Content. Introduction. Doğuş Group Structure. Operational Map. Financial and Operational Highlights. Consolidated Financial Information by Segments

Transcription

1 Annual Report 2012

2 Content Introduction Doğuş Group Structure Operational Map Financial and Operational Highlights Consolidated Financial Information by Segments Corporate Profile Doğuş Holding and its Functions Corporate Risk Management and Internal Audit Doğuş Group s Approach toward its Stakeholders Credit Ratings Message from the Chairman Members of the Board of Directors Committees Subject to the Board of Directors Message from the CEO Financial Services Automotive Construction Media Tourism and Services Real Estate Energy New Initiatives Corporate Responsibility Consolidated Financial Statements

3 01 INTRODUCTION Colors gain meaning and importance when the light reaches our eyes. Human visual perception for color varies depending on the reflection points of the light during its journey starting from its real source, the sun. The sun, the leading actor in the emerged unique color spectrum, is also known as the most important source of life. Even though the main source of the colors is the light emitted by the sun, this power is not sufficient to create a color spectrum. Reflection power of the surfaces improves the glory and variety of the colors. The more the refraction strengthens, the more the glory of the colors improves. Doğuş Group draws its strength from its stakeholders in the same manner as the colors draw their main strength from the sun. The Group reflects this light on seven different sectors, each of which put their sign under successful investments individually. All Group companies contribute to the formation of a glorious color spectrum by adding a separate value through their strong positions in their sectors. Doğuş Group Annual Report 2012

4 Doğuş Group Doğuş Group companies color and add value to life Doğuş Group carries out its activities in eight sectors with nearly 180 companies, each of which adds value to life with different colors. 02

5 03 Doğuş Group Annual Report 2012

6 Doğuş Group Doğuş Group Structure Banking& Financial Services Automotive Construction Media TV RADYO Corporate Responsibility 04

7 05 Tourism&Services Real Estate Energy Entertainment New Initiatives Doğuş Energy Doğuş Energy Artvin HEPP Use Light Logo 9 mm and over cap height see opposite Antalya PLAZA Use Bold Logo under 9 mm cap height see opposite. This Logo can be used on screen or for embroderie etc. Doğuş Energy Electricity Whole Sale Co. Doğuş Group Annual Report 2012

8 Doğuş Group Operational Map 1 Romania Garanti Bank Romania-Headquarters & 78 Branches SC Motoractive Credit SA Ralfi IFN SA Domenia Credit SA 2 Bulgaria Doğuş Construction&Trade Inc. 3 The Netherlands 17 GBI-Headquarters 4 UK 4 Garanti Bank-Representative Office Doğuş Int. 8 Morocco Doğuş ES-Branch&Doğuş SARL 9 Switzerland GBI-Representative Office D-Auto Suisse SA-Lausanne Doğuş SA-Geneva 10 Malta Garanti Bank-Branch 11 Libya Doğuş Construction Libya-Branch 12 Turkish Republic of Northern Cyprus Garanti Bank-5 Branches 13 Ukraine GBI-Representative Office Doğuş Construction&Trade Inc Italy Garanti Bank-Branch 13 9 Garanti Bank-Representative Office GBI Branch 7 Luxemburg Germany Capri Palace Hotel Partnership

9 Dubai 19 Doğuş Management Services Ltd. 15 Croatia D-Marin Marinas Group 16 Greece D-Marin Marinas Group Partnerships 17 Russia GarantiBank Moscow-Headquarters 18 Kazakhstan Doğuş Kazakhstan Branch Doğuş L.L.C. 19 China Garanti Bank-Representative Office 20 Qatar Doğuş Construction L.L.C. 21 Oman Doğuş Construction Oman L.L.C. Doğuş Group Annual Report 2012

10 Doğuş Group Financial and Operational Highlights The Turkish economy maintained its growth in accordance with fiscal and economic expectations in With its strong financial structure and future-oriented vision, Doğuş Group also attained a successful performance and completed the year with very satisfactory results. Key Financial Indicators (TL thousand) ROE (%) Total Assets 42,923,044 49,285,930 50,970,721 56,085,148 Total Shareholders Equity 6,728,866 7,701,796 9,864,793 10,801,229 Revenues 7,819,616 8,654,592 9,929,164 11,000,016 Net Profit for the Year 782, ,015 2,691, ,003 Gross Profit 2,667,310 2,744,273 2,551,956 2,790,710 EBITDA 1,329,406 1,667,002 3,737,557 1,300,874 Principal Performance Ratios (%) Gross Profitability (%) Net Profitability (%) EBITDA Margin (%) ROA-Return on Assets (%) ROE-Return on Group Equity (%) Total Assets by Segment 2012 Media 3% Construction 2% Energy 2% Tourism 4% Total Revenue by Segment 2012 Construction 5% Tourism 2% Others 2% Automotive 4% Media 5% Others 9% Financial Services 76% Automotive 50% Financial Services 36% 08

11 09 In all of its lines of business, the Group s consolidated revenues reached TL 11,000,016 thousand in value while its EBITDA amounted to TL 1,300,874 thousand. The Group s total assets increased to TL 56,085,148 thousand in The Group s consolidated shareholders equity in 2012 reached TL 10,801,229 thousand, up from the previous year s level of TL 9,864,793 thousand. Total Assets (TL thousand) Total Revenues (TL thousand) ,923,044 7,819, ,285, ,654, ,970, ,929, ,085, ,000,016 Total Shareholders Equity (TL thousand) Net Profit for the Year (TL thousand) ,728, , ,701, , ,864,793 2,691, ,801, ,003 Doğuş Group Annual Report 2012

12 Doğuş Group Consolidated Financial Information by Segments* (TL thousand) Banking and Finance Segment Assets 35,448,063 41,046,879 38,670,337 42,455,912 Total Interest and Commission Income 4,159,785 3,845,431 3,581,705 3,994,879 Automotive Segment Assets 1,357,552 1,586,373 1,918,829 2,113,525 Revenue 2,367,988 3,682,815 5,118,152 5,486,618 Construction Segment Assets 1,183,397 1,212,757 1,068,310 1,014,417 Revenue 673, , , ,446 Media Segment Assets 417, ,463 1,505,245 1,550,752 Revenue 173, , , ,153 Tourism and Services Segment Assets 1,207,860 1,494,482 1,696,527 2,122,733 Revenue 161, , , ,438 Energy Segment Assets - 306, ,448 1,291,204 Revenue ,060 Other Industrial Segments Segment Assets 3,308,582 3,189,279 5,221,025 5,536,605 Revenue 283,342 64,862 90, ,422 * Financial information is provided from Doğuş Holding IFRS Report segment note, due to comparability purposes reclassifications have been made in

13 11 Corporate Profile Due to its experience and network, combined with its customer-focused and productivity-centered management approach, Doğuş Group is among the pioneers of transformation and innovation in Turkey. Around 180 companies, nearly 35,000 employees For more than 60 years, Doğuş Group has been taking its place among the leading business conglomerates of Turkey. The Group is a corporate leader in the region. Doğuş Group is active in eight core businesses: financial services automotive construction media tourism and services real estate energy entertainment* With around 180 companies and nearly 35,000 employees, Doğuş Group has created strong customer loyalty while building brand value with its high-tech infrastructure. A key actor in the Turkish economy with strong global recognition Doğuş Group always provides its services based upon the principles of customer satisfaction and trust. As a result of this approach, the Group has created reputable brands with global standards and has been representing Turkey worldwide. Its name is a source of attraction for the international investors who are interested in Turkey. The Group has contributed to this process by creating a synergy with global giants including the following: BBVA (Banco Bilbao Vizcaya Argentaria, S.A.) in finance, Volkswagen AG and TÜVSÜD in automotive, CNBC, MSNBC and Condé Nast in media, and Hyatt International Ltd. and HMS International Hotel GmbH (Maritim) in tourism. In addition, Doğuş Group goes ahead full speed with its various investments in the new business lines. Doğuş Group and the global sports, fashion and entertainment company IMG Worldwide signed an agreement to form a joint venture in Turkey. The Group has also become strategic partners with one of South Korea s largest conglomerates, SK Group, and in the entertainment sector, the Group signed a partnership agreement with İstanbul Doors Group and International Azumi Group. Most recently, Doğuş Group underscored its ambitious standing regarding the marina operations sector with the partnership agreements it signed with Lamda Development, which is a part of Latsis Group, and with MedMarinas S.A., which is a part of Kiriacoulis Group in Greece, and with the Adriatic Croatia International (ACI) Group in Croatia. Doğuş Group plays a significant role in the Turkish economy with the high level of employment it creates, the taxes it pays, and the total business volume it generates. A model management style and corporate citizenship Doğuş Group utilizes a management style that is both customer-focused and productivity-centered. While it is formed through material gains, it embodies a strong corporate citizenship approach which is at the center of all business practices of the Group and which benefits the entire society. Doğuş Group Values Group companies share a set of core values based on integrity, understanding, excellence, creativity, unity and responsibility. These values have formed a part of the Group s beliefs and convictions since the very beginning and continue to guide and drive business decisions made by each company within Doğuş Group. A regional focus Doğuş Group continues contributing to Turkey s ongoing process of transformation and innovation. Utilizing its global perspective, world-class brands, and noteworthy partnerships, the Group s vision particularly with regard to services is a valuable asset to Turkey. The Group is able to maximize the value of its brands by utilizing the highest quality human resources and the most advanced technology to maintain the high standards that have made it a regional leader in the services sector. * Entertainment sector has been mentioned under the New Initiatives section of this report. Doğuş Group Annual Report 2012

14 Doğuş Group Doğuş Holding and its Functions Doğuş Holding It is the mission of Doğuş Holding to fulfill steering, coordination, control and audit functions, as well as to generate value for the Group and its companies, monitor activities of the Group companies on behalf of the shareholders, and perform the financial audit and administer control systems. Doğuş Holding aims to create competitive companies that put regional growth at the focal point of their operations. In the management of its subsidiaries, Doğuş Holding is committed to fulfilling the following responsibilities: Updating the Group s strategy along with the changing investment climate and steering the Group companies in line with the predetermined strategy. Ensuring generation of sufficient financial resources to realize the Group s long-term vision. Formulating and managing corporate initiatives so as to enable the Group to adapt in the quickest manner possible to the developing and evolving business environment. Leading the creation and management of strategic alliances and corporate partnerships. Providing communication among the Group companies and identifying opportunities that will result in synergies. Coordinating and consolidating the financial and corporate reporting of Group companies. Ensuring optimum use of technology, knowledge and human resources across the Group. Formulating and maintaining corporate values and communicating them within and outside the Group. Instilling an awareness of social responsibility and corporate citizenship. Implementing the ERM (Enterprise Risk Management) approach to assure that the business risks undertaken by Group companies are aligned with shareholders risk appetite. Holding Functions Corporate Communications The Corporate Communications Department is responsible for Doğuş Group s reputation management through the means of strategic communications tools, media relations, social responsibility projects and sponsorship activities. The Department is also responsible for the coordination of the internal communications among Doğuş Group companies and the Group s external communication tools including the annual report, corporate citizenship report, and the Group s website. 12 Finance and Financial Reporting The Finance Department is responsible for relations with local and foreign financial institutions in tandem with the financing needs of Doğuş Holding and other Group companies (excluding the finance sector), cash flow and asset management, coordination of market risks as well as rating process management, and project finance requirements of the non-financial segment of Doğuş Group. The Financial Reporting Department is mainly responsible for the preparation of consolidated financial statements, management reports and projections in accordance with International Financial Reporting Standards, and monitoring and reporting of deviations from business line budgets. The Group planning and budgeting process is monitored. Group Reporting System convergence projects are also carried out by Financial Reporting. Financial Affairs The Financial Affairs Department is responsible for organizing the accounting records in accordance with tax legislation and within the framework of a single-form accounts plan. The Department also has the responsibility of providing assistance in terms of tax accountability, affiliate relations, and financial activity compatibility. Human Resources The Human Resources Department is responsible for the management of Doğuş Holding human resources processes in line with corporate values and long-term strategies. The main goals of the Human Resources Department are attracting and recruiting talent, investing in and providing opportunities for continuous development of employees, developing employees careers based on the future needs of the Group, establishing competitive reward and recognition systems, and increasing employee motivation and commitment. The Department is also responsible for establishing the communication platform among the other Doğuş Group companies and providing human resources consultancy services for all Group companies. Information Technologies The IT Department is responsible for assistance and support services under information technologies. The Department in the organization provides support to computer users in the Company. This includes installing new hardware and software, repairing hardware problems, troubleshooting problems, and training employees on how to use new software programs.

15 13 The IT Department is also responsible for installing and setting up the computer network in the organization. IT professionals working in this capacity ensure that the network is operating properly and all employees have the ability to communicate through the Internet and the company intranet. Internal Audit The Internal Audit Department is responsible for the performance of financial, operational, and IT audits at Doğuş Group companies in accordance with its annual risk-based audit plan. In addition, the Department tracks all internal audit findings and coordinates follow ups to ascertain that appropriate action is taken. The results are periodically reported to the Risk & Audit Committee. Investments The Investments Department is responsible for undertaking business opportunities in new sectors and in those sectors in which Doğuş Group operates. It evaluates domestic and regional investment opportunities that are in line with the Group s strategy and changes in the global economy. Department responsibilities include providing thorough analysis of business opportunities and closing deals for the projects approved by Doğuş Holding Board of Directors. The Department is also responsible for monitoring projects after successful initiation to ensure timely and efficient returns for each business development project. Lean Management The Lean Management Department is responsible for coordinating the lean transformation within Doğuş Group. Through a series of activities such as training, value stream mapping studies, action workouts, and Kaizen projects, the Department helps management and employees to understand lean management principles and invigorate business performance of the entire Group. It leads and reports the results of process optimization studies that help the Group increase its competitive advantage and profitability through increased efficiency, quality and customer satisfaction. Risk Management The Risk Management Department s primary function is to assure that the risks and opportunities of Doğuş Group are managed successfully and that shareholder values are sustained and enhanced. Risks monitored by the Department include financial, strategic, legal and operational risks. The Department works closely with Group companies and risk management departments in order to obtain accurate information for assessing the risks and evaluating the decision making process. In accordance with predetermined risk management guidelines, the Department regularly prepares risk reports and makes recommendations to the CEO, Risk & Audit Committee, and the Board of Directors. Security and Administrative Affairs The Security and Administrative Affairs Department supports Doğuş Holding and Group companies in administrative cases including work safety, employee health, cleaning, catering, gardening, transport, common purchasing, vehicle fleet rental, emergency case management and other administrative affairs in line with the Group s vision, mission, main principles and terms. Tax Affairs The Tax Affairs Department is responsible for assistance and support services for Doğuş Group as well as its subsidiaries regarding tax laws and procedures such as tax disputes, incentives, M&A, transfer pricing, training and tax planning, and structuring to avoid international double taxation. The Department also participates in the meetings of the Tax Council and other related associations to support the tax legislation process. Legal Affairs The Legal Affairs Department is responsible for the legal representation of Doğuş Holding and other Group companies, and for ensuring that all kinds of contracts and legal processes are handled in line with the Company s best interests and with no legal risk. Doğuş Group Annual Report 2012

16 Doğuş Group Corporate Risk Management and Internal Audit Doğuş Group acts proactively in terms of risk management in order to ensure that its business operations in different industries and regions are not adversely affected as a result of market, operational, liquidity and/or counterparty risks. Risk Management and Internal Audit departments within each sector and at the Group level provide and maintain awareness for different types of risks, including emerging risks, and ensure that appropriate risk management mechanisms are in place. In 2012, policy actions lowered the acute crisis risks in the Euro area and the United States. Global growth is projected to increase during 2013, as the factors underlying soft global activity are expected to cool down. While Japan has slid into recession, stimulus there is expected to boost growth in the near term. At the same time, policies have supported a modest growth pickup in some emerging market economies while others continue to struggle with weak external demand and domestic bottlenecks. If crisis risks do not materialize and financial conditions continue to improve, global growth could be stronger than projected. However, downside risks remain significant as a result of renewed setbacks in the Euro area and risks of excessive near-term fiscal consolidation in the United States. Undoubtedly, global financial risk experiences in the last several years, as well as other catastrophic events, have made effective risk management mechanisms crucial. Increasing scrutiny, as well as a push for stronger governance coming from not only regulatory bodies but also the investing community, make it essential for companies to have in place solid risk management and control systems to ensure viability and sustainable growth. Doğuş Group, with diverse business operations in different regions and countries, has already been cognizant of its need to monitor and manage various risks, including not only its strategic, business and operation risks but external risks as well. As for Doğuş Group s risk management activities in 2012, it was a successful year in terms of maintaining and improving risk management practices, both at the Group level and at the Company level, and enhancing the risk culture across the Group. Risk Committee meetings are held on a regular basis and generate valuable and relevant risk information which is discussed and escalated if deemed necessary. The Doğuş Holding Risk Management Department established the Enterprise Risk Management (ERM) system in 2006 in line with the aforementioned approach. Risks are managed on a daily basis by all levels of management in each of the subsidiaries, and supporting risk management activities such as providing a framework for related guidance and reporting mechanisms are conducted by the risk function teams. In accordance with the Group Risk Committee decision in 2010, Group companies began creating their own Risk Management departments. Today, the Group Risk Management Function works even more closely with the company Risk Management departments in order to strengthen the standardized ERM system and obtain sound and timely information for assessing and evaluating the decision making processes. In addition to establishing an independent reporting infrastructure for companies, group-wide awareness for different types of risks and risk management strategies is ensured by periodical risk roundtables, workshops, dashboards and reports throughout the organization. 14

17 15 ERM is applied in all Group companies so that all risks are managed effectively within the Group in accordance with the defined risk management strategy, framework, and risk model. ERM is implemented based on an internal framework employing internationally accepted standards and best practices from around the world. This framework is customized according to the needs and structure of Group s businesses. Each sector has its own risk committee. The Risk and Audit Committee, which functions under the Board of Directors, is also responsible for assessing risks and proposing appropriate solutions according to risk appetite of shareholders. Internal Audit is an independent department designed to improve and add value to Doğuş Group s operations. It helps Doğuş Group to accomplish its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control and governance processes. and reviews the scope, extent and effectiveness of the activity of the Internal Audit Department of Doğuş Holding and receives a report. The report includes updates on audit activities, progress of the Group audit plan, the results of the audits, the action plans to address these areas, and resource requirements of the Internal Audit Department. The Internal Audit team consists of qualified professionals in different audit disciplines with relevant experience in the business processes that are under review. In addition, each sector within Doğuş Holding has its own Internal Audit department. The Internal Audit Department of Doğuş Holding works closely with the Internal Audit departments of various sectors to improve the effectiveness of control environments within the Group companies. The Internal Audit Department of Doğuş Holding is responsible for performing financial, operational (process) and IT audits at Doğuş Group companies in accordance with its annual risk-based audit plan. The Department operates with a risk-based approach, tracking all internal audit findings and coordinating follow-ups to ascertain that appropriate action is taken. Results are periodically reported to the Risk and Audit Committee of Doğuş Holding, which in turn monitors Doğuş Group Annual Report 2012

18 Doğuş Group Doğuş Group s Approach toward its Stakeholders Doğuş Group s stakeholder relations are shaped by the Group s principles of transparency, accessibility and equality. In addition to integrating high ethical standards in its own businesses, Doğuş Group requires from all of its stakeholders to adhere to these internationally-accepted standards. Transparency and Accountability Doğuş Group adheres to strict business ethics that include transparency and accountability in an environment where all players, from large corporations to individual customers, and from employees to society in general, are affected by each other s actions. In all of its operations and business activities, Doğuş Group has fully integrated globally-accepted principles of responsible business conduct. All stakeholders have been informed of the Group s position on these matters. Upholding these principles and high ethical standards is not limited to its own business dealings; the Group also requires that the same approach be followed by all of its stakeholders, on both national and international levels. Doğuş Group embraces the principle of not being involved with any party that acts contrary to globally-accepted standards and that cannot provide reliable disclosures with regards to its actions. Much attention is paid by Doğuş Group to the disclosure of its financial and non-financial information to its shareholders, employees, customers, national and international business partners, suppliers, existing and potential investors of its publicly-floated companies, and the public at large. The Group makes all relevant information available on its website and informs the public about its corporate strategy, activities, and new fields of investment via annual reports, periodic press releases, and conferences. The Group s financial statements are drawn up quarterly in accordance with International Financial Reporting Standards (IFRS). Independent semi-annual and year-end audit reports are shared with the public. All Doğuş Group affiliated companies listed on Borsa İstanbul (BIST) have their individual Investor Relations departments that are able to effectively manage the flow of information to their stakeholders in line with national regulations. The fields of activity and performance of the Group s publicly-floated companies are disclosed in conformity with the principles of their respective companies by the Capital Markets Board of Turkey (SPK). In terms of public disclosure requirements, BIST Material Event disclosures are the responsibility of the Holding s Finance Department. Ethical Principles Strict compliance with the Code of Conduct and Standards is a key principle for Doğuş Group. As such, actions that violate the Company s Code of Conduct are subject to disciplinary measures. As a participant to the United Nations Global Compact since April 2007, the Group has reaffirmed its commitment to fight corruption both internally and in other areas which may fall within its sphere of influence. Ethical principles are spelled out and documented in procedures under the following headings: Time and resource utilization at the companies, Relations with customers, subcontractors, suppliers of goods and other companies and individuals with whom the company has commercial interactions, The acceptance of gifts, invites, aids and donations, Relations with the media, Actions that can result in conflict of interest, Safeguarding of information pertaining to the companies, personal information, professional misconduct, security and harassment. 16

19 17 Credit Ratings Doğuş Holding can instantly be recognized based on the ratings given by international rating agencies. The Group has become well-known for both its quality of management and the global principles of corporate governance it supports. Transparency and accountability are the two key components of Doğuş Group s management approach. Consequently, Doğuş Holding has been rated by two of the major international rating agencies - Standard & Poor s and Moody s since 2000 and 2006, respectively. Doğuş Holding is instantly recognized by its ratings from international rating agencies. The Group has become wellknown for both its quality of management and the global principles of corporate governance it supports. Doğuş Holding Ratings as of June 1, 2013 are as follows; Doğuş Holding A.Ş. Ratings Standard & Poor s Rating Outlook Long-term Counterparty Credit Rating BB Stable Short-term Counterparty Credit Rating B Moody s Rating Outlook Long-term Corporate Family Rating Ba2 Stable Probability of Default Rating Ba2 Doğuş Group Annual Report 2012

20 Doğuş Group Message from the Chairman Doğuş Group will continue to do its best in seeking ways to further contribute to the Turkish economy. I sincerely believe that Turkey s enabling and promising business environment will attract even more interest from global investors. 18 The global economy managed to navigate another challenging year, especially with respect to the continued macroeconomic problems faced by developed countries, many of which suffer from policy ineffectiveness in reviving economic growth. Contrastingly, the Turkish economy experienced a more successful soft landing in 2012 after churning out record-high growth rates in preceding years. Well-targeted and tailormade policies and their effective implementation significantly improved the country s external balance on goods and services while increasing employment. In fact, the Turkish economy created more than one million new jobs last year. Moreover, for the first time, the current account deficit was reduced by effective policy management. Turkey s proven success in proactive and effective policy making has further boosted investor confidence. Impressive economic transformation of the country has been reshaping the business climate. We, as Doğuş Group, are also determined to contribute to and take part in the promising future of Turkey s economy. In this regard, the investment boom that Doğuş Group has been experiencing over the last few years in terms of new initiatives, mergers and acquisitions, partnerships, and projects gained further momentum in Highlights of such activity include: In the entertainment sector, we established a new company

21 19 called D.ream (Doğuş Restaurant Entertainment and Management) and formed partnerships with various restaurant brands in Turkey and abroad. D.ream has begun creating a portfolio of brands including Doors Group, Azumi Group (which owns the Zuma and Roka restaurant brands), Nusr-Et Steakhouse, Armani Ristorante, GQ Bar, Go Mongo, Mezzaluna and Lacivert Restaurant. We signed an agreement with the highly respected global sports, fashion and entertainment company, IMG Worldwide Inc. to form a joint venture in Turkey, IMG-Doğuş. Our investments into Internet, marketing and e-commerce continued in line with the strong growth of the Turkish Internet market. We became strategic partners with SK Group, one of the largest conglomerates in South Korea, and jointly launched an open market e-commerce platform, n11.com, which joined our portfolio of successful Internet platforms such as bonubon.com, enmoda.com and oley.com. Our partnership with euro.message - Related Group, which is one of the leading e-marketing platforms in the EMEA region was another important step we took in We entered the agriculture sector, which we believe offers huge potential and great strategic value. In this regard, not only did we establish an agricultural R&D company, but we also have been supporting the establishment of a new Agricultural Science and Technology Faculty at Niğde University with a view to creating synergies between agribusiness, R&D and education proved a very successful and productive year also for our pre-existing business lines. Landmark developments include the following: Garanti Bank, not only differentiating itself with its business model which underscores its sustainable growth strategy but also reinforcing itself with its state-of-the-art technology and innovative approach to banking, realized healthy market share gains in many areas. Doğuş Otomotiv performed outstandingly well, increasing its market share despite contraction in the automotive market. Doğuş Construction successfully completed three important projects: Boyabat Dam and HEPP in Turkey, Kiev Boryspil International Airport in Ukraine, and Sofia Metro in Bulgaria. Doğuş Media Group maintained its strategic expansion with Star TV becoming the number one channel in prime time for the first time in 10 years and with the launch of Tvyo as a premium video on demand portal, cnbce.com as a business and economy portal, and GQ Turkey magazine. In the tourism and services sector, we completed the renovation of our hotels within Doğuş Tourism Group and further extended our operations abroad. In addition, Doğuş Retail Group extended its portfolio by adding new brands and opening new stores in In our marina business, we kept in line with our strategic target of offering a distinguished global network of premium marina destinations in the Eastern Mediterranean and Adriatic Sea. In 2012, we entered into partnerships with Lamda Development and Kiriacoulis Mediterranean Cruises Shipping, resulting in the addition of a world class superyacht marina (Flisvos Marina) as well as three other premium marinas in Greece (Gouvia, Lefkas and Zea) to D-Marin s portfolio. We also expanded our investments in Croatia in 2012 with the acquisitions of D-Marin Dalmacija and Borik. Furthermore, we acquired the remaining shares of D-Marin Mandalina and, as a consequence, D-Marin Marinas Group became 100% owner of three marinas in Croatia. As another example of the Company s commitment to the region, D-Marin also acquired 6.92% of Adriatic Croatia International (ACI), the largest chain of marinas in the Mediterranean with 21 marinas. As a result of these new acquisitions, D-Marin s total yacht capacity in three countries increased to nearly 9,000. The strong performance of both D-Gym and D-Life Healthy Living and Detox Center in 2012 prompted us to extend our operations in this sector. The license agreement we signed with Henri Chenot, one of the leading medical spa brands in the world, was also another important initiative of our Group in this sector in the past year. The first step of this agreement will be the opening of a Detox and Spa Center in Cennet Koyu, Bodrum in the last quarter of The second center will be a full-service medical spa offering the complete set of Chenot Method treatments and will open at the end of 2015 in İstanbul. Regarding the real estate sector, Doğuş REIT and Doğuş Real Estate proved once again their operational excellence throughout D Energy has begun its power generation operations with the completion of the Boyabat Dam and HEPP. We are determined to sustain our growth momentum in 2013 and beyond. Doğuş Group will continue to closely follow global trends and continue to do its best in seeking ways to further contribute to the Turkish economy. I sincerely believe that Turkey s enabling and promising business environment, with stronger fundamentals and better prospects than many other countries, will attract even more interest from global investors. I would like to extend my sincerest thanks to all of my colleagues for their attentive and dedicated efforts, as well as to our esteemed customers, global and local partners, and all other stakeholders for their support and confidence in Doğuş Group. Ferit F. Şahenk Chairman of the Board of Directors Doğuş Group Doğuş Group Annual Report 2012

22 Doğuş Group Members of the Board of Directors Doğuş Group s Board of Directors consists of eleven members including its Chairman. The Board convenes four times a year or more frequently as the Group s business dictates. Ferit F. Şahenk Chairman of the Board of Directors Ferit F. Şahenk is the Chairman of Doğuş Group and also the Chairman of Garanti Bank. Formerly, he served as the founder and Vice President of Garanti Securities, CEO of Doğuş Holding and Chairman of Doğuş Otomotiv. Mr. Şahenk is an Executive Board Member of the Foreign Economic Relations Board (DEİK) of Turkey. Following his term as the Chairman of the Turkish-American Business Council of DEİK, he is currently chairing the Turkish-German Business Council and serving as Vice-Chairman of Turkish-United Arab Emirates Business Council of DEİK. Mr. Şahenk is an active member of the World Economic Forum and the Alliance of Civilizations Initiative. He serves on the Regional Executive Board of Massachusetts Institute of Technology (MIT) Sloan School of Management for Europe, Middle East, South Asia and Africa; Advisory Board of the Middle East Centre of London School of Economics; and Executive Board of Endeavor Turkey. Mr. Şahenk holds a Bachelor s degree in Marketing and Human Resources from Boston College and is a graduate of the Owner/President Management Program at Harvard Business School. Süleyman Sözen Vice Chairman Süleyman Sözen is a graduate of Ankara University, Faculty of Political Sciences and has worked as a Chief Auditor at the Ministry of Finance and the Treasury. Since 1981, he has served in various positions in the private sector, mainly in financial institutions. Sözen has been serving on the Board of Directors of various Doğuş Holding and Garanti affiliates since He holds a Certified Public Accountant license. Hüsnü Akhan CEO of Doğuş Group Hüsnü Akhan was born in Birecik/Şanlıurfa on the 23 rd of January, He completed his primary and secondary education at Birecik High School. Hüsnü Akhan is a graduate of Middle East Technical University, Department of Business Administration and earned his Master s degree in Economics from University of Miami (USA). Akhan served at various positions of the Central Bank of the Republic of Turkey. He served as Representative at London Office and Assistant General Manager at the Foreign Relations Department of the Central Bank of the Republic of Turkey. He joined Doğuş Group in After serving as the Executive VP responsible for Treasury, Operations and Foreign Relations at Garanti Bank, he was assigned as the General Manager of Körfezbank in Akhan was a Board Member of Doğuş Holding and CFO during Since January 2006, he has been a Board Member of Doğuş Holding and the CEO. Additionally, he currently serves as the Chairman of the Board for Doğuş Real Estate, Doğuş Energy and D-Marin Marinas Group, as a Deputy Chairman for Doğuş Tourism, D Energy, Doğuş Construction, TÜVTÜRK and as a Board Member for GarantiBank Moscow. Aclan Acar Member of the Board of Directors Aclan Acar is a graduate of Ankara University, Faculty of Economics and Commercial Sciences with postgraduate education on banking and insurance in the same university. Mr. Acar has a postgraduate degree from Vanderbilt University, USA in Economics. He joined Doğuş Group in 1990 and has held various managerial positions in finance, retail and automotive sectors. He has served as the Assistant General Manager of Garanti Bank, General Manager of Bank Express and Osmanlı Bank, and Chairman of Garanti Insurance, the Garanti Pension Company and Tansaş. Since January 2006, he serves as the Chairman of the Board of Directors for Doğuş Otomotiv. He is a member of the Board of Directors of Doğuş Holding. 20

23 21 Ahmet Kurutluoğlu Member of the Board of Directors Ahmet Kurutluoğlu obtained his undergraduate degree from Faculty of Law, his MBA degree from the Business Administration Faculty and his Master s degree in Labour Legislation from the Faculty of Law, İstanbul University. He joined Doğuş Group in 1981 and has been in charge for the legal affairs as a Legal Counsel for Doğuş Holding and Doğuş Construction. He is currently a member of the Board of Directors for Doğuş Holding and in charge for the legal affairs as the Chief Legal Counsel of the Group. Erman Yerdelen Member of the Board of Directors Erman Yerdelen was born in İstanbul and graduated from high school also in İstanbul. He has visited Münster University, Germany, where he attended the School of Business Administration. In 1966, he graduated from the Finance and Business Administration Faculty of İstanbul School of Economy and Commerce. He received his Master s degree in 1996 from Marmara University, İstanbul. After various managerial posts in the private sector, in 1992, he became the Chairman of the Board of Turkish Airlines. He participated in the founding of NTV News Channel in 1996 and has been acting as its Chairman of the Board since He is also a member of Doğuş Holding Board of Directors representing Doğuş Media Group. Mr. Yerdelen speaks both English and German. Gönül Talu Member of the Board of Directors Gönül Talu is a graduate of İstanbul Technical University with a master of sciences degree in civil engineering. He joined Doğuş Group in 1969 and has held various managerial positions in Doğuş Construction. Since 1991, he serves as the CEO and the Chairman of the Board of Directors for Doğuş Construction. He is also a member of the Board of Directors for Doğuş Holding. Muhsin Mengütürk Member of the Board of Directors Prof. Dr. Muhsin Mengütürk is a member of the Board of Directors of Doğuş Holding. He served as the Chairman of the Capital Markets Board of Turkey from 1997 to 2000 and he has held numerous executive roles in the finance sector. Prior to 1990, he taught at Bosphorus University and İstanbul Technical University (İTÜ). Prof. Mengütürk is a graduate of American Robert College in İstanbul where he completed his undergraduate degree in Mechanical Engineering. He received his MS and PhD at Duke University, again in Mechanical Engineering. Sadi Göğdün Member of the Board of Directors Sadi Göğdün graduated from İstanbul High School of Economics and Commercial Sciences and obtained his PhD in economics and commercial sciences. He joined Doğuş Group in 1976 and has worked as a member of the Board in various companies of the Group. Further, he served also as the member of the Board of Garanti Bank. Currently, he serves as a member of the Board of Directors of Doğuş Holding and Doğuş Construction Companies. Şadan Gürtaş Member of the Board of Directors Şadan Gürtaş is a graduate of Anadolu University, Faculty of Economic and Commercial Sciences. He has joined Doğuş Group in 1968 and currently serves as a member of the Board of Directors of Doğuş Holding. Yücel Çelİk Member of the Board of Directors Yücel Çelik is a graduate of Ankara University, Faculty of Political Sciences. He had served in the finance sector prior to joining Doğuş Group in 1974 with Garanti Bank. Between , he was a member of the Board of Directors for the Garanti Bank and its subsidiaries. Currently, he serves as a member of the Board of Directors for Doğuş Holding. Doğuş Group Annual Report 2012

24 Doğuş Group Committees Subject to the Board of Directors Three oversight committees support the work of Doğuş Group Board of Directors: The Risk and Audit Committee, the Human Resources Committee, and the Disciplinary Committee. In addition, the Group has a Legal Advisory Council. The Legal Advisory Council Evaluates law-related issues pertinent to Doğuş Group, Identifies important matters within these issues, Specifies the legal processes to be followed and the measures to be taken in all such matters. The Risk and Audit Committee The Risk and Audit Committee was established to assist and advise the Board of Directors. The Committee consists of three Board members elected by the Board. It meets regularly each week prior to Board meetings. The Committee s major responsibilities are Risk Management and Audit. Risk Management responsibilities include: Ensuring that a functional risk monitoring system transmits important issues to the Board, Reviewing regular information flow from Group companies and evaluating risk assumed in Group strategies, business plans, budgets and investments, Evaluating managerial actions in order to address risk along with the general risk management processes within each company, Reviewing Group risk levels to ensure that they are in line with predetermined levels of shareholder risk preferences, Advising the Board of Directors of risk plans and actions taken with regard to risk management within the Group. Audit responsibilities include: Overseeing the efficacy of actions taken by Group companies in response to the results of financial, operational, and information technology audits performed by the Doğuş Holding Internal Audit Department, Evaluating the efficacy of the internal control processes of Group companies and advising on ways to improve the internal control environment, Overseeing the efficacy of financial control and internal audit activities within the Group, Overseeing the security, efficiency and effectiveness of the information systems used by Doğuş Group companies and reviewing and approving their contingency plans, Assisting the Board of Directors to ensure that the business activities of Group companies are in compliance with the requirements of applicable laws and regulations. The Human Resources Coordination Committee The Human Resources Coordination Committee was established to assist the Board of Directors in human resources management practices at Doğuş Group companies. Comprised of Human Resources Managers from Doğuş Group companies, the Committee convenes at least twice a year as agreed upon in advance by the Board of Directors. The major responsibilities of the Committee include: Developing, implementing and sharing human resources best practices within Group companies, Arranging work groups relevant to planned issues, Sharing within the Group information about vacant positions and potential candidates, Developing common projects to increase employee engagement. 22

25 23 Message from the CEO Similar to its impact on Turkey, 2012 was a respectively successful year for Doğuş Group as well. Despite the recession in the global economy, we caught up with our targeted growth rate. Our total asset increased by 10% to reach TL 56.1 billion, and EBITDA was TL 1.3 billion. Dear Stakeholders, The global economic recession, which began in 2007, persisted into 2012 and started affecting developing countries along with the bigger actors of the world economy. Despite this poor global conjuncture, Turkey maintained its growth in accordance with fiscal and economic expectations. Measures taken to prevent the national economy from being drawn into the ongoing global crisis have been noticeably effective. Similar to its impact on Turkey, 2012 was a respectively successful year for Doğuş Group as well. Despite the recession in the global economy, we caught up with our targeted growth rate. While our consolidated turnover stood at TL 11 billion, our net profit for the period reached TL 744 million. Our total asset increased by 10% to reach TL 56.1 billion, and EBITDA was TL 1.3 billion. By the year s end, Doğuş Group employed nearly 35,000 employees in as many as 180 Group companies. Guided by our general principle in all our new investments, we aim to strengthen our core businesses by increasing our market shares while continuing to invest in new industries that have the potential not only to have added value to our Group, but also to create new jobs and add value to the Turkish economy. Garanti Bank, accounting for half of our Group revenues and 40% of our turnover, maintained its position as the flagship of Doğuş Group in Garanti was honored with numerous national and international awards with its competent human Doğuş Group Annual Report 2012

26 Doğuş Group Doğuş Group acts with the aim of creating a standard, both in the sectors in which we currently operate as well as those into which we have entered recently. resources capable of making a difference, its state-of-the-art technological infrastructure, its customer centric products and services and its applications created with the synergy driven by its superior customer relationship management solutions. Garanti continues to be one of the best managed and most profitable banks in Turkey. Doğuş Otomotiv allowed us to display a superior performance in Turkey s automotive sector as well, driving the Company s growth rate from an average of 12% over previous years in Taking place on top of import auto market, Doğuş Otomotiv increased its sales volume 12% by selling 125,563 vehicles (retail sales). High quality after sales services, accurate stock management, and effective cost management lie behind the superior performance of Doğuş Otomotiv which was awarded with several national and international prizes as a direct and pleasant outcome of our quality-focused work. Additionally, regarding investments, Krone Doğuş Treyler, the trailer factory established in Tire, İzmir in partnership with Krone, began trailer manufacturing for test purposes in the last quarter of Doğuş Construction continued successful national and foreign operations in 2012 as well. Boyabat Dam and Hydroelectric Power Plant was completed in a record period of 47.5 months. Doğuş Construction, that implements projects to facilitate solutions to Turkey s transportation problem, has successfully completed its ongoing Otogar-Bağcılar-Olimpiyat Metro Project in late May 2013 and the metro line will be operative in July Construction and electromechanical works for İstanbul s Üsküdar-Ümraniye-Çekmeköy Metro, one of the city s most important transportation projects are continuing. Doğuş Construction won the tender and have commenced the construction of the Konya-Akşehir-Afyon Road. After completing the Boryspil International Airport in Ukraine and the Sofia Metro Project in Bulgaria in 2012, Doğuş Construction focused its foreign operations in the Middle East. We closely monitor various transportation and superstructure projects as well as environmental projects and offshore structures, particularly in GCC countries and in Sub-Saharan Africa, Central Asia and Eastern Europe. Regarding our media sector, the restructuring, which Doğuş Media Group began with both entertainment channels and thematic channels, was finalized in Star TV is ranked first in prime time ratings in October 2012 for the first time in 10 years and has continued the success ever since, thus pointing to increased advertising revenues and market share in Our partnership with Condé Nast Group, one of the major players of world s magazine market, started with Vogue and last year 24 continued with GQ, another Condé Nast title. Finally, in keeping with trends in digital publishing, we have launched Tvyo. In 2012, within the scope of Doğuş Tourism Group s operations, we expanded the number of guest rooms in our D-Resort Grand Azur Marmaris, all of which will be fully renovated in time for the 2013 season. The Swissotel in Göcek, acquired in 2011 and launched in 2012 as D-Marin Resort Göcek, was opened in 2013 late spring as D-Resort Göcek with renovated facilities. The D-Hotel Maris opened its doors in April 2012 with its fully renewed concept. D-Resort Murat Reis Ayvalık will operate within upcoming two years. Internationally, we have acquired 51 percent of the Capri Palace Hotel & Spa located in Capri Island, Italy. We aim to attract the travelers with profiles similar to those of the Capri Palace Hotel & Spa guests to Turkey, by showing that luxury services in hospitality business exist in our country as well. In 2012, all retail activities of our Group were gathered under the umbrella of a newly established company, namely Doğuş Perakende Satış Giyim ve Aksesuar Tic. A.Ş. Thanks to the frame contract signed with Giorgio Armani S.p.a, which is the unique frame contract that Armani Group signed throughout the world, Doğuş Retail Group had exclusive rights of franchise and distribution business of the renowned luxury brands Giorgio Armani, Emporio Armani, Armani Jeans and Armani Junior. A new Emporio Armani store including Armani Caffè was opened at Suadiye, Bağdat Street. In 2012, the Group has begun cooperation with another luxury brand from premium market Porsche Design and signed franchise contract for a store in Maçka. Besides that, 2012 was the year in which Doğuş Retail Group has signed a distribution contract with Hublot, a brand associated with the fusion between watch-making tradition and innovation. Regarding maritime management, we are aware that the Mediterranean Region has great potential in terms of yacht tourism due to its geographic location. In this context, we are proceeding with our aim of creating a network of marinas that will span from the South Aegean to the Adriatic Sea. We continued investing in Croatia in 2012 with D-Marin Dalmacija and Borik. Acquiring the remaining shares of D-Marin Mandalina, D-Marin Marinas Group became 100% owner of three marinas in Croatia. After becoming the shareholder of the largest marina chain in the Mediterranean by acquiring a 6.92% stake in Adriatic Croatia International (ACI) Group in December 2012, D-Marin Marinas Group realized its first marina investment in Greece that same month by entering into a 50/50 partnership agreement on Flisvos Marina with Lamda Development SA,

27 25 one of Greece s leading companies. Finally, the Group increased its total yacht capacity in the three countries to nearly 9,000 in December 2012 by becoming a 51% partner in MedMarinas SA, the largest marina chain of Greece and affiliate of Kiriacoulis Group. As a result of these investments, D-Marin Marinas Group is now the largest international marina chain in the Eastern Mediterranean Basin and Adriatic Sea. In the healthy living industry, we also had a very fruitful year with D-Gym and D-Life. In order to be able to answer the increasing demand to both centers, we are planning to expand our operations in this sector in We entered into a license agreement with Henri Chenot, one of the leading medical spa brands of the world, for two locations in Turkey. First product of this collaboration will be the Detox and Spa Hotel in Cennet Koyu, Bodrum which will start to operate in the last quarter of The center will serve a clientele looking for a top notch spa and well-being service. The second center that will open at the end of 2015, will be in İstanbul, and will be a purely medical spa serving the complete set of Chenot Method treatments. Within the real estate sector, İstinye Park, Doğuş Center Maslak and Gebze Center continued their successful operations in We are planning to consider similar shopping mall projects in other locations in the upcoming period. Regarding other projects, construction of a 20-storey office building has commenced in the ex-headquarters of Doğuş Group and will be developed as a rental property. Another office project for commercial purposes also continues in Doğuş Center Maslak. Regarding the energy sector, D Energy s aim is to develop investment plans on prospective projects to have an optimal generation portfolio. Besides the clean and renewable energy investments, D Energy aims to expand its diversity of sources through thermic projects. D Energy also closely monitors privatization initiatives, green and brown field projects in various regions of the country in order to optimize its portfolio. Boyabat Hydroelectric Power Plant is in operation since December 2012 with its 513 MW installed capacity and is expected to generate 1.5 billion kwh of electricity per year. D Energy has also started to operate in the electricity trading business. Doğuş Group acts with the aim of creating a standard, both in the sectors in which we currently operate as well as those into which we have entered recently. Our activities in the entertainment sector have been conducted within this context. Our goal is to institutionalize this sector and to create an international brand by improving standards. Accordingly, we have concluded partnership agreements with Kiva Restaurant, Nusr-Et Steakhouse, Go Mongo, Mezzaluna, Lacivert Restaurant, İstanbul Doors Group and International Azumi Group by establishing D.ream - Doğuş Restaurant Entertainment and Management Company. In 2012, Doğuş Group also concluded an agreement with IMG, one of the world s largest sports, fashion and entertainment companies, to establish a 50/50 partnership in Turkey, called IMG-Doğuş. With this joint venture with IMG, we aim to realize a broad range of sports, fashion, and entertainment-related projects in Turkey as well as Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan. Understanding the increasing importance of digital technology and the reality of the ongoing digital transformation, we have stepped into various new initiatives in the IT sector. The launch of two e-commerce platforms, bonubon.com within the framework of Doğuş Yeni İnternet and n11.com under our partnership with the South Korean SK Group, were the two major initiatives we have recently undertaken in this context. Doğuş Group also entered into an e-marketing partnership with the Related Group. Furthermore, in 2012, we have established a new IT company, Doğuş Teknoloji, to primarily serve the IT needs of our Group companies. Last, but not least, our Group also aims to enhance the funding of knowledge and investments in the fields of agriculture and stockbreeding with the intention of maximizing potential in the most efficient way. In this context, a research and development company was established under the name of Doğuş Agro Projects R&D Services Corporation in September 2012 for the purpose of bringing a strategic and visionary approach to the agriculture sector and enhancing the sector s added value. We prioritize humanity and our environment, both in our business practices and in our corporate responsibility initiatives, and we try to make the world a more livable and sustainable place. In 2012, we launched our Corporate Responsibility Strategy, which is to support economic, social and environmental development while increasing the level of prosperity by creating innovative and sustainable business models in every sector and region in which we operate as a Group. Furthermore, our Group companies continued to implement community engagement programs in line with their area of businesses, ranging from education to health and safety. At Doğuş Group, we will maintain this momentum in 2013 by further developing our business practices towards fully sustainable business models and by extending our community engagement in every region under our sphere of influence. On behalf of Doğuş Group, I would like to take this opportunity to thank all of our valuable employees for their hard work, our business partners who always keep the quality bar high, our shareholders who support us with their investments, and our customers who always encourage us to constantly improve our standards. Hüsnü Akhan Chief Executive Officer Doğuş Group Doğuş Group Annual Report 2012

28 Financial Services Sustainability, trust and InnovatIon All are attributes reflected by the green color. Garanti Bank and its subsidiaries also base their business practices on these three notions, thereby providing high confidence and satisfaction for their customers. 26

29 27 Doğuş Group Annual Report 2012

30 Financial Services Financial Highlights With its dynamic business model and edge in technological innovation, our financial services continues to differentiate itself and facilitate the lives of its customers. Its custom-tailored solutions and wide product variety play a key role in exceeding US$ 100 billion total assets. Financial Highlights (TL thousand) Segment Assets 115,607, ,802, ,401, ,499,535 Net Interest Income 5,433,151 5,214,406 5,235,894 6,407,362 Net Fees and Commission Income 1,855,063 1,910,832 2,130,603 2,072,749 Gross Profit Margin (%) Income from Operations (*) 4,125,711 4,504,777 4,505,841 4,539,038 Income from Operations Margin (%) * Depreciation expense is excluded. Source: Figures are based on Garanti Bank IFRS financial statements. Total Assets (TL thousand) Net Interest Income (TL thousand) ,607, ,433, ,802, ,214, ,401, ,235, ,499, ,407,362 28

31 29 Garanti Bank In 2012, Garanti differentiated itself with its business model underscoring its robust and sustainable growth strategy, and attained a stellar performance. Doğuş Group Annual Report 2012

32 Financial Services Established in 1946, Garanti Bank is Turkey s second largest private bank with consolidated assets exceeding US$ 102 billion. Garanti operates in every segment of the banking sector including corporate, commercial, SME, retail, private and investment banking. Garanti is an integrated financial services group together with its eight financial subsidiaries, providing services in pension and life insurance, leasing, factoring, brokerage, and asset management besides the international subsidiaries in the Netherlands, Russia and Romania. Garanti provides a wide range of financial services with its 17,285 employees to its 11.7 million customers through an extensive distribution network that reached 926 domestic branches; 5 foreign branches in Cyprus, one in Luxembourg and one in Malta; 3 international representative offices in London, Dusseldorf and Shanghai; more than 3,500 ATMs; an award-winning call center; and the state-of-the-art Internet and mobile banking platforms built on cutting-edge technological infrastructure as of year-end Garanti commands a pioneering position in all lines of business through the profitable and sustainable growth strategy it pursued since the day of its establishment. Its competent and dynamic human resources, unique technological infrastructure, customer-centric service approach, innovative products and services offered with strict adherence to quality carry Garanti to a leading position in the Turkish banking sector. Following the best practices in corporate governance, Garanti is jointly controlled by two powerful entities, Doğuş Holding Co. and Banco Bilbao Vizcaya Argentaria S.A. (BBVA), under the principle of equal partnership. Having shares publicly traded in Turkey, the UK and the USA, Garanti has an actual free float of 49.97%. With its dynamic business model and superior technology integrated to its innovative products and services, Garanti continues to differentiate itself and facilitate the lives of its customers. Its custom-tailored solutions and the wide product variety play a key role in reaching US$ 70 billion cash and noncash loans. The high asset quality attained through advanced risk management systems and established risk culture place Garanti apart in the sector. Garanti is not only committed to add value for its customers and shareholders, but also for all its stakeholders and the society. Within this context, Garanti s long-term support in the areas of culture, arts, environment, education, and sports reflects its commitment as well as its keen sensitivity to sustainability. 30 Activities in 2012 In 2012, Garanti differentiated itself with its business model underscoring its robust and sustainable growth strategy, and attained a stellar performance. The paving stones of Garanti s path to success were its ability to read markets well, forecast accordingly, and, in light of these, carry out effective balance sheet management. In 2012, Garanti continued to stand out with its liquidity, sound asset quality and well capitalization fueled by its high internal capital generation capacity. Garanti s assets increased by 10% in 2012, reaching TL 179 billion 779 million 374 thousand; while the support provided to the economy through cash and non-cash lending reached TL 123 billion 903 million 825 thousand*. Expanding its cash loans by over 10% in 2012, Garanti increased the share of loans in assets to 55%. Garanti, with its disciplined growth strategy, did not pursue market share gains based purely on pricing competition and, thus grew selectively in order to manage the increasing pressure on margins in an effective and balanced manner. By concentrating on high-yielding consumer loans, including credit cards, Garanti gained healthy market shares. In 2012, the Bank s position in the sector was further strengthened with growth recorded in general-purpose loans by 16%, auto loans by 11% and mortgage loans by 17%. Garanti preserved its position as the Turkey s largest mortgage lender. Asset quality remained sound in Collections performance was strong, however at more normalized levels compared to the figures obtained over the past two years. Moreover, in parallel with the soft landing in the economy, lending growth was lower versus the previous year, yielding an increase in Garanti s non-performing loan ratio to 2.6% in 2012 from 2.1% in This ratio however, remained below the non-performing loan ratio calculated for the sector as a whole. Within the effectively managed and solid funding structure of Garanti, deposits carry the highest weight, funding 54% of the assets. In its effort to continually strengthen and expand its deposit base, Garanti successfully implemented the growth strategy with particular focus on mass deposits and demand deposits. Consequently, high demand deposit levels were maintained and the share of demand deposits in total deposits increased to 22% as of the end of the year. In 2012, Garanti diversified and further strengthened its funding mix by actively using alternative funding sources. Through the issuance of TL bonds, the Bank was able to effectively manage the cost as well as the maturity of the TL funding side. Garanti, as well regarded among the most trusted financial institutions by international investment banks, was able to undertake the largest ever non-sovereign Eurobond issue in Turkey to date, with the lowest coupon rate as of the date of issuance. With its sustainable growth focus, strong international banking network, experienced team, as well as its ability to generate potential business areas, Garanti was able to further reinforce its position * Figures are based on BRSA consolidated financial statements.

