istanbul Station, Station of the Month Qatar Airways, August, September and October 2010 Istanbul Station, Best Station for 100% OTP SAS Scandinavian Airlines, Q Istanbul Station, Most Improved Station Delta Air Lines, Q1 and Q Istanbul Station, Safety and On Time Award in the Atlantic Region the Grand Slam Swiss International Air Lines, April and June 2009 Istanbul Station, STAR of the Month British Airways, 2008 Izmir Station, Most Improved Station Summer Bronze Award Austrian Airlines, 2008 Istanbul Station, Best Station, Short & Middle Range Flights British Airways, 2007 and 2008 summer seasons Izmir Station, First prize among countries served by British Airways SAS Norge Airlines, 2007 Excellence Award TÜV, 2004 The Best Quality Management in the World KLM Royal Dutch Airlines, 2004 Five Crown Award British Airways, 2004 One of Top Three Ground Handling Companies First Choice Air Lines, 2004 The World s Best Ground Handling Company (Havaş won the first prize with Dalaman Station and second prize with the Bodrum Station) First Choice Air Lines, 2003 The World s Best Ground Handling Company KLM Royal Dutch Airlines, 2002 Four Crown Award (the second best award of the airline) Privatization Administration of Turkey, 2000 Best Privatization Certificate

90

91 Mustafa Yolasığmaz, Tgs, Ramp Worker

92 90 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Ground Handling servıces Havaş simulators will be installed at the Istanbul and Antalya airports, where operations are busy. The simulators will allow tractor drivers to gain experience before starting to drive these vehicles in the apron. Havaş has also started a pilot practice for the transportation of passengers with disabilities in Certifications ISO 9001:2008 Quality Management System OHSAS 18001:2007 Occupational Health and Safety Management System ISO 14001:2004 Environmental Management System Subsidiaries Turkish Ground Services (TGS) Turkish Ground Services (TGS) was established by Turkish Airlines in order to organize and provide its ground handling services under a separate company. Havaş was awarded the tender, held on November 28, 2008, to select the ground handling services company to participate in this company and became a 50% shareholder. TGS commenced operation at Istanbul Atatürk, Ankara Esenboğa, Izmir Adnan Menderes, Antalya and Adana airports in January 2010, and at Sabiha Gökçen Airport as of July 9, TGS also provided services to airlines such as Turkish Airlines, AnadoluJet, Transavia, SKY and Moldovian Air in North Hub Services (NHS) Reaching an agreement with Baltic Aviation Systems, Havaş acquired a 50% ownership stake in North Hub Services (NHS), which was then a fully-owned subsidiary of BAS. Headquartered in Latvia s capital Riga, NHS began providing passenger services to Air Baltic flights on January 1, 2010; soon after the beginning of this partnership, Havaş was awarded the Ramp License tender and obtained the necessary authorization to offer ramp services at the Riga Airport. NHS started delivering ground handling services in Finland s capital Helsinki as of July 1, 2010; the Company also plans to launch operations in Sweden s capital Stockholm and in Gothenburg. Setting out to become the largest ground handling company in Northern Europe, NHS offers a diverse range of services including representation, management, supervision, passenger services and apron services. A member of the International Aviation Handlers Association (IAHA) and the IATA Ground Handling Council (IGHC), NHS operates with the mission of supporting the accomplishments of its clients by offering them ground handling services at high standards. In 2010, NHS rendered services to Air Baltic, Turkish Airlines, Transaero and Air Bulgaria in Riga and to Air Baltic, City Airline and Primera Air in Helsinki. Havaş continues to transfer its nearly 80 years of experience and know-how in ground handling to NHS and to fully support the rapidly-growing NHS. Cyprus Airport Services (CAS) Ltd. A 50%-50% partnership of Cyprus Turkish Airlines and Havaş, CAS has been providing ground handling services at the Ercan Airport since December TAV Gözen TAV Gözen was founded by Havaş, Gözen Aviation and Türkmen Aviation in June 2008 to provide hangar, technical support, staff recreation, and aircraft cleaning services to private jets in two hangars, hangars number 2 and 14, at apron A14 of the Istanbul Atatürk Airport. The Company, which is a 32.4%-owned subsidiary of Havaş, commenced operation in March 2009.

93 91 TAV AIrports HoldIng Annual Report 2010 Baiba Urtane North Hub Services (NHS), Business Lounge Executive TGS Revenue 39.8 million EBITDA (4.7) million Number of flights served 133,941 TAV s Ownership share 50% NHS Revenue 2.8 million EBITDA (0.2) million Number of flights served 26,322 TAV s Ownership share 50%

94 Neriman Aslan, AtÜ, Product Representative

95

96 94 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Duty Free ATÜ A philosophy of excellence in service across three continents Revenue 340 million EBITDA 30.7 million Number of Employees 1,205 TAV s Ownership share 50% Established as a joint venture of TAV Airports and Unifree, ATÜ began operating the duty free stores following the commencement of operation of Istanbul Atatürk Airport International Terminal. In 2006, when TAV Airports began operating the new international terminals of the Izmir Adnan Menderes and Ankara Esenboğa Airports, ATÜ added these two airports to its operations. ATÜ later commenced operation at the Tbilisi International Airport and then at the Batumi International Airport in Georgia in 2007, at the Enfidha Airport in Tunisia in 2009, and at the Skopje and Ohrid Airports in Macedonia in March ATÜ was also awarded the Riga tender in Latvia. The Company will finalize its efforts and begin delivering its services in a European Union member state in the near future. Creative Practices and Increasing Product Diversity at the Stores ATÜ, Turkey s largest operator of duty free stores, offers passengers the opportunity to shop for over 50 thousand products in 52 outlets from among the world s most famous brands at attractive prices in a total area of 13,000 square meters. In an effort to expand the reach of duty free services and provide ease of shopping for passengers, ATÜ also offers a pre-ordering service on its web site. With the launch of the TAV Passport card in 2010, ATÜ stores on the arrivals and departures floors of Istanbul, Ankara and Izmir airports started to offer special discounts and other payment advantages to cardholders. ATÜ made yet another breakthrough by opening land side stores in Macedonia, and also displays a high revenue performance in its shops at the Tbilisi and Batumi airports. Reinventing itself with each passing day and constantly increasing its product diversity in order to provide world-class service, ATÜ made renovations in its stores on the arrivals floor of the Istanbul Atatürk Airport

97 95 TAV AIrports HoldIng Annual Report 2010 in 2010 and opened its A3 store. New shops were also opened on the departures floor of the Airport. During the year, ATÜ started the use of mobile hand terminals to ensure flawless inventory management in the stores. The Company launched the LTC+ Project, a sales staff system devised by Gebr. Heinemann and implemented in all of its large outlets, which resulted in increased efficiency. ATÜ continues to undertake comprehensive training projects for its employees. ATÜ s renewed arrivals floor premium shop concept at the Istanbul Atatürk Airport was designated The Special Concept of the Year by Frontier, the respected global duty free industry magazine. Dubai, Larnaca, Paris Orly, London Heathrow, Hawaii, Bali, Miami and New York airports competed at the Frontier Awards, which are referred widely to as Duty Free Oscars. Certifications TÜV Rheinland International Standards Certification and Audits ISO 9001:2008 Quality Management System Airports Served by ATÜ Duty Free Area (m 2 ) Istanbul Atatürk Airport 6,030 Ankara Esenboğa Airport 2,311 Izmir Adnan Menderes Airport 2,353 Tbilisi Airport 294 Batumi Airport 67 Enfidha Airport 1,564 Skopje Airport 104 Ohrid Airport 44

98

99 Öner Erdoğan, Bta, Waiter

100 98 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION food & beverage Services BTA The perfect blend of flavor, quality and rigor Revenue 75.0 million ebıtda 7.2 million number of employees 1,649 TAV s Ownership Share 67% Combining the diverse flavors of the world cuisines with the traditional Turkish hospitality, BTA offers passengers at TAV airports premium and healthy meals that conform to international food standards in accordance with its contemporary service approach based on comfort and safety. As of year-end 2010, BTA delivers services in 144 locations covering 33,000 square meters at the Istanbul Atatürk Airport, Izmir Adnan Menderes Airport International Terminal, Ankara Esenboğa Airport, Alanya Gazipaşa Airport, Georgia s Tbilisi and Batumi Airports, Tunisia s Monastir and Enfidha Airports and Macedonia s Skopje Alexander the Great Airport. Well aware that quality in food & beverage services depends on delicious food as well as hygienic conditions of preparation, and making the utmost effort in this sense since its inception; BTA offers its products and services with modern technology supervised by food engineers, and with well-trained personnel. At its main kitchen BTA utilizes the Cook and Chill technology, which allows the cooked meal to be rapidly chilled and stored to avoid bacteria growth and to deliver the same flavor and quality once reheated. On July 1, 2010 BTA took over from USAŞ the operation of the restaurant, café, kitchen and storage areas covering 1,388 square meters at the Istanbul Atatürk Airport Domestic Terminal and started to provide service at these locations. One of the facilities taken over from USAŞ, Liman Café, was renovated and its name changed to Kantin. Kantin is designed with a self-service outlet concept where quickly-prepared products are offered at convenient prices. As a result

101 99 TAV AIrports HoldIng Annual Report 2010 of the efforts to invite international brands to the Domestic Terminal of the Airport, Starbucks opened a store while agreements were signed for Burger King and Sbarro to open restaurants at the mezzanine floor. In order to compensate for the losses caused by the smoking ban, a smoking lounge was opened beyond the security check point. One outlet at Ankara Esenboğa Airport s Domestic Terminal changed its name to Tadında Anadolu and started offering Anatolian cuisine. Expanding Operations Map BTA has assumed the food & beverage operations at Latvia s Riga Airport as of January 1, 2011 for a period of ten years. One of the 2011 objectives of BTA is to undertake an extensive renovation of the Food Court area before the passport control at the Istanbul Atatürk Airport in order to be able to respond to the rising transit passenger traffic. This investment, the project and planning phases of which were conducted in 2010, is expected to be completed by the first quarter of In 2010 BTA received an award at Association for Popular Anatolian Cuisine s Ateşbaz-ı Veli Cuisine Awards, which brings together the best names of the gastronomic world to promote Turkish cuisine. BTA was acknowledged with this prize in the Kitchen Service Sector category for offering the leading cuisines from the seven regions of Anatolia with the concept of themed meals at the airports, which are the first places tourists set foot in Turkey. Sharing the extensive vision of TAV Airports, BTA expanded beyond the boundaries of the airports it caters in and is on its way to becoming an international brand in the catering sector. The most important steps in this direction are the ISO 9001:2000 Quality Management System certification, as well as the ISO 22000:Food Safety Management System certification, an indicator of 100% food safety and flawless food production in the food production sector; both of which BTA has obtained. Cakes&Bakes In recent years, Turkish consumers have been dining out more often, which has led world catering professionals to increase their presence in Turkey. Founded in 2006 by BTA to meet the need for companies that produce food at high standards, and arising as a direct consequence of recent developments; Cakes&Bakes is now a supplier to world-renowned fast food and coffee house chains. Initially established over an area of 2,500 square meters and producing 9 million products a year, Cake&Bakes now covers 4,500 square meters and is the main product supplier of many prominent brands in Turkey with an annual production volume of 18 million units. Cakes&Bakes also exports its products to the Middle East and the Arabian Peninsula. Producing bread, cakes, pastry products, sandwiches and salads; Cakes&Bakes supplies 200 stores of internationally known food and beverage chains throughout Turkey, as well as catering units and Cakes&Bakes cafés at airports operated by BTA.

102 100 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION food & beverage Services BTA Cannes Gala Dinner menu from BTA... International Airport Food and Beverage Conference (FAB 2010) organized by The Moodie Report in Manchester, 2010 BTA received the Best Supplier award for its Cakes&Bakes brand. Trade Leaders Club, 2007 BTA was acknowledged with the International Award for Tourist, Hotel and Catering Industry. 7 th Istanbul International Gastronomy Festival, 2009 The chefs of BTA and Cakes&Bakes won two gold, four silver and two merit awards. 62 nd Cannes Film Festival, 2009 At the 62 nd Cannes Film Festival, where Turkey was the guest country, the Gala Dinner menu was prepared by BTA, which was also in charge of the catering operations İş Bankası Millennium Lounge, operated by BTA, was designated The World s 10 th Best Lounge. 8 th Istanbul International Gastronomy Festival, 2010 The chefs of BTA and Cakes&Bakes won one gold, one silver, one bronze and two merit awards.

103 101 TAV AIrports HoldIng Annual Report 2010

104 102 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION food & beverage Services BTA Istanbul International Airport Hotel Airport hotels are designed to provide the fastest and most comfortable service to passengers. Like most of the leading airports in the world, Istanbul Atatürk Airport has an elegant hotel designed for the comfort and convenience of passengers. At the Airport Hotel, TAV Airports provides its customers with all the comforts of a home away from home. Operated by BTA, a TAV Airports service company, the Istanbul International Airport Hotel consists of an air side and a land side. With the expansion in 2010, the number of rooms at the Airport Hotel rose from 85 to rooms are located at the land side and 46 rooms at the air side. The rooms are designed to offer full comfort to passengers and feature monitors with flight details, music system, internet access and mini bars. Airport Hotel meets all the needs of businesspeople and companies including dinner and meeting organizations, thanks to its vast meeting area. Airport Hotel serves guests with Turkish hospitality, healthy products, high-quality service and a selection of delicious menus.

105 103 TAV AIrports HoldIng Annual Report 2010

106 Yunus Özcan, TAV Operations Services, Passport Card Operation Officer

107 Nilhan Kolay, Tav Operations Services, CIP Officer

108 106 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Other Services TAV operatıons servıces TAV s creative and innovative power Revenue 30.1 million EBITDA 4.5 million Number of Employees 253 TAV s Ownership Share 100% TAV Operations Services delivers many different valueadded services with a customer-oriented approach. TAV Operations Services undertakes innovative projects with its advanced technology and robust infrastructure. Since its establishment in 2004, the Company is in charge of non-aviation sources of income at all terminals operated by TAV Airports. As part of this responsibility, TAV Operations Services provides services such as commercial area allocation, leasing of advertisement and promotion areas, primeclass CIP Service, CIP Lounge operation, Havaş Tourism & Travel Agency and the management of The Gate magazine. Basing its business development efforts on a global perspective, TAV Operations Services operations map encompasses a wide region. Offering privileged services to the Istanbul Atatürk Airport, Ankara Esenboğa Airport, and Izmir Adnan Menderes Airport International Terminal passengers; TAV Operations Services also delivers 24/7 service with its specialist staff at Georgia s Tbilisi and Batumi Airports, Tunisia s Enfidha Airport and Macedonia s Skopje and Ohrid Airports. For a period of 10 years starting from January 1, 2011; TAV Operations Services has also assumed the operation of Latvia s Riga Airport s commercial areas including currency exchange offices, car rental services, banks, pharmacy and CIP Lounges. An Innovative Company Competent in Project Design These unprecedented services, used every year by millions of people visiting the airports, are a result of TAV Operations Services customer-oriented management approach, as well as the team spirit of the Company s young staff of highly qualified professionals. The key element of all implemented projects is the data obtained through know-how. Each new airport added to TAV Airports operation portfolio brings along innovative new approaches in terms of

109 107 TAV AIrports HoldIng Annual Report 2010 new customer profile analyses, propensities, needs and, consequently, non-aviation income. TAV Operations Services staff continues to attain successful results by assessing the data correctly and offering the right services in the right areas. TAV Passport Card Launched in July 2010, TAV Passport exceeded 1,000 members as of year-end Valid at all airports operated by TAV and based on annual membership, TAV Passport was unveiled following a very meticulous market survey and product development project. TAV Passport offers its guests complimentary parking and valet services, discounts in transfer services, complimentary lounge services, discounts in car rental, exclusive discounts and cash registers at duty free shops, discounts in accommodation at Istanbul Atatürk Airport s Airport Hotel and quick access to the customs area after entering the airport. Thanks to TAV Passport, TAV Operations Services plans to get a better understanding of the amount of time its customers spend at the airport as well as their traveling habits in order to devise products and services that will make traveling a more practical and stress-free experience for them in the future. Renting out Offices and Retail Stores TAV Operations Services allocates offices and retail stores to distinguished companies from Turkey, as well as from around the world, to cater to their needs at the airports. In the process, TAV Operations Services also allows passengers easy access to select retail outlets in many areas. Marketing of Advertisement Areas Geared towards Target Audiences Visited by tens of thousands of people daily, airports constitute a major channel for advertisement campaigns geared towards enhancing brand prestige. TAV Operations Services is in charge of marketing advertisement and promotion areas. Taking into account the circulation areas of passengers and visitors in the positioning of advertisement channels, TAV Operations Services chooses the best locations for effectively reaching target audiences. As a result of this detailed positioning process, companies choose many different areas at the airports TAV Operations Services operates in, in order to increase their brand recognition or inform passengers of new campaigns. The widely preferred areas for placing advertisements are check-in areas, catering areas, aircraft bridge zones, duty free areas, passport-baggage claim areas, meeting areas and parking lots. Tailor Made Solutions with primeclass CIP Service The primeclass CIP Service was designed by TAV Operations Services to deliver unlimited, high-quality service to passengers and to provide them with the utmost level of comfort and luxury. The primeclass CIP Service was launched to cater to the niche service demands of passengers after the Istanbul Atatürk Airport International Terminal commenced service as part of the TAV Airports family in Commencing operation towards the end of 2001, primeclass Service has been offering a world of privileged services to special clients of TAV Airports since then. Designed for busy, time-strapped passengers who seek comfort and stress-free travel; primeclass CIP Service saves time, simplifies all flight transactions, eliminates pre- and post-flight stress and provides luxury with services that make a difference. The primeclass CIP Service simplifies the lives of passengers, regardless of which airline they are flying with, before and after the flight, at every step of their way. Passengers who prefer the privileged world of primeclass CIP Service can relax away from the crowds in the primeclass lounges specially designed

110 108 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Other Services TAV Operations Services for comfort and quality at domestic and international terminals. Accompanied by a professional assistant at many points, primeclass CIP Service guests enjoy the privilege of being primeclass at every step of the way. Offered in two categories as Prime Pack and Prime Select, primeclass CIP Service currently caters to passengers at the Istanbul Atatürk and Ankara Esenboğa airports in Turkey, Tbilisi and Batumi International airports in Georgia, Enfidha Airport in Tunisia, and Alexander the Great Airport in Skopje. CIP Lounge Service primeclass CIP Service begins to operate exclusive passenger lounges at the airports for airlines, banks and other companies that choose to provide their clients with special facilities at the airports. As part of primeclass CIP Service, primeclass guests are provided with all sorts of luxury services including Internet access, television, daily newspapers, children s play rooms, diligently prepared buffet food service and showers. As of 2010, CIP Lounge serves clients at the Turkish Airlines domestic and international, Akbank Wings domestic and international, Garanti Zone domestic and international, Yapı Kredi World international, and primeclass international lounges at the Istanbul Atatürk Airport; Akbank Wings domestic lounge at the Ankara Esenboğa Airport; and primeclass international lounge at the Tbilisi and Batumi airports. CIP Lounges at Tunisia s Enfidha and Macedonia s Skopje and Ohrid airports have also started meeting the comfort and luxury needs of guests. Havaş Tourism & Travel Agency Founded with the assurance of TAV Operations Services under Havaş, the ground handling company with deep roots in Turkey, Havaş Tourism & Travel Agency provides services as a Class A travel agency. Combining the strength of its parent company, TAV Airports, with its own energy; Havaş Tourism & Travel Agency has become one of the best known brands in the tourism sector in short order. Thanks to this market position, the Company was admitted as a member of many domestic and international associations, including IATA, TÜRSAB, ASTA, MPI, UFTAA and SITE. Aiming primarily to provide special services to its clients and make them feel privileged, Havaş Tourism & Travel Agency accommodates all of its guests with excellent service in the trips that it plans and the organizations that it holds. Havaş Tourism & Travel Agency s greatest goal is to provide its clients with the value they deserve and become their first preference. Havaş Tourism & Travel Agency has become the unique solution partner for the tourism and travel operations of Turkey s major private sector companies. The Agency generates innovative, creative and out-of-the-ordinary services for its retail and corporate clients through seamless collaboration with many international tourism and travel companies. The Company meets every one of its clients needs with an extensive range of diverse and professional services including plane ticket and hotel reservations, private jet and helicopter rentals, airport transfers and car rentals, cruises, blue cruises, golf tourism, spa and wellness, honeymoon packages, gourmet tours, M.I.C.E. tourism, meetings, incentive, congress tourism and events. Among the nearly 60 events organized by the Agency in 2010, especially those for TÜBİTAK, ACI and GES attracted ample interest. As a result of diligent efforts throughout the year, the infrastructure of the online travel portal TAVPORT has reached its final phase. The Gate Airport Magazine Reaching almost everyone visiting TAV airports, The Gate is among Turkey s highest circulation magazines. A magazine that is making a difference with its distinguished readership, The Gate is also available to its readers on the Internet.

111 109 TAV AIrports HoldIng Annual Report 2010

112

113 Seda Osten, Tav Operations Services, Commercial Affairs Assistant Specialist

114 112 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Information Technology Services TAV IT The key factor underlying flawless operations Revenue 9.7 million EBITDA 1.5 million Number of Employees 126 TAV s Ownership Share 99% Founded in 2005, TAV IT underwent a restructuring in 2008 by adopting the ITIL framework of standards. Along with providing services for all the IT integrations required within airports, TAV IT also renders development and consulting services regarding other applications demanded by the TAV Airports. Creating turnkey solutions for airport systems, TAV IT delivers services for a wide range of processes from system design to installation and from setup to after-sales support. Ensuring the uninterrupted flow of services in all operations of TAV, with airports being the primary area of activity, through the 24/7 support approach, call center, maintenance and repair center, car park solutions, and process consulting and application support with regard to logistics and financial processes run by ERP, TAV IT plays a significant strategic role within TAV. In addition to the ongoing operations, TAV IT has completed 118 new projects in 2010 with the objective of reducing operational costs at the airports. Targeting Maximimum Operational Efficiency With its specialist staff, TAV IT strives to provide valuable services in airport management -a highly sophisticated sector that requires experience in operations- while reducing costs and enhancing service quality. Operational management is also simplified by minimizing personnel involvement in the transactions. TAV IT provides consulting, support and project management in financial affairs, logistics, human resources and financial reporting processes conducted within the companies under the TAV umbrella through the Oracle ERP system, which is used by the group affiliates as a means of corporate resource planning. By integrating the various processes run by Oracle, the business units are provided with access to the information stored in the common database. In addition to enhancing operational efficiency, this

115 113 TAV AIrports HoldIng Annual Report 2010 approach also forms an essential medium that enables fast, up-to-date and consistent financial reporting. TAV IT has accomplished a significant achievement in 2010 by winning three tenders, two in Turkey and one in Saudi Arabia. By launching the operation process of the Batman Airport, TAV IT has, for the first time, offered services at an airport not operated by TAV. Flight Information Display System (TAV FIDS), CCTV, Card Pass System, Fire Detection System, Central Announcement System, Central Time systems, and CUTE and BRS systems have been installed at the Batman Airport. TAV IT was awarded the tender for aviation systems of the KKIA and KFIA airports of Saudi Arabia, and the DHMİ tender for the aviation systems of the Erzincan Airport. TAV IT has redesigned its web site in 2010, thereby leading to a rise in the percentage of tender invitations issued through the company web site. With the virtualization technology, TAV IT has reduced the number of servers in use, which led to savings in the total amount of electrical energy needed to cool the servers. The Company intends to employ this technology for the new airports to be operated. TAV IT aims to expand its cost-effective and advanced technology solutions throughout the entire sector. Increasing the revenues through sales to non-affiliates of the TAV Airports, and reducing the IT expenditures of the TAV Group companies are also among the future objectives of TAV IT. With its specialist staff and flexible infrastructure, TAV IT creates software applications that can be customized to fulfill a wide range of requirements. Standing out amongst the competitors in the aviation sector with the highly sophisticated services it provides by employing the Flex technology, TAV IT offers great advantages to clients in terms of the price/performance criteria. Certifications ISO 9001:2008 Quality Management System

116 Seyhan Kahraman, Tav Security, Security Guard

117 Semra Hacı, Tav Security, Security Guard

118 116 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Private Security Services TAV Security World-class security services Revenue 8.6 million EBITDA 2.4 million Number of Employees 160 TAV s Ownership Share (*) 67% Operating primarily in the area of civil aviation security, TAV Security also provides project-based services for cargo security, physical security (store, facility, company) and authorized arms transportation to several companies outside of TAV Airports. Setting high standards, TAV Security operates in the civil aviation security business line in compliance with the principles stipulated by the National Civil Aviation Security Program, international standards/directives and Law No Regarding Private Security Services and the related Directive. Providing services in accordance with national and international security standards with its experienced and qualified staff, TAV Security combines the experience and know-how of the public sector with the advantages of the private sector. TAV Security staff consists of expert employees who are police and military retirees, as well as highly qualified civilians with international professional experience, trained in domestic and international programs in the civil aviation security area. Smart Solutions in Airport Security Developing smart solutions that achieve customer satisfaction without compromising security measures is of utmost importance for airports where there is a trade-off between convenience and security. TAV Security strives to provide modern and high-class security service while achieving the satisfaction of customers. In addition to developing rational solutions to facilitate the security control process not the favorite experience for the passengers-, the Company also conducts efforts to improve the positioning of the security control points, taking into consideration the elements of speed and comfort. Note: TAV Airports has concluded an agreement to increase its shareholding to 100% on March 25, 2011.

119 117 TAV AIrports HoldIng Annual Report 2010 TAV Security also takes an active role in the international investments of TAV Airports. All local legislations on security are analyzed to provide and sustain the appropriate conditions through all stages of the investment process, and effective measures are taken after the security risk analyses that evaluate all existing and potential threats. In addition to serving TAV Airports, the Company also provides physical security services and hotel security services for the Savings Deposit Insurance Fund (SDIF). Pursuant to Law No and the related Directive, TAV Security provides Private Security Training Services, thereby continuing to share its know-how as in previous years. Administering training activities for the Turkish State Airports Authority (DHMİ) personnel in 2010, TAV Security contributes to the sector by taking a role in the training of better equipped and more skilled staff, with the training modules it designs, its experienced team of instructors, and comprehensive and efficient training materials. In order to enhance its active role in security services industry, TAV Security also conducts business development and infrastructure activities regarding more specific areas of the sector. Evaluating new opportunities by feasibility studies and closely following the tenders, TAV Security attains healthy growth by developing itself with each passing day. TAV Security has completed its application process to the General Directorate of Civil Aviation (SHGM) to be awarded the Plane Private Security Service and Monitoring license within the scope of SHY-22. Activities in this area are envisioned to start in the first half of 2011, after the license is awarded.

120 118 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION MARKETING ACTIVITIES Effective marketing activities on an international scale Aviation Conferences In 2010, TAV continued to participate in aviation conferences where the players of the aviation industry such as airport operation companies, airlines and tour operators come together to create new business opportunities. Istanbul Atatürk Airport received the Highly Commended Award in the Southern Europe Region in the Europe Routes Development Forum held in May in Toulouse, France. The conferences attended throughout the year are as follows: ITB Tourism Fair - Berlin, Germany (March 2010) MITT Tourism Fair - Moscow, Russia (March 2010) Europe Routes Development Forum - Toulouse, France (May 2010) IATA Schedules Conference - Berlin, Germany (June 2010) World Routes Development Forum - Vancouver, Canada (September 2010) World Travel Market - London, UK (November 2010) German Tour Operators Conference - Agadir, Morocco (November 2010) Passenger Traffic Analyses - Forecasts TAV Marketing team regularly conducts potential route analyses for each airport in light of the airport traffic data. The analyses occupy a highly significant place in TAV s relationship with airlines. Sharing these analyses with airlines and tour operators, TAV Marketing has established communication with more than 100 airlines in 2010 to introduce flights on previously unserved routes. Evaluating the past traffic data, TAV Marketing regularly tracks the kinds of changes made at the airports on an airline basis. The periodic forecasts prepared for all airports are updated to include the new developments and are presented in the form of reports to the related units within TAV Airports. Communication with Airlines and Tour Operators TAV Marketing has started to prepare marketing catalogues in 2010 that highlight the distinctive features of all airports, their strong aspects and significant issues for the growth in passenger numbers, and shared these catalogues with various airlines and tour operators. TAV Marketing also initiated activities to prepare news bulletins to announce the developments at the airports on a regular basis. The first news bulletin was published in the final quarter of 2010 to cover the Enfidha Airport and was delivered to all airlines and tour operators TAV is in contact with. The Enfidha news bulletin will continue to be published quarterly. In 2010, TAV Marketing created profiles for all airports within TAV Airports to be posted on the Routeshop.com and Routesonline.com web sites, which are among the most visited and prominent aviation sites worldwide. Additionally, various posters and advertisements were prepared to be delivered at the conferences the Company attends and to be published in international magazines. Support for New Projects and Tenders TAV Marketing generates the traffic forecasts of the related airports for the tenders and projects participated by TAV Airports, in accordance with the process specifications. These traffic forecasts provide the data for the financial model, which is another stage of the tender process.

121 119 TAV AIrports HoldIng Annual Report 2010 Internal Audit Internal Audit to promote the efficient use of resources The TAV Internal Audit Directorate conducts periodic audits to monitor compliance with the Group Risk Policy at TAV Airports and its subsidiaries. The Internal Audit Directorate identifies and reports the deficiencies in risk management and governance processes, and the practices that are causing inefficiencies and waste of resources through internal audits and/or recommendations. Additionally, efforts are carried out to enhance organizational functionality and service quality. TAV Holding Internal Audit Directorate has successfully completed the Internal Audit Quality Assurance Review carried out by PwC. The audit report, dated February 14, 2009, verified the Unit s compliance with the International Internal Audit Standards and Ethical Principles. Thus, TAV Holding Internal Audit Directorate became the youngest unit to be qualified for this title. To enhance their knowledge, skills and competence, the members of the Audit team hold various certificates such as CISA, CIA, CFE, SMMM, CCSA, CFSA, CEH, ITIL V3 Foundation and initiatives in this area are carried out on an ongoing basis. The Internal Audit Directorate identifies the business units to be audited and conducts structural risk analysis for the Holding and its subsidiaries. Activities in 2010 Along with the process audits conducted in Turkey, branch audits were conducted in 2010 for locations outside Turkey and for companies with a low value of financial scope/turnover. Although TAV Airports operational structure remained unchanged in 2010, the scope of the audit activities expanded as the operation rights were obtained for Macedonia and Riga airports. Legal risks and regulatory risks also increased due to the compliance requirements the concession agreement and the laws and regulations of the related countries. No legislative amendments were effected during the year. 12 process audits, seven process consulting assignments and two company audits were conducted, and three special inspection reports were drafted. As a result of these efforts, the following areas were identified as needing improvement: Formulation of policies Raising control awareness Improvement of system-security controls For the areas of improvement identified in 2010, the security requirements of the systems were monitored and the required consulting services were provided within the scope of IT audits. Support has been provided for the units to form and improve Holding-wide policies, and efforts were carried out in collaboration with the units at the stage of mitigating identified issues in order to increase the effectiveness of the controls. The Internal Audit Directorate also administered training for executive candidates in order to raise control and risk awareness. Recommendations have been provided for the management to ensure that insurance and agreement processes operate adequately and effectively. In order to document all rules in writing and in an accessible format to all employees, the TAV Policies Handbook was published for the first time in 2010, ensuring that the management preferences of TAV Holding are uniformly comprehended and embraced by all employees.

122 120 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION SUSTAINABILITY AND THE ENVIRONMENT Mindful and intelligent use of limited natural resources The TAV Airports Sustainability Report uses the Global Reporting Initiative (GRI) standards as a reference for presenting its contents. The dynamic, or to be more exact, aerodynamic nature of aviation propels TAV Airports to adopt more effective and efficient risk management models that are strong in terms of sustainability. The Holding s main mission is to identify the economically, socially and environmentally positive and negative aspects of its activities. Climate change is a significant issue that shapes the environmental sustainability program of TAV. TAV also continues to pursue an aggressive yet stable growth strategy, which enables the Company to serve as a catalyst for robust economic growth on a local, regional and national scale. TAV operates with a particular focus on employee satisfaction and professional development of its staff. In summary, TAV Airports pays close attention to operating in transparency and being open to audits in all of its activities, in accordance with the principle of mutual respect and understanding with the groups it is part of and with its stakeholders. As part of its environmental vision, TAV Airports aims to identify the environmental impacts of its activities, and to eliminate or minimize these impacts in accordance with its sense of responsibility. All executives and employees of TAV Airports assume joint responsibility to ensure utmost compliance with national and international environmental laws and regulations and to attain the identified objectives. All business units are responsible for taking on and fulfilling the liabilities in their areas of operation. The objective of TAV Airports Environmental Policy is to promote the mindful and intelligent use of limited natural resources. Along with its environmental protection goals, TAV Airports also aims to protect public health through investments that improve quality of life and fulfills its responsibilities to leave a more habitable world behind for future generations. The Holding adopts an attitude of respect for the environment in accordance with its corporate principles, TAV performs its activities in line with international environmental standards. Istanbul Atatürk Airport Environmental investments at the Airport continued at full speed in Many new systems that conserve significant amounts of energy and water have been implemented. The comprehensive efforts to sort and recycle wastes also yielded fruitful results and the amount of recycled wastes reached a record-breaking level of 70 tons per month by the end of the year from nine tons per month at the beginning of the year. Participating in the Carbon Accreditation Program administered by the Airports Council International (ACI), the Airport attained the level 1 accreditation and was granted the Accreditation Certification. As a result of these efforts, TAV Istanbul became the first airport operator in Turkey to be designated as a Green Company as part of of the Green Airport project initiated by the General Directorate of Civil Aviation (SHGM). Ankara Esenboğa Airport The architectural features of the Airport allow natural daylight to reach every corner of the facility, which results in major energy conservation levels. At Ankara Esenboğa Aiport, the first airport in Turkey with a cogeneration system; electricity is generated from natural gas using the cogeneration plant while the heat captured by a waste heat recapture boiler is used for terminal air conditioning. These measures provide a 25% reduction in energy costs. Continuing its environmental investments in 2010, Ankara Esenboğa Airport participated in the Carbon Accreditation

123 121 TAV AIrports HoldIng Annual Report 2010 Program administered by the Airport Council International (ACI) and was awarded the Accreditation Certification. Izmir Adnan Menderes Airport As the first terminal in Turkey and the second one in Europe to be admitted to the Carbon Accreditation Program launched by the European Region of Airport Council International (ACI Europe) in 2009, Izmir Adnan Menderes Airport s International Terminal serves as a pioneering example for the environmental projects of other terminals operated by TAV Airports. As part of this program, all projects carried out by the Company to raise environmental awareness are documented and registered. Thanks to this project, the Company offsets its carbon emissions and contributes to the minimization of the global carbon dioxide level. TAV Izmir, which has an Environmental Management Plan that encompasses major environmental issues such as water quality, waste water discharge, waste management, green area landscaping, air quality and noise control; turned 150 tons of recycled waste into economically useful resources in Breaking new ground in Turkey with its Waste Management System, application pioneering practice in the country; TAV Izmir continues to win award after award thanks to its successful environment-friendly projects. TAV Georgia Having set the Environmental Management System, TAV Georgia also holds the ISO 14001:2004 certification. The Company, which also has the ISO 9001:2008 certification, regards environmental awareness as a priority in all of its business processes. TAV Tunisie Initiating a 4 MW natural gas-fired trigeneration plant investment to increase energy efficiency, TAV Tunisie also makes use of solar energy in all possible areas of the airports. The wastes are disposed of by a certified subcontractor while the Company heeds rational water consumption practices. Havaş Regarding environmental awareness as a priority in the entirety of its operations, Havaş was designated as a Green Company on May 21, 2010 by the General Directorate of Civil Aviation (SHGM) for its applications at the Milas Bodrum Airport. Stepping up its efforts to qualify the Dalaman, Adana and Antalya stations, respectively, for the same designation in the near future; Havaş pays special attention to selecting environment-friendly materials for its operations and has been purchasing battery electric vehicles for the last two years. The wastes are delivered to the certified institutions that are capable of performing the most efficient recycling operations; the Company has ongoing projects for using solar energy at the stations and verification of its operations for compliance with the ISO greenhouse gas standard in Having calculated the carbon footprint of its Shuttle Bus Operations, the Company accelerated its offsetting activities and planted 5,000 calabrian pines on a 5-hectare area in the town of Mazı in Bodrum, which suffered a major damage in TAV Operations Services Making significant progress toward obtaining the ISO 9001 certification in 2010, TAV Operations Services pays particular attention to using environmentallyfriendly products in its passenger transfer and lounge operation activities. Making investments to use electrical cars in passenger transfer services, TAV Operations Services regards environmental awareness as a priority in all of its activities.