33 31 as the most preferred financial institution in the international markets. In light of this, the Bank was also able to secure the lowest-cost syndicated loan amongst Turkish banks in Garanti continued to strengthen its capital base via internal capital generation throughout The increase recorded in shareholders equity was 21%, reaching TL 21.7 billion. Consolidated capital adequacy ratio, which stood at 15.8% at the end of 2011, increased to 16.9% at the end of 2012, even after Basel II rules came into effect as of the third quarter of the year. Garanti s strong capitalization was distinguishing, not only in Turkey, but in the global arena, as well. Garanti was the only Turkish bank among the world s top 100 rated banks by S&P, for two consecutive years, per risk-adjusted capital ratio. Despite the economic uncertainties and pressure created by regulatory actions in 2012, Garanti delivered a net interest margin expansion through dynamic balance-sheet management. A customer centric and innovative business model yielded an increase in Garanti s sustainable banking revenues. Carrying on with its ongoing investments in distribution channels, Garanti managed to maintain the highest per branch efficiencies in terms of assets, loans and ordinary banking income. At Garanti Bank, primary responsibility to the stakeholders is defined as creating sustainable value both in the short and long-term. In this context, the focus of the activities carried out in 2012 included managing the environmental and social impacts besides cultural-artistic, educational, sportive and jazz activities. Developed for managing the Bank s indirect impact stemming from loans disbursed, the Environmental and Social Impact Assessment System was the Bank s most important action to reduce its ecological footprint. Having completed the testing phase of the system in 2012, Garanti commenced to effectively manage environmental and social impacts of loan disbursement activities. Garanti, in 2012, similar to prior years, was honored by numerous national and international prestigious institutions with its exemplary practices backed by the synergies the Bank created through its dynamic human resources capable of making a difference, the state-of-the-art technology, innovative customer oriented products and services and the best customer relationship management solutions. Garanti Bank has, for the third time, been selected as the Best Bank in Turkey in the evaluations carried out by the Financial Times Group s The Banker magazine. According to the results of a survey of the Most Admired Company conducted by the monthly business and economics magazine, Capital, Garanti Bank has been selected as the 1 st Most Admired Company in the Banking sector and the 2 nd from among all the companies in Turkey. In the research, Garanti distinguishes itself with its investments in information and technology, financial health and dependability. Garanti Bank was selected as the Best in 2012, in the category of Talent Management, by the Peryön Human Management Awards which recognizes the best firms in Turkey in the area of Human Resources. Having received the same award in 2008 and 2010, in various categories, Garanti has once again proven the quality of its human resources practices. Garanti, in receiving the highest rating in Carbon Performance evaluation, was awarded the 2012 Turkey Carbon Performance Leadership. In October 2012, having been deemed worthy of the ISO Environmental Management System Certificate, Garanti has also been recognized as the first Turkish bank applying environmental management system in the most comprehensive manner and in the greatest number of buildings. In 2013, Garanti Bank became the first Turkish Bank to receive A level rating from Global Reporting Initiative, with its Sustainability Report. Future Plans The downside risks that began in and later advanced into a global debt and banking crisis remain ever present as we enter the fifth year of the crisis. In this respect, while the risk to foreign demand remains pressing, uncertainties concerning the direction of capital flows are also rising to the fore. Without doubt, global developments are anticipated to closely affect the Turkish economy and the banking sector. In 2013, with the expectation of a limited pick up in the pace of global growth and a revival in domestic demand in Turkey, the Turkish economy is estimated to grow around 4.8%. With expectations of such growth and oil prices remaining high, the current account deficit will probably rise in relative to GDP in In line with economic developments, sector balance sheet growth is expected to be better relative to It is critical that, in 2013, the banking sector continues, without losing focus, to efficiently deploy its capital. In fact, one of the most significant factors distinguishing the sector on international platforms is its capital strength. The goal at Garanti Bank is clear: in 2013, the Bank will work with all its resources, despite the challenging economic conjuncture, to be an internationally respected bank, continuing to grow in a sustainable and profitable manner while wishing to earn the appreciation of all its stakeholders. Doğuş Group Annual Report 2012

34 Financial Services GarantiBank International N.V. As a global boutique bank, GBI offers innovative, country-specific financial solutions to its customers worldwide in the areas of trade finance, private banking, structured finance and corporate and commercial banking. Established in Amsterdam in 1990 as a wholly-owned subsidiary of Garanti Bank, GarantiBank International N.V. (GBI) operates through its head office in the Netherlands as well as its branches and representative offices in Germany, Turkey, Switzerland and Ukraine. As a global boutique bank, GBI offers innovative, countryspecific financial solutions to its customers worldwide in the areas of trade finance, private banking, structured finance and corporate and commercial banking. Activities in 2012 Following a very successful year, GBI made a net profit of EUR 54.6 million* in 2012, achieving an increase of almost 2% over the previous year, without compromising its high asset quality. GBI also continued to reinforce its capital structure, improving its Capital Adequacy Ratio to 19.29% at year-end, 18.22% of which being the Tier-I capital. In 2012, GBI secured a one-year syndicated loan of EUR 220 million, from a consortium of 19 banks in nine countries. Easily exceeding the targeted amount, GBI renewed its syndicated loan with an increase of 10% by an agreement signed in Amsterdam, on July 9. Projections for 2013 In 2013, GBI will continue its prudent strategy focusing on its inherently low risk-bearing main activities of trade finance, private banking and structured finance. Projecting a balance sheet growth of 10% during this period, GBI aims to generate stable income from all its main activities. Having set a target cost-income ratio of 37-38% for 2013, GBI aims to further diversify its principal activities and maintain a strong commission income through increased revenues from private banking, structured finance and cash management operations. GBI s main objective in 2013 will remain as offering the best tailor-made solutions to its customers in a prompt manner. * Based on Dutch GAAP standards. 32

35 33 Garanti Bank SA Aiming to become one of the top 10 banks in Romania, Garanti Bank SA is responding to the needs of its customers with innovative products and technological supremacy. Garanti Bank SA continues to introduce many firsts that make life easier for its customers by extending its portfolio of products and services and is increasingly reinforcing its position in the Romanian banking sector. With its vision of becoming an international player, Garanti serves as an active financial group in Romania with Garanti Bank SA, Garanti Leasing, Garanti Mortgage and Garanti Consumer Finance. Activities in 2012 Offering services as a licensed bank since May 2010 and expanding its activities upon solid foundations, Garanti Bank SA continued to carry out its operations in the country successfully during Aiming to become one of the top 10 banks in Romania, which has a population of approximately 20 million, Garanti Bank SA is responding to the needs of its customers with innovative products and technological supremacy as well as well-developed and comprehensive banking services in all areas of banking, from retail and SME banking to commercial and Internet banking. Having raised its market share in 2012 to 1.8%*, with consolidated assets worth EUR 1.8 billion, the Bank ranked 13 th * in Romania, serving its customers through 78 branches covering 98% of the country. Having introduced a number of novelties to the Romanian banking sector, Garanti Bank SA completed yet another firstever project in 2012, offering its customers the opportunity of mobile payments via smart phone. Projections for 2013 Garanti Bank SA will pursue its activities in 2013 with the aim of introducing many firsts to the sector, differentiating itself through offering products and services combined with its technological edge and creating value for its customers. Furthermore, Garanti Bank SA will continue to grow on sound foundations and focus on gaining market share in *As of September 2012 Doğuş Group Annual Report 2012

36 Financial Services GarantiBank Moscow The customer base of GBM, of which the main area of activity is corporate and commercial banking, consists of Russian firms in various sectors and major Turkish firms doing business on the Russian market. GarantiBank Moscow (GBM) commenced operations in 1996, and is one of the 75 banks with foreign capital operating in Russia. Owning a full-scope banking license, GBM operates through one branch office with 80 employees. Having the experience and knowledge to carry out all banking transactions on an efficient and reliable IT platform and with experienced employees who have good knowledge about the conditions prevailing in the country, GarantiBank Moscow operates the balance sheet marked by high asset quality, operational productivity and sustainable profitability in an environment of intensive competition created by domestic and foreign banks. Despite its much smaller size compared with financial institutions targeting the same client segment; GBM serves to large corporates in anticipation of high standard banking services thanks to the ability to respond quickly and provide advanced level of services. The customer base of GBM, of which the main area of activity is corporate and commercial banking, consists of Russian firms in various sectors and major Turkish firms doing business on the Russian market. Having over 500 active commercial customers, GBM has credit relationships with over 75 firms. Activities in 2012 Having reached an asset size of US$ 462 million and a total loan volume of US$ 377 million, comprising US$ 258 million cash loans and US$ 119 non-cash loans, in line with its targets for 2012, GBM has recovered the volumes it had prior to the 2008 crisis. Driven by rapid increases in the projects undertaken by Turkish contractors in Russia in 2012, the volume of non-cash credit rose by 77%. As a result of coordinated work carried out with the representative office of BBVA in Russia, GBM advanced its relations with Spanish firms operating in Russia and increased the number of Spanish firms in its portfolio. Moreover, GBM has become the main bank of the Spanish Embassy and Consulate. GBM is now servicing all the banking needs, such as cash management, payments in ruble and FX and exchange transactions of the above-mentioned entities. In 2012, GBM continued to carry, in its portfolio, both the Russian government bonds with good yield potential and the private sector bonds in rubles and US dollars, issued by companies with high credibility. As a result of its trading in 2012, GBM earned an income of US$ 3.1 million from sales of securities. Despite the ongoing competition led by public banks and the shrinking margins since 2011, in 2012, GBM increased its post-tax profit by 30% with regard to the previous year to US$ 9.5 million. Projections for 2013 Offering fast and competitive services meeting the needs of customers, in 2013, GBM aims to continue its healthy growth by further developing the current corporate banking structure without sacrificing asset quality. 34

37 35 Garanti Securities Garanti Securities remains as Turkey s most preferred brand in corporate finance and brokerage services with its highly experienced team characterized by teamwork and custom-designed solutions. Garanti Securities strong presence in corporate finance and brokerage services with its experienced team, robust infrastructure and long-standing relationships with institutions further strengthen Garanti. Corporate Finance Named the Best Investment Bank in Turkey by Global Finance every year since 2007, the total size of corporate finance transactions advised by Garanti Securities has reached US$ 33.7 billion. In 2012, Garanti Securities advised the issuance of a total 37 bonds and bills with a total value of TL 7.7 billion. The Company completed 100% asset sale of Kümaş Manyezit for a consideration of US$ million in The privatization of 10.32% shares of Petkim worth US$ million was successfully completed in 2012 through the advisory services provided by Garanti Securities. For the privatization of Motorways and bridges through transfer of operation rights for a period of 25 years, Garanti Securities acted as buy-side advisor of the Atlantia, Doğuş Holding, Makyol and Akfen Holding Consortium. In November 2012, Garanti Securities was appointed by the Privatization Administration as the sell-side advisor for the privatization of the remaining 31.68% shares of Undersecretariat of the Treasury of the Prime Ministry in Türk Telekomünikasyon A.Ş. (Türk Telekom). Garanti Securities is also advising the Privatization Administration for the privatization of Başkent Doğalgaz. Tender for the block sale of Başkent Doğalgaz shares was made on September 13, and the highest bid of US$ 1,162 million was offered during the tender which was held on January 25. The transaction is expected to be completed in 2013 after obtaining the necessary approvals. Garanti Securities targets to continue its strong performance in 2013 and take part as an advisor in major transactions. The Privatization Administration announced the tender for the privatization of Başkent Doğalgaz on September 13, and planned to collect sealed bids on January 18. The transaction is expected to be completed in Research The Research Department provides periodical, sectoral, thematic reports and fundamental and technical analysis regarding the BIST equities, economy and the fixedyield securities to broad customer base of Garanti Bank, investment centres and foreign financial institutions. Research Department also extends support to corporate projects including public offerings, M&A projects and asset sales. The Department s equity research covers Turkey s leading sectors, financial institutions and the industrial corporations that steer the BIST. The model portfolio consisting of equities with Outperform recommendation has yielded an average annual relative return of 23% over that of the ISE 100 index since 2009, and a relative return of 14% in International Institutional Sales International Institutional Sales Department (IIS) provides brokerage services in equity and derivatives markets to foreign institutions which invest in Turkish capital markets. The Department also provides brokerage services to local investors in foreign markets. IIS raised its market share to 2.06% in 2012, from 1.36% a year ago. During the same period, despite a 1% increase at BIST foreign volume, IIS volume rose by 53% year-of-year and reached TL 4.5 billion thanks to increased contribution from new clients. IIS aims to increase its transaction volume and market share further in 2013 through expansion into new regions, namely in Eastern Europe, Russia, GCC countries, and Asia. Additionally, the Department organized an investor conference in London in May 2013, with the attendance of 20 Turkish listed companies and 65 investors, having 160 meetings. The Department also continues its collaboration with the Corporate Finance team for primary and secondary market offerings. Doğuş Group Annual Report 2012

38 Financial Services Garanti Asset Management Being the first asset management company in Turkey, Garanti Asset Management has been differentiating itself in the sector through its efficient business approach and proactive risk management. Being the first asset management company in Turkey, Garanti Asset Management has been operating in the asset management sector for 15 years, with the aim of being the leading company with its comprehensive research activities and robust risk management. The secret of Garanti Asset Management can be identified as, working with the aim of managing customer assets in the most efficient manner to the extent possible, and ensuring that its customers achieve their investment targets. The Company is combining its investment philosophy, relying on concrete knowledge, with consistency, efficiency and the concept of professional service, and working by focusing on responding to the ever changing and diversifying demands of customers, in dynamic market conditions, using the latest methodologies. As of today, where the selection of stocks has become more important, the internal research team makes visits to over 150 companies annually, provides support to the investment team in the selection of stocks and the making of investment decisions. This structure is the distinguishing point of Garanti Asset Management from its competitors. Garanti Asset Management has been differentiating itself in the sector through its efficient business approach and proactive risk management. With a professional human resources team consisting of 55 persons, 21 of whom form the investment team, Garanti Asset Management provides services in the fields of: Mutual Funds Management Pension Funds Management Alternative Investment Products Management Discretionary Portfolio Management With the aim of not only surpassing the benchmark standard, but also creating performance above the competition, Garanti Asset Management very closely monitors the competition. Activities in 2012 Garanti Asset Management succeeded in exhibiting a satisfactory performance in all business segments and reached an asset volume of TL 8.4 billion, as of December Mutual Funds In 2012, while the Mutual Funds sector grew by 1%, the overall size of the Mutual Funds managed by Garanti Asset Management grew by 8.2% and reached an asset volume of TL 4.7 billion. The top-performers among mutual funds were: The Flexi Fund which has a special place among Fixed Income Funds with its limited equity exposure, The Corporate Bonds and Bills Fund which is a good alternative Fixed Income Funds due to investments in the newly emerging Corporate Bonds and Bills markets, and, The Equity Fund which outperformed the funds included in the index due to the high equity selection performance. 36

39 37 Private Pension Funds In 2012, when the Private Pension System grew rapidly, the consistent management and successful performance of Pension Funds contributed significantly to an increase in AUM. Garanti Asset Management outgrew the sector to reach an asset volume of TL 3.3 billion and a market share of 16.20%. Alternative Investment Products Investors were offered new investment alternatives such as; Innovative Companies, Winning Business Models, Auto Control Index, Silver and BRIC countries by working outside the accustomed patterns in Capital-Protected Funds. First offered to qualified investors as a new alternative in 2009, the İstanbul Hedge Fund is still being managed with the goal of a consistent and sustainable yield. Discretionary Portfolio Management Garanti Asset Management reached a size of TL 447 million in this segment with the help of its efficient marketing and customer satisfaction where the sector reached a size of TL 6.5 billion, as of the end of Projections for 2013 After Turkey has regained investment grade rating, it is expected that foreign investment flow into the country and the need for local specialists will rise. In this environment, Garanti Asset Management is planning to launch new products appealing to foreign investors. The establishment of new funds for diversity in the Private Pension side, as permitted by the new law, is among other goals of Garanti Asset Management for Doğuş Group Annual Report 2012

40 Financial Services Garanti Leasing The only Turkish leasing company rated both by Standard and Poor s (S&P) and Fitch Ratings, Garanti Leasing is maintaining its performance above the sector average with its quality services that create distinction in the eyes of its customers. Garanti Leasing has been operating in the sector since Using the advantages of the branch offices of Garanti Bank as its distribution channel, Garanti Leasing executes leasing transactions with corporate customers, commercial customers and small and medium size enterprises, covering a broad customer base. Being the only Turkish leasing company rated both by Standards & Poor s (S&P) and Fitch Ratings, Garanti Leasing is maintaining its performance above the sector average with its quality services that create distinction in the eyes of its customers. Garanti Leasing, a well-known company on the international markets, is distinguished from its competitors through its well-qualified human resources, powerful technical infrastructure, high funding capability and diversity of borrowing on the international markets. Activities in 2012 According to the data of FİDER (Turkish Leasing Association), covering the period of , Garanti Leasing; Reached a transaction volume of US$ million, Maintained its 10-year leadership in 2012, in terms of number of contracts, with 2,953 contracts and a market share of 16.61%. Projections for 2013 Garanti Leasing will do business with more new customers and expand its customer base in In order to do this, Garanti Leasing will continue to reinforce its synergy with the branch offices of Garanti Bank, enhance its communication with the customer relations executives of Garanti Bank and ensure the creation of many more transactions. One other sales strategy to be pursued in 2013 is to concentrate on machinery, equipment and construction machinery products, the share of which in the sector is expected to increase via the support by the vendor sales team, and to expand the customer base. Furthermore, Garanti Leasing aims to pioneer the sector by adding new products to its product range, such as; operational leasing, sell & lease-back and software leasing products, which will be parts of our lives with the enactment of the new law by the Turkish Parliament. Garanti Fleet Through its strong, highly-competent staff, Garanti Fleet has been providing fleet management services, for the passenger cars of all makes and models sold in Turkey, to companies of any size since Aiming at unconditional and sustainable customer satisfaction through the power and sound financial structure of Garanti brand, Garanti Fleet pre-plans every detail from the tires to be used to the service points where maintenance and repair services will be received, together with ensuring full compliance with the maintenance and repair standards established by the automotive industry. Activities in 2012 In 2012, Garanti Fleet leased 2,898 new cars. Having adopted the concept of sustainable profitability as its basic strategy, Garanti Fleet earned a profit of TL 16.2 million from its operations. As of the end of 2012, Garanti Fleet is providing fleet management services to 1,197 customers with its car park consisting of 7,982 cars and a staff consisting of 56 persons. 38

41 39 Projections for 2013 In 2012, Garanti Fleet leased 2,898 new cars. Having adopted the concept of sustainable profitability as its basic strategy, Garanti Fleet earned a profit of TL 16.2 million from its operations. As of the end of 2012, Garanti Fleet is providing fleet management services to 1,197 customers with its car park consisting of 7,982 cars and a staff consisting of 56 persons. Garanti Fleet will continue to invest in its technological infrastructure, competent human resources and powerful distribution channels. Garanti Fleet will also commence provision of fleet management services to cars that are not leased by Garanti Fleet. Garanti Fleet will commence provision of an optional fuel management service. Garanti Fleet will launch its online sales platform in 2013 for the sale of used cars of which the term of lease has ended. Garanti Fleet will continue to embark on special price campaigns in collaboration with car manufacturers. The integration of the technological infrastructure of Garanti Fleet with that of contracted service shops and other suppliers will be achieved and the execution of insurance, maintenance and repair procedures will be accelerated. With smart phone and tablet applications, Garanti Fleet will enable customers to transmit their operational needs more quickly. Garanti Fleet will launch a reporting platform enabling customers to access information about the cars they have leased more easily and quickly. Garanti Fleet will use customer satisfaction surveys to improve and develop its service processes and quality management. Doğuş Group Annual Report 2012

42 Financial Services Garanti Factoring Garanti Factoring provides, in a single package, the financing, guarantee and collection management products required by both the domestic and international trade through trade finance and receivable-based finance pooling. Commencing its operations in 1990, Garanti Factoring has been serving its customers under the roof of Garanti since Garanti Factoring provides, in a single package, the financing, guarantee and collection management products required by both the domestic and international trade through trade finance and receivable-based finance pooling. 8.38% of the Company s shares in circulation are traded on the BIST National Market. Garanti Factoring serves a vast customer base, primarily consisting of SMEs as well as import-export focused firms and enterprises with extensive supplier and vendor networks. Garanti Factoring is the trail-blazer in terms of product development and consultancy with its customer-focused approach and expert team, aiming to create value for the sector and for customers. Together with its competent staff, able to provide tailored institutional solutions and its differentiating speed, its widespread network of correspondents, provided by its membership in two major international factoring chains, International Factors Group (IFG) and Factors Chain International (FCI), also makes it a strong factoring company with regard to overseas factoring transactions. Along with the rapidly-developing standard banking products related to export and import finance and the growing need for receivable-based financing methods in Turkey, Garanti Factoring offers quick, high-quality solutions to its customers with diversified products for both domestic and international transactions. With its 8.36 Corporate Governance Rating in the initial assessment for the Compliance with Corporate Governance Principles carried out by Kobirate Uluslararası Kredi Derecelendirme ve Kurumsal Yönetim Hizmetleri A.Ş. [Kobirate International Credit Rating and Corporate Governance Services Inc.], Garanti Factoring joined Borsa İstanbul Corporate Governance Index as the highest rated factoring company. 40 Activities in 2012 Having generated a net profit of TL 20,460 thousand in 2012, Garanti Factoring reached an asset volume of TL 1,955 million and return on assets of 1.37%. Return on equity was 21.41% and the ratio of non-performing loans, which was 1.43%, remained far below the average ratio in the sector and in the reference sectors. Garanti Factoring has moved up to leadership in the sector in basis of factoring receivables with 11.1% market share. The total transaction volume of Garanti Factoring increased by 35.5% in 2012, compared to the previous year, and reached US$ 4.2 billion. Garanti Factoring ranks the second in the sector with this volume, reaching to 10.31% market share. Maintaining and deepening its synergy with Garanti Bank, Garanti Factoring has established five new Regional Marketing Offices to increase penetration and deliver higherquality services at the micro-market level, and has finished 2012 by performing 33,957 operations. Projections for 2013 With the primary goal of growing profitably at high speed, Garanti Factoring aims to; Increase its share of factoring transactions by establishing closer relationships with existing customers, Raise its market share to 12% by adding new markets and firms, Work more intensively by focusing on a wider map by means of opening new branch offices, Continue to offer innovative products suiting customer needs, Take a more active role in the offering and selling of its 2F Export Factoring product to exporters and raise its market share in this field, Continue its market leadership in the intermediation of customer collections by further highlighting its Commercial Collection Management (CCM) service, Continue its collective and harmonious collaboration in synergy with Garanti Bank, Continue investing in its systems infrastructure and human resources in order to raise productivity.

43 41 Garanti Pension and Life Garanti Pension was the most profitable company in the sector in 2012 with a net profit of TL 134 million, and a total fund volume reaching TL 3.3 billion. Garanti Pension shapes the private pension and life insurance sectors with its innovative products, customer-centric services and expertise in bancassurance. Garanti Pension, with its 857 personnel, serves 610 thousand pension participants and over 1.9 million insured. Having completed another successful year, Garanti Pension was the most profitable company in the sector in 2012 with a net profit of TL 134 million, a total fund volume reaching TL 3.3 billion, a net annual contribution of TL 609 million and life insurance premium production of TL 263 million. Activities in 2012 Drawing its strength from its efficiency in bancassurance, technological infrastructure and product diversity, Garanti Pension continued to grow in the sector in Projections for 2013 Garanti Pension, aiming to continue its financial achievements, will continue to shape the sector with its innovative products in 2013, and focus on its principal goal of gaining market share. Additionally, Garanti Pension will continue to invest in its technological infrastructure and strong distribution channels in 2013 with the objective of supporting projects and enterprises that enhance customer satisfaction. With the goal of becoming the sector leader in terms of number of participants, Garanti Pension will increase participant earnings in the pension system and maximize their satisfaction by broadening its range of funds. Garanti Pension has 16% market share with a total fund volume of TL 3.3 billion. With an increase of 80 thousand participants and a market share of 17%, Garanti Pension became the most preferred pension company in The total number of participants in Garanti Pension reached 610 thousand with a market share of 20%. While life insurance sector was growing by 2%, Garanti Pension grew by 9% and increased its market share to 10% with TL 263 million premium production. Doğuş Group Annual Report 2012

44 Financial Services Garanti Payment Systems Reshaping shopping habits through numerous firsts it has introduced to the sector, Garanti Payment Systems offers commercial and virtual cards, marketing and e-commerce services including chip-based, multi-branded and co-branded card programs. Established as a subsidiary of Garanti Bank in 1999, Garanti Payment Systems (GÖSAŞ) currently operates on a staff of 650. Having reinforced its position as market leader through its success in integrating its products with technology since the very day of its establishment, Garanti offers a high quality service to diverse customer base. Turkey s first and only payment systems institution holds the market s broadest card segment. The main brands of personal cards include Bonus, Miles & Smiles credit card, American Express and Çevreci Bonus [Environmentally-friendly Bonus], Aynalı Bonus [Reflected Bonus], Şeffaf Bonus [Transparent Bonus], Taraftar Kartları [Football Clubs Affinity Cards] as secondary lines. Money Visa, Flexi and Altın Bonus are sub-category card products created under the Bonus Card. There are nine different products in the Business Cards Portfolio, and Paracard is the debit card brand used for cash payments. With its Bonus Card Platform, Garanti Bank ranks 6 th in Europe in terms of credit card turnover according to the Nilson Report. GÖSAŞ has realized a number of ground-breaking projects in Turkey and the world: It has the only network in Turkey of merchant members accepting VISA, MasterCard, JCB, American Express, CUP, Diners and Discover cards. Apart from the POS-matic, Kolay Vezne (Easy Teller), Ödeme Noktası (Payment Point), and Card Application Point services, GÖSAŞ also provides various payment solutions such as e-commerce and e-retail services via together with dial-up POS, ADSL POS, Mobile POS and Virtual POS to member merchants. Following the principles of Customer Relations Management (CRM), GÖSAŞ conducts pioneering studies in the areas of customer loyalty, profitability and risk measurement. Activities in 2012 Portfolio management: An activation rate of 61% was achieved through campaigns especially designed for individual customers, and firstcustomer care programs. Through a break-down of the portfolio into segments such as customer payment performance, spending habits and customer potential, extra turnover amounting to nearly TL 1.5 billion was created by means of several major campaigns affecting both profitability and turnover. By solving customer problems and ensuring customer satisfaction, 1,120,000 cards in the portfolio were regained in Customers were offered the opportunity to manage their payments and budgets by means of features such as Credit Repayable in Installments, Postpone the Payment to the Next Account Statement, Divide the Charge into Installments and Postpone the Charge to the Next Account Statement. Collaboration between Garanti Bank and Turkish Airlines has been extended for five years. Under the renewed contract, the name of the program has been changed to the Miles & Smiles credit card program and new features have been added to the existing ones. Collaboration with Migros on Money Visa has been extended for three years. 42

45 43 Authoring another ground-breaking project in Turkey, in collaboration with Turkcell, Garanti Bank introduced the Cep-T Paracard (Mobile Phone as Paracard) service, which is a turning point in mobile financial services. The Cep-T Paracard has paved the way to a new era in shopping which will make the life of all consumers easier, regardless of whether or not they are Garanti customers. Projections for 2013 With the goal of expanding the market and increasing card usage, GÖSAŞ aims: To adapt technology to products in the best manner, with applications such as Trink, the contact-free card charging system, in order to make payment systems available through pre-paid and debit cards, to those who do not use credit cards due to their age or income, To grow profitably through new market penetration at member merchant locations, the acquisition of customers from a wider customer base, launching of local campaigns and spreading installment payment practices, To reach 700,000 active card users by the 5 th anniversary of the Miles & Smiles & Turkish Airlines contract. The primary goal of Garanti Payment Systems toward its Business Cards portfolio is: To launch the new business credit card with deferred payment under the CUP license, particularly for businesspeople doing business with China. Doğuş Group Annual Report 2012

46 Financial Services Garanti Mortgage Never having lost its market-leadership, on its 5 th anniversary Garanti Mortgage has outperformed its competitors and reinforced its leadership in the sector. Reflecting its competitive superiority through the diversity of its products, the importance it gives to distribution channels and its exceptional service quality, Garanti Mortgage, through its specialist staff, offers the most affordable mortgage options and payment plans to home-purchasers. Having started its operations in October 2007 as the first mortgage company in Turkey with 26 employees, Garanti Konut Finansmanı Danışmanlık Hizmetleri A.Ş. (Garanti Mortgage) has distinguished itself in the sector as Garanti, the Mortgage Expert. Having been at the cutting-edge, due to its expertise, since its founding, Garanti Mortgage currently operates with a 72-person team of mortgage experts. Never having lost its market-leadership, on its 5 th anniversary Garanti Mortgage has outperformed its competitors and reinforced its leadership in the sector. Because Garanti Mortgage; Offers the broadest range of mortgage products in Turkey, Provides customers with the products that best suit their expectations and income, Provides Mortgage services delivered by specialist portfolio managers having completed the Mortgage Expertise Certificate Program, Manages all transactions through an expert team, Promotes a strong solidarity between real estate agents and branch offices through its Field Sales Representatives, Offers diverse product options effectively through digital channels such as the call center, internet and mobile banking, Concludes loan applications in the shortest time by means of enhancement projects carried out at every stage of the process, and focusing on customer satisfaction. Activities in 2012 Average monthly visits to increased by 28% and the website maintained its position as the most visited mortgage website of Turkey, due to projects carried out to increase interaction with customers via digital channels. Parallel to this success, Garanti Mortgage increased the total number of applications received via digital channels by 7% and the number of applications received via alone by 250%. As a result of work carried out in connection with 444 EVİM, the first mortgage call center in Turkey, established in April 2008, the proportion of customers applying for and receiving loans via this channel increased by 5.3% of total loans disbursed. Carrying out work on value appraisal/expertise within its organization since 2011, Garanti Mortgage increased the number of value appraisals completed during 2012 to 92,000, owing to the work it has completed so far. The field sales representative staff, who ensures rapid and efficient communication between Garanti Mortgage and real estate agents and developers, has been expanded. Thanks to the high performance of the team, the proportion of loans disbursed through real estate agents increased by 9.4%. 44

47 45 Garanti Mortgage continued its campaigns designed for various sectors and professional groups this year, and reached 169,350 mortgage loan customers in the aggregate as of Thanks to its collaboration with construction firms, Garanti Mortgage took part in almost 150 active housing projects, continuing to make loans available to customers wishing to pre-purchase homes from housing construction projects. Projections for 2013 Planning to closely monitor loan applications in 2013, Garanti Mortgage is collaborating with branch offices and aims to minimize waiting and service delivery periods. Furthermore, Garanti Mortgage aims to maintain its leadership in the efficiency of its digital channels and further outperform its competitors. Under its philosophy of efficient communication through each channel, Garanti Mortgage will organize seminars for real estate agents throughout the year with the aim of strengthening ties with real estate agents. Aiming at maintaining its position as the leading mortgage company in the sector, in 2013, by enhancing service quality through distinguished products and practices, Garanti Mortgage will reinforce its image as the most recognized bank in mortgage by combining its expertise with speed. Doğuş Group Annual Report 2012

48 Financial Services Garanti Technology Garanti Technology continues to lead the sector as a fully-functional IT Center, with its uninterrupted investments in state-of-the-art technology, continuously high-available transaction capability, infrastructure security, cost efficiency and energy saving, under the guidance of corporate governance and international quality standards. As a provider of services in information technology and creator of many firsts since 1981, Garanti Technology contributes a critical competitive edge to Garanti Bank and its subsidiaries, and to the other companies of the Doğuş Group with its innovative and creative products, services, applications and consultancy services. Garanti Technology continues to lead the sector as a fully-functional IT Center, with its uninterrupted investments in state-ofthe-art technology, continuously high-available transaction capability, infrastructure security, cost efficiency and energy saving, under the guidance of corporate governance and international quality standards. Activities in 2012 Garanti Technology not only invests in infrastructure but also integrates all technological innovations and enhancements with business processes. Having achieved a perfect harmony between technology and banking, the Garanti family is improving its processes, meeting the needs of its customers, ensuring operational efficiency and pioneering a number of innovations through the level of technology it has reached. Due to the systems developed so far, the employees of Garanti are able to see clearly which product is needed by which customer and which products will ensure customer loyalty. Garanti Technology successfully completed 3,520 projects in the field of Information Technology in The applications developed in 2012 which create the difference include: Personalized media, The New Corporate Internet Branch Office with faster transactions and personalisation features. Mobile finance applications, Integrated mobile solutions, System integrations, Integration of the regulations introduced by the new Turkish Law of Obligations with Retail, SME and Commercial Loan Processes, Integration of social security premium payment and instruction transactions on all channels with the new system of the Social Security Institution, Process optimizations, Infrastructure that enables the automation of correspondence with public authorities, The Proposal Evaluation Platform developed for commercial loan proposals to reduce paper consumption and physical circulation, An infrastructure which allows automated documentation and easy presentation of the basic banking products to new salary-customers, A set of equipment that enables instant execution of transactions by sales teams, Innovations in the use of biometric features for access to internal systems. 46

49 47 Major system and network projects realized in 2012 include: A new telephone infrastructure which increases the level of customer satisfaction and decreases the level of unanswered calls, A cutting-edge video communications infrastructure, with increased capacity and speed, The new zec12 systems that increase the transaction capacity of the mainframe by 25% and the total capacity by 19.5%, Average daily CICS transactions which increase from 220 million to 295 million, An infrastructure increasing the disc capacity in the mainframe and open systems environment by 55% and providing a shorter disc access time, on average, 1 ms for the mainframe and shorter than 5 ms for the open systems, Ensuring virtualization at the rate of 90% for Intel servers and 100% for Unix servers, Centralized identity verification application used to improve compliance and security, Ensuring centralized and secure management of mobile devices, Launching the new campaign management tool, Unica, Re-designing the Disaster Recovery infrastructure, so as to enhance the RPO (recovery point objective) and the RTO (recovery time objective). Projections for 2013 In 2013, Garanti Technology will continue to create critical competitive advantage through its innovative products, services and business applications and will provide online real-time, integrated, flexible and open solutions. Garanti Technology plans to offer improving services in the field of consolidated customer relations, personalized media and mobile banking. Doğuş Group Annual Report 2012

50 Automotive Power, sustainability, progress, Glory Orange and purple are the common components of all these expressions. Being the distributor of the world s leading brands that appeal to different target groups and offering the highest quality services, Doğuş Otomotiv constantly grows and outshines its competitors. 48

51 49 Doğuş Group Annual Report 2012

52 Automotive Financial Highlights Even though the automotive sector had a calmer year, performing below expectations, Doğuş Otomotiv, achieved sales volume growth of 12% compared to the previous year. Financial Highlights (TL thousand) Total Assets 1,219,008 1,499,369 1,905,092 2,222,852 Revenue 2,129,485 3,428,300 4,808,253 5,132,341 Cost (1,827,658) (2,943,411) (4,211,309) (4,418,927) Gross Profit Margin (%) EBITDA 96, , , ,181 EBITDA Margin (%) Total Assets (TL thousand) Revenue (TL thousand) ,219, ,129, ,499, ,428, ,905, ,808, ,222, ,132,341 50

53 51 Doğuş Otomotiv Having sold its one millionth vehicle in 2012, Doğuş Otomotiv managed to grow in a shrinking market - outperforming the sector and strengthening its position. Doğuş Otomotiv in 2012 Since 2011, the year of records for the automotive sector, the automotive market has shown a downtrend. A total of 777,761 passenger cars and light commercial vehicles were sold in 2012, signaling a shrinking of automotive market by 10.3% in these two segments compared to the previous year s figures. Despite the shrinkage, from a consolidated perspective, 2012 was a positive year for the automotive market following a year of sector records. One of the significant topics of the 2012 agenda was the Special Consumption Tax (SCT) increase imposed on small-engine passenger cars towards the year end. The tax increase did not have a deep impact on the sector. Similarly, its effect on 2013 is expected to be minor. Doğuş Group Annual Report 2012

54 Automotive Doğuş Otomotiv/Value Chain 2012 Replacement Plants and Used Vehicle Production Import and Distribution Retail Finance Other Investments After Sales Services (TR) Sales Total Vehicles Retail (Unit) Passenger Cars 61,331 81,720 96,958 Volkswagen 39,822 55,550 66,792 Audi 9,656 12,064 13,720 Porsche Bentley Lamborghini SEAT 5,113 6,059 5,811 Skoda 6,332 7,589 10,118 Light Commercial Vehicles 24,018 26,361 26,048 Volkswagen 24,018 26,361 26,048 Heavy Commercial Vehicles 3,501 4,318 2,557 Scania 2,500 2,929 1,701 Krone Meiller TOTAL 88, , ,563 52

55 53 Even though the automotive sector had a calmer year, performing below expectations, Doğuş Otomotiv did not decelerate in Having reached all its targets, the Company achieved sales volume growth of 12% compared to the previous year. Representing one of the most valuable brand portfolios of the world as a distributor, Doğuş Otomotiv benefited from this competitive edge and united its vision of providing innovative service beyond expectations and operating on a customeroriented basis, clearly reinforcing its position within the market throughout One noteworthy development in 2012 was Doğuş Otomotiv selling its one millionth vehicle. The Company s achievement was crowned with the World s Best Distributor award presented by Volkswagen in In 2012, Doğuş Otomotiv proved once again that it stands as the leading company of the Turkish automotive sector with: 125,563 vehicles (including heavy commercial vehicles) sold, Representation of 14 of the strongest automotive brands of the world, Over 80 different models offered to its customers in a wide product range, 17,000 used car sales, More than 2,000 employees, More than 500 customer contact points, A total vehicle park of more than 1 million vehicles. Sales Success Despite a shrinking market, a significant portion of the brands distributed by Doğuş Otomotiv grew and fortified their positions by reaching their sales targets. Volkswagen Passenger Car increased its sales in 2012 by 20.2% and completed the year with remarkable success. With effective product and communication strategies pursued throughout 2012, and with the help of the new model launches, Volkswagen Passenger Car increased its market share to 12% and thus became the secondhighest selling automobile brand in Turkey. Similarly, Audi grew by 14% compared to the previous year, with an all-time high figure of 13,720 units sold in Consequently, Audi s market share increased by 2.47%. Porsche increased its sales by 12% in With recently opened sales points, along with growth in after-sales services and effective marketing activities, Porsche broke a new sales record in 2012 with 497 units. Among 25 countries in Central and Eastern Europe, Porsche Turkey ranked third in sales volume. Bentley, another high end brand of Doğuş Otomotiv, achieved the position of the highest growing brand of the year. In the Automobile Distributors Association Sales and Communication Awards 2012 Gladiators contest, Bentley was presented with an award. Another brand that recorded significant accomplishments in 2012 is Skoda. With an increase of 33% in sales, Skoda reached 10,118 units. The brand repeated its worldwide achievement and outperformed the sector in Turkey. In 2012, the shrinkage in the market for light and heavy commercial vehicles was less severe than that for passenger cars market. However, commercial vehicle brands represented by Doğuş Otomotiv were only slightly affected by this unfavorable environment and performed remarkably well in Volkswagen Commercial Vehicles increased its share in the light commercial vehicles market to 11.8% and in the imported commercial vehicles market to 28.3%. Increasing its vehicle park to 21,701 units in 2012, Scania continued to create a difference with its new product alternatives and to be a preferred brand in both the on-road and off-road segments. Having stood among the most preferred brands in the Turkish market, Scania offered an important added value to the logistics sector. One of the leading semitrailer brands of Europe, Krone sold 674 units in 2012 and increased its market share to 11%, presenting an expansion of 2% compared to the previous year s figures. With this performance, Krone maintained its leadership in the imported cool liner trailer market. Thermo King, the world s leading cooling system brand, increased its sales in the Turkish market by 30% to reach a sales figure of 507 units in New Launches New model and engine alternatives offered to customers also contributed to the sales achievements of Volkswagen, which continuously improves itself and its technology with its vision of the world s most innovative automotive brand, launched its new Golf model at Autoshow İstanbul With this model, the brand increased its sales by 16.9% and reached a segment share of 12.9%. Meanwhile, Passat s new CC model included the 1.4 TSI 160 PS Tiptr DSG engine in its product range, and sales of this model expanded by 267%, presenting an outstanding success. Audi, which has notably widened its product range in recent years, organized launches for its Q3, A1 Sportback and A3 models in Porsche s legendary 911 model range, renewed in early 2012, was enriched with the Carrera 4S model and exhibited for the first time at Autoshow İstanbul With its new showroom which was opened on 4 May 2012, Porsche increased its sales points to seven throughout Turkey. In 2012, SEAT performed remarkably well with the New Ibiza model family which was renewed in June. The Ibiza model family, comprised of Ibiza SportCoupé, Ibiza 5-door and Sportourer versions, became the best selling model in 2012 with 2,886 units and 50% of the market share. New Leon and New Toledo models, displayed in Autoshow İstanbul 2012 in November, have played a significant role in improving the brand image and raising brand awareness. In 2012, Skoda offered its Citigo and Rapid models to customers. Offering smart solutions in addition to its in-city daily use qualities, Yeti, Skoda s first vehicle in the SUV segment, included the 1.6 TDI engine alternative for its GreenLine series. Volkswagen Passenger Cars performed impressively in the pick-up segment which it entered in 2011 with Amarok, ranking Doğuş Group Annual Report 2012

56 Automotive first in market share with 20.3% in Amarok, which has become the market leader in a very short time, launched its automatic transmission model in The New Caddy Sportline, a new member of Volkswagen Commercial Vehicles Caddy models which has been selling successfully throughout the world, was also launched in the Turkish market in With their innovative products and meeting the needs of the market, Scania, Krone and Meiller displayed at the IAA Commercial Vehicles Fair held in Hannover in After-Sales Services Attaching great importance to After-Sales Services, a dominant factor in maintaining the continuity of customer satisfaction, Doğuş Otomotiv continues to enhance itself. The successful results of, and the awards presented to, the brands under the Doğuş Otomotiv roof stand as evidence of the Company s determination for self-improvement in this area. Volkswagen Passenger After-Sales Services, expanded its service network with the Authorized Service Center it opened in Mardin in 2012, thereby increasing its Authorized Service points in Turkey to 69. In the 2012 Service Quality Award competition, the fifth such event organized by Volkswagen AG, three Volkswagen authorized service providers from Turkey ranked among the top 100 authorized service providers in Europe. In 2012, spare parts sales revenue grew by 25% while labor grew by 21%. In 2012, having increased its After-Sales Services revenue by 24%, Audi achieved a customer loyalty rate of 78%, an indicator of exemplary success in the premium segment in Europe. The scores recorded in the CSS survey, conducted by Audi AG to assess customer satisfaction during sales and in after-sales service, reached all-time highs in At the Audi Twin Cup After-Sales Competition, Doğuş Otomotiv Audi demonstrated that its service quality is superior to world standards when it ranked second among all countries in service and technical areas. Moreover, the Company stood among the top three in the IACS survey conducted by Audi AG. In a 2012 automobile sector report prepared by Şikayet Var website, Doğuş Otomotiv Audi was selected as the best performing brand in respect of customer complaint management. With the service campaigns it launched in 2012, Porsche increased its Authorized Service customer loyalty rate to 79% and its customer satisfaction survey score to 108. Porsche launched its Vehicle Receiving ipad project in The brand also expanded its accessory sales revenue by three. In the After-Sales Services area, the brand s Authorized Service work orders increased by 35% compared to 2011 figures. Having expanded its total revenue by 56%, Porsche achieved record growth in After-Sales Services. A similar performance was observed in SEAT. The brand expanded its vehicle park by 10% in With the service campaigns launched in connection with its vehicle park, SEAT increased its Authorized Service customer loyalty rate to 60% and its customer satisfaction survey score to 97. With its 24-hour customer hotline, Scania responded to its customers in Turkey and Europe by employing operators capable of speaking the language of any customer calling in. With 24 units of emergency roadside assistance vehicles, Scania offered emergency assistance services to customers in need. In the 21 Scania Authorized Services throughout Turkey, a total of 74,158 work orders were generated in With the aim of meeting the needs of its growing vehicle park and satisfying expectations created by the openings of the Krone Doğuş Trailer factory in Tire, İzmir, and the Meiller Doğuş Tipper factory in Sakarya, Krone and Meiller restructured their After-Sales Services. This restructuring, which covered the entire Authorized Service network and the spare parts operations of the brands, is expected to improve customer satisfaction and service quality in the long-run. D-Auto Suisse Excellent Service and Record Growth in Switzerland D-Auto Suisse opened as a Porsche dealer in Lausanne, Switzerland, in 2009 and achieved an all-time high of 184 new vehicles sold in The center serviced a total of 6,337 vehicles in Expertly bringing together Porsche standards and Turkish hospitality, D-Auto Suisse remains one step ahead of its rivals in the fiercely competitive Swiss market. DOD Leader of the Used-Car Market The first and biggest used-car corporate brand in Turkey and a symbol of trust in the sector since 1999, DOD has blazed trails in the corporate used car sector with the new projects it has designed. Operating with the mission of becoming the largest corporate company, both virtually and physically, in used-car trading, DOD outperformed its sales record of the previous year and realized total sales of 17,000 units in Focusing on digital marketing activities throughout 2012, DOD pioneered many achievements in various media of the digital world, particularly in social media, and stood out among those companies using digital platforms most efficiently. Among the social media innovations DOD launched, its Online Auction application via Facebook is a first in the world. DOD, which also sells older vehicles from fleet leasing services, signed new contracts in this area in 2012 and increased its sales in fleet vehicles by 51%. DOD supplied a total of 1,513 units to Authorized Dealers. LeasePlan Operational Leasing Functioning in the operational leasing field, LeasePlan Turkey obtained remarkable results in its fifth year. Despite the 54

57 55 stagnancy of the sector, LeasePlan Turkey grew beyond the market and expanded its fleet by 17%, raising its total vehicle portfolio to 9,427 units. TÜVTÜRK The Guarantee of Safe Driving Making a significant contribution to traffic safety by maintaining vehicle safety, TÜVTÜRK has grown in all business areas and increased its turnover by 15%. With an expansion of 3% compared to the previous year s figures, TÜVTÜRK handled periodic inspections of 6.3 million vehicles and measured emission rates of 2 million vehicles in Having expanded its service network in 2012, TÜVTÜRK opened stations in Antalya-Kaş, Suşehri-Sivas, İstanbul-Tuzla and Şanlıurfa-Birecik thereby reaching 196 permanent stations. In 2012, TÜVTÜRK began opening special stations for motorcycles at easily accessible spots in city centers. Similarly, the number of mobile stations handling emission rate measurements has been expanded from 11 to 67. Having completed its fifth year in 2012, TÜVTÜRK is proud to have achieved a customer satisfaction level of 90% and brand awareness of 80%. Manufacturing Plants The Meiller Doğuş Tipper Plant in Adapazarı which Doğuş Otomotiv entered into service in 2008 realized a sales volume of 382 units in the contracting market of The plant delivered its 1,500 th tipper to a customer in Turkey. Meanwhile, the Krone Doğuş Trailer plant, constructed in Tire, İzmir, pursuant to the manufacturing agreement signed between Doğuş Otomotiv and Krone in 2008, began its operations in A total of 35 million has been invested in the plant. The official opening of the plant was scheduled for the first quarter of Corporate Social Responsibility Employing the principle of being present in all the links of the automotive value chain, Doğuş Otomotiv continued its social responsibility initiatives in 2012 with two aims: 1) managing and minimizing the effects of its operations, and 2) sharing its solutions with all shareholders. A pioneer in its sector, Doğuş Otomotiv prepared its first Corporate Social Responsibility Report in Sustaining its leadership position in this area, the Company regularly continues reporting and maintains its efforts concerning transparency and accountability the two keystones of corporate social responsibility. Focused on expanding its corporate social responsibility activities and improving on its philosophy of doing business responsibly within the value chain, Doğuş Otomotiv initiated awareness activities in three pilot companies selected from among authorized dealers and service providers. The performances of these three have been included in the 2012 Corporate Responsibility Report. Within this scope, training was offered at authorized dealers and service providers in İstanbul, Bursa and Kayseri, all of which received consultancy services and suggestions for improving their performances with regard to corporate responsibility activities. Being a first for the sector in Turkey, International Code of Ethics studies were initiated in 2011 and completed in The Doğuş Otomotiv Code of Ethics is available to the public via the Company s official website. Within the framework of its civic duties, Doğuş Otomotiv believes that raising awareness about traffic safety, one of the key elements of social participation, is a basic responsibility. Hence, with its Traffic is Life! project, Doğuş Otomotiv aims to take a leading role in cultivating mutual respect, responsible behavior, and respect for traffic regulations. The Corporate Social Responsibility Association of Turkey presented the Jury Incentive Award to Doğuş Otomotiv for its educational activities within the Traffic is Life! project, recognizing the Company as a leader in promoting corporate responsibility and raising public awareness. Moreover, Traffic is Life! was selected as the Social Responsibility Project of the Year in the 2012 Automotive Distributors Association/ODD Communication and Sales Competition while Doğuş Otomotiv was presented with the Exemplary Education Application of Corporate Social Responsibility of the Year award. Other Awards In 2012, Doğuş Otomotiv and its brands received several awards for sales, after-sales services, customer satisfaction, and communications. For instance, in the Second SEAT International After-Sales Conference held in Portugal, SEAT Turkey was presented with the Original Parts Worldwide award, the criteria of which were the spare part and accessory performances of the brand. In the traditional Best Commercial Vehicles and Brands competition, held for the 16 th year and organized by German magazines specializing in the commercial vehicle sector, Meiller was once more selected as the Best Tipper brand of 2012 and thus became the holder of this title for the eighth consecutive year. Due to its achievements in the sales and service areas, Thermo King Turkey was awarded the Platinum Sales & Platinum Service Supplier by Original Equipment Manufacturer (OEM) in Furthermore, Volkswagen Passenger Car won the Crystal Apple award for its communications activities in In addition to the brands it distributes, Doğuş Otomotiv always ranks high in the reputation surveys regularly announced by leading institutions and publications each year. In 2012, Doğuş Otomotiv ranked first in the Most Appreciated Company in the Automotive Sector category in Capital Magazine s survey. In the scope of dutifully implementing corporate governance principles, Doğuş Otomotiv raised its corporate rating to 8.63 in 2012, up from 7.80 in 2011, and was selected as the Company of Highest Improvement in Corporate Governance Rating Score in Doğuş Group Annual Report 2012

58 Construction Prestige, experience and safety These expressions are mostly reflected by turquoise and yellow colors. Operating in the construction sector for over 60 years, Doğuş Construction represents experience and safety with its undertaken prestigious projects. 56

59 57 Doğuş Group Annual Report 2012

60 Construction Financial Highlights Doğuş Construction has completed 170 sizable projects worth approximately US$ 12 billion until today. Currently, the total value of projects in which Doğuş is involved is US$ 4,633 million, and Doğuş s share in these projects is US$ 3,684 million. Financial Highlights (TL thousand) Total Assets 1,279,349 1,246,622 1,161,899 1,141,000 Revenue 706, , , ,685 Cost (633,784) (640,096) (774,296) (779,593) Gross Profit Margin (%) EBITDA 68,941 91, ,587 75,288 EBITDA Margin (%) Total Assets (TL thousand) Revenue (TL thousand) ,279, , ,246, , ,161, , ,141, ,685 58

61 59 Doğuş Construction For more than 60 years, Doğuş Construction has combined its experience and expertise with modern technologies to successfully complete several infrastructure and superstructure projects in Turkey and abroad. Doğuş Construction is one of the leading companies in its sector due to its mega project perspective, its infrastructure and superstructure projects undertaken not only in Turkey but also abroad. Doğuş Construction which has been ranked among the most reputable construction companies since its establishment in 1950, has completed 170 sizable projects worth approximately US$ 12 billion. The works performed so far include 20 dams and HEPPs, with a total electricity production capacity of 3,000 megawatts, 1,235 km of roads including 415 km of motorways, 2,000,000 m 2 of building construction, infrastructure works, 35,000 m of bridges, viaducts and passages, more than 116,000 m of tunnels and diversion tunnels, ports, marinas, irrigation projects, sewerage systems, office buildings, shopping and leisure centers, residential and industrial buildings. Currently, the total value of projects in which Doğuş is involved is US$ 4,633 million, and Doğuş s share in these projects is US$ 3,684 million. Doğuş takes part in the execution of various prestigious rail mass transportation system and rail projects individually and as part of joint ventures or consortia established with the participation of international construction companies in local and international markets. Doğuş values long-term strategic partnership and alliances with reputable global companies in the industry to share the risks in the projects and to extend its field of activities. Doğuş s strategy involves growing in the current market in which it is operational and seeking business opportunities within potential markets to ensure sustainability, thereby maximizing profitability while maintaining liquidity and minimizing risks. As part of its vision to diversify its portfolio, Doğuş has added airport projects to its portfolio and has an expectancy to grow in this sector. Metro, light rail transit and rail systems, building projects, environmental and industrial projects, ports and marine structures are also areas in which Doğuş seeks business opportunities for expansion. Ongoing Projects As of Expected Projects Values (US$ million) Doğuş s Share (US$ million) Domestic Projects 3,433 2,762 Boyabat Dam and HEPP Otogar-Kirazlı-Başakşehir Metro Mass Transportation System and Electromechanical Works 1, Artvin Dam and HEPP Üsküdar-Ümraniye-Çekmeköy Metro Construction and Electromechanical Works Konya-Akşehir-Afyon Road Construction International Projects 1, Bulgaria Sofia Metro Extension Project-Route II, LOT I Ukraine Boryspil State International Airport Development Project Libya Sirte University Complex Construction of Section I Sirte University Complex Construction of Library Total 4,633 3,684 Doğuş Group Annual Report 2012

62 Construction Doğuş Construction s current domestic and international projects are as follows: Domestic Projects Boyabat Dam and HEPP Otogar-Kirazlı-Başakşehir Metro Mass Transportation System and E&M Works Artvin Dam and HEPP Üsküdar-Ümraniye-Çekmeköy Metro Construction and E&M Works Konya-Akşehir-Afyon Road Construction The Boyabat Dam and HEPP project is being constructed as a concrete dam on the Kızılırmak River by Doğuş Construction for energy generation. With an installed capacity of 513 MW, at a height of 195 meters from the foundation to the crest, and at a length of 262 meters, this dam is planned to generate 1.5 billion kwh per year when it is fully commissioned. The Otogar-Kirazlı-Başakşehir Metro is a mega mass transportation project that covers construction and electromechanical works and the delivery of rolling stock. The single-track length of the 16 station twin-tunnel system will be 47.4 km in total. It starts from the intercity bus terminal (Otogar) and extends through Bağcılar, Kirazlı and then divides into two branches and reaches to the Olympic Village as well as the residential area of Başakşehir. It constitutes a considerable part of İstanbul s railway systems network. Four Tunnel Boring Machines (TBM) were utilized in the construction of the twin tunnels; the circular cross-section of a TBM is 6.5 meters while the New Austrian Tunneling Method (NATM) is 7.8 meters. This project is executed by a joint venture in which Doğuş has 50% partnership. Artvin Dam and HEPP, an arch concrete gravity dam on the Çoruh River to generate energy, was awarded to Doğuş Construction in 2010 with an actual construction commencing in the first quarter of The power generation capacity of the dam is 1 billion kwh per year. The Dam has an installed capacity of 332 MW, a height of 180 meters from foundation to crest, and a length of 278 meters. Doğuş has been awarded a new project: the construction and electromechanical works of İstanbul Üsküdar-Ümraniye Çekmeköy Metro Project, a mass transportation project by İstanbul Metropolitan Municipality. Within the scope of the works, there is going to be 17 km metro tunnel, 2.7 km tunnel connection to depot area and 16 station works. This project was awarded to Doğuş Construction in 2011 and the actual construction commenced in the first quarter of The work related to the construction of Konya-Akşehir-Afyon road is a new project that was awarded to Doğuş in Doğuş commenced the construction locally in the second quarter of Bridges and various engineering structures shall also be constructed within the body of the road construction project with a total length of 46.7 km. International Projects Sofia Metro Extension Project Route II, LOT I Boryspil State International Airport Development Project Libya-Sirte University Complex, Construction of Section 1 Libya-Sirte University Complex, Construction of Administrative Building and Central Library Doğuş Construction undertook the 3.8 km Sofia Metro Extension Project LOT 1 section in Bulgaria. The project comprises of a tunnel with an inner diameter of 8.43 meters and four metro stations. In Ukraine, Doğuş Construction is involved in the construction of Kiev Boryspil State International Airport which involves 60

63 61 185,000 m 2 of apron pavement, 60,000 m 2 of roads and a surface car park, 1.3 km of viaduct and an international passenger terminal building of 83,500 m 2. The project is undertaken by a joint venture led by Doğuş Construction. With numerous infrastructure and superstructure works completed in Libya in the past, Doğuş Construction has been awarded the construction contract for the first phase of the Sirte University Complex. The Complex includes an area of 218,000 m 2 and encompasses five service buildings and nine faculty buildings. The Sirte University Complex project also includes the construction of two administrative buildings and a central library. These incorporate a total area of 26,400 m : Delivering the quality and expanding the core competencies In 2012, the whole industry recovered after the liquidity crisis sparked by mortgage foreclosures and constraints in the loan market. However, the industry has been significantly affected in a negative way by the Arab Spring; specifically starting from 2011 the uprising in Libya. All the projects in Libya have been temporarily suspended and companies operating in Libya were forced to seek alternative markets and sectors. In this respect, Doğuş Construction started to focus mainly on selective countries in the Gulf Cooperation Council (GCC). Doğuş Construction was awarded the construction contract of the Üsküdar Ümraniye Çekmeköy Metro Project as the sole contractor. With this project, Doğuş has strengthened its position once more as being one of the leading companies in the metro construction business line. sound and sustainable profitability. By increasing its share in the sector, Doğuş Construction gained a more dynamic structure and continues its progress without interruption towards achieving its goal of staying stable in the markets where it is operational. Making a considerable contribution to employment Thanks to engineering applications requiring different areas of expertise, Doğuş Construction offers a wide range of career opportunities to employees in various locations and within different cultures, enabling them to construct large scaled projects in domestic as well as global market. The Company currently employs around 5,000 people in domestic and international projects. The competencies of organizational commitment, desire to succeed, team work, eagerness to progress and to change within the perspective of quality orientation and self-reliance among Doğuş Construction s employees come to the forefront as the features integral to their overall success. Believing that the success of the company solely depends on the success of its people, Doğuş Construction creates a trusted working environment to provide an opportunity for each member to improve their technical, personal and executive abilities. Quality, Occupational Health and Safety, Environment Doğuş Construction adheres to Quality, Occupational Health and Safety as well as to Environmental Management Systems that were designed in the light of the best global standards. All of these three management systems are certified by the LRQA (Lloyd s Register). Utilizing its mega project approach and its long-standing experience, the Company continued to grow on the basis of Doğuş Group Annual Report 2012

64 Construction Risk Management The Board of Doğuş Construction established a Risk Committee in 2009 to better oversee risks and to implement the enterprise-wide risk management process within the Construction Group. The Risk Committee is accountable to the Board and advises the Board on risk management, aiming to better oversee risks in a more systematic manner and foster a risk culture within the Company. The senior management of the Company has the overall responsibility for the establishment and oversight of the risk management framework. The risk management vision of Doğuş Construction is defined as identifying and monitoring risks and opportunities that would affect corporate objectives and managing uncertainties in the most effective and efficient manner and in line with shareholders risk appetite and proactivity in implementing the most appropriate solutions. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and in Doğuş Construction s activities. Within the scope of the enterprise s risk management process, a well-defined risk reporting structure is set and integrated with each department s function and ongoing projects. Internal Audit The Audit Committee supervises as to whether the audits are carried on in the most effective and efficient manner within the Company and serve to the Company s objectives. Audit works that are performed in the framework of an annual plan are being carried on according to the international audit standards and generally accepted principles. Determinations that are established according to work results, incompetencies and improvement suggestions/measures are being submitted to the Audit Committee of Doğuş Construction for information and assessment. The Risk and Audit Committee of Doğuş Construction convene once in every two months to review the critical risks at the company and project level with high impact and probability and consider actions and measures to be taken to minimize such risks. Cost Management as a Sub-section of Doğuş Information System (DIS) Doğuş Construction has been using its Cost Management as a sub-section of Doğuş Information System since Cost Management enables not only the activity and resource based cost but also the productivity analysis at all levels within the Company. It places Doğuş Construction in a special place with regards to the assessment and measurement of profitability and performance in respect of internal processes while bringing improvements in productivity indicators. Within Cost Management; planned and actual data are compared to real-time tables as well as graphical and interactive chart reports are produced for the evaluation of the performance of ongoing projects. 62

65 63 Teknik Mühendislik ve Müşavirlik A.Ş. Established in 1984 within Doğuş Construction Group, Teknik Mühendislik offers thorough engineering, consultancy and technical services. Teknik Mühendislik is involved in projects including motorways, highways, railways, dams, hydroelectric power plants, irrigation projects, water and sewerage system projects and industrial plants. It provides: All engineering, consultancy and technical services, Assessments on planning and feasibility, technical and economical surveys, research and laboratory testing, drilling and similar studies, assistance in finding more rational and advanced methods and implementation of such for drafts, Business Management Services. Teknik Mühendislik continues to complete each project it has undertaken with its experienced and qualified key personnel as well as with its technological equipment since its establishment. Doğuş Group Annual Report 2012

66 Construction Ayson Geoteknik ve Deniz İnşaat A.Ş. As a Doğuş Construction Group company specializing in geotechnical works, Ayson has provided top level technical service to many local and international enterprises since its establishment in The Company was first established as Doğuş Sondaj ve Araştırma A.Ş. in 1977 to serve for the soil survey and grouting works in the large dam projects (Hasan Uğurlu HEPP, Suat Uğurlu HEPP, Aslantaş HEPP) which Doğuş Construction had then undertaken. In 1999, the name was changed to Ayson Sondaj, Araştırma ve İnşaat A.Ş. and in 2008 to Ayson Geoteknik ve Deniz İnşaat A.Ş. by adding construction and marine works in the scope of works respectively. Ayson s Quality and HSE Policies In 2009, Ayson established an integrated management system with Quality, Occupational Health and Safety and Environmental Management Systems and earned certificates from the LRQA. These management systems were established utilizing ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007 standards and managed by a highly qualified technical staff with 36 years of experience. Quality Policy Directing customer requests and conforming to these requests at maximum level, Maintaining the communication between customers and sub-contractors without any mistake by defining the communication channels between them, Completing and delivering the projects on schedule and in conformity with the work program and with the technical specifications, Using the modern, required and valid techniques, technology, knowledge and management systems, and for this purpose not to escape from necessary researches and investments, Conforming to the legislation and obligatory standards of the country worked in, To maintain that the personnel feel happy and proud to be working in Ayson, To make the improvement studies which are the results of work processes analysis natural behavior of the employees, To be a director as to develop sub-contractors while establishing and applying control and follow up systems for maintaining occupational health and safety and environmental management criteria, To contribute the growth of earned dignity which is gathered within long years by taking all actions with the responsibility of being an Ayson employee, Adopting to exceed customer s expectations as the basic policy; to apply an integrated management system to reach the stated targets actively and efficiently, and to use required resources for continuously improving the integrated management system. 64

67 65 HSE Policy Compliance with the current occupational health and safety and environmental management legislation and regulations of the country worked in, Recognition of continual improvement as the basic principle in all operations, Paying attention to the views and expectations of all interested parties including employers, in implementation of occupational health and safety and environmental management systems, Attributing significance to the recycling of waste and thus providing the processing and evaluation of waste in source, Avoiding over-consumption of energy and natural resources, Developing and submission to employers the projects with optimum use of natural resources and minimum adverse impacts to the environment during execution and commissioning, Prevention of hazardous events which can lead to accidents and elimination of the existing hazardous surroundings, Being prepared for emergency situations, Ensuring the subcontractor s observance of legislation and the procedures and principles of Ayson HSE program. Ayson specializes in all kinds of geotechnical contracting works, grouting works, marine works and NATM tunneling. Ayson s fields of activity include all types of bored and precast concrete piles, prefabricated vertical drains (wick drains), sand drains, jet grout columns, stone columns, impervious walls, retaining walls, pre-stressed anchoring with steel strands, sheet piling, bolting, soil nails, grouting works, shot-creting, exploratory drilling, water well drilling, drainage wells, foundation explorations, soil improvement works, deep excavation supporting systems, ventilation shafts, and excavation work, including preliminary studies for all of these operations and evaluation through in-situ tests. The strategic priorities and targets in the sector are having a gradual increase in the domestic market share in short-term and operating in large overseas projects in long-term. Ayson also works to increase the part in the HEPP projects especially in grouting and tunneling works both locally and internationally. Ayson also offers a wide range marine structure services, including jetties, dolphins, ferry terminal ramps and breakwaters. Recently, the Company added viaduct construction, steel superstructure construction and tunnel construction to its field of activities. Ayson has successfully completed more than 76,290 tons of grouting, 1,169,460 meters of bored piling and 529,770 meters of anchoring work in projects it has undertaken so far. Doğuş Group Annual Report 2012

68 Construction Ayson has provided employment to 702 people directly and 464 people indirectly (sub-contractors) by the projects it has undertaken. Company s Position in the Sector Ayson, a Doğuş Group company and one of the pioneer geotechnical contracting companies in Turkey, provides the highest-quality services to local and international companies. Ayson has a large and strong machinery and equipment park, a highly experienced and dedicated staff and innovative management. It has diversified the services provided and increased the revenue via its expertise and commitment to its customers. In addition, Ayson is an institutional and a reliable company which fulfills all its commitments in the same quality. Some Major Projects in Turkey and Overseas are as Follows Ayson started to work in the Metro line by implementing NATM Tunnel Construction and Shoring Works of the stations in the Üsküdar-Ümraniye-Çekmeköy Metro Project in İstanbul. Ayson has completed work on four stations for the Sofia Metro Extension Project LOT 1 Section, which is 3.8 kilometers in length, in Bulgaria. The project consisted of diaphragm walls, pre-stressed anchor constructions, bored pile constructions and other relevant geotechnical works. In Ukraine, Ayson has served as geotechnical supervisor for the Kiev Boryspil State International Airport Project made up of 22,000 meters of bored pile construction, 12 nos static axial compressive load tests, 14 nos high-strain integrity tests and 505 nos low-strain integrity tests. Future Plans Ayson aims to increase the amount of grouting and tunneling projects in its portfolio and act as a strategic partner to one of the leading investors in Turkey in the short-term. Ayson also works to expand its experience abroad, competing and succeeding in the international arena in the long-term, especially for potential marine, grouting and tunneling projects. Currently, the Company is pursuing projects in Turkey and GCC countries. Ayson began serving Enerjisa in 2011, first by undertaking the grouting works in Suçatı HEPP, an RCC dam which had already been in service for a while, and secondly by executing the bored piling works in Adana Kavşakbendi HEPP. It continued in 2012 and early 2013 by undertaking the grouting work in Kavşakbendi HEPP and is still executing the grouting works in Kandil Dam and HEPP in Maraş. Within the scope of the Boyabat Dam and HEPP being constructed as a concrete dam on the Kızılırmak River, Ayson has executed grouting works of 10,800 meters in downstream cofferdam and 210,230 meters in galleries in total. Within the scope of Artvin Dam and HEPP, an arch concrete gravity dam on the Çoruh River, Ayson has undertaken all the derivation, variant and relocation tunnel construction works. The tunnels are 18 km long in total, and 1,553,402 m 3 excavation and 270,000 m 3 concreting works are being executed. Ayson also has undertaken bored piling, grouting and soil investigation works in the same project. For the first time in Turkey, Ayson has completed the cutoff wall under the upstream and downstream cofferdams in Artvin Dam and HEPP Project by constructing secant bored piles which are 120 cm in diameter, 50 m in length and 6,065 m in total length, rather than the general application of diaphragm wall. 66

69 67 Ayson Geoteknik ve Deniz İnşaat A.Ş. Projects in Progress Project Name and Project Project Estimated Description of Works Client Location Value (US$) Start Date Completion Date Boyabat Dam Project Grouting, Piling Works, Tunnelling Works Doğuş Cons. Co. Boyabat 31,175, Artvin Dam Project Tunnel Construction, Site Invertigation, Grouting, Piling Works Doğuş Cons. Co. Artvin 135,193, Artvin Dam Project Downstream and Upstream Coffer Dam Cut Off Wall Doğuş Cons. Co. Artvin 2,257, Doğançay Regulator and Hepp Construction, Hydromechanical Project Extansiometer, Dywidag Rods and Drainage Drilling Ataç Cons. Co. Adana 128, Kavşakbendi Dam Project Piling Works Age Cons. Co. Adana 64, Kavşakbendi Dam Project Grouting Works Age Cons. Co. Adana 5,450, İkisu Dam and HEPP Project Site Investigation Works IC İçtaş Giresun 265, Ayhan Şahenk Niğde University, Faculty of Agricultural Sciences and Teknolojileri Building Construction Piling Works Doğuş Turizm Niğde 99, Kandil Dam Project Grouting Works Yüksel Cons. Co. Maraş 3,685, Construction and Elektromechanical Works Üsküdar - Ümraniye - Çekmeköy Metro Piling, Tunnel, Excavation, Shaft, Anchoring Works Doğuş Cons. Co. İstanbul 44,599, Total Project Value 222,919, Doğuş Group Annual Report 2012

70 Media Intelligence, entertainment and trust These are the most efficient three words that describe the blue color. Informing and entertaining at the same time with its comprehensive content, Doğuş Media Group is also the most attractive color of the Turkish media with its unique style. 68

71 69 Doğuş Group Annual Report 2012

72 Media Financial Highlights The total advertising market increased by 6.5% in 2012, and Doğuş Media Group increased its share in active markets by 18.3%. The Group s market share in 2012 was 12.9% of the total ad market. Financial Highlights (TL thousand) Total Assets 471, ,659 1,505,103 1,549,105 Revenue 182, , , ,242 Cost (178,853) (224,873) (298,639) (700,147) Gross Profit Margin (%) (6.4) (16.8) EBITDA (57,802) (58,246) (152,271) (249,190) EBITDA Margin (%) (31.6) (22.9) (54.2) (41.6) Total Assets (TL thousand) Revenue (TL thousand) , , , , ,505, , ,549, ,242 70

73 71 Doğuş Media Group Operating in all branches of media and consistently strengthening its presence by following the latest trends, Doğuş Media Group reaches millions of people through its innovative, informative and entertaining broadcasts on its TV channels, radio stations and web portals, as well as through its outstanding periodicals and books. Media Group Market Shares Doğuş Media Group s vision is to become the world s best-known Turkish media and entertainment company. From TV and Internet to radio and magazines, Doğuş Media Group has made a name with its prestigious and qualified publications. The Group aims to cater to the needs of consumers by following and supporting developments and innovations in technology and media. TV Channels % % % % Doğuş Media Group directs and influences the Turkish media sector with its innovations and successful applications. The success of Turkey s first news channel, NTV, heralded a new era of thematic channels in Turkey. Now, with CNBC-e Radio Stations % % % % Magazine % % % % Internet % % % 2.8% Doğuş Group Annual Report 2012

74 Media offering finance and economy news during the day and international series and movies at night, the thematic TV channel trend has gained pace. CNBC-e is not only Turkey s first financial channel but also the first hybrid TV channel offering two different kinds of programming in the same day. The Media Group has widened its audience profile by acquiring Turkey s first private mainstream entertainment channel, Star TV, in Doğuş Media Group has made significant progress with created/acquired brands and has built upon global alliances with partners such as CNBC, National Geographic, Virgin Radio and Condé Nast / Vogue. The Group has broadened its operations from TV to magazines, radios, digital and print media, and it has become the leading media organization providing thematic content to the public. With 1,425 employees (944 male and 481 female), Doğuş Media Group currently is one of the largest companies in the media industry. Doğuş Media Group fosters public trust with its professionalism and quality-focused business dealings. The sense of belonging it creates for consumers also gives rise to expectations of continuous progress and distinction. The close bonds developed with consumers by Doğuş Media Group also have had an impact on advertisers, leading them to prefer the Media Group s brands for promotions. Always staying one step ahead in its advertising practices, Doğuş Media Group generates tailored solutions for customers who wish to be associated with the Media Group s brand equity and to differentiate themselves from the competition. Advertisers are offered various media solutions and a high level of efficiency. Doğuş Media Group offers a wide variety of high quality media including not only television, but also magazines, radio, various Internet portals and more. Thus, its is taking part from the budgets of advertisers for several segments which are an advantage for the Group. Within the entertainment sector, television is preferred most by advertisers. TV ad sales constituted 57.6% of Turkey s total advertising market in 2012, and the entertainment sector represented 81% of the TV ad market in Turkey. With the integration of Star TV, the Media Group also began to meet the expectations of advertisers in the entertainment sector. Activities in 2012 Doğuş Media Group expanded its portfolio in 2012 with the launch of GQ Türkiye magazine, Tvyo, a premium video on demand portal and cnbce.com, an economy portal. The total advertising market increased by 6.5% in 2012, and Doğuş Media Group increased its share in active markets by 18.3%. The Group s market share in 2012 was 12.9% of the total ad market. The TV segment increased its market share to 20.3% as a result of the acquisition of Star TV. The Group s radio stations increased their market share to 23.7%, magazines increased to 20.5%, and the Internet segment increased to nearly 2.8% in Technological Infrastructure The uplink system that enables satellite distribution of Doğuş Media Group s TV and radio programming consists of eight live-broadcast vehicles four in İstanbul, three in Ankara and one in Diyarbakır. The Group has a total of 171 NTV transmitters, two in the Turkish Republic of Northern Cyprus, 206 Star transmitters, two in the Turkish Republic of Northern Cyprus, 52 CNBC-e transmitters, 112 NTV Spor transmitters, 39 NTV Radio transmitters, 36 Kral FM transmitters, 31 Virgin Radio transmitters, 16 Kral Pop Radio transmitters and one transmitter for each; NTV Spor Radio, Capital Radio, Radio Eksen and Radio Voyage. Star TV HD broadcasts on D-Smart platform whereas NTV Spor HD broadcasts on Digiturk. Awards Doğuş Media Group has been honored as the recipient of 835 awards between 2001 and 2012 for its broadcasts and social responsibility campaigns. Of these awards earned during 2012, a total of 75 were granted by various ministries, organizations, associations and foundations, professional chambers, universities and high schools. Future Plans Doğuş Media Group s vision is to become the world s best-known Turkish media and entertainment company. 72

75 73 Doğuş Media Group - Brands TV CHANNELS NTV In 1996, NTV began broadcasting the first 24-hour news channel in Turkey. In January 1999, it became a member of Doğuş Media Group family. The success of NTV changed the Turkish media industry and started the era of thematic TV channels. NTV primarily broadcasts national and global news as well as quality documentaries and programs on economy, culture and arts, lifestyle, and sports. NTV aims to bring accurate news and analysis to its audience without interruption and without bias. The quality of its content, along with its impartial editorial approach, has made NTV a prestigious brand and a synonymous with reliable news. NTV s broadcasts on health, education, and the environment, along with other special projects, are concrete examples of its social responsibility approach. In addition to NTV s Head Office in İstanbul, the latest developments in Turkey are also monitored by NTV from its offices in Ankara, İzmir and Diyarbakır. Reporters and news agencies scour the entire country for the latest happenings. For international news, NTV relies mainly on its offices in Brussels and New York; reporters in major cities including Washington D.C., Paris, Milan, Strasbourg, Berlin, Athens, Lefkosia, Baghdad and Tehran, but also on well-known global news agencies such as Reuters, ENEX and APTN. Star Star TV began broadcasting under the name of Magic Box in May 1990 in Liechtenstein. In September 1990 with the German satellite, Eutelsat, it started its official broadcasting and then changed its name to Interstar in 1992 before finally becoming Star TV. A new era began when Star TV joined Doğuş Media Group in November With its experienced professional team and innovative vision, the Group nurtured and renewed Star s image, design, and content. Star s mission has been entertainment for everyone and the Channel has always had a colorful and intimate brand perception. Adhering to this mission, Doğuş Media Group enhanced this objective as high quality entertainment for everyone. The Group aims to raise the standards of Turkish TV networks with Star. CNBC-e CNBC-e is an example of the successful fusion of the economy and entertainment under the same brand. It was established on 16 October 2000 as a result of cooperation between the world s leading business channel, CNBC, and the Group s entertainment channel, Canal e. CNBC-e has two different programming formats: its daytime format comes from American channel CNBC while its content is derived from Doğuş Media Group. During the day, CNBC-e targets business professionals and individual investors with its real-time access to economic news and market data. The evening lineup sees CNBC-e become an entertainment channel offering award-winning films, worldwide popular TV series, dramas and important events, all in original languages with Turkish subtitles. CNBC-e cooperates with the giants of the industry such as HBO, WB, MGM, Paramount, Buena Vista, Sony Columbia and Fox. Surveys show that CNBC-e viewers tend to be well-educated, selective city-dwellers who care about creativity and who are seeking to improve their standard of living. NTV Spor Launched in March 2008, NTV Spor is a dedicated TV channel producing sports-related programming 24 hours a day. Using NTV s expertise in news and sports broadcasting, NTV Spor is regarded as a round-the-clock sports platform where fans can catch up on everything related to sports. From the very beginning, NTV Spor has aimed to provide up-to-date, impartial sports news combined with rich content and a dynamic programming format. Most programming on NTV Spor is either live or tape-delay sporting events, national and global sports news, sports-related documentaries or TV shows with special guest appearances by major sports figures. NTV Spor holds official broadcasting rights to large sporting events from various sports branches such as La Liga, NBA, FA Cup, Wimbledon, WTA, Eurobasket 2011, Euroleague, UEFA Euro 2012 and 2014 FIFA World Cup qualifying matches. Only six months after its launch, NTV Spor was ranked second among all thematic TV channels. NTV Spor began terrestrial broadcast in early Doğuş Group Annual Report 2012

76 Media e2 Established in December 2006, TV channel e2 offers extraordinary entertainment content consisting of talk shows and TV series. With a loyal, highly involved and selective audience, e2 differentiates itself as a niche entertainment TV network, bringing uncommon TV characters and celebrities to the screen. e2 has three broadcasting slots: Daytime, when popular daily shows such as Martha Stewart and The Ellen DeGeneres Show are broadcasted and dubbed in Turkish. Primetime, when e2 welcomes audiences who enjoy prime entertainment such as The Tonight Show with Jay Leno and Conan O Brien. Midnight, when e2 presents the most popular award-winning dramas and series including Breaking Bad, Treme and Mad Men. Kral TV Turkey s first music TV station, Kral TV is the leader in its category with its music video clips and programs. From arabesque to Turkish folk music and Turkish classical music, Kral TV broadcasts all genres of Turkish music fulfilling an important need in the music television sector. The best video clips of all Turkish music genres and the best artists are on Kral TV, 24 hours. Kral Pop TV Kral Pop TV, the heart of popular music, airs all the Turkish hits in tandem with Kral Group s second radio station, Kral Pop Radio. Kral Pop TV, which features shows such as Kral Pop Fans, Story of an Album, 0 Kilometer, Artist of the Day, Magazine News, Story of a Concert, Kral is Everywhere, Kral Pop Local, Kral Pop Chart and Kral Pop Diary, is one step ahead of its competitors because it airs first-time, exclusive clips of famous artists. INTERNET ntvmsnbc.com Turkey s News Portal, ntvmsnbc, was founded on 15 May 2000 via partnership with the world s most visited news portal, MSNBC. This partnership merges MSNBC s technological expertise with NTV s news experience and network. The content of ntvmsnbc is prepared and developed by its own editors in an impartial and unbiased manner. Providing news on a wide range of subjects, ntvmsnbc caters to the daily news needs of readers with various subjects from national and international news, including the latest developments in breaking news, to detailed reports on special events. With ntvmsnbc s February 2009 restructuring based on Web 2.0 technology, the portal serves the users with a modern interface and infrastructure full of user-friendly multimedia elements. Tvyo Tvyo is a new online video on demand (VoD) platform published by Doğuş Media Group and offering a new experience with the widest scope. Tvyo went public in November 2012, introducing a premium platform in which users may enjoy various video content for free. VoD content is enhanced by adding popular series from other content providers such as TRT s Leyla ile Mecnun, Seksenler etc. Providing the most exclusive content, Tvyo offers TV Series, Music, Sports, Live TV and Channels categories with varying live, on-demand and thematic content. Tvyo is accessible via ipad, iphone and Android applications. Tvyo users can add their favorite programs to their personal Queue and follow their favorites daily. Tvyo aims to be the first choice of Internet users who demand free and high quality online video service. SosyoTV SosyoTV is the latest service which was launched at the end of SosyoTV is a social networking application focusing on TV. SosyoTV allows users to check-in to their favorite TV shows and share their comments. As a result, users gain virtual awards such as badges, bonus points, etc. Furthermore, users can compare themselves with their friends and see who their biggest fans are. Users can connect to SosyoTV with their Facebook and Twitter accounts. SosyoTV also provides TV Guide for all national TV Channels and Trending Shows according to social network popularity. SosyoTV is currently available on all popular platforms including, web, wap, iphone, ipad, Android phone and tablet. NTVHava NTVHava is a multi-platform weather information service which serves current weather information and forecasts for all of Turkey and most major world cities. Weather information is not limited to temperature, it also includes details of wind direction and speed, barometric air pressure, precipitation, and sea temperatures. In addition to quantitative data, NtvHava also provides lifestyle information; for example, is the weather suitable for picnicking, walking, or swimming, or is there any 74

77 75 risk of flu, air pollution, etc. NtvHava is currently available on web, wap, iphone, ipad, Android phone and Android tablet. It has special native applications for these platforms which are aligned with user experience expectations. Cnbce.com Cnbce.com, Turkey s first finance channel s website which was established in November 2012, is a fast and trusted source whose main purpose is to become a new medium for news, information and commentary from Turkey and around the world. The finance portal is for people who follow markets closely, offering news, analysis, graphics, photos and commentary from the leading economists. Alongside the web, it is also available on smartphones, tablets and Smart TV. Oley.com Oley.com began as a virtual dealer in June 2009 within the Doğuş Media Group structure. As a legal sports betting site, Oley.com provides its members with betting opportunities for various sports including horse racing as well as National Lottery. Hosting many famous sports authorities within its structure, Oley.com initially enabled the posting of previously selected betting coupons, special videos and content but is now a platform where members share their betting choices and evaluations. Oley.com provides users with the latest news and developments on upcoming games and competitions. While members are preparing their bets, they can also follow up on live scores through the web site. Oley.com combines fast, reliable, high-quality services and the most up-to-date content with valuable insights from famous sports authorities. Oley.com, which set out with the mission of being a trustworthy, user-friendly and innovative website, now has over 300,000 members. NTVSpor.net NTVSpor.net is the official website of NTV Spor, Turkey s leading sports channel. The content of the website is put together by a professional and experienced staff and takes advantage of the powerful content and experience of NTV Spor. NTVSpor.net, Turkey s leading sports portal was set up just before the 2006 World Cup. NTVSpor.net, which was active as a sports page on ntvmsnbc.com until June 2010, was launched with its new interface and content on the first day of the World Cup in June The website, with more than 100 million page views each month and approximately 350,000 unique visitors each day, has 500,000 members through the portal and over 1 million followers on Facebook and Twitter. NTVSpor.net exceeds more than five times the number of users of its closest competitor through the portal and social networks. NTVSpor.net also provides its members with access to live coverage from NTV Spor television and NTV Spor radio through its pages, thus providing a service with which its rivals cannot compete. NTVSpor.net has been downloaded as an application more than 500,000 times on mobile platforms such as iphone, ipad and Ovi, and it is the leader in this category in Turkey. The website also provides online games such as Fantasy Football and Football Tycoon. It is the number one sports gaming website with more than 300,000 active gaming members. RADIO STATIONS NTV Radyo Launched in November 2000, NTV Radyo carries out an important mission in the area of news broadcasting. Its broadcasts include economy, sports, lifestyle, and arts and culture. NTV Radyo reaches its audience from 46 centers with news every day. After midnight and at the weekends, NTV Radyo becomes the address of music and talk show programs. Virgin Radio One of the most prestigious members of the Virgin Group and associated with its founder Sir Richard Branson, Virgin Radio was launched under Turkey s biggest radio group, Doğuş Media Group, in Turkey s most well-known radio programs are produced by Turkey s most famous programmers Geveze and Bay J every weekday. Geveze is on air between 6:30 am and 10:00 am while Bay J is on air between 6:00 pm and 8:00 pm. With its entertaining and dynamic profile, Virgin Radio plays the latest contemporary hits including urban, pop-rock, R&B, hip-hop and dance music. Ten Hits in a Row delivers ten songs, one after the other, without commercial breaks. In addition to music and entertainment, Virgin Radio meets with its audiences by creative projects and events. Virgin Radio became a partner of the NBA and was the Doğuş Group Annual Report 2012

78 Media official Turkish radio station of the NBA Turkey in In 2011, Virgin Radio made a similar collaboration with the Turkey Tennis Federation and was the sound of the WTA Championships. Kral FM Turkish most-listened-to radio station, Kral FM, was launched in 1992 and became a member of the Doğuş Media Group in June Kral FM plays the best of Turkish Pop, Turkish Folk, Turkish Classical, Arabesque-Fantasy and Turkish Rock. The radio station is also dedicated to the delivery of daily news and the latest developments in Turkey. Kral FM reaches its listeners via 37 transmitters and has one of the largest radio communities in Europe. Kral Pop 76 With the acquisition of Kral TV and Kral FM in 2008, Doğuş Media Group became a prominent member of the music industry. One of the latest attempts of the Group was the launch of the new national radio station, Kral Pop. The King of Turkish Pop: Kral Pop broadcasts the best examples of Turkish pop music from the past to the present and new songs for the first time. From the first day, Kral Pop has been attracting the attention of the music industry as well as of the listeners. Radyo Eksen * Launched in November 2000, Radyo Eksen delivers a wide range of quality music, from Indie to Country, and from Hard Rock to Modern Rock. Its broadcasting philosophy is based on the reflection of urban life in modern music. The Less Talk, More Music approach has created an audience of Radyo Eksen lovers in a very short period of time, making it a loved brand. Furthermore, between 2008 and 2012, Radyo Eksen played a major role as a media sponsor of big organizations, including Devotchka, Gutter Twins, Helldorado, Judas Priest, Moby, Paul Weller, Mark Knopfler, Metallica, U2, James, Rock n Coke, One Love Festival, İstanbul Jazz Festival,!F, and İKSV Film Festival. Radyo Eksen also collaborates with İstanbul s most well-known venues such as Babylon, Ghetto, Garajİstanbul and Otto. Radyo Eksen broadcasts on 96.2 FM in İstanbul and live on the Internet and via satellite. NTV Spor Radyo* Launched in September 2009, NTV Spor Radyo broadcasts from İstanbul on 87.7 FM and on different frequencies in several cities around Turkey, as well as live over the Internet and satellite. Broadcasting in tandem with NTV Spor TV channel, NTV Spor Radyo delivers to its listeners the voices of famous names in Turkish sports. In addition to these joint broadcasts, NTV Spor Radyo also presents its unique shows covering football, basketball, volleyball, tennis, motorsports, betting and horse-racing complete with viewer comments. Capital Radio* Capital Radio was initially launched as a CHR (Contemporary Hit Radio) station in Ankara and re-launched in March 2011 by Doğuş Media Group as a foreign-music radio channel, playing 80s and 90s hit music. Capital Radio broadcasts on 99.4 FM in İstanbul and live via Internet and satellite sources. Radyo Voyage* Launched in January 2009, Radio Voyage is Turkey s first and only new age, ambient and world music radio station. Radio Voyage takes its listeners on a voyage through Ambient, New Age, Avant Classical, Gregorian Pop, World Music and Ethnic Jazz genres, allowing them to discover new music and new sounds. Radio Voyage broadcasts on the FM in İstanbul and live via Internet and satellite sources. * These radio stations were sold as of 25 December PERIODICALS Vogue Türkiye Vogue, a Condé Nast Publication, has been leading and inspiring the fashion world since It now reaches millions of people in 19 countries where it is published. There was a long wait for Vogue in Turkey, and the magazine was finally launched by Doğuş Media Group in March The magazine not only informs its readers of new trends, but it also decides what fashion is. Vogue Türkiye is courageous, avant-garde and innovative with its shoots. Anything that is exciting finds a place in the pages of Vogue Türkiye. Most important of all, from the covers to fashion shoots, portraits to style tips, the magazine creates original content. Vogue Türkiye has a selective and unique perspective elegant style with women at its center, and a glamorous visuality by which it covers fashion, beauty and lifestyle since the first day it was published.

79 77 GQ Türkiye GQ was established in the United States in The magazine became a part of Condé Nast Publications 32 years ago and is currently published in 20 countries and in 12 different languages. GQ covers all fields relevant to metropolitan men and guides the lifestyles of men in all the countries where it is published. GQ has the unique formula for men. It brings together fashionable aspects of life and intellectual commentary with its rich content, from fashion to art, health to relationships, sports to technology, food and drink to remarkable interviews. GQ Türkiye has been published by Doğuş Media Group since March GQ, the best-selling men s magazine in the world, outshines competitors with extraordinary photo shoots, humorous tone, and the best writers and photographers. It combines its global position with the values and dreams of Turkish men. National Geographic With a history dating back to 1888 and a readership of more than 60 million readers worldwide, National Geographic is more than just a magazine; it is also one of the most prestigious brands in the world. The magazine s Turkish edition debuted in 2001, and each month it presents to its readers a fresh array of fascinating features and original articles about geography, science, exploration, history and more. National Geographic Kids Published since 1975, National Geographic Kids was launched in Turkey by Doğuş Media Group in The aim of this magazine is twofold: to entertain and simultaneously equip children with knowledge via its high quality content and visuals. Robb Report The Robb Report joined Doğuş Media Group in 2008 as Turkey s first magazine focused on the luxury market. Its mission is to become an exclusive guide for high net worth individuals who are passionate about celebrating life. From yachts and automobiles to jewelry, priceless watches, fashion and premiere vacation spots, Robb Report readers can find all the elements of a luxurious lifestyle. This magazine covers both the latest products and original styles from world-renowned luxury brands. NTV Tarih NTV Tarih is a monthly popular history magazine. Its original and insightful content is based on independent academic research and conveyed in a simple writing style. The magazine analyzes events according to their specific historical context and opens new windows to the material conditions, everyday life, social relations and practices of a variety of historical periods. NTV Tarih contributes a refreshing scientific approach to past events as well as to the current debates relevant to them. The mission of NTV Tarih is to inform readers, to contribute to the development of a sense of history, and to increase awareness on the preservation of all historical, cultural and environmental values, both national and international. NTV Publications Ever since March 2007, NTV Publications has been offering a new perspective in reading and thinking. While acting as a reference for subjects such as history, science, arts, photography, politics, nature and environment, NTV also covered cooking, children books and graphic novels. Expanding its product line every month, NTV Publications has become an important and prestigious brand in the public eye in only four years with its bestselling non-fiction titles. In addition to presenting readers outstanding foreign books with fluent translations, NTV has also encouraged local projects with books on the historical and cultural heritage of Turkey as well as its natural treasures. NTV Publications in 2012 included NTV Almanac 2012, Türkan Şoray - Sinemam ve Ben (My Movies and Me), Suç - Verbrechen, Suç II - Schuld, Cahillikler Kitabı (The Book of General Ignorance), and Dünyanın En Harika Fikri (The World s Greatest Idea). Doğuş Group Annual Report 2012

80 Tourism and Services Joy, dynamism and vibrancy Red, yellow and orange warm and energize all colors of the rainbow. Also the activities of Doğuş Group in tourism and services sector brighten up and bring joy to life as same as these colors. 78

81 79 Doğuş Group Annual Report 2012

82 Tourism and Services Financial Highlights In the tourism and services sector, Doğuş Group operates with Doğuş Tourism Group, Doğuş Retail Group, D-Marin Marinas Group, D-Gym, D-Life, and Körfez Havacılık. Financial Highlights (TL thousand)* Total Assets 1,375,150 1,709,170 1,821,355 2,503,839 Revenue 167, , , ,691 Cost (94,572) (125,296) (120,545) (174,345) Gross Profit Margin (%) EBITDA 13,349 (17,109) 6,345 50,801 EBITDA Margin (%) 8.0 (8.1) * Figures are based on standalone financial statements of Doğuş Tourism Group, Doğuş Retail Group and D-Marin Marinas Group. Total Assets (TL thousand) Revenue (TL thousand) ,375, , ,709, , ,821, , ,503, ,691 80

83 81 Doğuş Tourism Group Doğuş Tourism Group performed successfully throughout the year in terms of room occupancy rate which increased by 1% in 2012, room rates which increased by TL 41, and total hotel revenue generated which increased by TL million. Established in 1976, Doğuş Tourism owns six five-star hotels and a travel agency, Antur. Hotel facilities of Doğuş Tourism Group include operated hotels the Park Hyatt İstanbul, Maçka Palas; Grand Hyatt İstanbul; MARITIM Hotel Club Alantur, Alanya; MARITIM Hotel Grand Azur, Marmaris (as of 2013, D-Resort Grand Azur, Marmaris) as well as owned hotels D-Hotel Maris and D-Marin Resort Göcek (as of 2013, D-Resort Göcek). Finally, Rixos Downtown is operated by Rixos Group under a rental agreement Tourism Turkey enjoyed a successful year in tourism in Targets were reached with 36.7 million tourists and US$ 29.3 billion in revenue resulting in an average expenditure per person per day of US$ 798 in Turkey. As a result, Turkey became sixth in the world regarding the highest number of tourists and ninth in tourist income. Compared to 2011, Turkey s number of arriving tourists increased by 1.7%, revenue increased by 4%, and daily average expenditure increased by 2%. The first three countries in nationality rankings of arriving tourists were Germany (15.82%), Russia (11.33%), and England (7.73%). Compared to 2011, arriving tourist statistics increased in some markets such as CIS (21.23%), Middle East (55.06%), and Latin America (47.53%). Turkey obtained 77.9 percent of tourism income from foreign visitors and 22.1 percent from Turkish citizens residing abroad. Turkey enjoys year-round sunshine, permitting an extended holiday season and the expansion of its market to include consumers in search of winter sun and sports tourism options. Indeed, in addition to summer vacation tourism, other forms of tourism such as skiing, trekking and health tourism are also becoming increasingly popular in Turkey. Doğuş Tourism Group performed successfully throughout the year in terms of room occupancy rate which increased by 1% in 2012, room rates which increased by TL 41, and total hotel revenue generated which increased by TL million. DTG-2012 Hotels Revenues (TL thousand) Grand Hyatt International Park Hyatt International D-Hotel Maris D-Resort Göcek D-Resort Grand Azur Maritim Club Alantur 2,632 3,671 17,933 15,777 14,453 13,504 21,895 14,415 16,042 14,513 10,950 13,350 11,616 Actual Budget Last Year Full Year Occupancy 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 77% 73% 54% 67% 35% 45% 59% 63,777 66,477 58,668 79% 74% 78% 0% 0% GHI PHI *DHMA **DRGO DRGA ALA Occupancy 2012 Occupancy Full Year Average Rate 700% 600% 500% 400% 300% 200% 100% 0% GHI PHI *DHMA **DRGO DRGA Average Rate 2012 Average Rate ALA * D-Hotel Maris is not included in the above charts as the Hotel was closed for renovation during the year ** D-Resort Göcek is not included in the above charts as the Hotel was under the operational management of Swissotel during the year Doğuş Group Annual Report 2012

84 Tourism and Services Activities in 2012 Swissotel Göcek was taken over from Turkon Holding and the Hotel s name was changed to D-Marin Resort Göcek as of The Hotel has run its existing operations with 57 comfortable rooms with views of Göcek village, gardens or mountains. The Hotel facilities included a waterfront restaurant and bar, meeting facilities, an outdoor pool, and access to Göcek s only private beach. As of 2013, D-Marin Resort Göcek will be rebranded as D-Resort Göcek. D-Hotel Maris was opened in April 2012, introducing to the resort sector in Turkey a successful development of a luxury hotel with the bed-and-breakfast concept that is not part of an international luxury hotel chain, despite the general trend in the region for full board hotels. Maritim Grand Azur Marmaris completed the contract with Maritim Group and plans to finish renovation in the 2013 season and rebranding as D-Resort Grand Azur, Marmaris. Awards D-Hotel Maris Best Beach Hotel in Marusya Cup Russia: Best Beach Hotel Tripadvisor 2012 Traveler s Choice Espa as D-Hotel Maris, Spa Finder 2012 Readers Choice Award Winner Maritim Grand Azur Hotel Thomas Cook Marque of Excellence 2012 Expedia Best Growth 2012 Regional Turkey Tripadvisor Excellence Award 2012 Holidaycheck.de Qualified Hotels Award Park Hyatt İstanbul-Maçka Palas Tripadvisor 2012 Traveler s Choice Grand Hyatt İstanbul Awarded with the Hotel Greening Project award by Bureau Veritas for energy, water, inner air and waste management and recycling efforts Maritim Hotel Club Alantur Holiday Check Quality Selection 2012 Tripadvisor Recommended 2012 Zoover Highly Recommended 2012 There was also a rise in the number of visitors from Latin America and Scandinavia, and this increase is expected to continue into Preliminary data indicates that the figure is 12.54%. Despite the figures, the sector has been struggling as crisis-hit rivals Greece, Egypt, and Spain maintain reduced hotel prices from the previous year amid unstable political and economic forces. It is possible that these conditions will force Turkish hoteliers to reduce prices in order to remain competitive. Future Plans Doğuş Tourism Group s future strategies in line with those of Doğuş Group, strives to become a regional leader and to continue expanding in the sector. Doğuş Tourism Group will continue to reflect its growth-oriented investment philosophy in its financial results and operations in the coming years as well. In accordance with this philosophy, D-Marin Resort Göcek (D-Resort Göcek as of 2013) began renovation and construction at the end of 2012 with a view to reopening for the 2013 season with existing rooms facilities and newly renovated lobby, threemeal dining restaurant and bar, waterfront restaurant, newly built spa, gym, and meeting rooms. Maritim Grand Azur Hotel (D-Resort Grand Azur, Marmaris, as of 2013) began renovation at the end of All rooms, lobby area and a restaurant will be introduced as renovated facilities in ANTUR TURİZM A.Ş. Antur Tourism is a leading corporate travel services company in Turkey owned by Doğuş Group since Antur prides itself on being an innovative company which offers a comprehensive range of services to meet all aspects of its clients needs in an everdemanding and complex business world. Providing corporate travel management services as well as incentive, events and meetings management services, 2013 Forecast Turkey has famously begun attracting more tourists from the Middle East, Latin America and Balkan countries, especially since the country began exporting its soap operas to the Middle East and the Balkan region. Turkey s influence and attractiveness have also increased due to economic performance, and Turkey has begun to be viewed as a role model by many in these regions. 82