124 122 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE SOCIAL RESPONSIBILITY (csr) Environmental, cultural and social investments continued in Supporting a Brighter Future Regarding social responsibility as an integral part of its management and business culture, TAV Airports puts its full support behind environmental, cultural and social development in order to contribute to a brighter future and to create lasting values for the society. TAV s corporate social responsibility approach consists of its commitments in the area of sustainable development. While it acts with the awareness of using the world s limited resources responsibly as well as protecting and developing them in all of its business processes, the Company plays an active role in social development with its social responsibility projects. TAV Airports investments in the area of social responsibility focus on projects that are sustainable, open to development and change, transparent and easy to comprehend and accepted internationally and that create value and provide guidance for the society, set an example, and promote the participation of volunteers. TAV Airports strives to support social responsibility projects in all areas. The Holding s priority will be the environment and education in TAV will also ensure the continuity of its projects in various branches of art. Over the medium-term, TAV Airports aims to launch projects geared toward its own industry, with a particular focus on the regions it operates in, via various social, environmental and economic sustainability practices. Projects Carried Out in 2010 Aviation Industry Pulsates at Istanbul Hosted by TAV Airports Representatives of the Airports Council International (ACI), which manages more than 96% of the global passenger traffic, met at the Airport Exchange 2010 that was held in Istanbul under the sponsorship of TAV Airports. As part of the Airport Exchange 2010, the leading figures in the industry participated in conferences organized under five main headings: Airport operations, Airport infrastructure and the environment, Economic regulations, Security, and Facilitating solutions in information technology and customer service. In addition to the conferences, 32 international organizations took part in the fair section with their stands. Airport sector executives also held their ACI Committee Meetings in Istanbul during this organization. Organized by the cooperation of ACI Europe and ACI Asia-Pacific, Airport Exchange 2010 was attended by around 800 aviation industry executives from round the world. Global Economic Symposium (GES) was Held in Istanbul Organized traditionally in Germany as an initiative of the Kiel Institute, the Global Economic Symposium was held at the Istanbul Congress Center between September 27 and 29, 2010, for the first time outside of Germany. Hosted by the Central Bank of Turkey and

125 123 TAV AIrports HoldIng Annual Report 2010 sponsored also by TAV Airports, the Global Economic Symposium s opening speech was delivered by Abdullah Gül, the President of Turkey. Major economic, political, social and environmental issues facing the world were analyzed in-depth during the course of the symposium; innovative strategies and solutions were put forth in order to create a common vision for the future and to achieve this vision. Politicians, corporate executives, academicians and non-governmental organizations from round the world attended the symposium. Global problems were identified and tangible solutions were advanced in the sessions. TAV Airports at AIREX 2010 International Civil Aviation and Airports Exhibition AIREX 2010, which is regarded as one of the leading global aviation organizations, was held at the General Aviation Apron at Istanbul Atatürk Airport under the main sponsorship of TAV Airports. Over 150 firms from 30 countries participated in AIREX At the event, Aircraft manufacturer Airbus presented its favorite new product A 380. A 380, which was parked at the General Aviation Apron at Istanbul Atatürk Airport, provided the visitors of Airex 2010 a chance to get a glimpse of the largest passenger aircraft in the world. TAV Airports Became an Airports Council International (ACI) Training Center Airports Council International (ACI), whose objectives include the development of airports on a global scale and raising their quality standards, has signed a Global Training Center agreement with TAV Airports. Under the agreement, ACI, which has more than 1,600 airports worldwide as its members, will be working in cooperation with the TAV Academy, a training institution owned by TAV Airports, in the training of aviation professionals. Sustainability Initiatives at TAV The applications of two subsidiaries of TAV Airports, TAV Istanbul (operator of the Istanbul Atatürk Airport) and TAV Esenboğa (operator of the Ankara Esenboğa Airport), were accepted for the Airport Carbon Accreditation program, which was initiated by Airports Council International (ACI) Europe, one of the most notable organizations in the world aviation sector, as part of the environmental awareness project. As a result of the efforts conducted within TAV Istanbul and TAV Esenboğa in order to obtain the Level 1 Airport Carbon Accreditation issued by the ACI, both TAV Istanbul and TAV Esenboğa qualified for the certification by reporting the source of their carbon dioxide emissions during this first Mapping stage of the Program. The Program provided a common framework for reporting and reducing carbon emissions from airport operations. For the first time, it sets standards for the reporting of carbon emissions according to a framework that is specifically adapted to the unique complexity of the airport sites. These standards are fully compatible with the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI) Greenhouse Gas Protocol Corporate Accounting and Reporting Standards. In the first level Airport Carbon Accreditation Program, which is comprised of four levels, the carbon dioxide emission levels of an organization or a company due to electricity, natural gas and fuel consumption are verified by internationally accepted institutions according to the internationally accepted standards.

126 124 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE SOCIAL RESPONSIBILITY TAV considers social responsibility as an integral part of its corporate culture. TAV Became the Activity Sponsor of the World Basketball Championship and the Sponsor of the Tunisia Basketball Team TAV Airports became the activity sponsor of the 2010 World Basketball Championship organized by FIBA from August 28 to September 12. As one of the main sponsors of the Tunisia Basketball Team, which participated in the championship for the first time, TAV Airports supported the Tunisia Basketball Team during their matches in Turkey, with contributions from the TAV family. Having undertaken and supported a wide range of social and cultural projects to this day, TAV Airports once again carried out a project in the social and cultural platform through these sponsorships it has assumed. TAV Gallery-Ankara Launched at TAV Esenboğa The TAV Gallery of TAV Airports, a culture and arts platform, opened at Ankara Esenboğa Airport as the second venue after the first one at the Istanbul Atatürk Airport. The opening ceremony of TAV Gallery- Ankara, which attracted great interest with its first exhibition Photographs of Esenboğa Airport from Past to Present, was honored with the participation of Esenboğa Airport Civilian Administration Manager Hayrettin Balcıoğlu, Turkish State Airports Authority (DHMİ) General Manager Orhan Birdal, Ankara Esenboğa Airport General Director Yılmaz Keleş and TAV Esenboğa General Manager Nuray Demirer. The Photographs of Esenboğa Airport from Past to Present exhibition aimed to tell the story of Ankara Esenboğa Airport in pictures, beginning with its opening in 1955 until the present. Composed of 68 photos, the exhibition was held in the TAV Gallery-Ankara located on the Ankara Esenboğa Airport Domestic Terminal Departures Floor and remained open to visitors for one month. Snapshots of Our Future Exhibition Brought Children Together at TAV Gallery-Istanbul At its art platform TAV Gallery-Istanbul, TAV Airports launched the exhibition titled Snapshot of Our Future, the theme for the Annual Report 2009, consisting of airport photographs taken by the children of TAV employees. Developed in conjunction with the Photography Department of Mimar Sinan University and displaying the airports through children s perspective, the Snapshots of Our Future exhibition was launched by Turkish State Airports Authority (DHMİ) General Manager Orhan Birdal, and TAV Airports President & CEO M. Sani Şener. Adopting a different branch of art as the theme in each of its Annual Reports, TAV Airports had chosen photography for the 2009 Annual Report after literature and music in previous years. As part of the project, children aged 7-12 carried out photography shootings at the airports; Istanbul Atatürk, Ankara Esenboğa, Izmir Adnan Menderes, Antalya Gazipaşa in Turkey, Enfidha and Monastir in Tunisia, and Skopje and Ohrid in Macedonia. Transformation of the Cocoon Showcases the Secret World of Butterflies at TAV Gallery TAV Gallery-Istanbul opened a window on the colorful world of butterflies with the Transformation of the Cocoon exhibition, the first butterfly collection exhibition held in Turkey. The exhibition, which represented Dr. Oktay Onaran s protest against the threat of extinction of different species of butterflies, consisted of over 100 different species of approximately 15 thousand butterflies. Lepidopterist Dr. Onaran aimed to support the efforts to help the butterflies struggle against extinction through his Transformation of the Cocoon exhibition, which brought together a variety of butterflies that had completed their life cycles.

127 125 TAV AIrports HoldIng Annual Report 2010 Sultans of Poetry Exhibition at TAV Gallery-Istanbul TAV Gallery-Istanbul held the Sultans of Poetry exhibition consisting of the poems written by the Ottoman sultans. The exhibition displayed the poetic works by 23 Ottoman sultans, including Sultan Selim I, Mehmet II and Yıldırım Bayezid, which depicted the events of their era. TAV Gallery-Istanbul Hosted Children from around the World TAV Gallery-Istanbul hosted the 8 th Turkish Olympiad Exhibition. Consisting of vibrant photographs taken during the Olympiads held in the previous years with the participation of 600 children from approximately 120 countries, the exhibition was opened at TAV Gallery with the performances staged by the child contestants of the Olympiads. Opening with folk dances native to seven regions throughout Turkey, the exhibition was colored with the recitation of poems and songs in Turkish by children from Mozambique, Northern Iraq and Moldova. Presidential Cycling Tour Photography Exhibition Opened at TAV Gallery-Istanbul TAV Gallery-Istanbul hosted the photography exhibition prepared by the Turkish Photojournalists Society to mark the 46 th Presidential Cycling Tour. 70 photographs taken during last year s tour by the Turkish Photojournalists Society (TFMD) members from several newspapers and agencies were displayed at the exhibition. Istanbul Photo Contest at TAV Gallery-Istanbul TAV Gallery-Istanbul displayed the photographs taken by foreign tourists who have visited Istanbul and entered the Istanbul Photo Contest. The exhibition hosted 70 works selected from the 1,500 applications made to the Istanbul Photo Contest held in Students Flied to Their Dreams by BTA BTA, a subsidiary food and beverage service company of TAV Airports, brought the students of Haluk Gökalp Kılınç Primary School from Elbistan s village of Kalealtı in Kahramanmaraş to Ankara in cooperation with Anadolujet as part of a social responsibility project. Coming to Ankara from Kahramanmaraş in two groups, the students visited the historical and cultural attractions of Ankara during their three-day visit. TAV Airports Supports garajistanbul s Alternative Approach to Art TAV Airports supports garajistanbul, a group formed by Övül and Mustafa Avkıran that strives for a distinct approach to the arts. The Avkıran brothers are also the founders of 5. Sokak Tiyatrosu (5 th Street Theatre), which is one of the first examples of modern performing arts in Turkey. As its first production, with the support of TAV Airports, garajistanbul staged the play A Trial in Istanbul, an adaptation of Kafka s famous novel The Trial. Continuing to showcase its distinct perspective to theatre enthusiasts in Istanbul, garajistanbul s subsequent plays, Ashura, Histanbul and And God Said were also met with great interest.

128 126 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT 1. Statement of Compliance with Corporate Governance Principles TAV Airports ( the Company ) makes every effort to comply with the Capital Markets Board s (CBM) Corporate Governance Principles ( Corporate Governance Principles ). To this end, the Company continually strives to achieve the highest corporate governance standards and is working diligently towards implementing some of the stipulations specified as recommendations in the Corporate Governance Principles. TAV Airports considers ethics rules, as well as principles of transparency, equality, responsibility and accountability, to be part of the Company s culture. The Company s efforts with respect to the Corporate Governance Principles are evaluated in the Corporate Governance Rating Report, prepared by RiskMetrics Group (ISS), an international corporate governance rating agency that is also licensed to conduct corporate governing rating activities in Turkey in accordance with the Capital Markets Boards Corporate Governance Principles. As a result of this report, the Company s Corporate Governance Rating Score, which was 83.3 (8.5) as of 2009 has been raised to (9.03) in 2010, taking into consideration the continual development and improvement of Company s activities since the previous rating, as well as the Company s great sensitivity and determination about corporate governance and its implementation. As part of its corporate governance rating process, ISS performed evaluations at the Company and conducted numerous interviews. The final rating score was calculated based on the respective weight coefficients of the four subcategories stipulated in the CMB s related principle resolution. Within this scope, the Company s Corporate Governance Ratings by subcategory are presented in the table below. The Company s information disclosure policy, which was formed in accordance with the Capital Markets Board s Corporate Governance Principles, was discussed and approved at the General Assembly Meeting dated May 24, The information disclosure policy was documented in writing and announced through the web site, ir.tav.aero An amendment was approved at the General Assembly Meeting held on May 24, 2010, changing the number of members required for the Board of Directors from 15 to at least 9. The requirement of incorporating at least 2 Independent Members in the Board of Directors, which is stipulated by the Company s Corporate Governance Principles, has already been fulfilled since the initial public offering. Thus, another step has been taken toward implementing the recommendation of constituting at least 1/3 of the Board of Directors from Independent Members. As of the reporting period ending December 31, 2010, the Company complies with and implements the Corporate Governance Principles, with the exception of matters stipulated in sections ( Using a cumulative voting system in the election of members of the Board of Directors ) and ( The number, structure and independence of the Board committees - committee chairmen are elected from among independent members of the Board of Directors ) of the Report. These aforementioned issues are not believed to cause any significant conflict of interest as of the present time. While the exercise of minority rights were made possible via the two independent members on the Company s Board of Directors, the Company will assess the advantages and disadvantages of using the cumulative voting system in the election of the members of the Board of Directors. The two independent members of the Board of Directors Subcategories Weight Score Rating Shareholders Public Disclosure and Transparency Stakeholders Board of Directors Total

129 127 TAV AIrports HoldIng Annual Report 2010 of the Company, Mehmet Cem Kozlu and Pierre de Champfleury, also serve as Corporate Governance Committee Chairman and Audit Committee Member, respectively. The Board of Directors, senior management and all employees of TAV Airports have always supported the adoption of the Corporate Governance Principles within the Company at every stage of the process. Following the adoption of the Corporate Governance Principles, Corporate Governance Principles Compliance Report was announced to the public, in which the Company declares that all activities shall be undertaken in line with the principles of equality, transparency, accountability and responsibility. SECTION I - SHAREHOLDERS 2. Shareholder Relations Unit The Company complies with the legislation, Articles of Association and other Company regulations on the matter of exercise of shareholder rights and takes necessary measures to facilitate the exercise of these rights. In order to oversee all relations with shareholders and establish channels of communication between the Company and its shareholders, the Investor Relations Department was established within the Company in September 2006, before the initial public offering in February The Investors Relations Department operates for the purpose of presenting accurate, timely and consistent information to existing and potential investors about TAV Airports, increasing the recognition and credibility of the Company, positioning the Company among the publicly-traded airport operation companies in the world, lowering the Company s cost of capital by implementing the Corporate Governance Principles and establishing communications between the Board of Directors and capital markets participants. In line with this objective, the Company strives to maintain close communication with its shareholders and investors and conducts an active investor relations program. TAV Airports Investor Relations Department won first place in the Investor Relations Web site category at the Investor Relations Awards organized by Thomson Reuters and Acclaro in 2009 for the first time in Turkey. M. Sani Şener, TAV s CEO, was the recipient of the Best Investor Relations CEO Award, and Nursel İlgen, TAV Investor Relations Coordinator, won the second place award in the Best Investor Relations Officer category. TAV Airports was the winner in three categories; Best Investor Relations CEO, Best Investor Relations CFO and Best Investor Relations Officer, at Turkey s 2 nd Investor Relations Awards, organized by Thomson Reuters and Acclaro in TAV Airports also won awards in the categories of Investor Relations Web site and Investor Relations Department at Turkey s Investor Relations Awards TAV Investor Relations Department is carrying on with its efforts to sustain this level of recognition and prestige. Per the organization of the Company, the Investor Relations Department reports directly to the Chief Executive Officer (CEO), who is also an Executive Member of the Board of Directors. The Head of Investor Relations Department attends Board of Directors meetings in order to establish duplex communication between the Board of Directors and shareholders. Primary responsibilities of the Investor Relations Department, which serves as the communication bridge between the Board of Directors and the financial world, consist of: Ensuring that shareholder records are kept accurately, reliably and up-to-date; Responding to written or verbal information requests from shareholders, potential investors, stock analysts, legal bodies (Capital Markets Board, Istanbul Stock Exchange, Central Registry Agency, etc.) and financial publication houses about the Company, unless the requested information is publicly unavailable, confidential or a trade secret; ensuring that information is simultaneously made available to everyone in a consistent manner and updating existing information; Preparing and sending out material disclosures to the Public Disclosure Platform (PDP) in both Turkish and English simultaneously; Reviewing all Company announcements and preparing the announcements about financial results in both Turkish and English simultaneously;

130 128 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT Updating the Investor Relations website, which was created in order to provide information to shareholders and potential investors; and using electronic communication resources; Creating a database of domestic and foreign institutional investors and equity and industry analysts; Representing the Company in investor relations meetings with existing and potential investors and analysts in Turkey and abroad; Examining and monitoring analyst reports; Monitoring significant developments and statistics about the sector; Taking necessary measures to ensure that the General Assembly meetings are held in compliance with legislation in force, the Company s Articles of Association and other Company regulations; Preparing the documents that will be beneficial to shareholders for General Assembly meetings; Ensuring that meeting minutes are sent to shareholders; Monitoring and overseeing every aspect of the public disclosure process for compliance with legislation. Investor Relations Department makes every effort to use electronic communication tools and the Company web site in all of its endeavors. Contact information for the Investor Relations Department is posted on the web site, ir.tav.aero and published in the annual reports. The Investor Relations Department can be reached at [email protected] for all requests and questions. Enhancing its design and content in 2010, the internet site of TAV Investor Relations has been renovated to provide an interactive experience, and various new features were adapted into the web site facilitating easier user access to information and data. The transactions of the Investor Relations Department are conducted by Nursel İlgen, who holds CMB Advanced Level and the Corporate Governance Rating Licenses, and by Besim Meriç, who holds CMB Advanced Level, Derivatives and Corporate Governance Rating Licenses. The persons in charge of the Investor Relations Department are listed below: As of April 2011, 44% of the Company s outstanding shares are publicly held, approximately 80% of which reside in the portfolios of foreign investors. In 2010, the Investor Relations Department attended 13 domestic and foreign conferences that were organized to provide information to shareholders and investors. 425 face-toface meetings were held with investors, shareholders and analysts about the Company s operating results, performance and other developments. In addition, pursuant to Capital Markets Law, 34 material disclosures were made in 2010 and these material disclosures were also posted on the Company website. The Department responded to inquiries from many investors and analysts via telephone and during 2010, while detailed presentations were prepared about the Company s financial results during financial reporting periods (quarterly). 3. Exercise of Shareholders Right to Obtain Information Pursuant to its Information Disclosure Policy, it is the Company s principle to treat all shareholders, potential investors and analysts equally with respect to exercise of the right to obtain and analyze information, as well as to make all information disclosures to everyone simultaneously and with identical content. All information sharing is performed within the scope of the content previously disclosed to the public. As part of the information sharing effort, all information of interest to shareholders and market participants is announced via material disclosures; the English translations of these disclosures are transmitted electronically to all people and entities who give their TAV Investor Relations Department Name Title Phone Nursel İlgen Investor Relations Coordinator +90 (212) ext [email protected] Besim Meriç Investor Relations Senior Specialist +90 (212) ext [email protected]

131 129 TAV AIrports HoldIng Annual Report addresses to the Company and past material disclosures are posted on the Company s website in both Turkish and English. Many written and verbal information requests from shareholders were responded to on an expedited basis under the supervision of the Investor Relations Department and in compliance with the Capital Markets Law. In an effort to enhance shareholders rights to obtain information, all necessary information that is stipulated in Section II, Article of the Corporate Governance Principles and that can impact the exercise of shareholder rights is presented to shareholders in an up-to-date manner on the Company website. All information on the Company website is presented in Turkish, as well as in English, in order to treat all shareholders, domestic and foreign, equally. The activities of the Company are regularly audited on a periodic basis by Independent Auditor and Auditors assigned by the General Assembly. In the fiscal year 2010, the independent audit activities were conducted by KPMG under the legal entity Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. The Articles of Association currently do not recognize requests for assignment of a special auditor as an individual right. The Company did not receive any requests for the appointment of special auditors. However, Article 20.1 of the Company s Articles of Association authorizes shareholders to direct the attention of auditors to doubtful matters and request necessary explanations. 4. Information on the General Assembly The Ordinary General Assembly meeting of shareholders regarding the Company s 2009 activities was held on Monday May 24, 2010, at 10 a.m. at the Akfen Meeting Hall, located in the Company s Istanbul Office at the Atatürk Airport International Terminal, Yeşilköy-Istanbul. The announcement for the Ordinary General Assembly, including the necessary information about the meeting date, time and location, agenda items, procedures for the attendance of shareholders at the meeting, proxy forms and arrangement procedures were published on page 856 of the Turkish Trade Registry Gazette, issue no. 7560, dated May 10, The announcement was also published in the daily Radikal and Dünya Newspapers, dated May 8, Of the 363,281,250 shares representing the Company s share capital as of the date of the meeting, 227,061,597 shares (62.5%) were represented at the Ordinary General Assembly meeting. In addition to procedures stipulated by legislation, the General Assembly meeting announcement was also made available at the Company Headquarters and on the Company website (ir.tav.aero) 17 days prior to the meeting in an attempt to reach the maximum number of shareholders possible. The General Assembly meeting announcement with the General Assembly information document posted on the Company website included the meeting date and time, meeting location, agenda, the fact that the invitation was being extended by the Board of Directors and the procedures for the attendance of shareholders. Since the Company does not have any registered shares, no accommodations were made to facilitate the participation of this class of shareholders in the General Assembly meetings. As of the date of the announcement inviting shareholders to the General Assembly meeting, financial statements and reports and the General Assembly agenda items were made available for examination at locations easily accessible by shareholders. There have been no major changes in the management or operational organization of the Company during the previous reporting period, nor are any such changes planned for subsequent periods. In case of such change occurs,it will be shared with public within the scope of legislative requirements. The Company did not receive any requests from shareholders for adding items to the agenda of the General Assembly meetings held during the year. The meeting procedure of the General Assembly facilitates maximum participation by shareholders. General Assembly meetings are carried out with the simplest possible procedures, at the lowest possible cost for the shareholders and in a manner that does not create any inequality among them. The Akfen Meeting Hall, where the General Assembly meetings take place, is located at the Atatürk Airport International Terminal and it can accommodate all shareholders. The Company s General

132 130 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT Assembly meetings are open to the public and are held under the supervision of a Ministry of Industry and Commerce Government Official. During the General Assembly meeting, agenda items were presented in an objective, detailed, clear and comprehensible manner and the language and expressions used did not allow for misinterpretations. Shareholders were given equal opportunity to voice their opinions and ask questions, thus creating a healthy environment for discussion; however, shareholders did not exercise this right during the General Assembly meeting regarding 2009 activities, or during the Extraordinary General Assembly meeting. Minutes of the General Assembly meeting are available on the Company website ( Pursuant to a provision in the Company s Articles of Association, the Board of Directors, without prejudice to the resolutions of the General Assembly, is authorized to take and give motions of waiver at the land registries on behalf of the Company regarding the purchase and sale of immovable property and assets, qualified as immovable pursuant to the Turkish Civil Code and associated rights. Furthermore, the Board may establish mortgages in favor of third parties on such immovable property and real assets -and associated rights for short, medium and long-term borrowings-by presenting them as collateral and accept all mortgages granted by third parties in favor of the Company at any level and grade at the land registry office. It may also sign documents associated with such transactions and terminate such mortgages as necessary. Conversely, without prejudice to the provisions of the Turkish Commercial Code with respect to the non-transferrable powers of the General Assembly, there are no provisions in the Company s Articles of Association requiring a General Assembly resolution for important decisions such as the purchase, sale or leasing of significant amounts of property. In fact, the Company is of the opinion that if General Assembly resolutions were required for the abovementioned or other similarly significant decisions, the Company s activities would be significantly impeded and management s ability to react to dynamic and fluid business opportunities would be reduced, thus harming the partners of the Company. 5. Voting Rights and Minority Rights Voting Rights The Company avoids practices that make it difficult to exercise voting rights. All shareholders are given the opportunity to exercise their voting rights in the easiest and most convenient manner possible. Each share is entitled to one vote in the Company. According to the Company s Articles of Association, there are no privileges associated with voting rights. Therefore, there are no preferred stocks or different classes of shares in the Company. There is no Company regulation that restricts the exercise of shareholders voting rights for a certain time period following the acquisition date of the shares. The Company s Articles of Association do not contain any provision that prevents non-shareholders from voting in proxy as a representative of a shareholder. The share capital of the Company does not involve any cross-shareholdings. Minority Rights The Company s Articles of Association contain a provision which stipulates that minority rights shall be exercised by shareholders collectively holding at least 5% of the share capital. Exercise of minority rights in the Company is subject to the Turkish Commercial Code, the Capital Markets Law and related legislation, communiqués and resolutions of the Capital Markets Board. The Company s Articles of Association do not contain any provisions in addition to the provisions mentioned above. The Company facilitates the exercise of minority rights in accordance with the relevant legislation and, if necessary, by the Independent Board Members. As the cumulative voting right is left to the discretion of Publicly Listed Joint Stock Companies pursuant to Communiqué Series: IV, No. 29 of the CMB; the Company s Articles of Association do not (yet) provide for cumulative voting. However, within the scope of legislative developments, the Company will assess the advantages and disadvantages of this method. Principle of Equal Treatment of Shareholders As it is included in Company Information Policy, all shareholders, including minority and foreign shareholders, are treated equally.

133 131 TAV AIrports HoldIng Annual Report Dividend Policy and Timing of Distribution There are no privileges with respect to participation in the Company s profit. The Company makes its dividend distribution decisions taking into account the Turkish Commercial Code, Capital Markets Law, Capital Markets Board communiqués and resolutions, the Tax Laws and the provisions of other relevant legislation, as well as the Company s Articles of Association. Accordingly, pursuant to CMB s resolution no. 02/51 dated January 27, 2010; publicly-listed joint stock companies are not obligated to pay any dividends from the profits they made from their activities in 2009 (there was a 20% minimum threshold for 2008). The corporations that resolve to distribute profits may make dividend payments based on the resolution of their general assemblies; either in cash or as gratis shares issued by adding that amount to the Company s paid-in capital, or a combination of the two. This dividend policy adopted by the Company s Board of Directors can also be found in the annual report and on the Investor Relations web site. It is among the Company s primary goals to adhere to this dividend policy, except for special circumstances when investments and other funds are required for the long-term growth prospects of the Company or its subsidiaries and affiliates, as well as for extraordinarily unfavorable developments in the economy. As stated by item 5 on the Agenda of the Company s Ordinary General Assembly Meeting held on May 24, 2010; since the Company has no distributable profit when the losses from previous years are netted out with the profit that accrued at year-end 2009 based on the Company s legal records, the General Assembly unanimously resolved that no dividend should be distributed to the shareholders and that the consolidated net profit should be set aside as extraordinary reserve pursuant to the Capital Markets Board s principle resolution regarding the issue and related regulations. 7. Transfer of Shares The Company s Articles of Association do not contain any provisions that make it difficult for the shareholders to freely transfer their shares. SECTION II - PUBLIC DISCLOSURE AND TRANSPARENCY 8. Information Disclosure Policy of the Company The Information Disclosure Policy of the Company, prepared pursuant to the Capital Markets Board Corporate Governance Principles, was discussed and approved at the Board of Directors meeting dated The Information Disclosure Policy was also produced as a written declaration and posted on the website. The Board of Directors is responsible for overseeing, reviewing and improving the Information Disclosure Policy. The Corporate Governance Committee provides information and recommendations to the Board of Directors, the Audit Committee and the Investor Relations Department on matters regarding the Information Disclosure Policy. The Investor Relations Department is charged with overseeing and monitoring all matters regarding public disclosures. The Information Disclosure Policy aims to establish active and transparent communication by sharing the past performance and future outlook of the Company with shareholders, investors and capital markets experts (capital markets participants) equally within the framework of generally-accepted accounting principles and Capital Markets Law provisions, in a complete, fair, accurate, timely and comprehensible manner. Public Disclosure Principles and Tools The information to be disclosed to the public is disseminated in a prompt, accurate, complete, comprehensible and easy to interpret manner. Attention is also focused on easy and equal access to information, with little cost, that will assist persons and companies who will benefit from the disclosure in their decision making. TAV Airports complies with the Capital Markets legislation and Istanbul Stock Exchange regulations in all of its public disclosure practices. Information about the public disclosure principles and tools adopted by the Company are presented below: The Investor Relations Department is responsible for overseeing and monitoring all issues related to public disclosures. Questions received from outside the Company are responded to in the shortest amount of time possible by the CEO, the Finance Director

134 132 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT (CFO), or within the knowledge of and authorization limits set by the CEO and the CFO, by the Investor Relations Department. The Company keeps a record of all questions received in writing and the responses provided by the Company. All correspondence and meetings with capital markets participants are carried out by the Investor Relations Department. In addition to the channels stipulated by legislation, other public disclosure tools and methods such as press bulletins, electronic data distribution channels, messages, meetings with shareholders and potential investors, as well as announcements posted on the Company website, are effectively utilized in the Company s public disclosures. The Code of Ethics stipulated within TAV Airports spells out the principles and rules that all managers and employees are obligated to comply with. These rules of conduct are posted on the Company website for public information. Without prejudice to any of the provisions in the relevant regulations, the Company informs the public when a material change occurs, or is expected to occur in the near future, in the financial position and/ or activities of the Company. The Company continually updates and publicly announces any changes or developments that arise regarding public announcements made by the Company. With the assistance of a domestic company retained for monitoring the media, TAV Airports follows all the news reported by the prominent national and international media outlets; including television, print media, the Internet and radio. Within this framework, TAV Airports executives, Investor Relations Department and Corporate Communications Department are informed each morning of the related news published or broadcasted. If non-factual news reports are identified, the Investor Relations Department assesses the situation and makes the necessary announcements in accordance with the TAV Airports Information Disclosure Policy, in response to an announcement request from the Istanbul Stock Exchange or from the CMB, or in some cases, without waiting for a request for information. Periodic Financial Statements and Reports and Independent Audit in Public Disclosures The Company s financial statements and accompanying notes are prepared on a consolidated basis in accordance with CMB Communiqué Series: XI, No. 29, as well as the International Financial Reporting Standards (IFRS), independently audited in accordance with the International Audit Standards (IAS); and are announced to the public. 9. Material Disclosures Developments that have the potential to impact the value of the Company s capital markets instruments are announced to the public in an expedited basis within the timeframe stipulated by legislation. The Company made 34 material disclosures during 2010, none of which were additional disclosures requested by the CMB or the Istanbul Stock Exchange. The Company has no additional disclosure obligations since the Company does not have any capital markets instruments listed on foreign exchanges. 10. The Company Website and its Contents As stipulated by CMB Corporate Governance Principles, the Company website is actively used in public disclosures. All matters related to the Investors Relations Department are posted on the aero website. In addition to Turkish, all information on the Company website is also presented in English for the benefit of foreign investors. The website won the first place in the Best Website category at the Investor Relations Awards organized jointly by Thomson Reuters and Acclaro for the first time in 2009 and second time in All publicly disclosed information by the Company is also available on the Company website. The Company letterhead clearly indicates the address of its website Of the information provided in Article of Section II the of Capital Markets Board s Corporate Governance Principles, all parts revelant to the Company are posted and updated on the web site. With the activities conducted throughout 2010, the content of the Investor Relations web site has been enhanced, and the web site was redesigned to provide an interactive experience that enables easy access to information and data. Organized to address four different groups of users; General User, Institutional Investors, Individual Investors, and

135 133 TAV AIrports HoldIng Annual Report 2010 Analysts, the content of the Company s web site differs depending on the choice the user makes among the categories appearing on the main page. Thanks to the new features included in the Company s web site, investors can submit all kinds of questions to the TAV Investor Relations Department, as well as establishing active communication with the Company s management by sending messages to the Company s Board of Directors. By joining the Company s mail delivery list, users can have regular access to the reports and information regarding the Company; and institutional investors can send meeting requests through the related section of the web site. Analysts drafting reports regarding the Company can also enter the web site and post their reports, major financial and operational forecasts regarding the Company, and their expectations of the macroeconomic outlook for the coming years by using the personal user IDs and passwords provided to them. The following information can be accessed through the Company s internet site, Company history Current management and shareholder structure Summary balance sheet, income statement and cash flow statement Summary operational data Company s Corporate Governance Guidelines Company s Code of Ethics Board of Directors and Board Committees Most recent version of the Articles of Association and the dates and issue numbers of thetrade Registry Gazette in which the amendments were published Prospectuses and public offering circulars Trade registry information General Assembly meeting agenda, General Assembly Information Document, proxy voting form, meeting minutes Corporate Governance Principles Compliance Report List of people with insider information Information disclosure policy Annual reports Periodic financial statements and reports Financial calendar Material disclosures Presentations Stock price and performance information and charts News updated by the data provider company Frequently asked questions Analyst contact information Company contact information Contact with the Board of Directors Distribution list registration Meeting requests Report requests Investor Feedback Form 11. Disclosure of Ultimate Controlling Shareholders There is no individual in the Company with ultimate controlling shares. The shareholder structure of the Company as of December 31, 2010 is presented below. Shareholder Share (TL) Share (%) Tepe İnşaat Sanayi A.Ş. 94,664, Akfen Holding A.Ş. 94,886, Sera Yapı Endüstrisi ve Ticaret A.Ş. 15,139, Other non-floating 12,775, Other free-floating 145,816, TOTAL 363,281, %

136 134 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT 12. Public Disclosure of Insiders Pursuant to the relevant legislation, as well as the employment contracts entered into with Company employees, persons who hold key positions and fall within this category are listed below: Abdullah Atalar Member of the Board of Directors Ali Haydar Kurtdarcan Vice Chairman of the Board of Directors, Chairman of the Audit Committee Ali Said Yavuz Internal Audit Manager Alkan Özyayla Project and Structured Finance Specialist Alper Topçu Corporate Communications Design Manager Altuğ Koraltan Internal Audit Director Asaf Kirazoğlu Budget and Planning Specialist Aslıhan Çörtük Marketing Coordinator Aslıhan Manaş Executive Assistant of the Board of Directors Ayşe Kefli Project and Structured Finance Specialist Aytekin Bektaş Accounting Manager, TAV Istanbul Aziz Murat Uluğ Finance Director, Member of the Corporate Management Committee Banu Pektaş General Counsel Bengi Vargül Corporate Communications Coordinator Berk Kayserli Corporate Communications Assistant Specialist Besim Meriç Investor Relations Senior Specialist Bilde Bilen Legal Counsel Binnur Onaran Deputy General Manager, TAV IT Burak Birhekimoğlu Management Systems Coordinator Burcu Geriş Project and Structured Finance Coordinator Burcu Sarıoğlu Corporate Communications Manager Burcu Yar Gürhan Internal Audit Manager Bülent Özütürk Investments Coordinator Cenk Laçin Accounting Assistant Manager, TAV Airports Ceyda Akbal Legal Counsel Defne Sertel Translator Demet Sözmen Tax Manager Deniz Aydın Financial Affairs Director Doruk Karabulut Project and Structured Finance Specialist Eda Bildiricioğlu General Manager, TAV Operations Services Elif Yılmaz Project and Structured Finance Specialist Ersagun Yücel Member of the Board of Directors, General Secretary Ersan Arcan General Manager, ATÜ Ersel Göral General Manager, TAV Tunisie Esin Rodoplu Risk Management and Research Assistant Manager Fatih Ömür Business Development Specialist Fırat Erkan Balcı General Manager, TAV Izmir Gamze Şen Financial Reporting Specialist Giray Çolpan Business Development Specialist Gökçe Atasoy Project and Structured Finance Specialist Göker Köse Project and Structured Finance Manager Gökhan Aygör Budget and Planning Coordinator Gökhan Doğan Strategic Analysis and Reporting Manager Güçlü Batkın Business Development Coordinator Gülçin Bulan Tax Specialist Haluk Bilgi Tunisia Country Director, Business Development Director in charge of Subsidiaries Hamdi Akın Chairman of the Board of Directors Hasan Yeşilyurt Corporate Communications Specialist Hilal Doğru Administrative Bureau Staff İbrahim Süha Güçsav Member of the Board of Directors İsmail Varlı Financial Reporting Specialist Kaan Sertcan Budget and Planning Manager Kadri Mete Erkal Deputy General Manager, TAV Georgia Kemal Ünlü General Manager, TAV Istanbul Kerem Aran Budget and Planning Specialist Mahmut Miraç Pekmezci Financial Reporting Assistant Manager Mehmet Cem Kozlu Member of the Board of Directors, Chairman of the Corporate Governance Committee Mehmet Erdoğan, External Relations Coordinator Mehmet Sina Avşar Process Development and Reporting Coordinator Melek Tan Executive Board Office Manager Melis Erkun Legal Counsel Mete Erkal General Manager, TAV Georgia Müjdat Yücel General Manager, Havas Murat Altıkardeşler Budget and Planning Coordinator Murat Cevher Tax Manager Murat Örnekol Operations Director Mustafa Ayvaz Accounting Chief, TAV Izmir Mustafa Sani Şener Member of the Board of Directors and President & CEO Nazım Yaprak Finance Coordinator Nazmi Hugül Systems Analysis Coordinator Neşe Kerimoğlu Risk Management and Research Coordinator

137 135 TAV AIrports HoldIng Annual Report 2010 Nihat Akkaya Administrative Bureau Chief Nuray Demirer General Manager, TAV Esenboğa Nursel İlgen Investor Relations Coordinator Onur Aygüneş Business Development Assistant Specialist Önder Sezgi Member of the Board of Directors, Member of the Audit Committee Özlem Tekay Human Resources Director, Member of the Corporate Governance Committee Pierre de Champfleury Member of the Board of Directors, Member of the Audit Committee Pınar Tanılkan Legal Counsel Sadettin Cesur General Manager, BTA Sertay Sargın Budget and Planning Senior Specialist Sıla Usta Corporate Event Management Manager Sibel Arı Financial Reporting Senior Specialist Şafak Özbay Financial Reporting Senior Specialist Şaziye Çevik Administrative Bureau Manager Turgay Şahan General Manager, TAV Security Umut Ercevahir Financial Reporting Manager Vehbi Serkan Kaptan Business Development Director, Member of the Board of Directors Waleed Ahmed Youssef Strategy Director Yaşar Kerem Gökyer Tax Senior Specialist Zoran Krstevski General Manager, TAV Macedonia All employment contracts contain the following clause: The employee understands that insider trading transactions are prohibited ( Insider trading means stock trading in violation of competition and honesty, using information on the financial position of a publicly traded company or any other information that can affect the share price of the company before other investors can learn of it). Therefore, the employee accepts and commits to not using any information or documents on the Company s financial position, or any other information that can affect the value of the Company s publicly traded shares, acquired as a result of managerial position, or any other position in the Company, or through other means in or outside of stock market trading for the purpose of making a profit on his/her own behalf or on behalf of another person. Pursuant to the Corporate Governance Principles, whenever the list of insiders is reconstituted, the latest version of the list is announced on the Company website. SECTION III - STAKEHOLDERS 13. Informing Stakeholders The Company s corporate governance practices and code of ethics ensure the protection of the rights of stakeholders as stipulated in legislation or mutual agreements. Stakeholders are continually kept informed within the framework of the Company s Information Disclosure Policy, established with respect to governing legislation and the Company s code of ethics. In addition, the Company aims to provide information to all stakeholders via press bulletins, annual reports, Company website and other practices within the framework of the Company s transparencyoriented Information Disclosure Policy. For the Company s employees, the Intranet, which is the intra-company information sharing platform, is used actively and the NewsPORT magazine is published quarterly and Gate magazine is published monthly. The Company s employees are expected to fulfill their responsibilities and hold the Company s interests above their own interests and the interests of their families or acquaintances while performing their jobs. The employees shall avoid any conduct that may be construed as pursuing their own or acquaintances interests. Foreseeable conflict of interest situations as well as situations, defined by the Company management in such manner are shared with the employees and Company management takes necessary measures when required. 14. Participation of Stakeholders in Management The Company does not have a formal model or mechanism for the participation of stakeholders in management. However, Independent Board Members allow the representation of all stakeholders, as well as the Company and the shareholders, in management. 15. Human Resources Policy Organizational structures are developed, human resources requirements are identified and workforce plans are formed in accordance with the strategic plans, areas of business and needs of TAV Airports. All operations within TAV Airports are conducted on the basis of achieving personal and professional development through customer-oriented and innovative approaches. All managers and employees

138 136 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT are expected to create and support an environment that makes a difference and creates value. Producing high quality products and services, managing the processes on the basis of data, satisfaction of internal and external customers, and establishing interactions to enhance the productivity of the processes are adopted as the main principles in all activities. It is necessary to implement the systems and processes that relate the Company s objectives to business results by means of observable and measurable parameters. Achieving business excellence and sustained success is only possible by conducting effective efforts toward attaining the Company s objectives. It is essential to manage and evaluate corporate and individual performance. Employees are evaluated on the basis of their responsibilities, qualifications, work development and contribution to the Company s objectives. Outstanding performance is differentiated from all others and rewarded by various benefits. The Company does not discriminate on any basis in the recruitment and placement processes and employees suitable for the requirements of the job are recruited from local and international sources. Employees are expected to improve themselves and their jobs. The Company s objective in this regard is to provide the basic means needed in the development process. All employees are provided with equal opportunities in terms of personal development. The salary for a given position is determined by evaluating the description and responsibilities of and the necessary qualifications required for the job as well as the prevailing market wages. Corporate Governance Principles are embraced by all employees. Respect for the people and the job, open and honest communication, and business ethics principles constitute the basic management principles. As of December 31, 2010, TAV Airports, including all of its subsidiaries, has a total of 18,768 employees. No complaints related to discrimination were received from the employees. 16. Information about Relations with Customers and Suppliers Since the Company is a holding company, it is not directly involved in any operation. Therefore, it does not have any direct relationships with customers or suppliers. As a holding company, TAV Airports determines the general policies for regulations and practices geared towards achieving the satisfaction of customers of its subsidiaries. It provides maximum support to its subsidiaries and, in some circumstances, enters into contracts with third parties on these matters, continually striving to enhance customer satisfaction. In this respect, surveys are conducted for quality control, as well as enhanced customer satisfaction. Customers are provided with opportunities to easily communicate their needs and complaints are responded to and resolved as quickly as possible. 17. Social Responsibility The Company expends maximum effort to be sensitive to its social responsibilities in its operations. It complies with all regulations regarding the environment, consumer and public health, as well as ethics rules, and directs and supports its subsidiaries to behave in the same manner. The Company s terminal operating subsidiaries conduct their operations in compliance with environmental legislation, directives and guidelines of international aviation organizations such as the ICAO, ECAC, EUROCONTROL and IATA, as well as the Equator Principles of the World Bank. Due to the nature of their operations, the Company and its subsidiaries are not legally obligated, within the scope of Environment Law and its related legislation, to produce environmental impact assessment reports. Nevertheless, the Company s relevant subsidiaries prepare environmental reports and environmental management plans during both the construction and operation phases of terminals and comply with updated environmental management plans. Furthermore, the Company s subsidiaries have international quality control plans for their operation areas and quality control audits are conducted in compliance with international standards.