85 83 Antur Tourism is a member of International Air Transport Association (IATA), American Society of Travel Agent (ASTA), United Federation of Travel Agents Associations (UFTAA), and Association of Turkish Travel Agencies (TÜRSAB). Corporate Travel Management A core service since 1976, corporate travel management is probably the best known of Antur s business activities. Antur brings together local expertise and specialist knowledge to deliver an all-around value offering and tailored solutions for its clients. In addition to traditional corporate transactions processing such as airline ticketing, hotel and car rental bookings and more, Antur s corporate travel management services include: Travel reporting: post-trip data reporting including traveler tracking. Financial reporting: itemized reporting for various services. Visa services: support in obtaining all visas required for travel. Events & Meeting Management Antur has an innovative and creative team of professionals who handle a wide spectrum of conferences, seminars and corporate events catering to the needs of specific corporate clients or a specific topic/industry. Antur s event management, local knowledge and supplier relations, combined with solid understanding of business dynamics, guarantees excellent customer satisfaction time after time. Conferences, seminars, meetings of all sizes alongside corporate events such as incentives, product launches, openings, gala nights are Antur s basic activities in Turkey. Outbound incentives are an area of specialization for Antur. The Company s professional team members pride themselves on surpassing client expectations combining their event management expertise with solid business understanding to achieve results that speak for themselves. Antur boasts a distinguished list of multinational and leading Turkish companies for which it regularly organizes tours ranging in size from 25 to 1,500 participants. In addition to incentives, Antur caters to free individual travelers (FIT s) and groups attending various trade fairs, exhibitions and conventions worldwide. Destination Management Antur caters to the needs of incoming FITs, groups and incentives. Antur works closely with leading travel agencies and tour operators from Europe, Asia, North America and South Africa. Large volumes of domestic traffic have led to excellent relations and bargaining power with local suppliers, resulting in competitive negotiated rates. Time-tested itineraries are fully flexible and scalable to adapt to specific requirements. Antur s experienced team of incoming specialists is at its customers service to provide assistance, information and quotations. Antur owns a five-star hotel in Alanya along the Mediterranean coast, 140 km east of Antalya. Only 5 km from Alanya s city center, the Maritim Hotel Club Alantur welcomes its guests with 350 rooms and suites. The Hotel, with its 60,000 m 2 garden and pool area, is located directly on the beach in an area known as the Turkish Riviera, offering guests relaxation, entertainment, or recreation via several on-site facilities. From 21 March 2013, the Hotel has been operated by Alantur Turizm ve Ticaret A.Ş. which is 100% owned by Antur Tourism. In this way, two business lines which are owned by Antur has been separated. D OTEL MARMARİS TURİZM İŞL. TİC. VE SAN. A.Ş. D Otel owns luxury resort D-Hotel Maris, the first directly operated hotel of Doğuş Tourism Group. D-Hotel Maris is located in a unique conservation area on the beautiful Datça Peninsula, high on a hillside surrounded by breathtaking views, crystal clear sea and five beautiful, natural Blue Flag beaches. After being under construction for a year and a half, the completely renovated D-Hotel Maris opened on 20 April D-Hotel Maris s goal is to be known not only for its superb nature and extensive range of beautiful and luxurious facilities, but also as a brand with the highest level of personalized services available to guests. D-Hotel Maris is striving to outdo the existing competition in the Turkish resort market by going beyond standard amenities customary in five star hotels, providing its guests with the best rooms and facilities, quality products, luxurious environment, and the highest level of personalized attention and recognition in order to encourage loyalty. One of the keys to its financial success is developing a loyal following of returning guests while being a leader in Turkish hospitality. Consisting of 173 rooms, 27 suites and one villa, the Hotel targets international and local wealthy leisure guests with at least five nights stay within the resort property. In addition to leisure business, the Resort will concentrate on selling the meeting facility to targeted business segments including automotive, pharmaceutical, and financial sectors with meetings not exceeding guests and only in low seasons. Major Developments in 2012 The breakthrough development for the Aegean region was the change of the Hotel s concept from full board plus club resort to a luxury bed and breakfast hotel. D-Hotel Maris became a member of The Leading Hotels of the World, making it one of only four hotels and the one and only resort hotel in Turkey. Doğuş Group Annual Report 2012

86 Tourism and Services Another major development was being listed as number one hotel in Robb Report Russia s 2012 Best of the Best issue. The Hotel was also announced as a Grand Opening in Robb Report USA. Boasting an ESPA spa, superb water sports facilities, and a yacht fleet, the Resort introduces its guests to superb service and personalized attention. GARANTİ TURİZM YATIRIM VE İŞLETME A.Ş. Garanti Turizm Yatırım ve İşletme A.Ş. was established in 1988 and invested in a five-star luxury hotel. The Maritim Hotel Grand Azur (D-Resort Grand Azur, Marmaris as of 2013) is situated in the center of Marmaris, approximately 100 km from Dalaman Airport. As of 2013, the Hotel will have 324 fully renovated rooms and suites, with half of the rooms offering a sea view. The Hotel also has a conference area accommodating up to 350 people as well as two seminar rooms with seating for 35 people. D OTEL GÖCEK TURİZM YATIRIMLARI VE İŞLETMECİLİĞİ TİCARET A.Ş. D Otel Göcek owns a 57-room property known as D-Marin Resort Göcek since The Hotel offers comfortable rooms with views of Göcek village, gardens or mountains. The Resort s facilities include a waterfront restaurant and bar, meeting facilities, an outdoor pool, and access to Göcek s only private beach. As of 2013, the D-Marin Resort Göcek is rebranded as D-Resort Göcek. The Hotel was opened in late Spring 2013 with the existing 57 rooms plus a newly renovated lobby, three-meal dining restaurant and bar as well as waterfront restaurant offering its guests the only Teppanyaki (A Japanese style of grilling) grill station in the area (area here means the Fethiye Dalaman region). A newly built spa, gym and meeting facilities accommodating up to 100 guests are all estimated to open in June Additional accommodation facilities and renovation of the existing rooms are scheduled to be completed in Spring GÖKTRANS TURİZM VE TİCARET A.Ş. Göktrans Turizm ve Ticaret A.Ş. owns the Grand Hyatt İstanbul, a five star facility managed by Hyatt International (Europe Africa Middle East) LLC and located in Taksim in the heart of İstanbul. Grand Hyatt İstanbul is located in the center of the city s business district, just a five-minute walk from the Bosphorus and Taksim Square. Grand Hyatt İstanbul features large (40 sqm) guestrooms and fully marbled bathrooms with separate bathtub and rain showers. Of the 360 guest rooms, 102 are king, 159 are deluxe king, and 71 are Grand Club rooms with special amenities. There are 22 suites (12 with kitchenettes), three rooms for disabled guests, and seven fully furnished luxury apartments. The Grand Club rooms offer VIP accommodation, separate check-in and check-out facilities, a private lounge and boardrooms. A total of 1,507 m 2 of function space is available with 13 meeting rooms including a ballroom. The new meeting venue, Mansion, offers a unique residential meeting concept where guests have the opportunity to hold meetings in a home-like setting with highly personalized and dedicated service. All six Mansion rooms feature natural light and can cater parties of up to 88 guests. The new restaurant, 34, is a casual dining venue with animated show kitchens and a lively atmosphere offering a fascinating culinary journey through Turkey and the Mediterranean for breakfast, lunch and dinner. Other outlets are the Mezzanine Lounge & Bar, the Library Bar and Gazebo at the outdoor pool in summer. Gaia Fitness Center & Spa offers four specially designed treatment rooms, a fitness studio and an exercise room for yoga and pilates classes. ARENA GİYİM SANAYİ TURİZM VE TİCARET A.Ş. The historic Maçka Palas building, owned by Arena Giyim, was in 2009 converted into a 90-room boutique hotel under the Park Hyatt İstanbul Maçka Palas Hotel brand name. Ideally located in trendy Nişantaşı, the Hotel uniquely combines the historic architecture of an art deco building with innovative interior design. Housing the existing Emporio Armani and Gucci boutiques, the Hotel is also within walking distance to many other upscale designer fashion houses as well as ultra-trendy bars and restaurants. There are 90 generously sized deluxe rooms averaging 59 m 2, including seven Park Suites, one Executive Suite, one Diplomatic Suite and a Presidential Suite. The residential top-floor suites offer a private terrace. Each guestroom features a grand bathroom clad in local fossilized limestone offering five different bathing experiences. Twenty-five of the rooms include an authentic Turkish bath complete with heated stone seating. VOYAGER MEDITERRANEAN TURİZM ENDÜSTRİSİ VE TİCARET A.Ş. Voyager Mediterranean Turizm Endüstrisi ve Ticaret A.Ş. owned the Sheraton Voyager Antalya Hotel, Resort & Spa, which was managed by Starwood Hotels & Resorts Worldwide Inc. until 31 December The building was rented to and has been operated by Rixos Group since 1 January

87 85 Doğuş Retail Group Doğuş Retail Group, restructured in 2012, aims to enlarge its share by operating world s leading brands under one roof in the Turkish retail market. The Company initially secured the franchises for Emporio Armani and Gucci, opened their first boutiques in one of İstanbul s most prestigious locations, the historical Maçka Palas Building. The Company also initiated a multi-brand fashion retail project under the In-formal name. The first store was opened in the D-Marin Turgutreis Shopping Complex; the boutique s philosophy is to present prestigious labels to a fashion-conscious clientele with exclusive service standards in a very unique surrounding. After Emporio Armani, Armani Jeans and Gucci boutiques and Emporio Armani Caffé were opened in 2007 at İstinye Park, one of İstanbul s most prominent shopping malls. In addition to these new boutiques, the Company also secured the franchise of Loro Piana in the same year, a well-known name for cashmere fashions. Loro Piana boutique was opened in the fashionable Nişantaşı district of İstanbul in 2007 and later moved to İstinye Park in Moreover, the world s first Emporio Armani Ristorante concept opened at the end of 2011 in the former location of Emporio Armani Caffé location. In 2012, a Porsche Design store was opened in Maçka and another Emporio Armani including Armani Caffé in Bağdat Street, one of İstanbul s most important primary street locations. Doğuş Retail Group, restructured in 2012, aims to enlarge its share by operating world s leading brands under one roof in the Turkish retail market. The restructuring included its current stores, systems and human resources while improving standardization and operational productivity as well as integrating new brands to its portfolio. The retail business, furthermore, is going to be formatted as an umbrella of additional premium brands in the coming years. In 2012, Doğuş Retail Group had the distribution rights for several luxury brands such as Hublot, Giorgio Armani, Armani Jeans and Armani Junior in Turkey, and it entered the wholesale business as well. The Company will also open a Hublot boutique in İstinye Park Mall in 2013 in order to further penetrate into the luxury watch market. Doğuş Retail Group aims to operate along with Doğuş Group s growth-oriented strategies in order to become a regional leader in retail sector. Doğuş Group Annual Report 2012

88 Tourism and Services D-Marin Marinas Group The marinas under the sector leading D-Marin Marinas Group continue to be popular destinations for existing yachters as well as being the new routes for new sailors. Maritime tourism has made a major stride in the second half of the twentieth century in developed coastal states and the Mediterranean, in particular. All countries expecting revenue from yacht tourism have initially made investments in marinas. The human and yacht traffic that was generated led to the development of a society geared towards tourism. Doğuş Group believes that marina operations have very high growth potential in Turkey and in the region. While the economic and social developments have enabled increasing numbers of people to travel; a shortening of the working week, extension of holidays as well as a raised standard of living, and a rising interest in yachting have led Doğuş Group to develop marinas that would not only cater to yachts but establish integrated tourism facilities catering to yachters and their associates. D-Marin Marinas Group began operating in 2003 in Turkey with its first marina, D-Marin Turgutreis. In 2009, D-Marin Didim commenced operations as the second marina in the network, and then in 2010, D-Marin Gocek joined the D-Marin Marinas Group. Construction of the fourth marina in Dalaman, Turkey, is planned for In 2009, D-Marin expanded beyond Turkey and entered Croatia through the now-renowned D-Marin Mandalina located in Sibenik, Croatia. In April 2012, D-Marin Dalmacija, which is the largest marina in Croatia, and D-Marin Borik joined D-Marin Marinas Group. The Group expanded its investments in Croatia by acquiring 6.92% of the Adriatic Croatia International (ACI) Group, the largest chain of marinas in the Mediterranean with a total of 21 marinas, in December D-Marin Marinas Group continues to invest in other international markets. In December 2012, it established a 50/50 partnership with Lamda Development SA listed on the Athens Stock Exchange, which results in control of the Flisvos Marina. D-Marin added an upscale, world class marina to its portfolio offering exclusive services to superyachts. In January 2013, D-Marin entered into a strategic partnership with Kiriacoulis Mediterranean Cruises Shipping SA, also listed on the Athens Stock Exchange. D-Marin Marinas Group added the Gouvia, Lefkas and Zea marinas to its portfolio, increasing its total capacity in the three countries to approximately 9,000 berths. D-Marin Marina Management Company, established in 2012, will utilize its knowledge and expertise gained from its experience in the marina sector to provide management and consultancy services to marinas under the Doğuş Group umbrella as well as to other marinas across the world. D-Marin Marinas Group is actively growing its European network through strategic acquisitions and management partnerships while focusing on prestigious marinas in the Mediterranean and the Adriatic regions in order to establish a market-leading marina network. 86

89 87 D-MARIN TURGUTREIS Economic and social developments in Turkey resulted in more and more people traveling for pleasure TURGUTREİS MARİNA and cruising. Increasing interest in the beauty of the sea fostered development of integrated tourism centers by the sea, including marinas. In this framework, D-Marin Turgutreis is designed to be not only a marina but also an integrated tourism center which serves both local and foreign guests. In line with Doğuş Group s mission and vision, D-Marin Turgutreis gives the utmost priority to providing the best service possible and anticipates becoming the sector leader for marina operations all around Europe. D-Marin Turgutreis has a unique infrastructure which enables the marina to provide its customers with excellent services. It is the first and the best marina in Turkey to offer bilge and savage collection service to yachts. D-Marin Turgutreis has a berthing capacity for 550 yachts afloat up to 70 m and 150 yachts in dry dock. Since its inauguration, D-Marin Turgutreis is providing a wide range of high quality technical, social and administrative services to yachts and yacht owners. In 2012, the 8 th D-Marin Turgutreis International Classical Music Festival, which is a member of EFA (European Festivals Association) hosted an audience of 20,500 at D-Marin Turgutreis and was awarded as Classical Music Event of the Year in the 2012 Donizetti Awards organized by the Andante Magazine. In addition, the 9 th International Bodrum Boat Show was also organized at the Marina and resulted in record number of visitors. Furthermore, the Marina hosted several exhibitions by various artists and other events throughout the season. As the host of the first boat show held in a marina in Turkey since 2003 and the first open air classical music festival held in a marina since 2005, D-Marin Turgutreis has demonstrated its success by receiving many awards and certificates. Since 2004, the Marina has held Blue Flag status given by the Foundation for Environmental Education, and the Five Gold Anchors flag given by The Yacht Harbour Association (TYHA) waves from its flag pole. The Marina was the recipient of the Best Marina Investment award in 2004 and Best Marina Operation in the Skalite awards organized by the Turkish branch of SKAL International Club for three consecutive years, beginning in D-Marin Turgutreis became the Turkish marina network s fifth-time Skalite award winner, scooping the award with the Classical Music Festival in the Turkish Regional Clubs category. D-Marin Turgutreis was also recognized as the Best Harbor Operation in Doğuş Group Annual Report 2012

90 Tourism and Services D-MARIN DIDIM DİDİM MARİNA With a berthing capacity of 576 yachts and 600 in dry dock, and with the ability to accommodate yachts ranging from 8 m to 70 m, D-Marin Didim is the largest marina in Turkey. The Marina has two travel lifts, 400 tons and 75 tons, one 100-ton capacity trailer, two 15x60 m hangars and a dry park area of 80,000 m 2. There are many well-equipped technical shops in the dry park area able to provide full maintenance services throughout the year for D-Marin Didim s yachtsmen. D-Marin Didim offers a shopping and entertaining center including brand-name stores, restaurants, cafeterias and bars. These options greatly enhance Didim s tourism, economy and social life. In addition to top quality service and comfort, D-Marin Didim offers a yacht club, a private beach, spa, fitness center, tennis court and a swimming pool. D-Marin Didim is a port of entry with ferryboat services for cruises to the Greek Islands. The Marina is able to provide the best berthing capacity and the largest dry park area all set in a pastoral location. In addition, transportation from/to Bodrum and İzmir Airports is available for international direct flights. D-Marin Didim presents a modern marina infrastructure to complement its high quality service and customer-oriented marina employees. D-Marin Didim is a member of the Yacht Harbour Association and Professional Yachtsmen s Association (PYA). The Marina has held the Blue Flag since 2010 and Five Gold Anchors flag from TYHA. The Marina was the recipient of the Best Marina Investment award in 2010 Turkey s Most Successful Tourism Investments Research. D-Marin Didim was also awarded The Best Marina in Turkey by SKAL International in D-Cat Club has been started at D-Marin Didim in 2012 which is the only catamaran center of East Mediterranean. Nine catamarans participated to the first D-Cat catamaran rally in 2012, followed the route of Patmos, Leros, Kalimnos and Didim. 2 nd D-Cat Rally will be held between 29 September and 4 October Aside from offering high quality service and comfort to yachtsmen and crew, the Marina contributes to the social life in Didim and surrounding regions with the D-Marin Didim Summer Concerts. An audience of around 40,000 participated in the two concerts that took place in the summer of D-Marin Didim Summer Concerts will continue with other famous stars and an increasing number of audiences in D-Marin Didim is the first marina in the eastern Mediterranean which provides full superyacht services regarding the existing yacht mix and all related services. 88

91 89 D-MARIN GOCEK D-Marin Gocek has a berthing capacity of 380 yachts available for up to 75 m yachts. The boatyard has 75 tons of GÖCEK MARİNA travel lifts and 40 tons of boat movers. The Marina has a dry docking capacity for 150 yachts. Blending in with the backdrop of Gocek s green forests; the aesthetically landscaped gardens of D-Marin Gocek offers its guests peace and tranquility. The water in the Marina is kept clean by the floating break water system which allows currents to maintain their natural flow. The resulting clean and well oxygenated waters provide a healthy environment for The Posidonia Meadows, one of the most vibrant examples of vegetation along the Mediterranean coast. From the beginning of the construction phase of D-Marin Gocek and whilst carrying out its operations, D-Marin Marinas Group has attached importance to preserving the natural environment where the marina is located. Set amongst a large number of beautiful bays, D-Marin Gocek is easily accesible by sea or land and is only 22 km from Dalaman International Airport. Situated in the centre of the main yachting route between Kekova and Gökova, Gocek is a small, charming village. With six marinas, exceptional natural beauty, crystal clear waters and close proximity to significant historic sites, Gocek is a unique yachting heaven. In addition to its technical superiorities and high quality service, D-Marin Gocek has also been built and managed with an environmentally friendly perspective. The wavebraker and pontoons in the Marina are floatable and the wavebraker is the first of its kind in Turkey. D-Marin Gocek is a member of the TYHA and it has Five Gold Anchors. The Marina also holds the Blue Flag. In 2012, the Marina underwent renovations. All drains, cable channels and environmental equipment were renewed in the concrete boatyard, and a new ship lift with 7 m beam capacity was installed. A new water treatment system was constructed to ensure that international environmental standards are met and exceeded. Three new environmental yacht sheds were built to accommodate yachts up to 27 m, and a new lifting jetty was developed to provide a safer arrival and departure experience. D-Marin Gocek has continued to contribute to social life as well. Three regattas, paint exhibitions and environment friendly events were held in the Marina in Starting from 2012, D-Marin Gocek has been hosting the world famous jazz groups in its Welcome to Summer parties. Doğuş Group Annual Report 2012

92 Tourism and Services D-MARIN MANDALINA D-Marin Mandalina is located in the historic city of Sibenik on the beautiful Dalmatian coast of Croatia. Sibenik MANDALİNA MARİNA was chosen as the world s number one sailing destination by the National Geographic magazine, and the town is noted for its UNESCO-protected cathedral and two national parks including the waterfalls of Krka and the Kornati archipelago. The Marina is 45 minutes away from Zadar and Split international airports. Following the Marina s initial investments in 2010, D-Marin Mandalina opened Croatia s first dedicated superyacht marina facility in early The Marina features 429 wet berths and 50 dry dock berths on land, accommodating yachts up to 140 m in length. Besides its capability of strong electricity power supply (over 600 amps), unlimited draft conditions render D-Marin Mandalina an ideal berthing place for superyachts. The neighboring yacht refit shipyard facility offers highly qualified technical support for yachts as well. In 2012, D-Marin Mandalina focused on marketing to the superyacht market due to the new investment for superyachts which became operational on 1 May Participation at the MYBA Genova and Monaco Yacht Shows has revealed very good results during the summer and winter seasons in which the Marina was visited by more than 120 superyachts. Two of these yachts, which preferred D-Marin Mandalina, are among the biggest in the world, one 95 m and the other 75 m. D-Marin Mandalina undertook the main sponsorship of 15 th Sibenik Şanson Fest which was organized last year. 90

93 91 D-MARIN DALMACIJA D-Marin Dalmacija, the largest marina destination in Croatia, is located in DALMACİJA MARİNA a naturally protected bay only 7 km from the ancient port town of Zadar. It is easily accessible by land or sea and is 5 km from the international airport. With over 1,200 fully serviced berths, dry docking for 500 yachts, and deep water access with spacious docks for easy berthing access, the Marina can provide highquality facilities for yachts up to 60 m. The mild Mediterranean climate with predictable and pleasant winds provides perfect sailing conditions and frequent regattas make the Marina an attractive and vibrant place throughout the entire year. D-Marin Dalmacija is known as The Gateway to Dalmatia as it is only 4 nautical miles from one of the most beautiful cruising areas in the world. GOUVIA MARINA Gouvia Marina is located in the world-famous Corfu Island. The Marina is situated in the bay of Gouvia, approximately 6 km from the town of Corfu and 7 km from the international airport. Gouvia is the biggest marina in terms of berth capacity in Greece with a total of 1,235 berths on both permanent and floating pontoons, while there are also dry dock facilities for approximately 520 boats. Moorings are available for yachts up to 80 m and 5.5 m draught. In the 3,500 m 2 of building facilities, a number of different services are available, such as shops, restaurants, bars and cafes, and a supermarket. The broad quaysides include a kindergarden, a swimming-pool, sports facilities as well as a cricket pitch and a croquet field. D-MARIN BORIK D-Marin Borik is situated on the west coast of the 3,000 year old city of BORİK MARİNA Zadar. The constant ferry connection with the city of Ancona on the Italian side of the Adriatic as well as the international flights offer an opportunity to access D-Marin Borik with ease for all European yacht owners. The Marina offers a full range of technical boat services. There are one 65-ton and one 80-ton travelifts and two 45-ton and 80-ton mobile cranes available in the Marina. Since 2007, the Marina has been awarded Blue Flag status. The Islands of Zadar, three hundred in total, are the most precious offering of this touristic area. The Kornati National Park area, which encompasses of 150 islands, also provides a great sailing experience to yacht owners. D-Marin Borik is truly a boutique marina with unparallel service making it one of the most desirable marinas in Croatia. The Marina has total berthing capacity of 227,177 wet and 50 dry dock berths. Doğuş Group Annual Report 2012

94 Tourism and Services LEFKAS MARINA The Marina is situated in the eastern side of Lefkas Island, the fourth largest of the Ionian Islands. The geographical location of Lefkas is considered to be its greatest advantage as it is one of the most beautiful areas for yachting. The island is connected with a small bridge, facilitating the approach to the Airport of Aktion in Preveza and to mainland Greece. area of 40,000 m 2, modern, top-standard services are available in restaurants, bars, cafes and shops. The Marina operates year round and is situated 45 km away from Athens International Airport and 15 km away from the centre of Athens. The Marina, one of the most modern in the Mediterranean, has been operating since 2002 with moorings for 620 boats up to 45 meters long. Within the 70,000 m 2 shore area surrounding the Marina, guests are offered a great number of different facilities and services such as a shopping centre, restaurants, a supermarket, and a cafe. In the Marina, there exists a hotel and a conference centre. The Marina offers a full range of technical boat services. There are dry dock facilities for 278 boats plus a 150-ton and a 70-ton travelift as well as a 60-ton mobile crane to maneuver of boats in and out of the water. Since 2007, the Marina has been awarded the Blue Flag status. ZEA MARINA Zea Marina is located in Athens near the main port of Piraeus, the largest Greek port and the starting point for millions of tourists every year to the Aegean islands, the Saronic Gulf and the island of Crete. FLISVOS MARINA Located only 6 km from the centre of Athens, Flisvos Marina provides easy access to many cultural and entertainment attractions available in the rejuvenated Olympic city. Flisvos Marina, a multi-starred commercial and leisure center, is internationally recognized for the high quality services it provides to superyachts. The Marina has a berthing capacity for 303 yachts from 15 m up to 70+m. The Marina provides a diversity of recreation and relaxation opportunities, and sports enthusiasts can enjoy jogging, walking and cycling activities. Additionally, Flisvos Marina is the ideal base for sea-loving voyagers eager to explore more than 3,000 Greek islands, many of which are within leisurely sailing distance. The Marina is situated on the most commercial, lively and crowded area of Piraeus. Wonderful little harbors with beautiful restaurants, coffee shops and bars, offer entertainment to all guests. The Marina has a berthing capacity of 670 yachts up to 120 m and 6 m draught, and it is one of the mega yacht marinas in the vicinity of Athens. Within the marina shore 92

95 93 D-Gym D-Gym is focused on quality while at the same time maximizing customer comfort and providing complete satisfaction. D-Gym, a Doğuş Group investment in the tourism and services sector, aims to bring corporate-class quality to the sports and fitness industry. D-Gym began operations on 15 October 2009 within Doğuş Center Maslak the financial district of İstanbul surrounded by business centers as well as residential compounds. The 4,500 m 2 complex aims to spread the message of Change in Exercise Habits, Change in Quality of Life, Change for the Individual. D-Gym is focused on quality while at the same time maximizing customer comfort and providing complete satisfaction. The Complex aims to provide personalized, high quality customer service with its skilled and experienced trainers. Offering its members a large, comfortable training facility equipped with the latest fitness equipment, D-Gym appeals to business professionals who work or reside in Maslak or nearby neighborhoods. D-Gym is the most comprehensive and technologically advanced health club in Turkey and features state-of-the-art cardiovascular and weight training areas in three different categories, private training, group exercise classes, multi-purpose studios, a pilates studio, a spin studio, nutritional counseling, full-service spa providing various skincare and massage services, a Turkish bath, saunas, steam rooms, a relaxation lounge and an indoor swimming pool. D-Café, located within D-Gym, welcomes members and non-members and offers a tempting and healthy menu which combines local and seasonal ingredients. D-Gym provides all the expertise and equipment needed to promote an array of healthy habits with special emphasis on a healthy athletics routine. Open on weekdays between 06:30 am and 10:00 pm and on weekends between 08:00 am and 08:00 pm, D-Gym was designed as a facility to meet every need of those who wish to live a healthier and a more fulfilling life. In order to meet increasing demand, D-Gym plans to offer additional centers to prospective members in the near future. Doğuş Group Annual Report 2012

96 Tourism and Services D-Life With the motto, Your lifetime companion for a healthy life, D-Life offers preventive medicine, wellness, comprehensive cleansing, detox, and nutrition programs for a healthy body, mind and soul. D-Life was established on 13 September 2010 in İstanbul with the aim of rendering wellness and detox services, and preventive medicine. The public opening was realized at the end of The Center made a great impression with customers who appreciated how D-Life differentiated itself from competitors. Designed on a total area of approximately 2,000 m 2 in İstanbul s central Ulus district, D-Life Healthy Living and Detox Center invites healthy lifestyle enthusiasts to the new destination for renewal. The Center aims to be the number one destination for those who wish to physically, spiritually and mentally renew themselves and adopt healthy nutrition as their lifestyle by undergoing purification from the adverse effects of city life. D-Life, which is based on the customer-oriented management approach of Doğuş Group, offers services to its customers in a friendly and trustworthy manner. D-Life incorporates various services such as healthy eating habits and healthy life style liquid fast for certain periods, optional intestinal cleansing via colon hydrotherapy and colema therapy, cleaning the blood with ozone, spa services such as sauna and massage, as well as yoga, meditation, and breathing and energy exercises. Currently operating in Ulus, D-Life sets its sights on extending its detox and renewal activities. Furthermore, Doğuş Group entered into a license agreement with Henri Chenot, one of the leading medical spa brands of the world, for two locations in Turkey. First product of this collaboration will be the Detox and Spa Hotel in Cennet Koyu, Bodrum which will start to operate in the last quarter of The Center will serve a clientele looking for a top notch spa and well-being service. The second center that will open at the end of 2015 will be in İstanbul, and will be a purely medical spa serving the complete set of Chenot Method treatments. In 2012, D-Life s main investment was related to the new D-Life/Bag, which helps guests consume only healthy foods all day. D-Life/Bag consists of five different packs which are named as Low-Calorie, Vegan, Belly-Burning, Kids and Sportsmen. Before the preparation of the menus, guests medical conditions, food intolerances and food allergies are considered. The Center aims to provide a full range of healthy lifestyle options including preventive medicine, detoxification, healthy and well-balanced nutrition, wellness (spa etc.) and to make these a choice of lifestyle. 94

97 95 Körfez Havacılık Körfez Havacılık operates domestic and international commercial flights. Its professional flight crew, with more than 14 years of civil aviation experience, are also qualified instructors. Körfez Havacılık Turizm ve Ticaret A.Ş., under the affiliation of Doğuş Group, was formed in 2007 and in May 2008 received its Air Operator s Certificate (AOC) from the Turkish Civil Aviation Authority. Körfez Havacılık is one of the leading and high-quality business jet operators in Turkey. Due to its substantial corporate structure, highly experienced flight and ground crew, and its well-maintained fleet, the Company has been able to soar above its competitors. Körfez s fleet, comprised of one Gulfstream 450 airplane, one Hawker 900XP airplane, one Bell 407 helicopter and one DHC Twin Otter amphibious aircraft, is authorized to operate commercial flights both domestically and internationally. The Company s 14-seat Gulfstream 450 heavy class business jet was the first in its class in Turkey. The Company s main operations center is at the General Aviation Apron of İstanbul Atatürk Airport. Körfez has its own special hangar in which the aircraft are based and where its experienced technical personnel perform regular maintenance. When necessary, maintenance is performed at authorized service centers under the observation of the Company s team of experts. Körfez Havacılık s flight crew, with more than 14 years of civil aviation experience, are also qualified instructors (TRI) on the aircraft they fly. The Company has established and applies a Quality Management System (ISO 9001:2008) for Air Taxi Management. The Company executed more than 1,000 flight hours with two business jets and one helicopter in Also last year, it received nearly 1,300 charter flight demands, 90% of which came from charter flight brokers who represent its main client base. Major international destinations in 2012 included Geneva, London, Moscow, Paris, the Greek Islands and several others in Italy. Domestic destinations included Bodrum and Dalaman. Doğuş Group Annual Report 2012

98 Real Estate Effectiveness, strength and PROFIT It is the common language of the combination of red and purple colors. All projects undertaken by Doğuş Group companies operating in the real estate sector represent these qualities for high customer satisfaction. 96

99 97 Doğuş Group Annual Report 2012

100 Real Estate Financial Highlights In the real estate sector, Doğuş Group operates with three companies; Doğuş REIT, Doğuş Real Estate and also with Doğuş Turizm Sağlık Yatırımları ve İşletmeciliği San. ve Tic. A.Ş. which owns 42% of the İstinyePark Shopping Mall. Financial Highlights (TL thousand)* Doğuş REIT Segment Assets 177, , , ,917 Revenues 41,699 10,174 12,411 14,373 Cost of Revenues (31,405) (1,855) (1,894) (1,812) Gross Profit Margin (%) EBIT 5,427 9,003 10,683 34,791 EBITDA 5,518 9,080 10,832 37,674 EBITDA Margin (%) Net Income 2,980 9,711 13,205 37,452 *From CMB Report and Annual Report Financial Highlights (TL thousand)** Doğuş Real Estate Segment Assets 448, , , ,921 Total Equity 323, , , ,602 Net Rental Income 127 1,396 23,474 26,356 Other Operating Income, Net 39, , ,869 23,939 EBIT 35, , ,520 33,167 EBITDA 35, , ,546 33,229 Net Income 26,929 85,389 85,128 25,711 ROA (%) ROE (%) **From IFRS Report Financial Highlights (TL thousand)*** Doğuş Turizm Sağlık Segment Assets 851,830 1,032,825 1,412,331 1,701,485 Revenues 262,942 47,620 59,207 70,997 Cost of Revenues (154,593) (4,198) (5,008) (3,889) Gross Profit Margin (%) EBIT 94,487 72, , ,843 EBITDA 94,487 72, , ,200 EBITDA Margin (%) Net Income 84,685 66, , ,670 ***Financial information about Doğuş Turizm Sağlık is prepared on a standalone basis. The Company is 90% shareholder of D-Otel Marmaris and D-Marin Göcek, which operate under tourism sector. 98

101 99 Doğuş REIT Supported by the new partnership structure and together with the global experience and wealth funds of Doğuş Group, Doğuş REIT aims to be among the leaders in real estate investment companies in Turkey. Real Estate Investment Trust (REIT) companies began operating in Turkey in 1995 as a result of the regulations prepared by the Capital Markets Board. Two years later, they became publicly listed on Borsa İstanbul (BIST). REITs are capital market facilities established in order to operate in public offerings and portfolio management activities. They may make investments in real estate, capital markets instruments based on real estate, real estate projects, rights, money and capital markets tools based on real estate. Doğuş REIT s strategic priority in this sector is to consider real estate development and investment activities as productive and profitable sources of income which require experience and expertise in construction, financing and marketing, and which must be carried out in a corporate structure and a professional manner. On 25 July 1997, the Company began operating as the third REIT on the BIST under the title Osmanlı REIT. At that time, it had a registered capital of TL 5 trillion and a paid-in capital of TL 250,000, and was listed on the ISE 100 index. Doğuş REIT was established with the aim of being one of the leading REITs by assimilating Doğuş Group s national as well as global experience in finance, construction and real estate. At the end of 2001, as a result of the merger between Osmanlı Bank and Garanti Bank, both belonging to Doğuş Group, 51% of the Company s shares were transferred to Garanti Bank, making it a financial subsidiary of the Bank. Its name was changed into Garanti REIT. By the end of 2005, the Company s registered capital and paid-in capital reached TL 500 million and TL million, respectively. As of 1 December 2006, the shareholder structure of Doğuş- GE REIT changed when Garanti Bank sold 50% of its shares to GE Capital Corporation and 50% to Doğuş Holding. Doğuş Holding and GE Capital Corporation each held 25.5% of the shares, while 49% of the shares are publicly held. Shares are listed on Borsa İstanbul (BIST), National 100 and ISE-GMYO industrial indices; their ticker symbol in the national market is DGGYO. Doğuş Group Annual Report 2012

102 Real Estate Following the letter of intent signed on 15 September 2010, a Share Purchase and Sale Agreement was entered into effect by and between Doğuş Holding and General Electric Capital Corporation on 12 November 2010 for the sale of all the shares with a nominal price of TL 23,913,900 (25.5% of the company capital) owned by General Electric Capital Corporation at Doğuş-GE Gayrimenkul Yatırım Ortaklığı A.Ş. to Doğuş Holding in consideration of US$ 28,000,000. As of 3 January 2011, the parties had fulfilled the necessary applications for the purpose of obtaining approvals from relevant public authorities for completion of the transfer and closing procedures. Currently, the Company s commercial title is Doğuş REIT. The shareholding of the Company was consequently changed to 51% owned by Doğuş Holding and 49% open to the public as of this date. Its commercial title was then registered as Doğuş GYO A.Ş. Doğuş REIT strategically aims to make investments in real estates and development projects which may create high rental income and to target low-risk commercial projects, both in purchasing and in selling, in order to act in its stakeholders best interests. Productivity and liquidity principles are always taken into consideration when arranging the portfolio of the Company. Measures are taken to increase the income of real estate investments for which profitability is being reduced. It is always important to maintain strong liquidity and to actively manage the cash and real estate portfolio in a professional manner. It is always aimed to obtain an income that is higher than alternative investment opportunities and recourse cost. Doğuş REIT attempted as usual to develop its sectoral relationships in Turkey and in foreign countries by means of participating in various events in Such activities aimed to monitor developments in Turkey and foreign countries, uncover investment opportunities, and establish public opinion and pressure groups with respect to the Company s activities. To that end, Doğuş REIT maintains its close relationships and joint activities with national and international organizations such as GYODER. Vision Supported with the new partnership structure, Doğuş REIT aims to be one of the leaders investing and developing companies in Turkey; together with the global experience and wealth funds of Doğuş Group, which shelters finance, construction and real estate specialties. Mission Doğuş REIT s mission is to increase the value of its investment portfolio through stable growth, thus maximizing shareholder value by offering higher dividends and market capitalization and concurrently providing the highest customer satisfaction in the projects developed. Highlights from Properties Portfolio Doğuş REIT portfolio includes Doğuş Center Maslak located in İstanbul and the Antalya 2000 Plaza located in Antalya. 100

103 101 Doğuş Center Maslak Doğuş Center Maslak broke new ground in Turkey by exclusively hosting large stores and offering a unique store mix. This mix includes car showrooms and service areas, a supermarket, fitness center and food court. Located in İstanbul s main business district, Maslak, and exclusively featuring large stores known as big boxes, Doğuş Center Maslak offers a high-quality of interior design and equipment unlike its foreign counterparts. The main reason behind this choice is that the Maslak-Levent area is Turkey s banking and finance center where educated white-collar personnel work. The Center is also easily accessible as it is near main roads (the coast road, TEM, and E5 highways), the junctions of both bridges that cross the Bosphorus, and the new Metro station. Portfolio Breakdown 2012 Doğuş Center Maslak 79.6% Doğuş Center Maslak also offers significant benefits to the brands included in its store mix. Such brands are usually unable to find adequately large and cost-effective spaces in downtown malls and forced to move to the outskirts of the city, resulting in an inability to attract their target audience. Doğuş Center Maslak offers such stores the opportunity to occupy large spaces in Maslak, at the heart of the city. The total space of the Center is 63,202 m 2, with stores occupying 47,508 m 2. There is enclosed parking with capacity for 788 vehicles, and there is also an open parking area. Construction of Doğuş Center Maslak Project was completed in November The building represents 79.58% of the Company s portfolio and is valued at TL 176,278,000 according to the expert report dated 25 December 2012, prepared by Taksim Kurumsal Gayrimenkul Değerleme ve Danışmanlık A.Ş. Antalya / Centrum, Shopping Center, Antalya 2000 Plaza Antalya 2000 Plaza is an office and shopping center building located in Recep Peker Street where urban rents have the highest value and vehicle and pedestrian traffic is very dense. It offers 92 independent sections and other sections of 9,000 m 2 for offices, shopping area, bazaars, cinemas and fast food restaurants. 56.8% of the building was included in the Company s portfolio in Antalya 2000 Plaza 3.4% Money and Capital Market Facilities 17% The building represents 3.33% of the Company s portfolio and is valued at TL 7,431,000 according to the expert report dated 25 December 2012, prepared by Taksim Kurumsal Gayrimenkul Değerleme ve Danışmanlık A.Ş. Future Plans In accordance with its strategic target of investing in architecturally original and financially feasible commercial real estate projects; shopping mall and office buildings development projects with a certain conceptual approach in metropolitan areas, Doğuş REIT will continue to seek and evaluate new investment opportunities. Doğuş Group Annual Report 2012

104 Real Estate Doğuş Real Estate By analyzing market expectations, regional characteristics, customer needs and demands comprehensively, Doğuş Real Estate provides maximum benefit through its investments in a wide range of portfolios including office projects, commercial centers, hotels, wellness centers and hospitals. Doğuş Real Estate Investment and Management Company, whose shares are 100% held by Doğuş Group, was founded in Since its foundation, its goal has been to be the most valuable company in the sector without sacrificing trust, respectability, honesty or the high quality of service from its expert staff in real estate development, construction management, sales and marketing fields. The fact that Turkey is one of the countries that reached the highest level of growth during among the countries of OECD and G20, affected investor demand in a positive way. Doğuş Real Estate is closely monitoring the dynamics of the real estate sector throughout Turkey and proceeding to develop projects which include commercial buildings as well as hospitals, wellness centers and logistics facilities by utilizing the large real estate portfolio owned and invested by Doğuş Group. Doğuş Real Estate, which holds 16 assets all over Turkey today, continues its work with great care in order to make the best use of these assets. Targets: Focusing on unconditional customer satisfaction, Reflecting the Doğuş identity and different points of views in all of its projects, Creating places that provide high standards of living, Becoming the most valuable and respected company in the sector. Principles: Trust, Respectability, Honesty, Fulfilling the responsibilities of current and future generations, 102

105 103 Maintaining high-quality service, Providing permanent institutional competitive advantages, Keeping team work at the forefront. Completed Projects Gebze Center Shopping Mall Realized entirely by the investment of Doğuş Real Estate, Gebze Center Shopping Mall opened on 3 September 2010 and continues to add value to the region and the vicinity, both from the point of economy and socially life. Gebze Center Shopping Mall continued its 2011 growth in number of visitors and revenue into During the year, 9 million visitors were served and a 21% increase in Shopping Center general revenue was obtained. Additionally, it increased its quality by adding national retail brands. Important in this success are the facts that the project was realized at the right time and location and has a strong store mix. Beside its financial success, Gebze Center supports the development of social life in Gebze and adds value to the region. Gebze Center has 127 stores located on an area of 59,000 m 2, and is close to 99% occupancy rate. There is a continuing demand for renting kiosks and stores in the mall. As required by the marketing strategy, events held in 2012 were planned to create loyal customers. In this respect, many activities were realized which pleased retailers as well as customers and increased their revenues. Events which add value to Gebze Center and help to promote the brand also continued during the year. The world famous Atlantis Circus, 3 rd Gebze Book Days event, and the Sea Life interactive exhibition realized with the participation of TÜDAV experts are among the main events. Additionally, the number of visitors to the Kral FM/TV Studio, where live broadcasts are realized each week with famous artists, was maintained and continued to be a center of distinction. In addition to all these projects, the Center puts its name on many various social responsibility projects. Various events were prepared, especially for disabled persons, and informative campaigns were launched to increase the awareness on the environmental concerns. Gebze Center aims to bring together well-known national and international brands under the same roof. TESCO-KİPA (10,500 m 2 ) as hypermarket, KOÇTAŞ (7,600 m 2 ) as DIY, and TEKNOSA (2,800 m 2 ) as electronic market are included. Gebze Center continues to offer variety in shopping to its visitors with a wide product range from more than 120 stores including apparel, food, souvenir items, household utilities, furniture, stationary, jewelry, cosmetics, white goods, and textiles. Doğuş Group Annual Report 2012

106 Real Estate Ayazağa Doğuş Group Office Building Renovation Project Renovation of a 12,147 m 2 existing building on land of 6,880 m 2 in Ayazağa, İstanbul, which began in December 2011, was completed in December D-Hotel Maris Renovation Project Project Management Service, given to D-Hotel Maris to renovate 200 rooms on land of 156,000 m 2, began in March 2011 and was completed in March Future Plans The future plan of Doğuş Real Estate is to increase investments in the market and provide maximum customer satisfaction in project development and management service business. Doğuş Real Estate aims to complete projects effectively in order to get the highest performance in terms of income and prestige. D-Life Ulus Project The D-Life Healthy Living and Detox Center project, comprising 1,500 m 2 of enclosed area and 560 m 2 of outdoor area in Ulus, İstanbul, was completed in April Nusr-Et Etiler Renovation Project Renovation of the restaurant which occupies 550 m 2 of enclosed area in Etiler, İstanbul, was completed in June Grand Hyatt Hotel Restaurant Renovation Project Renovation of the main restaurant in the Grand Hyatt Hotel in Taksim, İstanbul started in October 2011 and was completed in May D.ream Ortaköy Office Building Renovation of D.ream s office building in Ortaköy, İstanbul was completed in February Doğuş Holding Dubai Office Interior decoration of the office which occupies 2,000 m 2 of enclosed area in Dubai, was completed in December Ongoing Projects Maslak Office Building Project The project is in Maslak, İstanbul and occupies 45,717 m 2 of closed area on 4,725 m 2 of land. Project development works have now been completed. Project management and construction began in November Doğuş Center Etiler Building Renovation Project Project development and management works of the trade complex occupying 9,000 m 2 began in January 2012 and are planned to be completed in the first quarter of D-Hotel Bodrum Project The project development and management works of D-Hotel Bodrum occupying 8,200 m 2 on 11,250 m 2 of land in Bodrum, Muğla, began in December 2011 and are planned to be completed in the last quarter of Gebze Center Shopping Mall Data O p e n i n g D a t e : 0 3 S e p t e m b e r Land Area : 61,000 m 2 Total Construction Area : 140,000 m 2 Total Rentable Area : 59,000 m 2 Car Park Capacity : 1,500 vehicles Hypermarket : 10,500 m 2 DIY : 7,600 m 2 Electronic Market : 2,800 m 2 Total Terrace Area : 1,250 m 2 Stores : 23,100 m 2 Cafe and Restaurant : 4,800 m 2 Entertainment Areas : 6,200 m Performance Indicators Total Turnover : 229,234,000 TL Total Visitors : 9,182,000 people Total Vehicle Entrance : 2,170,000 vehicles Monthly Basket Average : TL/people Monthly Endorsement/m 2 Average : 331 TL/m 2 Total Rental Income : 22,718,000 TL Occupancy Rate : 98% 104

107 105 İstinyePark Doğuş Group also operates with İstinyePark in the real estate sector since September 2007 under a partnership between Doğuş Turizm Sağlık Yatırımları ve İşletmeciliği San. ve Tic. A.Ş. and Orta Gayrimenkul Yatırım Yönetim A.Ş. Since September 2007, Doğuş Group has been operating İstinyePark under a partnership between Doğuş Turizm Sağlık Yatırımları ve İşletmeciliği San. ve Tic. A.Ş. and Orta Gayrimenkul Yatırım Yönetim A.Ş. Doğuş Holding owns 42% while Orta Gayrimenkul Yatırım Yönetim owns 58%. Offering luxury, style and convenience under the same roof, İstinyePark provides its guests the experience of the world of elegance and luxury in İstanbul. Every renovation made and every brand new store opened could be counted as a milestone. Also, 42 brands opened their first monobrand stores in Turkey at İstinyePark. İstinyePark aims to become an international shopping destination. Since its opening in September 2007, İstinyePark has been working non-stop with its 300 stores to offer the best service to its visitors. The shopping mall provides a vast selection of products and services thanks to its 270,000 m 2 construction area, 87,000 m 2 store area, 3,600-unit car park and wide range of stores. There are 70 people in the management department and 3,500 employees at İstinyePark. İstinyePark has the widest selection in terms of brand mix. It has two unique points called Bazaar area and Lifestyle area. The only shopping center in the Sarıyer district of İstanbul, İstinyePark has become a role model for the new generation of shopping centers. İstinyePark offers viable alternatives to a wide scale of visitors from all ages and backgrounds. The shopping mall features both indoor and outdoor space. With its giant glass dome and glass ceilings, the mall allows for an abundance of natural light, giving visitors the perfect harmony of indoor comfort and outdoor airiness. İstinyePark was built in line with the belief that a shopping mall should provide the highest standards in service and presentation as well as in architectural details and technical solutions. Visitors to İstinyePark can experience the joy of sitting under the shade of a tree or the comfort of chatting with local shopkeepers, together with the ultimate pleasure of watching a movie in a state-of-the-art theater or the fulfillment of living an active city life all possible under one roof. Awards In 2008, the world s biggest real estate and retail expo, Mapic, crowned İstinyePark as the Shopping Mall Developer of the Year. In 2009, the International Shopping Mall Council (ICSC) awarded İstinyePark with Grand Opening, Expansion & Renovation and Maxi Silver awards. In that same year, the Mall was also recognized as Europe s Best Shopping Mall by the ICSC. Also, the Shopping Malls and Retailers Association (AMPD) awarded İstinyePark Shopping Mall of the Year. İstinyePark was recently awarded FIABCI Prix d Excellence prize for retail in Doğuş Group Annual Report 2012

108 Energy Know-how, sustainability and vitality Blue for knowledge; green for sustainability; yellow, orange and red for vitality; pink for caring for next generations. The investments made by Doğuş Energy have utmost importance for a sustainable and livable future for Turkey as well as for the world. 106

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110 Energy D Energy Doğuş Energy D Energy aims to generate electricity from domestic energy sources which will meet increasing energy demand in the best way possible. The Company grows through its strategic and profitable ongoing investments. Financial Highlights (TL thousand)* Doğuş Enerji (Artvin) Total Assets 32, , ,048 Revenues Cost of Revenues Gross Profit Margin N/A N/A N/A EBIT (3,095) (302) (268) EBITDA (3,091) (298) (254) EBITDA Margin N/A N/A N/A Net Profit (2,639) (15,564) 9,013 *Financial information about Doğuş Enerji (Artvin) is prepared on a standalone basis. Financial Highlights (TL thousand)** Aslancık Total Assets 41, , ,461 Revenues Cost of Revenues Gross Profit Margin N/A N/A N/A EBIT (1,953) (1,632) (1,745) EBITDA (1,901) (1,582) (1,718) EBITDA Margin N/A N/A N/A Net Profit (2,004) (12,140) 6,704 **Financial information about Aslancık is prepared on a standalone basis. Financial Highlights (TL thousand)*** Boyabat Total Assets 785,895 1,782,690 2,207,377 Revenues ,705 Cost of Revenues - - (7,737) Gross Profit Margin N/A N/A 67% EBIT (32,930) (5,159) (1,794) EBITDA (32,829) (5,039) 3,217 EBITDA Margin N/A N/A 0 Net Profit (26,692) (98,757) 85,694 ***Financial information about Boyabat is prepared on a standalone basis. 108

111 109 The Energy Sector The electricity sector in Turkey is characterized by strong growth, low per-capita usage, and ongoing liberalization of the market. To maintain the continuity of Turkey s economic, sociological, and technological progress and expansion, the energy sector must adapt and keep up with the latest developments in this industry. Installed capacity reached 57 GW at the end of According to the TEİAŞ projections, it is estimated that the sector needs an increase of approximately 100% of installed capacity in order to meet an estimated increase of 5.7% - 6.7% CAGR in demand for the next decade. The increase is expected to be undertaken by the private sector. From this perspective, the share of private sector in Turkey s installed capacity is expected to increase every year. The demographics of Turkey and its strong economic growth dictate that the energy sector will require an investment of US$ 130 billion by 2020 mainly by utilities. D Energy Doğuş Holding holds a 100% share in D Energy which holds: 100% share in Doğuş Trading Company, 100% share in Artvin HEPP, 34% share in Boyabat HEPP, 33% share in Aslancık HEPP. D Energy develops and grows through strategic and profitable enterprises to maintain an optimal generation portfolio. In order to maintain the sustainability of the economical, sociological, and technological progresses, D Energy aims for reduction in the foreign energy dependency through the utilization of electricity from local energy sources. The Energy Business Line was founded within Doğuş Holding in The Company aims to monitor all developments concerning the energy sector, both within Turkey and throughout the region. It is responsible for formulating and generating strategies for all energy and infrastructure investments within Doğuş Group. Taking necessary measures and creating profitable business enterprises are ultimate goals of this organization. Doğuş Group Annual Report 2012