139 137 TAV AIrports HoldIng Annual Report 2010 There is currently no investigation, lawsuit, other legal proceeding or sanction initiated against the Company or its subsidiaries related to the matters mentioned above. Information regarding the awards and certificates the Company has received in 2010 is presented below. THE FIRST AIRPORT OPERATOR TO BE DESIGNATED AS GREEN COMPANY TAV Istanbul has become the first airport operator to earn the Green Company certificate as part of the Green Airport project of the Turkish Ministry of Transportation s Directorate General of Civil Aviation (SHGM). As part of the same project, Havas was also designated as a Green Company as a result of its activities at TAV İzmir and at the Milas-Bodrum Airport. THE MOST ENVIRONMENTALLY-FRIENDLY AIRPORT IN EUROPE As a result of the environmental projects, successful ecological implementations and environmentallyfriendly management policies at Adnan Menderes Airport s International Terminal, TAV Izmir has been presented the first Eco-Innovation Award in 2010 by the Airports Council International Europe (ACI Europe). The first Eco-Innovation Award that has been presented to TAV Izmir by ACI Europe as a result of the sucessful implementation of environmental policies at Izmir Adnan Menderes Airport s International Terminal became a solid proof of the environmetal awareness, not only of TAV, but of Turkey as well. SECTION IV BOARD OF DIRECTORS 18. The Structure and Formation of the Board of Directors and Independent Members The formation and election of the Board of Directors conform to the Corporate Governance Principles and the principles governing this issue are set forth in the Company s Articles of Association. Accordingly; Following the resolution of the General Assembly Meeting dated May 24, 2010; the article stipulating that the Company is governed by a Board of Directors comprised of at least 15 members elected by the General Assembly from among shareholders has been amended to state that the Company is governed by a Board of Directors comprised of at least 9 members. As stipulated in the Company s Articles of Association, two Board Members are required to be independent members as defined by the Capital Markets Board s Corporate Governance Principles. The names of the Members of the Board of Directors who were appointed in accordance with the Company s Articles of Association are presented below: Board of Directors of TAV Airports Hamdi Akın Chairman of the Board of Directors (Nonexecutive) Ali Haydar Kurtdarcan Vice Chairman of the Board of Directors (Non-executive) Mustafa Sani Şener Member of the Board of Directors, President & CEO Mehmet Cem Kozlu Member of the Board of Directors, Independent Pierre de Champfleury Member of the Board of Directors, Independent Ahmet Ersagun Yücel Member of the Board of Directors, General Secretary Abdullah Atalar Member of the Board of Directors (Non-executive) İbrahim Süha Güçsav Member of the Board of Directors (Non-executive) Önder Sezgi Member of the Board of Directors (Nonexecutive) Non-executive members comprise 7 of the 9 Board Members (more than half of the Board of Directors), the remaining two being executive members. The Chairman is not the same person as the President and CEO. Six Board Members are empowered to represent and bind the Company.

140 138 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT Of the Board Members, Mr. Mehmet Cem Kozlu and Mr. Pierre de Champfleury qualify as independent members according to the independence criteria stipulated in the CMB Corporate Governance Principles. No situation arose in the reporting period that would cease the independent status of the Company s Independent Board Members. Independent Board Members are obligated to submit a written statement of independence to the Board of Directors and immediately inform the Board of Directors when their independent status ceases. An individual who serves a total of seven years on the Company s Board of Directors cannot be appointed Independent Board Member. The Company does not impose any rules or restrictions on its Board Members for assuming additional duties outside of the Company. 19. Qualifications of Board Members All of the nominated and appointed members of the Company s Board of Directors possess the qualifications stipulated in Articles 3.1.1, and of Section IV of the CMB s Corporate Governance Principles. The Board of Directors is structured to ensure maximum influence and effectiveness. Article 13 of the Company s Articles of Association stipulates the principles regarding this matter. It is the Company s principal aim to appoint Board Members who possess the fundamental knowledge regarding the legal principles governing the Company s transactions and business, are qualified and experienced in corporate management, possess the capability of examining financial statements and reports, and preferably have graduate degrees. Background information of the members of the Board of Directors are included in the annual report and company website. 20. Mission, Vision and Strategic Goals of the Company Our Mission To create the highest value for all stakeholders in airport operations with a customer-oriented management approach. Our Vision To become the leader and the pioneer airport operating company in our target regions (Europe, Russia and the Commonwealth of Independent States, Baltic States and Georgia, the Middle East, Africa and India). Our Strategic Goals The Company s general strategic goals are specified below: To achieve long-term, sustainable and profitable growth, To maintain and solidify our leadership in the domestic market and to become the leader, or one of the leaders, at the international level in the near future. The Board of Directors sets strategic goals for relevant periods through discussions with the Executive Member (CEO) and the Group Directors. 21. Risk Management and Internal Audit Mechanism Internal Audit TAV Airports The Internal Audit Directorate that is audited by the Institute of Internal Auidtors (IIA), provides assistance to the Audit Committee in the Committee s supervision role. The mission of the Internal Audit Directorate is to assist the Board of Directors and Senior Management in their management and operational responsibilities by identifying and reporting deficiencies in internal audit, risk management and governance processes, as well as practices that are causing inefficiencies and waste of resources. The Internal Audit Director reports to the CEO hierarchically. Internal audit plans are formulated by taking into account risk analyses, as well as matters highlighted by the Audit Committee and management. Risk analyses are conducted regularly to identify both existing and newly emerging risks. Officially, risk analyses are performed annually; however, they may be performed more frequently if deemed necessary. Studies have been conducted in the critical processes at locations in Turkey and abroad and the results have been reported to the senior management. The Internal

141 139 TAV AIrports HoldIng Annual Report 2010 Audit Directorate continuously examines its systems and methods of operation in order to to identify all risks in a precise and timely fashion, and implements new approaches and methodologies to conduct more effective and efficient audits. In this regard, the Directorate implemented two new methods, Control Self-Assessment and Continuous Audit, in Risk Management Along with Internal Audit, the Risk Management and Research Coordination Department is also a part of the Finance Directorate and it is responsible for identifying the risk factors that may have an impact on the processes carried out to attain TAV s corporate objectives, determining the risk-taking appetite compatible with this goal, and assessing these risks. The Holding s risk management approach can be defined as integrated risk management. Under the coordination of TAV Airports Enterprise Risk Management (ERM) Department, all Group companies and operations are encompassed by this risk management approach. In contrast to the classical risk management method, which evaluates the risks in various business units separately; the Holding aims to implement a risk management which can oversee the general risks of the Company, puts the general interest of the Company before that of the business unit the risk is stemming from, and functions in a continuous manner. 22. Authorities and Responsibilities of the Board Members and Executives The authorities and responsibilities of the Board of Directors are defined in the Company s Articles of Association in a manner that is consistent with the Board s functions, that does not leave room for any doubt and that is clearly distinguishable and identifiable from the authorities and responsibilities of the General Assembly. All partners are obligated to keep confidential the Company secrets forever, regardless of how they learned those secrets, even after losing their shareholding rights. Partners who fail to meet this obligation are liable to the Company for the damages this may cause. However, the provisions of this article are not applicable for information that needs to be disclosed pursuant to the Capital Markets Law. 23. Operating Principles of the Board of Directors Board Members are provided with timely access to any information they need to fully execute their duties. The Board of Directors issues a separate resolution for the approval of financial statements and accompanying notes, the independent audit report, the Corporate Governance Principles Compliance Report and the annual report. According to the Company s Articles of Association, a quorum for the meetings is the majority (half the number of directors plus one) of the Board of Directors. A Board of Directors Secretariat, which serves all Board Members and reports to the Chairman, has been formed to properly maintain documents related to Board meetings. Board of Directors meetings are planned and held in an effective and efficient manner. As stipulated in the Company s Articles of Association; The Board of Directors shall meet as the business and transactions of the Company require. However, the Board of Directors attempts to meet at least once every three months. Four Board of Directors meetings were held during The Chairman, Vice Chairman or any Member of the Board of Directors has the right to call the Board of Directors for a meeting and/or include any subject in the agenda that he/she wants discussed by inviting all Board Members at least seven days in advance. Such meeting invitations shall be made via facsimile. However, Board Members may waive these meeting formalities in writing. All meetings of the Board of Directors in 2010 were held at the Company Headquarters, as it was not decided otherwise by the Board of Directors. Alternative opinions expressed, opposing votes cast (with their reasons) and deliberate questions posed by Members of the Board of Directors at the Board meetings are also recorded in the resolution book. However, such opposition or alternative opinion has not been expressed in Board meetings; therefore, no announcement to this effect has been made to the public. Every Board Member is entitled to one vote. Board Members do not have weighted voting rights or affirmative/negative veto rights.

142 140 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT The Board of Directors executes the duties stipulated in the Articles of Association and the relevant legislation. 24. Prohibited Dealings and Competition with the Company At the General Assembly meeting that took place on May 24, 2010, the proposal that was presented for shareholder approval to authorize the Chairman and the Board Members to perform the transactions stipulated in articles 334 and 335 of the Turkish Commercial Code regarding the ban on doing business and competing with the Company was approved by the General Assembly. 25. Code of Ethics TAV Airports Code of Ethics sets out the rules and principles that all executives and employees are obligated to comply with in order to add financial value to its shareholders and to enhance its corporate value. The Company has publicly announced the Code of Ethics on the Company website within the framework of its disclosure policy, published it on the Company s Intranet and shared it with its employees through workplace programs and performance evaluation forms. The Code of Ethics is designed to ensure that the conduct of TAV executives and employees is of the highest standard and that they are aware of the impact of their conduct and attitudes on the Company. Furthermore, the Code ensures that ethics of the highest standards are upheld and the best actions are employed regarding Company activities and shareholders. The members of the Board of Directors, executives and employees are expected to comply with all provisions of TAV Airports Code of Ethics presented below. Conflict of Interest A conflict of interest arises when there is an existing or potential conflict between the personal interests of an employee and those of the Company. TAV Airports employees are obliged to consider the interests of the Company over their personal interests or over the interests of their families or relatives in their conduct. Employees shall avoid all kinds of conduct that may be construed as benefiting themselves or their relatives. Conflict of Interest Situations It is essential that the employees prioritize the interest of the Company in all of the business activities. The situations described below are regarded as situations that constitute conflict of interest: A family member or a relative within third degree of consanguinity has a business relationship with the Company; A family member or a relative within third degree of consanguinity has an ownership in or relationship of interest with the competitors of the Company; An employee contracts work to a company where a family member or a relative within third degree of consanguinity is employed; An employee borrows money from or establishes private business relationship with the firms working with the Company. Prevention of Conflicts of Interest Predictable potential conflict of interest situations and others defined by the Company Management are communicated to the employees and necessary measures are taken by the Company s management. The Company s executives and employees are obliged to report the conflict of interest situations they come across to the Management. Once a conflict of interest comes about, Corporate Governance Committee takes the necessary actions after evaluating the matter. Responsibility of Diligence on Duty Employees are obliged to perform the jobs they assume by the employment contract diligently and to make efforts to acquire and develop the competencies and to obtain the information required by their jobs. Employees are responsible for the damages caused to the Company as result of misconduct, recklessness or negligence. Employees are responsible for completing the jobs in a timely manner by delegating work to subordinates when necessary and for making every effort to comply with the instructions of their seniors and supervisors. As the representatives of the Company, all employees are responsible for protecting the Company s reputation against third parties. Employees are obliged to avoid all conduct and actions that may put the Company in a difficult position. All employees are obligated to manage their professional

143 141 TAV AIrports HoldIng Annual Report 2010 relationships with colleagues, business partners and stakeholders within the framework of business ethics and codes of conduct. Employees are strictly barred from receiving benefits from third parties regarding their jobs, establishing private business relationships with them, and demanding making payments. Reponsibility of Compliance with Workplace Principles and Rules Employees are obliged to comply with the Company s rules regarding management, harmony, discipline, occupational health and safety, as well as the instructions, regulations and procedures on these rules. Responsibility of Being Mindful in Conduct and Relationships Employees are obligated to work in harmony with their colleagues and managers, to form good personal relationships with private or official persons or entities associated with the workplace, and to perform their duties quickly and honestly. Employees have the responsibility of reporting the persons acting in breach of the principles of business ethics to the Management together with the supporting documents. Obligation of Confidentiality and Keeping Secrets Employees are obligated to keep the information and secrets regarding their jobs or the Company confidential, whether they are related to the position of the employee or not. Employees cannot disclose the secrets, information and related documents to unauthorized persons or entities. This obligation continues even after the job agreement between the employee and the Company is terminated. Responsibility of Protecting the Interests of the Company Employees are obliged to protect the Company s interests related to the business and the workplace run by the Company and avoid all conduct that may harm these interests. Employees cannot use the Company s resources for their personal interests. Prohibition of Working in Another Job Employees cannot accept another job -public or private, permanent or temporary, paid or unpaid- or engage in commerce without the consent of the Company. Responsibility of Reporting the Changes in Personal Information Employees are obigated to provide the Personnel Department with prompt information and supporting documents regarding all changes in their family status, marital status and address;as well as all changes in the information regarding the employee, his/her family or relatives that form the basis for the rights and obligations stipulated in the agreements and/or regulations. 26. The Number, Structure and Independence of Board Committees In line with the Capital Markets Board Corporate Governance Principles, a Corporate Governance Committee and an Audit Committee, which report to the Board of Directors, were formed within the Company. General principles regarding the Corporate Governance Committee and the Audit Committee were stipulated in Article 34.A of the Company s Articles of Association that was published in the Turkish Trade Registry Gazette, dated December 17, Corporate Governance Committee Directly reporting to the Board of Directors, the Corporate Governance Committee s function is to assist the Board of Directors in creating and improving the structure and practices necessary for the governance of the Company in accordance with the internationally accepted Corporate Governance Principles, as well as remuneration, professional development and career planning of the senior executives. The duties and responsibilities of the Corporate Governance Committee are stipulated in the Company s Articles of Association. The Corporate Governance Committee is responsible of overseeing the Company s compliance with corporate governance principles, and its primary duties include: Overseeing the implementation of corporate governance principles by the Company, identifying the reasons if they are not being fully implemented and the consequences of inadequate implementation, and recommending measures for improvement; Determining methods that ensure transparency in the process of identifying candidates for the Board of Directors membership;

144 142 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT Conducting studies on the number of Board members and executives and making recommendations; Developing and overseeing the principles and practices regarding performance evaluation and remuneration of Board members and executives. Mehmet Cem Kozlu is the Chairman of the Corporate Governance Committee and was elected from among the Independent Board members. Members of the Corporate Governance Committee are listed below: TAV Airports Holding Co. Corporate Governance Committee Chairman of the Corporate Governance Committee Mehmet Cem Kozlu Member of the Board of Directors, TAV Airports (Independent) Members of the Corporate Governance Committee (Independent) Özlem Tekay TAV Learning and Innovation Center Director, TAV Airports Murat Uluğ Finance Director (CFO), Member of the Board of Directors, TAV Airports Audit Committee Reporting directly to the Board of Directors, the Audit Committee assists the Board of Directors in ensuring that Company practices are in compliance with domestic and international laws and regulations, contributing to the improvement of business processes through their audits and coordinating activities to be undertaken for ensuring information transparency. The Audit Committee is responsible for taking all measures to ensure the adequacy and transparency of all internal and independent external audit activities and executing the duties stipulated in the Capital Markets Law. Its primary duties and responsibilities include: Auditing and approving the compliance of financial statements and accompanying notes to be publicly reported in accordance with current legislation and international accounting standards; Overseeing the operation and effectiveness of the Company s accounting system, public disclosure of financial information, independent audit and internal control and risk management systems; Examining and resolving complaints about the Company s accounting, internal control system and independent audit; Preventing conflicts of interest that may arise among Board members, executives and other employees and identifying regulations that may prevent the abuse of the Company s commercial secrets. The Company s Articles of Association stipulate that the Audit Committee shall meet at least once every three months upon the invitation of the Committee Chairman. Senior executives responsible for financial affairs are not allowed to be Audit Committee members. Pierre de Champfleury, one of the members of the Audit Committee, is also an Independent Board Member. Members of the Audit Committee are listed below: TAV Airports Holding Co. Audit Committee Chairman of the Audit Committee A. Haydar Kurtdarcan Vice Chairman of the Board of Directors, TAV Airports Members of the Audit Committee Önder Sezgi Financial Affairs and Audit Director, Bilkent Holding Co. H. Kadri Samsunlu Pierre de Champfleyry Executive Vice President of Financial Affairs Akfen Holding Member of the Board of Directors, TAV Airports (Independent) 27. Remuneration of the Board of Directors Within the framework of the Capital Markets Board s Corporate Governance Principles, the Company pays a salary to each Independent Board Member commensurate with the time investment and efforts necessary for Board membership. However, it was resolved by the General Assembly that the Company shall not pay any salary or attendance fee to the other Board Members or the statutory auditors.

145 143 TAV AIrports HoldIng Annual Report 2010 BOARD OF DIRECTORS Hamdi Akın Chairman of the Board of Directors Hamdi Akın assumed his current position as the Chairman of the Board of Directors of TAV Airports in One of the founders and shareholders of TAV Airports, Akın is also the founder and the Chairman of Akfen Holding. After graduating from Gazi University, Department of Mechanical Engineering, Akın founded Akfen Holding in 1975, a company that operates in construction, tourism, commerce and service industries. Undertaking infrastructure, energy and investment projects within the scope of privatization efforts, in addition to private entrepreneurial activities, Akın served as a founder and executive in many associations, foundations and NGOs. Akın served as the Vice President of Fenerbahçe Sports Club from 2000 to 2002, the President of Ankara Region Representative Council of the Turkish Metal Industrialists Union (MESS) from 1992 to 2004, the Chairman of the Board of Directors of Turkish Young Businessmen s Association (TÜGİAD) from 1998 to 2000, Member of the Board of Directors of Turkish Confederation of Employer Associations (TİSK) from 1995 to 2001, Member of the Board of Directors of Turkish Industrialists and Businessmen s Association (TÜSİAD) and the President of Information Society and New Technologies Committee from 2008 to He is one of the founders of the Chair in Contemporary Turkish Studies at the London School of Economics and currently serves as the Founding Member and the Honorary Chairman of the Human Resources Foundation of Turkey (TİKAV), which has been active since 1999 in order to provide well-educated human resources for Turkey. Ali Haydar Kurtdarcan Vice Chairman of the Board of Directors Ali Haydar Kurtdarcan assumed his current position as the Vice Chairman of the Board of Directors of TAV Airports in 2000 and is also the Chairman of the Audit Committee. A 1973 graduate of Middle East Technical University, Department of Civil Engineering, Kurtdarcan is the Chairman of the Board of Directors of Tepe Construction, a shareholder of TAV Airports. He served in various managerial positions, including General Manager and Assistant General Manager, at Tepe Construction for the last 22 years. Mustafa Sani Şener Member of the Board of Directors and President & CEO Mustafa Sani Şener was appointed Member of the Board of Directors, President and CEO of TAV Airports in After graduating from Black Sea Technical University (BTU), Department of Mechanical Engineering in 1977, Şener earned his Master s degree in fluid mechanics in 1979 from the Department of Applied Sciences, University of Sussex in the UK. He has been awarded an Honorary Doctorate from BTU for his invaluable contributions to the development of Turkish engineering at the international level. Prior to his career at TAV Airports, he served in various positions, from project manager to general manager, in national and international projects. Mustafa Sani Şener is currently a Member of the Board of Directors of the Airports Council International (ACI) Europe.

146 144 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION BOARD OF DIRECTORS Abdullah Atalar Member of the Board of Directors Abdullah Atalar was appointed a Member of the Board of Directors of TAV Airports in After graduating from Middle East Technical University, Department of Electrical Engineering in 1974, Atalar received his Master s and PhD degrees from the Department of Electrical Engineering, Stanford University in the USA, respectively in 1976 and Beginning his career at the Hewlett Packard Research Labs in 1979, Atalar returned to Turkey as an Assistant Professor at Middle East Technical University in In 1982 he led the project to develop the first commercial acoustic microscope at Ernst Leitz Wetzlar, Germany. In 1986 he served as the Chair of the Department of Electrical and Electronics Engineering and as Associate Professor at the newly established Bilkent University and he was promoted to Professorship in He worked as Visiting Professor at Stanford University in Atalar received the Scientific Encouragement and Science Awards of TÜBİTAK in 1982 and 1994, respectively. He was also elected as a full-member of the Turkish Academy of Sciences in 1997 and has been awarded a Fellow Degree by the IEEE in He led research projects for companies such as ASELSAN, Teletaş and Hitachi. Atalar has 17 international patents, 76 scientific papers and 108 conference proceedings and there are more than 1,500 citations referring to his papers. He is currently the President of Bilkent University, Member of the Science Board of TÜBİTAK, and Vice Chairman and Executive Director of Bilkent Holding. Ersagun Yücel Member of the Board of Directors and General Secretary Ersagun Yücel was appointed the General Secretary of TAV Airports in 2002 and as a Member of the Board of Directors in He graduated from the Department of Business Administration, California Newport University in Yücel is currently pursuing his MBA degree at the same university. He also graduated from Yıldız Technical University, Department of Serigraphy in 1994 and attended the New York University Advertising and Marketing Program in Beginning his career as a graphic artist in MR Com Graphics in 1993, Ersagun Yücel worked as manager in Rifle Jeans and Calvin Klein Jeans between 1995 and He joined TAV Airports in 1999 as the Assistant to the President & CEO. In addition to his responsibilities as General Secretary of TAV Airports, Yücel also oversees the activities of the Corporate Communications and External Relations departments that report to the Holding s General Secretary as well as Board of Directors Administrative Affairs Department. İbrahim Süha Güçsav Member of the Board of Directors İbrahim Süha Güçsav was appointed a Member of the Board of Directors of TAV Airports in 2000 and as the CEO of Akfen Holding in March Güçsav graduated from Istanbul University, Department of Economics in 1992 and earned his Master s degree from Gazi University, Institute of Social Sciences, Department of Business Administration. Beginning his career at Alexander&Alexander Insurance Brokerage Co. in 1992, Güçsav joined Akfen Group in Serving at Akfen Holding as Finance Group President and then as President of the Executive Board, Güçsav was the Vice Chairman of the Board of Directors of Akfen Holding between 2003 and March He also serves as a Member of the Board of Directors at various affiliates including TAV Airports, Executive Member of the Board of Directors at Akfen GYO (Real Estate Investment Partnership) and the CEO at IBS Insurance Brokerage Services.

147 145 TAV AIrports HoldIng Annual Report 2010 Mehmet Cem Kozlu Member of the Board of Directors Mehmet Cem Kozlu was appointed an Independent Member of the Board of Directors of TAV Airports in 2006 and is also the Chairman of the Corporate Governance Committee. He received his BA from Denison University, Department of Economics in 1969, MBA from Stanford University and PhD from Boğaziçi University in Administrative Sciences. He has been awarded an Honorary Doctorate Degree by Denison University. Kozlu held various positions at National Cash Register Co. in Ohio, Procter&Gamble in Switzerland and Komili, and served as a Member of the Parliament between 1991 and He served as the President and CEO of Turkish Airlines, and President of Central Europe, Eurasia and Middle East Group in The Coca- Cola Company. He currently serves as Consultant to Coca-Cola Eurasia and Africa Group and he is currently a Board Member of The Coca-Cola Bottling Company of Saudi Arabia and Trader Media East Limited, Amsterdam. He is the President of International Airlines Training Fund (IATF), Geneva and the Chairman of the Turkish-Russian Business Council of Foreign Economic Relations Board, in which he also serves as a Board Member. He also serves on the boards of Hürriyet Newspaper and Printing Co., Coca-Cola İçecek (Bottling) Co., Evyap Soap, Oil and Glycerine Industry and Trading Co., Godiva, Anadolu Industry Holding, Efes Brewery and Malt Industry, Kamil Yazıcı Management and Consulting Co. and Council of Foreign Economic Relations. Kozlu is also a Member of the Board of Trustee of Anadolu-Johns Hopkins Health Center and Istanbul Modern Arts Foundation. Önder Sezgi Member of the Board of Directors Önder Sezgi was appointed a Member of the Board of Directors of TAV Airports in After graduating from Ankara University, Faculty of Political Sciences, Department of Public Administration in 1988, Sezgi served as a Tax Inspector at the Ministry of Finance until He joined Tepe Group the same year and is currently serving as the Financial Affairs Coordinator (CFO) at Bilkent Holding. Having more than 35 articles about economics, tax, law and finance published in various newspapers and journals, Sezgi participated as a speaker in more than 20 conferences and panels regarding these topics. Being certified as a Swornin Certified Public Accountant, he served in various positions and operations in Tax Council, Turkish Industrialists and Businessmen s Association, International Investors Association, Foundation of Tax Inspectors and TÜRMOB. Pierre de Champfleury Member of the Board of Directors Pierre de Champfleury was appointed an Independent Member of the Board of Directors of TAV Airports in 2007 and is also a Member of the Audit Committee. After graduating from Paris École des Hautes Études Commerciales in Paris in 1967, Champfleury earned his MBA degree from Stanford University in Beginning his 30-year career in luxury goods at Eli Lilly, he served as the CEO of various companies such as Yves Saint Laurent Parfums, Austin Nichols and Co., and Manuel Canovas.

148 146 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION SENIOR MANAGEMENT Mustafa Sani Şener Member of the Board of Directors and President & CEO Mustafa Sani Şener was appointed Member of the Board of Directors, President and CEO of TAV Airports in After graduating from Black Sea Technical University (BTU), Department of Mechanical Engineering in 1977, Şener earned his Master s degree in fluid mechanics in 1979 from the Department of Applied Sciences, University of Sussex in the UK. He has been awarded an Honorary Doctorate from BTU for his invaluable contributions to the development of Turkish engineering at the international level. Prior to his career at TAV Airports, he served in various positions, from project manager to general manager, in national and international projects. Mustafa Sani Şener is currently a Member of the Board of Directors of the Airports Council International (ACI) Europe. Murat Uluğ Finance Director (CFO) Murat Uluğ was appointed the CFO of TAV Airports in He is also a Member of the Corporate Governance Committee, and has been a Member of the Board of Directors of Havaş Ground Handling since He graduated from Istanbul Technical University, Faculty of Electrical and Electronic Engineering, Department of Electronic and Communication Engineering in Uluğ received his Executive MBA degree from the joint program of Istanbul Bilgi University and Manchester Business School in After 11 years of banking experience in ABN AMRO, HSBC and Garanti Bank, Uluğ served as the Finance Coordinator at Akfen Holding before joining TAV Airports. Serkan Kaptan Business Development & Investments Director Serkan Kaptan was appointed the Business Development Director of TAV Airports in Kaptan is also the Chairman of the Board of Directors of North Hub Services, Vice Chairman of the Board of Directors of Cyprus Airport Services, and Executive Committee Member for TAV Georgia and TAV Macedonia. He graduated from Istanbul University, Department of Business Administration in Kaptan received his MBA degree from Marmara University in Before joining TAV Airports in 1998, he worked at Birgenair Charter Group as dispatcher and operations supervisor. He served as an airport operations consultant at Airport Consulting Vienna from 1998 to Having a wealth of experience in airport and airline operations, privatization and public-private partnerships, acquisitions, new businesses spanning 18 years, Kaptan managed the Iran and Georgia operations. He has served as a Member of the Board of Directors at TAV Airports, Havaş, and Turkish Ground Services (TGS). He has also been the Chairman of the Turkish-Latvian Business Council and a Member of the Board of Directors of the Turkish-Czech Business Council in the Foreign Economic Relations Board of Turkey (DEİK) since 2010.

149 147 TAV AIrports HoldIng Annual Report 2010 Altuğ Koraltan Internal Audit Director Altuğ Koraltan was appointed the Internal Audit Director of TAV Airports in After graduating from Istanbul University, Department of Business Administration, in 1986, Koraltan began his career as an External Auditor at Peat Marwick&Mitchell between 1986 and He served as a sales representative at the Baghdad office of ENKA Marketing. Working at Effemex-Mars as a Finance Manager in 1990, Koraltan served as Internal Auditor, Securities Department Assistant Manager and Dealer at the foreign exchange desk of the Treasury Department at Ottoman Bank during the following five years. Serving as the Chairman of the Internal Audit Board of OYAK Bank for a one-year term in 1997, Koraltan was the head of Internal Audit in charge of Turkey and Greece at ABN AMRO Bank for ten years, from 1997 to 2007, before joining TAV Airports. Murat Örnekol Operations Director Murat Örnekol was appointed the Operations Director of TAV Airports in He graduated from Middle East Technical University, Department of Industrial Engineering in Örnekol served as the General Manager of TAV Esenboğa between 2006 and Before joining TAV Airports, Örnekol worked for Beretta Holding as the General Manager between 2000 and 2006, and from 1991 to 2000 served as Deputy CEO of Bayındır Holding Co., President of Health Care Division, Director of Telecom Project, Logistics and Business Development Coordinator at Bayındır Group. In his early career, Örnekol worked as General Manager at Bordata, an IT company and as Planning Engineer, IT Manager and Trade Manager at Kutlutaş Holding. Waleed Ahmed Youssef Strategy Director Waleed Ahmed Youssef was appointed the Strategy Director of TAV Airports in A graduate of the University of California at Berkeley s Department of Civil Engineering, he subsequently earned his Master s degree in transportation economics and PhD in air transport finance from Berkeley. Prior to joining TAV Airports, Youssef served as Director at Abu Dhabi Airports Company, and as Aviation Specialist at the International Finance Corporation (IFC), the private sector arm of the World Bank Group. Having vast experience in airport privatization, Youssef managed the JFK Terminal 4 (the US), Brisbane International Airport (Australia), and Bangalore International Airport (India) operations, and served as privatization advisor to the governments of Jordan (Amman), Saudi Arabia (Hajj Terminal), Nigeria (Abuja) and Panama (Howard). Youssef is a member of the World Economics Standing Committee at Airports Council International (ACI) and a member of the Committee on Airfield and Airspace Capacity and Delay at the US National Academy of Sciences Transportation Research Board.

150 148 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION SENIOR MANAGEMENT Haluk Bilgi Business Development Director (Subsidiaries) and TAV Tunisie Country Director Haluk Bilgi was appointed the Business Development Director Responsible for Subsidiaries of TAV Airports in 2008 and also serves as TAV Tunisie Country Director. He graduated from Istanbul University, Faculty of Economics, Department of Economics in Bilgi received his MBA degree from Middle East Technical University in 1999, and attended the Structuring Effective Private Equity Partnership Program of Harvard Business School. He began his career as a Foreign Relations Specialist at BBBAG in Assuming his first position abroad in 1993 with Sibkon Siberia, Bilgi joined Tepe Group in 1995, and served as Senior Executive in the Russian Federation, the UK, the US and Iraq at Tepe Group and its subsidiaries for ten years. Before joining TAV Airports as Business Development Group Manager in 2005, Bilgi served as the Business Development Coordinator at Tepe Construction and has served as a Member of the American Management Association, Foreign Economic Relations Board s Turkish American Business Council International Contracting Committee, Central Anatolia Exporters Union Board of Directors, and Member of Global Ethics. Deniz Aydın Financial Affairs Director Deniz Aydın, who was appointed TAV Airports Financial Affairs Director in July 2010, originally joined TAV in 2006 as Financial Affairs Coordinator. She graduated from Middle East Technical University, Department of Economics in Prior to joining TAV Airports, Aydın served in the financial affairs departments of companies such as Ernst & Young, Akfen Holding, Bobcock & Wilcox Gama Kazan and FMC Nurol Savunma Sanayi in establishing cost systems, management and international reporting systems, and other similar systems. Obtaining a CPA qualification in 2004, Aydın is currently a member of the Istanbul TURMOB Independent Accountant and Financial Advisors Chamber (SMMM). Ersagun Yücel Member of the Board of Directors and General Secretary Ersagun Yücel was appointed the General Secretary of TAV Airports in 2002 and as the Member of the Board of Directors in He graduated from the Department of Business Administration, California Newport University in Yücel is currently pursuing his MBA degree at the same university. He also graduated from Yıldız Technical University, Department of Serigraphy in 1994 and attended the New York University Advertising and Marketing Program in Beginning his career as a graphic artist in MR Com Graphics in 1993, Ersagun Yücel worked as manager in Rifle Jeans and Calvin Klein Jeans between 1995 and He joined TAV Airports in 1999 as the Assistant to the President & CEO. In addition to his responsibilities as General Secretary of TAV Airports, Yücel also oversees the activities of the Corporate Communications and External Relations departments that report to the Holding s General Secretary as well as Board of Directors Administrative Affairs Department.

151 149 TAV AIrports HoldIng Annual Report 2010 Banu Pektaş General Counsel Banu Pektaş was appointed the General Counsel of TAV Airports in She graduated from Istanbul University, Faculty of Law in Pektaş worked as a freelance attorney between 1965 and During the same period, she also served as a lecturer at Istanbul University, School of Foreign Languages. Between 1987 and 2006, she was the Legal Counsel of Coca-Cola Turkey and served as the Head Counsel over these years with responsibilities increasing to cover 36 countries in the Eurasia and the Middle East Group of the company. Kemal Ünlü General Manager, TAV Istanbul Kemal Ünlü was appointed the General Manager of TAV Istanbul in He graduated from Gazi University, Department of Electrical Engineering in Ünlü joined TAV Airports in 2004 after leaving his post as the Principal in Charge of Atatürk Airport at the Turkish State Airports Authority (DHMİ). He held various positions at the Turkish State Airports Authority Esenboğa, Antalya and Atatürk Airports between 1978 and Nuray Demirer General Manager, TAV Esenboğa Nuray Demirer was appointed the General Manager of TAV Esenboğa in She graduated from Istanbul Technical University, Department of Architecture in Demirer joined TAV Airports for the construction of the Atatürk Airport International Terminal in Demirer was the Project Manager of TAV Esenboğa Domestic and International Terminals. She served as the Assistant General Manager of TAV Esenboğa between 2006 and Beginning her career at Atölye T Architecture in 1988, Demirer served in both the construction and the operation of Eczacıbaşı Pharmaceuticals Factory, as well as Site Manager, Construction Manager and Project Manager at Tepe Construction.