112 Energy In terms of the generation sector, which is based on renewable energy sources, D Energy is one of the leading private companies with its 1 GW installed capacity. D Energy has designated new investment projects and privatizations for the generation of electricity as well as the operation of these assets and energy trading as its core areas of business. D Energy has also started to operate in the electricity trading business. Ongoing Investments Considering Turkey s growing energy dependence, benefiting from domestic and renewable energy sources carry strategic importance for the country. In addition, renewable sources are playing a key role by supporting endeavors for decreasing carbon emission levels. To that extent, hydroelectric energy, which is a domestic, renewable and clean energy source, has begun to assume greater importance in Turkey as stated in the strategic paper declared by State Planning Agency. With the 513 MW installed capacity of Boyabat DAM, D Energy covers 1% of Turkey s installed capacity. TEİAŞ is expecting installed capacity to reach 72 GW by the end of At that time, D Energy is predicted to have 1 GW installed capacity which will cover 1.5% of Turkey s installed capacity. The current portfolio has 1 GW licensed installed capacity and includes the Artvin Hydroelectric Power Plant (332 MW), in which D Energy holds 100% share, the Boyabat Hydroelectric Power Plant (HEPP) (513 MW), in which D Energy holds a 34% share, and the Aslancık Hydroelectric Power Plant (120 MW), in which D Energy holds a 33% share. The total amount of investment in these three projects exceeds US$ 2,500 billion. Construction of Artvin Hydroelectric Power Plant, located on Çoruh Reservoir in the north eastern side of the country, began in January A total of US$ 840 million will be invested in the project which is fully owned by D Energy. Once the project is completed at the end of 2015, it will be one of the leading hydroelectric power plants in Turkey, generating more than 1 billion kwh of electricity per year with its 332 MW installed capacity. 110

113 111 With US$ 1,200 million of investment, Boyabat Hydroelectric began operations in December It is expected to generate about 1.5 billion kwh of electricity per year. The project has the greatest installed capacity among private sector hydroelectric power plants in Turkey. US$ 240 million will be invested for the run-of-river Aslancık Hydroelectric Power Plant with an installed capacity of 120 MW. The project is expected to be operational by 2013 Q3. Artvin and Boyabat hydroelectric power plants, which represent 88% of total capacity investment by D Energy, are designed to benefit from peak hours. Both will help the Company to maximize its profit and serve the country by stabilizing spot market electricity prices in peak hours. Future Plans D Energy closely monitors privatization initiatives and also greenfield and brownfield projects in various regions of the country in order to optimize its portfolio. D Energy will continue to operate in the areas of energy generation and electricity trading. In addition, D Energy is developing investment plans on prospective projects in order to have an optimal generation portfolio. The Company aims to build an additional 2 GW of installed capacity mainly from renewable and conventional sources. Doğuş Group Annual Report 2012

114 New Initiatives Innovation, inspiration and high standards Colors bring amusement to the world and lighten up our lives. Reading the trends accurately, getting to the future by properly understanding the moment, raising the bar against the standards, Doğuş Group is unique and unrivaled thanks to its new ventures that are carried out in the newly entered sectors. 112

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116 New Initiatives D.ream D.ream aims to become an international player in the world entertainment sector by offering a wide variety of dining experience to a broad range of customers at different income levels. Doğuş Group established Doğuş Restaurant Entertainment and Management (D.ream) in March To date, D.ream has acquired majority stakes of Kiva, Nusr-Et Steakhouse, Go Mongo, İstanbul Doors Group, Mezzaluna and Lacivert Restaurant. As for international expansion, D.ream became partner with Azumi Group and has licensing agreement with GQ Bar and Armani Ristorante. Currently, D.ream has 38 brands represented at 78 outlets with more than 2,250 employees in Turkey. The key factor in D.ream s future strategy is introducing new, innovative, corporate standards to the sector, in general. In addition, D.ream plans to expand via a twofold approach: 1) domestic expansion, and 2) international expansion. Both approaches are to be executed by locating different brands in suitable cities and locations. D.ream aims to become an international player in the world entertainment sector by offering a wide variety of dining experience to a broad range of customers at different income levels. İstanbul Doors Group 18 brands (A jia, Anjelique, CA D ORO, Carlotta, Da Mario, Doors Akademi, Foodist Catering, Gigi, Gina, ID Card, Kitchenette, Mama, Raika, Tom Aikens, Tom s Deli, Tom s Kitchen, Vogue and Zuma), 40 locations in 4 countries, serving approximately 3.5 million customers annually. Azumi Group 2 brands (Roka and Zuma), 9 locations in 6 countries (Miami, Dubai, London, Hong Kong, Bangkok and İstanbul). 114

117 115 Go Mongo 1 brand, 3 domestic locations. Mezzaluna 3 brands (Mezzaluna, Mezzaluna Ristorante and Mezzaluna Express), 13 locations. New restaurant opening at Bodrum Yalıkavak Marina. Nusr-Et Steakhouse 2 brands (Nusr-Et Steakhouse and N-Burger), 3 locations in İstanbul and Ankara. New restaurant opening at Bodrum Yalıkavak Marina. Kiva 1 brand, 1 location. Emporio Armani Ristorante 2 brands (Emporio Armani Ristorante and Armani Caffé), 2 locations. GQ Bar 1 brand, 1 location. Lacivert Restaurant 1 brand, 1 location. Doğuş Group Annual Report 2012

118 New Initiatives IMG-Doğuş Doğuş Group and the global sports, fashion and entertainment company IMG Worldwide signed an agreement to form a joint venture in Turkey; IMG-Doğuş. The Company aims to develop sports, fashion and entertainment projects in Turkey and neighboring countries. IMG-Doğuş has already concluded a long-term agreement to promote and market the sponsorship and ticketing rights of Beşiktaş Football Club. Also, Mercedes-Benz Fashion Week İstanbul is being organized by IMG-Doğuş and the Company would help to raise the profile of Turkish designers and the Turkish fashion industry as a whole. In addition, IMG-Doğuş is actively seeking opportunities including: creating a sports academy and training facilities; creating and organizing events in the region around popular sports such as football, tennis, sailing, golf, motor sports, action sports, cycling and other mass participation events; constructing and developing sporting infrastructure including stadia and venues; organizing new fashion events; and building and/or operating venues and indoor arenas for the purpose of hosting entertainment & music events. 116

119 117 Bonubon Bonubon assists merchants to deliver specially-designed lifestyle campaigns and experiences in fashion, dining, travel, beauty, leisure and entertainment categories to Internet savvy customers. Established as an Internet marketing platform for sellers, Bonubon was launched in April 2012 as a service mark of Doğuş Yeni Internet. Bonubon is a platform that helps merchants deliver carefullyselected offers to millions of customers across the country via mobile or Internet. With an innovative perspective that aims to maximize customer satisfaction, Bonubon assists merchants to deliver specially-designed lifestyle campaigns and experiences in fashion, dining, travel, beauty, leisure and entertainment categories to Internet savvy customers. Segmented database marketing and full integration with leading banks credit card systems allow users to transact in a comfortable and trusted environment when browsing offers and selecting deals. In addition, Bonubon consumers are able to transact without traditional coupons by uploading their purchases directly to their Garanti Bank credit cards or by selecting their own Bonumara ID. Bonus card holders are also able to transact on the site using bonus points and all purchases are guaranteed beyond the coupon expiration date as unredeemed purchases are refunded to users accounts. Helping to build a trustworthy Internet shopping space with strong consumer confidence is part of Bonubon s mission. With new laws emerging on Internet marketing, Bonubon strictly follows guidelines to respect privacy laws. With close to one million members within its first year of operation, Bonubon members have easy access to membership accounts to make changes on their profile or terminate membership if they choose to do so. Social networks continue to play an increasingly important role in many people s lives. Alongside brand building activities, Bonubon s industry experts leverage social media as a strong communication tool that helps the Company to understand its customers needs and expectations. By bridging this information to merchants, Bonubon creates a strong echo system delivering value and excellence to consumers and merchants alike. Thanks to its innovative approach with close to one million people voting, Bonubon was ranked second in the Best New Initiative Website category in the Webrazzi Awards Doğuş Group Annual Report 2012

120 New Initiatives Doğuş Planet With the vision of becoming a regional leader within the e-commerce sector, Doğuş Planet embraces the mission to be the locomotive power in reshaping the Turkish e-commerce sector by providing innovative services to customers and stores. Doğuş Planet, established in June 2012, is a joint venture between Doğuş Group and Korean SK Group focusing on the e-commerce sector. Doğuş Planet brings together SK Group s experience in technology and innovation with Doğuş Group s local expertise, regional experience, and strong assets. With the vision of becoming a regional leader within the e-commerce sector, Doğuş Planet embraces the mission to be the locomotive power in reshaping the Turkish e-commerce sector by providing innovative services to customers and stores. n11.com provides to its customers millions of products and services ranging from fashion to electronics, from kitchenware to rare Turkish handicrafts all under six main categories and more than 30 subcategories. n11.com s strategy is to provide value propositions based on trust and convenience to customers and support and care to stores and brands within an eco-system that is built upon a strong alliance of strategic partners. n11.com Resulting from this strong partnership, Doğuş Planet launched its new e-commerce investment, n11.com in the first quarter of This new venture operates as an open market platform connecting diverse stores and brands to millions of customers. 118

121 119 Doğuş Teknoloji Doğuş Teknoloji creates products that answer to actual demands and that reflect strong technological and operational experience and sectoral expertise. Doğuş Teknoloji began its activities as a part of Doğuş Group companies in Since then, it has remained an innovative, solution-oriented and dynamic company creating customer satisfaction through high-quality, value-added products and services at the lowest costs possible. Doğuş Teknoloji works on all kinds of areas regarding Information Technology (IT) infrastructures, adapting systems and software products, creating and maintaining products using the latest technologies. The Company approaches its customers as strategic partners, working closely with their internal business and IT units. Doğuş Teknoloji creates products that answer to actual demands and that reflect strong technological and operational experience and sectoral expertise. In addition, the Company offers effective project management services, and it reviews and continuously improves its methodologies to deliver the best on-time, as-promised solutions, thereby maintaining the highest levels of quality and customer satisfaction. Doğuş Teknoloji is able to expand its customer portfolio with these principles of perfection and dependability. The main areas of Doğuş Teknoloji s expertise cover; designing of software and information systems requests from analysis of business requirements (i.e. business process automation, reporting, security etc.); development, installation, updating, maintenance, error fixing and integration of projects on these systems; maintaining security, monitoring of performance and reporting of abnormalities, consultancy services and management of all these processes. data access and analysis capabilities among all brands, modules and points of operation. DOD - Second hand vehicle sales system. MYS - Costs tracking and reporting system developed for Doğuş Construction. D-İnsan - Integrated Employee Performance Evaluation system. VIAOnline - Vehicle Inspection Automation software developed for TÜVTÜRK. VDFNet VDF Factoring System VDF Insurance Fleet Rental System (FleetNet) - LeasePlan. Design, development and technical support for +250 web sites. Future Plans Doğuş Teknoloji s mission is to research leveraging technology solutions in accordance with business development and management performance targets of businesses, provide technology consultancy by offering projects in compliance with these targets, and bring these technological applications to life. In this context, Doğuş Teknoloji is developing Internet and mobile applications, corporate and sectoral boutique software, and business intelligence applications as well as providing support and maintenance services for advanced technological infrastructures. In this context, below is a list of some of the software products the Company has given service to in the year 2012: TURKUAZ - A large scale enterprise software used by Doğuş Otomotiv, all its Authorized Dealers/Service Providers, OEMs, and suppliers which adds value to all automotive processes. It is a fully integrated system that creates instantaneous Doğuş Group Annual Report 2012

122 New Initiatives Related euro.message allows its clients to manage their interactive marketing campaigns via different channels over a single platform. Related Group leverages synergies of different digital marketing services within the Group since The Company offers variety of online marketing services between its different business lines. Related Group initially entered the market under euro.message name in Turkey, as an service provider to a few market leader companies. Being chosen by Turkcell, one of the GSM leaders in MENA region, triggered the Company s path to success. Since then, euro.message has been offering on demand marketing service to more than 3,000 selected worldwide brands, with offices in İstanbul, Hamburg and Dubai. By forming creative teams, Related Group addressed the increasing demand for website design and other creative services in the market. In the beginning, this new service line supported euro.message as a complementing lateral branch. euro.message s exceptional performance focus creative work expanded this line and the Company decided to turn it into a brand as MadebyCat in Services Marketing automation via workflow management, Cross channel marketing management, and SMS messaging services (all world languages), Social media services, Online surveys, HTML optimization, campaign development and design, Lead generation, Integration operations, Digital consulting, Website, micro site, landing page and banner campaign design. Third service line, Brand Mail was established to respond to the demands for permitted data in 2009 in order to manage an database for the current customers and for all online advertisers. This service line offers advertisers to reach high-level income groups in digital media. euro.message serves more than 3,000 world s top brands and helping them implementing , mobile and social campaigns cross all channels and automatize their marketing processes. euro.message also focuses on providing customized solutions to any size and type companies from SEM s to enterprises and e-commerce companies. 120

123 121 Doğuş Agro Projects R&D Services Corp. Doğuş Group established in September 2012 an agricultural research company, Doğuş Agro Projects R&D Services Corporation, to create value-added products and services based on actual needs of the developing agribusiness in Turkey. For Doğuş Group, 2012 was a year full of new partnerships and new investments in many areas. The Group recognized the enormous potential of agriculture in Turkey and made a strategic decision to link agribusiness with research and development by employing a visionary approach. In this context, Doğuş Group established in September 2012 an agricultural research company, Doğuş Agro Projects R&D Services Corporation, to create value-added products and services based on actual needs of the developing agribusiness in Turkey. The specific aim of the R&D company is to form a strong high-tech research hub serving the interests of the public and private agricultural actors in the region. Doğuş Agro Projects R&D Services Corporation initiated two projects in The first ongoing project is a maximum yield trial around Konya region, subject to two different potato varieties, which is financed jointly by the Doğuş Holding and Farm Frites from Netherlands, a global expert and major actor on potato cultivation and processing. The second project aims to investigate the R&D and agro commercial potential of the Middle Anatolian region around Niğde. 15 academicians from the Faculty of Agricultural Sciences and Technologies of Niğde University have been conducting an in-depth research to determine the agro inventory within the region and the level of efficiency in the agro production value chain. The Group expects this project to give birth to new R&D projects serving to the interests of the producers in the region. Doğuş Group Annual Report 2012

124 Corporate Responsibility Integrity, unity and harmony Dark blue is the expression of all these descriptions. Since its inception, Doğuş Group has been carrying out all its activities in line with its corporate social responsibility and sustainability principles with the aim of contributing to a better world for all. 122

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126 Corporate Responsibility Corporate Responsibility The communities where we do business are important stakeholders for Doğuş Group. We promise to make our communities better places, and we are committed to that promise. Our community engagement comprises of a combination of CSR initiatives, and employee volunteerism, as social development programs in addition to sponsorships as community engagement programs. Corporate Social Responsibility Initiatives Doğuş Holding Child Development Doğuş Kids (Doğuş Çocuk) Established in December 2004, Doğuş Kids is the community development platform of Doğuş Group based on the perspective that our future will be largely shaped by today s children. We believe that this perspective should be given utmost importance today by all players including the business sector. Contributing to the development of young children through education, entertainment activities, and projects since its inception, Doğuş Kids aims to create a more conscious and responsible society in the areas of child development, education and culture and arts. With this objective in mind, Doğuş Kids engages in partnerships with other institutions including non-governmental organizations, international organizations, state and governmental bodies. All of these other institutions share the Doğuş Kids vision of cultivating social change through our children. In 2012, Dr. Erdal Atabek, Social Psychologist and Mentor of the Doğuş Kids Symphony Orchestra, conducted three seminars which were held in public as well as private schools with the support of Doğuş Holding. Seminars were organized with his participation on the relationship between music and child development. Doğuş Kids Symphony Orchestra The Doğuş Kids Symphony Orchestra was established in 2006 as Turkey s first national, permanent children s symphony orchestra. The Orchestra is comprised of conservatory students between 11 and 18 years of age from different regions of Turkey, and introduces the wonder of symphonic music to Turkish children as performed by their peers. In 2012, Doğuş Kids Symphony Orchestra performed a concert with The Choir of General Directorate of Child Services in cooperation with the Republic of Turkey Ministry of Family and Social Policies. The Orchestra took stage in Konya within the events of the National Sovereignty and Children s Day. In addition to this project, the Orchestra also performed four concerts, one at the D-Marin Turgutreis International Classical Music Festival with the world renowned guitarist José Maria Gallardo Del Rey and famous Spanish dancer Antonio Marquez and the others in Niğde, Konya, and Kayseri to reach an audience of 5,200. Concert proceeds were donated to the TOHUM Autism Foundation. Furthermore, in 2012 the book, The Music Calls You, in which the story behind the establishment of the Doğuş Kids Symphony Orchestra is told by Dr. Atabek, was republished. Doğuş Kids Symphony Orchestra Website Having reached its target member number of 100,000 in less than five years, the Doğuş Kids website was replaced by the Doğuş Kids Symphony Orchestra website in July The Doğuş Kids Symphony Orchestra website aims to create a communication platform among the orchestra members, and it also aims to inform and educate young people about classical music. Send Me to School Campaign (Baba Beni Okula Gönder) Since 2006, Doğuş Holding has been providing scholarship for the education of 50 female students on an annual basis through its support of the Send Me to School Campaign, a joint effort with Milliyet newspaper and the Association in Support of Contemporary Living (ÇYDD). 124

127 125 Financial Literacy Para Durumu (Turkey s first financial literacy initiative reaching out to the masses) Financial literacy is an individual s ability to make informed judgments and effective decisions about the use and management of his/her money. Thus, financially literate consumers manage their income, save and invest wisely and avoid fraudulent practices. The term has gained much importance all around the world, as each person and household is the base of economic sustainability in a country. Para Durumu, Turkey s first private media and interaction-based financial literacy initiative, reaches out to the public via multiplatform weekly TV show, a page in the most circulated national newspaper, Posta, as well as the weekend section of Hürriyet, another prominent newspaper. Para Durumu is also published in the monthly women s magazine, ELELE, actively uses social media channels such as Facebook and Twitter, and operates a popular blog and personal finance website at Para Durumu, recognized as a Turkish financial literacy initiative by the OECD, is spearheaded by Doğuş Holding Executive Vice President of Strategy, Özlem Denizmen. Doğuş Holding empowers and encourages Mrs. Denizmen in her capacity as a social entrepreneur in this important endeavor promoting sustainable change in Turkish society. As a result of this initiative, Mrs. Denizmen was honored by the White House Entrepreneurship Summit and as a Young Global Leader 2011 at the World Economic Forum. Para Durumu has soon become an address where people seek solutions and guidance on personal finance problems, financial products, saving for a house, budget decisions, investment choices, credit card issues, and more. It has become a popular (and only) venue for people to talk about money in public. Financial Literacy for Women: İSMEK The financial literacy partnership with İstanbul Metropolitan Municipality began in 2010 and continued during 2012 with İSMEK (İstanbul Metropolitan Municipality Art and Vocational Training Courses) training sessions. By the end of the year, the program reached a total of 14,500 women with great success. The goal to reach 20,000 women is expected to be achieved by mid Cebinde Mucize Yarat (Make Miracles in Your Pocket) Özlem Denizmen s new book, Cebinde Mucize Yarat (Make Miracles in Your Pocket), was published in In previous years, as many as 3,500 women attended seminars in Bursa, Ankara, İzmir and Gaziantep for launching events and signing days. Doğuş Holding has sponsored the publication of 2,000 books in order to reach out to mainly women and youth. National Strategy on Financial Literacy: Financial Literacy and Inclusion Association (FODER) FODER, the Financial Literacy and Inclusion Association, was founded in November 2012 with the aim of being the civil voice on research, policy, practice and general coordination for financial literacy. For this, Mrs. Denizmen as the Founding Chairman has been regularly visiting top executives of the Ministry of National Education, Ministry of Family and Social Policies, Ministry of Finance, and relevant financial regulatory institutions such as the Capital Markets Board, Borsa İstanbul, Inter Card Center, Credit Bureau, Banking Regulatory Institution and the Central Bank of Turkey for a national level financial literacy policy. Doğuş Holding is a member of FODER. Kırmızı Kumbara Project Doğuş Grubu supports the Kırmızı Kumbara project which was initiated in 2012 by Para Durumu in collaboration with the Ministry of National Education, within the scope of the Okullar Hayat Olsun project led by the Ministry. The project aims to promote and expand financial literacy and inclusion by educating children between the ages 9-11 regarding the concept of money, money management, savings awareness and budgeting. The first phase of the project starts in the pilot city İstanbul, where the aim is to reach 50 elementary schools and 25,000 by the end of May 2013 and a total of 50,000 by the end of 2014 educational year. The student sessions are specially considered for maximum efficiency. A brand new practice of teaching, creative drama method, is being introduced to the program. Besides training presentations and creative drama exercises, supportive materials were prepared to solidify financial literacy education for children. Prior to student training sessions, families and teachers are informed as to why financial literacy is essential. An educational framework was designed for adults to build a stronger base for student sessions and sustainability of the cause. The Kırmızı Kumbara project is planned to span over to Following the initiation in the pilot city of İstanbul, the plan is to widen the reach by expanding seven schools in each of the seven regions of Turkey, thus totaling 49 schools. By the end of the 2014 educational year, the plan is to reach a total of 75,000 students. Then the project is to expand to 81 cities across Turkey between the years via the educators that the program is training. Ayhan Şahenk Foundation Since its establishment in 1992, the Ayhan Şahenk Foundation has been undertaking initiatives in the areas of education, health and environment as well as offering social aid to those living in disadvantaged areas. With the vision and philosophy of its founder, Mr. Ayhan Şahenk, the Foundation continued to implement significant projects in 2012 for the benefit of people and community with a responsible perspective to help the government in fulfilling its social welfare duties. Doğuş Group Annual Report 2012

128 Corporate Responsibility Education In 2012, a 24-classroom industrial and technical high-school was completed and handed over to the Ministry of Education in the city of Şanlıurfa. Within the campus of this high-school, a 200-student dormitory building for the male students, a multifunctional meeting room and four workshop laboratories in two separate buildings were built as well. These additional units were aimed at raising the quality of education in this technical school. Another project that was completed by the Foundation in 2012 was the refurbishment and maintenance of Ayhan Şahenk Secondary School. Because it was originally built as a primary school, the School required many changes in order to be used as a secondary school. Many changes were made in the science lab, the computer lab, and the gym by renewing them with up-to-date technical equipment. In September 2012, Ayhan Şahenk Secondary School in Zeytinburnu opened its doors to its new students with its new look painted, furnished and built up to the new standards as a secondary school. In 2012, the Ayhan Şahenk Foundation gave scholarships to a total of 40 students. Of these, 26 attended primary schools, one attended high school, six attended universities and seven attended foreign universities abroad. Health In 2012, the number of patients who benefited from the Mobile Healthcare Units project totalled more than 20,000, thereby reaching a cumulative number of 414,000 patients since its establishment in This project was conceived at the request of the Honorary Chairman of Doğuş Group, Mr. Ayhan Şahenk, who thought that patients living in underserved regions where immigration rates are high should be provided with good quality general health and ophthalmology services, both in terms of treatment and preventive healthcare. Mobile health caravans, equipped with modern technology medical devices as well as specialized physicians and nurses, supply this service in coordination with primary schools and local municipalities. This project was awarded Professor Dr. Nusret Fişek Public Health Award in March 2012 after selection by votes of many professionals from Turkish Medical Association, public health departments of universities and the Ministry of Health. Environment In the context of Ayhan Şahenk Forests of Endearment Project (Ayhan Şahenk Sevgi Ormanları), which was founded with the aim of leaving a healthy and clean environment for future generations, more than 550,000 trees have been planted to date in areas which were previously destroyed by fire, mining, or erosion. In 2012, the Ayhan Şahenk Foundation formed a new forest within an area of 11 hectares nearby Silivri. This region, which benefited from 11,000 adult pine trees being planted, will be maintained for five years, and the plants which have not rooted properly in that time course will be substituted with new ones. The other Forests of Endearment in Marmaris, Bodrum, Niğde and İstanbul are still being maintained this year by the Foundation in accordance with a protocol signed with the Ministry of Environment and Forestry. Fences and gates surrounding the forests are all renewed where necessary, in line with this protocol. Social Aid As a part of the Foundation s ongoing commitment to providing social aid to the underprivileged, the Ayhan Şahenk Foundation provided clothing, boots and hygienic products to 1,075 students and food supplies to 3,205 families in During the month of Ramadan in 2012, the Foundation served iftar dinners to nearly 2,000 people per day, hosting a total of 53,000 people. For detailed information about the Foundation and its projects, please refer to Banking and Financial Services Education Teachers Academy Foundation (Öğretmen Akademisi Vakfı) Having supported education through the Deniz Yıldızları (Sea Stars) project since 1999, Garanti Bank began in 2007 working on a long-term corporate responsibility initiative in the field of education that would bring a new voice. Rather than targeting infrastructural issues such as scholarships, donations, construction of schools, the Bank instead chose to focus strategically on value-creating programs related directly to the teachers, who determine the quality of education. In 2008, following the completion of preparatory work, the Teachers Academy Foundation was founded. With the intention of contributing to the implementation of an education model based on thinking, questioning, and research in our country, the Foundation commenced work on the No Limit in Teaching project, again developed and implemented by Garanti Bank. The main goal of the İstanbul-based Foundation is to make a contribution catering to the needs of teachers committed to educating young people who are conscious of their individual and societal responsibilities, who are capable of research and able to think critically and analytically, who are self-confident and always give importance to self-development, who identify themselves with universal values, and who are capable of embracing the country s cultural heritage. 126

129 127 No Limit in Teaching (Öğretmenin Sınırı Yok) Within the scope of the No Limit in Teaching project, the Bank signed a five-year contract with the Ministry of National Education to arrange training activities aimed at the personal and professional development of teachers. 100,000 teachers are targeted to receive training within the scope of the program, which commenced in the academic year, and for which Garanti Bank has allocated funds totaling TL 15 million. The program s face-to-face trainings which began in May 2009 had reached a total of 73,349 teachers in 78 provinces by 2012, spreading nationally within a brief period of time. All administrators, teachers and inspectors working in primary education can participate in the training sessions on a voluntary basis and without charge. The trainings, administered in the teachers own schools, cover topics under the rubrics of Classroom Management, Communication Skills and Evaluation. Teachers participating in the trainings are presented with an MEB-approved certificate. The trainings covered by the program are administered by 13 full-time expert educators and nearly 400 part-time educators in over 50 provinces who joined the Foundation after the Educator Trainings which were first administered in August 2009 and then again in January 2010 and February All educators work under the Teachers Academy Foundation. Through the ekampus website, developed as a permanent finishing platform, teachers participating in No Limits in Teaching have the opportunity to continue their personal and professional development. Over 55,000 thousand people use ekampus. For further information concerning the No Limit in Teaching project, please visit For further information concerning the Teachers Academy Foundation, please visit İstanbul Modern Education Program Since 2005, Garanti Bank has been supporting the education program of Turkey s first and only modern art museum, İstanbul Modern. The program aims to play a central role in supplementing classroom education and fostering creative and inquisitive individuals who are familiar with, and actively participate in, the arts. Through the ongoing Garanti-sponsored İstanbul Modern training program, more than 466,034 children and teenagers have participated in the program to date. The Genç Hayat Foundation Since 2009, Garanti Bank has been supporting the Genç Hayat Foundation s Anatolian Teacher High-Schools Social Events and, accordingly, supports the Renk Çemberi (Color Circle) project. The program aims not only to enable the students of Anatolian Teacher High Schools to gain awareness of themselves and their environment and develop essential communication skills, but also to shape attitudes and behaviors conducive to a sense of individual and social responsibility. Community Volunteers Foundation (Toplum Gönüllüleri Vakfı-TOG) Garanti Bank is a supporter of Community Volunteers Foundation (Toplum Gönüllüleri Vakfı), a transformational project aimed at turning the energy of young people into a positive benefit for society. The Community Volunteers Foundation (TOG) was formed in December 2002 with the aim of fostering social peace, solidarity and change with its pioneering youth and adult guidance. By enabling youth to participate in volunteerism and social responsibility work, the Foundation contributes to their personal development and encourages their social participation on the basis of volunteerism. Young Community Volunteers, organized in clubs, groups or gatherings in their universities, execute sustainable social responsibility initiatives according to the perceived needs of their communities. Among the projects carried out with the support of the Bank in the reporting period by the Foundation were the Voluntary Education Support program aimed at contributing to the personal development of students in disadvantaged regions, the Periodic Summer Projects consisting of educational support and summer social activities both nationally and internationally, and the five Key Trainings aimed at creating awareness in youth of fundamental concepts such as civil society, projects and volunteerism. Since 2006, Garanti Pension and Life has been supporting several children s education and personal development projects carried out by the Community Volunteers Foundation. By donating a specific percentage of its monthly sales to the Foundation, Garanti Pension and Life supports many projects carried out by the young Community Volunteers, including carrying out repairs in village schools, helping working children and street children, tutoring students of limited means with their high school and university entrance exam preparations, teaching literacy skills, and providing computer courses at youth centers. Open Academy (Açık Akademi) In January 2011, Turkey s first free-of-charge, open-to-all software school was opened with the support of Garanti Bank, contributions from the Ministry of Transport, Maritime Affairs and Communications, and the cooperation of Microsoft. The Open Academy, with three different educational levels, is of benefit to those wishing to develop their application Doğuş Group Annual Report 2012

130 Corporate Responsibility and/or software skills as well as to software development professionals. Since January 2011, 15,367 people have received a total of 32,918 certificates of participation while 1,898 people have graduated from the program. Back to School: Educating, not Employing Children (İşimiz Okumak) Since 2010, aiming to lure secondary school working children (most particularly the ones on the streets) back to school on a full time basis, Garanti Pension and Life has been carrying out İşimiz Okumak (Back to School: Educating, not Employing, Children) project, in collaboration with İstanbul Province National Education Directorate and Bosphorus University. As a part of the project, about 3,100 children from 32 primary schools in İstanbul have been taught how to enhance their achievements and increase their school loyalty. In addition, nearly 450 Garanti Pension and Life employees have participated in school activities, volunteering on weekends and individually sponsoring activities such as going to cinema, theatre, museum, etc. The interaction between the children and volunteers was remarkable. In light of its aim to continually improve the project, Garanti Pension reached an agreement with a professional theatre institution to include Creative Drama as one of the personal development activities in the project as of the academic year. Since the beginning of the project, 7% of the students followed under the project stopped working completely. Compared with similar projects in the world, it has had considerable success by taking many children off the streets and out of work. Moreover, a significant improvement in school success of these children has been observed. In addition, the children s parents now view education in a more positive light. Garanti Pension intends to spread the project to other schools soon so as to let more children benefit from the project. Support for Cappadocia Vocational School Since 2008, with the purpose of preparing students for the professional world, Garanti Pension and Life has been collaborating with the Cappadocia Vocational School. Within the scope of this project, the Company s executives give lectures on the private pension system and life insurance sector, help students to obtain the Private Pension Intermediary License, and share their experiences with the students. Garanti Pension and Life also supports students in their preparation for business life by offering them summer internships and job opportunities. The Company continued its support to the school throughout Garanti Factoring CO-OP Project CO-OP (Cooperative Education) is an integrated educational model of university study and the business world. CO-OP is based on the work of the student during his or her undergraduate education. The goal is to integrate education and business. For students who have taken advantage of the CO-OP opportunity, the transition into their workplace after graduation has been much easier and smoother. It is a continuous process that must be completed in a single block of time. Its duration is a minimum of three months and maximum of nine months. Garanti Factoring has been in cooperation with CO-OP Project for three years, offering students internships via The World of Receivable Finance lessons. Undergraduate students from any faculties of the university who wish to work through CO-OP apply to the CO-OP Directorate. Submitting an application doesn t necessarily mean that a student will be elected for CO-OP. A high academic record, recommendations and other required criteria are necessary for the CO-OP application. A student accepted into the CO-OP program is called a CO-OPer. The students selected by the CO-OP Directorate are then sent to Garanti Factoring for interviews. The CO-OP Directorate prepares students to speak with employers. A CO-OPer accepted by the partner company after completing his or her interviews will be offered an internship position. Health Support for Mobile Healthcare Units Since 2005, Garanti Pension and Life has been a permanent supporter of the Mobile Healthcare Units Project carried out by the Ayhan Şahenk Foundation. The Project has been implemented by means of modern health vehicles designed particularly to render service in the fields of Visual Health, General Health and Children s Health. Health services are offered free of charge to individuals who have no social security and/or limited financial income. Children attending primary schools in underserved districts are given priority. Women Support for Women Entrepreneurs Garanti Bank sees supporting the women entrepreneurs as a major responsibility for Turkey s social and economic development. Apart from extending funds to women entrepreneurs, the Bank also supports activities encouraging entrepreneurship and educational projects. In its 6 th year of Turkey s Woman Entrepreneur Competition organized with the aim of supporting and encouraging women in business, Garanti received over 6,000 applications. Through its organization of the Women Entrepreneurs Gatherings, organized in collaboration with the Women Entrepreneurs Association of Turkey (KAGİDER), Garanti Bank aims to contribute to the personal development of women in business, informing them on fundamental business issues and encouraging them to create new opportunities in their own businesses. 128

131 129 In 2012, the Women Entrepreneur Gatherings were held in the provinces of Antalya, Denizli, Antakya, Mardin and Muğla with the participation of around 1,000 businesswomen. In 2012, the Women Entrepreneur Executive School program was opened in conjunction with Bosphorus University Lifelong Learning Center. Under the program, women entrepreneurs in Ankara, İstanbul and İzmir received instruction from Bosphorus University academics on subjects such as innovation and sustainable company administration. The Third International Women Entrepreneurship and Leadership Summit, which has been sponsored by Garanti Bank since its inception, was held on 8-9 November The event s theme was The Rising Power of Women in the New World Order and included participation by expert speakers and leaders from around the world. Customers Garanti Anatolian Meetings Celebrating its 10 th year in 2012, the Garanti Anatolian Meetings (GAS) brings together Small and Medium Enterprises (SMEs) and the representatives of local administrations from different provinces in Turkey. Through discussing changes in the economy and market conditions with professionals who are experts in their field, Garanti enables SMEs and local administrators to evaluate regional and international opportunities, discover potential business areas, and create solutions together for their local problems. Since the commencement of the program, 83 meetings have been held in 61 provinces, bringing together 25,000 representatives from SMEs. In 2012, approximately 2,000 SMEs came together in eight provinces. KOBİLGİ (SME Informative) Meetings Garanti Bank organizes seminars, conferences and industrybased informative meetings with the aim of helping to increase the information levels of SMEs. Commencing in 2011, the KOBİLGİ Meetings consist of a series of seminars enriched with examples and practical activities and delivered by experts on subjects such as developments in regulations, marketing and sales. Open to all SMEs, the meetings also simultaneously play a major role in the consolidation of customer loyalty. These training sessions, explaining in technical detail not only the latest regulations but also the most recent developments in areas such as marketing and sales, were held in six different provinces and attended by approximately 1,000 people in Women Entrepreneur Gatherings In 2007, in collaboration with Turkish Women Entrepreneurs Association (KAGİDER), a small-scale training event was held for 100 women. From 2008 onwards, the context and scope of these events expanded. Women Entrepreneur Gatherings are now held annually in five cities across Turkey. Trainings are provided on fundamental topics to enable women to create new opportunities for their businesses and establish networks. Moreover, women get a chance to meet with role models who share their experiences and gather tips about marketing, management, technology, future trends and EU integration. As of 2012, 1,000 women had participated in five cities. Garanti Pension Hobby Clubs In 2008, Garanti Pension and Life initiated the Hobby Clubs Project with the goal of keeping customers happy by providing pleasant moments not only after their retirement but also during the wealth accumulation phase. Currently, the Project covers 19 different hobbies ranging from arts to sports and is implemented with the participation of 200 partners, all of which are leading institutions in their fields. Garanti Pension and Life members participating in Hobby Clubs benefit from discounts up to 50% on hobby courses, training and hobby equipment they use in their different hobby fields. The Hobby Clubs website, hobimlemutluyum. com, gives members the opportunity to discover the different aspects of their hobbies and share their thoughts and accomplishments with other members. New events are organized every month to allow members the opportunity to develop their social lives and communities concurrently. Arts and Culture SALT With the intention of creating cultural awareness and public memory, Garanti Bank, identifying the social need for a cultural environment able to recognize research and creation as an opportunity, has set itself the goal of forming a cultural institution that is unique, autonomous and, most importantly, able to develop interactively with its users. With this in mind, the cultural associations Platform Garanti Contemporary Art Center, Ottoman Bank Museum and Garanti Gallery, operating within the Bank and having been successful in their own fields, have been restructured as one independent institution under the name of SALT. SALT, set up in Beyoğlu, Galata and Ulus on the basis of three buildings-one program, is a cultural institution which implements a number of programs in diverse fields such as contemporary art, social and economic history, architecture, design and urban living. Entrance to SALT, which develops innovative programs aimed at experimental thinking and research and evaluating critical subjects such as visual and material culture, is free-of-charge. In this regard, SALT is an institution with its doors truly open to society as a whole. SALT Research, administered under SALT Galata, serves as a valuable resource for students, academics and researchers. Its library of approximately 100,000 printed publications under Doğuş Group Annual Report 2012

132 Corporate Responsibility 40,000 titles and its archive enable access to over 1,600,000 digital documents. Since commencing activities in 2011, SALT Beyoğlu, SALT Galata and SALT Ulus have authored six comprehensive publications and held 28 exhibitions. In tandem with these exhibitions, 280 events and 92 student-oriented guided tours and workshop activities have been held. During this time, a total of 515,000 people have visited SALT Beyoğlu, SALT Galata and SALT Ulus. Mother Kid Education Foundation Project (MKEF) Garanti Factoring supports the Mother Kid Education Foundation (MKEF) Project which aims to contribute to the social, emotional and mental development of children. Volunteers read the books which are conscientiously picked up by MKEF with creative techniques each week at a location determined as the shortest distance from their home. With this project, volunteers contribute to the development of children and change their reading habits as well. Private Sector Volunteers Foundation and Culture Ants Project Supported by Garanti Factoring, the Private Sector Volunteers Foundation which cooperates with the Culture Ants project aims to educate young students about İstanbul s cultural values and historical places. In that way, they learn history not only from history books but also from life itself. Culture Ants get the opportunity to learn together with volunteers who enjoy sharing and discovering cultural heritage and meeting new friends as well. To be a volunteer, communication and cultural field trainings must be completed. Automotive Education LeasePlan s Support to Education LeasePlan contributes to education through the organizations of Doğuş Group and the Ayhan Şahenk Foundation. In addition, LeasePlan made contributions to Association in Support of Contemporary Living (ÇYDD) for each LeasePlan participant who attended the Avrasya Maraton. Health and Safety Traffic is Life! In connection with its area of activity, Doğuş Otomotiv has been engaging in public awareness projects under the framework of its Traffic is Life! platform on traffic safety since Within the scope of this platform, Doğuş Otomotiv aims to engender cultural change in society. Doğuş Otomotiv intends to touch all segments of society and create positive change in traffic-related behavior through public awareness activities directed at the target audience. Doğuş Otomotiv continues to improve education-focused efforts related to traffic safety that are at the center of the Company s corporate social responsibility policies under the leadership of its spokespersons. The Traffic is Life! platform rests on raising awareness and consciousness of the concept of traffic, while expanding and deepening this consciousness for Doğuş Otomotiv. The activities of Doğuş Otomotiv are structured in such a way as to touch and benefit all segments of society through sustainable programs. Doğuş Otomotiv Employees Come First Doğuş Otomotiv aims to educate all segments of society on the issue of traffic safety, starting from inside this organization. In 2011, Doğuş Otomotiv completed training in safe driving and first aid with regard to traffic, targeting the primary stakeholders (namely employees) in order to engender and strengthen a corporate traffic culture. Then, in 2012, they started to extend their training ventures to the employees of other companies in the private sector. First Aid in Traffic training exposes participants to basic theoretical and practical information in relation to potential incidents and accidents. Doğuş Otomotiv plans to bring similar training, developed by experts and academics with differing content depending on the group targeted, to different organizations throughout Turkey. Doğuş Otomotiv s Corporate Traffic Principles After the completion of all in-company training activities, Doğuş Otomotiv determines the corporate traffic principles by reviewing them together with the Company s employees. Doğuş Otomotiv plans to put into practice corporate traffic safety principles in the form of an Employee Pledge by its employees. Doğuş Otomotiv continues its efforts in the name of guiding its employees to abide by the notion of respect for life in traffic and prompting them to serve voluntarily as role models on this issue. Children and Young People The Traffic is Life! platform aims to create continuing awareness of traffic safety among children and young people who are the drivers of the future. Parallel to this, in 2012, Doğuş Otomotiv launched various activities centered around the philosophy of training which targeted youth. The Şişli Science Center, run by the Turkey Science Center Foundation, which was established in September 2011, has been visited by around 400 children each day and gives information to pre-school and elementary school children on the subject of traffic safety. Designed with the cooperation of expert academics and the exhibition s curator, plays and visual presentations in the exhibition area are meant to direct children s perceptions of traffic safety towards correct behavior. Approximately 80,000 children visited the Traffic Safety Exhibition which remained open until September In addition, Doğuş Otomotiv contributes to the Doğuş Fair Day & Doğuş Champions League Awards by targeting children every 130

133 131 year. Children are provided with information on several topics ranging from compliance with traffic signals to using seat belts and pedestrian crossings for traffic safety including instruction given on specially prepared roads. In addition, children are introduced to the Traffic Pledge on this special, traditional day. Traffic Safety Training in Elementary School Traffic safety training targeting 2 nd grade elementary school children is another project that started in This training is planned to be incorporated into the Social Studies Lesson that is currently part of the Elementary School Curriculum. Initially, 30,000 students received training under the rubric of teachers training put into effect in İstanbul, Kocaeli, Bursa, Ankara, and Niğde with the cooperation of the Provincial Directorates for National Education. Doğuş Otomotiv plans to expand these training activities by putting them into practice in additional cities in The Company is continuing to work on the integration of this training into the curriculum, with the cooperation of the Ministry of National Education. Virgin Radio and High School Students In 2011, Doğuş Otomotiv started raising awareness on traffic safety amongst high school students who will potentially become drivers in the near future. These activities targeting high school students continued during the course of Slogan competitions with the theme of traffic were held with the cooperation of İstanbul Provincial Directorate for National Education, Doğuş Otomotiv, Doğuş Broadcasting Group, and Virgin Radio Turkey, one of Doğuş Broadcasting Group s radio stations popular among high school students in İstanbul. Doğuş Otomotiv visited Şişli Terakki High School, İstek Kemal Atatürk High School, Nişantaşı Işık High School, Açı Schools, Notre Dame de Sion French High School, and Beşiktaş Anatolian High School with the objective of raising traffic safety awareness amongst high school students. On the one hand, these awareness-raising activities conveyed messages about traffic safety to high school students, who are the group closest to becoming potential drivers, by entertaining them. On the other hand, students used their creativity to come up with slogans which were broadcasted live on Virgin Radio Turkey. Furthermore, instructive materials including positive messages about traffic were distributed to the students. University Cooperation Doğuş Otomotiv has also been working on schemes to give traffic safety training targeting university students. For instance, the 3-credit elective Traffic Safety Course, which is part of the Distance Education System, provides content along with useful information on safe driving and first aid techniques. The pilot scheme of this project was put into effect at Kocaeli University and 588 students at the university selected the course. This project will become more widespread, reaching different universities and wider audiences in Doğuş Otomotiv Customers and Traffic is Life! Targeting society as a whole, Doğuş Otomotiv is launching activities aimed at raising the awareness of its customers within the framework of the Traffic is Life! platform. Doğuş Otomotiv firmly believes that it is their responsibility not only to sell vehicles to their customers but also to enable them to travel in a secure way. Accordingly, Doğuş Otomotiv prepared special-content training sessions under the guidance of expert instructors. The Company has put into practice an online training program including topics such as Safety Culture in Traffic, Factors Affecting Traffic Safety, Safe Driving, Communication, and Automobile Maintenance. This online training program provides intranet-based computer services and remote access throughout the country to the employees in charge of the brands for which Doğuş Otomotiv conducts sales and marketing activities. Through its authorized dealer network and sales employees, Doğuş Otomotiv aims to contribute to its customers increased awareness of traffic safety and their ability to drive safely. Throughout Turkey, its sales employees relay accurate and useful information to over 100,000 customers on traffic safety during the vehicle buying process, and they continue their efforts in this regard. In addition to the above-mentioned activities, Doğuş Otomotiv has at the same time added items concerned with traffic safety to its renewed vehicle delivery procedures. From now on, each of its customers receives their vehicle only after being reminded about Seat Belts, Child Safety Seats, Safe Following Distances and other similar serious safety issues. Traffic is Life! at the Autoshow Fair With its Traffic is Life! platform, Doğuş Otomotiv also participated in the Autoshow Fair organized once every two years and attended by thousands of visitors. The Company set up a stand involving several activities at TÜYAP Fair s Autoshow that took place between 1 and 11 November At this fair, Doğuş Otomotiv informed visitors about the first aid approach to traffic awareness and theoretical safe driving in traffic. In addition, the Company also gave social media integrated traffic safety messages and taught children traffic rules via various games. Highway Traffic Safety Symposium In tandem with all these activities, the Highway Traffic Safety Symposium and Exhibition, which was organized by the Security General Directorate, took place for the third time between 16 and 18 May This activity united public and private sector organizations, trade bodies, and universities working in order to improve highway traffic safety under a single platform. Doğuş Otomotiv participated in this crucial meeting with its corporate social responsibility platform Traffic is Life! aimed at engendering a positive cultural shift in all segments of society. The Security General Directorate provided information on the Company s activities in the information booklet prepared for the symposium. Doğuş Group Annual Report 2012

134 Corporate Responsibility Traffic is Life! in the Media Doğuş Otomotiv, with public support, has prepared TV and radio public spots with the cooperation of the Security General Directorate and Radio and Television Supreme Council (RTÜK). Seven radio public spots prepared by Doğuş Otomotiv were broadcasted free of charge with the cooperation of the Security General Directorate and Radio and Television Supreme Council. Meanwhile, one TV public spot that the Company prepared with the cooperation of the Security General Directorate is being broadcasted on television. Doğuş Otomotiv continues to work on producing new public spots. It has been carrying out awareness-raising efforts concerning traffic safety through several radio channels including Virgin Radio s radio spot activities about traffic safety in Turkey, Radio Eksen s DJ talks on the topic of traffic, and Kral FM s radio spot activities on the subject of traffic safety. Furthermore, the Company shares information about the Traffic is Life! website and the activities appearing on written and visual media through social media channels (Facebook, Twitter, YouTube), conveying awareness-raising messages to society. Doğuş Otomotiv also uses its Traffic is Life! logo, along with other corporate logos, in sponsorship projects generated in different areas including sports, arts, education, and sales marketing activities, thereby continuing to deliver traffic safety messages to society. Traffic is Life! Awards Several respected organizations have also drawn attention to Doğuş Otomotiv s improvement activities within the scope of its Traffic is Life! platform. Meanwhile, the Company s different projects were rewarded in different categories. Doğuş Otomotiv participated in the Corporate Social Responsibility Solutions Marketplace activity with its Traffic is Life! platform. This activity was organized by the Corporate Social Responsibility Association of Turkey so as to enable companies internalizing corporate social responsibility as part of their corporate culture to share their solutions with the public. Doğuş Otomotiv, which was the first organization to prepare a corporate responsibility report in its sector in Turkey, was awarded two prizes the Corporate Social Responsibility Exemplar Training Application Award and the Jury s Special Award. In addition, the ODD Sales and Communication Awards 2012 Gladiators, which was first organized by the Turkish Automotive Distributors Association in 2010, evaluates each communication product developed throughout the year on the basis of concrete criteria. Doğuş Otomotiv was deemed worthy of an award with its Traffic is Life! platform in the Social Responsibility Project category of The Company will continue its activities in the direction of disseminating its Traffic is Life! program to society as a whole, thereby engendering change on the issue of safety in parallel to its sustainability strategy thanks to the pride it takes in all these remarkable recognitions. The Indicator Project As part of its Traffic is Life! platform, the final design of the Indicator Project displayed at one of its authorized dealers where Doğuş Otomotiv concluded that the project was effective but not dynamic and that it was not suitable for updating in areas such as new technologies, new improvements, and increasingly high-quality service alternatives. The Company decided to improve the project by keeping it continuously up-to-date through the use of multimedia technology instead of physical material and by making it available to its customers at all times. Volkswagen Laboratories at Vocational High Schools Doğuş Otomotiv continued its training activities at Volkswagen Laboratories of Vocational High Schools and at other institutions in The third Volkswagen Training Laboratory was opened at Ankara Gazi Industrial Vocational High School following those in Şişli and Samandıra. The Company aided the school in terms of physical improvements and provided support in the terms of equipment, material, and hardware as per the protocol signed with the Ministry of National Education. Doğuş Otomotiv chose 24 technicians for the training of teachers. The total number of schools it supported reached 107. The internship organizations of 87 students were carried out, 42 students graduated from the laboratories, and 20 of its students were employed. The total number of graduates reached 206, the number of students in training reached 166, and the total number of those employed reached 65. Doğuş Otomotiv also sponsored the E-VIWO (Education in the Virtual World) project conducted jointly by Finland, Scotland, and Turkey. Traffic Responsibility Action Traffic Responsibility Action (Trafikte Sorumluluk Hareketi) is a corporate social responsibility project carried out under the coordination of the Turkish Ministry of Transport, Maritime Affairs and Communications in cooperation with institutions and organizations that operate in the field of traffic and vehicle safety. With the support of TÜVTÜRK, Traffic Responsibility Action aims to raise public awareness of the need to take protective precautions for safety of life in traffic and to act responsibly in traffic, which is one of Turkey s severest problems causing loss of life and damage to property. The project is based on the fact that it is possible to produce permanent and sustainable solutions to the problem of safety of life in traffic only by engaging the relevant stakeholders. Among the stakeholders of the project are six ministries, five universities, two metropolitan municipalities, public institutions, NGO s and occupational organizations. These stakeholders play a vital role in the project as they not only share their experiences and expertise for improving the project, but they also steer the project on the grounds of the feedback received from the field and target audiences. Some stakeholders, such as the General Directorate of Basic Education, also cooperate with the 132