152 150 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION SENIOR MANAGEMENT Fırat Erkan Balcı General Manager, TAV Izmir Fırat Erkan Balcı was appointed the General Manager of TAV Izmir in Balcı was appointed as the Assistant General Manager of TAV Izmir in 2006 and served as the Acting General Manager from March 2008 to January He graduated from Middle East Technical University, Department of Civil Engineering in He served as the Assistant General Manager of TAV Izmir between 2006 and Before joining TAV Airports, Balcı worked as the Operations Manager at the Antalya Airport International Terminal I, IT Project Manager at Fraport, and IT Chief at Bayındır Antalya Airport. Ersel Göral General Manager, TAV Tunisie Ersel Göral was appointed the General Manager of TAV Tunisie in He graduated from Istanbul University, Department of Business Administration in He served at Tbilisi and Batumi International Airports as the General Manager of TAV Georgia between 2005 and Göral joined TAV Istanbul in 1999 and worked as Terminal Operations Manager and Assistant General Manager. Beginning his career as an Operations Chief at Çelebi Ground Handling in 1993, he later served as Assistant Station Manager at Gözen Air. K. Mete Erkal General Manager, TAV Georgia K. Mete Erkal was appointed the General Manager of TAV Georgia in June He graduated from the Southern Illinois University, Department of Finance in Erkal served as the Operations Coordination Manager of TAV Airports from 2008 to He was a Management Trainee at the Blinder&Robinson Co., in St. Louis, the US and served as the New York and Paris Lines Manager at Turkish Airlines before He served as the Assistant General Manager, responsible from Sales and Services in the privatization of Havaş and in the partnership with Swissport from 1995 to 1999, and from 1999 to 2002, he served as the Commerce Director at Çelebi Air Services. Erkal, who served as the Marketing Director at ATA Holding for three years before joining TAV Airports, is also a Member of the American Marketing Association.

153 151 TAV AIrports HoldIng Annual Report 2010 Zoran Krstevski General Manager, TAV Macedonia Zoran Krstevski was appointed the General Manager of TAV Macedonia in January He graduated from the University St. Cyril & Methodius, Faculty of Law in Krstevski served as the General Director of the Civil Aviation Agency of the Republic of Macedonia from 2008 to 2010 before joining TAV Airports. During his mandate he was a member of the Provisional Council of the Eurocontrol Management Board, member of the Enlarged Committee, member of ECAC, and EASA Management Board Observer. Krstevski worked as the General Director of JSC Airports Macedonia between 2006 and 2008, where he was a member of the ACI Policy Committee. He was a Member of Parliament of the Republic of Macedonia from 2002 to 2006 and served as the Deputy Prime Minister for European Affairs from 2000 to Krstevski, who worked as the Vice President and Assistant General Director of JSC Makpetrol from 1996 to 2000, was the General Director of PEAS Airport Services for three years, and a Senior Expert Associated with Aviation Law between 1986 and Eda Bildiricioğlu General Manager, TAV Operations Services Eda Bildiricioğlu was appointed the General Manager of TAV Operations Services in She graduated from the Eastern Mediterranean University, Department of Business Administration and Economics in Bildiricioğlu served as marketing manager at various companies before joining TAV Airports in 1997 as the Commercial Affairs Manager. Binnur Güleryüz Onaran General Manager, TAV IT Binnur Güleryüz Onaran assumed her current position as the General Manager of TAV IT in July She was appointed the System Support and Application Assistant General Manager of TAV IT in 2006 and served as the Acting General Manager from October 2009 to July Having attended the Computer Programmer/Analyst Program at Conestoga College from 1990 to 1993, Onaran administered trainings on computer programming and network administration as the Training Manager at Vancouver, CDI College from 1993 to She worked as Manager at the Information Technology and Organization Department of Mercedes Benz Turkey from 1995 to After completing the executive training program at Daimler Chrysler, she was appointed the Manager of Organization & IT Administration of Mercedes Benz Turkey in Having worked as IT Director of TÜVTURK before joining TAV Airports, Onaran carried out various network, telecommunication, software, ERP and infrastructure system projects, and served in organizational structuring, process optimization and system development projects.

154 152 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION SENIOR MANAGEMENT Turgay Şahan General Manager, TAV Security Turgay Şahan was appointed the General Manager of TAV Security in April Joining TAV Security in 2006 as the Esenboğa Airport Security Manager, Şahan served as the Assistant General Manager and the Esenboğa Airport Private Security Coordinator from January 2010 to April He graduated from the Police Academy in Şahan attended the Scotland Yard Police Department Occupational Collaboration Program between 1989 and 1990 and the European Union Integration Course in Ankara University between 1999 and He served at various positions in different units of Izmir, Tunceli, Ankara Police departments and he also served in Haiti, Bosnia, Kosovo, United Nations Peacekeeping Force, Belgium ECAC and as Airports Security Branch Manager at Security General Directorate of National Police Protection Department and Chairman of Training, Inspection and Investigation Experts Committee (EADUK). Müjdat Yücel General Manager, Havaş Müjdat Yücel was appointed the General Manager of Havaş in 2005 after joining Havaş as Assistant General Manager in He worked for Turkish Airlines from 1972 to During his tenure at Turkish Airlines, Yücel served in Singapore, Iran, the US, and the UK internationally, as well as serving as the Head of Ground Operations for two years and as the Assistant General Manager of Ground Operations for four years in Turkey. Ersan Arcan General Manager, ATÜ Ersan Arcan was appointed the General Manager of ATÜ in October He graduated from Schiller University (Heidelberg), Department of Business Administration in Arcan served as Operations Manager between 1999 and 2006, and as Assistant General Manager between 2006 and 2007 at ATÜ. Before joining TAV Airports, Arcan worked as Sales Representative at A.T.A s.a.r.l in Switzerland and as Sales Manager at A.R.E.X Ltd. in Luxembourg.

155 153 TAV AIrports HoldIng Annual Report 2010 Sadettin Cesur General Manager, BTA Sadettin Cesur was appointed the General Manager of BTA in He graduated from the Istanbul Tourism and Hotel Management School and attended Managing Successfully Program in the US. Before joining TAV Airports, Cesur also worked for five-star hotels including Çınar Hotel, Parksa Hilton, Conrad Istanbul and the Four Seasons Hotel.

156 154 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION COMMITTEES Audit Committee Chairman of the Audit Committee Ali Haydar Kurtdarcan Vice Chairman of the Board of Directors TAV Airports Members of the Audit Committee Önder Sezgi Member of the Board of Directors TAV Airports Hüseyin Kadri Samsunlu Executive Vice President of Financial Affairs Akfen Holding Pierre de Champfleury (Independent) Member of the Board of Directors TAV Airports Corporate Governance Committee Chairman of the Corporate Governance Committee Mehmet Cem Kozlu (Independent) Member of the Board of Directors TAV Airports Members of the Corporate Governance Committee Özlem Tekay President of TAV Learning and Innovation Center TAV Airports Murat Uluğ Finance Director TAV Airports

157 155 TAV AIrports HoldIng Annual Report 2010 AGENDA FOR THE ORDINARY GENERAL ASSEMBLY MEETING Agenda for the Ordinary General Assembly Meeting of TAV AIRPORTS HOLDING CO. for 2010, to be held on Friday, May 13, 2011: 1. Opening and formation of the Presidential Council 2. Granting the Presidential Council the authority to sign the Minutes of the General Assembly Meeting 3. Reading, discussion and approval of the Annual Report of the Board of Directors and the Report of the Statutory Auditors of the Company for Reading, discussion and approval of the Balance Sheet and the Profit and Loss Statements of the Company for Submission for the information and approval of the General Assembly of the fact that the Company has no distributable profit when the net profit for the period (TL 99,952,661 profit) is netted out with the losses from previous years (TL 100,150,613 loss); therefore no dividend should be distributed to the shareholders and the consolidated net profit should be set aside as extraordinary reserve 6. Releasing members of the Board of Directors and the Statutory Auditors from their duties for Election of new statutory auditors in place of the statutory auditors whose terms of office have expired and determination of the terms of office and remuneration of the newly elected statutory auditors 8. Submission of the elected Independent Audit Company for the approval of the General Assembly 9. Presentation of information to the General Assembly about transactions conducted with Related Parties pursuant to Article 5 of the Communiqué of Capital Markets Board Series: IV No: Presenting information to the shareholders of the donations made by the Company in Presenting information to the shareholders regarding the pledges, collaterals and mortgages granted by the Company pursuant to Decision No. 28/780 of the Capital Markets Board dated September 9, Granting the Chairman and the Members of the Board of Directors the authority to perform the transactions stipulated in Articles 334 and 335 of the Turkish Commercial Code, 13. Wishes and requests 14. Closing

158 156 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION Statutory Auditors Report TO THE ORDINARY GENERAL ASSEMBLY OF TAV AIRPORTS HOLDING CO. Title : TAV Airports Holding Co. Head Ofice : Istanbul Capital : TL 363,281,250 (as of December 31, 2010) Area of Operation : Airports, Investment and Operation Activities regarding Airport Terminal Construction and Operation, participation in companies engaged in such activities and provision of management and financing services. Names and Terms of Office of the Statutory Auditors,and whether they are shareholders or employees of the Company Number of Board of Directors Meetings Attended and Board of Statutory Auditors Meetings Held The Scope of the Examination Performed on the Company s Accounts, Books and Documents, Dates of such Examinations, and Conclusion Reached Number and Conclusions of the Counts Performed in the Company s Treasury Pursuant to Article 353, Section 1.3 of the Turkish Commercial Code Number and Dates of the Audits Pursuant to Article 353, Section 1.4 of the Turkish Commercial Code Complaints and Frauds Reported and Actions Taken in Response : Murat AŞKAR, Meral ALTINOK, Belgin BERKER Our term of office is two years. We are not shareholders of the Company. We are not employees of the Company. : : We performed examinations and audits during the first weeks of the 3 rd, 6 th, 9 th and 12 th months, in accordance with the Tax Laws and the Turkish Commercial Code; we have not encountered any issue to critique. : Inventory counts were performed and count reports were created during the audit; as a result of the counts, we determined that actual inventories agree with the records. : As a result of the examinations we performed on the first day of each month, we determined that securities present agree with the records. : No complaints were reported to the statutory auditors. We have audited the transactions and accounts of TAV Airports for the fiscal year from January 1, 2010 to December 31, 2010 in accordance with the Turkish Commercial Code, the Company s Articles of Association, other laws and applicable legislation and generally accepted Accounting Principles and Standards. In our opinion, the balance sheet prepared as of December 31, 2010 factually and accurately reflects the Company s true financial position as of this date; and the income statement prepared for the period from January 1, 2010 to December 31, 2010 factually and accurately reflects the Company s operations results for this period; the profit distribution proposal is in accord with the laws and the Company s Articles of Association. We recommend the approval of the balance sheet and the income statement and the acquittal of the Board of Directors from its fiduciary duties. AUDIT COMMITTEE Murat AŞKAR Meral ALTINOK Belgin BERKER

159 157 TAV AIrports HoldIng Annual Report 2010 STATEMENT OF RESPONSIBILITY STATEMENT OF RESPONSIBILITY PURSUANT TO ARTICLE 9 OF SECTION THREE OF THE COMMUNIQUÉ SERIAL: XI NO: 29 OF THE CAPITAL MARKETS BOARD Approved by the Board of Directors and the Audit Committee, the consolidated financial statements of the Company regarding the period of January-December 2010, which were prepared in accordance with the mandatory format stipulated by the Capital Markets Board (CMB) on December 20, 2004, to comply with the CMB resolution 11/367, dated March 17, 2005 and the International Financial Reporting Standards stipulated by the Communiqué Serial: XI No: 29 of the CMB on Principles of Financial Reporting in Capital Markets are enclosed herewith. We hereby declare that; a) We have reviewed the consolidated financial statements dated December 31, 2010, b) To the best of our knowledge, the consolidated financial statements do not contain any untrue statement or any omission of material facts that may result in misleading conclusion as of the date of issuance, c) Prepared in accordance with the financial reporting standards in effect, the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and the annual report includes a fair review of the development and performance of the business and the financial position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties faced. With Kind Regards, M. Sani ŞENER Deniz AYDIN President & CEO Financial Affairs Director

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161 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER March 2011 This report contains the Independent Auditors Report comprising 1 page and Consolidated Financial Statements and their explanatory notes comprising 97 pages.

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163 Independent Auditors Report To the Board of Directors of TAV Havalimanları Holding Anonim Şirketi We have audited the accompanying consolidated financial statements of TAV Havalimanları Holding Anonim Şirketi and its subsidiaries (the Group ), which comprise the consolidated statement of financial position as at 31 December 2010, the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2010, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. İstanbul, Turkey 3 March 2011

164 162 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Notes 31 December December 2009 ASSETS Property and equipment ,534, ,527,566 Intangible assets 18 37,877,865 41,320,152 Airport operation right ,271, ,041,011 Other investments 20 24,238 24,238 Goodwill ,019, ,402,835 Prepaid rent expenses 21 82,283, ,413,971 Trade receivables ,810, ,457,502 Other non-current assets ,680 8,930,598 Deferred tax assets 22 79,492,563 54,254,039 Total non-current assets 1,371,917,160 1,338,371,912 Inventories 23 13,966,730 11,403,317 Prepaid rent expenses ,592, ,275,560 Trade receivables 25 77,681,614 62,044,641 Due from related parties 40 5,124,375 10,482,379 Derivative financial instruments 36-6,390,781 Other receivables and current assets 24 33,305,357 29,287,322 Cash and cash equivalents 26 32,442,373 34,010,922 Restricted bank balances ,444, ,849,601 Total current assets 667,557, ,744,523 TOTAL ASSETS 2,039,474,431 1,923,116,435 The accompanying notes form an integral part of these consolidated financial statements.

165 163 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Notes 31 December December 2009 EQUITY Share capital ,383, ,383,978 Share premium 220,286, ,286,470 Legal reserves 21,655,917 18,385,795 Other reserves 14,622,932 - Revaluation surplus 1,982,718 2,324,325 Purchase of shares of entities under common control 40,063,860 40,063,860 Cash flow hedge reserve (61,729,366) (59,776,657) Translation reserves 849,301 (2,056,517) Retained earnings / (accumulated losses) 37,209,526 (9,168,016) Total equity attributable to equity holders of the Company 437,325, ,443,238 Non-controlling interests 103,060,117 40,555,777 Total Equity 540,385, ,999,015 LIABILITIES Loans and borrowings 30 1,008,094,394 1,089,524,346 Reserve for employee severence indemnity 31 7,451,972 4,645,483 Due to related parties 40 14,130,564 19,082,385 Deferred income 33 21,688,366 14,339,463 Deferred tax liabilities 22 6,281,310 7,335,962 Total non-current liabilities 1,057,646,606 1,134,927,639 Bank overdraft 26 2,865,313 2,379,933 Loans and borrowings ,363, ,758,985 Trade payables 35 34,158,389 29,306,087 Due to related parties 40 14,021,181 12,285,718 Derivative financial instruments ,968,109 85,400,809 Current tax liabilities 16 9,920,571 1,391,675 Other payables 32 38,074,621 39,264,452 Provisions 34 4,832,799 2,695,918 Deferred income 33 7,238,327 5,706,204 Total current liabilities 441,442, ,189,781 Total Liabilities 1,499,088,978 1,510,117,420 TOTAL EQUITY AND LIABILITIES 2,039,474,431 1,923,116,435 The accompanying notes form an integral part of these consolidated financial statements.

166 164 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Notes Construction revenue 8 41,627, ,491,359 Operating revenue 9 713,278, ,957,180 Other operating income 10 39,627,856 35,970,417 Construction expenditure 8 (41,410,646) (271,354,562) Cost of catering inventory sold (16,466,156) (13,865,759) Cost of duty free inventory sold (64,892,061) (55,306,456) Cost of services rendered (42,097,025) (34,309,570) Personnel expenses 11 (219,294,927) (152,826,421) Concession and rent expenses 12 (129,638,846) (143,621,639) Depreciation and amortisation expenses 14 (59,544,585) (37,224,592) Other operating expenses 13 (100,439,595) (72,331,417) Operating profit 120,750, ,578,540 Finance income 31,885,484 25,120,947 Finance costs (89,169,954) (84,588,880) Net finance costs 15 (57,284,470) (59,467,933) Profit before income tax 63,466,045 53,110,607 Income tax expense 16 (11,826,115) (1,645,831) Profit for the year 51,639,930 51,464,776 Other comprehensive income Revaluation of intangible assets 68,320 68,320 Effective portion of changes in fair value of cash flow hedges (13,594,103) (36,225,843) Foreign currency translation differences for foreign operations 3,237,686 (1,365,484) Income tax on cash flow hedge reserves 4,868,363 7,299,593 Other comprehensive income for the year, net of tax (5,419,734) (30,223,414) Total comprehensive income for the year 46,220,196 21,241,362 Profit attributable to: Owners of the Company 49,780,525 50,523,133 Non-controlling interests 1,859, ,643 Profit for the year 51,639,930 51,464,776 Total comprehensive income attributable to: Owners of the Company 50,801,954 20,932,633 Non-controlling interests (4,581,758) 308,729 Total comprehensive income for the year 46,220,196 21,241,362 Weighted average number of shares outstanding 363,281, ,693,065 Basic and diluted earnings per share The accompanying notes form an integral part of these consolidated financial statements.

167 165 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Note Share Capital Share Premium Legal Reserves Other Reserves Revaluation Surplus Attributable to owners of the Company Purchase of Shares of Entities Under Common Control Cash Flow Hedge Reserve Translation Reserves Retained Earnings / (Accumulated Losses) Total Balanceat 1 January ,910, ,182,481 15,062,069-2,665,932 40,063,860 (31,301,803) (872,551) (56,688,149) 294,022,106 15,017, ,039,300 Total comprehensive income for the year Profit for the year ,523,133 50,523, ,643 51,464,776 Other comprehensive income Revaluation of intangible assets (341,607) ,927 68,320-68,320 Effective portion of changes in fair value ofcash hedges, net of tax (28,474,854) - - (28,474,854) (451,396) (28,926,250) Foreign currency translation differences for foreign operations (1,183,966) - (1,183,966) (181,518) (1,365,484) Total other comprehensive income (341,607) (28,474,854) (1,183,966) 409,927 (29,590,500) (632,914) (30,223,414) Total comprehensive income for the year (341,607) (28,474,854) (1,183,966) 50,933,060 20,932, ,729 21,241,362 Transactions with owners of the Company, recognized directly in equity Contributions by and distributions to owners of the Company Issue of share capital 57,473, , ,577,700 19,975 57,597,675 Dividend distributions (404,720) (404,720) Changes in ownership interests in subsidiaries Group structure change ,878,983 9,878,983 Sale of non-controlling interest ,646,415 15,646,415 Total transactions with owners of the Company 57,473, , ,577,700 25,140,653 82,718,353 Transfers - - 3,323, (3,412,927) (89,201) 89,201 - Balance at31 December ,383, ,286,470 18,385,795-2,324,325 40,063,860 (59,776,657) (2,056,517) (9,168,016) 372,443,238 40,555, ,999,015 Balance at 1 January ,383, ,286,470 18,385,795-2,324,325 40,063,860 (59,776,657) (2,056,517) (9,168,016) 372,443,238 40,555, ,999,015 Total comprehensive income for the year Profit for the year ,780,525 49,780,525 1,859,405 51,639,930 Other comprehensive income Revaluation of intangible assets (341,607) ,927 68,320-68,320 Effective portion of changes in fair value of cash hedges, net of tax (1,952,709) - - (1,952,709) (6,773,031) (8,725,740) Foreign currency translation differences for foreign operations ,905,818-2,905, ,868 3,237,686 Total other comprehensive income (341,607) - (1,952,709) 2,905, ,927 1,021,429 (6,441,163) (5,419,734) Total comprehensive income for the year (341,607) - (1,952,709) 2,905,818 50,190,452 50,801,954 (4,581,758) 46,220,196 Transactions with owners of the Company, recognized directly in equity Contributions by and distributions to owners of the Company Issue of share capital , ,808 Dividend distributions (640,545) (640,545) Changes in ownership interests in subsidiaries Sale of non-controlling interest, net ,622, ,622,932 66,981,047 81,603,979 Total transactions with owners of the Company ,622, ,622,932 66,543,310 81,166,242 Transfers - - 3,270, (3,812,910) (542,788) 542,788 - Balance at 31 December ,383, ,286,470 21,655,917 14,622,932 1,982,718 40,063,860 (61,729,366) 849,301 37,209, ,325, ,060, ,385,453 Non- Controlling Interests Total Equity The accompanying notes form an integral part of these consolidated financial statements.

168 166 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit for the period 51,639,930 51,464,776 Adjustments for: Amortisation of airport operation right ,765,582 19,266,667 Depreciation of property and equipment ,218,211 13,464,997 Amortisation of intangible assets ,560,792 4,492,928 Amortisation of prepaid rent ,638, ,621,639 Provision for employment termination benefits 4,393,388 5,640,693 Provision set for doubtful receivables 38 1,336, ,451 Provision set for tax penalties ,174 Other provisions set 204, ,277 Gain on sale of non-controlling interest in a subsidiary 10 - (8,993,461) Discount on receivables and payables, net (22,078) 9,937 Impairment losses on property and equipment 17 6,638,910 - Gain on sale of property and equipment (386,413) (67,121) Provision set / (reversal) for unused vacation 34 1,802,934 (47,067) Provision for slow moving inventory 53,749 31,887 Accrued insurance income 24 (6,924,254) - Interest income 15 (14,619,447) (17,514,462) Interest expense on financial liabilities 15 81,804,039 68,068,857 Income tax expense 16 11,826,115 1,645,831 Discount income from concession receivable (10,242,300) (7,542,366) Unrealised foreign exchange differences on statement of financial position items 23,649,535 18,182,260 Cash flows from operating activities 340,338, ,648,897 Change in trade receivables (16,948,645) (6,315,574) Change in non-current trade receivables 30,888,845 29,391,720 Change in inventories (2,617,149) (1,664,482) Change in due from related parties 5,358,004 4,677,867 Change in restricted bank balances 159,245,338 84,032,565 Change in other receivables and current assets 17,525,665 34,959,996 Change in trade payables (7,513,802) (13,193,070) Change in due to related parties (3,216,358) (30,652,508) Change in other payables and provisions 7,691,195 9,000,296 Change in other long term assets 8,328,918 5,960,467 Additions to prepaid rent expenses 21 (97,461,768) (104,458,368) Cash generated from operations 441,618, ,387,806 Income taxes paid 16 (24,797,818) (11,158,291) Interest paid (78,695,629) (79,336,425) Retirement benefits paid 31 (1,834,364) (4,215,585) Net cash from operating activities 336,290, ,677,505 The accompanying notes form an integral part of these consolidated financial statements.

169 167 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Notes CASH FLOWS FROM INVESTING ACTIVITIES Interest received 14,509,566 16,952,284 Proceeds from sale of property and equipment and intangible assets 1,863, ,517 Proceeds from sale of non-controlling interest in a subsidiary 141,668,682 27,999,826 Acquisition of subsidiary net of cash acquired (3,241,766) (18,164,878) Acquisition of property and equipment (79,841,910) (52,459,245) Additions to airport operation right (38,015,639) (259,025,519) Acquisition of intangible assets (1,046,598) (594,035) Net cash provided from / (used in) investing activities 35,896,039 (284,941,050) CASH FLOWS FROM FINANCING ACTIVITIES New borrowings raised 140,991, ,969,675 Repayment of borrowings (215,050,661) (198,880,814) Change in restricted bank balances (242,350,100) (136,500,200) Non-controlling interest change (59,633,892) (14,952,311) Addition to / (repayment of) finance lease liabilities 1,803,095 (47,106) Increase in share premium - 103,989 Proceeds from issue of share capital - 57,473,711 Net cash (used in) / provided from financing activities (374,240,555) 86,166,944 NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS (2,053,929) 10,903,399 CASH AND CASH EQUIVALENTS AT 1 JANUARY 26 31,630,989 20,727,590 CASH AND CASH EQUIVALENTS AT 31 DECEMBER 26 29,577,060 31,630,989 The accompanying notes form an integral part of these consolidated financial statements.

170 168 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 1. REPORTING ENTITY TAV Havalimanları Holding A.Ş. ( TAV, TAV Holding or the Company ) was established in 1997 under the name of Tepe Akfen Vie Yatırım Yapım ve İşletme A.Ş. in Turkey for the purpose of reconstructing the İstanbul Atatürk Airport (International Lines Building) and operating it for a limited period of 66 months. On 7 August 2006, the Company s name has been changed to TAV Havalimanları Holding A.Ş.. The address of the Company s registered office is İstanbul Atatürk Havalimanı Dış Hatlar Terminali Yeşilköy, İstanbul, Turkey. The Company is listed in İstanbul Stock Exchange since 23 February 2007 and the Company s shares are traded as TAVHL. The immediate parents and ultimate controlling parties of TAV and its subsidiaries are Tepe Group and Akfen Group. As explained in Note 3, Significant accounting policies, in years 2005, 2006 and 2007, the ultimate shareholders of the Company transferred their shares in certain companies and joint ventures to the Company. As a result of these share transfers, the Company became the parent company of these subsidiaries. TAV, its subsidiaries and its joint ventures are collectively referred to as the Group in this report. The Company s subsidiaries as at 31 December 2010 and 2009 are as follows: 31 December December 2009 Name of Subsidiary Principal Activity Place of operation Ownership interest % Voting power held % Ownership interest % Voting power held % TAV İstanbul Terminal İşletmeciliği A.Ş. ( TAV İstanbul ) İstanbul Airport Terminal Services Turkey TAV Esenboğa Yatırım Yapım ve İşletme A.Ş. ( TAV Esenboğa ) Ankara Airport Terminal Services Turkey TAV İzmir Terminal İşletmeciliği A.Ş. ( TAV İzmir ) İzmir Airport Terminal Services Turkey TAV Tunisie S.A. ( TAV Tunisie ) Airport Operator Tunisia TAV Batumi Operations LLC ( TAV Batumi ) Airport Management Service Provider Georgia TAV Urban Georgia LLC ( TAV Tbilisi ) Airport Operator Georgia Batumi Airport LLC Airport Operator Georgia TAV Macedonia Dooel Petrovec ( TAV Macedonia ) Airport Operator Macedonia TAV Gazipaşa Yapım, Yatırım ve İşletme A.Ş. ( TAV Gazipaşa ) Airport Operator Turkey SIA TAV Latvia ( TAV Latvia ) Airport Operator Latvia HAVAŞ Havaalanları Yer Hizmetleri A.Ş. ( HAVAŞ ) Ground Handling Services Turkey BTA Havalimanları Yiyecek ve İçecek Hizmetleri A.Ş. ( BTA ) Food and Beverage Services Turkey BTA Georgia LLC ( BTA Georgia ) Food and Beverage Services Georgia BTA Tunisie SARL ( BTA Tunisia ) Food and Beverage Services Tunisia BTA Macedonia Dooel Petrovec ( BTA Macedonia ) Food and Beverage Services Macedonia

171 169 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 31 December December 2009 Name of Subsidiary Principal Activity Place of operation Ownership interest % Voting power held % Ownership interest % Voting power held % BTA Unlu Mamülleri Pasta Üretim Turizm Gıda Yiyecek İçecek Hizmetleri San. ve Tic. A.Ş. ( Cakes & Bakes ) Food and Beverage Services Turkey TAV İşletme Hizmetleri A.Ş. ( TAV İşletme ) Operations & Maintenance ( O&M ), Lounge Services Turkey TAV Georgia Operation Services LLC ( TAV İşletme Georgia ) Lounge Services Georgia TAV Tunisie Operation Services SARL ( TAV İşletme Tunisia ) Lounge Services Tunisia TAV Tunisie Operation Services Plus SARL ( TAV İşletme Tunisia Plus ) Lounge Services Tunisia TAV Bilişim Hizmetleri A.Ş. ( TAV Bilişim ) Software and System Services Turkey TAV Özel Güvenlik Hizmetleri A.Ş. ( TAV Güvenlik ) Security Services Turkey The entities that are jointly controlled by the Company as at 31 December 2010 and 2009 are as follows: 31 December December 2009 Voting Ownership power held interest % % Ownership interest % Voting power held % Name of joint venture Principal Activity Place of operation ATÜ Turizm İşletmeciliği A.Ş. ( ATÜ ) Duty Free Services Turkey ATÜ Georgia Operation Services LLC ( ATÜ Georgia ) Duty Free Services Georgia ATÜ Tunisie SARL ( ATÜ Tunisia ) Duty Free Services Tunisia ATÜ Macedonia Dooel ( ATÜ Macedonia ) Duty Free Services Macedonia AS Riga Airport Commercial Development ( ATÜ Latvia ) Duty Free Services Latvia TAV Gözen Havacılık İşletme ve Ticaret A.Ş. ( TAV Gözen ) Operating Special Hangar Turkey Cyprus Airport Services Ltd. ( CAS ) Management and Ground Handling KKTC TGS Yer Hizmetleri A.Ş. ( TGS ) Ground Handling Turkey North Hub Services SIA ( NHS ) Ground Handling Latvia HAVAŞ, Gözen Havacılık ve Ticaret A.Ş. and Türkmen Havacılık Taşımacılık ve Ticaret A.Ş. formed a joint venture under the name of TAV Gözen on 10 June HAVAŞ has 32.4% ownership in TAV Gözen as at 31 December TAV Gözen is engaged in management of all operational inventory, machinery and system in the special hangar of İstanbul Atatürk Airport, and any construction and investment related to its subject. HAVAŞ and Kıbrıs Türk Havayolları Limited Şirketi ( KTHY ) formed a joint venture as 50% + 1 of participation for KTHY under the name of CAS according to the protocol signed on 1 September 2006 to construct an airport terminal and to undertake its management for ground handling operations in the Turkish Republic of Northern Cyprus ( KKTC ). CAS started its operations on 1 August 2008.

172 170 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) On 28 November 2008, HAVAŞ has become the preferred bidder for the tender held by Türk Hava Yolları A.O. ( THY ) to participate in the 50% share in TGS. For the acquisition of TGS see note 7. On 1 January 2010, TGS started its operations in five airports and it continues its operations in six airports as at 31 December On 12 April 2010, HAVAŞ signed the agreement regarding the purchase of 50% shares of NHS. For the acquisition of NHS, see note 7. Description of Operations The Group s core businesses are related to the construction of terminal buildings, management and operation of terminals or airports. TAV Esenboğa, TAV İzmir and TAV Gazipaşa enter into Build-Operate-Transfer ( BOT ) Agreements with Devlet Hava Meydanları İşletmesi Genel Müdürlüğü (General Directorate of State Airports Authority) ( DHMİ ), TAV Tbilisi with JSC Tbilisi International Airport ( JSC ), TAV Batumi with Georgian Ministry of Economic Development ( GMED ), TAV Tunisie with Tunisian Airport Authority (Office De L Aviation Civil Et Des Aeroports) ( OACA ) and TAV Macedonia with Macedonian Ministry of Transportation and Communication ( MOTC ). Under these agreements, the Group agrees to build or renovate or manage an airport or terminal within a specified period of time and in exchange receives the right to operate the airport and terminal for a preestablished period of time. At the end of the contracts, the Group will transfer the ownership of the terminal buildings or airports back to the related public authority, DHMİ, JSC, GMED, OACA or MOTC accordingly. In addition, the Group enters into subsequent stand alone contracts for the operation of airports and terminals. BOT Agreements The airport terminals operated by the Group are as follows: İstanbul Atatürk International Airport A BOT agreement was executed between TAV and DHMİ regulating the reconstruction, investment and operations of Atatürk International Airport International Lines Building (referred to as Atatürk International Airport Terminal or AIAT ) in year TAV was required to complete the construction by August 2000 and then had the right to operate the facilities of the International Lines Building for 3 years, 8 months and 20 days. TAV completed the reconstruction of the International Lines Building in January 2000 and started the operation seven months early, after completion of a significant portion of the construction. Construction of the remaining parts of the project was finalised in August DHMİ and the Undersecretariat of Treasury gave their acceptance of the project in August 2000 when the investment period was formally completed. An addendum to the agreement was made in September Under the terms of the addendum, TAV committed to enlarge the International Lines Building by 30% by year In return for extending the International Lines Building, the operation period of TAV was extended by 13 months 12 days (approximately 66 months in total) through June The contract expired in June 2005 and TAV transferred AIAT to DHMİ. On 3 September 2005, TAV İstanbul signed a rent agreement to operate AIAT and Atatürk Domestic Airport Terminal (referred to as ADAT ) for 15.5 years until year The rent agreement requires TAV İstanbul to make annual rent payments totaling US Dollar ( USD ) 2,543,000,000 plus VAT (18%) over the life of the rent agreement, of which USD 584,890,000 plus VAT has been prepaid at the beginning of the rent period under the terms of the rent agreement. In addition, TAV İstanbul is required to maintain the facilities throughout the rent period. An addendum has been signed on 4 November 2008, namely Atatürk Airport Development Project, covering installation of new passenger boarding bridges and construction of new commercial areas. Through this addendum TAV has undertaken approximately EUR 36 million of investment in exchange of the operation right of newly created commercial areas.

173 171 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Ankara Esenboğa International Airport A BOT agreement was executed between TAV Esenboğa and DHMİ on 18 August 2004 regulating the reconstruction, investment and operations of the Ankara Esenboğa International Airport (international and domestic terminals) for the period until May According to the Agreement, TAV Esenboğa was required to complete the construction within 36 months after the agreement date and would then have the right to operate the facilities of the Ankara Esenboğa International Airport Terminal for a period of 15 years and 8 months. TAV Esenboğa is providing terminal, car park and passenger boarding services since the beginning of operations on 16 October İzmir Adnan Menderes International Airport A BOT agreement was executed between TAV İzmir and DHMİ on 20 May 2005 regulating the reconstruction, investment and operations of İzmir Adnan Menderes Airport International Terminal. According to the Agreement, TAV İzmir was required to complete the construction within 24 months after the agreement date and would then have the right to operate the facilities of İzmir Adnan Menderes Airport International Terminal for a period of 6 years, 7 months and 29 days. An addendum to the Agreement was signed on 21 August Under the terms of the addendum, in return for additional works, the operation period of TAV İzmir was extended by 11 months 17 days through January TAV İzmir has been providing terminal, car park and passenger boarding services since the beginning of operations on 13 September Tbilisi International Airport A BOT agreement was executed between TAV Tbilisi and JSC on 6 September 2005 for the operations of Tblisi International Airport (both international, domestic terminals and parking-apron-taxi ways). The BOT agreement undertakes the design, engineering, financing, construction, testing, commissioning and maintenance of the new terminal for Tbilisi International Airport, for an initially agreed term of 10 years and 6 months from the commencement date of the new terminal operations. Subsequently, this period was extended by another 9.5 years until August 2027, in exchange for an obligation by TAV Tbilisi to invest an additional amount for the construction of the terminal (including construction of additional runways, extension of apron etc.) for Batumi airport. TAV Tbilisi is providing a wide range of airport activities such as terminal, car-park, cargo, ground handling, aircraft parking, apron and runway services-excluding air traffic control-in New Tbilisi International Airport since the beginning of operations on 8 February Batumi International Airport On 9 August 2007, TAV Batumi Operations signed an agreement with the Georgian Ministry of Economic Development to transfer the management rights of all shares of the Batumi Airport LLC to TAV Batumi for 20 years. According to such share management agreement, all airport operations (excluding only the air traffic control and aviation security services) of the Batumi International Airport will be carried out by TAV Batumi until August Tunisia Monastir and Enfidha International Airports A BOT agreement was executed between TAV Tunisie and OACA on 18 May 2007, for the operation of existing Monastir Habib Bourguiba Airport and new Enfidha Airport (International, domestic terminals and parking-apron-taxi-ways). Through the BOT agreement TAV Tunisie undertakes the operation of the existing Monastir Habib Bourguiba Airport and design, engineering, financing, construction, testing, commissioning and maintenance of the new Enfidha Airport. The operations of Monastir Habib Bourguiba Airport and Enfidha Airport were undertaken in January 2008 and December 2009, respectively. The concession periods of both airports will end in May The operations of the Monastir and Enfidha Airports cover a wide range of airport activities such as terminal, car-park, cargo, ground handling, aircraft parking, apron and runway services services excluding air traffic control services.

174 172 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Gazipaşa Airport Relating to the transfer of the operational rights of Antalya-Gazipaşa Airport via a lease, the concession agreement between TAV Gazipaşa and DHMİ was signed on 4 January The operation period of Antalya-Gazipaşa Airport, which currently has 500,000 annual passenger capacity, is 25 years until January 2033, and the operation of the airport covers activities within airside and landside facilities and area of runway, apron and taxiway. TAV Gazipaşa shall make an annual rent payment of USD 50,000 plus VAT as a fixed amount, until the end of the operation period; as well as a share of 65% of the net profit to DHMİ. Macedonia Skopje, Ohrid and Shtip Airports On 24 September 2008, the 20-year Concession Agreement for the construction and operation of Alexander the Great Airport in Skopje, renovation and operation of the St. Paul the Apostle Airport in Ohrid, and the construction and optional operation of the New Cargo Airport in Shtip airports was signed between TAV Macedonia and the Ministry of Transport and Communication of Macedonia. The operation of the airports shall cover all airport activities with the exception of air traffic control, and modernisation activities are contemplated to include the technical infrastructure. The effective date of the concession contract for Alexander the Great Airport and St. Paul the Apostle Airport is 1 March 2010 and final date of Concession Agreement is 1 March The effective date for initiating construction of New Cargo Airport in Shtip will be decided after meteorological and technical measurements which will last for at least 10 years after the effective date. Operations Contracts BOT operations and management contracts include the following: Terminal and airport services-the Group has the right to operate the terminals and airports as mentioned in the preceding paragraphs. This includes passenger, ramp and check-in counter services and services for parking-apron-taxi ways (for airport operations). A fee is charged to each airline based on the number of passengers that utilise the airport, based on the number of aircrafts that utilize ramps and runways and based on the number of check-in counters utilised by the airlines. Duty free goods-the Group has the right to manage duty free operations within the terminals which the Group operates. Duty free shopping is available to both arriving and departing passengers. The duty free shops are either operated by the Group or, in certain circumstances, subcontracted to other companies in exchange for a commission based on sales. Catering and airport hotel services-the Group has the right to manage all food and beverage operations within the terminals both for the passengers and the terminal personnel. The Group subcontracts certain food and beverage operations in exchange for a commission based on sales. Area allocation services-as a lessor, the Group leases office space in the airport terminal including the offices leased to the airlines for ticket office and banks. Ground handling-the Group has the right to provide all ground handling operations. Ground handling involves providing traffic, ramp, flight operation, cargo and all other ground handling services for domestic and international flights under the Civil Aviation Legislation License ( SHY 22 ). Additional activities include shuttle bus and car parking.

175 173 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Lounge services-the Group has the right to operate or rent the lounges to provide CIP services to the passengers who have the membership. Bus and car parking services-the Group has the right to operate the car park and render valet parking services. Revenues from bus operations include shuttle services running from airports to city centers. Software and system services-the Group develops software and systems on operational and financial optimisation in aviation, particularly terminal, flight management system and software programs and to meet the information systems requirements of group companies and certain third parties. Security services-the Group operates the security services within the domestic terminals. The Group employs approximately 18,768 (average: 17,535) people as at 31 December 2010 (31 December 2009: 10,719 (average: 12,194) people). 2. BASIS OF PREPARATION a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRSs ). The Group s consolidated financial statements were authorized for issue by the Board of Directors on 3 March The power to change the consolidated financial statements after the issuing of the consolidated financial statements is held by the General Assembly. b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments which are measured at fair value. The methods used to measure fair values are discussed further in note 4.

176 174 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) c) Functional and presentation currency TAV Holding and its subsidiaries operating in Turkey maintain their books of account and prepare their statutory financial statements in Turkish Lira ( TRL ) in accordance with the accounting principles as promulgated by the Turkish Commercial Code and tax legislation. The foreign subsidiaries and jointly controlled entities maintain their books of account in accordance with the laws and regulations in force in the countries in which they are registered. The accompanying consolidated financial statements expressed in EUR, the functional currency of TAV Holding, are based on the statutory records, with adjustments and reclassifications, including remeasurement from TRL to EUR for the purpose of fair presentation in accordance with IFRSs. Although the currency of the country in which the majority of the Group entities are domiciled is TRL, most of the Group entities functional currency and reporting currency is EUR. The table below summarizes the functional currencies of the Group entities: Company TAV Holding TAV Istanbul TAV Esenboğa TAV Izmir TAV Tunisie TAV Batumi TAV Tbilisi Batumi Airport LLC TAV Macedonia TAV Gazipaşa TAV Latvia HAVAŞ BTA BTA Georgia BTA Tunisie BTA Macedonia Cakes & Bakes TAV İşletme TAV İşletme Georgia TAV İşletme Tunisia TAV İşletme Tunisia Plus TAV Bilişim TAV Güvenlik ATÜ ATÜ Georgia ATÜ Tunisia ATÜ Macedonia ATÜ Latvia TAV Gözen CAS TGS NHS Functional Currency EUR EUR EUR EUR EUR Georgian Lari ( GEL ) GEL GEL EUR EUR EUR EUR TRL GEL Tunisian Dinar ( TND ) Macedonian Denar ( MKD ) TRL TRL GEL TND TND EUR TRL EUR GEL EUR EUR EUR USD USD TRL EUR

177 175 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) d) Use of estimates and judgements The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgements 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 3(f)-mark-up applied to construction cost incurred under IFRIC 12. 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 17 and 18-useful life of tangible and intangible assets Note 18-key assumptions used in discounted cash flow projections Note 22-utilisation of tax losses Note 31-measurement of reserve for employee severance indemnity Notes 34 and 39-provisions and contingencies Note 38-valuation of financial instruments e) Changes in accounting policies i) Overview Strarting as of 1 January 2010, the Group has changed its accounting policies in the following areas: Accounting for business combinations Accounting for increases in 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 is applied prospectively and had no material impact on earnings per share ( EPS ). 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.

178 176 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 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. 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. iii) Accounting for increases in 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 beeen applied prospectively and has had no material impact on EPS. Under the new accounting policy, acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a 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.

179 177 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 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 consolidated financial statements include the financial statements of the Company and entities controlled or jointly controlled by the Company (its subsidiaries and jointly controlled entities). 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. Each entity is consolidated based on the following methods: TAV İstanbul, TAV Esenboğa, TAV İzmir, TAV Macedonia, TAV Gazipaşa, TAV Latvia and TAV İşletme are fully consolidated without non-controlling interest s ownership. TAV Tunisie, TAV Tbilisi, TAV Batumi, Batumi Airport LLC, HAVAŞ, BTA, BTA Georgia, BTA Tunisie, BTA Macedonia, Cakes & Bakes, TAV İşletme Georgia, TAV İşletme Tunisia, TAV İşletme Tunisia Plus, TAV Bilişim and TAV Güvenlik are fully consolidated with the non-controlling interest s ownership reflected as a non-controlling interest. The share capital of Batumi Airport LLC is fully allocated as non-controlling interest due to the transfer of right on shares to JSC at the end of share management agreement period. In 2009, TAV Holding acquired 6% shareholding of TAV Tbilisi, increasing its total share from 60% to 66% and its voting power from 50% to 66%. After the transfer of 6% shares, TAV Tbilisi is fully consolidated with the non-controlling interest s ownership of 34% reflected as a non-controlling interest. ATÜ, ATÜ Georgia, ATÜ Tunisia, ATÜ Macedonia, ATÜ Latvia, TAV Gözen, CAS, TGS and NHS are proportionately consolidated. i) Business combinations The Group has changed its 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 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) Acquisitions from entities under common control: Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or, if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder s consolidated financial statements. The components of equity of the acquired entities are added to the same components within the Group equity and any gain/loss arising is recognised directly in equity.

180 178 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) iv) Loss of control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary,vany 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. v) Jointly controlled entities: 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. The Group reports its interests in jointly controlled entities using proportionate consolidation. The Group s share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line-by-line basis. 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 jointly controlled entities are eliminated to the extent of the Group s interest in the jointly controlled entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. vii) Effect of group structure change: After the acquisition of 6% shares of TAV Tbilisi in 2009, TAV Holding obtained control of TAV Tbilisi and accordingly TAV Tbilisi, which was previously proportionally consolidated, has started to be fully consolidated from the effective date of share transfer (Note 7). The effects of such changes are presented as effect of group structure change in the notes to the consolidated financial statements. viii) Acquisitions through business combinations As stated in the joint venture agreement which was approved by the Competition Board on 27 August 2009, 50% of TGS was acquired by HAVAŞ in TGS is jointly controlled by HAVAŞ and THY and is proportionately consolidated (Note 7). In April 2010, 50% of NHS was acquired by HAVAŞ. NHS is jointly controlled by HAVAŞ and Baltic Aviation Services and is proportionately consolidated (Note 7). The effects of such changes are presented as acquisitions through business combinations in the notes to the consolidated financial statements.

181 179 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) b) 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 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. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on qualifying cash flow hedges, which are recognised in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. ii) Foreign operations: The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Euro at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Euro at 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 noncontrolling 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. The Group entities use either EUR, TRL, USD, TND or GEL as functional currencies since these currencies are used to a significant extent in, or have a significant impact on, the operations of the related Group entities and reflect the economic substance of the underlying events and circumstances relevant to these entities. All currencies other than the currency selected for measuring items in the financial statements are treated as foreign currencies. Accordingly, transactions and balances not already measured in the functional currency have been re-measured to the related functional currencies in accordance with the relevant provisions of IAS 21 ( The Effects of Changes in Foreign Exchange Rates ). The Group uses EUR as the reporting currency. The financial statements of subsidiaries that report in the currency of a hyperinflationary economy (Turkey) are restated in terms of the measuring unit current at the reporting dates until 31 December 2005 before they are translated into EUR. Turkey came off highly inflationary status for the period beginning after 15 December 2005, therefore restatement for IAS 29 has not been applied since 1 January The financial statements of subsidiaries, namely BTA, TAV İşletme and TAV Güvenlik, which have the TRL as their functional currency, were restated to compensate for the effect of changes in the general purchasing power of the TRL until 31 December 2005, in accordance with IAS 29 as TRL was the currency of a hyperinflationary economy. Financial statements of such subsidiaries are then translated into Euro, the main reporting currency of the Group, by the exchange rate ruling at reporting date.

182 180 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) The EUR / TRL, EUR / GEL, EUR / TND, EUR / MKD, EUR / USD and exchange rates as of the related periods are as follows: 31 December December 2009 EUR / TRL EUR / GEL EUR / TND EUR / MKD EUR / USD c) 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. 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. Non-derivative financial assets of the Group comprise loans and receivables. 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 cash and cash equivalents, trade and other receivables, due from related parties, guaranteed passenger fee receivable from DHMİ (Concession receivables) (see note 25). Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. The Group s use of Project Accounts or Reserve Accounts or Funding Accounts is dependent upon the lenders consent according to financial agreements. Therefore, bank balances included in these accounts are presented as restricted bank balances in the consolidated statement of financial position.

183 181 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 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 is accounted for separately and is recognised initially at the fair value of the consideration (see also note 3(e)(vi)). ii) Non-derivative financial liabilities: The Group initially recognises debt securities issued 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, 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. The Group classifies non-derivative financial liabilities into the other financial liabilities category. 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. The Group has the following non-derivative financial liabilities: loans and borrowings, bank overdrafts, trade and other payables and due to related parties. Bank overdrafts that are repayable on demand and form an integral part of the Group s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. iii) Share capital: Ordinary shares are classified as equity. iv) Derivative financial instruments, including hedge accounting: The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. 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, 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 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 when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

184 182 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 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. The amount recognised in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the statement of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. 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. 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. d) Property and equipment i) Recognition and measurement: Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. 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 capitalized 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. Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognised net within other operating income in profit or loss. ii) 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 part 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.

185 183 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) iii) 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. 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 years are as follows: Buildings Machinery and equipment Vehicles Furniture and fixtures Leasehold improvements 50 years 4-15 years 5 years 2-15 years 1-15 years Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. e) 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. ii) Intangible assets recognised in a business combination: Customer relationships are the intangible assets recognised during the purchase of HAVAŞ shares in years 2006 and 2007, purchase of TGS shares in 2009 and purchase of NHS shares in DHMİ license is the intangible asset recognised during the purchase of HAVAŞ shares in years 2006 and 2007 and purchase of TGS shares in In a business combination or acquisition, the acquirer recognises separately an intangible asset of the acquiree at the acquisition date only if it meets the definition of an intangible asset in IAS 38 Intangible Assets and its fair value can be measured reliably. The fair values of DHMİ licence and customer relationship are determined by an independent external third party expert. The Group applied proportionate consolidation method to account for its 60% ownership interest in HAVAŞ until 30 September Therefore, intangible assets arising from the initial acquisition of HAVAŞ were reflected by 60%, being the shareholding of the Group, in the consolidated financial statements. In accordance with IFRS 3, the Group applied step acquisition during the purchase of the remaining 40% shareholding in HAVAŞ. Customer relationship and DHMİ licence were remeasured to their fair values. The fair value change attributable to 60% portion was recorded to the revaluation reserve under equity. This figure reflected the change in fair value of intangible assets which were already carried in the consolidated financial statements prior to the acquisition of the additional 40% shareholding. 50% share purchase of TGS and 50% share purchase of NHS are accounted by applying IFRS 3 in 2009 and 2010, respectively. DHMİ license and customer relations arising from the share purchase are revalued at their fair values which are determined by the independent valuation experts.

186 184 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) iii) Internally generated software: Internally generated software consists of airport software developed by TAV Bilişim. Internally generated software with finite useful lives is measured at cost less accumulated amortisation and permanent impairment losses. 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. 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. Purchased software is amortised over estimated useful lives, which is between 3-5 years. Intangible assets recognized in HAVAŞ, TGS and NHS acquisitions are customer relationships and DHMİ licence. Customer relationships have 10 years useful life and DHMİ licence has indefinite useful life since the duration of net cash inflow arising from DHMİ licence to the Company does not have any foreseeable limit. DHMİ licence is tested for impairment annually. Amortisation methods, useful lives and residual values are reviewed at each reporting and adjusted if appropriate. The estimated useful life of an intangible asset in a service concession arrangement is the period from when the Group is able to charge the public for the use of the infrastructure to the end of the concession period. vii) Service concession arrangements TAV Esenboğa and TAV İzmir are bound by the terms of the BOT Agreements made with DHMİ. According to the BOT agreements, TAV Esenboğa and TAV İzmir have guaranteed passenger fee to be received from DHMİ. The agreements cover a period up to January 2015 for TAV İzmir and May 2023 for TAV Esenboğa. A BOT agreement was executed between TAV Tbilisi and JSC on 6 September 2005 for the operations of airport (both international, domestic terminals and parking-apron-taxi ways). The agreement covers a period up to August A BOT agreement was executed between TAV Tunisie and OACA on 18 May 2007, for the operation of existing Monastir Habib Bourguiba Airport and new Enfidha Airport (International, domestic terminals and parking-apron-taxi-ways). The concession periods of both airports will end in May A concession agreement was executed between TAV Gazipaşa and DHMİ on 4 January 2008 for the operation of Antalya Gazipaşa Airport (air side, land side, parking-apron-taxi ways). The agreement covers a period up to July On 24 September 2008, the 20-year Concession Agreement for the construction and operation of Alexander the Great Airport in Skopje, renovation and operation of the St. Paul the Apostle Airport in Ohrid, and the construction and optional operation of the New Cargo Airport in Shtip airports was signed between TAV Macedonia and the Ministry of Transport and Communication of Macedonia. The agreement covers a period up to March 2030.

187 185 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) i) Intangible assets: The Group recognizes an intangible asset arising from a service concession agreement when it has a right to charge for usage of concession infrastructure. Intangible assets received as consideration for providing construction or upgrade services in a service concession agreement are measured at fair value upon initial recognition. Subsequent to initial recognition the intangible asset is measured at cost less accumulated amortisation and accumulated impairment losses. The airport operation right as an intangible asset is initially recognised at cost, being the fair value of consideration transferred to acquire the asset, which is the fair value of the consideration received or receivable for the construction services delivered. The fair value of the consideration received or receivable for the construction services delivered includes a mark-up on the actual costs incurred to reflect a margin consistent with other similar construction work. Mark-up rates for TAV İzmir, TAV Esenboğa, TAV Tbilisi, TAV Tunisie, TAV Macedonia and TAV Gazipaşa are 0%, 0%, 15%, 5%, 0% and 0% respectively. The consideration receivable for the construction services delivered includes direct costs of construction and borrowing and other similar costs that are directly related to the construction of the airport and related infrastructure. ii) Financial assets: The Group recognizes the guaranteed passenger fee amount due from DHMİ as financial asset which is determined by the agreements with TAV Esenboğa and TAV İzmir. Financial assets are initially recognised at fair value. Fair value of financial assets is estimated as the present value of all future cash receipts discounted using the prevailing market rate of instrument. iii) Accounting for operations contract (TAV İstanbul): The costs associated with the operations contract primarily include rental payments and payments made to enhance and improve ADAT. TAV İstanbul prepaid certain rental amounts and the prepayment is deferred as prepaid rent and is recognised over the life of the prepayment period. The expenditures TAV İstanbul incurs to enhance and improve the domestic terminal are recorded as prepaid development expenditures and are being amortised over the life of the associated contract. Any other costs associated with regular maintenance are expensed in the period in which they are incurred. Under IFRIC 12 Service Concession Arrangements an operator recognizes an intangible asset or financial asset received as consideration for providing construction or upgrade services or other items. In TAV İstanbul there is neither construction nor significant upgrade service provided and the contract is in operating phase. Therefore, no intangible asset or financial asset is recognised in TAV İstanbul s financial statements and the revenue and costs relating to the operation services are recognised in accordance with IAS 18 as required by IFRIC 12. Amortisation of the airport operation right is calculated on a straight line basis over the BOT periods of each project from the date of commencement of physical construction of the terminal. f) 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 the leased assets are not recognised on the Group s consolidated statement of financial position.

188 186 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) g) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out (FIFO) principle, 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. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. h) 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 any 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 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, 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. Loans and receivables and held-to-maturity investment securities The Group considers evidence of impairment for loans and receivables and held-to-maturity investment securities at both a specific asset and collective level. All individually significant receivables and held-to-maturity investment securities are assessed for specific impairment. All individually significant receivables and held-to-maturity investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together receivables and held-to-maturity investment securities with similar risk characteristics. In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the asset s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

189 187 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) ii) Non-financial assets: The carrying amounts of the Group s non-financial assets, other than 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 one not yet available for use, the recoverable amount is estimated 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 (the CGU ). Goodwill acquired in a business combinationis allocated to groups of CGU s 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 CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. 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. i) Reserve for employee severance indemnity In accordance with the existing labour law in Turkey, the Group entities operating in Turkey are required to make lump-sum payments to employees who have completed one year of service and whose employment is terminated without cause or who retire, are called up for military service or die. Such payments are calculated on the basis of 30 days pay maximum TRL 2,517 as at 31 December 2010 (equivalent to EUR 1,228 as at 31 December 2010) (31 December 2009: TRL 2,365 (equivalent to EUR 1,095 as at 31 December 2009)) per year of employment at the rate of pay applicable at the date of retirement or termination. Reserve for retirement pay is computed and reflected in the accompanying consolidated financial statements on a current basis. The management of the Group used some assumptions (detailed in Note 31) in the calculation of the retirement pay provision. The calculation was based upon the retirement pay ceiling announced by the Government. j) 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 where appropriate and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

190 188 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) k) Revenue Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns, 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, 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 sales are recognised. Construction revenue and costs: Construction revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting date, as measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Service concession agreements: Revenue relating to construction services under a service concession arrangement is recognised based on the stage of completion of the work performed, consistent with the Group s accounting policy on recognising revenue on construction contracts. Operation or service revenue is recognised in the period in which the services are provided by the Group. When the Group provides more than one service in a service concession arrangement the consideration received is allocated by reference to the relative fair values of the services delivered. Aviation income: Aviation income is recognised based on the daily reports obtained from related airline companies for terminal service income charged to passengers, as well as for ramps utilised by aircraft and check-in counters utilised by the airlines. Area allocation income: Area allocation income is recognised by the issuance of monthly invoices based on the contracts made for allocated areas in the terminal. Sales of duty free goods: Sales of goods are recognised when goods are delivered and title passes. Catering services income: Catering services income is recognised when services are provided. The Group defers revenue for collections from long-term contracts until the services are provided. There are no deferred costs related to these revenues since these are related with the selling rights given to food and beverage companies to sell their products at domestic and international lines terminals as well as third parties out of the terminals where the subsidiaries operate. Ground handling income: Ground handling income is recognised when the services are provided. Commission: The Group subcontracts the right to operate certain duty free operations and the catering services to third parties. The third parties pay the Group a specified percentage of their sales for the right to operate these concessions. The commission revenue is recognised based on the sales reports provided from the subcontractor entities in every 2 to 3 days. Software and system sales: Software and system sales are recognised when goods are delivered and title has passed or when services are provided.

191 189 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Lounge services: Lounge service income is recognised when services are provided. Bus and car parking operations: Income from bus and car parking operations is recognised when services are provided. l) Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis 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. m) Finance income and finance costs Finance income comprises interest income on funds invested and unwinding of discount on guaranteed passenger fee receivable from DHMİ arising from the application of IFRIC 12 and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group s right to receive payment is established. Finance costs comprise interest expense on borrowings, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, (other than trade receivables) and losses on hedging instruments that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis as either finance income or finance cost Depending on whether foreign currency movements are in net gain or loss position. n) Income tax Income tax expense comprises current and deferred tax. Income tax expense is 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 on the taxable income 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, 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 the 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, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

192 190 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they 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. The Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the accompanying consolidated financial statements, have been calculated on a separate-entity basis. o) Earnings per share The Group presents basic and diluted EPS data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. There are no dilutive potential shares. p) 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 regularly reviewed by the Group Management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Group management include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company s headquarters), head office expenses, and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill. q) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for annual periods beginning after 1 January 2010, and have not been applied in preparing these consolidated financial statements. None of these will have an effect on the consolidated financial statements of the Group, except for IFRS 9 Financial Instruments, which becomes mandatory for the Group s 2013 consolidated financial statements and could change the classification and measurement of financial assets. The Group does not plan to adopt this standard early and the extent of the impact has not been determined. 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 nonfinancial 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. i) Property and equipment:specific to that asset or liability. 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 on the date of acquisition 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. The fair value of items of equipment, fixtures and fittings is based on the market approach and cost approaches using quoted market prices for similar items when available and replacement cost when appropriate.

193 191 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) ii) Intangible assets: The fair value of intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets. The fair values of customer relationship and DHMİ licence acquired in a business combination are determined according to the excess earnings method and replacement cost approach, respectively. The airport operation right as an intangible asset is initially recognised at cost, being the fair value of consideration transferred to acquire the asset, which is the fair value of the consideration received or receivable for the construction services delivered. The fair value of the consideration received or receivable for the construction services delivered includes a mark-up on the actual costs incurred to reflect a margin consistent with other similar construction work. Mark-up rates for TAV İzmir, TAV Esenboğa, TAV Tbilisi, TAV Tunisie, TAV Gazipaşa and TAV Macedonia are 0%, 0%, 15%, 5%, 0% and 0% respectively. iii) Trade and other receivables: The fair value of trade and other receivables is estimated as the present value of future cash flows discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. iv) Derivatives: The fair value of forward exchange contracts is based on their quoted market price, if available. If a quoted 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) or option pricing models. 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. v) Non-derivative financial liabilities: Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements. 5. FINANCIAL RISK MANAGEMENT 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 risk, and the Group s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

194 192 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the Group s risk management framework. The Group has established a Risk Management Department and the Group aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. All directors act to ensure an effective internal control, providing assurance in relation to control, governance and the risk management process. The Group Audit Committee is assisted in its oversight role by Internal Audit. The mission of the Internal Audit Directorate of the Group is to assist TAV Holding Board of Directors and Management (including subsidiaries) in their oversight, management and operating responsibilities by identifying; ineffectivenesses of internal control, risk management and governance processes inefficiencies that cause waste of its resources and making professional recommendations through independent audits (reports) and / or advisory services. Internal audit plans are based on risk assessments as well as the issues highlighted by the Audit Committee and the management. Risk assessment is conducted on a continuous basis so as to identify not only existing risks but also emerging risks. Formally, risk assessment is made annually but more often if required. Credit risk 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 bank balances. The Group s principal financial assets are cash and cash equivalents and trade and other receivables. Credit risk on liquid funds is limited because the counterparties are banks with high credit ratings. The Group has procedures in place to ensure that services are provided to customers with an appropriate credit history. The carrying amount of trade and other receivables, net of provision for impairment of receivables, and the total of cash and cash equivalents, represents the maximum amount exposed to credit risk. The main customer is Turkish Airlines ( THY ). Based on past history with this customer, the Group management believes there is no significant credit risk for this customer. Although collection of receivables could be influenced by economic factors, management believes that there is no significant risk of loss to the Group beyond the provisions already recorded due to reputation and type of customers for the airlines (well-known reputable, international and flag carrier companies), method of sales which is cash or credit card basis for duty free sales. In addition, the Group receives letters of guarantee, and notes from some customers whose credibilities are low. 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. The Group uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimising its cash return on investments. Typically the Group ensures that it has sufficient cash on demand to meet expected operational and financial expenses, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

195 193 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Market risk 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. The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by lenders and executives of the Group as mentioned in Note 36. The Group applies hedge accounting in order to manage volatility in profit or loss. i) Currency risk: Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Group has exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. As at 31 December 2010, the Group had balances that are denominated in a currency other than the respective functional currencies of Group entities, primarily the Euro, but also USD, GEL, TND, MKD and TRL which are disclosed within the relevant notes to these consolidated financial statements. The Group manages this currency risk by maintaining foreign currency cash balances and using some financial instruments as mentioned in Note 38. ii) Interest rate risk: The Group adopts a policy of ensuring that between 50 and 100 percent of its exposure to changes in interest rates on borrowings is on a fixed rate basis. This is achieved by entering into interest rate swaps as mentioned in Note 38. Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group s operations. The Group s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity. The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This responsibility is supported by the development of overall Group standards for the management of operational risk in the following areas: requirements for appropriate segregation of duties, including the independent authorisation of transactions requirements for the reconciliation and monitoring of transactions compliance with regulatory and other legal requirements documentation of controls and procedures requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified requirements for the reporting of operational losses and proposed remedial action development of contingency plans training and professional development ethical and business standards risk mitigation, including insurance where this is effective.

196 194 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Compliance with Group standards is supported by a programme of periodic reviews undertaken by Internal Audit. The results of Internal Audit reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit Committee and senior management of the Group. Capital management The Board s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence; to sustain future development of the business and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. 6. SEGMENT REPORTING Operating Segments: For management purposes, the Group is currently organised into five divisions; Terminal Operations, Catering Operations, Duty Free Operations, Ground Handling and Bus Operations and Other Operations. These divisions are the basis on which the Group reports its primary segment information, the principal activities of each are as follows: Terminal operations: Operating terminal buildings, the car park and the general aviation terminal, the Group companies included in this segment are TAV İstanbul, TAV Esenboğa, TAV İzmir, TAV Tunisie, TAV Batumi, TAV Tbilisi, Batumi Airport LLC, TAV Macedonia and TAV Gazipaşa. TAV Tbilisi and TAV Batumi also include the ground handling operations, and parking-apron-taxi ways as they are not outsourced and are run by the airport. Catering operations: Managing all food and beverage operations of the terminal, both for the passengers and the terminal personnel, which is run by BTA, BTA Georgia, BTA Tunisie, BTA Macedonia and Cakes & Bakes. Duty free operations: Sales of duty free goods for the international arriving and departing passengers. The Group operates its duty free services through ATÜ, ATÜ Georgia, ATÜ Tunisie, ATÜ Macedonia and ATÜ Latvia. Ground handling and bus operations: Providing traffic, ramp, flight operation, cargo and all other ground handling services for domestic and international flights under the Civil Aviation Legislation License. The Group operates the ground handling services through HAVAŞ, CAS, TAV Gözen, TGS and NHS. HAVAŞ also provides bus operations. Other: Providing lounge services, IT and Security services, the Group companies included in this segment are TAV Holding, TAV İşletme, TAV İşletme Georgia, TAV İşletme Tunisia, TAV İşletme Tunisia Plus, TAV Bilişim, TAV Güvenlik and TAV Latvia. Information regarding the results of each reportable segment is included below. Performance is measured based on segment operating profit, as included in the internal management reports that are reviewed by the Group s Management. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on arm s length basis.

197 195 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Operating Segments Terminal Operations Catering Operations Duty Free Operations Year ended 31 December Ground Handling and Bus Operations Other Operations Total Total external revenues 304,794, ,537,119 53,218,141 42,214, ,835, ,975, ,894, ,070,365 27,535,702 25,159, ,278, ,957,180 Inter-segment revenue 101,630,926 85,547,980 13,377,867 10,259, ,266 51,333 19,051,288 13,828, ,315, ,688,012 Construction revenue 41,627, ,491, ,627, ,491,359 Construction expenditure (41,410,646) (271,354,562) (41,410,646) (271,354,562) Interest income 15,205,488 16,713, ,672 48, , , ,162 1,030,011 2,959,624 3,217,367 20,057,507 21,844,029 Interest expense (70,458,919) (55,136,665) (257,860) (214,649) (1,330,650) (1,491,663) (6,454,905) (581,596) (8,762,614) (14,976,173) (87,264,948) (72,400,746) Depreciation and amortization (41,945,246) (23,663,645) (2,367,477) (2,028,175) (936,237) (682,355) (12,964,912) (9,260,084) (1,330,713) (1,590,333) (59,544,585) (37,224,592) Reportable segment operating profit / (loss) 96,399,806 62,101,860 4,847,132 4,452,689 14,434,623 13,157,841 12,573,364 14,366,397 (5,968,298) 18,762, ,286, ,841,248 Terminal Operations Catering Operations Duty Free Operations As at 31 December 2010 and 2009 Ground Handling and Bus Operations Other Operations Total Reportable segment assets 1,663,658,919 1,587,946,633 21,120,961 13,284,018 24,174,029 21,970, ,782, ,978, ,738, ,936,682 2,039,474,431 1,923,116,435 Other investments ,238 24,238 24,238 24,238 Capital expenditure 87,589, ,898,526 2,817,956 2,957, ,064 3,313,287 30,788,076 4,642,469 1,538,257 1,267, ,661, ,078,799 Reportable segment liabilities 1,238,131,234 1,216,366,204 13,153,062 8,053,339 37,727,069 33,217, ,053,540 56,582,199 77,024, ,898,142 1,499,088,978 1,510,117,420

198 196 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items Revenues Total revenue for reportable segments 842,634, ,148,342 Other revenue 46,586,990 38,988,209 Elimination of inter-segment revenue (134,315,347) (109,688,012) Consolidated revenue 754,906, ,448,539 Operating profit Segment operating profit 128,254,925 94,078,787 Other operating profit / (loss) (5,968,298) 18,762,461 Elimination of inter-segment operating profit (1,536,112) (262,708) Consolidated operating profit 120,750, ,578,540 Finance income 31,885,484 25,120,947 Finance expense (89,169,954) (84,588,880) Consolidated profit before tax 63,466,045 53,110,607 Assets 31 December December 2009 Total assets for reportable segments 1,856,736,294 1,744,179,753 Other assets 182,738, ,936,682 Consolidated total assets 2,039,474,431 1,923,116,435 Liabilities 31 December December 2009 Total liabilities for reportable segments 1,422,064,905 1,314,219,278 Other liabilities 77,024, ,898,142 Consolidated total liabilities 1,499,088,978 1,510,117,420 Interest income Total interest income for reportable segments 17,097,883 18,626,662 Other interest income 2,959,624 3,217,367 Elimination of inter-segment interest income (5,438,060) (4,329,567) Consolidated interest income 14,619,447 17,514,462 Interest expense Total interest expense for reportable segments (78,502,334) (57,424,573) Other interest expense (8,762,614) (14,976,173) Elimination of inter-segment interest expense 5,460,909 4,331,889 Consolidated interest expense (81,804,039) (68,068,857)

199 197 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Geographical information The main geographical segments of the Group are comprised of Turkey, Tunisia, Georgia and Macedonia. 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. Revenue Turkey 644,092, ,315,126 Tunisia 47,998, ,952,745 Macedonia 41,291,630 - Georgia 19,945,184 11,079,776 Other 1,578,807 2,100,892 Consolidated revenue 754,906, ,448,539 Non-current assets 31 December Decembe 2009 Turkey 749,020, ,374,262 Tunisia 511,310, ,195,397 Georgia 82,944,828 92,462,026 Macedonia 28,301, Other 340, ,264 Consolidated non-current assets 1,371,917,160 1,338,371,912

200 198 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 7. ACQUISITIONS OF JOINTLY CONTROLLED ENTITIES AND ADDITIONAL INTERESTS Acquisitions of jointly controlled entities Acquisition of 50% shares of NHS: On 12 April 2010, HAVAŞ acquired 50% shareholding of NHS for a consideration of EUR 3,250,000 from Baltic Aviation. After the transfer of 50% of shares, NHS, which provides ground services at Latvia Riga International Airport, is proportionately consolidated in the Group s consolidated financial statements. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognized on acquisition are their estimated fair values. The fair value of the customer relationship acquired is based on the excess earnings method. Under IFRS 3, customer relationships at the amount of EUR 637,000 have been recognized as intangible assets arising from the acquisition of 50% share of NHS. Identifiable assets acquired and liabilities assumed Recognized values on acquisition Property and equipment 89,068 Intangible assets 637,483 Other investments 713 Other non-current assets 131,434 Deferred tax liabilities (95,550) Inventories 22,177 Trade receivables 83,662 Cash and cash equivalents 8,234 Other assets 64,622 Loans and borrowings (53,223) Trade payables (141,341) Other liabilities and tax payables (114,151) Total identifiable net assets 633,128 Goodwill 2,616,872 Total consideration, satisfied by cash 3,250,000 Cash consideration paid 3,250,000 Cash and cash equivalents acquired (8,234) Net cash outflow arising on acquisition 3,241,766

201 199 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Acquisition of 50% share of TGS: On 12 March 2009, THY and HAVAŞ signed a joint venture agreement which sets the terms and the conditions for the sale of 50% share capital of TGS to HAVAŞ as well as the basic principles of the engagement between THY and TGS. The joint venture was approved by the Competition Board on 27 August As stated in the joint venture agreement, 50% of TGS capital which has a nominal value of TRL 6,000,000 was acquired by HAVAŞ for TRL 119,000,000 (equivalent to EUR 54,737,811) including a share premium of TRL 113,000,000. The first installment amounting to TRL 58,000,000 (equivalent to EUR 26,678,933) in 2009 and the second installment amounting to TRL 19,713,791 (equivalent to EUR 9,067,981) were paid as of 31 December As of 31 December 2010, the remaining payments amounting to TRL 41,286,209 (equivalent to EUR 18,990,897) will be made in two installments on 31 October 2011 and 31 October TGS had no operation before the acquisition date. 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. The fair value of the customer relationship acquired is based on the excess earnings method whereas the fair value of licenses is based on the replacement cost approach. TGS signed a Service Agreement with THY. According to this agreement TGS provides ground handling services to THY in six main airports of Turkey, i.e. İstanbul Atatürk, İstanbul Sabiha Gökçen, Ankara, İzmir, Antalya and Adana Airports. Under IFRS 3, customer relationships at the amount of EUR 9,480,000 and DHMI license at the amount of EUR 2,420,000 have been recognized as intangible assets arising from the acquisition of 50% share of TGS. Identifiable assets acquired and liabilities assumed Recognized values on acquisition Intangible assets 11,900,000 Due from related parties 14,868,005 Cash and cash equivalents 13,885,834 Deferred tax liability (1,896,000) Total identifiable net assets 38,757,839 Goodwill 15,979,972 Total consideration 54,737,811 Total consideration 54,737,811 Unpaid portion at acquisition (28,058,878) Cash consideration paid 26,678,933 Cash and cash equivalents acquired (13,885,834) Net cash outflow arising on acquisition 12,793,099

202 200 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Acquisition of additional interest Acquisition of 6% share of TAV Tbilisi: In 2009, TAV Holding acquired 6% shareholding of TAV Tbilisi, increasing its total share from 60% to 66% and its voting power from 50% to 66%. The sales price of the relevant shares has been calculated through the investment amount. After the transfer of 6% shares, TAV Tbilisi is fully consolidated with the non-controlling interest s ownership reflected as a non-controlling interest. Identifiable assets acquired and liabilities assumed Recognized values on acquisition Property and equipment 278,671 Intangible assets 1,398 Airport operation right 3,980,592 Other non-current assets 493,813 Deferred tax asset 73,838 Inventories 27,181 Trade receivables 173,189 Due from related parties 12,776 Cash and cash equivalents 2,313 Restricted bank balances 224,887 Other assets 28,999 Loans and borrowings (2,002,568) Trade payables (31,017) Due to related parties (1,320,092) Other liabilities and tax payables (415,821) Provisions (12,391) Total identifiable net assets 1,515,768 Goodwill 3,858,324 Total consideration, satisfied by cash 5,374,092 Cash consideration paid 5,374,092 Cash and cash equivalents acquired (2,313) Net cash outflow arising on acquisition 5,371, CONSTRUCTION REVENUE AND EXPENDITURE An analysis of the Group s construction revenue and expenditure for the years ended 31 December is as follows: Construction expenditure 41,410, ,354,562 Mark up on construction expenditure 217,321 13,136,797 Construction revenue 41,627, ,491,359 Construction revenue and expenditure for the year ended 31 December 2010 relate to the construction of Enfidha International Airport, Gazipaşa Airport, Skopje International Airport and Ohrid International Airport. (Construction revenue and expenditure for the year ened 31 December 2009 relate to the construction of Enfidha International Airport and Gazipaşa Airport.)