135 133 Ministry of Transport, Maritime Affairs and Communications and TÜVTÜRK as partners for sub-projects designed in order to reach particular target groups. Traffic Responsibility Action consists of four sub-projects: 1) Safe Vehicle Action aims to raise awareness in commercial vehicle drivers, in particular, and the public, in general. The project is carried out thanks to cooperation with the Turkish Drivers and Vehicle Owners Association. 2) Responsible Citizen Action aims to reach the public by benefiting from the mechanism of Public Training Centers. The project is executed through the cooperation by the Ministry of Transport, Maritime Affairs and Communications, General Directorate of Lifelong Learning (Ministry of National Education) and TÜVTÜRK. 3) Bosom Buddies Action s target groups are primary school teachers, students, parents and school bus drivers. The partners of the project are Ministry of Transport, Maritime Affairs and Communications, General Directorate of Basic Education (Ministry of National Education) and TÜVTÜRK. By training the trainer and providing additional materials on traffic safety, the project aims to raise awareness and improve the notion of individual responsibility in traffic. 4) Youth s Action in Traffic addresses high school students. According to data provided by the World Health Organization, road accidents rank first among the causes of death for the age group As such, the project aims to raise awareness among high school students on safety in traffic and individual responsibility. The partners of the project are Ministry of Transport, Maritime Affairs and Communications, General Directorate of Secondary Education (Ministry of National Education), TÜVTÜRK and Goodyear Tires. This project is especially noteworthy as it enables two private sector entities to collaborate under the same umbrella. As of May 2013, the following outputs and results have been achieved under the sub-projects: Safe Vehicle Action reached more than 225,000 citizens and 3,000 commercial vehicle drivers in 36 cities, Responsible Citizen Action reached 3,200 teachers and more than 65,000 citizens in 31 cities, Bosom Buddies Action reached 3,200 teachers, 100,000 students, 200,000 parents, and 6,000 school bus drivers in 36 cities, Youth s Action in Traffic reached 10,000 high school students, 20,000 parents, and 500 school bus drivers in 10 cities in its first year. Another initiative of the Traffic Responsibility Action is the Traffic Responsibility Platform. Pioneered by the Ministry of Transport, Maritime Affairs and Communications, the platform seeks to encourage public and private entities to contribute to traffic safety through internal and external activities for their employees and the public. The platform further envisages encouraging these entities to incorporate traffic safety into their corporate policies, enabling coordination and cooperation for activities on traffic safety to be carried out by different entities, and developing, adopting and extending a framework for corporate traffic safety principles. In addition to such activities and in order to reach the general population through mass media, eight introductory films were shot and broadcasted on television with messages about individual responsibility in terms of traffic safety. These films were supported by several celebrity volunteers such as Kenan Işık, Kenan İmirzalıoğlu, Grup Hepsi. The project s films were broadcasted on national and local television channels and watched at least once by 80% of the population. Additionally, the Traffic Responsibility Action keeps traffic safety always on the agenda by sharing the latest developments about the project through its social media platforms, interacting with the social network users on traffic safety, and organizing prize competitions with questions on traffic safety. The project has received 45,000 likes on Facebook and has attracted more than 6,000 Twitter followers. Within the scope of the project, two internet pages were also developed: and In consideration of its vision, scope and achievements in three years, the Traffic Responsibility Action was included in the National Action Plan for Road Safety pioneered by H. E. Prime Minister Recep Tayyip Erdoğan, himself. Construction Health and Safety Local and international occupational health and safety requirements are meticulously enforced in every phase of construction work. Compliance with project-specific and general environmental and labor safety requirements of each project is the key to the high service quality offered by Doğuş Construction to its clients. Accordingly, training courses are provided to employees to continuously keep up with the changing requirements in the areas of Quality, the Environment, Occupational Health and Safety Management Systems. Doğuş Construction is certified by Lloyd s Register (LRQA) with ISO 9001:2008 Quality Management, OHSAS 18001:2007 Occupational Health & Safety Management, and ISO 14001:2004 Environmental Management Systems. Environment The preservation of the environment is of great importance to Doğuş Construction. Particular care is taken to protect natural resources, to minimize negative environmental impacts and to adopt necessary mitigation measures. To this end, Doğuş Construction is in full compliance with the applicable environmental laws and regulations. Doğuş Group Annual Report 2012

136 Corporate Responsibility Boyabat Dam and HEPP Construction Project The Natural Wastewater Treatment Plant that Doğuş implemented under the title of the Boyabat Dam and HEPP Project adopts the principles of protecting natural resources, minimizing negative environmental impacts and placing emphasis particularly on taking measures that are in the direction of decreasing existing negative impacts. The construction of this natural treatment system, where natural flora is used, is quite simple and economical. These systems are based on the principle of filtering wastewater in basins using natural materials available in the environment. The treatment of water with wetland plants is a small imitation of nature. Wetlands are capable of using solar energy in the environment and renewing themselves. They form a wild life habitat, providing living space for several species, and ensure that the natural balance of the atmosphere is protected by consuming carbon dioxide and generating oxygen. They have high capacity of treatment since they can eliminate organic materials, suspended solids, nutrients, toxic materials, heavy metals and biological components. While the treatment system, with no commissioning cost, is very inexpensive in terms of investment, it is human and environmentally friendly. The aim is to increase the awareness of the local community with this type of environmentally friendly projects. Indeed, it may be appropriate to refer to this technology as Living Machine since the treatment procedure is performed by several aquatic living beings. Media Environment Once again, Doğuş Media Group has been a pioneer by disclosing the first carbon footprint report in Turkey. Approximately 30 companies in Turkey have taken action to measure their carbon footprints, the first step toward reducing greenhouse gas emissions. The first company to receive the result of the measurement was Doğuş Media Group, which had already shown its sensitivity to this matter through Green Screen for the preceding five years. Doğuş Media Group has also been the first media company to measure its carbon footprint, through the services of Carbon Clear Limited. NTV-Green Screen Project Since 2008, NTV s summer lineup has been mainly composed of environmental programs called the Green Screen. This project calls attention to environmental problems and raises public awareness on related issues, responding to questions and correcting common misunderstandings about green issues including global warming, renewable energy, organic diets, green holidays etc. in a variety of formats. The project is being supported by the other brands of the Doğuş Media Group as well, and the Group has been awarded prizes by NGOs and academic institutions for its efforts and contributions made to environmental issues. Real Estate Community Doğuş REIT intends to contribute to the social, cultural, artistic and economic development of communities in which it operates. The Company has been implementing several social responsibility projects to achieve this. The most significant example of these projects is the Company s support of the Dudullu Cultural Center which aims to contribute to the social and cultural development of the area in tandem with the Evidea Residential Project in Çekmeköy. Gebze Center - 2. Gebze Book Days The second Gebze Book Days fair, in which an award was granted by AMPD association in the category of the Marketing Campaign of the Year within the scope of the 14 th AMPD awards program, took place in January. Many authors such as Murathan Mungan, Mehmet Coşkundeniz, Ali Karaçam, Ceyhun Yılmaz, Toprak Işık, Süleyman Bulut, Vahdettin Engin and Sinan Yağmur have come together with their readers for book signings and conversations between 13 and 22 January. During the fair, which was organized with the support of the district governorship of Gebze, District Directorate of National Education of Gebze and the municipality of Gebze, 20,000 books were offered to visitors including students who attended the event free of charge. CSR Activities for Disadvantaged People Gebze Center supported the disabled as well as orphan students by helping them to participate in social life, enabling them to exhibit their manual works, photographs and shows in the exhibitions organized inside Gebze Shopping Center. Pictures and works reflecting the manual skills of the students were presented to visitors. Students had the chance to enjoy the entertainment areas of the shopping mall and to exhibit their shows to crowds of people. Environment Gebze Center realized an activity called The Exhibition of Sea Animals within the scope of the National Sovereignty and Children s Day on 23 April, a first of its kind in Turkey. In this activity which has been realized specifically for children, sea life was portrayed by means of the replicas of mother and nestling whales, big white sharks, seals, turtles, porpoise and dolphins. During this event, which was organized with the aim of recognizing live creatures in sea life and protecting the environment, all information supplied by the international instructors was presented to children with the support of TÜDAV experts. Students were informed through the replicas of sea animals and also had fun by playing games. This event, 134

137 135 held between 21 and 29 April, fulfilled its purpose by attracting the interest of visitors from all age groups. Women Gebze Center continued providing services to the people of the region in the field of culture through exhibitions organized during the year. It hosted numerous exhibitions during The mixed photograph exhibition named The Witnesses of Life: Asia telling stories of witnessing life, opened between 27 February and 7 March while the photograph exhibition named Masculinity is an Exceptional Case, which was organized by the association of socially volunteer youth for the purpose of highlighting issues such as women s rights, violence against women and sexual discrimination, opened on Women s Day, 8 March, and remained open until 13 March. The 5 th exhibition of original works named Drops from the Eye to the Heart was realized by Hayrullah Sözen who became popular through his articles published in the newspaper Düzce Posta for many years. It was presented to art lovers between 16 and 19 February. Besides exhibitions organized by the schools in the vicinity, exhibitions belonging to İSU, GESMEK and KOMEK and exhibitions of numerous painters and photographers were organized throughout the year. Community Engagement Programs Doğuş Holding Art and Culture D-Marin Turgutreis International Classical Music Festival Doğuş Group continues to contribute to and provide support for the development of classical music. The Group strives to ensure its access to a wider section of the population and help Turkish artists produce world-class pieces. Since 2005, Doğuş Group has been organizing the D-Marin Turgutreis International Classical Music Festival in Bodrum. This Festival highlights the support that is required for the development of diverse forms of music. D-Marin Turgutreis International Classical Music Festival is a member of the European Festivals Association (EFA) which is the umbrella organization for festivals across Europe. For more than 50 years, the Association has grown into a dynamic network representing more than 100 music, dance, theatre and multidisciplinary festivals, national festival associations and cultural organizations from about 40 (mainly European) countries. On its eighth anniversary, the Festival took place on 14&15 and 17&18 July 2012, hosting many gifted artists and wellknown orchestras from Turkey and other countries including the world-renowned Turkish pianist Fazıl Say and famous operatic tenor José Carreras. Festival proceeds were donated to the Tohum Autism Foundation to be used for educational materials at the Foundation s private school for children with autism and for the training of teachers specialized in this area. In the meantime, some of the proceeds were used for providing professional skills to the mothers of handicapped children with the cooperation of the Bodrum Health Foundation. The Festival has already attracted a loyal audience of its own which constantly increases each year. In 2012, a total of 20,500 fans followed the festival, which was joined with nearly 300 artists at seven concerts during the four days. The Festival has been also awarded as the Classical Music Event of the Year in the Donizetti Classical Music Awards 2012 by the classical music magazine, Andante. Presidential Symphony Orchestra of Turkey-Symphony on Campus The Presidential Symphony Orchestra of Turkey, established in 1826, has been one of the few special orchestras in the world that has managed to survive to date. In November 2007, Doğuş Group signed an agreement with the Ministry of Culture and Tourism to become the main sponsor of the Orchestra for a period of three years and to start the Technical Betterment Project of the concert building of the Orchestra. Renovations covering the renovation of the entire inner building and the concert hall, the landscaping as well as the renewal of the orchestral and office furniture, were completed in less than a year and finished in October In line with its main sponsorship of the Presidential Symphony Orchestra of Turkey, which was renewed in early 2012 for another three years, Doğuş Holding initiated a new corporate sponsorship project in 2009, Symphony on Campus. The objective of this Project is to take the Orchestra on a tour covering state universities in Anatolian cities, where the Orchestra has never visited, to promote classical music among university students and regional communities. In 2009 and 2010, the project covered the universities of Konya-Selçuk, Niğde, Gaziantep, Kars-Kafkas, Erzurum-Atatürk, Rize, Giresun and Trabzon-Black Sea Technical Universities reaching a total audience of nearly 8,000. In 2012, the Presidential Symphony Orchestra of Turkey visited Isparta-Süleyman Demirel, Afyon-Kocatepe, Denizli-Pamukkale, Burdur-Mehmet Akif Ersoy, Aydın-Adnan Menderes and Muğla universities and reached total audience of 6,350. At the end of three years, the Project reached around 14,000 audiences in a total of 14 cities. The Symphony on Campus Project will continue covering many more universities in the upcoming period. Leyla Gencer Voice Competition Since 2006, Doğuş Holding and Garanti Bank have been the sponsors of the Leyla Gencer Voice Competition. This Doğuş Group Annual Report 2012

138 Corporate Responsibility international voice competition was started by Ms. Gencer herself in 1995 and has supported several young opera singers from all over the world throughout their career paths. In 2012, the 7 th Biennial Leyla Gencer Voice Competition was held in İstanbul on 20 September. Fatma Said, a young soprano from Egypt, won both the first prize in addition to the Doğuş Audience Prize in the competition and will be performing in the 9 th D-Marin Turgutreis International Classical Music Festival in August Santral İstanbul In cooperation with İstanbul Bilgi University, Doğuş Group became the strategic founding partner of the International Modern Art Museum and Cultural Center, Santral İstanbul in Opened in September 2007, Santral İstanbul, the first power station in the Ottoman Empire, recently became one of the main attractions in İstanbul in terms of culture & arts. Environment Since 2007, Doğuş Holding has been one of the corporate members of the DenizTemiz Turmepa Foundation. DenizTemiz Foundation was founded on 8 April 1994 by leading business institutions and the marine sector with the aim of protecting the seas and the 8,333 kilometer coast line that stretches around most of Turkey from Hopa to the İskenderun region. Banking and Financial Services Arts and Culture Garanti Jazz Green Garanti has been sponsoring İKSV, the organizer of the İstanbul Jazz Festival, without interruption for 15 years. With the aim of introducing jazz to a larger audience, Garanti also holds other concerts at the venues it supports under the brand Garanti Jazz Green. Mini Bank Children s Movie Festival Since 2004, Garanti has been co-organizing the first children s film festival in Turkey, the Mini Bank Children s Movie Festival, together with TÜRSAK (the Turkish Foundation of Cinema and Audio-Visual Culture). Through this festival, approximately 70,000 children, in nine different provinces (many of which have very limited access to cinemas) such as Kars, Ordu, Mardin, Konya and Aksaray, received the opportunity to familiarize themselves with the art of cinema. The Lycian Way The Lycian Way is a 500 km-long walking road stretching between Fethiye and Antalya. Garanti took on the task of organizing guided walks along the Lycian Way and placing road signs to make navigation easier for walkers. Moreover, a Lycian Way guidebook, prepared in 2006, has contributed to tourism in the region. The Arykanda Excavations Led by Dr. Cevdet Bayburtluoğlu, the excavation of the ancient city of Arykanda has been receiving support from Garanti Bank for 18 years. The principle of protecting and excavating our archeological heritage, along with the excavation work supported by Garanti, serves universal culture in a significant way. Sports 12 Giant Men and Pixies of Basketball Garanti has been the main sponsor of 12 Giant Men (Turkish National Men s Basketball Team) since 2001 and of Pixies of Basketball (Turkish National Women s Basketball Team) since Athletics Garanti began its support for the Turkish national athletes, Gülcan Mıngır and Aslı Çakır Alptekin, at the time of their preparation for the London Summer Olympics. Aslı Çakır Alptekin brought Turkey its first Olympic gold medal by coming first the women s 1500 meter finals. Football Joining the main sponsors of the National Football Teams in 2008, Garanti began supporting sports on the green pitch. Equestrian Sports Garanti Masters Private Banking has been the official sponsor of the Turkish Equestrian Federation since Ladies European Tour The Garanti Masters Pro-Am Golf Tournament unites amateur golfers with famous professionals. In May 2012, the Turkish leg of the Ladies European Tour, the Turkish Airlines Ladies Open Garanti Masters Pro-Am, organized in several countries of the world, saw the participation of 36 teams. The Bonus Snow Masters Sponsored principally by Bonus for 11 years, the Bonus Snow Masters races are formed from the İstanbul Provincial Championships. The winners of this race are awarded overseas skiing holidays. The winners of the Bonus Snow Masters Open, for six years open also to unlicensed sportspeople, are also rewarded with overseas holidays and various other prizes. The American Express Sailing Regatta The American Express Sailing Regatta, sponsored with the American Express brand aims to spread the love of the sport of sailing among the public. The races are continuing with the 136

139 year support of the Garanti Payment Systems (GÖSAŞ). The races, consisting of the Bosphorus, Turgutreis and Göcek stages, receive the participation of over 140 boats and more than 1,200 sportspeople. The American Express İstanbul Challenger The İstanbul Challenger, under its other name, the TED Open, constitutes the İstanbul stage of Challenger tournaments which began to be organized globally with the support of American Express in Another special tournament for American Express cardholders has been held for four years under the aegis of the tournament, the American Express İstanbul Challenger, where winners receive both the privilege of playing against world-renowned tennis players as well as the opportunity to attend one of the world s major final s matches. Environment WWF-Turkey (World Wildlife Foundation Turkey) Garanti Bank, as the main sponsor for 20 years of WWF- Turkey, is making a major contribution to the sustainable use and conservation of Turkey s natural resources with the slogan Garanti for Nature. With its work on conserving biological diversity and ensuring the sustainable use of natural resources, with the intention of building a future where humanity co-exists harmoniously with nature, the WWF is an international NGO supporting 2,000 conservation projects around the world. With nearly 4,000 employees, it is the world s largest environmental organization. The Foundation carries out projects in around 100 countries in the main areas of climate-change, forest conservation, fresh water, protecting the seas, endangered species and sustainability. garden plays and acknowledgement of interesting plants. As for the adults, they experience the joy of growing vegetables and identifying plants. Volunteers may participate as a trainer in workshops or accompany children of different age groups. Depending on volunteers preferences, they might procure any kind of equipment necessary or they might provide the communication among workshops and festival coordination groups. Other Community Development Programs Çocukların Gözüyle Van Project (Van from the View of Children) Following the October 2011 Van earthquake, a photo workshop entitled Van from the View of Children involving a total of 250 children accompanied by photography teachers from İstanbul, Diyarbakır and Van, was held in Van for over 10 weeks between June and September 2012 with the support of Garanti Bank. The point of the workshop was both to create a space for the children suffering for a year in exceptionally difficult conditions to be able to breathe freely and be creative, as well as to show the consequences of the Van earthquake through the eyes of children. The workshop was carried out by the Photography Academy, Photography Foundation, Nar Photos and the Galata House of Photography and coordinated by Anadolu Kültür. Following the workshop, the children s photographs were exhibited and published in book form for art-lovers. Due to its long-term support for WWF-Turkey s nature conservation projects, Garanti Bank was recognized in 2008 for the second time with the Golden Panda award. Having received the same award in 2001, Garanti retains its status as the only Turkish company to have won a Golden Panda award. In additional to its regular, systematic support, Garanti Bank also in February 2012 supported the Report on Turkey s Ecological Footprint, prepared by WWF-Turkey, which investigated the consumption patterns and their impact on natural resources. TÜBİTAK Nature Festival Garanti Factoring volunteers aim to contribute to the enhancement of nature with Nature Festival Project and provide support to the establishment of organizations and presented with corporate volunteers stand in Nature Festival area. Volunteers are supposed to participate in training courses at least one week before. In that festival, children take part in different kinds of workshops such as observing birds, origami, art workshops, Doğuş Group Annual Report 2012

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141 Consolidated Financial Statements As at and for the Year Ended 31 December 2012 With Independent Auditors Report Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi 15 April 2013 This report includes 2 pages of independent auditors report and 162 pages of consolidated financial statements together with their explanatory notes and 4 pages of supplementary information.

142 Doğuş Group Table of Contents Independent Auditors Report 141 Consolidated Statement of Financial Position 143 Consolidated Statement of Comprehensive Income 145 Consolidated Statement of Changes in Equity 146 Consolidated Statement of Cash Flows 148 Notes to the Consolidated Financial Statements 149 Appendix: Supplementary Information - Convenience Translation to US Dollar

143 141 Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Kavacık Rüzgarlı Bahçe Mah. Kavak Sok. No: 29 Beykoz İstanbul Telephone +90 (216) Fax +90 (216) Internet Independent Auditors Report To the Board of Directors of Doğuş Holding Anonim Şirketi We have audited the accompanying consolidated financial statements of Doğuş Holding Anonim Şirketi and its subsidiaries ( the Group ), which comprise the consolidated statement of financial position as at 31 December 2012, 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 ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from 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 policies 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 audit opinion. Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş., a Turkish corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. Doğuş Group Annual Report 2012

144 Doğuş Group Basis for Qualified Opinion As at 31 December 2012, the accompanying consolidated statement of financial position includes a general provision amounting to TL 107,775 thousand provided by the Group management in line with conservatism principle considering the circumstances which may arise from any changes in the economy or market conditions, and all of this provision amount was recognised as expense in the previous periods. Qualified Opinion In our opinion, except for the effects on the consolidated financial statements of the matter described in the Basis for Qualified Opinion paragraph, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2012, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. Other Matter Our audit was made for the purpose of forming an opinion on the consolidated financial statements taken as whole. The - supplementary information included in Appendix I - is presented for the purposes of additional analysis and is not a required part - of the basic consolidated financial statements. The US Dollar amounts presented in Appendix I - are solely for the convenience of the reader as additional analysis and have not been subjected to the audit procedures applied in the audit of the basic consolidated financial statements. Accordingly, we do not express an opinion on this supplementary information. İstanbul, Turkey 15 April

145 143 Consolidated Statement of Financial Position As at 31 December 2012 Currency: Thousands of Turkish Lira ( TL ) 31 December December 2011 Notes Assets Property and equipment 15 4,851,755 3,921,875 Intangible assets 16 2,421,421 1,610,044 Investments in debt securities 17 5,667,402 7,815,877 Investments in equity securities ,577 54,554 Accounts receivable , ,676 Banking loans and advances to customers 25 14,390,873 12,650,050 Banking loans and advances to banks 26 1,124,970 1,203,379 Financial assets at fair value through profit or loss 27 78,604 45,526 Investment property 19 2,189,168 1,903,086 Other non-current assets , ,600 Deferred tax assets , ,012 Assets held for sale 7 30,780 30,573 Total non-current assets 32,685,800 30,473,252 Inventories , ,069 Accounts receivable 22 1,251, ,242 Due from related parties , ,134 Other current assets 24 3,731,180 2,413,763 Investments in debt securities 17 3,936, ,881 Banking loans and advances to customers 25 9,573,341 9,116,509 Banking loans and advances to banks 26 1,128,628 2,444,856 Financial assets at fair value through profit or loss 27 53,508 55,051 Cash and cash equivalents 28 2,635,107 3,679,314 Assets held for sale 7 64,088 66,650 Total current assets 23,399,348 20,497,469 Total assets 56,085,148 50,970,721 The accompanying notes are an integral part of these consolidated financial statements. Doğuş Group Annual Report 2012

146 Doğuş Group Consolidated Statement of Financial Position (continued) As at 31 December December December 2011 Notes Equity Paid-in capital 2,055,292 2,055,292 Capital stock held by subsidiaries (94,531) (98,755) Share premium 159, ,350 Fair value reserve 247,066 11,912 Translation reserve 34,049 45,446 Hedging reserve (5,571) (8,066) Revaluation surplus 1,101,531 1,060,279 Legal reserves 359, ,281 Retained earnings 6,944,576 6,355,054 Total equity attributable to owners of the Company 10,801,229 9,864,793 Non-controlling interests Şahenk Family 104, ,621 Others 329, ,437 Total non-controlling interests 434, ,058 Total equity 29 11,235,541 10,214,851 Liabilities Loans and borrowings 30 6,511,359 5,831,709 Bonds payable , ,019 Subordinated liabilities 32 35, ,870 Deposits , ,006 Obligations under repurchase agreements ,123 Accounts payable , ,433 Deferred tax liabilities , ,443 Other non-current liabilities , ,961 Total non-current liabilities 10,012,546 9,099,564 Loans and borrowings 30 4,943,933 4,657,559 Bonds payable , ,203 Subordinated liabilities ,871 Deposits 35 23,026,609 21,629,065 Obligations under repurchase agreements 36 3,378,613 2,525,166 Accounts payable 37 1,057, ,724 Due to related parties 40 9,465 6,819 Taxes payable on income 14 92,766 32,589 Other current liabilities 38 1,814,657 1,635,310 Total current liabilities 34,837,061 31,656,306 Total liabilities 44,849,607 40,755,870 Total equity and liabilities 56,085,148 50,970,721 The accompanying notes are an integral part of these consolidated financial statements. 144

147 145 Consolidated Statement of Comprehensive Income For the Year Ended 31 December 2012 Notes Revenues 11,000,016 9,929,164 Cost of revenues (8,209,306) (7,377,208) Gross profit 9 2,790,710 2,551,956 Administrative expenses 10 (1,351,433) (1,189,808) Selling, marketing and distribution expenses (294,942) (242,626) Impairment losses, net 11 (297,992) (273,490) Trading gain, net 27 40, ,956 Other income ,862 2,674,216 Other expenses 12 (227,363) (241,575) Result from operating activities 993,655 3,455,629 Finance income 337, ,174 Finance costs (316,836) (640,346) Net finance income / (costs) 13 20,513 (291,172) Share of profit of equity accounted investees 53,629 8,003 Profit before income tax 1,067,797 3,172,460 Income tax expense 14 (224,469) (436,552) Profit for the year 843,328 2,735,908 Other comprehensive income Revaluation of property and equipment 64,215 (5,335) Change in fair value of available-for-sale financial assets 284,765 (561,781) Change in translation reserve (11,397) 42,078 Effective portion of changes in fair value of cash flow hedges 2,495 (207) Income tax on other comprehensive income 14 (51,484) 102,262 Other comprehensive income / (loss) for the year, net of income tax 288,594 (422,983) Total comprehensive income for the year 1,131,922 2,312,925 Profit attributable to: Owners of the Company 744,003 2,691,764 Non-controlling interests 29 99,325 44,144 -Şahenk Family 16,036 8,312 -Others 83,289 35, ,328 2,735,908 Total comprehensive income attributable to: Owners of the Company 1,029,338 2,267,796 Non-controlling interests 102,584 45,129 -Şahenk Family 16,284 6,060 -Others 86,300 39,069 1,131,922 2,312,925 The accompanying notes are an integral part of these consolidated financial statements. Doğuş Group Annual Report 2012

148 Doğuş Group Consolidated Statement of Changes in Equity For the Year Ended 31 December 2012 Attributable to owners of the Company Paid-in capital Capital stock held by subsidiaries Share premium Fair value reserve Translation reserve Hedging reserve Revaluation surplus Legal reserves Retained earnings Total Noncontrolling interests Total equity Balances at 1 January ,055,292 (98,755) 159, ,725 3,368 (7,859) 1,086, ,507 3,748,970 7,701, ,959 7,980,755 Total comprehensive income for the year Profit for the year ,691,764 2,691,764 44,144 2,735,908 Other comprehensive income Net fair value losses from cash flow hedges, net of tax (279) (279) -- (279) Net fair value losses from available-for-sale portfolio, net of tax (321,412) (321,412) -- (321,412) Transferred to net income from fair value increases, net of tax (86,507) (86,507) -- (86,507) Foreign currency translation differences for foreign operations , , ,488 Transferred to retained earnings from revaluation surplus due to partial disposal of proportionately consolidated joint venture (7,700) -- 7, Change in joint venture rate in a proportionately consolidated joint venture due to partial disposal (64,894) (410) (65,232) -- (65,232) Change in revaluation surplus, net of tax (18,219) -- 25,193 6, ,959 Total other comprehensive income (472,813) 42,078 (207) (25,919) -- 32,893 (423,968) 985 (422,983) Total comprehensive income for the year (472,813) 42,078 (207) (25,919) -- 2,724,657 2,267,796 45,129 2,312,925 Transactions with owners, recorded directly in equity Acquisition of non-controlling interests in previously proportionately consolidated joint ventures with change in control (Note and Note 8.9.2) ,666 88,666 Acquisition of non-controlling interests through business combinations (Note 8.9.3) Acquisition from non-controlling interests in a consolidated subsidiary (Note 8.9.1) (55,207) (55,010) Adjustment to equity for share transfer of a subsidiary of a proportionately consolidated joint venture ,024 1,028 (1,028) -- Change in joint venture rate in a proportionately consolidated joint venture due to partial disposal (34,984) -- (34,984) -- (34,984) Dividends paid (71,040) (71,040) (2,804) (73,844) Transfers ,754 (48,754) Change in non-controlling interests in consolidated subsidiaries (3,933) (3,933) Total transactions with owners ,774 (118,573) (104,799) 25,970 (78,829) Balances at 31 December ,055,292 (98,755) 159,350 11,912 45,446 (8,066) 1,060, ,281 6,355,054 9,864, ,058 10,214,851 The accompanying notes are an integral part of these consolidated financial statements. 146

149 147 Consolidated Statement of Changes in Equity (continued) For the Year Ended 31 December 2012 Attributable to owners of the Company Paid-in capital Capital stock held by subsidiaries Share premium Fair value reserve Translation reserve Hedging reserve Revaluation surplus Legal reserves Retained earnings Total Noncontrolling interests Total equity Balances at 1 January ,055,292 (98,755) 159,350 11,912 45,446 (8,066) 1,060, ,281 6,355,054 9,864, ,058 10,214,851 Total comprehensive income for the year Profit for the year 744, ,003 99, ,328 Other comprehensive income Net fair value gain from cash flow hedges, net of tax , , ,495 Net fair value gain from available-for-sale portfolio, net of tax , , ,549 Transferred to net income from fair value increases, net of tax , , ,212 Foreign currency translation differences for foreign operations ,393 (11,397) (28) -- (10,032) -- (10,032) Change in revaluation surplus, net of tax , ,859 59,111 3,259 62,370 Total other comprehensive income ,154 (11,397) 2,495 41,252 (28) 17, ,335 3, ,594 Total comprehensive income for the year ,154 (11,397) 2,495 41,252 (28) 761,862 1,029, ,584 1,131,922 Transactions with owners, recorded directly in equity Acquisition of non-controlling interests through business combinations (Note 8.1, Note 8.2, Note 8.5 and Note 8.7) ,478 51,478 Effect of legal merger with a previously consolidated subsidiary (5,264) 5, Dividends paid (122,787) (122,787) (32,445) (155,232) Transfers 5,264 (1,040) ,214 (79,438) Change in non-controlling interests in consolidated subsidiaries without a change in control ,885 29,885 (37,363) (7,478) Total transactions with owners -- 4, ,214 (172,340) (92,902) (18,330) (111,232) Balances at 31 December ,055,292 (94,531) 159, ,066 34,049 (5,571) 1,101, ,467 6,944,576 10,801, ,312 11,235,541 The accompanying notes are an integral part of these consolidated financial statements. Doğuş Group Annual Report 2012

150 Doğuş Group Consolidated Statement of Cash Flows For the Year Ended 31 December 2012 Notes Cash flows from operating activities Profit for the year 843,328 2,735,908 Adjustments for: Impairment losses , ,490 Fair value change in investment property 6 and 12 (180,341) (266,214) Provision for and reversal of employee severance indemnity, net 6 and 33 34,537 41,449 Depreciation and amortisation 15 and , ,928 Technical reserves relating to insurance operations 6 14,735 5,369 Gain on sales of property and equipment 12 (14,938) (17,718) Loss from written-off property and equipment, and inventory 6 and 12 1,417 44,487 Loss from deconstruction process of a hotel building 6 and ,331 Gain on partial sales of proportionately consolidated joint venture (2,163,189) Loss on sale of subsidiaries 12 6, Fair value gain on trading property transferred to property and equipment 6 and (51,830) Gain on sales of investment in equity securities 12 and (57,862) Bargain purchase gain recognised on acquisition 8 (5,498) (1,758) Share of profit of equity accounted investees 6 (53,629) (8,003) Change in accrued interest expense, net 6 (2,717) 56,576 Provision for taxes on income , ,793 Deferred tax (credit) / expense 14 (172,128) 186,759 Warranty provision expense 6 and 12 56,600 39,498 1,529,905 1,376,014 Changes in operating assets and liabilities Change in deposits 2,550,827 4,341,604 Change in banking loans and advances to banks 221,726 (655,675) Change in balances with the Central Bank (1,521,391) (1,046,225) Change in banking loans and advances to customers (4,666,678) (7,283,915) Change in financial assets at fair value through profit or loss (29,040) 122,704 Change in other assets 73,407 (135,265) Change in inventories 48,416 (149,425) Change in accounts receivable (520,811) 153,070 Change in due from related parties (136,486) (127,992) Change in obligations under repurchase agreement 739,512 (129,466) Change in accounts payable 329, ,953 Change in bonds payable 570, ,296 Change in due to related parties 206 (56,589) Change in other liabilities 289, ,989 (519,897) (2,123,922) Interest paid (2,181,922) (1,486,649) Interest received 3,377,098 3,027,217 Taxes paid 14 (336,314) (316,652) Warranties paid (51,532) (30,514) Employee termination indemnity paid 33 (9,788) (10,159) Net cash (used in)/provided from operating activities 277,645 (940,679) Cash flows from investing activities Acquisition from non-controlling interest in a consolidated subsidiary 8 -- (55,010) Acquisition of jointly controlled entities 8 (369,202) -- Acquisition of subsidiaries 8 (413,019) (266,361) Acquisition of equity accounted investees (20,000) -- Acquisition of additional interest in previously proportionately consolidated joint ventures with change in control -- (46,873) Proceeds from partial sale of proportionately consolidated joint venture -- 2,833,275 Proceeds from sales of investment in equity securities -- 77,867 Proceeds from sales of subsidiaries 4, Acquisitions of investment property 19 (133,918) (76,595) Decrease in investments in debt securities (1,794,063) (324,583) Acquisition of property and equipment and intangible assets 15 and 16 (1,015,014) (975,449) Proceeds from sale of property and equipment 91,969 78,066 Increase in interest in consolidated subsidiaries (39,906) (12,700) Decrease in interest in consolidated subsidiaries 2,543 8,767 Cash flows provided/(used in) investing activities (3,685,846) 1,240,404 Cash flows from financing activities Dividends paid (122,787) (71,040) Change in short-term loans and borrowings, net 611,147 1,741,681 Change in long-term loans and borrowings, net 1,105, ,181 Change in subordinated liabilities (233,132) 34,737 Cash flows provided by financing activities 1,360,789 2,169,559 Net increase/(decrease) in cash and cash equivalents (2,047,412) 2,469,284 Cash and cash equivalents at 1 January 5,031,447 2,562,163 Cash and cash equivalents at 31 December 28 2,984,035 5,031, The accompanying notes are an integral part of these consolidated financial statements.

151 149 Notes to the consolidated financial statements Notes Description Pages 1 Reporting entity Basis of preparation Significant accounting policies Determination of fair values Financial risk management Operating segments Assets held for sale Acquisitions of subsidiaries and jointly controlled entities Revenues and cost of revenues Administrative expenses Impairment losses, net Other income/expenses Net finance income / (costs) Taxation Property and equipment Intangible assets Investments in debt securities Investments in equity securities Investment property Other non-current assets Inventories Accounts receivable Due from/due to customers for contract work Other current assets Banking loans and advances to customers Banking loans and advances to banks Financial assets at fair value through profit or loss Cash and cash equivalents Capital and reserves Loans and borrowings Bonds payable Subordinated liabilities Other non-current liabilities Retirement benefit obligation Deposits Obligations under repurchase agreements Accounts payable Other current liabilities Commitments and contingencies Related party disclosures Financial instruments Use of estimates and judgments Group enterprises Significant events Subsequent events 303 Appendix: Supplementary information Doğuş Group Annual Report 2012

152 Doğuş Group 1 Reporting entity Doğuş Holding Anonim Şirketi ( Doğuş Holding or the Company ) was established in 1975 to invest in and coordinate the activities of companies operating in different industries, including banking and finance, automotive, construction, tourism, media, real estate, energy and entertainment and is registered in Turkey. Doğuş Holding is owned and managed by the members of Şahenk Family. As at 31 December 2012, the principal shareholders and their respective shareholding rates in Doğuş Holding are stated in note 29. The address of the registered office of Doğuş Holding is as follows: Huzur Mahallesi, Maslak Ayazağa Caddesi, No: Şişli / İstanbul-Turkey As at 31 December 2012, Doğuş Holding has 109 (31 December 2011: 81) subsidiaries ( the Subsidiaries ), 58 (31 December 2011: 36) joint ventures ( the Joint Ventures ) and 12 (31 December 2011: 8) associates ( the Associates ) (referred to as the Group or Doğuş Group herein and after). The consolidated financial statements of Doğuş Group as at and for the year ended 31 December 2012 comprises Doğuş Holding and its subsidiaries and the Group s interest in associates and jointly controlled entities. As explained in more detail in note 2, Doğuş Holding holds controlling interest directly or indirectly via other companies owned and/or exercising the control over the voting rights of the shares held by the members of Şahenk Family, in all its subsidiaries included in the Group. The Group operates partnerships and has distribution, management and franchise agreements with internationally recognised brand names, such as Banco Bilbao Vizcaya Argentaria S.A. ( BBVA ), Volkswagen AG, Volkswagen Finance AG, Audi AG, Porsche AG, Bentley Motors Limited, Seat SA, Scania, Krone, Meiller Fahrzeug&Maschinenfabrik-GMBH&Co KG, Lamborghini S.p.A., Thermo King, Hyatt International Ltd., HMS International Hotel GMBH, Emporio Armani, Guccio Gucci Spa, CNBC, Condé Nast New Markets Europe/Africa NC ( Vogue ), Virgin Radio International Limited ( Virgin Radio ), National Geographic Society ( NG-NG Kids ), Nielsen Media Inc., Curtco Robb Media LLC ( Robb Report ), NBC News Digital LLC ( Ntvmsnbc ), Loro Piana, Hublot, Porsche Design, Armani Ristorante, Armani Caffe, GQ-Bar, Toms Deli, Tom Aikens Restaurant, Tom s Kitchen, Kitchenette, Zuma and Roka. The number of employees of the Group at 31 December 2012 is approximately 30,250 (31 December 2011: 29,000). As explained in more detail in note 6, The Group is organised mainly in Turkey under five core operating segments: Banking and finance Construction Automotive Tourism Others 150

153 151 1 Reporting entity (continued) The subsidiaries, the joint ventures and the associates included in the consolidation scope of Doğuş Holding, their country of incorporation, nature of business and their respective operating segments are as follows: 1.1 Entities in banking and finance segment Below entities are first consolidated under Türkiye Garanti Bankası Anonim Şirketi ( Garanti Bank ); then proportionately consolidated under the Group in accordance with IAS 31 Interests in Joint Ventures. Joint ventures Nature of business Country of incorporation Domenia Credit IFN S.A. ( Domenia ) Mortgage Romania G Netherlands B.V. ( G Netherlands ) Finance The Netherlands Garanti Bank Banking Turkey Garanti Bank International NV ( GBI ) Banking The Netherlands Garanti Bank Moscow ( GB Moscow ) Banking Russia Garanti Bank S.A. Banking Romania Garanti Bilişim Teknolojisi ve Ticaret Anonim Şirketi IT services Turkey ( Garanti Bilişim ) (1) Garanti Diversified Payment Rights Finance Company ( Garanti DPR ) Special purpose entity for Turkey securitisation transaction Garanti Emeklilik ve Hayat Anonim Şirketi ( GEHAŞ ) Life insurance Turkey Garanti Faktoring Hizmetleri Anonim Şirketi ( Garanti Faktoring ) Factoring Turkey Garanti Filo Yönetimi Hizmetleri Anonim Şirketi ( Garanti Filo ) (1) Fleet management Turkey Garanti Finansal Kiralama Anonim Şirketi ( Garanti Leasing ) Leasing Turkey Garanti Hizmet Yönetimi Organizasyon ve Danışmanlık Service activities for fund Turkey Anonim Şirketi ( Garanti Hizmet ) (2) management and operations Garanti Holding B.V. Holding company The Netherlands Garanti Konut Finansmanı Danışmanlık Hizmetleri Mortgage marketing Turkey Anonim Şirketi ( Garanti Konut ) (2) Garanti Kültür Anonim Şirketi ( Garanti Kültür ) (2) Cultural activities Turkey Garanti Ödeme Sistemleri Anonim Şirketi ( GÖSAŞ ) (2) Credit card operational Turkey services Garanti Portföy Yönetimi Anonim Şirketi ( Garanti Portföy ) Fund management Turkey Garanti Yatırım Menkul Kıymetler Anonim Şirketi ( Garanti Yatırım ) Garanti Yatırım Ortaklığı Anonim Şirketi ( Garanti Yatırım Ortaklığı ) Brokerage and investment banking Portfolio management Golden Clover Stichting Custody (2) Settlement and custody The Netherlands Motoractive IFN S.A. ( Motoractive ) Leasing Romania Ralfi IFN S.A. ( Ralfi ) Consumer finance Romania Stichting Safekeeping (2) Settlement and custody The Netherlands Trifoi Real Estate Company (2) Real estate investment Romania United Custodian (2) Settlement and custody The Netherlands (1) These companies are subsidiaries of Garanti Bank and are operating in businesses other than banking and/or finance. They are included within the banking and finance segment for the purposes of Doğuş Holding s consolidated financial statements since Garanti Bank owns their controlling interests. (2) These companies are not consolidated in the accompanying consolidated financial statements as they do not currently have material operations compared to the consolidated performance of the Group. Turkey Turkey Doğuş Group Annual Report 2012

154 Doğuş Group 1 Reporting entity (continued) 1.2 Entities in construction segment Below entities are first consolidated under Doğuş İnşaat ve Ticaret Anonim Şirketi ( Doğuş İnşaat ); then consolidated under the Group. Subsidiaries Nature of business Country of incorporation Ayson Geoteknik ve Deniz İnşaat Anonim Şirketi ( Ayson ) Drilling Turkey Ayson Sondaj Limited Ukraine ( Ayson Sondaj ) A non-operating company Ukraine Dogus Construction LLC Construction Qatar Doğus Insaat ES Construction Morocco Doğus Maroc SARL Construction Morocco Doğuş EOOD Construction Bulgaria Doğuş İnşaat Construction Turkey Doğuş İnşaat Limited (Ukraine) ( Doğuş İnşaat Limited ) Construction Ukraine Dogus Oman LLC Construction Oman Teknik Mühendislik ve Müşavirlik Anonim Şirketi ( Teknik Mühendislik ) Civil engineering Turkey Joint ventures Nature of business Country of incorporation Doğuş Alarko YDA İnşaat ( Doğuş Alarko ) Construction Turkey Doğuş Polat Adi Ortaklığı ( Doğuş Polat ) Construction Turkey Gülermak-Doğuş Adi Ortaklığı ( Gülermak Doğuş ) Construction Turkey Kazakhistan Joint Venture ( Doğuş Prestige ) Construction Kazakhistan Yapı Merkezi-Doğuş-Yüksel-Yenigün-Belen Adi Ortaklığı ( YMDYYB ) Construction Turkey 1.3 Entities in automotive segment Below entities are first consolidated under Doğuş Otomotiv Servis ve Ticaret Anonim Şirketi ( DOAŞ ); then consolidated under the Group. Joint ventures Nature of business Country of incorporation Krone-Doğuş Treyler Sanayi ve Ticaret Anonim Şirketi Production Turkey ( Krone Doğuş ) (1) Meiller Doğuş Damper Sanayi ve Ticaret Limited Şirketi Production Turkey ( Meiller Doğuş ) (1) TÜVTURK Kuzey Taşıt Muayene İstasyonları Yapım ve Vehicle inspection station Turkey İşletim Anonim Şirketi ( TÜVTURK Kuzey ) (1) TÜVTURK Güney Taşıt Muayene İstasyonları Yapım ve Vehicle inspection station Turkey İşletim Anonim Şirketi ( TÜVTURK Güney ) (1) TÜVTURK İstanbul Taşıt Muayene İstasyonları Yapım ve İşletim Anonim Şirketi ( TÜVTURK İstanbul ) (1) Vehicle inspection station Turkey 152

155 153 1 Reporting entity (continued) 1.3 Entities in automotive segment (continued) Associates Leaseplan Otomotiv Servis ve Ticaret Anonim Şirketi ( Leaseplan ) Nature of business Operational leasing Country of incorporation Turkey LPD Holding Anonim Şirketi ( LPD Holding ) Operational leasing Turkey VDF Faktoring Hizmetleri Anonim Şirketi ( VDF Faktoring ) Factoring Turkey VDF Sigorta Aracılık Hizmetleri Anonim Şirketi Agency/brokerage Turkey ( VDF Sigorta ) VDF Servis Holding Anonim Şirketi ( VDF Servis Holding ) Holding company Turkey Volkswagen Doğuş Tüketici Finansmanı Anonim Şirketi Consumer finance Turkey ( VDF Tüketici ) Yüce Auto Anonim Şirketi ( Yüce Auto ) Automotive distribution Turkey (1) These companies are proportionately consolidated joint ventures of Doğuş Holding. 1.4 Entities in tourism segment Subsidiaries Nature of business Country of incorporation Antur Turizm Anonim Şirketi ( Antur ) Hospitality and travel Turkey agency Arena Giyim Sanayi ve Ticaret Anonim Şirketi ( Arena ) Hospitality and cafe Turkey Anadolu Göcek Marina Turizm Yatırımları Anonim Şirketi Marina operation Turkey ( D Marin Göcek ) D Otel Göcek Turizm Yatırımları ve İşletmeciliği Anonim Hospitality Turkey Şirketi ( D Otel Göcek ) D Otel Marmaris Turizm İşletmeciliği Ticaret ve Sanayi Hospitality Turkey Anonim Şirketi ( D Otel ) Datmar Turizm Anonim Şirketi ( Datmar ) Hospitality Turkey Doğuş Dalaman Marina İşletmeciliği Turizm Ticaret A non-operating company Turkey Anonim Şirketi ( Doğuş Dalaman ) (1) Doğuş Didim Marina İşletmeleri ve Ticaret Anonim Şirketi Marina operation Turkey ( Doğuş Didim ) Doğuş Hoteli d.o.o. ( Doğuş Hoteli ) Hotel management and Croatia investment Doğuş Marina Hoteli d.o.o. ( Doğuş Marina Hoteli ) Hotel management Croatia Doğuş Marina Mandalina d.o.o. ( Doğuş Marina ) Investments company Croatia D Marina İşletmeciliği Turizm ve Yönetim Hizmetleri Anonim Şirketi ( D Marina ) Marina management Turkey D Marine Investments Holding Coöperatief U.A. Investments company The Netherlands D Marine Investments Holding B.V. Investments company The Netherlands Doğuş Hoteli Sibenik d.o.o. ( Doğuş Hoteli Sibenik ) A non-operating company Croatia Doğuş Marina Upravljanje d.o.o. ( Doğuş Upravljanje ) Marina management Croatia Doğuş Otel İşletmeciliği ve Yönetim Hizmetleri Anonim Şirketi Hospitality Turkey ( Doğuş Otel İşletmeciliği ) Doğuş Perakende Satış, Giyim ve Aksesuar Ticaret Retail services Turkey Anonim Şirketi ( Doğuş Perakende ) Doğuş Sibenik Razvitak Marina d.o.o. ( Sibenik Razvitak ) Tourism - construction Croatia development Doğuş Sibenik Upravljanje Marina d.o.o. ( Sibenik Upravljanje ) Marina management Croatia Doğuş Turgutreis Marina İşletmeciliği Turizm ve Ticaret Anonim Şirketi ( Doğuş Turgutreis ) Marina operation Turkey Doğuş Group Annual Report 2012

156 Doğuş Group 1 Reporting entity (continued) 1.4 Entities in tourism segment (continued) Subsidiaries Nature of business Country of incorporation Garanti Turizm Yatırım ve İşletme Anonim Şirketi Hospitality Turkey ( Garanti Turizm ) Göktrans Turizm ve Ticaret Anonim Şirketi ( Göktrans Turizm ) Hospitality Turkey Marina Borik d.o.o ( Marina Borik ) Marina operation Croatia Marina Dalmacija d.o.o ( Marina Dalmacija ) Marina operation Croatia Marina Sibenik d.o.o. ( Marina Sibenik d.o.o. ) (formerly, named Marina operation Croatia NCP Marina Mandalina d.o.o.) Şahintur Şahinler Otelcilik Turizm Yatırım İşletmeciliği A non-operating company Turkey Anonim Şirketi ( Şahintur ) Voyager Mediterranean Turizm Endüstrisi ve Ticareti Anonim Şirketi ( Voyager ) Hospitality Turkey Joint ventures Nature of business Country of incorporation Acropolis S.P.A Hospitality Italy Gouvia Marina S.A. Marina operation Greece Lefkas Marina S.A. Marina operation Greece K&G Medmarinas Management S.A. Marina management Greece Zea Marina S.A. Marina operation Greece (1) Doğuş Dalaman was established to build and operate yachting marina in seaside resort towns in Mediterranean coasts of Turkey. However, Doğuş Dalaman has not yet started its operations and accordingly was noted as non-operating. 1.5 Entities in other segment 154 Subsidiaries Nature of business Country of incorporation A Yapım Televizyon Programcılık Anonim Şirketi ( A Yapım ) Media Turkey A.L.E. Gıda Turizm ve Ticaret Anonim Şirketi ( A.L.E. Gıda ) Restaurant establishment Turkey Aresta Gıda Ticaret ve Sanayi Anonim Şirketi ( Aresta ) Restaurant establishment Turkey Bal Turizm ve Gıda Pazarlama Anonim Şirketi ( Bal Turizm ) Restaurant establishment Turkey Büke Turizm ve Lokantacılık Ticaret Anonim Şirketi Restaurant establishment Turkey ( Büke Turizm ) D Eğlence Bar Restoran İşletmeciliği ve Yatırım Anonim Şirketi ( D Eğlence ) Establishment and management of restaurants and cafes D Enerji Üretim ve Yatırım Anonim Şirketi ( D Enerji ) Energy Turkey D Et ve Et Ürünleri Gıda Pazarlama Ticaret Anonim Şirketi Establishment and Turkey ( D Et ) management of D Otel Bodrum Sağlıklı Yaşam Hizmetleri Ticaret Anonim Şirketi ( D Otel Bodrum ) (formerly, named Atami Turizm İşletmeciliği ve Ticaret Anonim Şirketi) D Koruma ve Güvenlik Hizmetleri Anonim Şirketi ( D Koruma ) Dafne Yayıncılık Turizm ve Gıda Pazarlama Ticaret Anonim Şirketi ( Dafne Yayıncılık ) Doğuş Araştırma Geliştirme ve Müşavirlik Hizmetleri Anonim Şirketi ( Doğuş Arge ) Doğuş Bilgi İşlem ve Teknoloji Hizmetleri Anonim Şirketi ( Doğuş Bilgi İşlem ) Doğuş Cennet Koyu Sağlıklı Yaşam Hizmetleri Ticaret Anonim Şirketi ( Doğuş Cennet Koyu ) Doğuş Enerji Toptan Elektrik Ticaret Anonim Şirketi ( Doğuş Enerji Toptan ) restaurants and cafes Healthcare counseling and hospitality Security and protection activities Restaurant and catering Investing Software development A non-operating company Purchasing and selling of electricity Turkey Turkey Turkey Turkey Turkey Turkey Turkey Turkey