203 201 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 9. OPERATING REVENUE An analysis of the Group s operating revenue for the years ended 31 December is as follows: Aviation income 169,691, ,376,756 Sales of duty free goods 165,835, ,975,330 Ground handling income 152,044, ,198,961 Commission from sales of duty free goods 77,824,570 68,216,782 Catering services income 47,753,898 38,057,891 Income from car parking operations and valet service income 25,028,222 20,067,876 Income from lounge services 21,649,152 17,111,654 Bus services income 21,373,448 14,075,264 Area allocation income 21,308,147 17,724,204 Other operating revenue 10,769,130 11,152,462 Total operating revenue 713,278, ,957, OTHER OPERATING INCOME An analysis of the Group s other operating income for the years ended 31 December is as follows: Advertising income 13,045,190 10,710,258 Rent income from sublease 9,678,898 7,545,402 Insurance income (*) 9,672,529 - Net gain on sale of non-controlling interest in a subsidiary (**) - 8,993,461 Utility and general participation income and other income (***) 7,231,239 8,721,296 Total other operating income 39,627,856 35,970,417 (*) For the damage occurred on the generators of the Trigeneration Project of TAV İstanbul, insurance income is accrued for the receivables from insurance companies (See note 17). (**) Net gain on sale of non-controlling interest in a subsidiary comprises the sale of 15% of shares of TAV Tunisia at a sales price of EUR 27,999,825 to International Finance Corporation ( IFC ), a World Bank entity, in (***) Utility and general participation income consists of electricity, water supplies, heat, natural gas expenses which are initially paid by the Group and charged to the tenants of the terminal according to the m2 of the areas rented. 11. PERSONNEL EXPENSES An analysis of the Group s personnel expenses for the years ended 31 December is as follows: Wages and salaries 173,096, ,951,633 Compulsory social security contributions 25,642,117 17,061,205 Employment termination benefit expenses 4,393,388 5,640,693 Other personnel expenses 16,163,158 17,172,890 Total personnel expenses 219,294, ,826,421

204 202 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 12. CONCESSION AND RENT EXPENSES An analysis of the Group s concession and rent expenses for the years ended 31 December is as follows: TAV İstanbul 117,275, ,743,101 TAV Tunisia (*) 10,250,799 14,878,538 TAV Macedonia (**) 2,112,487 - Total rent expenses 129,638, ,621,639 Rent expense is related with TAV İstanbul, concession rent expense is reated with TAV Tunusia and TAV Macedonia. (*) TAV Tunisia has a concession period of 40 years with a concession rent fee that will increase in a linear rate between 11% and 26% of the annual revenues of the Monastir and Enfidha Airports to be paid. (**) The concession fee of TAV Macedonia is 15% of the gross annual turnover until the number of passengers using the two airports reaches 1 million, and when the number of passengers exceeds 1 million, this percentage shall change between 4% and 2% depending on the number of passengers. 13. OTHER OPERATING EXPENSES An analysis of the Group s other operating expenses for the years ended 31 December is as follows: Utility costs 13,366,931 11,802,439 VAT non-recoverable 12,349,059 11,615,371 Insurance expense 11,105,294 7,715,387 Consultancy expense 10,707,134 3,705,736 Maintenance expenditures 9,785,423 7,954,739 Cleaning expense 8,982,899 6,406,389 Impairment loss on property and equipment (*) 6,638,910 - Communication and stationary expenses 3,893,859 2,506,001 Traveling and transportation expenses 3,674,701 2,447,717 Taxes 3,431,711 7,359,822 Rent expense 3,168,748 1,983,277 Advertisement and marketing expenses 2,984,281 1,813,854 Representation expenses 1,612,240 1,220,663 Impairment loss on trade receivable 1,336, ,451 Security cost 937, ,833 Other operating expenses 6,464,399 4,931,738 Total other operating expenses 100,439,595 72,331,417 (*) Impairment loss recognised is related with the fire in the Trigeneration Project of TAV İstanbul (See Note 17).

205 203 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 14. DEPRECIATION AND AMORTISATION An analysis of the Group s accumulated depreciation and amortisation for the years ended 31 December is as follows: Airport operation right Property and equipment Other intangible assets Total Balance at 1 January ,000,202 64,079,963 10,081, ,161,291 Effect of movements in exchange rates (187,522) (128,522) (112,198) (428,242) Charge for the year 19,266,667 13,464,997 4,492,928 37,224,592 Disposals - (737,430) (25) (737,455) Effect of group structure change (*) 5,728,827 1,477,321 60,451 7,266,599 Balance at 31 December ,808,174 78,156,329 14,522, ,486,785 Balance at 1 January ,808,174 78,156,329 14,522, ,486,785 Effect of movements in exchange rates 481, ,441 43, ,192 Charge for the year 32,765,582 21,218,211 5,560,792 59,544,585 Disposals - (2,354,352) (75,063) (2,429,415) Balance at 31 December ,055,351 97,494,629 20,051, ,601,147 (*) Effect of acquisition of 6% of TAV Tbilisi shares in See note 3(a)(vii). 15. FINANCE INCOME AND FINANCE COSTS Recognised in profit or loss An analysis of the Group s finance income and finance costs for the years ended 31 December are as follows: Interest income on bank deposits and intercompany loans 14,619,447 17,514,462 Discount income (*) 10,264,378 7,532,429 Foreign exchange gain, net 6,179,665 - Other finance income 821,994 74,056 Finance income 31,885,484 25,120,947 Interest expense on financial liabilities and intercompany loans (81,804,039) (68,068,857) Commission expense (1,979,851) (1,408,191) Foreign exchange loss, net - (7,062,018) Other finance costs (**) (5,386,064) (8,049,814) Finance costs (89,169,954) (84,588,880) Net finance costs recognised in profit or loss (57,284,470) (59,467,933) (*) Discount income mainly includes unwinding of discount on guaranteed passenger fee receivables from DHMİ (concession receivables). (**) Other finance costs include bank charges and consultancy expenses charged in accordance with the requirements of project financing facilities.

206 204 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Recognised in other comprehensive income Effective portion of changes in fair value of cash flow hedges (13,594,103) (36,225,843) Foreign currency translation differences for foreign operations 3,237,686 (1,365,484) Income tax on cash flow hedge reserves 4,868,363 7,299,593 Finance costs recognised in other comprehensive income, net of tax (5,488,054) (30,291,734) 16. INCOME TAX EXPENSE An analysis of the Group s income tax expense for the years ended 31 December is as follows: Income tax recognised in profit or loss Current tax expense Current year tax expense 33,632,939 10,061,625 Adjustments for prior years (306,225) - 33,326,714 10,061,625 Deferred tax expense Origination and reversal of temporary differences (18,047,173) 380,001 Change in unrecognised deductible temporary differences - (424,605) Change in previously recognised investment incentives 6,383,194 (22,828,079) Recognition of previously unrecognised tax losses (9,836,620) 14,456,889 (21,500,599) (8,415,794) Total income tax expense 11,826,115 1,645,831 Income tax recognised in other comprehensive income Before tax Tax benefit Net of tax Before tax Tax benefit Net of tax Revaluation of intangible assets 68,320-68,320 68,320-68,320 Effective portion of changes in fair value of cash flow hedges (13,594,103) 4,868,363 (8,725,740) (36,225,843) 7,299,593 (28,926,250) Foreign currency translation differences for foreign operations 3,237,686-3,237,686 (1,365,484) - (1,365,484) (10,288,097) 4,868,363 (5,419,734) (37,523,007) 7,299,593 (30,223,414)

207 205 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Reconciliation of effective tax rate The reported income tax expenses for the years ended 31 December 2010 and 2009 are different than the amounts computed by applying the statutory tax rate to profit before income tax of the Group, as shown in the following reconciliation: % 2010 % 2009 Profit for the period 51,639,930 51,464,776 Total income tax expense 11,826,115 1,645,831 Profit before income tax 63,466,045 53,110,607 Income tax using the Company s domestic tax rate 20 12,693, ,622,121 Tax effects of: -not deductible expenses 2 1,298, ,491,458 -translation of non-monetary items according to IAS ,510,047 - (113,651) -change in previously recognised investment incentives 10 6,383,194 (43) (22,828,079) -tax exempt income (1) (405,953) (1) (716,099) -translation effect on tax losses (2) (1,117,220) - (129,483) -recognition of previously unrecognised tax losses (16) (9,836,620) (12) (6,304,082) -change in previously recognized tax losses ,139,946 -current year tax losses which no deferred tax asset was recognized 3 2,062, ,798,396 -derecognition of previously recognised tax losses ,345,193 -under / (over) provided in prior years - 306, utilization of previously not recognised carry forward losses (5) (3,047,108) - - -change in unrecognised temporary differences 1 411, ,591,348 -effect of different tax rates for foreign juristictions (4) (2,284,108) 4 2,227,320 -tax effect of sale of investments recognised in equity (7) (4,416,944) - - -other consolidation adjustments 2 1,268, ,443 Income tax expense 19 11,826, ,645,831 Corporate tax: 31 December December 2009 Corporate tax provision 33,632,939 10,061,625 Adjustments for prior periods (306,225) - Add: taxes payable from previous period 1,391,675 2,488,341 Less: corporation taxes paid during the period (24,797,818) (11,158,291) Current tax liabilities 9,920,571 1,391,675 The Turkish entities within the Group are subject to Turkish corporate taxes. Provision is made in the accompanying consolidated financial statements for the estimated charge based on the each of the Group entities results for the year.

208 206 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back nondeductible expenses, and by deducting dividends received from resident companies, other exempt income and investment incentives utilised. In Turkey, advance tax returns are filed on a quarterly basis. The advance corporate income tax rate at 31 December 2010 is 20% (31 December 2009: 20%). Losses can be carried forward for offsetting against future taxable income for up to 5 years. Losses cannot be carried back. Georgian corporate income tax is levied at a rate of 15% on income less deductible expenses. Tunisian corporate income tax is levied at a rate of 30% on income less deductible expenses. According to concession agreement, TAV Tunisia is exempt from corporate tax for a period of 5 years starting from the concession agreement date. Macedonian corporate income tax is levied at a rate of 10% on income less deductible expenses. Unless there is a dividend distribution, no corporate tax is levied. Corporate taxpayers should pay tax on their non-deductible expenses at a rate of %10 regardless of their loss. Losses cannot be carried forward. Latvian corporate income is levied at a rate of 15% on income less deductible expenses. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns between 1-25 April following the close of the accounting year to which they relate. Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five years. 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 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 Accordingly, the investment incentive allowance practice was ended as of 1 January 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 of 31 December On the other hand, the Article 19 of the Income Tax Law was annulled and the investment allowance practice was ended as of 1 January 2006 with effectiveness of the Article 2 and the Article 15 of the Law no and the investment allowance rights on the investment expenditures incurred during the period of 1 January 2006 and 8 April 2006 became unavailable. However, at 15 October 2009, the Turkish Constitutional Court decided to cancel the clause no. 2 of the Article 15 of the Law no 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 of 1 January 2006 rather than 8 April 2006, since it is against the Constitution. Accordingly, the time limitations for the carried forward investment allowances that were entitled to in the previous period of mentioned date and the limitations related with the investments 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 dated 8 January 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% of investment expenditures that are realized 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.

209 207 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) New treatment on investment incentive was introduced by the Law no 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 The Article 5 of the Law regulates the amount of investment incentive to be benefited in computing the corporate tax base after the cancellation of the clause no.2 of the Article of the Law no 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 up to 25% of the taxable income of the respective tax period. Income withholding tax: In addition to corporate taxes, companies should also calculate income withholding taxes on any dividends distributed, except for companies receiving dividends who are resident companies in Turkey. The rate of income withholding tax is 10% starting from 24 April This rate was changed to 15% with the code numbered 5520 article 15 commencing from 21 September After the resolution, declared in Official Gazette on 23 July 2006, this rate was changed to 15% thereafter. Undistributed dividends incorporated in share capital are not subject to income withholding taxes. Transfer pricing regulations: In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of disguised profit distribution via transfer pricing. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 2007 sets details about implementation. If a taxpayer 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 principle, 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 tax deductible for corporate income tax purposes. Research and development incentives: TAV Bilişim is qualified for the incentives and exemptions provided by Support of Research and Development Act, numbered 5746 effective from 24 November For the year ended 31 December 2010, TAV Bilişim utilized a corporate tax benefit of EUR 113,860 due to research and development expenses.

210 208 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 17. PROPERTY AND EQUIPMENT Land Buildings Machinery and equipment Vehicles Furniture and fixtures Leaseholds improvements Construction in progress Cost Balance at 1 January ,336,908 94,701 51,250,566 16,603,763 16,124,474 28,143,964 15,637, ,191,461 Effect of movements in exchange rates (310,886) (1,500) (45,947) (50,771) (80,978) (68,592) (192,824) (751,498) Additions (*) - 230,449 4,414,876 1,164,657 2,257,049 3,155,024 41,237,190 52,459,245 Disposals - - (60,608) (137,134) (201,490) (616,226) (850) (1,016,308) Transfers (**) - - (69,166) - 93,888 4,731,530 (5,290,382) (534,130) Effect of group structure change (***) - 56, ,657 1,793, , ,335,125 Balance at 31 December ,026, ,627 56,314,378 19,373,671 18,853,278 35,345,700 51,390, ,683,895 Total Balance at 1 January ,026, ,627 56,314,378 19,373,671 18,853,278 35,345,700 51,390, ,683,895 Effect of movements in exchange rates 397,489 6, , , , ,235 (3,417) 1,584,609 Additions (*) ,458,541 3,479,288 5,170,049 3,932,187 42,503,008 80,543,073 Disposals - - (179,052) (438,239) (620,019) (2,588,475) - (3,825,785) Impairment losses (****) (6,638,910) (6,638,910) Transfers (**) - - 1,003 25,157 6,195 54,091,069 (54,529,965) (406,541) Acquisitions through business combinations (*****) , ,514-89,068 Balance at 31 December ,423, ,703 81,825,834 22,593,801 23,808,395 91,270,230 32,720, ,029,409 (*) Borrowing costs amounting to EUR 701,163 is capitalised on property,plant and equipment in 2010 (2009: EUR 591,818). (**) The remaining portion of transfer amounting to EUR 406,541 (2009: EUR 534,130) comprises intangible assets. (***) Effect of acquisition of 6% of TAV Tbilisi shares in See note 3(a)(vii). (****) There has been a fire in the Trigeneration Project of TAV İstanbul in March 2010 which is covered by an insurance policy. Impairment loss amounting to EUR 6,638,910 is recognised in the consolidated financial statements for the damage occurred on the generators. Additionally, an income accrual is booked for the amount that will be compensated by the insurance company for the damage and loss of operations. (*****) Effect of acquisition of 50% of NHS in See note 3(a)(viii).

211 209 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Land Buildings Machinery and equipment Vehicles Furniture and fixtures Leaseholds improvements Construction in progress Accumulated depreciation Balance at 1 January ,688 39,381,757 6,654,941 9,219,041 8,799,536-64,079,963 Effect of movements in exchange rates - (766) (24,412) (25,325) (53,444) (24,575) - (128,522) Depreciation for the year - 35,902 2,940,324 3,031,059 2,718,662 4,739,050-13,464,997 Disposals - - (54,910) (58,563) (85,121) (538,836) - (737,430) Transfers - - (48,466) - 48, Effect of group structure change (*) - 21, , , , ,477,321 Balance at 31 December ,581 42,625,987 10,293,059 12,180,527 12,975,175-78,156,329 Total Balance at 1 January ,581 42,625,987 10,293,059 12,180,527 12,975,175-78,156,329 Effect of movements in exchange rates - 2,037 42,456 50, , , ,441 Depreciation for the year - 37,143 4,702,936 3,518,019 3,200,982 9,759,131-21,218,211 Disposals - - (62,912) (340,270) (296,201) (1,654,969) - (2,354,352) Balance at 31 December ,761 47,308,467 13,521,419 15,336,603 21,207,379-97,494,629 Carrying amounts At 31 December ,026, ,046 13,688,391 9,080,612 6,672,751 22,370,525 51,390, ,527,566 At 31 December ,423, ,942 34,517,367 9,072,382 8,471,792 70,062,851 32,720, ,534,780 (*) Effect of acquisition of 6% of TAV Tbilisi shares in See note 3(a)(vii). There is a pledge on vehicles of HAVAŞ amounting to EUR 2,037,126 (31 December 2009: EUR 1,869,948) for the outstanding notes payable amounting to EUR 633,560 (31 December 2009: EUR 82,084). There is a pledge on property and equipment of TAV Tunisia amounting to EUR 3,389,113 (31 December 2009: EUR 3,075,511) with respect to the borrowings from financial institutions.

212 210 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 18. INTANGIBLE ASSETS Purchased software and brandmarks Internally generated software Customer relationships DHMİ license Total Cost Balance at 1 January ,454,602 3,754,038 23,228,550 5,323,771 42,760,961 Effect of movements in exchange rates (11,919) (11,919) Additions 594, ,035 Acquisitions through business combinations (***) - - 9,480,000 2,420,000 11,900,000 Effect of group structure change (*) 69, ,770 Disposals (4,543) (4,543) Transfers from construction in progress(**) 534, ,130 Balance at 31 December ,636,075 3,754,038 32,708,550 7,743,771 55,842,434 Balance at 1 January ,636,075 3,754,038 32,708,550 7,743,771 55,842,434 Effect of movements in exchange rates 76, ,896 Additions 1,046, ,046,598 Disposals (80,921) (80,921) Acquisitions through business combinations (***) , ,484 Transfers from construction in progress (**) 69, , ,541 Balance at 31 December ,748,221 4,091,489 33,345,551 7,743,771 57,929,032 Amortisation Balance at 1 January ,953, ,766 5,569,206-10,081,126 Effect of movements in exchange rates (112,198) (112,198) Amortisation for the year 2,224, ,269 2,018,182-4,492,928 Effect of group structure change (*) 60, ,451 Disposals (25) (25) Balance at 31 December ,125, ,035 7,587,388-14,522,282 Balance at 1 January ,125, ,035 7,587,388-14,522,282 Effect of movements in exchange rates 43, ,156 Amortisation for the year 2,226, ,766 3,061,732-5,560,792 Disposals (75,063) (75,063) Balance at 31 December ,320,246 1,081,801 10,649,120-20,051,167 Carrying amounts At 31 December ,510,216 2,945,003 25,121,162 7,743,771 41,320,152 At 31 December ,427,975 3,009,688 22,696,431 7,743,771 37,877,865 (*) Effect of acquisition of 6% of TAV Tbilisi shares in See note 3(a)(vii). (**) Transfers amounting to EUR 406,541 (31 December 2009: EUR 534,130) are related with construction in progress. (***) Effect of acquisition 50% of TGS in 2009 and effect of acquisition 50% of NHS in See note 3(a)(viii).

213 211 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) There is a pledge on intangible assets of TAV Tunisia amounting to EUR 27,663 (31 December 2009: EUR 106,408) with respect to the borrowings from financial institutions. DHMİ licenses through the purchase of HAVAŞ shares in years 2006 and 2007 and purchase of TGS shares in year 2009 were recognised with indefinite useful lives since there is no foreseeble limit to the period over which they are expected to generate net cash inflows. The DHMİ license associated with the acqusitions of HAVAŞ and TGS were deemed indefinite lived intangible assets since; without these licenses ground handling companies could not operate, it s difficult to obtain the licence, which requires high pre-operational costs and procurement of workforce and equipment required to deliver ground handling services the continuity of the license requires low annual payments compared to initial license cost. The replacement cost method was used in order to determine the fair value of the DHMI licences for impairment testing. As a result of the impairment testing no impairment was recognised. An analysis of goodwill as at 31 December 2010 and 2009 is as follows: Goodwill Balance at 1 January 151,402, ,564,539 Addition during the year 2,616,872 19,838,296 Balance at 31 December 154,019, ,402,835 Goodwill is related with the CGU s HAVAŞ, TGS, NHS and TAV Tbilisi as at 31 December 2010 (31 December 2009: HAVAŞ, TGS, and TAV Tbilisi). Impairment testing for CGU s For the purpose of impairment testing, goodwill is allocated to CGU s. The aggregate carrying amounts of goodwill allocated to each CGU are as follows: HAVAŞ 131,564, ,564,539 TGS 15,979,972 15,979,972 TAV Tbilisi 3,858,324 3,858,324 NHS 2,616, ,019, ,402,835 A valuation of the fair value of equity for HAVAŞ, TGS and TAV Tbilisi as three seperate CGU s was performed by an independent valuation company. The income and market approaches were used to determine the fair value of equity of HAVAŞ and TAV Tbilisi. In the analysis, income approach (discounted cash flow method) was mostly used, with lower weightings were applied to the value of HAVAŞ and TAV Tbilisi resulting from the Guideline Transaction and Company methods. For the valuation of TGS, solely income approach method was used since the TGS only became fully operational during year business plan prepared by the management for HAVAŞ, and 10-year business plans prepared by the management for TGS and TAV Tbilisi were used in the valuation of companies. The growth in business plan of HAVAŞ and TGS is driven by the increase in number of passengers at Turkish airports establishing new air travel routes and a stronger TRL. Furthermore, since TAV Tbilisi has a limited life, the forecast of TAV Tbilisi was extended until the end of the BOT period assuming a lower growth rate and maintaining the margins estimated by the management. As a result of the impairment testing performed on CGU basis, no impairment loss was recognised as at 31 December 2010.

214 212 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Key assumptions used in discounted cash flow projections Key assumptions used in calculation of recoverable amounts are discount rates and terminal growth rates. These assumptions are as follows: Terminal growth Discount rate rate HAVAŞ 13% 2% TGS 12% 2% TAV Tbilisi 16% n.a Discount rate The discount rates used in discounted cash flows are the weighted average cost of capitals ( WACC ) of the companies. Terminal growth rates for HAVAŞ and TGS are determined as 2%. Since TAV Tbilisi has a limited life, terminal growth rate is not used in the valuation. Market Approach The Guideline Transaction Method utilises valuation multiples based on actual transactions that have occurred in the subject company s industry. These derived multiples are then applied to the appropriate operating data of the subject company to arrive at an indication of fair market value. Guideline Company Method focuses on comparing the subject company to guideline publicly-traded companies.

215 213 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 19. AIRPORT OPERATION RIGHT Ankara Esenboğa International Airport İzmir Adnan Menderes International Airport Tbilisi International Airport Enfidha International Airport Antalya Gazipaşa Airport Skopje International Airport Cost Balance at 1 January ,500,212 80,469,270 49,948, ,388,415 3,104, ,411,040 Effect of movements in exchange rates - - (853,477) (853,477) Effect of group structure change (*) ,266, ,266,103 Additions (**) ,300,056 8,725, ,025,519 Balance at 31 December ,500,212 80,469,270 81,361, ,688,471 11,830, ,849,185 Total Balance at 1 January ,500,212 80,469,270 81,361, ,688,471 11,830, ,849,185 Effect of movements in exchange rates - - 2,406, ,406,338 Additions (**) ,973,614 8,974,248 28,123,622 42,071,484 Balance at 31 December ,500,212 80,469,270 83,767, ,662,085 20,804,386 28,123, ,327,007 (**) Borrowing costs amounting to EUR 4,055,845 are capitalised on airport operation right in 2010 (2009: EUR 28,975,484). Ankara Esenboğa International Airport İzmir Adnan Menderes International Airport Tbilisi International Airport Enfidha International Airport Antalya Gazipaşa Airport Skopje International Airport Accumulated amortization Balance at 1 January ,817,090 22,100,886 7,082, ,000,202 Effect of movements in exchange rates - - (187,522) (187,522) Effect of group structure change (*) - - 5,728, ,728,827 Amortisation for the year 6,715,383 9,759,313 2,791, ,266,667 Balance at 31 December ,532,473 31,860,199 15,415, ,808,174 Total Balance at 1 January ,532,473 31,860,199 15,415, ,808,174 Effect of movements in exchange rates , ,595 Amortisation for the year 6,715,383 9,759,313 3,968,425 11,955, ,629-32,765,582 Balance at 31 December ,247,856 41,619,512 19,865,522 11,955, , ,055,351 Carrying amounts At 31 December ,967,739 48,609,071 65,945, ,688,471 11,830, ,041,011 At 31 December ,252,356 38,849,758 63,901, ,706,253 20,437,757 28,123, ,271,656 (*) Effect of acquisition of 6% of TAV Tbilisi shares in See note 3(a)(vii).

216 214 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 20. OTHER INVESTMENTS Non-current investments At 31 December, non-current investments comprised the following: Ownership % 31 December December 2009 Unlisted entities TAV Havacılık A.Ş. ( TAV Havacılık ) ,238 24,238 24,238 24, PREPAID RENT EXPENSES An analysis of the Group s prepaid rent expenses as at 31 December 2010 and 2009 is as follows: 31 December 2010 Rent Prepaid development expenditures Total Balance at 31 December ,777,674 33,911, ,689,531 Rent payments 97,461,768-97,461,768 Current period rent expense-tav İstanbul (114,197,265) (3,078,295) (117,275,560) Balance at 31 December ,042,177 30,833, ,875,739 Represented as current prepaid rent expense 119,513,728 3,078, ,592,025 Represented as non-current prepaid rent expense 54,528,449 27,755,265 82,283, December 2009 Rent Prepaid development expenditures Total Balance at 31 December ,984,112 36,990, ,974,264 Rent payments 104,458, ,458,368 Current period rent expense-tav İstanbul (125,664,806) (3,078,295) (128,743,101) Balance at 31 December ,777,674 33,911, ,689,531 Presented as current prepaid rent expense 114,197,264 3,078, ,275,560 Presented as non-current prepaid rent expense 76,580,410 30,833, ,413,971 Rent: The total rent associated with the rent agreement is USD 2,543,000,000 plus VAT (equivalent to EUR 1,918,636,475 as at 31 December 2010). TAV İstanbul paid in advance 23% of the total amount plus VAT as required by the Rent Agreement. A payment representing 5.5% of the total rent amount will be made within the first five workdays of each rental year following the first rental year. Below is the payment schedule per the Rent Agreement, excluding VAT, as at 31 December 2010: Year Amount (US Dollar) Amount (Euro) ,865, ,525, ,865, ,525, ,865, ,525, ,865, ,525,006 After 2015 to ,190, ,150,037 1,398,650,000 1,055,250,061

217 215 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Prepaid development expenditures: Prepaid development expenditures represent costs incurred by TAV İstanbul related to the installation of EDS Security Systems ( EDS ) for the International and Domestic Lines Terminals, and various re-design at the exterior of the Domestic Lines Terminal as required by the Rent Agreement. 22. DEFERRED TAX ASSETS AND LIABILITIES The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between its financial statements as reported for IFRS purposes and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for IFRS and tax purposes and they are given below. For calculation of deferred tax asset and liabilities, the rate of 20% for subsidiaries and joint ventures in Turkey (31 December 2009: 20%), the rate of 15% for subsidiaries and joint ventures in Georgia and Latvia (31 December 2009: 15%), the rate of 30% for subsidiaries in Tunisia (31 December 2009: 30%) and the rate of 10% for subsidiaries in Macedonia (31 December 2009: 10%) are used. In Turkey, companies cannot declare a consolidated tax return, therefore subsidiaries and joint ventures that have deferred tax assets position were not netted off against subsidiaries and joint ventures that have deferred tax liabilities position and disclosed separately. Recognised deferred tax assets and liabilities As at 31 December 2010 and 2009, deferred tax assets and liabilities are attributable to the following: 31 December 2010 Assets Liabilities Net 31 December 31 December 31 December 31 December December 2009 Property and equipment, airport operation right, and other intangible assets 13,613,639 9,413,198 (14,484,033) (18,435,510) (870,394) (9,022,312) Prepaid rent expenses - - (4,383,534) (7,769,016) (4,383,534) (7,769,016) Other investments (3,061,313) - (3,061,313) Derivatives 19,749,109 12,407, ,749,109 12,407,950 Loans and borrowings 3,437,327 2,629,130 (924,698) (652,064) 2,512,629 1,977,066 Reserve for employee severance indemnity 1,400, , ,400, ,095 Provisions 833, ,426 - (120) 833, ,306 Trade and other receivables and payables 38, ,422 (1,465,460) (85,477) (1,427,180) 17,945 Investment incentives 16,444,885 22,828, ,444,885 22,828,079 Tax loss carry-forwards 37,115,082 27,278, ,115,082 27,278,462 Other items 2,896, ,547 (1,059,767) (101,732) 1,836, ,815 Deferred tax assets / (liabilities) 95,528,745 77,023,309 (22,317,492) (30,105,232) 73,211,253 46,918,077 Set-off of tax (16,036,182) (22,769,270) 16,036,182 22,769, Net deferred tax assets / (liabilities) 79,492,563 54,254,039 (6,281,310) (7,335,962) 73,211,253 46,918,077

218 216 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Movements in temporary differences during the year Balance at 1 January 2009 Recognised in profit or loss Effect of group structure change Recognised in other comprehensive income Effect of changes in foreign exchange rate Acquired in business combinations Balance at 31 December 2009 Recognised in profit or loss Recognised in other comprehensive income Effect of changes in foreign exchange rate Acquired in business combinations Property and equipment, airport operation right andother intangible assets (3,676,622) (3,723,626) 273, (1,896,000) (9,022,312) 8,227,704-19,764 (95,550) (870,394) Prepaid rent expenses (8,711,900) 942, (7,769,016) 3,385, (4,383,534) Other investments (3,396,840) 335, (3,061,313) 3,061, Trade and other receivables and payables (4,826) 59,070 (36,299) ,945 (1,445,125) - - (1,427,180) Derivatives 4,097, ,299,593 1,010,688-12,407,950 2,472,796 4,868, ,749,109 Loans and borrowings 121,210 1,854,259 1, ,977, , ,512,629 Reserve for employee severance indemnity 397, , , , ,400,546 Provisions 447,062 22,863 14, , , ,383 Tax loss carry-forwards 41,727,578 (14,456,889) 7, ,278,462 9,836, ,115,082 Investment incentives - 22,828, ,828,079 (6,383,194) ,444,885 Other items 613,783 57, , , , ,836,727 Tax assets / (liabilities) 31,614,194 8,415, ,808 7,299,593 1,010,688 (1,896,000) 46,918,077 21,500,599 4,868,363 19,764 (95,550) 73,211,253 Balance at 31 December 2010

219 217 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Unrecognised deferred tax assets as at 31 December 2010 and 2009 are as follows: 31 December December 2009 Tax loss carry-forwards - 11,726,497 Investment incentives 22,830,830 11,390,736 22,830,830 23,117,233 At the reporting date, the Group has unused tax losses of EUR 164,213,148 (31 December 2009: EUR 195,485,819) available for offset against future profits. Tax losses can be carried forward for five years under the current tax legislation. Deferred tax asset amounting to EUR 37,115,082 (31 December 2009: EUR 27,278,462) which the Group can utilize for offsetting the against tax losses in the following years, is recognised as at 31 December In 2009, it was assessed that EUR 58,915,967 of tax losses would not be utilized because it was not probable that future taxable profits would be available against which the Group could utilize the benefits therefrom and accordingly deffered tax asset on such amount was not recognised. Unutilised tax losses will expire as follows: 31 December December 2009 Expire in year ,619,294 Expire in year ,920,603 Expire in year ,331,234 11,889,039 Expire in year ,729, ,136,247 Expire in year ,475,637 26,920,636 Expire in year ,677,206 - Total 164,213, ,485,819 In accordance with IAS 12 Income Taxes, at 31 December 2010, a deferred tax liability of EUR 20,925,379 (31 December 2009: EUR 31,061,488) related to investments in subsidiaries and joint ventures was not recognized since it is assessed as probable that the temporary difference will not reverse in the foreseeable future. As per the annulment decision of the Turkish Constitutional Court (see Note 16), TAV Esenboğa and TAV İzmir, consolidated subsidiaries of the Company, are subject to investment allowance ruling and can use their available allowances to reduce their taxable corporate income without any time limitations. Accordingly, deferred tax asset amounting EUR 16,444,885 (31 December 2009: EUR 22,828,079) is recorded in the accompanying consolidated financial statements as of 31 December 2010 considering the fact that TAV Esenboğa and TAV İzmir may use their right of deducting investment allowances from their corporate income in the future. Movements of deferred tax assets are as follows: Restated balance at 1 January 46,918,077 31,614,194 Charged to profit or loss for the period 21,500,599 8,415,794 Recognised in other comprehensive income 4,868,363 7,299,593 Effect of movements in exchange rates 19,764 1,010,688 Acquired in business combinations (95,550) (1,896,000) Effect of group structure change - 473,808 Balance at 31 December 73,211,253 46,918,077

220 218 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 23. INVENTORIES At 31 December 2010 and 2009, inventories comprised the following: 31 December December 2009 Duty free inventories 6,792,669 6,580,720 Spare parts and other inventories 5,802,862 3,754,240 Catering inventories 1,371,199 1,068,357 13,966,730 11,403,317 At 31 December 2010, the write-down of inventories to net realizable value amounted to EUR 221,502 (31 December 2009: EUR 167,753). 24. OTHER RECEIVABLES, CURRENT AND NON-CURRENT ASSETS At 31 December 2010 and 2009, other receivables and current assets comprised the following: Other receivables and current assets 31 December December 2009 Income accruals (*) 9,910, ,872 Prepaid insurance 6,156,491 6,856,484 VAT deductible (**) 6,026,244 13,750,599 Other prepaid expense 4,123,586 2,977,911 Business advances given 2,178, ,109 Prepaid taxes and funds 1,918,552 1,318,494 Advances to suppliers 698, ,219 Other receivables 2,292,910 2,809,634 33,305,357 29,287,322 At 31 December 2010 and 2009, non-current assets comprised the following: Other non-current assets: 31 December December 2009 Advances to suppliers (***) 239,385 - Non-current prepaid insurance expenses 34,616 25,976 VAT deductible and carried forward (**) - 7,036,169 Other non-current receivables 327,679 1,868, ,680 8,930,598 (*) Income accruals include the accrued insurance income from insurance companies amounting to EUR 6,924,254 related with the Trigeneration Project of TAV İstanbul. (See Note 17) (**) VAT deductible is mainly attributable to the VAT of TAV Macedonia, TAV Tbilisi and TAV Tunisia according to local legislations. (***) Advances to suppliers consist of advances given for property and equipment.

221 219 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 25. TRADE RECEIVABLES At 31 December 2010 and 2009, trade receivables comprised the following: Trade receivables: 31 December December 2009 Trade receivables (*) 54,812,599 39,840,694 Guaranteed passenger fee receivable from DHMİ (**) 20,646,543 21,849,354 Doubtful receivables 3,111,507 2,046,447 Allowance for doubtful receivables (-) (3,111,507) (2,046,447) Notes receivable 2,212, ,224 Other 10,184 30,369 77,681,614 62,044,641 Non-current trade receivables: Guaranteed passenger fee receivable from DHMİ (**) 113,810, ,457, ,810, ,457,502 Allowance for doubtful receivables has been determined by reference to past default experience. The Group s exposure to credit and currency risks and impairment losses related to trade receivables are disclosed in Note 38. (*) Pledges on trade receivables are disclosed in Note 39. (**) Guaranteed passenger fee receivable represents the remaining discounted guaranteed passenger fee to be received from DHMİ according to the agreements made for the operations of Ankara Esenboğa Airport and İzmir Adnan Menderes Airport as a result of IFRIC 12 application. 26. CASH AND CASH EQUIVALENTS At 31 December 2010 and 2009, cash and cash equivalents comprised the following: 31 December December 2009 Cash on hand 591, ,765 Cash at banks -Demand deposit 7,431,550 3,732,314 -Time deposits 23,830,600 27,624,667 Other liquid assets 588,885 2,097,176 Cash and cash equivalents 32,442,373 34,010,922 Bank overdrafts used for cash management purposes (2,865,313) (2,379,933) Cash and cash equivalents in the statement of cash flows 29,577,060 31,630,989

222 220 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) The details of the Group s time deposits, maturities and interest rates as at 31 December 2010 and 2009 are as follows: 31 December 2010 Original Currency Maturity Interest rate % Balance TRL January ,899,934 EUR January ,261,075 USD January ,219 MKD January ,372 23,830, December 2009 Original Currency Maturity Interest rate % Balance TRL January ,018,058 EUR January ,888,643 USD January ,966 27,624,667 The Group s exposure interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 38. There is no blockage or restriction on the use of cash and cash equivalents as at 31 December 2010 and RESTRICTED BANK BALANCES At 31 December 2010 and 2009, restricted bank balances comprised the following: 31 December December 2009 Project reserve and funding accounts (*) 369,914, ,178,589 Cash collaterals (**) 12,529,990 10,671, ,444, ,849,601 (*) Certain subsidiaries, namely TAV İstanbul, TAV Esenboğa, TAV İzmir, TAV Tunisia, TAV Tbilisi and ATÜ ( the Borrowers ) opened Project Accounts designated mainly in order to reserve required amount of debt services, lease payment to DHMİ based on agreements with their lenders. As a result of pledges regarding the project bank loans as explained in Note 30, all cash except for cash on hand are classified in these accounts for TAV İstanbul, TAV Esenboğa, TAV İzmir, TAV Tunisia and TAV Tbilisi. Based on these agreements, the Group can access and use such restricted cash but all withdrawals from the project accounts are upon the lenders consent. (**) Cash collaterals include the time deposit provided by HAVAŞ as guarantee for bank loan. Interest rates are in the range of 0.10%-3.70% (31 December 2009: 0.10%-3.70%) for EUR reserves, in the range of 0.24%-3.00% (31 December 2009: 0.17%-1.50%) for USD reserves, and in the range of 1.50%-9.00% (31 December 2009: 4.25%-10.50%) for TRL reserves.