157 155 1 Reporting entity (continued) 1.5 Entities in other segment (continued) Subsidiaries Nature of business Country of incorporation Doğuş Enerji Üretim ve Ticaret Anonim Şirketi ( Doğuş Enerji ) Electricity generation Turkey Doğuş Finance Ukraine A non-operating company Ukraine Doğuş Gayrimenkul Yatırım ve İşletme Anonim Real estate development Turkey Şirketi ( Doğuş Gayrimenkul ) Doğuş Gayrimenkul Yatırım Ortaklığı Anonim Real estate investment Turkey Şirketi ( Doğuş GYO ) fund Doğuş Grubu İletişim Yayıncılık ve Ticaret Anonim Media Turkey Şirketi ( Doğuş İletişim ) Doğuş International Limited ( Doğuş International ) Construction equipments England Dogus Management Services Limited ( Dogus Management ) Business and financial Dubai investments Doğuş Media Group GmbH ( Doğuş Media ) Media Germany Doğuş Nakliyat ve Ticaret Anonim Şirketi ( Doğuş Nakliyat ) A non-operating company Turkey Doğuş SA A non-operating company Switzerland Doğuş Sağlıklı Yaşam ve Danışmanlık Hizmetleri Healthcare counseling Turkey Ticaret Anonim Şirketi ( Doğuş Sağlıklı Yaşam ) Doğuş Spor Kompleksi Yatırım ve İşletme Anonim Şirketi Sports activities Turkey ( Doğuş Spor ) Doğuş Tarımsal Projeler Araştırma Geliştirme Anonim Şirketi ( Doğuş Tarım ) Agricultural research and Turkey development activities Doğuş Telekomünikasyon Hizmetleri Anonim A non-operating company Turkey Şirketi ( Doğuş Telekom ) Doğuş Turizm Sağlık Yatırımları ve İşletmeciliği Real estate development Turkey Sanayi ve Ticaret Anonim Şirketi ( Doğuş Turizm ) Doğuş Video ve Dijital Yayıncılık Anonim Şirketi Producing social websites Turkey ( Doğuş Video ) and digital games Doğuş Yayın Grubu Anonim Şirketi ( Doğuş Yayın Grubu ) Media Turkey Doğuş Yeni İnternet Reklam Pazarlama ve Turizm Hizmetleri Anonim Şirketi Online marketing and Turkey ( Doğuş Yeni ) (formerly, named Doğuş Yeni İnternet Reklam ve Pazarlama Hizmetleri Anonim Şirketi) advertising Doors Akademi Eğitim ve Danışmanlık Hizmetleri Anonim Şirketi Academy Turkey ( Doors Akademi ) Doors Holding Anonim Şirketi ( Doors Holding A.Ş. ) Holding company Turkey Doors Uluslararası Yönetim Danışmanlığı Ticaret Anonim Şirketi A non-operating company Turkey ( Doors Uluslararası Yönetim ) Dream International B.V. Investing The Netherlands Dream International Coöperatif U.A. Investing The Netherlands Enformasyon Reklamcılık ve Filmcilik Sanayi ve Media Turkey Ticaret Anonim Şirketi ( Enformasyon ) E Elektronik Bahis Oyunları Anonim Şirketi ( E Elektronik ) Lottery Turkey Genoto Otomotiv Pazarlama ve Ticaret Anonim A non-operating company Turkey Şirketi ( Genoto ) HD-E Radyo ve Televizyon Yayıncılığı Anonim Şirketi Media Turkey ( HD-E ) HD Yayıncılık ve Medya Hizmetleri Anonim Şirketi ( HD Yayıncılık ) Media Turkey Havana Yayıncılık Turizm ve Gıda Pazarlama Ticaret Anonim Şirketi ( Havana Yayıncılık ) Restaurant, food and beverage production Turkey Doğuş Group Annual Report 2012

158 Doğuş Group 1 Reporting entity (continued) 1.5 Entities in other segment (continued) 156 Subsidiaries Nature of business Country of incorporation Işıl Televizyon Yayıncılık Anonim Şirketi ( Star TV ) (1) Media Turkey İstinye Park Gayrimenkul Yatırım ve İşletme Shopping mall Turkey Anonim Şirketi ( İstinye Park Gayrimenkul ) administration Kivahan Turizm Ticaret Anonim Şirketi ( Kivahan ) Establishment and management Turkey of restaurants and cafes Körfez Havacılık Turizm ve Ticaret Anonim Şirketi Transportation Turkey ( Körfez Hava ) Kral Pop Avrupa Radyo ve Televizyon Yayıncılığı Media Turkey Anonim Şirketi ( Kral Pop Avrupa ) Kral Pop Medya Hizmetleri Anonim Şirketi ( Kral Pop ) Media Turkey London Doors Restaurant Group LTD Holding company United Kingdom Nahita Restoran İşletmeciliği ve Yatırım Anonim Şirketi ( Nahita ) Establishment and management Turkey of restaurants and cafes NTV Avrupa Yayıncılık Anonim Şirketi ( NTV Avrupa ) Media Turkey NTV Batı Medya Hizmetleri Anonim Şirketi ( NTV Batı ) Media Turkey NTV Radyo ve Televizyon Yayıncılığı Anonim Media Turkey Şirketi ( NTV Radyo ) Sititur Turizm Yatırım ve Danışmanlık Hizmetleri A non-operating company Turkey Anonim Şirketi ( Sititur ) Star Avrupa Radyo ve Televizyon Yayıncılığı Anonim Şirketi Media Turkey ( Star Avrupa ) (formerly,named E2 Radyo ve Televizyon Yayıncılığı Anonim Şirketi) Star Yapım ve Prodüksiyon Hizmetleri Anonim Şirketi Media Turkey ( Star Yapım ) Tag Restaurants Holdings LTD Holding company United Kingdom Tansaş Gıda ve Sanayi Turizm Anonim Şirketi ( Tansaş Gıda ) A non-operating company Turkey The Tom Aikens Group LTD Restaurant establishment United Kingdom Tom Aikens LTD Restaurant establishment United Kingdom Tom s Kitchen LTD Restaurant establishment United Kingdom Uydu Dijital İnternet Teknolojileri Anonim Şirketi ( Uydu Dijital ) Media Turkey (formerly, named Doğuş Uydu Haberleşme ve Teknik Hizmetler Anonim Şirketi) Yonca Radyo ve TV Yayıncılık Anonim Şirketi ( Yonca Radyo ) Media Turkey Joint ventures Nature of business Country of incorporation Aslancık Elektrik Üretim Anonim Şirketi ( Aslancık ) Electricity generation Turkey Azumi Limited Restaurant United Kingdom Boyabat Elektrik Üretim ve Ticaret Anonim Şirketi ( Boyabat ) Electricity generation Turkey D Tes Elektrik Enerjisi Toptan Satış Anonim Şirketi ( D Tes ) A non-operating company Turkey Doğuş Planet Elektronik Ticaret ve Bilişim Hizmetleri Anonim Şirketi E-commerce Turkey ( Doğuş Planet ) IMG Doğuş Spor Moda ve Medya Hizmetleri ve Ticaret Anonim Şirketi Establishment and management Turkey ( IMG Doğuş Spor ) of sports academies Kanlıca Turizm Sanayi Anonim Şirketi ( Kanlıca Turizm ) Restaurant and hotel Turkey Robata Rest LTD Restaurant establishment United Kingdom Taddeo Trading LTD Restaurant establishment Thailand

159 157 1 Reporting entity (continued) 1.5 Entities in other segment (continued) Joint ventures Nature of business Country of incorporation Taraneete International LTD Restaurant Hong Kong Time Result International LTD Restaurant Hong Kong Wildfire Entertainment LTD Restaurant United Kingdom Zuma Bangkok LTD Restaurant Thailand Zuma Club LLC Restaurant Dubai Zuma Japanese Restaurant INC Restaurant United States Zuma Japanese Restaurant Miami LLC Restaurant United States Zuma Turizm ve Gıda Pazarlama Ticaret Anonim Şirketi Restaurant Turkey ( Zuma Turizm ) Associates Altın Mecralar İnteraktif Medya ve Pazarlama ve Teknoloji Hizmetleri Ticaret Limited Şirketi ( Altın Mecralar ) Nature of business marketing Country of incorporation Turkey Enmoda E Alışveriş ve Ticaret Anonim Şirketi ( Enmoda ) (formerly, named Online shopping Turkey Doğuş E Alışveriş ve Ticaret Anonim Şirketi) (2) Hedef Medya Tanıtım Interaktif Medya Pazarlama Anonim Şirketi ( Hedef Medya ) marketing Turkey İstinye Yönetim Hizmetleri Anonim Şirketi ( İstinye Yönetim Hizmetleri ) Shopping mall administration World Wide Entertainment Medya Ticaret Anonim Şirketi ( World Wide ) Media Turkey Turkey (1) On 29 June 2012, Kapital Radyo ve Televizyon Yayıncılığı Anonim Şirketi ( Kapital Radyo ) merged with Star TV. (2) On 2 April 2012, the Group has sold 75 percent shares of Enmoda which was a previously wholly owned subsidiary. Enmoda is accounted for using the equity method in the accompanying consolidated financial statements starting from 2 April Doğuş Group Annual Report 2012

160 Doğuş Group 2 Basis of preparation (a) Statement of compliance Doğuş Group entities operating in Turkey maintain their books of account and prepare their statutory financial statements in Turkish Lira ( TL ) in accordance with the Accounting Practice Regulations as promulgated by the Banking Regulatory and Supervision Agency ( BRSA ) applicable to Garanti Bank, Turkish insurance legislation and accounting principles applicable to insurance business, and accounting principles per Turkish Uniform Chart of Accounts and per Capital Market Board of Turkey applicable to entities operating in other businesses. Doğuş Group s foreign entities maintain their books of account and prepare their statutory financial statements in accordance with the generally accepted accounting principles and the related legislation applicable in the countries they operate. The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRSs ). The consolidated financial statements were authorised for issue by Doğuş Holding s management on 15 April The Doğuş Holding s General Assembly and the other reporting bodies have the power to amend the consolidated financial statements after their issue. (b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis as adjusted for the effects of inflation that lasted until 31 December 2005, except for the following material items in the consolidated statement of financial position: derivative financial instruments are measured at fair value, available-for-sale financial assets are measured at fair value, non-derivative financial instruments at fair value through profit and loss are measured at fair value, investment property is measured at fair value, certain tangible assets are measured at fair value. The methods used to measure the fair values are discussed further in note 4. (c) Functional and presentation currency These consolidated financial statements are presented in TL which is Doğuş Holding s functional currency. All financial information presented in TL has been rounded to the nearest thousand, except when otherwise indicated. (d) Use of estimates and judgments The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. 158

161 159 2 Basis of preparation (continued) (d) Use of estimates and judgments (continued) Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes: Note 17 Investment in debt securities Note 25 Banking loans and advances to customers Note 27 Financial assets at fair value through profit or loss Note 35 Deposits Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: Note 4 Determination of fair values Note 14 Taxation (utilisation of tax losses) Note 16 Intangible assets Note 34 Retirement benefit obligation Note 39 Commitments and contingencies Note 41 Financial instruments (e) Comparative information The accompanying consolidated financial statements are presented comparatively to give a true and fair view of financial performance of the Group. Certain comparative amounts have been reclassified to conform with the current period s presentation as summarised below: Premium receivables, previously classified in current account receivables amounting to TL 578,127 thousand have been classified in non-current account receivables by the same amount as at 31 December Premium payables, previously classified in current account payables amounting to TL 568,265 thousand have been classified in non-current account payables by the same amount as at 31 December Payables to securities lending market, previously classified in accounts payable amounting to TL 176,706 thousand have been netted-off against receivables from securities lending market, previously classified in accounts receivable by the same amount as at 31 December Value Added Tax ( VAT ) receivables previously classified in other current assets amounting to TL 55,225 thousand have been classified in other non-current assets by the same amount as at 31 December Indemnification asset, previously classified in current accounts receivable amounting to TL 32,756 thousand have been classified in non-current accounts receivable by the same amount as at 31 December Provision for lawsuits previously classified in current liabilities amounting to TL 32,756 thousand have been classified in other non-current liabilities by the same amount as at 31 December Construction in progress previously classified in property, plant and equipment amounting to TL 17,676 thousand have been classified in other non-current assets by the same amount as at 31 December Assets held for sale, previously classified in other current assets amounting to TL 2,427 thousand have been classified in assets held for sale by the same amount as at 31 December Doğuş Group Annual Report 2012

162 Doğuş Group 3 Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities. (a) Basis of consolidation The accompanying consolidated financial statements include the accounts of the parent company, Doğuş Holding, its subsidiaries, joint ventures and associates on the basis set out in sections below. The financial statements of the entities included in the consolidation have been prepared as at the date of the consolidated financial statements. (i) Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The Group measures goodwill at the acquisition date as: the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss. Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. (ii) Non-controlling interests For each business combination, the Group elects to measure any non-controlling interests in the acquiree either. at fair value; or at their proportionate share of the acquiree s identifiable net assets, which are generally at fair value. Changes in the Group s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss. 160

163 161 3 Significant accounting policies (continued) (a) (iii) Basis of consolidation (continued) Subsidiaries Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The table below sets out all consolidated subsidiaries and shows shareholding structure of these subsidiaries at 31 December: Direct and indirect ownership interest held by Doğuş Holding and its subsidiaries Ownership interest through shares held by Şahenk Family Proportion of ownership interest Proportion of effective interest of Doğuş Holding and its subsidiaries A Yapım A.L.E. Gıda Antur Arena Aresta Ayson Ayson Sondaj Bal Turizm Büke Turizm D-Auto Suisse SA D Eğlence D Enerji D Et D Koruma D Marina D Marin Göcek D Marine Investment Holding B.V D Marine Investment Holding Coöperatief U.A D Otel D Otel Bodrum D Otel Göcek Dafne Yayıncılık Datmar Doğuş Sağlıklı Yaşam DOAŞ Doğuş Arge Doğuş Auto Mısr JS Doğuş Auto Mısr LLC Doğuş Bilgi İşlem Doğuş Cennet Koyu Dogus Construction LLC Doğuş Dalaman Doğuş Didim Doğuş Enerji Doğuş Enerji Toptan Doğuş EOOD Doğuş Group Annual Report 2012

164 Doğuş Group 3 Significant accounting policies (continued) (a) Basis of consolidation (continued) (iii) Subsidiaries (continued) Direct and indirect ownership interest held by Doğuş Holding and its subsidiaries Ownership interest through shares held by Şahenk Family Proportion of ownership interest Proportion of effective interest of Doğuş Holding and its subsidiaries Doğuş Finance Ukraine Doğuş GYO Doğuş Gayrimenkul Doğuş Hoteli Doğuş Hoteli Sibenik Doğuş İletişim Doğuş İnşaat Doğus Insaat ES Doğuş İnşaat Limited Doğuş International Doğuş Management Doğuş Marina Doğuş Marina Hoteli Doğus Maroc SARL Doğuş Media Doğuş Nakliyat Dogus Oman LLC Doğuş Otel İşletmeciliği Doğuş Oto Doğuş Perakende Doğuş SA Doğuş Sigorta Doğuş Spor Doğuş Tarım Doğuş Telekom Doğuş Turgutreis Doğuş Turizm Doğuş Upravljanje Doğuş Video Doğuş Yayın Grubu Doğuş Yeni Doors Akademi Doors Holding A.Ş Doors Uluslararası Yönetim Dream International B.V Dream International Coöperatif U.A E Elektronik Enformasyon Garanti Turizm Genoto Göktrans Turizm Havana Yayıncılık HD-E

165 163 3 Significant accounting policies (continued) (a) Basis of consolidation (continued) (iii) Subsidiaries (continued) Direct and indirect ownership interest held by Doğuş Holding and its subsidiaries Ownership interest through shares held by Şahenk Family Proportion of ownership interest Proportion of effective interest of Doğuş Holding and its subsidiaries HD Yayıncılık İstinye Park Gayrimenkul Kivahan Körfez Hava Kral Pop Kral Pop Avrupa London Doors Restaurant Group LTD Marina Borik Marina Dalmacija Marina Sibenik d.o.o Nahita NTV Avrupa NTV Batı NTV Radyo Sibenik Razvitak Sibenik Upravljanje Sititur Star Avrupa Star TV Star Yapım Şahintur Tag Restaurants Holdings LTD Tansaş Gıda Teknik Mühendislik The Tom Aikens Group LTD Tom Aikens LTD Tom s Kitchen LTD Uydu Dijital Voyager Yonca Radyo (iv) Loss of control On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained. Doğuş Group Annual Report 2012

166 Doğuş Group 3 Significant accounting policies (continued) (a) (v) Basis of consolidation (continued) Associates (Equity-accounted investees) Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Investments in associates are accounted for using the equity method and are initially recognised at cost. The cost of investments includes transaction costs. The consolidated financial statements include the Group s share of profit and loss and other comprehensive income of associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group s share of losses exceeds its interest in an associates, the carrying amount of that interest, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. The table below sets out the associates and shows the shareholding structure of these associates at 31 December: Direct and indirect ownership interest held by Doğuş Holding and its subsidiaries Ownership interest through shares held by Şahenk Family Proportion of ownership interest Proportion of effective interest of Doğuş Holding and its subsidiaries Altın Mecralar (1) Enmoda Hedef Medya İstinye Yönetim Hizmetleri Leaseplan LPD Holding VDF Faktoring (2) VDF Tüketici VDF Servis Holding VDF Sigorta (2) World Wide Yüce Auto (1) Consolidated under Hedef Medya. (2) Consolidated under VDF Servis Holding. (vi) Joint ventures Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Joint ventures are accounted for using the proportionate consolidation method. The consolidated financial statements include the Group s proportionate share of the enterprises assets, liabilities, revenues and expenses with items of a similar nature on a line-by-line basis, from the date that joint control commences until the date that joint control ceases. 164

167 165 3 Significant accounting policies (continued) (a) (vi) Basis of consolidation (continued) Joint ventures (continued) The table below sets out the joint ventures and shows the shareholding structure of these joint ventures at 31 December: Direct and indirect ownership interest held by Doğuş Holding and its subsidiaries Ownership interest through shares held by Şahenk Family Proportion of ownership interest Proportion of effective interest of Doğuş Holding and its subsidiaries Acropolis S.P.A Aslancık Azumi Limited Boyabat D Tes Doğuş Alarko Doğuş Planet Doğuş Polat Doğuş Prestige Domenia Garanti Bank Garanti Bank SA Garanti Bilişim Garanti Faktoring Garanti Filo Garanti Holding B.V Garanti Hizmet Garanti Konut Garanti Kültür Garanti Leasing Garanti Portföy Garanti Yatırım Garanti Yatırım Ortaklığı (1) G Netherlands GBI GB Moscow GEHAŞ Golden Clover Stichting Custody Gouvia Marina S.A. (2) Gülermak Doğuş GÖSAŞ IMG Doğuş Spor Kanlıca Turizm K&G Medmarinas Management S.A Krone Doğuş Lefkas Marina S.A. (2) Meiller Doğuş Motoractive Ralfi Robata Rest LTD Doğuş Group Annual Report 2012

168 Doğuş Group 3 Significant accounting policies (continued) (a) (vi) Basis of consolidation (continued) Joint ventures (continued) Direct and indirect ownership interest held by Doğuş Holding and its subsidiaries Ownership interest through shares held by Şahenk Family Proportion of ownership interest Proportion of effective interest of Doğuş Holding and its subsidiaries Stichting Safekeeping Taddeo Trading LTD Taraneete International LTD Time Result International LTD Trifoi Real Estate Company TÜVTURK Güney TÜVTURK İstanbul TÜVTURK Kuzey United Custodian Wildfire Entertainment LTD YMDYYB Zea Marina S.A. (2) Zuma Bangkok LTD Zuma Club LLC Zuma Japanese Restaurant INC Zuma Japanese Restaurant Miami LLC Zuma Turizm (1) Although the ownership rate of Garanti Bank on this company is less than 50 percent, Garanti Bank has the controlling power on the operations and financial policies of this company. (2) Consolidated under K&G Medmarinas Management S.A. 166

169 167 3 Significant accounting policies (continued) (a) (vii) Basis of consolidation (continued) Special purpose entities The Group has established special purpose entities ( SPEs ) to accomplish a narrow and well defined objective such as securitisation of particular assets, or the execution of specific borrowing or lending transactions. The Group does not have any direct or indirect shareholdings in these entities. An SPE is consolidated if, based on an evaluation of the substance of its relationship with the Group and the SPE s risks and rewards, the Group concludes that it controls the SPE. SPEs controlled by the Group were established under terms that impose strict limitations on the decision-making powers of the SPEs management and that result in the Group receiving the majority of the benefits related to the SPEs operations and net assets, being exposed to risks incident to the SPEs activities, and retaining the majority of the residual or ownership risks related to the SPE or their assets. Garanti DPR is a special purpose entity established for Garanti Bank s securitisation transactions. The Group does not have any shareholding interest in this company. (viii) Transactions eliminated on consolidation Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (b) Accounting in hyperinflationary economies Until 31 December 2005, the financial statements of the Turkish entities have been restated for the changes in the general purchasing power of the Turkish Lira ( TL ) based on IAS 29 Financial Reporting in Hyperinflationary Economies. Beginning from January 2006, it was declared that Turkey should be considered a non-hyperinflationary economy under IAS 29. Therefore, IAS 29 has not been applied to the accompanying consolidated financial statements since 1 January (c) (i) Foreign currency Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments (except on impairment in which case foreign currency differences that have been recognised in other comprehensive income are reclassified to profit or loss), a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or qualifying cash flow hedges to the extent the hedge is effective. Doğuş Group Annual Report 2012

170 Doğuş Group 3 Significant accounting policies (continued) (c) (ii) Foreign currency (continued) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to TL at exchange rates at the reporting date. The income and expenses of foreign operations are translated to TL at average exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the foreign operation is a non-wholly-owned subsidiary, then the relevant proportion of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss. When the settlement of a monetary item receivable from or payable to a foreign operations is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented within equity in the translation reserve. (iii) Hedge of net investment in foreign operation The Group applies hedge accounting to foreign currency differences arising between the functional currency of the foreign operation and the parent entity s functional currency (TL), regardless of whether the net investment is held directly or through an intermediate parent. Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in other comprehensive income to the extent that the hedge is effective, and are presented within equity in the translation reserve. To the extent that the hedge is ineffective, such differences are recognised in profit or loss. When the hedged part of net investment is disposed of, the relevant amount in the translation reserve is transferred to profit or loss as a part of the profit or loss on disposal. (d) (i) Financial instruments Non-derivative financial assets The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. 168

171 169 3 Significant accounting policies (continued) (d) (i) Financial instruments (continued) Non-derivative financial assets (continued) Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets and loans and receivables and available-for-sale financial assets. Financial assets at fair value through profit or loss A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. These include investments and certain purchased loans. Financial assets are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group s documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend income, are recognised in profit or loss. Held to maturity financial assets If the Group has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held to maturity financial assets are measured at amortised cost using the effective interest method less and impairment losses. Held to maturity financial assets includes certain banking loans and advances to banks and customers and certain debt instruments. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise banking loans and advances to customers and banks, trade and other receivables, including service concession receivables, and due from related parties. Finance lease receivables Leases where the entire risks and rewards incident to ownership of an asset are substantially transferred to the lessee are classified as finance leases. A receivable at an amount equal to the present value of the lease payments, including any guaranteed residual value, is recognised. The difference between the gross receivable and the present value of the receivable is unearned finance income and is recognised over the term of the lease using the effective interest rate method. Finance lease receivables are included in banking loans and advances to customers. Factoring receivables Factoring receivables are stated at fair value at initial recognition. Subsequent to the initial recognition, factoring transactions are accounted at amortised costs. The carrying amounts of factoring receivables approximate to their fair values since amortisation is taken into account at initial recognition. Doğuş Group Annual Report 2012

172 Doğuş Group 3 Significant accounting policies (continued) (d) (i) Financial instruments (continued) Non-derivative financial assets (continued) Cash and cash equivalents Cash and cash equivalents comprise cash balances, call deposits, balances with Central Bank of Turkey ( CBT ) and other central banks and other liquid assets with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value. Money market placements are classified in banking loans and advances to banks. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories of financial assets. The Group s investments in certain debt and equity instruments are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(m)) and foreign currency differences on available-forsale equity instruments (see note 3(c)(i)), are recognised in other comprehensive income and presented within equity in the fair value reserve. When an instrument is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss. Accounting for interest income and expenses for banking and finance segment is discussed in note 3 (p). Accounting for finance income and expenses for segments other than banking and finance is discussed in note 3 (s). Service concession arrangements The Group recognises a financial asset arising from a service concession arrangement when it has an unconditional contractual right to receive cash or another financial asset from or at the direction of the grantor for the construction or upgrade services provided. Such financial assets are measured at fair value upon initial recognition. Subsequent to initial recognition the financial assets are measured at amortised cost. If the Group is paid for the construction services partly by a financial asset and partly by an intangible asset, then each component of the consideration received or receivable is accounted for separately and is recognised initially at the fair value of the consideration received or receivable (see also note 3(f)(ii)). Other Other non derivative financial instruments are measured at amortised cost using the effective interest rate method, less any impairment losses (see accounting policy 3(m)). (ii) Non-derivative financial liabilities The Group initially recognises debt securities issued, deposits, obligations under repurchase agreements, due to related parties, bonds payable and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. 170

173 171 3 Significant accounting policies (continued) (d) (ii) Financial instruments (continued) Non-derivative financial liabilities (continued) The Group has the following non-derivative financial liabilities: deposits, obligations under repurchase agreements, loans and borrowings, accounts and other payables, subordinated liabilities, bonds payable, due to related parties and liabilities from short-term sales of financial instruments. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method. (iii) Derivative financial instruments including hedge accounting The Group holds derivative financial instruments to hedge its certain risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. All trading derivatives in a net receivable position (positive fair value) as well as options purchased are reported as trading assets. All trading derivatives in a net payable position (negative fair value) as well as options written, are reported as trading liabilities. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. Cash flow hedges When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. Doğuş Group Annual Report 2012

174 Doğuş Group 3 Significant accounting policies (continued) (d) (iii) Financial instruments (continued) Derivative financial instruments, including hedge accounting (continued) Cash flow hedges (continued) When the hedged item is a non-financial asset, the amount accumulated in equity is included in the carrying amount of the asset when the asset is recognised. In other cases, the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified in profit or loss. Separable embedded derivatives Changes in the fair value of separated embedded derivatives are recognised immediately in profit or loss. Other non-trading derivatives When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in profit or loss. (iv) Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. Repurchase, disposal and reissue of share capital (Treasury shares) When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share premium. (e) (i) Property and equipment Recognition and measurement The costs of items of property and equipment purchased before 31 December 2005 are restated for the effects of inflation in TL units current at 31 December 2005 pursuant to IAS 29. Property and equipment purchased after this date are recorded at their historical costs. Accordingly, items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any (see accounting policy 3(m)), except as explained below: 172

175 173 3 Significant accounting policies (continued) (e) (i) Property and equipment (continued) Recognition and measurement (continued) In 2001, the Group started to reflect the land and buildings at their fair values as appraised by independent third party appraisers. Any increase arising on the revaluation of such land and buildings is credited to other comprehensive income, and presented in revaluation surplus in equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in the carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation surplus relating to a previous revaluation of that asset. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the following: the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, when the Group has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. Any gain or loss on disposal of an item of property and equipment (calculated as the difference between the net proceeds from disposals and the carrying amount of the item) is recognised, net in profit or loss in other income or other expenses. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings. (ii) Reclassification to investment property When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Property that is being constructed for future use as investment property is accounted for at fair value. Any gain arising on remeasurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the revaluation reserve in equity. Any loss is recognised immediately in profit or loss. (iii) Subsequent costs Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred. (iv) Depreciation Items of property and equipment are depreciated on a straight-line basis in profit or loss over the estimated useful lives of each component. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. Doğuş Group Annual Report 2012

176 Doğuş Group 3 Significant accounting policies (continued) (e) (iv) Property and equipment (continued) Depreciation (continued) Items of property and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the assets are complete and ready for use. The estimated useful lives for the current and comparative years of significant items of property and equipment are are as follows: Description Year Buildings 50 Furniture and equipment 4-20 Motor vehicles 5-10 Leasehold improvements are amortised over the periods of the respective leases, also on a straight-line basis. Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Tangible assets purchased before 2005 at Garanti Bank and its subsidiaries are depreciated over their estimated useful lives on a straight line basis from the date of their acquisition. Assets acquired after this date are depreciated based on the declining balance method. For the assets acquired after 1 January 2009, the straight line depreciation method is in use. Expenditures for major renewals and improvement of tangible assets are capitalised and depreciated over the remaining useful lives of the related assets. (f) (i) Intangible assets Goodwill Goodwill that arises upon the acquisition of subsidiaries and joint ventures is presented with intangible assets. For the measurement of goodwill at initial recognition, see note 3(a)(i). Subsequent measurement Goodwill is measured at cost less accumulated impairment losses (see accounting policy 3(m)). In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment, and any impairment loss is allocated to the carrying amount of the associates as a whole. (ii) Service concession arrangements Concession rights acquired by the Group have finite useful lives of 20 years ( TÜVTURK ), 38 years ( D Marin Göcek ), 36 years ( Dalmacija ), 18 years ( Borik ) and 12 years (*) ( Gouvia Marina S.A. ) starting from 15 August 2007, 7 December 2010, 30 April 2012, 30 April 2012 and 31 December 2012 respectively, and are measured at cost less accumulated amortisation. Cost includes borrowing costs directly attributable to the acquisition of the concession rights. The Group capitalises the borrowing costs directly attributable to the acquisition, or construction of a qualifying asset as part of the cost of that asset. (*) Concession period ending in 2024 can be prolonged for 13 years after final decision of regulatory authorities. 174

177 175 3 Significant accounting policies (continued) (f) (iii) Intangible assets (continued) Broadcasting rights Broadcasting rights represent terrestrial broadcasting licence of Kral TV and Kral FM which are the intangible assets recognised during the acquisition of commercial and economic assets of Kral TV and Kral FM in 2008 and terrestrial broadcasting licence of Star TV which are the intangible assets recognised during the acquisition of Işıl Televizyon Yayıncılık Anonim Şirketi in Terrestrial broadcast rights have indefinite useful lives. These rights are tested for impairment annually. (iv) Brand name Brand name represents brand name of Ajia, Anjelique, Capri, Da Mario, Gina, Go Mongo, IL Riccio, Kivahan, Kitchenette, Nusr-et, Roka, Tom s Kitchen, Vogue and Zuma which is related to the intangible asset recognised during the acquisitions in 2012 and Star TV which is related to the intangible asset recognised during the acquisition in Brand names have indefinite useful lives and are tested for impairment annually. (v) Content library The content library of series and movies are related to the intangible assets recognised during the acquisition of Star TV in Ownership right of these items in the content library belong to Star TV with unlimited transmission. The fair value of the content library on the acquisition date has been determined by an independent external expert. The content library is measured at cost less accumulated amortisation and any accumulated impairment losses. Useful lives of content library are five years period when content library is ready to screen on TV starting. (vi) Other intangible assets Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and any accumulated impairment losses (see accounting policy 3(m)). (vii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. (viii) Amortisation Except for goodwill, broadcasting rights and brand name recognised in business combinations, intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are available for use. Amortisation of service concession rights acquired by the Group is recognised in profit or loss on a straight line basis over their respective concession periods. Amortisation of content library is based on the fair value of the asset which is acquired through business combination under scope of IFRS 3 Business Combinations. The amortisation period for all items in content library are five years period when content library is ready to screen on TV. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Amortisation of franchise network is based on the fair value of the asset which is acquired through business combination under scope of IFRS 3 Business Combinations. The amortisation period for franchise network is ten years period. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Doğuş Group Annual Report 2012

178 Doğuş Group 3 Significant accounting policies (continued) (f) (viii) Intangible assets (continued) Amortisation (continued) Amortisation of sponsorship is based on the fair value of the asset which is acquired through business combination under scope of IFRS 3 Business Combinations. The amortisation period for sponsorship is ten years period. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (g) Securities borrowing and lending business Investments lent under securities lending arrangements continue to be recognised in the statement of consolidated financial position and are measured in accordance with the accounting policy for the related assets as appropriate. Cash collateral received in respect of securities lent is recognised as liabilities to either banks or customers. Investments borrowed under securities borrowing agreements are not recognised in the consolidated statement of financial position as the related risks and rewards of such securities are not retained. Borrowed securities are recorded under commitments and contingencies. Cash collateral placements in respect of securities borrowed are recognised under loans and advances to either banks or customers depending on the type of counterparty. (h) Repurchase and resale agreements over investments Garanti Bank and its subsidiaries enter into purchases of investments under agreements to resell ( reverse repo ) substantially identical investments at a certain date in the future at a fixed price. Investments purchased subject to commitments to resell them at future dates are not recognised. The amounts paid are recognised in banking loans to either banks or customers. The receivables are shown as collateralised by the underlying security. Investments sold under repurchase agreements ( repo ) continue to be recognised in the consolidated statement of financial position and are measured in accordance with the accounting policy for the related assets as appropriate. The proceeds from the sale of the investments are reported as obligations under repurchase agreements, a liability account. Income and expenses arising from the repurchase and resale agreements over investments are recognised on an accrual basis over the period of the transactions and are included in Revenues or Cost of revenues. (i) Investment property Investment property is property held either to earn rental income or for capital appreciation or for both but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at fair value with any change therein recognised in profit or loss. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of selfconstructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs. Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. When an investment property that was previously classified as property and equipment is sold, any related amount included in the revaluation surplus is transferred to retained earnings. When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting. 176

179 177 3 Significant accounting policies (continued) (j) Inventories Inventories are measured at the lower of cost and net realisable value. Except as discussed in the following paragraphs, the cost of inventories is mainly based on the moving weighted average, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Cost of trading goods and trading properties are determined on specific identification basis by the entities operating in automotive and construction businesses. Trading properties comprise land and buildings that are held for trading purposes. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (l) Construction contracts in progress Construction contracts in progress represent the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognised to date (see note 3 (p)(iii)) less progress billings and recognised losses. Cost includes all expenditures related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group s contract activities based on normal operating capacity. Construction contracts in progress is presented as part of accounts receivable in the consolidated statement of financial position for all contracts in which costs incurred plus recognised profits exceed progress billings. If progress billings exceed cost incurred plus recognised profits, then the difference is presented as deferred income in the consolidated statement of financial position. The asset, Due from customers for contract work represents revenues recognised in excess of amounts billed. The liability, Due to customers for contract work represents billings in excess of revenues recognised. (m) (i) Impairment Non-derivative financial assets A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that the loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. Available-for sale financial assets Impairment losses on available-for-sale investment securities are recognised by reclassifying the cumulative loss that has been recognised in other comprehensive income, and presented in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from other comprehensive income and recognised in profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in cumulative impairment losses attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. Doğuş Group Annual Report 2012

180 Doğuş Group 3 Significant accounting policies (continued) (m) (i) Impairment (continued) Non-derivative financial assets (continued) Available-for sale financial assets (continued) However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income. For an investment in unquoted equity instruments carried at cost because their fair value cannot be measured reliably, impairment losses is not be reversed. Loans and receivables and held-to-maturity investments The recoverable amounts of banking loans and receivables and held-to-maturity instruments are calculated as the present values of the expected future cash flows discounted at the instruments original effective interest rates. Short-term balances are not discounted. Loans and receivables are presented net of specific and portfolio basis allowances for uncollectibility. Specific allowances are made against the carrying amounts of loans and receivables that are identified as being impaired based on regular reviews of outstanding balances to reduce these banking loans and receivables to their recoverable amounts. In assessing the recoverable amounts of banking loans and receivables, the estimated future cash flows are discounted to their present value. Portfolio basis allowances are maintained to reduce the carrying amount of portfolios of similar banking loans and receivables to their estimated recoverable amounts at the reporting date. The expected cash flows for portfolios of similar assets are estimated based on previous experience and considering the credit rating of the underlying customers and late payments of interest or penalties. Increases in the allowance account are recognised in profit or loss. When a banking loan is known to be uncollectible, all the necessary legal procedures have been completed, and the final loss has been determined, the loan is written off directly. If, in a subsequent period, the amount of impairment loss decreases and the decrease can be linked objectively to an event occurring after the write down, the write-down or allowance is reversed through profit or loss. Financial assets remeasured to fair value The recoverable amount of an equity instrument is its fair value. The recoverable amount of debt instruments and purchased loans remeasured to fair value is calculated as the present value of the expected future cash flows discounted at the current market rate of interest. Where an asset remeasured to fair value is impaired, the write-down is recognised in profit or loss. If, in a subsequent period, the amount of impairment loss decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through profit or loss. (ii) Non-financial assets The carrying amounts of the Group s non-financial assets, other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. Goodwill and intangible assets with indefinite lives are tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or its related cashgenerating unit ( CGU ) exceeds its recoverable amount. 178

181 179 3 Significant accounting policies (continued) (m) (ii) Impairment (continued) Non-financial assets (continued) The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (n) (i) Employee benefits Defined benefit plan A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee and his/her dependants will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. Garanti Bank, a jointly controlled entity, has a defined benefit plan ( the Plan ) for its employees namely Türkiye Garanti Bankası Anonim Şirketi Emekli ve Yardım Sandığı Vakfı ( the Fund ). The Fund is a separate legal entity and a foundation recognised by an official decree, providing pension and post-retirement medical benefits to its all its employees entitled to receive such benefits. This benefit plan is funded through contributions of both by the employees and the employer as required by Social Security Law numbered 506 and these contributions are as follows: 2012 Employer % Employee % Pension contributions Medical benefit contributions Employer % Employee % Pension contributions Medical benefit contributions This benefit plan is composed of a) the contractual benefits of the employees, which are subject to transfer to Social Security Foundation ( SSF ) ( pension and medical benefits transferable to SSF ) (see note 34 (i)) and b) other excess social rights and payments provided in the existing trust indenture but not transferable to SSF and medical benefits provided by Garanti Bank for its constructive obligation ( excess benefits ) (see note 34 (ii)). Doğuş Group Annual Report 2012

182 Doğuş Group 3 Significant accounting policies (continued) (n) (i) Employee benefits (continued) Defined benefit plan (continued) Pension and medical benefits transferable to SSF As discussed in note 34, Garanti Bank expects to transfer a portion of the obligation of the Fund to SSF. This transfer will be a settlement of that portion of the Fund s obligation. Final legislation establishing the terms for this transfer was enacted on 8 May Although the settlement will not be recognised until the transfer is made, Garanti Bank believes that it is more appropriate to measure the obligation as the value of the payment that would need to be made to SSF to settle the obligation at the date of the statement of financial position in accordance with the Temporary Article 20 of the Law No.5754: Law regarding the changes in Social Insurance and General Health Insurance Law and other laws and regulations ( the New Law ). The pension disclosures set out in Note 34, therefore reflect the actuarial assumptions and mortality tables specified in the New Law, including a discount rate of 9.80 percent. The pension benefits transferable to SSF are calculated annually by an independent actuary, who is registered with the Undersecretariat of the Treasury. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are directly charged to profit or loss. Excess benefits not transferable to SSF The excess benefits, which are not subject to the transfer, are accounted in accordance with IAS 19, Employee Benefits. The obligation in respect of the retained portion of the defined benefit pension plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value by using the projected unit credit method, and any unrecognised past service costs and the fair value of any plan assets are deducted. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are directly charged to profit or loss. (ii) Reserve for employee severance indemnity Reserve for employee severance indemnity represents the present value of the estimated future probable obligation of the Group arising from the retirement of the employees and calculated in accordance with the Turkish Labour Law. It is computed and reflected in the consolidated financial statements on an accrual basis as it is earned by serving employees. The computation of the liabilities is based upon the retirement pay ceiling announced by the Government. The ceiling amounts applicable for each year of employment were TL 3.03 thousand and TL 2.73 thousand at 31 December 2012 and 2011, respectively. IFRSs require actuarial valuation methods to be developed to estimate the entity s obligation under defined benefit plans. The principal statistical assumptions used in the calculation of the total liability in the accompanying consolidated financial statements at 31 December were as follows: % % Discount rate Turnover rate to estimate the probability of retirement

183 181 3 Significant accounting policies (continued) (o) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (i) Warranties A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities. The warranties on automobiles sold by the Group are issued by the main producers (Volkswagen, Audi, Porsche, Seat, Scania, Krone) where the Group acts as an intermediary between the customers and the producer. The claims of customers to the Group are recognised as warranty expense in profit or loss. The Group recognises the amount claimed from the producers as warranty income and offset against warranty expense. The Group incurs the cost that is not paid by the manufacturers. Accordingly, the Group recognises the estimated liability for the difference between possible warranty claims of customers and possible warranty claims from producers based on historical service statistics. (ii) Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract (see note 3 (m)(ii)). (p) (i) Revenue and cost recognition Banking and finance business Fees and commission income: Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income, including account servicing fees, investment management fees, sales commission, placement fees and syndication fees, are recognised as the related services are performed. When a loan commitment is not expected to result in the draw-down of a loan, loan commitment fees are recognised on a straight-line basis over the commitment period. Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received. Interest income and expense: Interest income and expense are recognised on an accrual basis in profit or loss, taking into account the effective yield of the asset or an applicable floating rate. Interest income and expense include the amortisation of any discount or premium or other differences between the initial carrying amount of an interest bearing instrument and its amount at maturity calculated on an effective interest rate basis. Trading gain/(loss), net: Trading gain/(loss) includes gains and losses arising from disposals of financial assets at fair value through profit or loss and available-for-sale and from trading derivatives. Doğuş Group Annual Report 2012

184 Doğuş Group 3 Significant accounting policies (continued) (p) (ii) Revenue and cost recognition (continued) Insurance business Premium income: For short-term insurance contracts, premiums are recognised as revenue (earned premiums), net of premium ceded to reinsurer firms, proportionally over the period of coverage. The portion of premium received on in-force contracts that relates to unexpired risks at the reporting date is recognised as the reserve for unearned premiums that are calculated on a daily pro-rata basis. Premiums are shown before deduction of commissions and deferred acquisition cost, and are gross of any taxes and duties levied on premiums. For long-term insurance contracts, premiums are recognised as revenue when the premiums are due from the policyholders. Premiums received for long-term insurance contracts with discretionary participation feature ( DPF ) are recognised directly as liabilities. Unearned premium reserve: Unearned premiums are those proportions of the premiums written in a period that relate to the period of risk subsequent to the reporting date for all short-term insurance policies. In accordance with the incumbent legislation on the computation of insurance contract liabilities, unearned premium reserve set aside for unexpired risks as at the reporting date has been computed on daily pro-rata basis. The change in the provision for unearned premium is recognised in profit or loss in the order that revenue is recognised over the period of risk. Claims and provision for outstanding claims: Claims are recognised in the period in which they occur, based on reported claims or on the basis of estimates when not reported. The claims provision is the total estimated ultimate cost of settling all claims arising from events, which have occurred up to the end of the accounting period. Full provision is accounted for outstanding claims, including claim settlements reported at the period-end. Incurred but not reported claims ( IBNR ) are also provided for under the provision for outstanding claims. Liability adequacy test: At each reporting date, asset-liability adequacy tests are performed to ensure the adequacy of the contract liabilities, net of related deferred acquisition cost. In performing these tests, current best estimates of future cash flows are used. Any deficiency is immediately charged to profit or loss. Income generated from pension business: Revenue arising from asset management and other related services offered by one of the Group s proportionately consolidated insurance joint venture are recognised in the accounting period in which the service is rendered. Fees consist primarily of investment management fees arising from services rendered in conjunction with the issue and management of investment contracts where the company actively manages the consideration received from its customers to fund a return that is based on the investment profile that the customer selected on origination of the instrument. These services comprise the activity of trading financial assets in order to reproduce the contractual services. In all cases, these services comprise an indeterminate number of acts over the life of the individual contracts. Mathematical provisions: Mathematical provisions are the provisions recorded against the liabilities of the proportionately consolidated insurance joint venture to the beneficiaries of long-term life, health and individual accident policies based on actuarial assumptions. Mathematical provisions consist of actuarial mathematical provisions for long term insurance contracts, saving portion of the saving life products classified as investment contracts and related profit sharing reserves. Actuarial mathematical provisions are calculated as the difference between the net present values of premiums written in return of the risk covered by the insurance proportionately consolidated joint venture and the liabilities to policyholders for long-term insurance contracts based on the basis of actuarial mortality assumptions as approved by the Republic of Turkey Prime Ministry Undersecretariat of Treasury, which are applicable for Turkish insurance companies. 182

185 183 3 Significant accounting policies (continued) (p) (ii) Revenue and cost recognition (continued) Insurance business (continued) Profit sharing reserves are the reserves provided against income obtained from asset backing saving life insurance contracts. These contracts entitle the beneficiaries of those contracts to a minimum guaranteed crediting rate per annum or, when higher, a bonus rate declared by the insurance affiliate from the eligible surplus available to date. Mathematical provisions are presented under other non-current liabilities in the accompanying consolidated financial statements. (iii) Construction contracts Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue is recognised in profit or loss in proportion to the stage of completion of the contract. Contract expenses are recognised as incurred unless they create an asset related to future contract activity. The stage of completion is assessed by reference to the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognised immediately in profit or loss. (iv) Commissions When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commission made by the Group. (v) Rental income Rental income from investment property is recognised as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from other property is recognised as other income. (vi) Service concession arrangements Inspection revenues and cost of revenues Inspection revenues constitute fees charged to the customers for services rendered in the Vehicle Inspection Stations ( VIS ) through sub-operators. Such inspection fees are recognised as revenue in profit or loss at the date the service is provided. Until 15 August 2010, the cost of inspection revenues constitutes sub-operators share for their sub-operating activities which constitutes 63 percent of the inspection revenues and payments to the State for its share as provided in the Concession Agreement which constitutes 30 percent of the inspection revenues. After 15 August 2010, State share has been increased to 40 percent as provided in the Concession Agreement and consequently, sub-operators share has decreased to 53 percent while the Group companies share has remained the same. Revenues from sub-operation fees and cost of revenues The sub-operation fees are the payments made by the sub-operators to the Group for their use of the sub-operation rights in the manner and conditions set out in sub-operation agreements. The sub-operation fees are initially recognised as unearned revenue in the consolidated statement of financial position and then transferred to the profit or loss in the periods from the starting date of operations in the VIS until the end of the concession period. Doğuş Group Annual Report 2012

186 Doğuş Group 3 Significant accounting policies (continued) (p) (vi) Revenue and cost recognition (continued) Service concession arrangements (continued) Revenues from sub-operation fees and cost of revenues (continued) The sub-operation fees constitute a profit margin plus various costs of the Group to prepare the vehicles inspection stations for their intended use. Such costs represent the cost of the concession right paid by the Group and all other relevant expenditures including station construction, testing equipment, preparation of station personnel, setting-up suboperation systems and related borrowing costs that are altogether considered as the cost of sub-operation fees. Profit derived from the sub-operation fees is recognised in profit or loss from the starting date of operations in the vehicle inspection stations until the end of the concession period on a straight line basis. Cost of sub-operation fees including depreciation expense of property and equipment of the vehicle inspection stations that are in operation and the amortisation expense of the concession right, and the related station personnel expenses, among others are recognised as expense in the period in which the economic benefits associated with those cost items are consumed or expired. (vii) Other businesses Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sale is recognised. Transfers of risks and rewards vary depending on the individual terms of the contract of sale. Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. (viii) Research and development costs Expenditure on research activities is recognised in profit or loss when incurred. (ix) Dividend income Dividend income is recognised on the date that the Group s right to receive payment is established, which in the case of quoted securities is the ex-dividend date. (q) Government grants Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and that the Group will comply with the conditions associated with the grant and are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognised. 184

187 185 3 Significant accounting policies (continued) (r) (i) Leases Leased assets Assets held by the Group under leases which transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. At initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recognised in the Group s consolidated statement of financial position. (ii) Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. (iii) Determining whether an arrangement contains a lease At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. The following two criteria must be met for a lease : the fulfilment of the arrangement is dependent on the use of a specific asset or assets; and the arrangement contains a right to use the asset(s). At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group s incremental borrowing rate. (s) Finance income and finance costs Finance income comprises interest income on funds invested, foreign currency gains, and gains on derivative instruments that are recognised in profit or loss. Interest income is recognised as it accrues, using the effective interest method. Finance costs comprise interest expense on borrowings, foreign currency losses, and losses on derivative instruments that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position. (t) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Doğuş Group Annual Report 2012

188 Doğuş Group 3 Significant accounting policies (continued) (t) Income tax (continued) Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries jointly controlled entities and associates to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the reporting date. In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity. A deferred tax asset is recognised for unused tax losses, tax credits and deductable temporary differences, to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred taxes related to fair value measurement of available for sale assets and cash flow hedges are charged or credited to equity and subsequently recognised in profit or loss together with the deferred gains that are realised. Deferred taxes related to revaluation surplus reserve are recognised in other comprehensive income in revaluation surplus in equity on a net basis. (u) Assets held for sale or distribution Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or distribution rather than through continuing use, are classified as held for sale or distribution. Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in accordance with the Group s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets and investment property, which continue to be measured in accordance with the Group s accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. 186

189 187 3 Significant accounting policies (continued) (u) Assets held for sale or distribution (continued) Intangible assets and property and equipment once classified as held for sale or distribution are not amortised or depreciated. In addition, equity accounting of associates ceases once classified as held for sale or distribution. (v) Indemnification assets Initial recognition Indemnification assets are an exception to the recognition and measurement principles of IFRS 3. An acquirer recognises indemnification assets at the same time and measures them on the same basis as the indemnified item, subject to contractual limitations and adjustments for collectibility, if applicable. The Group has the right to reimburse the provision for litigation and claims brought through the acquisition of Star TV to Alp Görsel İletişim Anonim Şirketi, the previous shareholder of Star TV, when such legal cases end against the favor of the Group and create a possible cash outlow. Subsequent measurement Subsequent to initial recognition, the acquirer continues to measure an indemnification asset on the same basis as the related indemnified asset or liability and the revision in measurement of the provision due to the subsequent information will be recognised through the profit or loss in contrary of the effect leading the net effect on the profit or loss be equal to zero whereas the decreasing effect on the asset and liability side on the consolidated statement of financial position will be the same. The initial and subsequent accounting for indemnification assets recognised at the acquisition date applies equally to indemnified assets and liabilities that are recognised and measured under the principles of IFRS 3 and those that are subject to exceptions to the recognition or measurement principles of IFRS 3. If the amounts recognised by an acquirer for an indemnified liability and a related indemnification asset recognised at the acquisition date do not change subsequent to the acquisition and ultimately are settled at the amounts recognised in the acquisition accounting, then there will be no net effect on profit or loss providing that those amounts are the same. (w) Items held in trust Assets, other than cash deposits held by Garanti Bank and its subsidiaries in fiduciary or agency capacities for its customers and government entities, are not included in the accompanying consolidated statement of financial position, since such items are not under the ownership of Garanti Bank. (x) Financial guarantees The financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because of a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are initially recognised at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment (when a payment under the guarantee has become probable). Doğuş Group Annual Report 2012

190 Doğuş Group 3 Significant accounting policies (continued) (y) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group s other components. All operating segments operating results are reviewed regularly by the CEO ( Chief Executive Officer ) and BOD members to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. (z) De-merger/ Spin off Economically a de-merger represents a division of an entity into separate parts. The result of a de-merger is that the same shareholders own the same group of businesses; the shareholders structure and their ownership interests are identical both before and after the de-merger. In the absence of further guidance in IFRS, the Group has accounted the de-merger via book values. (µ) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2012, and have not been applied in preparing these consolidated financial statements. The following standards and amendments are expected to affect the consolidated financial statements of the Group: Amendments to IAS 1 Presentation of Items of Other Comprehensive Income require that an entity present separately the items of other comprehensive income that would be reclassified to profit or loss in the future if certain conditions are met from those that would never be reclassified to profit or loss. The amendments are effective for annual periods beginning on or after 1 July IFRS 10 Consolidated Financial Statements supersedes IAS 27 (2008) and SIC-12 Consolidation-Special Purpose Entities and becomes effective for annual periods beginning on or after 1 January Retrospective application is required. FRS 11 Joint Arrangements supersedes IAS 31 and SIC-13 Jointly Controlled Entities-Non-Monetary Contributions by Venturers and becomes effective for annual periods beginning on or after 1 January The proportionate consolidation method currently applied to the Group s interests in joint ventures will be prohibited effective from 1 January 2013 and such interests in joint ventures will be accounted through equity method. Retrospective application is required. IFRS 12 Disclosure of Interests in Other Entities contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities and becomes effective for annual periods beginning on or after 1 January Retrospective application is required. IFRS 13 Fair Value Measurement replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance and becomes effective for annual periods beginning on or after 1 January Retrospective application is required. IAS 27 Separate Financial Statements (2011) supersedes IAS 27 Consolidated and Separate Financial Statements (2008) and becomes effective for annual periods beginning on or after 1 January IAS 28 Investments in Associates and Joint Ventures (2011) supersedes IAS 28 Investments in Associates (2008) and becomes effective for annual periods beginning on or after 1 January 2013.

191 189 3 Significant accounting policies (continued) (µ) New standards and interpretations not yet adopted (continued) IFRS 9 Financial Instruments could change the classification and measurement of financial assets and becomes effective for annual periods beginning on or after 1 January Retrospective application is required. IAS 19 changes the definition of short-term and other long-term employee benefits (2011) to clarify the distinction between the two. For defined benefit plans, the accounting policy choice for recognition of actuarial gains and losses and corridor method are removed and IAS 19 revised (2011) is effective for annual periods beginning on or after 1 January 2013 with early adoption permitted. IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities (Amended): The amendments clarify the meaning of currently has a legally enforceable right to set-off and also clarify the application of the IAS 32 offsetting criteria to settlement systems which apply gross settlement mechanisms that are not simultaneous. These amendments are to be retrospectively applied for annual periods beginning on or after 1 January IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements (Amended): New disclosures would provide users of financial statements with information that is useful in (a) evaluating the effect or potential effect of netting arrangements on an entity s financial position and (b) analyzing and comparing financial statements prepared in accordance with IFRSs and other generally accepted accounting standards. The amendments are to be retrospectively applied for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The Group does not plan to adopt these standards early and the extent of the impact has not been determined yet. Doğuş Group Annual Report 2012

192 Doğuş Group 4 Determination of fair values A number of the Group s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (a) Property and equipment The fair value of property and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm s length transaction after proper marketing wherein the parties had each acted knowledgeably. The Group reflects land and buildings at their fair values as appraised by independent third party appraisers. The fair values of land and buildings are determined based on the discounted cash flow method, depreciable replacement cost or market prices for similar items. (b) Intangible assets The fair values of intangible assets, which comprise the broadcasting rights, concession rights for marina management, customer relationship, content library, franchise network, sponsorship contracts and brand names acquired in business combinations, are based on the discounted cash flows expected to be derived from the use and eventual sale of the assets. (c) Investment property External, independent valuation companies, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Group s investment property portfolio every year. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows then is applied to the net annual cash flows to arrive at the property valuation. Valuations reflect, when appropriate; the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities between the Group and the lessee; and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices and when appropriate counter-notices have been served validly and within the appropriate time. (d) Inventories The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories. (e) Investments in equity and debt securities The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only. 190

193 191 4 Determination of fair values (continued) (f) Trade and other receivables The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. The fair value is determined for disclosure purposes or when such assets are acquired through a business combination. (g) Derivatives The fair values of forward exchange contracts, options and other derivative contracts are based on their listed market prices, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a riskfree interest rate (based on government bonds). The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate. (h) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements. 5 Financial risk management (a) Overview The Group has exposure to the following risks from its use of financial instruments: credit risk liquidity risk market risk operational risk This note presents information about the Group s exposure to each of the above risks, the Group s objectives, policies and processes for measuring and managing risks, and the Group s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. Risk management framework Enterprise Risk Management ( ERM ) efforts have been initiated by Doğuş Group since 2006 and these efforts have been executed by Doğuş Holding Risk Management Department. Risk Management activities are conducted by a realistic organizational structure and it is fully supported with the commitment of top level management, so that the Group is pioneer in risk management activities in Turkish business environment. Group acts proactively in terms of risk management in order to ensure that its business operations in different industries and regions are not adversely affected as a result of market, operational, liquidity and counterparty risks. Risk Management and Internal Audit departments within each sector and at the Group level provide and maintain awareness for different types of risks, including emerging risks, and ensure that appropriate risk management mechanisms are in place. Doğuş Group Annual Report 2012

194 Doğuş Group 5 Financial risk management (continued) (a) Overview (continued) Risk management framework (continued) Downside risks remain significant as a result of renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States. As for Turkey; risks in relation to balance of payment deficit and weak growth are still of great importance. Nevertheless Group, with diverse business operations in different regions and countries, has already been cognizant of its need to monitor and manage those risks and related impacts on its strategic, business and operation decisions. As for Group s risk management activities in 2012, it was a successful year in terms of maintaining and improving risk management practices both in group and company levels and enhancing the risk culture group wide. Risk Committee meetings are held on regular basis and valuable and relevant risk information is generated discussed and escalated if deemed necessary. In 2010, by the Risk and Audit Committee decision, Group companies created their own Risk Management departments. Now, Doğuş Holding Risk Management works even more closely with the Group companies Risk Management departments to establish a standardised ERM system and obtain accurate information to assess and evaluate the risk taking processes. In addition to establishing an independent reporting infrastructure for Group companies, group-wide awareness for different types of risks and risk management strategies is ensured by periodical risk roundtables, workshops, dashboards and reports throughout the organization. ERM is applied in all Group companies so that all risk is managed effectively within the Group in accordance with the defined risk management strategy, framework and the risk model. ERM is implemented based on an internal framework employing internationally accepted standards and best practices from around the world. This framework is customised according to the needs and structure of the Group s businesses. ERM activities are executed throughout the Group in the following fields: Determining risk management standards and policies, Developing group-wide culture and capabilities, Conducting risk analysis of existing and potential investments, Creating an executive reporting channel of new investments, Determining risk levels, limits and action plans, Supporting the implementation of these action plans, Enhancing strategic processes with a risk management approach. Doğuş Holding s CEO has the ultimate responsibility for ERM and Doğuş Holding s Risk Management Department is under the supervision of Doğuş Holding s CEO and the Risk and Audit Committee which functions under the Board of Directors. The Risk and Audit Committee is responsible for assessing the risk appetite of the shareholders. Additionally, this committee provides guidance to adjust risk levels where needed. Each sector has its own risk committee. Furthermore, internal audit activities performed by Doğuş Holding Internal Audit Department are also implemented on a risk-based perspective, and the risk management performance is assessed throughout the organization with well defined key performance indicators. 192

195 193 5 Financial risk management (continued) Risk management framework (continued) (b) (i) Risk management framework for the corporate segments Automotive DOAŞ s risk management approach can be defined as minimizing the threats towards the organization, personnel and assets using reasonable, justifiable and clearly documented methods and improving the efficiency of oversight activities. In the frame of this approach, authorised by the Board of Directors, the Corporate Governance Committee ensures that the risk management is handled effectively in a fair, transparent, responsible consistent, and accountable nature and in compliance with the Corporate Governance Committee Directive. The duties and responsibilities of the Early Risk Detection Committee are fulfilled by the Corporate Governance Committee. This group conducts studies towards an effective management of risk by proactively detecting the potential outcomes, which may endanger the presence, development and continuation of the DOAŞ and by putting the necessary precautions and measures into effect. DOAŞ handles risks based on a stream of principles: define; classify accurately; hedge, ensure the information flow; strengthen the effectiveness of oversight. DOAŞ puts emphasis on defining the risks tangibly and in clarity and in compliance with corporate governance principles. (ii) Construction Risk organisation The Board of Doğuş İnşaat has established a Risk Committee in 2009 to have a better view over risks and implement the enterprise-wide risk management process within the construction group. The Risk Committee shall be accountable to the Board and shall advise the Board on risk management, aiming to manage risks in a more systematic manner and foster a risk culture within the company. The management of the company has the overall responsibility for the establishment and oversight of the risk management framework. In January 2010, Doğuş İnşaat Risk Management Department has been established and assigned to managing risk management processes. Risk management vision Risk management vision of Doğuş İnşaat is defined as, identifying and monitoring risks and opportunities that will impact the corporate objectives, managing risks and uncertainties in the most effective and efficient manner and in line with the shareholders risk appetite, and proactively implementing the most appropriate response to risk. Risk policies and procedures Doğuş İnşaat s risk management policies and procedures are established to identify and analyse the risks faced by the company, to set up appropriate risk limits and controls, and to monitor risks, responses, and adherence to such limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and Doğuş İnşaat s activities. Risks are identified and managed at three levels: i) corporate level ii) business process level and iii) project level. Risks are discussed at monthly Risk Committee meetings with management and monitored by regular reports. Doğuş Group Annual Report 2012

196 Doğuş Group 5 Financial risk management (continued) (b) (iii) Risk management framework for the corporate segments (continued) Media The Board of Directors has overall responsibility for establishment and oversight of the Media s risk management framework. In January 2010, Internal Audit and Risk Management Department was established with the decision of the Board. This will strengthen focus on corporate risk management throughout the Media by developing methodology as well as centralising risk management operations. (iv) Tourism Doğuş Tourism Group has started to develop a risk management process to strengthen the internal controls and focus on risk assessment at the strategic level of the business. Within this perspective, Doğuş Tourism Group has selected an internationally accepted internal control model and built a framework to operationalise the selected model in the organisation. The risk management framework consists of five interrelated components derived from the way management runs the business process: control environment, risk assessment, control activities, information and communication and monitoring. (v) Real Estate, Energy, Marina and other segments Doğuş Holding s Risk Management Department gives support to ensure the application of risk management processes in the Real Estate, Energy, Marina and other businesses. (c) Risk management framework for the banking and finance segment Garanti Bank s Risk Management Strategy is established as part of a maintainable long term, value adding growth strategy. This strategy involves optimal allocation of economic capital to business lines considering the risk-return balance by measuring risks with the methods in compliance with its activities and national regulations and international standards. Garanti Bank determines the necessary approaches in order to update, revise, apply and manage its policies set for the proper assessment and management of risks considering changes in conditions. It is the ultimate responsibility of the top management to apply and improve risk management strategies, policies and procedures that are approved by Garanti Bank Board of Directors, to inform the Board of Directors about the important risks Garanti Bank is exposed to, to assess internal control, internal audit and risk reports with regard to Garanti Bank s departments and to eliminate the risks, deficiencies or defects identified in these departments or to take the necessary precautionary actions to prevent those risks, deficiencies and defects, to participate in the determination of risk limits. The risk management activities are structured under the responsibility of Garanti Bank s Board of Directors. The top management is responsible to the Board of Directors for monitoring and managing of risks. Besides, the following departments participate in monitoring of risks coordinately, independent from executive functions; Internal Control, Risk Management, Fraud, Compliance and Internal Audit. The risks are evaluated on a continuously developing structure that is managed by internationally accepted applications and in compliance with the Bank s policies and procedures and the international and local regulations. The risks are also managed through risk mitigations using hedging transactions beside measurement, limitation and capital allocation techniques. The data of Garanti Bank and the market are regularly monitored for better risk monitoring and management. As part of limitation of risks, internal limits are also set beside the legal limits. The possible changes in economic conditions and the risks that can be faced under extraordinary conditions are taken into consideration. 194

197 195 5 Financial risk management (continued) (c) Risk management framework for the banking and finance segment (continued) In order to ensure the compliance with the rules altered pursuant to the Articles 23, 29 and 31 of the Turkish Banking Law No and the Articles 20, 36, 40, 60 and 71 of Regulation on Internal Systems of Banks published in the Official Gazette dated 28 June 2012, Garanti Bank periodically reviews the current written policies and implementation procedures regarding management of each risk encountered in its activities. Garanti Bank purchased an integrated software system to place better risk management and Basel II applications in order to support and improve risk management activities. The Basel II application has became mandatory for all the banks operating in Turkey effective from 1 July (i) Audit Committee The Audit Committee consists of two members of the Board of Directors of Garanti Bank who do not have any executive functions. The Audit Committee, which was established to assist the Board of Directors of Garanti Bank in its auditing and supervising activities, is responsible for: Monitoring the effectiveness and adequacy of Garanti Bank s internal control, risk management and internal audit systems, operation of these systems and accounting and reporting systems in accordance with applicable regulations and the integrity of resulting information; Performing the preliminary studies required for the election of independent audit firms and regularly monitoring their activities; Ensuring that the internal audit functions of subsidiaries are performed in a consolidated and coordinated manner. (ii) Liquidity Risk Management Committee The Liquidity Risk Management Committee is responsible for: Determining the excess liquidity that Garanti Bank holds in foreign currencies; Periodically monitoring the liquidity report and early-warning signals; Determining the stress level of Garanti Bank; monitoring internal and external factors that might affect Garanti Bank s liquidity in case of a liquidity crisis; Ensuring that the action plan aligned with the Contingency Funding Plan is properly implemented; Determining measures required by Garanti Bank s customer confidence, cost of funding and key liquidity increasing strategies, and ensuring internal communication and coordination with regard to the implementation of committee decisions. (iii) Other committees Market, credit and operational sub-risk committees have been established in order to facilitate exchange of information and views with the relevant units of Garanti Bank and to promote the use of risk management and internal audit systems within Garanti Bank. (iv) Derivative financial instruments Garanti Bank and its subsidiaries enter into a variety of derivative financial instruments for hedging and risk management purposes. This note describes the derivatives used. Further details of the objectives and strategies in the use of derivatives are set out in the sections of this note on non-trading activities. Details of the nature and terms of derivative instruments outstanding at the reporting dates are set out in Note 41. Derivative financial instruments used include swaps, futures, forwards, options and other similar types of contracts whose values change in response to the changes in interest rates, foreign exchange rates and gold prices. Derivatives are individually negotiated over-the-counter contracts. Doğuş Group Annual Report 2012

198 Doğuş Group 5 Financial risk management (continued) (c) (iv) Risk management framework for the banking and finance segment (continued) Derivative financial instruments (continued) A description of the main types of derivative instruments used is set out below: Swaps Swaps are over-the-counter agreements to exchange future cash flows based upon agreed notional amounts. Most commonly used swaps are currency swaps. Garanti Bank and its subsidiaries are subject to credit risk arising from the respective counterparties failure to perform. Market risk arises from the possibility of unfavorable movements in market rates relative to the contractual rates of the contract. Futures and forwards Futures and forward contracts are commitments to either purchase or sell a designated financial instrument, currency, commodity or an index at a specified future date for a specified price and may be settled in cash or another financial asset. Futures are standardised exchange-traded contracts whereas forwards are individually traded over-the-counter contracts. Initial margin requirements for futures are met in cash or other instruments, and changes in the future contract values are settled daily. Therefore credit risk is limited to the net positive change in the market value for a single day. Futures contracts have little credit risk because the counterparties are futures exchanges. Forward contracts result in credit exposure to the counterparty. Futures and forward contracts both result in exposure to market risk based on changes in market prices relative to contracted amounts. Options Options are derivative financial instruments that give the buyer, in exchange for a premium payment, the right, but not the obligation, to either purchase from (call option) or sell (put option) to the writer a specified underlying at a specified price on or before a specified date. Garanti Bank enters into foreign exchange, bond, equity index, interest rate options, not only vanilla options but also exotic options. Foreign currency options provide protection against rising or falling currency rates. Garanti Bank as a buyer of over-the-counter options is subject to market risk and credit risk since the counterparty is obliged to make payments under the terms of the contract if Garanti Bank exercises the option. As the writer of over-thecounter options, Garanti Bank is subject to market risk only since it is obliged to make payments if the option is exercised. (v) Trading activities Garanti Bank and its subsidiaries maintain active trading positions in non-derivative financial instruments. Most of the trading activities are customer driven. In anticipation of customer demand, an inventory of capital market instruments is carried and access to market liquidity is maintained by quoting bid and offer prices to and trading with other market makers. Positions are also taken in the interest rate, foreign exchange, debt and equity markets based on expectations of future market conditions. These activities constitute the proprietary trading business and enable Garanti Bank and its subsidiaries to provide customers with capital market products at competitive prices. As trading strategies depend on both market-making and proprietary positions, given the relationships between instruments and markets, those are managed in concert to maximise net trading income. Trading activities are managed by type of risk involved and on the basis of the categories of trading instruments held. 196

199 197 5 Financial risk management (continued) (d) (i) Credit risk Banking and finance segment Garanti Bank and its subsidiaries counterparty credit exposure at the reporting date from financial instruments held or issued for trading purposes is represented by the fair value of instruments with a positive fair value at that date, as recorded on the consolidated statement of financial position. Notional amounts disclosed in the notes to the consolidated financial statements do not represent the amounts to be exchanged by the parties to derivatives and do not measure the exposure to credit or market risks. The amounts to be exchanged are based on the terms of the derivatives. The risk that counterparties to trading instruments might default on their obligations is monitored on an ongoing basis. In monitoring credit risk exposure, consideration is given to trading instruments with a positive fair value and to the volatility of the fair value of trading instruments. To manage the level of credit risk, Garanti Bank and its subsidiaries deal with counterparties of good credit standing, enter into master netting agreements whenever possible, and when appropriate, obtain collateral. Master netting agreements provide for the net settlement of contracts with the same counterparty in the event of default. Garanti Bank and its subsidiaries are subject to credit risk through their trading, lending, hedging and investing activities and in cases where they act as intermediaries on behalf of customers or other third parties or issues guarantees. Credit risk associated with trading and investing activities is managed through Garanti Bank s market risk management process. Garanti Bank and its subsidiaries primary exposures to credit risk arise through their loans and advances. The amount of credit exposure in this regard is represented by the carrying amounts of these assets on the consolidated statement of financial position. Garanti Bank developed a statistical-based internal risk rating model for its credit portfolio of corporate/ commercial/medium-sized companies. This internal risk rating model has been in use for customer credibility assessment since 2003 and is currently being reviewed and updated. Risk rating has become a requirement for loan applications, and ratings are used both to determine branch managers credit authorisation limits and in credit assessment process. Garanti Bank and its subsidiaries are exposed to credit risk on various other financial assets, including derivative instruments used for hedging and debt investments. The current credit exposure in respect of these instruments is equal to the carrying amount of these assets in the consolidated statement of financial position. In addition, Garanti Bank and its subsidiaries are exposed to off statement of financial position credit risk through guarantees issued (Note 41). The risk that counterparties to both derivative and other instruments might default on their obligations is monitored on an ongoing basis. To manage the level of credit risk, Garanti Bank and its subsidiaries deal with counterparties of good credit standing, enter into master netting agreements whenever possible, and when appropriate, obtain collateral. Concentrations of credit risk (whether on or off statement of financial position) that arise from financial instruments exist for groups of counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Impaired loans Impaired loans are those which Garanti Bank determines that it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the loan agreement due to lack of assets, high debtness ratio, insufficient working capital and/or equity of the customer. Doğuş Group Annual Report 2012

200 Doğuş Group 5 Financial risk management (continued) (d) (i) Credit risk (continued) Banking and finance segment (continued) Allowance for impaired loans Garanti Bank establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a portfolio-basis loan loss allowance established for groups of homogeneous assets in respect of losses that have been incurred but have not been identified on loans subject to individual assessment for impairment. Write-off policy Garanti Bank writes off a receivable balance (and any related allowances for impairment losses) when it is determined that the receivable is uncollectible based on the evidence of insolvency issued by the Court. In cases where any possible collections are negligible comparing to the prospective expenses and costs, such receivables are written off by the decision of the Board of Directors. Collateral policy Garanti Bank s policy is to require suitable collateral to be provided by certain customers prior to the disbursement of approved loans. Garanti Bank and its subsidiaries currently hold collateral against banking loans and advances to customers in the form of mortgage interests over property, other registered securities over assets and guarantees. Collateral generally is not held over banking loans and advances to banks, except when securities are held as part of reverse repurchase and securities borrowing activity. Collateral usually is not held against investment securities, and no such collateral was held at 31 December 2012 and (ii) Other corporate segments Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group s receivables from customers and investment securities. Accounts receivable The Group s exposure to credit risk is influenced mainly by the individual characteristics of each customer of the segments other than banking and finance. The demographics of the Group s customer base, including the default risk of the industry and country in which customers operate has an influence on credit risk. Since the Group mainly operates in construction, automotive, media, real estate and tourism businesses, geographically the concentration of credit risk for the Group s entities operating in the mentioned businesses are mainly in Turkey. Majority of accounts receivable in the automotive business segment is due from dealers. Entities operating under automotive business segment have set an effective control mechanism to follow up and limit the risk for each counter party and obtain letters of guarantee from its dealers against its receivables for vehicle and spare part sales. The companies operating under the segments other than banking and finance segment and automotive segment have set a credit policy under which each new customer is analysed individually for the creditworthiness before each company s standard payment and delivery terms and conditions are offered. 198

201 199 5 Financial risk management (continued) (d) (ii) Credit risk (continued) Other corporate segments (continued) Accounts receivable (continued) In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are a dealer, tourism agency, retail or end-user customer, geographic location, industry, aging profile, maturity and existence of previous financial difficulties. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of accounts receivable. The component of this allowance is a specific loss component that relates to individually significant exposures. The Group establishes an allowance for impairment losses that represent its estimate of incurred losses in its receivables portfolio. The Group sets impairment for its receivables if there is objective evidence that the Group will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees and collateral discounted based on the original effective interest rate of the originated receivables at inception. Guarantees In general terms, the Group s policy is to provide guarantees to its Group entities in terms of sureties, letters of guarantee in the nature of the businesses that each entity operates. (e) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group s reputation. (i) Banking and finance segment Liquidity risk is defined as the risk that Garanti Bank may not be able to fullfil its payment obligations in a timely manner due to the lack of available cash or cash inflows in quality and in quantity to cover the cash outflows in a complete and timely manner due to imbalances in the cash flows of of Garanti Bank and its subsidiaries. In order to manage the liquidity risk, Garanti Bank and its subsidiaries diversify their funding sources considering their short and long term liquidity requirements, through instruments such as customer deposits, repurchase transactions, bond issuances and foreign borrowings. Besides, in order to secure the maturity match between the assets and liabilities, the strategies for maturity extension of funding, exist. The liquidity needs in different currencies are managed through transactions such as currency swaps. In order to meet the cash outflow requirements during crises periods, high-liquid asset reserves are maintained. In the context of Turkish Lira and foreign currencies liquidity management, Garanti Bank monitors the cash flows regarding assets and liabilities and forecast the required liquidity in future periods. By monitoring stress conditions, necessary measures shall be taken in line with liquidity needs. There exists a contingency funding plan that includes the mechanisms to prevent a liquidity risk increase under ordinary operations and liquidity crisis scenarios under various conditions and levels of stress. Available liquid sources are determined by considering the liquidity crisis. As per this plan, the liquidity risk is monitored through possible actions and scenarios at various stress levels of liquidity risks and early warning signals. Doğuş Group Annual Report 2012

202 Doğuş Group 5 Financial risk management (continued) (e) (i) Liquidity risk (continued) Banking and finance segment (continued) Exposure to liquidity risk The calculation method used to measure Garanti Bank s compliance with the liquidity limit is set by BRSA. Currently, this calculation is performed on a bank only basis. In November 2006, BRSA issued a new communiqué on the measurement of liquidity adequacy of banks. The legislation requires the banks to meet minimum 80 percent liquidity ratio of foreign currency assets/liabilities and minimum 100 percent liquidity ratio of total assets/liabilities on a weekly and monthly basis effective from 1 June Garanti Bank s liquidity ratios for 2012 and 2011 are as follows: 2012 First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TL Average (%) First Maturity Bracket (Weekly) Second Maturity Bracket (Monthly) FC FC + TL FC FC + TL Average (%) Garanti Bank s banking subsidiary in the Netherlands is not subject to a similar liquidity measurement, however the Dutch Central Bank requires the bank to have a positive liquidity gap, i.e. the liquidity gap should be greater than zero. Garanti Bank s banking subsidiary in Russia is subject to three levels of liquidity requirement; instant liquidity of minimum 15 percent, current liquidity of minimum 50 percent and long-term liquidity of maximum 120 percent. Garanti Bank s banking subsidiary in Romania calculates the liquidity ratio as a ratio of total effective liquidity in local currency equivalent to total necessary liquidity in local currency equivalent for several individual time buckets (<1 month, 1-3 months, 3-6 months, 6-12 months, >1 year) and each ratio for each bucket should be >1. (ii) Other corporate segments Typically, the Group entities operating under other corporate segments ensure that they have sufficient cash on demand to meet expected operational expenses in terms of the relevant characteristics of the businesses they operate, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. For the entities operating under automotive business segment, risk of funding current and potential requirements is mitigated by ensuring the availability of adequate number of creditworthy lending parties. Entities operating under automotive business segment, in order to minimise liquidity risk, hold adequate cash and available line of credit (including factoring capacity). 200

203 201 5 Financial risk management (continued) (f) (i) Market risk Banking and finance segment All trading instruments are subject to market risk, the risk that future changes in market conditions may make an instrument less valuable or more onerous. Those instruments are recognised at fair value, and all changes in market conditions directly affect trading gain/(loss), net. Garanti Bank and its subsidiaries manage their use of trading instruments in response to changing market conditions. Market risks arising from trading transactions are measured by internal risk measurement model using ( VaR ) methodology. In the VaR calculations, trading and available-for-sale portfolios are taken into account. VaR is calculated by three different methods, namely historical simulation, Monte Carlo simulation and parametric method. Garanti Bank takes the historical VaR results as the basis for the internal management of market risk and determination of limits. The calculations made according to other two methods are used for comparison and monitoring purposes. In the VaR calculation, one year historical market data set is used, and 99 percent confidence interval and one-day retention period are taken into account. In order to test the reliability of the VaR model, back tests are performed. Stress tests and scenario analysis are also applied in order to reflect the effects of prospective severe market fluctuations in the VaR calculations. Internal limits are set as well as legal limits in order to restrict market risk; value at risk limits for trading portfolio, position limits set for trading desks, single transaction limits set for traders and stop-loss limits. Approval, update, monitoring, override and warning procedures of these limits are put into practice and changed with the approval of the Board of Directors of Garanti Bank. The capital requirement for general market risk and specific risks is calculated using the standard method defined by the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks as set out by the BRSA and reported monthly. Currency risk Garanti Bank and its subsidiaries are exposed to currency risk through transactions in foreign currencies and through their investments in foreign operations. Garanti Bank and its subsidiaries main foreign operations are in the Netherlands and Russia. The measurement currencies of these operations are Euro and USD. As the currency in which Garanti Bank presents its consolidated financial statements is TL, the consolidated financial statements are affected by currency exchange rate fluctuations against TL. Garanti Bank finances a significant portion of its net investment in foreign operations with borrowings in the same currencies as the relevant measurement currencies to mitigate its currency risk. Currency swaps are also used to match the currency of some of its other borrowings to the measurement currencies involved. Garanti Bank and its subsidiaries transactional exposures give rise to foreign currency gains and losses that are recognised in profit or loss. These exposures comprise the monetary assets and monetary liabilities that are not denominated in the measurement currency of Garanti Bank involved. The short positions in the consolidated statement of financial position of Garanti Bank and its subsidiaries are hedged by currency swaps, forward contracts and other derivatives entered into to manage these currency exposures. In respect of monetary assets and liabilities in foreign currencies that are not economically hedged, Garanti Bank and its subsidiaries ensure that their net exposures are kept to an acceptable level by buying and selling foreign currencies at spot rates when considered appropriate. Doğuş Group Annual Report 2012

204 Doğuş Group 5 Financial risk management (continued) (f) (i) Market risk (continued) Banking and finance segment (continued) Interest rate risk Garanti Bank and its subsidiaries operations are subject to the risk of interest rate fluctuations to the extent that interestearning assets (including investments) and interest-bearing liabilities mature or reprice at different times or in differing amounts. In the case of floating rate assets and liabilities, Garanti Bank and its subsidiaries are also exposed to basis risk, which is the difference in repricing characteristics of the various floating rate indices, such as the deposit rate and libor and different types of interest. Treasury activities are aimed at optimising net interest income, given market interest rate levels consistent with Garanti Bank s business strategies. In general, as common in current economic environment, the consolidated financial statements are liability sensitive because its interest-earning assets have a longer duration and reprice slightly less frequently than interest-bearing liabilities. This means that in rising interest rate environments, margins earned will narrow as liabilities reprice. However, the actual effect will depend on a number of factors, including the extent to which repayments are made earlier or later than the contracted dates and variations in interest rate sensitivity within repricing periods and among currencies. Interest rate derivatives are primarily used to bridge the mismatch in the repricing of assets and liabilities. This is done in accordance with the guidelines established by Garanti Bank s Assets and Liabilities Management Committee. Some assets have no defined maturities or interest rate sensitivities and are not readily matched with specific liabilities. Those assets are funded through liability pools based on the assets estimated maturities and repricing characteristics. Part of Garanti Bank s return on financial instruments is obtained from controlled mismatching of the dates on which interest receivable on assets and interest payable on liabilities are next reset to market rates or, if earlier, the dates on which the instruments mature. The measurement process of interest rate risk resulting from banking book, is established and managed by Garanti Bank on a bank-only basis to include the interest rate positions defined as banking book and to consider the relevant repricing and maturity data. Duration gaps, gaps by maturity buckets and sensitivity analysis are used in monitoring of repricing risk resulting from maturity mismatch. In the duration gap analysis, the present values of interest-rate-sensitive asset and liability items are calculated using yield curves developed from market interest rates. In case of instruments with no maturities assigned, the maturity is determined as per interest rate fixing periods and customer behaviours. Such results are supported by sensitivity and scenario analysis applied periodically for possible instabilities in the markets. The interest rate risk on the interest-rate-sensitive financial instruments of the trading portfolio is evaluated as part of the market risk. 202

205 203 5 Financial risk management (continued) (f) (i) Market risk (continued) Banking and finance segment (continued) Interest rate risk (continued) Economic value differences resulted from intrest rate instabilities calculated on a bank-only basis for the banking book according to the relevant legislation as per the standard shock method is as follows; Type of Currency Shocks applied ( +/ - basis points) Gains / Losses (Group share) Gains / Equity - Losses / Equity (Group share) TL (+) 500 bps (675,528) (12.92) percent TL (-) 400 bps 661, percent USD (+) 200 bps 3, percent USD (-) 200 bps (14,904) (0.28) percent Euro (+) 200 bps (18,333) (0.35) percent Euro (-) 200 bps 19, percent Total (of negative shocks) 666, percent Total (of positive shocks) (690,273) (13.20)percent (ii) Other corporate segments Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Currency risk The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily USD, but also Euro, Swiss Francs ( CHF ), Sterling ( GBP ), Libyan Dinar ( LYD ), Japanese Yen ( JPY ), Croatian Kuna ( HRK ), Romanian Leu ( RON ) and Ukranian Hryvnia ( UAH ). The currencies in which these transactions primarily are denominated are TL, Euro and USD. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. The Group is exposed to currency risk through the impact of rate changes on the translation of foreign currency denominated payables and bank borrowings from financial institutions. Such risk is monitored by the Board of Directors and limited through taking positions within approved limits as well as using derivative instruments where necessary. To minimise risk arising from foreign currency denominated statement of financial position items, the Group sometimes utilises derivative instruments as well as keeping part of its idle cash in foreign currencies. Doğuş Group Annual Report 2012

206 Doğuş Group 5 Financial risk management (continued) (g) (i) Operational risk Banking and finance segment Operational risk expresses the probability of loss that may arise from the overlook of faults and inconsistency with the established rules due to the deficiencies in Garanti Bank and its subsidiaries internal controls, manner of the management and the personnel that are not in coherence with time and conditions, deficiencies in the bank management, faults and problems in information technology systems and disasters such as earthquake, fire, flood or terror attacks. The operational risk items in Garanti Bank are determined in accordance with the definition of operational risk by considering Garanti Bank s whole processes, products and departments. The control areas are set for operational risks within Garanti Bank and all operational risks are followed by assigning the risks to these control areas. In this context, appropriate monitoring methodology is developed for each control area that covers all operational risks and control frequencies are determined. Currently, the value at operational risk is calculated according to the basic indicator approach as per the Article 14 of Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks as pronounced by BRSA. The annual gross income is defined as net interest income plus net non-interest income reduced by realised gains/losses from the sale of securities available-for-sale and held-to-maturity, non-recurring gains and income derived from insurance claims. The result is added to risk weighted assets in the capital adequacy calculation. Capital management regulatory capital BRSA sets and monitors capital requirements for Garanti Bank as a whole. The parent company and individual banking operations are directly supervised by their local regulators. In implementing current capital requirements, BRSA requires the banks to maintain a prescribed ratio of minimum 8 percent of total capital to total value at credit, market and operational risks. Garanti Bank and its subsidiaries consolidated regulatory capital is analysed into two tiers: Tier 1 capital, which includes paid-in capital, share premium, legal reserves, retained earnings, translation reserve and non-controlling interest after deductions for goodwill and certain cost items. Tier 2 capital, which includes qualifying subordinated liabilities, general impairment allowances and the element of the fair value reserve relating to unrealised gain/loss on assets classified as available-for-sale. Banking operations are categorised as either trading book or banking book, and risk-weighted assets are determined according to specified requirements that seek to reflect the varying levels of risk attached to assets and off-balance sheet exposures. Garanti Bank s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders return is also recognised and Garanti Bank recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position. There have been no material changes in the Garanti Bank s management of capital during the period. Starting from 1 July 2012, the capital adequacy ratio is calculated within the scope of the Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks (the Regulation ), Regulation on Credit Risk Mitigation Techniques and Regulation on Calculation of Risk Weighted Amounts for Securitisations published in the Official Gazette no dated 28 June 2012 and the Regulation on Equities of Banks published in the Official Gazette no dated 1 November

207 205 5 Financial risk management (continued) (g) (i) Operational risk (continued) Banking and finance segment (continued) Capital management regulatory capital (continued) In calculation of capital adequacy ratio, the data prepared from accounting records in compliance with the current legislation are used. Such accounting data is included in the calculation of credit and market risks subsequent to their designation as trading book and banking book according to the Regulation. The items classified as trading book and the items deducted from the equity are not included in the calculation of credit risk. In the calculation of risk weighted assets, the assets subject to amortisation or impairment, are taken into account on a net basis after being reduced by the related amortisations and provisions. In the calculation of the value at credit risk for the non-cash loans and commitments and the receivables from counterparties in such transactions are weighted after netting with specific provisions that are classified under liabilities and calculated based on the Regulation on Identification of and Provision against Non-Performing Loans and Other Receivables. The net amounts are then multiplied by the rates stated in the Article 5 of the Regulation, reduced as per the Regulation on Credit Risk Mitigation Techniques and then included in the relevant exposure category defined in the article 6 of the Regulation and weighted as per Appendix-1 of the Regulation. In the calculation of the value at credit risk for the derivative financial instruments and the credit derivaties classified in banking book, the receivables from counterparties are multiplied by the rates stated in the Appendix-2 of the Regulation, reduced as per the Regulation on Credit Risk Mitigation Techniques and then included in the relevant exposure category defined in the article 6 of the Regulation and weighted as per Appendix-1 of the Regulation. As per the article 5 of the Regulation, the counterparty credit risk is calculated for repurchase transactions, securities and commodities borrowing agreements. Garanti Bank s and its subsidiaries regulatory capital position on a consolidated basis as at 31 December 2012 is as follows: 2012 (*) Tier 1 capital 4,977,739 Tier 2 capital 475,361 Deductions from capital (40,561) Total regulatory capital 5,412,539 Value at credit, market and operational risks 32,080,677 Capital ratios (%) Total regulatory capital expressed as a percentage of total value at credit, market and operational risks Total tier 1 capital expressed as a percentage of total value at credit, market and operational risks (*) The amounts are presented in terms of proportionate ownership interest of the Group. The prior period s capital adequacy ratio is not presented above as the calculation base has changed to Basel II starting from 1 July 2012 as stated above. The capital ratios as per the previous legislation were percent and percent, respectively, as at 31 December Doğuş Group Annual Report 2012

208 Doğuş Group 5 Financial risk management (continued) (g) (i) Operational risk (continued) Banking and finance segment (continued) Hedging Due to Garanti Bank and its subsidiaries overall interest rate risk position and funding structure, its risk management policies require that it should minimise its exposure to changes in foreign currency rates and manage interest rate, credit risk and market price risk exposure within certain guidelines. Derivative financial instruments are used to manage the potential earnings impact of interest rate and foreign currency movements. Several types of derivative financial instruments are used for this purpose, including interest rate swaps and currency swaps, options, financial futures, forward contracts and other derivatives. The purpose of the hedging activities is to protect Garanti Bank and its subsidiaries from the risk that the net cash inflows will be adversely affected by changes in interest or exchange rates, credit ratings or market prices. Garanti Bank and its subsidiaries enter into transactions to ensure that they are economically hedged in accordance with risk management policies. In the accompanying consolidated financial statements, hedge accounting is applied for the cases where hedge accounting relationship is evidenced. Garanti Bank enters into various interest rate swap transactions in order to hedge its certain cash flow and fair value exposures on floating/fixed rate assets and liabilities, through converting its floating/fixed rate income/payments into fixed/ floating rate income/payments. There are no outstanding cash flow or fair value hedges as of 31 December Garanti Bank has applied fair value hedge accounting for the fixed rate eurobonds issued in 2011 with a total face value of USD million (Group share) with maturity of 10 years and maturity date of 20 April 2021 which were priced at percent originally and had a coupon rate of 6.25 percent, by designating interest rate swaps with the same face value amount and conditions. On 5 June 2012, Garanti Bank ceased to apply hedge accounting and accordingly fair value calculations for these bonds. The accumulated fair value incurred starting from the date of hedge accounting up to the date on which it was ceased, is amortised. (ii) Other corporate segments Due to the Group s overall interest rate risk position and funding structure, its risk management policies require that it should minimise its exposure to changes in interest rate. Derivative financial instruments are used to manage the potential earnings impact of interest rate and foreign currency movements. Several types of derivative financial instruments are used for this purpose, including interest rate swaps and currency swaps, options, financial futures, forward contracts and other derivatives. The purpose of the hedging activities is to protect the Group from the risk that the net cash inflows will be adversely affected by changes in interest rates. 206

209 207 6 Operating segments The Group has five reportable segments, as described below, which are largely organised and managed separately according to nature of products and services provided, distribution channels and profile of customers. Almost each entity included in the Group operates in one specific industry. Accordingly, all the financial statement components of an entity concerned are considered related only to its specific industry. The Group s main business segments are as follows: Banking and finance: Entities operating in the banking and finance segment are mainly involved in retail banking, insurance, leasing and factoring businesses. Construction: Entities operating in the construction segment are mainly involved in the constructions of buildings, infrastructure and related civil engineering businesses. Automotive: Entities operating in the automotive segment are exclusively involved in the importation, distribution and retailing of Volkswagen, Audi, Seat, Porsche, Bentley, Scania, Lamborghini, Krone and Meiller brand motor vehicles and spare parts and after sales services, and vehicle inspection services in Turkey. Tourism: Entities operating in the tourism segment are involved in hotel and marina investments, hotel management, ticket sales, hotel reservation and tour/conference organisation services. Others: Entities operating in other operations segment are mainly involved in media, real estate, energy, entertainment and several service businesses. Doğuş Holding is included in the other industrial segment as well. 6.1 Geographical segments The Group operates principally in Turkey, but also has operations in the Netherlands, Russia, Ireland, Turkish Republic of Northern Cyprus, Malta, Luxembourg, Switzerland, Germany, Romania, Morocco, Ukraine, Bulgaria, Libya, Italy, Greece, United Kingdom, Hong Kong, United States, Oman, Qatar, Dubai, Thailand and Croatia. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. As at and for the years ended 31 December, total geographical sector risk concentrations, both on and off statement of financial position, are presented below: Banking loans and advances to customers Total assets Total liabilities Non-cash loans Capital expenditure Turkey 22,351,347 48,397,339 32,555,016 4,359,030 1,367,350 Romania 625,061 1,280, ,633 26,541 2,223 The Netherlands 300,156 1,214,408 1,029,527 57, Malta 161, ,204 86, Russia 152, , ,728 28, Switzerland 106, ,316 1,039, ,468 4,913 USA 85, ,358 1,627, , United Kingdom 48,352 1,624,710 4,272, , ,667 Germany 16, ,057 1,501,433 53, Others 116,876 1,714,356 2,261, , ,901 23,964,214 56,085,148 44,849,607 5,623,028 1,697, Doğuş Group Annual Report 2012

210 Doğuş Group 6 Operating segments (continued) 6.1 Geographical segments (continued) Banking loans and advances to customers Total assets 2011 Total liabilities Non-cash loans Capital expenditure Turkey 20,042,038 40,986,517 28,805,625 4,236,994 1,452,316 Romania 781,961 1,276, ,707 54,599 5,307 The Netherlands 228, , ,588 76, Malta 150,386 1,346, , Switzerland 117, , , , Russia 111, , ,416 23, United Kingdom 65, ,367 1,800, , USA 61,295 2,008,426 4,125,353 46, Germany 7, ,425 1,331,830 27, Others 199,316 3,021,777 2,596, ,781 74,630 21,766,559 50,970,721 40,755,870 5,251,221 1,532, Major customers As at 31 December 2012 and 2011, there is not any single external customer which comprises more than 10 percent of the Group s consolidated revenue. 208

211 209 6 Operating segments (continued) 6.3 Information about the reportable segments 31 December 2012 Banking and finance Construction Automotive Tourism Others Total Revenues Total external revenue 4,003, ,685 5,494, , ,570 11,545,943 Intersegment revenue 8, ,239 8,210 17, , ,927 Net segment revenue 3,994, ,446 5,486, , ,635 11,000,016 Gross profit / (loss) 1,983,915 22, ,566 56,729 (16,571) 2,790,710 Result from operating activities 949,758 (22,348) 349,332 (30,871) (252,216) 993,655 Interest income -- 15,694 4,124 1,707 68,600 90,125 Interest expense -- (6,474) (72,477) (11,002) (148,850) (238,803) Share of profit of equity accounted investees , ,585 53,629 Income tax (expense)/benefit (213,122) (1,268) (55,793) (3,251) 48,965 (224,469) Profit/(loss) for the year attributable to owners of the Company 834,847 (14,584) 195,610 (34,680) (237,190) 744, December 2012 Other information Segment assets 42,450,061 1,014,417 2,026,027 2,109,710 8,345,356 55,945,571 Investments in equity securities 5, ,498 13,023 33, ,577 Total assets 42,455,912 1,014,417 2,113,525 2,122,733 8,378,561 56,085,148 Segment liabilities 37,220, ,649 1,383, ,509 5,056,083 44,849,607 Total liabilities 37,220, ,649 1,383, ,509 5,056,083 44,849, December 2012 Capital expenditure 85,640 57, , ,314 1,042,069 1,697,597 Depreciation 58,915 56,707 32,219 58,573 61, ,236 Non-cash expenses/(income) other than depreciation 323,112 (7,365) 112,110 1,938 (139,250) 290,545 Doğuş Group Annual Report 2012

212 Doğuş Group 6 Operating segments (continued) 6.3 Information about the reportable segments (continued) 31 December 2011 Banking and finance Construction Automotive Tourism Others Total Revenues Total external revenue 3,589, ,901 5,126, , ,420 10,248,904 Intersegment revenue 7, ,575 8,045 13,160 41, ,740 Net segment revenue 3,581, ,326 5,118, , ,989 9,929,164 Gross profit 1,798,279 36, ,162 62,326 29,461 2,551,956 Result from operating activities 1,184,519 (29,374) 253,606 (37,648) 2,084,526 3,455,629 Interest income -- 8,791 2, ,385 94,265 Interest expense -- (6,394) (61,559) (17,634) (88,906) (174,493) Share of profit of equity accounted investees 1, , (1,818) 8,003 Income tax (expense)/benefit (226,357) 319 (36,441) 1,301 (175,374) (436,552) Profit/(loss) for the year attributable to owners of the Company 878,480 (52,182) 104,966 (133,378) 1,893,878 2,691, December 2011 Other information Segment assets 38,665,415 1,068,310 1,872,169 1,696,527 7,613,746 50,916,167 Investments in equity securities 4, , ,962 54,554 Total assets 38,670,347 1,068,310 1,918,829 1,696,527 7,616,708 50,970,721 Segment liabilities 34,013, ,576 1,414, ,177 4,147,338 40,755,870 Total liabilities 34,013, ,576 1,414, ,177 4,147,338 40,755, December 2011 Capital expenditure 101,477 47,247 70, ,787 1,026,971 1,532,997 Depreciation 58,062 67,130 35,368 48,216 48, ,508 Non-cash expenses/(income) other than depreciation 97,574 51,865 95,726 22,612 (73,201) 194,

213 211 6 Operating segments (continued) 6.4 Interests in joint ventures As explained under accounting policy 3a, interests in joint ventures are proportionately consolidated in the accompanying consolidated financial statements. As at 31 December, the Group s share in the assets and liabilities of the joint ventures using the proportionate consolidation method is as follows: 2012 Banking and finance Construction Automotive Tourism Others Total assets 42,455, , ,747 68,757 1,093,626 Total liabilities 37,220,870 58, ,359 41, , Banking and finance Construction Automotive Tourism Others Total assets 38,670, , , ,647 Total liabilities 34,013, , , ,195 For the years ended 31 December, the Groups share in the profit or loss of the joint ventures using the proportionate consolidation method is as follows: 2012 Banking and finance Construction Automotive Tourism Others Profit/(loss) for the year 834,847 (26,662) 14, , Banking and finance Construction Automotive Tourism Others Profit/(loss) for the year 878,480 (10,725) (5,939) (369) (41,534) Doğuş Group Annual Report 2012

214 Doğuş Group 6 Operating segments (continued) 6.5 Non-cash (income)/expenses other than depreciation Non-cash (income)/expenses other than depreciation for the year ended 31 December 2012 were as follows: 2012 Banking and finance Construction Automotive Tourism Others Total Provision for loans and lease receivables 329, ,163 Warranty provision expense , ,600 Amortisation of other intangible assets 3, ,696 2,126 10,882 38,983 Provision for and reversal of employee severance indemnity 17,947 5,524 3,680 1,057 6,329 34,537 Insurance technical reserves and provisions 14, ,735 Provision for doubtful receivables ,583 7,604 Impairment in property and equipment ,795 3,659 Loss from written-off property and equipment, and inventory -- 1, ,417 Written-off non-current receivables Fair value change in investment property (8,523) (172,393) (180,341) Recoveries of loan and lease receivables losses (53,342) (53,342) Reversal of impairment in property and equipment (5,305) (5,305) Accrued interest and other accruals (17,022) (14,446) 25,613 (1,509) 4,647 (2,717) Recoveries of doubtful receivables (114) (683) (797) Others 41, ,495 (218) , ,112 (7,365) 112,110 1,938 (139,250) 290,

215 213 6 Operating segments (continued) 6.5 Non-cash (income)/expenses other than depreciation (continued) Non-cash (income)/expenses other than depreciation for the year ended 31 December 2011 were as follows: 2011 Banking and finance Construction Automotive Tourism Others Total Provision for loans and lease receivables 193, ,507 Written-off non-current receivables , ,307 Accrued interest and other accruals (24,319) 3,575 22,975 (1,917) 56,262 56,576 Loss from written-off property and equipment, and inventory -- 44, ,487 Provision for and reversal of employee severance indemnity 24,814 3,718 6,208 1,065 5,644 41,449 Warranty provision expense , ,498 Impairment in property and equipment ,389 2,919 22,780 34,088 Loss from deconstruction process of a hotel building , ,331 Provision for general banking risk 27, ,216 Amortisation of other intangible assets 3, , ,442 24,420 Provision for doubtful receivables ,323 8,342 Insurance technical reserves and provisions 5, ,369 Fair value change in investment property (7,382) (258,832) (266,214) Recoveries of loan and lease receivables losses (134,095) (134,095) Fair value gain on trading property transferred to property and equipment (51,830) (51,830) Reversal of impairment in property and equipment (11,386) (11,386) Recoveries of doubtful receivables (161) (225) (1,037) (1,423) Others 13, (1,260) 11,934 97,574 51,865 95,726 22,612 (73,201) 194,576 Doğuş Group Annual Report 2012

216 Doğuş Group 7 Assets held for sale 7.1 Non-current portion of assets held for sale As at 31 December, non-current portion of assets held for sale comprised the following: Non-current assets held for sale 30,780 30,573 30,780 30,573 As at 31 December 2012, TL 30,780 thousand (31 December 2011: TL 30,573 thousand) of the tangible assets held for sale is comprised of foreclosed real estate acquired by Garanti Bank against its impaired receivables. Such assets are required to be disposed of within three years following their acquisitions according to the Turkish Banking Law. This threeyear period can be extended by a legal permission from the regulators. In case of real estate held for sale, this requirement is valid only if the legal limit on the size of the real estate portfolio that a bank can maintain is exceeded. Currently, as Garanti Bank is within this legal limit, it is not subject to the above requirement. Impairment losses provided on real estate held for sale were determined based on the appraisals of independent appraisal firms. As at 31 December 2012, real estate held for sale has been impaired by TL 3,524 thousand (31 December 2011: TL 2,870 thousand). As at 31 December 2012, the rights of repurchase on various tangible assets held for sale amounted to TL 1,272 thousand (31 December 2011: TL 1,502 thousand). 7.2 Disposal group held for sale At 31 December, the disposal group comprised the following assets: Property and equipment (*) 60,608 64,223 Other (**) 3,480 2,427 64,088 66,650 (*) On 22 November 2011, the Group and Diana Otel Yatırımları ve İşletmeciliği Anonim Şirketi ( Diana Otel ) signed a preshare sales agreement. According to this agreement, the Group has decided to sell its shares in Datmar, one of tourism segment subsidiaries, to Diana Otel. Following the commitment of the Group s management, two touristic premises located in Side, Antalya, namely Aldiana Side (a holiday village) and Paradise Side Beach (an apart hotel) have been presented as a disposal group held for sale in the accompanying consolidated financial statements. Before classification as held for sale, assets in the disposal group have been measured in accordance with applicable IFRSs. As at 31 December 2012, property and equipment classified as held for sale comprise buildings amounting to TL 59,171 (31 December 2011: TL