223 221 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 28. CAPITAL AND RESERVES At 31 December 2010 and 2009, the shareholding structure of the Company was as follows: Shareholders (%) 31 December 2010 Akfen Holding A.Ş. ( Akfen Holding ) ,886,071 Tepe İnşaat Sanayi A.Ş. ( Tepe İnşaat ) ,664,477 Sera Yapı Endüstrisi ve Tic. Ltd. Şti. ( Sera Yapı ) ,139,046 Other non-floated ,775,048 Free float ,816,608 Paid in capital in TRL (nominal) ,281,250 Paid in capital in EUR (nominal) as at 31 December ,288,200 Effect of non-cash increases and exchange rates (14,904,222) Paid in capital EUR 162,383,978 Shareholders (%) 31 December 2009 Tepe İnşaat ,890,026 Akfen Holding ,886,071 Sera Yapı ,101,375 Other non-floated ,113,087 Free float ,290,691 Paid in capital in TRL (nominal) ,281,250 Paid in capital in EUR (nominal) as at 31 December ,162,407 Effect of non-cash increases and exchange rates (5,778,429) Paid in capital EUR 162,383,978 The Company s share capital consists of 363,281,250 shares amounting to TRL 363,281,250 as at 31 December 2010 (31 December 2009: 363,281,250 shares amounting to TRL 363,281,250). On 20 February 2009, TAV Holding has increased its capital to TRL 363,281,250 from TRL 242,187,500 within the Company s TRL 1.5 billion maximum registered capital limit and the amount was fully paid in February Legal Reserves According to the Turkish Commercial Code ( TCC ), legal reserves are comprised of first and legal reserves. The first legal reserves are generated by annual appropriations amounting to 5 percent of income disclosed in the Company s statutory accounts until it reaches 20 percent of paid-in share capital. If the dividend distribution is made in accordance with Communiqué XI-29, a further 1/10 of dividend distributions, in excess of 5 percent of paid-in capital is to be appropriated to increase second legal reserves. If the dividend distribution is made in accordance with statutory records, a further 1/11 of dividend distributions, in excess of 5 percent of paid-in capitals are to be appropriated to increase second legal reserves. Under the TCC, the legal reserves can be used only to offset losses and are not available for any other usage unless they exceed 50 percent of paid-in capital. At 31 December 2010, legal reserves of the Company amount to EUR 21,655,917 (31 December 2009: EUR 18,385,795).

224 222 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Dividend distribution Publicly held companies distribute dividends based on the Capital Market Board ( CMB ) regulations explained below: According to CMB s decision on 27 January 2010 numbered 02/51, corporations traded on the stock exchange market are not obliged to distribute a specified amount of dividends. For corporations that will distribute dividends, in relation to the resolutions in their general meeting the dividends may be in cash, may be free by adding the profit into equity, or may be partially from both, it is also permitted not to distribute determined first party dividends falling below 5 percent of the paid-in capital of the company but, corporations that increased capital before distributing the previous year s dividends and as a result their shares are separated as old and new are obliged to distribute 1st party dividends in cash. In the Ordinary General Shareholders Meeting for the year 2009, it was resolved that there would not be distribution of profit for 2009 fiscal year, mainly due to accumulated losses. Share premium Excess amount of selling price and nominal value for each share was recorded as share premium in equity. Revaluation surplus The revaluation surplus comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognised or impaired. Purchase of shares of entities under common control The purchase of the shares of entities that are under common control are accounted for at book values. The net amount of consideration paid over the book value of the net assets acquired is recognized directly in equity. Cash flow hedge reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

225 223 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Other reserve Other reserve comprises all gain or loss realized on sale of non-controlling interest in a subsidiary. On 5 March 2010, an agreement regarding the sale of 18% of shares of TAV Tunisia to Pan African Infrastructure Development Fund ( PAIDF ) was signed by the parties. Fore-mentioned shares have been transferred to PAIDF in June 2010 and PAIDF has gained the control of these shares afterwards. As a result, as at 31 December 2010, TAV Holding s share in TAV Tunisia has decreased to 67% and the effect of this transaction amounting to EUR 20,402,679 is recognised as an equity transaction as other reserves in the consolidated financial statements. On 18 March 2010, HAVAŞ Holding has been established as per the laws of the Republic of Turkey in which TAV has 65%, HSBC Investment Bank Holdings Plc ( HSBC ) has 28.33% and İş Girişim Sermayesi Yatırım Ortaklığı A.Ş. ( İş Girişim ) has 6.67% ownership interest. HAVAŞ Holding has taken over whole shares of HAVAŞ by paying EUR 180 million and in accordance with its ownership in HAVAŞ Holding, TAV had transferred capital of EUR 78 million to HAVAŞ Holding, as HSBC and İş Girişim injected EUR 34 million and EUR 8 million, respectively into HAVAŞ Holding, totaling to a capital of EUR 120 million. On 28 December 2010, share capital of HAVAŞ increased from TRL 45,000,000 to TRL 182,632,211 as a result of the acquisition of HAVAŞ Holding by HAVAŞ as a whole with all assets and liabilities. As a result, the Group s share in HAVAŞ decreased to 65% and HAVAŞ is fully consolidated with the noncontrolling interest s ownership reflected as a non-controlling interest and the effect of this transaction is recognised as an equity transaction as other reserves in the consolidated financial statements. 29. EARNINGS PER SHARE The calculation of basic and diluted EPS at 31 December 2010 was based on the profit attributable to ordinary shareholders of EUR 49,780,525 (31 December 2009: EUR 50,523,133) and a weighted average number of ordinary shares outstanding of 363,281,250 (31 December 2009: 346,693,065), calculated as follows: Numerator: Profit for the year 49,780,525 50,523,133 Denominator: Weighted average number of shares 363,281, ,693,065 Basic profit per share Issued ordinary shares at 1 January 363,281, ,187,500 Effect of shares issued during the period - 104,505,565 Weighted average number of ordinary shares 363,281, ,693,065

226 224 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 30. LOANS AND BORROWINGS This note provides information about the contractual terms of the Group s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group s exposure to interest rate, foreign currency and liquidity risk, see Note December December 2009 Non-current liabilities Unsecured bank loans 592,092 18,244,670 Secured bank loans (*) 1,005,945,828 1,071,051,709 Finance lease liabilities 1,556, ,967 1,008,094,394 1,089,524,346 Current liabilities Short term unsecured bank loans 47,986,157 62,449,923 Short term secured bank loans (*) 42,813,809 19,429,978 Current portion of long term unsecured bank loans 628,677 1,519,223 Current portion of long term secured bank loans (*) 133,213, ,113,533 Current portion of finance lease liabilities 720, , ,363, ,758,985 (*) Secured bank loans mainly consist of project finance loans that have been secured by pledges. The Group s total bank loans and finance lease liabilities as at 31 December 2010 and 2009 are as follows: 31 December December 2009 Bank loans 1,231,180,066 1,285,809,036 Finance lease liabilities 2,277, ,295 Total 1,233,457,456 1,286,283,331 The Group s bank loans as at 31 December 2010 are as follows: Presented as Current liabilities Non-current liabilities Total TAV İstanbul 66,454, ,819, ,274,362 TAV Tunisia 17,751, ,455, ,206,929 TAV Esenboğa 10,220, ,334, ,554,803 HAVAŞ 7,446,835 72,607,995 80,054,830 TAV İzmir 19,236,918 40,437,681 59,674,599 TAV Holding 42,223,876-42,223,876 ATÜ 6,194,360 22,074,317 28,268,677 TAV Tbilisi 5,909,002 22,216,129 28,125,131 TAV Macedonia 19,834,878-19,834,878 TAV Gazipaşa 16,958,210-16,958,210 TGS 11,783,002-11,783,002 Others 628, ,092 1,220, ,642,146 1,006,537,920 1,231,180,066

227 225 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) The Group s bank loans as at 31 December 2009 are as follows: Presented as Current liabilities Non-current liabilities Total TAV İstanbul 31,841, ,020, ,862,338 TAV Tunisia 15,235, ,451, ,687,430 TAV Holding 103,182,666 56,823, ,006,184 TAV Esenboğa 8,366, ,681, ,048,218 TAV İzmir 18,558,267 57,323,568 75,881,835 TAV Tbilisi 5,409,562 26,108,300 31,517,862 ATÜ 3,615,263 20,457,758 24,073,021 HAVAŞ 1,330,555 18,442,788 19,773,343 TAV Gazipaşa 8,058, ,133 8,986,377 Others 914,188 1,058,240 1,972, ,512,657 1,089,296,379 1,285,809,036 Redemption schedules of the Group s bank loans according to original maturities as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 224,642, ,512,657 In the second year 125,322, ,765,061 In the third year 129,332, ,208,198 In the fourth year 116,588, ,315,744 In the fifth year 120,675, ,976,491 After five years 514,619, ,030,885 1,231,180,066 1,285,809,036 The majority of the borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. Spread for EUR and USD denominated loans as at 31 December 2010 is between 1.50%-5.75% and 4.50%, respectively (31 December 2009: 1.54%- 5.75% and 1.20%-4.50%, respectively). 100%, 65%, 100% and 50% of floating bank loans for TAV İstanbul, TAV İzmir, TAV Esenboğa and HAVAŞ, respectively are fixed with interest rate swaps, 100% of floating senior bank loans for TAV Tunisia was fixed with interest rate swap until 31 October 2009 and 85% of floating senior bank loans for TAV Tunisia is fixed with interest rate swap starting from 1 November 2009, as explained in Note 36.

228 226 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) The Group has obtained project loans to finance construction of its BOT concession projects, namely TAV Esenboğa, TAV İzmir, TAV Tbilisi, TAV Macedonia and TAV Tunisia; and to be able to finance advance payments to DHMİ related to concession leasing project, TAV İstanbul. Details of the loans are summarised for each project below: TAV İstanbul The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loans (*) EUR 2018 Euribor % 431,220, ,274, ,220, ,274,362 TAV İstanbul has bank loan in the amount of EUR 430,274,362 under the facility agreement. The terms of the loan require monthly principal and interest payments until 5 July 2010 and semi-annual principal and interest payments on 4 July and 4 January of each year following 5 July 2010 according to the loan agreements. (*) Interest rate is Euribor+2.50% until 4 January 2013, Euribor+2.65% between the period of 4 January 2013 and 4 January 2016 and Euribor+2.75% between the period of 4 January 2016 and 4 July The breakdown of bank loans as at 31 December 2009 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loans (*) EUR 2018 Euribor % 415,800, ,756,931 Secured bank loans (**) EUR 2019 Euribor % 40,000,000 39,105, ,800, ,862,338 (*) Interest rate is Euribor+2.50% until 4 January 2013, Euribor+2.65% between the period of 4 January 2013 and 4 January 2016 and Euribor+2.75% between the period of 4 January 2016 and 4 July (**) Interest rate is Euribor+2.50% until 4 January 2013, Euribor+2.65% between the period of 4 January 2013 and 4 January 2016 and Euribor+2.75% between the period of 4 January 2016 and 4 January Redemption schedules of TAV İstanbul bank loans according to the original maturities as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 66,454,425 31,841,606 In the second year 45,968,671 42,588,595 In the third year 51,273,849 46,641,170 In the fourth year 56,232,498 51,374,707 In the fifth year 60,155,520 55,398,538 After five years 150,189, ,017, ,274, ,862,338

229 227 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) TAV Tunisia The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR 2028 Euribor % 167,487, ,443,763 Secured bank loan EUR 2022 Euribor % 109,684, ,378,082 Secured bank loan EUR 2028 Euribor % 69,650,000 68,800,117 Secured bank loan EUR 2028 Euribor % 29,950,427 29,584, ,771, ,206,929 The breakdown of bank loans as at 31 December 2009 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR 2028 Euribor % 168,329, ,951,425 Secured bank loan EUR 2022 Euribor % 110,235, ,330,795 Secured bank loan EUR 2028 Euribor % 70,000,000 69,910,379 Secured bank loan EUR 2028 Euribor % 29,950,427 29,494, ,514, ,687,430 Redemption schedules of TAV Tunisia bank loans as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 17,751,562 15,235,735 In the second year 21,000,989 20,735,684 In the third year 21,125,801 25,054,753 In the fourth year 24,485,906 23,455,665 In the fifth year 27,721,040 25,375,000 After five years 260,121, ,830, ,206, ,687,430 TAV Esenboğa The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loans EUR 2021 Euribor % 143,250, ,554, ,250, ,554,803 TAV Esenboğa has a bank loan in the amount of EUR 140,554,803 under loan agreement. The terms of the loan require semi-annual principal and interest payments at each 30 June and 31 December according to the loan agreements starting from 31 December 2007 for interest and 30 June 2008 for principal.

230 228 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) The breakdown of bank loans as at 31 December 2009 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loans EUR 2021 Euribor % 147,000, ,048, ,000, ,048,218 Redemption schedules of TAV Esenboğa borrowings according to original maturities as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 10,220,401 8,366,571 In the second year 11,628,863 10,481,986 In the third year 12,886,545 11,857,442 In the fourth year 14,165,252 12,866,252 In the fifth year 15,134,935 13,893,880 After five years 76,518,807 86,582, ,554, ,048,218 HAVAŞ The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR 2018 Euribor % 60,000,000 60,203,252 Secured bank loan EUR 2017 Euribor % 20,000,000 19,818,302 Unsecured bank loan EUR 2015 Euribor % 33,191 33,276 80,033,191 80,054,830 The breakdown of bank loan as at 31 December 2009 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR 2017 Euribor % 20,000,000 19,773,343 20,000,000 19,773,343 Redemption schedules of the HAVAŞ bank loans as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 7,446,835 1,330,555 In the second year 14,022,366 3,333,626 In the third year 12,610,653 3,189,703 In the fourth year 11,255,058 2,823,325 In the fifth year 9,964,334 2,494,514 After five years 24,755,584 6,601,620 80,054,830 19,773,343

231 229 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) On 24 March 2010, HAVAŞ utilized a bank loan amounting to EUR 60,000,000 with an interest rate of Euribor % and a maturity of March 2018 from Türkiye İş Bankası A.Ş.. The following securities are provided in favor of the lender: TAV Holding has provided surety of EUR 10,000,000. Second ranking pledge was established on 50% of the shares in TGS. Dividend receivables arising from subsidiaries and joint ventures of HAVAŞ are assigned to repayment of the outstanding loan. Second ranking pledge was established on the shares of HAVAŞ. The loan agreement includes covenants, including restrictions on the ability of HAVAŞ to incur additional indebtedness; to make certain other restricted payments, loans; to create liens; to give guarantees; to dispose of assets, and to acquire a business or an undertaking. On 9 December 2009, HAVAŞ utilized a bank loan amounting to EUR 20,000,000 with an interest rate of Euribor % and a maturity of December 2017 from Türkiye İş Bankası A.Ş.. Following securities are provided in favor of the lender: First ranking pledge was established on 50% of the shares in TGS. Time and demand deposit amounting to EUR 12,529,990 is provided as guarantee. TAV Holding was provided surety for the total outstanding loan amount. Dividend receivables arising from subsidiaries and joint ventures are assigned to repayment of the outstanding loan. Pledge has been registered with first priority against but not limited to business entity and entity name registered in trade register, machinery and equipment, furnitures and fixtures and vehicles of HAVAŞ. First ranking pledge was established on the shares of HAVAŞ. The loan agreement includes covenants, including restrictions on the ability of HAVAŞ to incur additional indebtedness; to make certain other restricted payments, loans; to create liens; to give guarantees; to dispose of assets, and to acquire a business or an undertaking. Related with the bank loan amounting to EUR 60,000,000 with an interest rate of Euribor % and a maturity of March 2018 and the bank loan amounting to EUR 20,000,000 with an interest rate of Euribor % and a maturity of December 2017 from Türkiye İş Bankası A.Ş., 65% shares of HAVAŞ with a nominal amount of TRL 118,711,263 have been pledged in favour of Türkiye İş Bankası A.Ş. by TAV Holding. However, the voting right for these shares remains at TAV Holding. TAV İzmir The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR 2013 Euribor % 58,522,448 59,674,599 58,522,448 59,674,599 TAV İzmir has bank loans in the amount of EUR 59,674,599 under loan agreements. The terms of the loan require semi-annual principal and interest payments at each 23 January and 23 July according to the loan agreements.

232 230 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) The breakdown of bank loans as at 31 December 2009 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR 2013 Euribor % 74,312,653 75,881,835 74,312,653 75,881,835 Redemption schedules of TAV İzmir bank loans according to original maturities as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 19,236,918 18,558,267 In the second year 19,833,326 18,652,964 In the third year 20,604,355 19,074,871 In the fourth year - 19,595,733 59,674,599 75,881,835 Pledges regarding the project bank loans of TAV İstanbul, TAV İzmir and TAV Esenboğa: a) Share pledge: In case of an event of default, the banks have the right to take control of the shares. Upon the occurrence of any event of default, the banks can demand the sale of shares by way of public auction in accordance with the applicable provisions of the Bankruptcy and Execution Law of the Republic of Turkey or by way of private auction among the nominees. b) Receivable pledge: In case of an event of default, the banks have the right to take control of the receivables of project companies (disclosed as the Borrowers in Note 27) in order to perform its obligations under the loan documents. Immediately upon the occurrence of default, and all payments relating to assigned receivables shall be made to the banks which shall be entitled to collect the assigned receivables and exercise all rights with respect to assigned receivables. TAV İstanbul, TAV İzmir and TAV Esenboğa have pledged their receivables amounting to EUR 19,543,667, EUR 1,376,218, and EUR 3,077,029, respectively as at 31 December 2010 (31 December 2009: EUR 18,094,234, EUR 4,538,809 and EUR 3,215,325, respectively). c) Pledge over bank accounts: In case of an event of default, the banks have the right to control the bank accounts of project companies in order to perform its obligations under the loan documents. Upon the occurrence of event of default project companies shall be entitled to set-off and apply the whole or any part of the cash standing to the credit of the accounts and any interests, proceeds and other income that may accrue or arise from the accounts. TAV İstanbul, TAV İzmir and TAV Esenboğa have pledges over bank accounts amounting to EUR 271,216,672, EUR 33,426,426, and EUR 30,759,515, respectively as at 31 December 2010 (31 December 2009: EUR 443,818,979, EUR 65,575,948 and EUR 55,413,765, respectively). With the consent of the facility agent, TAV İstanbul, TAV İzmir and TAV Esenboğa have a right to have an additional; subordinated debt approved in advance by the Facility Agent, indebtedness up to USD 0.5 million for the acquisition cost of any assets or leases of assets, indebtedness up to USD 3 million for the payment of tax and social security liabilities.

233 231 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Pledges regarding the project bank loan of TAV Tunisia: Similar to above, TAV Tunisia has granted share pledge, account pledge and pledge of rights from the Concession Agreement to the lenders. TAV Tunisia has a right to have additional indebtedness; with a maturity of less than one year for an aggregate amount not exceeding EUR 3,000,000 (up to 1 January 2020) and not exceeding EUR 5,000,000 (thereafter), under finance or capital leases of equipment if the aggregate capital value of the equipment leased does not exceed EUR 5,000,000, incurred by, or committed in favour of, TAV Tunisia under an Equity Subordinated Loan Agreement, disclosed in writing by TAV Tunisia to the Intercreditor Agent and in respect of which it has given its prior written consent. TAV Holding The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Unsecured bank loan USD % 18,861,939 19,189,843 Unsecured bank loan EUR %-8.00% 17,000,000 17,013,312 Secured bank loan EUR % 6,000,000 6,020,721 41,861,939 42,223,876 The breakdown of bank loans as at 31 December 2009 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Libor % Secured bank loan USD 2012 Euribor % 62,341,573 62,615,071 Unsecured bank loan EUR 2010 Euribor % 32,500,000 32,610,000 Unsecured bank loan EUR %-8.00% 20,500,000 20,634,037 Unsecured bank loan TRL % % 12,336,250 13,255,196 Secured bank loan EUR 2010 Euribor % 10,000,000 10,041,179 Secured bank loan EUR % 8,000,000 8,036,679 Unsecured bank loan USD % 6,969,865 6,975,037 Unsecured bank loan USD 2010 Libor % 5,808,221 5,838, ,455, ,006,184 Redemption schedules of TAV Holding bank loans as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 42,223, ,182,666 In the second year - 39,859,003 In the third year - 16,964,515 42,223, ,006,184

234 232 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) ATÜ The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR 2015 Euribor % 10,522,368 10,476,144 Secured bank loan EUR % 9,996,250 10,240,432 Secured bank loan EUR % 4,998,125 5,004,604 Secured bank loan EUR % 1,072,915 1,117,576 Secured bank loan EUR % 819, ,021 Secured bank loan TND % 630, ,900 28,040,233 28,268,677 The breakdown of bank loans as at 31 December 2009 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR 2015 Euribor % 12,639,810 12,575,704 Secured bank loan EUR % 9,996,250 10,277,022 Secured bank loan EUR % 1,220,204 1,220,295 23,856,264 24,073,021 Redemption schedules of the ATÜ bank loans as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 6,194,360 3,615,263 In the second year 6,258,254 3,997,476 In the third year 4,694,988 4,227,506 In the fourth year 4,238,714 3,509,338 In the fifth year 3,848,187 3,169,492 After five years 3,034,174 5,553,946 28,268,677 24,073,021 TAV Tbilisi The breakdown of bank loan as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan USD 2015 Libor % 27,813,520 28,125,131 27,813,520 28,125,131 The breakdown of bank loan as at 31 December 2009 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan USD 2015 Libor % 31,456,290 31,517,862 31,456,290 31,517,862

235 233 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Redemption schedules of the TAV Tbilisi bank loans as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 5,909,002 5,409,562 In the second year 6,017,633 5,642,313 In the third year 6,136,087 5,685,279 In the fourth year 6,210,943 5,690,724 In the fifth year 3,851,466 5,645,067 After five years - 3,444,917 28,125,131 31,517,862 Pledges regarding the bank loans: a) Share pledge-to take control of 75 percent plus one share of the charter capital of TAV Tbilisi; b) Revenue pledge-to take control of the revenues derived from Tbilisi International Airport operations as stipulated in the BOT Agreement; c) Pledge over bank accounts-to take control of TAV Tbilisi s bank accounts in JSC Bank of Georgia, JSC Bank Republic and JSC TBC Bank and be entitled to set-off and apply the whole or any part of the cash standing to the credit of the accounts and any interests, proceeds and other income that may accrue or arise from the accounts; d) Pledge over insurance proceeds-to receive all insurance compensation and any other amounts payable under the insurance policies of TAV Tbilisi; e) Pledge over BOT rights-to control all interests and benefits of TAV Tbilisi pursuant to the BOT Agreement; f) Pledge over rights under the construction guarantees-to control all right, title and interest under each construction guarantee; g) Pledge over project reserve account-to control the project reserve account. The shareholders of TAV Tbilisi, TAV Holding, Akfen İnşaat, Urban İnşaat Sanayi ve Ticaret A.Ş., Sera Yapı Endüstrisi ve Ticaret A.Ş., and Aeroser International Holding (UK) Limited concluded Guarantee, Share Retention, Support and Subordination Deed with EBRD and IFC in respect with the loans extended to TAV Tbilisi. Accordingly, all shareholders irrevocably and unconditionally guarantee, on joint and several basis: to pay to EBRD and IFC on demand, and in the currency in which the same falls due for payment by TAV Tbilisi, all monies and liabilities which shall have been advanced to, become due, owing or incurred by TAV Tbilisi to or in favour of EBRD and IFC; to indemnify EBRD and IFC in full on demand against all losses, costs and expenses suffered or incurred by EBRD and IFC arising from or in connection with any one or more of the purported liabilities or obligations of TAV Tbilisi to EBRD and IFC under the loan and related agreements.

236 234 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) TAV Macedonia The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR 2011 Euribor % 20,000,000 19,834,878 20,000,000 19,834,878 Redemption schedules of TAV Macedonia bank loans as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 19,834,878-19,834,878 - TAV Gazipaşa The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan EUR %-7.00% 10,450,000 10,755,767 Secured bank loan TL % 6,100,239 6,202,443 16,550,239 16,958,210 The breakdown of bank loans as at 31 December 2009 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Secured bank loan TL %-14.38% 4,985,419 5,035,827 Secured bank loan EUR %-7.80% 2,950,000 3,022,417 Unsecured bank loan TL % 925, ,133 8,861,216 8,986,377 Redemption schedules of TAV Gazipaşa bank loans as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 16,958,210 8,058,244 In the second year - 928,133 16,958,210 8,986,377

237 235 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) TGS The breakdown of bank loans as at 31 December 2010 is as follows: Original Currency Year of Maturity Nominal Interest Rate Face Value Carrying Amount Unsecured bank loan TL %-7.95% 11,712,460 11,783,002 11,712,460 11,783,002 Redemption schedules of TGS bank loans as at 31 December 2010 and 2009 are as follows: 31 December December 2009 On demand or within one year 11,783,002-11,783,002 - Finance lease liabilities Future minimum lease payments Present value of Future minimum minimum lease lease Interest payments payments Interest Present value of minimum lease payments 1 year 748,758 27, ,916 1 year 275,216 28, , year 1,572,058 15,584 1,556, year 243,486 15, ,967 Total 2,320,816 43,426 2,277,390 Total 518,702 44, ,295 It is the Group s policy to lease certain of its fixtures and equipment under finance leases. The average remaining lease term is three years as at 31 December For the year ended 31 December 2010, the average effective borrowing rate was 6.60% (31 December 2009: 6.09%). Interest rates are fixed at the contract date, and thus expose the Group to fair value interest rate risk. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. 31. RESERVE FOR EMPLOYEE SEVERANCE INDEMNITY Under the Turkish Labour Law, the Company and its Turkish subsidiaries and joint ventures are required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service (20 years for women) and reaches the retirement age (58 for women and 60 for men). Since the legislation was changed on 8 September 1999, there are certain transitional provisions relating to length of service prior to retirement. Such payments are calculated on the basis of 30 days pay maximum full TRL 2,517 as at 31 December 2010 (equivalent to EUR 1,228 as at 31 December 2010) (31 December 2009: TRL 2,365 (equivalent to EUR 1,095 as at 31 December 2009)) per year of employment at the rate of pay applicable at the date of retirement or termination. Reserve for retirement pay is computed and reflected in the financial statements on a current basis. The reserve has been calculated by estimating the present value of future probable obligation of the Company and its Turkish subsidiaries and joint ventures arising from the retirement of the employees. The calculation was based upon the retirement pay ceiling announced by the government. The provision has been calculated by estimating the present value of the future probable obligation of the Company and its subsidiaries and joint venture registered in Turkey arising from the retirement of employees. IFRSs require actuarial valuation methods to be developed to estimate the enterprise s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:

238 236 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying consolidated financial statements as at 31 December 2010, the provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. The provision at 31 December 2010 has been calculated assuming an annual inflation rate of 5.10% and a discount rate of 10.00% resulting in a real discount rate of approximately 4.66% (31 December 2009: annual inflation rate of 4.80% and a discount rate of 11.00% resulting in a real discount rate of approximately 5.92%). It is planned that retirement rights will be paid to employees at the end of concession periods. Accordingly, present value of the future probable obligation has been calculated based on the concession periods Balance at 1 January 4,645,483 3,247,519 Interest cost 699,279 2,123,752 Service cost 2,106,677 2,330,760 Payment made during the year (*) (1,834,364) (4,215,585) Effects of change in foreign exchange rate 247,465 (27,144) Actuarial difference 1,587,432 1,186,181 Balance at 31 December 7,451,972 4,645,483 (*) 1,161 of total personnel transferred from TGS to HAVAŞ have obtained termination benefits amountingto EUR 3 million in OTHER PAYABLES At 31 December 2010 and 2009, other payables comprised the following: 31 December December 2009 Concession payable (*) 18,706,708 11,450,078 Due to personnel 6,626,054 7,664,301 Taxes and duties payable 4,574,775 11,067,818 Social security premiums payable 4,516,272 3,198,013 Expense accruals 2,137,509 1,116,835 Advances received 678, ,355 Other accruals and liabilities 834,456 4,303,052 38,074,621 39,264,452 (*) TAV Tunisia has a concession period of 40 years with a concession rent fee that will increase in a linear rate between 11% and 26% of the annual revenues of the Monastir and Enfidha Airports to be paid. TAV Macedonia has a concession period of 20 years with a concession rent fee that will increase in a linear rate between 2.21% and 15.02% of the annual revenues to be paid. The Group s exposure to currency and liquidity risk is related to other payables is disclosed in Note DEFERRED INCOME The breakdown of deferred income as at 31 December 2010 and 2009 is as follows: 31 December December 2009 Deferred income Short-term deferred income 7,238,327 5,706,204 Long-term deferred income 21,688,366 14,339,463 28,926,693 20,045,667 EUR 19,275,195 (31 December 2009: EUR 15,784,295) of deferred income is related with the unearned concession rent income from ATÜ.

239 237 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 34. PROVISIONS At 31 December 2010 and 2009, provisions comprised the following: 31 December December 2009 Unused vacation provision 4,401,279 2,468,446 Other provisions 431, ,472 4,832,799 2,695,918 Unused vacation Balance at 1 January 2,468,446 2,538,425 Provision set / (released) during the year, net 1,802,934 (47,067) Effects of change in foreign exchange rate 129,899 (22,912) Balance at 31 December 4,401,279 2,468,446 Tax penalty Balance at 1 January - 1,168,501 Provision set during the year, net - 444,174 Payments during the year - (1,609,354) Effects of change in foreign exchange rate - (3,321) Balance at 31 December TRADE PAYABLES At 31 December 2010 and 2009, trade payables comprised the following: 31 December December 2009 Trade payables 33,260,277 28,613,929 Deposits and guarantees received 818, ,027 Other 79,374 61,131 34,158,389 29,306,087 Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The Group s exposure to currency and liquidity risk related to trade payables is disclosed in Note 38.

240 238 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 36. DERIVATIVE FINANCIAL INSTRUMENTS At 31 December 2010 and 2009, derivative financial instruments comprised the following: 31 December 2010 Assets Liabilities Net Amount Interest rate swap - (99,485,643) (99,485,643) Cross currency swap - (5,482,466) (5,482,466) - (104,968,109) (104,968,109) 31 December 2009 Assets Liabilities Net Amount Interest rate swap - (85,400,809) (85,400,809) Cross currency swap 6,390,781-6,390,781 6,390,781 (85,400,809) (79,010,028) Interest rate swap: TAV Esenboğa uses interest rate derivatives to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2010, 100% of project finance loan is hedged through Interest Rate Swap ( IRS ) contract during the life of the loan with an amortising schedule depending on repayment of the loan (31 December 2009: 100%). TAV Tunisia uses interest rate derivatives to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2010, 85% of floating senior bank loan is hedged through IRS contract during the life of the loan with an amortising schedule depending on repayment of the loan (31 December 2009: 85%). TAV İstanbul uses interest rate derivatives to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2010, 100% of project finance loan is hedged through IRS contract during the life of the loan with an amortising schedule depending on repayment of the loan (31 December 2009: 100%). TAV İzmir uses interest rate derivative to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2010, 65% of total project finance loan is hedged through IRS contract (31 December 2009: 74%). HAVAŞ uses interest rate derivative to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2010, 50% of total loan is hedged through IRS contract (31 December 2009: None). Cross currency swap: TAV İstanbul uses cross currency derivatives to manage its exposure to foreign currency exchange rates on its rent installments that will be paid to DHMİ. TAV İstanbul had signed a derivative contract with Dexia Credit Local ( DCL ) on 12 March 2008 to manage and fix its exposure to foreign currency exchange rates between USD and EUR on the rent installments that will be paid to DHMİ till TAV İstanbul has terminated the hedge relationship in 2010 and new two cross currency swap contracts have been signed by and between TAV İstanbul, DCL, and ING Bank N.V. on 16 December The total notional amount of the contract is EUR 316,004,183 (in exchange of USD 416,493,513) as at 31 December 2010 (31 December 2009: EUR 317,474,667 (in exchange of USD 470,814,932)). The fair value of derivatives at 31 December 2010 is estimated at EUR 104,968,109 (31 December 2009: EUR 79,010,028). This amount is based on market values of equivalent instruments at the reporting date. Since the Group applied hedge accounting as at 31 December 2010 changes in the fair value of these interest rate derivatives and cross currency swaps were reflected to other comprehensive income amounting to a loss of EUR 8,725,740 (31 December 2009: a loss of EUR 28,926,250) net of tax.

241 239 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Fair value disclosures: The Group has determined the estimated fair values of the financial instruments by using current market information and appropriate valuation methods. Since the book values of the foreign exchange denominated monetary items are estimated to approximate their fair values, these monetary items are translated to EUR by using the foreign exchange rates as at the reporting date. Since the financial assets and liabilities are short term in nature, it is accepted that their fair values approximate to their carrying amounts. 37. OPERATING LEASES The Group entered into various operating lease agreements (excluding rent agreement for TAV İstanbul, TAV Macedonia and TAV Tunisia). For the year ended 31 December 2010, total rent expenses for operating leases amounted to EUR 3,168,748 (31 December 2009: EUR 1,983,277). 38. FINANCIAL INSTRUMENTS Exposure to credit, interest rate and currency risks arises in the normal course of the Group s business. However, most of the Group s revenues are denominated in hard currency. The gap between hard currency assets and liabilities are hedged by derivative financial instruments such as cross currency swaps. In addition to hedging of the currency risk, TAV İstanbul, TAV İzmir, TAV Esenboğa, TAV Tunisia and HAVAŞ use interest rate swaps as to hedge the fluctuations in Euribor and Libor rates (i.e. 100%, 65%, 100%, 85% and 50% of floating loans of TAV İstanbul, TAV İzmir, TAV Esenboğa, TAV Tunisia and HAVAŞ, respectively are fixed). 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 is: Note 31 December December 2009 Trade receivables-non-current ,810, ,457,502 Trade receivables-current 25 77,681,614 62,044,641 Due from related parties 40 5,124,375 10,482,379 Other receivables and current assets (*) 24 7,112,588 1,535,893 Restricted bank balances ,444, ,849,601 Cash and cash equivalents (**) 26 31,851,035 33,454,157 Interest rate and cross currency swaps used forhedging 36-6,390, ,025, ,214,954 (*) Non-financial instruments such as VAT deductible and carried forward, prepaid expenses and advances given are excluded from other current assets and other non-current assets. (**) Cash on hand is excluded from cash and cash equivalents.

242 240 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Impairment losses The movements in the allowance for impairment in respect of trade receivables during the years ended 31 December were as follows: 1 January- 31 December January- 31 December 2009 Balance at 1 January (2,046,447) (1,846,399) Collections during the year 414,944 89,736 Impairment loss recognized (1,336,568) (306,451) Effect of changes in foreign exchange rates (143,436) 16,667 Balance at 31 December (3,111,507) (2,046,447) Allowance for doubtful receivables is determined by reference to past default experience. The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amount considered irrecoverable is written off against the trade receivable directly. Liquidity risk The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: 31 December 2010 Carrying Amount Contractual cash flows 3 months or less 3-12 months 1-5 years More than five years Non-derivative financial liabilities Secured bank loans 1,181,973,140 (1,568,760,956) (81,465,237) (86,820,043) (575,295,078) (825,180,598) Unsecured bank loans 49,206,926 (50,821,104) (12,577,209) (37,592,813) (651,082) - Financial lease liabilities 2,277,390 (2,277,390) (180,036) (540,882) (1,556,472) - Bank overdraft 2,865,313 (2,865,313) (2,865,313) Trade payables (*) 33,339,651 (33,410,648) (33,410,648) Due to related parties 28,151,745 (45,468,611) (28,435,202) (3,001,342) (9,603,518) (4,428,549) Other payables (*) 37,395,774 (37,395,774) (20,801,555) (16,594,219) - - Derivative financial liabilities Interest rate swaps used for hedging 99,485,643 (128,396,091) (7,771,973) (22,535,602) (74,547,906) (23,540,610) Currency swaps Outflow 5,482,466 (316,044,183) - (40,694,826) (163,343,650) (112,005,707) Inflow - 309,982,153-40,633, ,594, ,754,396 1,440,178,048 (1,875,457,917) (187,507,173) (167,146,560) (663,403,116) (857,401,068)

243 241 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 31 December 2009 Carrying Amount Contractual cash flows 3 months or less 3-12 months 1-5 years More than five years Non-derivative financial liabilities Secured bank loans 1,203,595,220 (1,695,934,414) (34,032,256) (103,320,641) (573,585,146) (984,996,371) Unsecured bank loans 82,213,816 (85,543,037) (13,089,720) (52,507,767) (19,945,550) - Financial lease liabilities 474,295 (494,862) (66,438) (196,563) (231,861) - Bank overdraft 2,379,933 (2,379,933) (2,379,933) Trade payables (*) 28,675,060 (28,748,874) (28,748,874) Due to related parties 31,368,103 (32,865,946) (6,650,611) (7,132,950) (19,082,385) - Other payables (*) 38,800,097 (38,800,097) (38,358,333) (441,764) - - Derivative financial liabilities Interest rate swaps used for hedging 85,400,809 (114,995,377) (2,365,800) (23,339,016) (66,743,806) (22,546,755) Currency swaps Outflow - (317,474,668) (20,244,609) (16,384,804) (144,084,516) (136,760,739) Inflow (6,390,781) 325,206,006 20,423,643 16,992, ,875, ,915,189 1,466,516,552 (1,992,031,202) (125,512,931) (186,331,432) (674,798,163) (1,005,388,676) (*) Non-financial instruments such as deposits on guarantees and advances received are excluded from trade payables and other payables. The following table indicates the periods in which the cash flows associated with the derivatives that are cash flow hedges expected to occur. 31 December 2010 Carrying Amount Contractual cash flows 3 months or less 3-12 months 1-5 years More than five years Interest rate swaps Assets Liabilities (99,485,643) (128,396,091) (7,771,973) (22,535,602) (74,547,906) (23,540,610) Cross currency swaps Assets Liabilities (5,482,466) (6,062,030) - (61,659) (1,749,060) (4,251,311) 31 December 2009 Carrying Amount Contractual cash flows 3 months or less 3-12 months 1-5 years More than five years Interest rate swaps Assets Liabilities (85,400,809) (114,995,377) (2,365,800) (23,339,016) (66,743,806) (22,546,755) Cross currency swaps Assets 6,390,781 7,731, , ,269 4,790,585 2,154,450 Liabilities

244 242 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Currency risk Exposure to currency risk: The Group s exposure to foreign currency risk in Euro equivalent of their original currencies was as follows: 31 December 2010 Foreign currency denominated financial assets USD EUR (*) TRL Other Total Other non-current assets 6,262-46,073 11,411 63,746 Trade receivables 13,540, ,824 3,350,067 5,806,226 23,272,686 Due from related parties 924,730-1,510,813-2,435,543 Other receivables and current assets 48,008 1,797 8,095,835 5,083,236 13,228,876 Restricted bank balances 11,857,494 44, ,838,200 2,081, ,821,722 Cash and cash equivalents 1,547,022 81,651 7,515,141 1,857,146 11,000,960 27,924, , ,356,129 14,839, ,823,533 Foreign currency denominated financial liabilities Loans and borrowings (48,652,286) - (6,143,968) (913,676) (55,709,930) Bank overdraft - - (1,738,590) (4,870) (1,743,460) Trade payables (2,684,766) (22,344) (6,768,971) (7,461,918) (16,937,999) Due to related parties (4,609,180) (52,928) (10,193,770) - (14,855,878) Derivative financial instruments (5,482,466) (5,482,466) Other payables (1,049,707) (30,478) (10,118,087) (2,784,677) (13,982,949) (62,478,405) (105,750) (34,963,386) (11,165,141) (108,712,682) Net exposure (34,554,320) 598,261 87,392,743 3,674,167 57,110,851 (*) The figures in this column reflect the Euro position of subsidiaries and joint ventures that have functional currencies other than Euro.

245 243 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 31 December 2009 Foreign currency denominated financial assets USD EUR (*) TRL Other Total Other non-current assets 19, ,819 2, ,022 Trade receivables 9,451, ,409 6,829,672 2,449,024 19,441,988 Due from related parties 1,906, ,252, ,632 4,694,894 Derivative financial instruments 6,390, ,390,781 Other receivables and current assets 56, ,285 3,274,415 12,912,103 16,658,785 Restricted bank balances 105,508,839 1,127 74,029,307 4,013, ,553,218 Cash and cash equivalents 1,103,130 1,098,235 2,152,926 1,203,127 5,557, ,437,580 2,226,719 88,641,149 21,116, ,422,106 Foreign currency denominated financial liabilities Loans and borrowings (108,532,085) - (19,152,528) - (127,684,613) Bank overdraft - - (1,627,468) - (1,627,468) Trade payables (3,073,367) (47,926) (6,455,251) (3,807,971) (13,384,515) Due to related parties (3,794,634) (1,237) (416,931) - (4,212,802) Other payables (394,974) (6,822) (13,600,390) (1,879,075) (15,881,261) (115,795,060) (55,985) (41,252,568) (5,687,046) (162,790,659) Net exposure 8,642,520 2,170,734 47,388,581 15,429,612 73,631,447 (*) The figures in this column reflect the Euro position of subsidiaries and joint ventures that have functional currencies other than Euro. The following significant exchange rates applied during the year: Average Rate Reporting Date Closing Rate 31 December December December December 2009 USD TRL GEL Sensitivity analysis: The Group s principal currency rate risk relates to changes in the value of the Euro relative to TRL and the USD. The Group manages its exposure to foreign currency risk by entering into derivative contracts and, where possible, seek to incur expenses with respect to each contract in the currency in which the contract is denominated and attempt to maintain its cash and cash equivalents in currencies consistent with its obligations. The basis for the sensitivity analysis to measure foreign exchange risk is an aggregate corporate-level currency exposure. The aggregate foreign exchange exposure is composed of all assets and liabilities denominated in foreign currencies, both short-term and long-term purchase contracts. The analysis excludes net foreign currency investments.

246 244 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) A 10 percent strengthening (weakening) of EUR against the following currencies at 31 December 2010 and 2009 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. Equity Profit or loss Strengthening of EUR Weakening of EUR Strengthening of EUR Weakening of EUR 31 December 2010 USD (25,972,195) 31,744,226 2,907,185 (2,907,185) TRL - - (8,739,274) 8,739,274 Other - - (367,417) 367,417 Total (25,972,195) 31,744,226 (6,199,506) 6,199, December 2009 USD (26,023,783) 31,784,618 (225,174) 225,174 TRL - - (4,738,858) 4,738,858 Other - - (1,542,961) 1,542,961 Total (26,023,783) 31,784,618 (6,506,993) 6,506,993 Interest rate risk The Group has used material amounts of bank borrowings from foreign sources and banks. Although most of these loans used have floating interest rates, the Group management and banks fixed interest rates by using derivative financial instruments. TAV İstanbul, TAV İzmir, TAV Esenboğa, TAV Tunisia and HAVAŞ use interest rate swap to hedge of fluctuations in Euribor and Libor rates (i.e. 100%, 65%, 100%, 85% and 50% of floating loans of TAV İstanbul, TAV İzmir, TAV Esenboğa, TAV Tunisia and HAVAŞ, respectively are fixed). Profile: At the reporting date, the interest rate profile of the Group s interest-bearing financial instruments was: Carrying amount 31 December December 2009 Fixed rate instruments Financial assets 345,054, ,062,772 Financial liabilities (209,071,088) (172,684,670) 135,983, ,378,102 Carrying amount 31 December December 2009 Variable rate instruments Financial assets 14,380,772 13,305,923 Financial liabilities (1,130,956,789) (1,224,728,989) (1,116,576,017) (1,211,423,066)

247 245 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Fair value sensitivity analysis for fixed rate instruments: The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments: Based on the Group s current borrowing profile, a 50 basis points increase in Euribor or Libor would have resulted in additional interest expense of approximately EUR 4.6 million on the Group s variable rate debt when ignoring effect of derivative financial instruments. EUR 3.9 million of the exposure is hedged through interest rate swap contracts. Therefore, the net exposure on statement of comprehensive income would be EUR 0.7 million. A 50 basis points increase in Euribor or Libor would have resulted an increase in cash flow hedge reserve in equity approximately by EUR 25.3 million and a 50 basis points decrease in Euribor or Libor would have resulted an decrease in cash flow hedge reserve in equity approximately by EUR 26.5 million. Fair values Fair values versus carrying amounts: The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows: Carrying Amount 31 December December 2009 Fair Carrying Value Amount Fair Value Note Financial assets Trade receivables-non current ,810, ,669, ,457, ,810,901 Trade receivables-current 25 77,681,614 84,000,402 62,044,641 64,266,282 Due from related parties 40 5,124,375 5,124,375 10,482,379 10,482,379 Other receivables and current assets (*) 24 7,112,588 7,112,588 1,535,893 1,535,893 Restricted bank balances ,444, ,444, ,849, ,849,601 Cash and cash equivalents 26 32,442,373 32,442,373 34,010,922 34,010,922 Derivative financial instruments ,390,781 6,390,781 Financial liabilities Bank overdraft 26 (2,865,313) (2,865,313) (2,379,933) (2,379,933) Loans and borrowings 30 (1,233,457,456) (1,233,457,456) (1,286,283,331) (1,286,283,331) Trade payables (**) 35 (33,339,651) (33,339,651) (28,675,060) (28,675,060) Due to related parties 40 (28,151,745) (28,151,745) (31,368,103) (31,368,103) Derivative financial instruments 36 (104,968,109) (104,968,109) (85,400,809) (85,400,809) Other payables (**) 32 (37,395,774) (37,395,774) (38,800,097) (38,800,097) (821,561,344) (734,384,441) (910,135,614) (847,560,574) (*) Non-financial instruments such as prepaid expenses, prepaid taxes and dues and advances given are excluded from other noncurrent assets and other receivables and current assets. (**) Non-financial instruments such as advances received are excluded from trade payables and other payables. The methods used in determining the fair values of financial instruments are discussed in Note 4.

248 246 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Fair value hierarchy: The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: 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 (i.e., as prices) or indirectly (i.e., derived from prices). Level 3: input for the asset or liability that are not based on observable market data (unobservable inputs). 31 December 2010 Level 1 Level 2 Level 3 Interest rate swap - (99,485,643) - Cross currency swap - (5,482,466) - - (104,968,109) - 31 December 2009 Level 1 Level 2 Level 3 Interest rate swap - (85,400,809) - Cross currency swap - 6,390, (79,010,028) COMMITMENTS, CONTINGENCIES AND CONTRACTUAL OBLIGATIONS Commitments and contingencies 31 December December 2009 Letters of guarantee given to DHMİ 122,819, ,246,397 Letters of guarantee given to third parties 54,776,983 46,321,988 Letters of guarantee given to Macedonian Government 20,250,000 6,000,000 Letters of guarantee given to Tunisian Government 8,421,230 57,921, ,267, ,489,615 The Group is obliged to give 6% of the total rent amount of USD 152,580,000 of TAV İstanbul as a letter of guarantee according to the rent agreement made with DHMİ. The total obligation has been provided by TAV İstanbul. The Group is obliged to give a letter of guarantee at an amount equivalent of EUR 7,971,230 (2009: EUR 41,421,230) to the Ministry of Transport and EUR 450,000 (2009: EUR 16,500,000) to OACA according to the BOT agreement signed with OACA in Tunisia. The total obligation has been provided by the Group. Majority of letters of guarantee given to third parties includes the guarantees given to customs and some customers. Contractual obligations TAV İstanbul TAV İstanbul is bound by the terms of the Rent Agreement made with DHMİ. If TAV İstanbul does not follow the rules and regulations set forth in the Rent Agreement, this might lead to the forced cessation of TAV İstanbul s operation. At the end of the contract period, TAV İstanbul will be responsible for one year for the maintenance and repair of the devices, system and equipment supplied for the contractual facilities. In case the necessary maintenance and repairs are not made, DHMİ will have this maintenance and repair made, and the cost will be charged to TAV İstanbul.

249 247 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Pursuant to the provisions of this agreement, the contractual obligations of TAV İstanbul include the rental of the above mentioned facilities for a period of fifteen and a half years beginning on 3 July 2005; the operation of the facilities in compliance with international norms and standards within the rental (operation) period; the performance of periodic repair and maintenance activities on the facilities and the transfer of the facilities in question including the supporting systems, equipment, furniture and fixtures in a proper and usable condition to DHMİ upon the expiry of the rental period. In the case where TAV İstanbul as the lessee performs a delayed and/or incomplete rent payment to DHMİ, TAV İstanbul is charged a penalty of 10% of the rent amount to be paid. TAV İstanbul is then obliged to perform the payment latest within five days. Otherwise, DHMİ shall be entitled to terminate the rent agreement. TAV İstanbul is not entitled to claim the rent payments performed to DHMİ prior to the termination of the contract. TAV Esenboğa and TAV İzmir TAV Esenboğa and TAV İzmir are bound by the terms of the BOT Agreements made with DHMİ. If these companies do not follow the rules and regulations set forth in the concession agreement, this might lead to the forced cessation of these companies operations according to the BOT Agreements. According to the BOT agreements: The share capital of the companies cannot be less than 20% of fixed investment amount. The companies have a commitment to make additional investment up to 20% of the initial BOT investment upon request of DHMİ. DHMİ has requested an extension of EUR 13,900,000 (13% of the initial investment) from TAV İzmir on 21 August 2006 which extended the construction period by 2 months and 20 days, and operation period by 8 months and 27 days. TAV İzmir completed the construction for such extension on 10 May After granting of temporary acceptance by DHMİ in year 2007, final acceptance was granted by DHMİ at 21 March Final acceptance for BOT investments of TAV Esenboğa was granted by DHMİ on 5 June At the end of the contract period, the companies will be responsible for one year for the maintenance and repair of the devices, system and equipment supplied for the contractual facilities. In case the necessary maintenance and repairs are not made, DHMİ will have this maintenance and repair made and the cost will be charged to TAV İzmir and TAV Esenboğa. All equipment used by TAV Esenboğa and TAV İzmir must be in a good condition and under warranty and need to meetthe international standards and Turkish Standards as well. If the need shall arise to replace fixed assets subject to depreciation, which become unusable within the rent period and the depreciation rates of which are not delineated in the Tax Application Law, the operator is obliged to perform the replacement. All fixed assets covered by the implementation contract will be transferred to DHMİ free of charge. Transferred items must be in working conditions and should not be damaged. TAV Esenboğa and TAV İzmir have the responsibility of repair and maintenance of all fixed assets under the investment period.

250 248 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) HAVAŞ and TGS In accordance with the general ground handling agreement (an integral part of the ground handling operation A Group license) signed with DHMİ, HAVAŞ and TGS undertake the liability of all losses incurred by their personnel to DHMİ or to third parties. They also take the responsibility of the training facilities given to the personnel and the quality of the service provided by its personnel together with the repair and maintenance of the ground handling vehicles and equipment. HAVAŞ and TGS are required to provide DHMİ with letters of guarantee each amounting to USD 1,000,000. Fines received from losses incurred by the ground handling personnel or fines arising from the violation of the related agreement will be charged to HAVAŞ and TGS. Fines which are overdue in accordance with the appointed agreement / period declared by DHMİ will be settled by the liquidation of the letter of guarantee. If DHMİ liquidates the collateral, HAVAŞ and TGS are obliged to complete the collateral at its original amount which is USD 1,000,000 within 15 days. In accordance with the rental agreements signed with DHMİ regarding several parking areas, land, buildings, offices at the Atatürk, Esenboğa, Adnan Menderes, Dalaman, Adana, Trabzon, Milas, Nevşehir, Antalya, Gaziantep, Kayseri, Urfa, Batman, Adıyaman, Elazığ, Muş, Sivas, İzmir and Konya airports; when the rent period ends, DHMİ will have the right to retain the immovables in the area free of charge. TAV Tbilisi TAV Tbilisi is bound by the terms of the BOT Agreement. In case TAV Tbilisi fails to comply with the rules and regulations set forth in the agreement, it may be forced to cease its operations. With regards to the BOT Agreement, TAV Tbilisi is required to; comply with all applicable safety standards and ensure that the airport and all other ancillary equipment are operated in a manner safe to passengers, workers and general public, as well as to comply with the technical and operational requirements of Tbilisi International Airport and environmental standards of Georgia; maintain and operate the new terminal and infrastructure at Tbilisi International Airport in accordance with the applicable requirements of the BOT Agreement and IATA, ICAO or ECAC; ensure that its subcontractors and TAV Tbilisi itself obtain and maintain relevant insurance policies from financially strong and internationally reputable insurance companies; remedy accidents that might occur upon mechanical damage inflicted by TAV Tbilisi to existing communication networks or inappropriate use or operation thereof. The commercial operation of the New Terminal is carried out based on the Provisional Acceptance Protocol concluded according to the BOT Agreement for Tbilisi International Airport terminal building and related infrastructure. The Final Acceptance Protocol was not concluded as of the date of approval for issue of the consolidated financial statements as at 31 December 2010, as the legal form of transfer of the New Terminal was still under discussion among the parties to the BOT Agreement in order to be in compliance with the Georgian legislation. The legal form of the final acceptance of the New Terminal may have various effects on the TAV Tbilisi s financial and/or tax positions.

251 249 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Tax legislation and contingencies Georgian commercial legislation and tax legislation in particular may give rise to varying interpretations and amendments. In addition, as management s interpretation of tax legislation may differ from that of the tax authorities, transactions may be challenged by the tax authorities, and as a result TAV Tbilisi may be assessed additional taxes, penalties and interest. Tax periods remain open to review by the tax authorities for six years. Management believe that their interpretation of the relevant legislation is appropriate and TAV Tbilisi s profit, currency and customs positions will be sustained. On 4 June 2009, TAV Tbilisi received a Tax Request from Large Taxpayers Inspection of the Ministry of Finance of Georgia notifying accrual of tax charges of GEL 5,479,370 (EUR 2,331,647) consisting of cancellation of recoverable VAT of GEL 5,091,451 (EUR 2,166,575) and related fines of GEL 387,919 (EUR 165,072) reported in the interim report prepared by the Auditing Department of Ministry of Finance of Georgia based on the tax audit of TAV Tbilisi. Upon the objection of the management to Ministry of Finance of Georgia, the tax office made a reassessment and notified TAV Tbilisi that a tax liability and penalty of GEL 3,596,560 (EUR 1,530,451)as the VAT amount of the reimbursement receivable of the company deducted. The amount was fully paid in TAV Batumi TAV Batumi is obliged to perform the terms agreed under the Agreement for Management of 100 percent of Shares in Batumi Airport LLC (the Agreement ) together with its Schedules annexed to the Agreement. In the event that TAV Batumi fails to fulfill its material obligations under the Agreement and its Schedules, it may be forced to cease the management of the Batumi International Airport and all operation rights generated at the Airport. With regards to the Agreement, TAV Batumi is required to; comply with all requirements of the relevant statutes and the Applicable Laws of Georgia; prevent repatriation and transfer of the dividends distributable by Batumi Airport LLC from Georgia; comply with the terms of Permits that materially adversely affect the performance of TAV Batumi s obligations under the Agreement or achievement of the Revenues by Batumi Airport LLC and/or achievement of dividends by the TAV Batumi from Batumi Airport LLC; protect, promote, develop and extend the business interests and reputation of Batumi Airport in connection with the Services (reasonable effort basis); maintain and operate Batumi Airport in accordance with the international standards applicable to similar international airports, and any other local standards that will be applicable to the operations of an international airport; recruit and train sufficient number of staff for the operation of Batumi Airport in accordance with standard, accepted operational standards; perform regular, periodic and emergency maintenance and repair works of all the fixed assets, as well as the annexations and accessories related thereto located on the territory of Batumi Airport; and procure and maintain insurance policies listed under the Agreement during the term of the operation.

252 250 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) TAV Tunisia TAV Tunisia is bound by the terms of the Concession Agreements related to the building and operation of Enfidha Airport and to the operation of Monastir Airport. In case TAV Tunisia fails to comply with the provisions of these Concession Agreements as well as the Terms and Specifications annexed thereto, it may be forced to cease the operation of the said airports. According to Enfidha Concession Agreement, TAV Tunisia is required to: design, construct, maintain, repair, renew, operate and improve at its own costs and risks and under its liabilities, the land made available to it, infrastructures, buildings, facilities, equipments, networks and services necessary for the operation of Enfidha Airport; complete the construction of the Airport and start operating it at the latest on 1 October 2009 which is then extended to 1 December 2009 through a notice from the Authority, unless the requirements by the Terms and Specifications of the Agreement fails. The operation of the Airport was started in the specified date in finance up to 30% of the Project by Equity. According to Monastir Concession Agreement, TAV Tunisia is required to maintain, repair, renew, operate and improve at its own costs and risks and under its liabilities, the land made available to it, infrastructures, buildings, facilities, equipments, networks and services necessary for the operation of Monastir Airport. Pursuant to both Concession Agreements, TAV Tunisia is required to: market and promote the activities operated in the Airports and perform the public service related with these activities; provide with and maintain the bank guarantees in accordance with the Agreements; pay the Concession Royalties to the Conceding Authorities (Tunisian State and OACA); comply particularly with provisions of Appendix 2 to the Terms and Specifications annexed to the Agreements related to the ownership of the shares by TAV Tunisia s shareholders; require the approval of the Conceding Authority prior to the transfer of its rights under the Concession Agreements to any third party or to the conclusion of any sub-contract during the operation phase of the Airports; comply with its obligations under the Agreements and with all applicable Tunisian Laws and International rules related particularly but not limited to safety, security, technical, operational and environmental requirements; comply with its obligations related to insurance as provided for by the Agreements.

253 251 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) TAV Tunisia may also be obliged to cease the operation of the said airports if (i) it is declared insolvent or is subject to judicial liquidation proceedings or (ii) it is forced to cease the operation of one of the Airports. The Conceding Authority and TAV Tunisie shall, seven years prior to the expiry of the Concession Agreement, negotiate and agree on a repair, maintenance and renewal program, with the assistance of specialists if applicable, which program includes the detailed pricing of the works for the final five years of the concession which are necessary in order to ensure that the movable and immovable concession property is transferred in good condition to the Conceding Authority, as well as the schedule of the tasks to be completed prior to the transfer. In this context, TAV Tunisie anually performs repair and maintenance procedures for the operation of the concession property according to the requirements set in the Concession Agreement. TAV Gazipaşa TAV Gazipaşa is bound by the terms of the Concession Agreement made with DHMİ for Antalya Gazipaşa Airport. If TAV Gazipaşa violates the agreement and does not remedy the violation within the period granted by DHMİ, DHMİ may terminate the Agreement. The share transfers of the shareholders of TAV Gazipaşa are subject to the approval of DHMİ. The Agreement is made for a period of twenty-five years effective from the date TAV Gazipaşa obtains the operation authorisation from the Ministry of Transportation. The contractual obligations of TAV Gazipaşa include the operation of the facilities in compliance with the international norms and standards subject to the supervision of the Ministry of Transportation Civil Aviation General Directorate and DHMİ; obtaining maintenance and periodic maintenance and repairs of all systems and equipment requisite for the operation and the transfer of the facilities together with the systems, equipment, furniture and fixtures in a proper and usable condition to DHMİ, without any debt or liabilities, upon the expiry of the Agreement (if the economic lives of the systems, equipment, furniture and fixtures have come to an end, they should be renewed before the transfer to DHMİ). Upon the expiry of the Agreement, TAV Gazipaşa will be responsible for one year for the maintenance and repair of the systems and equipment in the facilities. In case the necessary maintenance and repairs are not made, DHMİ will have this maintenance and repairs made and the cost will be charged to TAV Gazipaşa.

254 252 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) If expropriation of land is required for construction of additional facilities or systems during the term of the Agreement, TAV Gazipaşa will be responsible for the compensation for expropriation and will not demand any compensation and/or additional rent period from DHMİ and the owner of the subject land will be DHMİ. In the event that TAV Gazipaşa is delayed in paying the rent and/or the rent is not fully paid to DHMİ, TAV Gazipaşa will be charged a monthly penalty in the amount of 10% of the outstanding amount. Facility usage amount represents the USD fixed payment that is paid as a usage amount of the airport facility, subsequent to rent period starting, within the last month of each rent payment year. Management believes that as at 31 December 2010, the Group has complied with the terms of the contingencies mentioned above. TAV Macedonia TAV Macedonia is bound by the terms of the Concession Agreement made with Macedonian Ministry of Transport and Communication ( MOTC ). If TAV Macedonia violates the agreement and does not remedy the violation within the period granted by MOTC, MOTC may terminate the Agreement. All equipment used by TAV Macedonia must need to meet the Concession Agreement s standards. All fixed assets covered by the implementation contract will be transferred to MOTC free of charge. Transferred items must be in working conditions and should not be damaged. TAV Macedonia has the responsibility of repair and maintenance of all fixed assets under the investment period.

255 253 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Contingent asset TAV İstanbul is able to expense VAT on rent payments upon the issuance of the related invoice and DHMİ issues the invoice monthly. Cumulative VAT expense related with DHMİ invoices as at 31 December 2010 is EUR 77,046,084 (31 December 2009: EUR 54,779,378). TAV İstanbul has opened a tax court case in February 2006 against the Ministry of Finance for the rent, which has been paid partially and the remaining that will be paid to DHMİ, for not being subject to VAT. According to temporary VAT code number 12, TAV İstanbul stated that airport privatisations are exempt from VAT. The resolution of the İstanbul First Tax Court has been declared to TAV İstanbul on 9 April The resolution sets forth that the administrative transaction is not a tax error in the manner prescribed in the Tax Procedures Law, and that no legal inappropriateness had been observed in the transaction that had been formed via the rejection of the application made upon complaint. The decision does not assess whether there is an exemption from the VAT or not; and it is judged that the application does involve a legal shortcoming; TAV İstanbul had submitted the case to the Court of Appeals. With regard to the mentioned case, the Company had submitted a letter to the 4th Department of the Court of Appeals on 28 May 2007 and required a motion for stay. TAV İstanbul has brought a tax case against Ministry of Finance and Maltepe Tax Administration, with the claim that the rent amounts paid to the State Airports Authority General Directorate are exempt from value added tax; and the Tax Court dismissed the case on the grounds of incompetence. TAV İstanbul had applied against the dismissal decision of the Tax Court. The award of the 4th Chamber of the Council of State ( Danistay ) had been declared to TAV İstanbul on 25 July Accordingly, the Council of State approved the application of TAV İstanbul and decided to reverse the judgement of the Tax Court. The case reverted to the Tax Court according to the Code of Administrative Procedures and the Tax Court rejected the case with the decision notified to TAV İstanbul on 29 November An application for appeal has been made by TAV İstanbul. But according to the last decision declared by 4th Chamber of the Danistay, the rejection decision of Tax Court was approved and TAV İstanbul appealed for the correction of decision. Group management believes that this court will be finalised in Group s favour. Contingent liability BTA and the Ministry of Finance were not able to reach an agreement upon a reconciliation requested for the corporate and value added tax notified in the penalty report regarding the accounts of October 2007-December Ministry of Finance had determined a value added tax of TRL 1,483,014, a corporate tax of TRL 222,523 and a tax loss penalty of 1.5 folds of the total tax amount in the penalty report. The report stated that the food and beverage sales of BTA carried out at the customs zones of the airports (also known as airside ) must not be exempt from value added tax. In January 2010, BTA filed a lawsuit disputing the abovementioned tax and penalty. The management, lawyers and tax auditors of BTA are in the opinion that the lawsuit will result in BTA s favor, so no provision is provided in the accompanying consolidated financial statements.

256 254 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 40. RELATED PARTIES The major immediate parents and ultimate controlling parties of the Group are Tepe and Akfen Groups. All other transactions not described in this footnote between the Company and its subsidiaries and joint ventures, which are related parties of the Company, have been eliminated on consolidation. Details of balances between the Group and other related parties are disclosed below. Key management personnel compensation: The remuneration of directors and other members of key management during the year comprised the following: Short-term benefits (salaries, bonuses etc.) 7,786,951 6,040,670 7,786,951 6,040,670 As at 31 December 2010 and 2009, none of the Group s directors and executive officers has outstanding personnel loans from the Group. The details of the transactions between the Group and any other related parties are disclosed below:

257 255 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Other related party transactions: 31 December December 2009 Due from related parties 4,628,730 8,733,358 Current loan to related parties 495,645 1,749,021 5,124,375 10,482,379 Due from related parties 31 December December 2009 ATÜ 1,603,588 1,631,069 TAV G Otopark Yapım Yatırım ve İşletme A.Ş. 1,139,341 - TAV Tepe Akfen Yat. İnş ve İşl. A.Ş. ( TAV İnşaat ) 1,111,065 6,581,484 Tepe Savunma ve Güvenlik Sistemleri A.Ş. 484,746 26,803 Other related parties 289, ,002 4,628,730 8,733,358 Loan to related parties 31 December December 2009 CAS 487, ,195 TAV Gözen - 433,105 Other related parties 8, , ,645 1,749, December December 2009 Due to related parties 6,059,656 5,638,584 Current loan from related parties 7,961,525 6,647,134 14,021,181 12,285,718 Non-current loan from related parties 14,130,564 19,082,385 14,130,564 19,082,385 Due to related parties 31 December December 2009 IBS Brokerlik ve Sigorta Hizmetleri A.Ş. (IBS Sigorta) (*) 5,480,173 4,448,649 TAV İnşaat - 1,134,906 Other related parties 579,483 55,029 6,059,656 5,638,584 (*) IBS Sigorta provides insurance intermediatory services to the Group.

258 256 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) Current loan from related parties 31 December December 2009 TGS (*) 5,120,686 5,120,205 ATÜ 1,242, ,838 Other related parties 1,598, ,091 7,961,525 6,647,134 Non-current loan from related parties 31 December December 2009 ATÜ 9,006,363 9,592,962 TGS (*) 5,124,201 9,489,423 14,130,564 19,082,385 (*) Loan from TGS is related with HAVAŞ s share of unpaid portion of the capital increase of TGS. Services rendered to related parties ATÜ (*) 75,328,545 64,738,336 Other related parties 4,540,943 5,756,444 79,869,488 70,494,780 (*) Services rendered to ATÜ comprise non-eliminated portion of concession fee duty-free per proportionate consolidation. Services rendered by related parties IBS Sigorta (*) 7,849,041 6,643,264 Tepe Servis ve Yönetim Hizmetleri A.Ş. 609,758 27,915 TAV Havacılık 516, ,351 TAV İnşaat 448,327 15,250 Other related parties 436, ,965 9,859,625 7,513,745 (*) IBS Sigorta provides insurance intermediatory services to the Group. Interest (expense) / income from related parties (net) TGS (1,488,049) (967,652) ATÜ (657,496) (692,800) TAV İnşaat (150,324) (1,199,831) Other related parties 22, ,268 (2,273,670) (2,702,015) The average interest rate used within the Group is 3.81% per annum (31 December 2009: 3.82%). The Group converts related party TRL loan receivable and payable balances to USD at month end using the Central Bank s announced exchange rates and then charges interest on the USD balances. Construction work rendered by related parties TAV İnşaat 59,201, ,497,490 59,201, ,497,490 (*) TAV İnşaat manly provided services relating to the construction of Skopje, Ohrid, and renovation of Gazipaşa, İstanbul Atatürk Airports in 2010.

259 257 TAV AIrports HoldIng Annual Report 2010 TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 41. JOINT VENTURES The Group has the following significant interests in joint ventures: 49.98% equity shareholding with 50% voting power in ATÜ, a jointly controlled entity established in Turkey. Summary of financial information of ATÜ and its subsidiaries, not adjusted for the percentage ownership held by the Group is as follows: Statement of Financial Position 31 December December 2009 Current assets 42,713,446 34,465,038 Non-current assets 64,682,272 61,609,187 Current liabilities (33,372,318) (27,879,283) Non-current liabilities (45,315,704) (41,841,781) Statement of Comprehensive Income Total revenues 340,167, ,185,590 Total expenses (319,368,809) (274,308,725) Profit for the period 20,798,683 17,876, % equity shareholding with 50% voting power, in CAS, a joint venture established in KKTC. Summary of financial information of CAS, not adjusted for the percentage ownership held by the Group is as follows: Statement of Financial Position 31 December December 2009 Current assets 760, ,833 Non-current assets 674, ,530 Current liabilities (3,491,808) (2,281,034) Statement of Comprehensive Income Total revenues 3,199,746 4,224,901 Total expenses (4,268,521) (5,823,216) Loss for the period (1,068,775) (1,598,315) 32.40% equity shareholding with 32.40% voting power, in TAV Gözen, a joint venture established in Turkey. Summary of financial information of TAV Gözen, not adjusted for the percentage ownership held by the Group is as follows: Statement of Financial Position 31 December December 2009 Current assets 259, ,348 Non-current assets 893,197 2,479,082 Current liabilities (27,216) (2,020,030) Statement of Comprehensive Income Total revenues 1,370, ,831 Total expenses (1,014,870) (1,268,287) Profit / (loss) for the period 355,805 (665,456)

260 258 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION TAV HAVALİMANLARI HOLDİNG A.Ş. AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2010 (Amounts expressed in Euro unless otherwise stated) 50.00% equity shareholding with 50.00% voting power, in TGS, a joint venture established in Turkey. HAVAŞ acquired 50% of shares of TGS in Summary of financial information of TGS, not adjusted for the percentage ownership held by the Group is as follows: Statement of Financial Position 31 December December 2009 Current assets 46,524,398 35,423,947 Non-current assets 47,707,553 2,417,653 Current liabilities (38,172,947) (7,352,202) Non-current liabilities (947,188) - Statement of Comprehensive Income Total revenues 79,575,316 1,689,098 Total expenses (86,583,575) (785,769) (Loss) / profit for the period (7,008,259) 903, % equity shareholding with 50.00% voting power in NHS, a joint venture established in Latvia. HAVAŞ acquired 50% of shares of NHS in Summary of financial information of NHS, not adjusted for the percentage ownership held by the Group is as follows: Statement of Financial Position 31 December December 2009 Current assets 1,264,056 - Non-current assets 5,981,050 - Current liabilities (4,300,495) - Non-current liabilities (2,543,048) - Statement of Comprehensive Income Total revenues 5,666,644 - Total expenses (6,265,338) - Loss for the period (598,694) SUBSEQUENT EVENTS None

261 259 TAV AIrports HoldIng Annual Report 2010 GLOSSARY ACI Airports Council International APRON Apron is a designated area at an airport where aircraft are parked, refueled, loaded, unloaded, boarded and maintenance is performed. ISOLATED AREAS Isolated lounges are zones at airports that are open to international flights, where passengers are taken before making entry and exit and after declaration and control process in terms of the customs regulations, as well as lounges where passengers, who come from abroad without entering into customs and will go to another airport of the same country or to another country, are taken and isolated. Baggage Handling System (BHS) A conveyor belt system that transports checked baggage to areas where the bags are loaded onto airplanes. CHARTER TERMINAL Terminal building reserved for passengers who travel with flights other than the scheduled or regular flights. CHECK-IN Check-in is the process where ticket and baggage transactions and passenger control are conducted at airport terminals by airline or ground handling company representatives. CHECK-IN COUNTER Equipped tables at terminals used for passenger check-in procedures. CHECK-IN LOUNGES Sections at terminals hosting groups of check-in counters. CIP PASSENGER Commercially important person DUTY FREE SHOP Shops at airports where passenger can make purchases without paying customs tax. CARRY-ON BAGGAGE HANDCARTS Portable, mechanical transporters used at airports to carry passenger properties. EBITDA Acronym for Earnings before Interest, Taxes, Depreciation and Amortization. EBITDAR Acronym for Earnings before Interest, Taxes, Depreciation, Amortization and Rent. GUARANTEED PASSENGER INCOME Guaranteed passenger income is the passenger revenue guaranteed by the related entity, based on the expected number of passengers per year, pursuant to the concession contract signed with the authorized entity. It can vary based on the contract as well as the period covered by the contract. DUTY-PAID LOUNGE Isolated lounges at airports that are open to international flights, where passengers are taken before making entry and exit and after declaration and control process in terms of the customs regulations. CUSTOMS ENFORCEMENT The organization that inspects or confiscates the baggage or other freight, cargo or postal belongings of passengers at airports that are open to international flights, which are used with respect to customs regulations, or used to enforce customs regulations provisions in the process of sending or receiving all kinds of commodities and materials that will go-come abroad. HANGAR Mostly large structures at airports to shelter or conduct maintenance and repair activities of aircraft AVIATION INCOME Income earned from services rendered to passengers and aircraft at the airports. NON-AVIATION INCOME Income derived from activities other than services rendered to passengers and aircraft at the airports, such as duty free. HAVAŞ Havaalanları Yer Hizmetleri A.Ş., (Ground Handling Services Co.), the company that performs ground handling services at the airports. AIRPORT A large area, on land or water, with buildings, facilities and equipment where aircraft can take off, land and taxi. EARNING PER SHARE (EPS) An indicator calculated by dividing a company s net (aftertax) profit by its number of outstanding shares. HUB Main Center ICAA International Civil Airports Association ICAN International Commission for Air Navigation

262 260 TAV AT A GLANCE ASSESSMENTS REVIEW OF OPERATIONS IN 2010 REPORTS AND FINANCIAL INFORMATION GLOSSARY ICAO International Civil Aviation Organization INORGANIC GROWTH Inorganic growth is revenue growth achieved by a company by acquiring another firm and consolidating the production and revenue of the acquired firm. SUBSIDIARY A direct or indirect capital and management relationship that creates a permanent tie between a partnership and a company in terms of participation in the management of the partnership and the formulation of the partnership s policies. COMPOSITE COVER A mixture of concrete and asphalt used for covering runways. CONVEYOR A mechanical apparatus with a moving belt that carries the passengers baggage from check-in counter to the aircraft and back to the baggage-claim area. LIQUIDITY Liquidity is the degree of speed and ease to which an asset can be exchanged for cash. ORGANIC GROWTH Organic growth is the growth achieved via a company s own activities. It expresses production increase, as well as the increase in revenue attained by selling this output. OVERFLIGHT An aircraft flight passing over a foreign territory without landing. PROJECT FINANCE Project finance is a method of securing the financing needed for long-term infrastructure and industrial investments at the maximum possible level and with the minimum possible impact on the company s balance sheets. Posting the project s income stream or the asset itself as collateral may be needed as a condition of financing. PEAK DAY, PEAK HOUR Maximum number of passengers, aircraft, cargo, etc. at an airport during one day or one hour within a given period (generally a calendar year). RUNWAY Designated rectangular areas on which aircraft take off and land. RAMP Ramp is the area at the airports where aircraft are parked and attended to. TAXI The movements of an aircraft on the ground. TAXIWAY Standard-sized paths at airports along which the aircrafts taxi to or from a runway, apron, etc. SCHEDULED FLIGHT Scheduled flight is the flight service with a pre-determined departure-arrival time and route. CHARTER FLIGHT Charter flight is a non-scheduled flight service offered in certain periods, mostly in summer months, where departure time is determined based on airport traffic and passenger demand. TRANSIT PASSENGER Transit passengers are those who continue their travel in the same aircraft or with the same flight number shortly after arriving at an airport on an airplane. These passengers are not allowed to take advantage of duty free, catering and accommodation services at the airport. TRANSFER PASSENGER Transfer passengers are those who continue their travel with a different aircraft or in the same aircraft but with a different flight number shortly after arriving at an airport on an airplane. These passengers are allowed to take advantage of duty free, catering and accommodation services at the airport. VIP A very important person. VIPs are mostly the top managers of public organizations listed by the Prime Ministry. VIP LOUNGE Places reserved at airports for VIP Passengers. BUILD-OPERATE-TRANSFER This is the process where a private company provides the financing for a public infrastructure investment or service, undertakes the project, operates it for a period determined by the public authorities and transfers the facility at the end of the designated period to the related public authority in an intact, operating and well-maintained condition. PASSENGER All individuals traveling on the aircraft that are not part of the flight personnel or cabin crew are referred to as passengers.

263

264 TAV AIRPORTS HOLDING Istanbul Atatürk Airport International Terminal (Gate A Next to VIP) Yeşilköy, Istanbul, Turkey Tel: Fax: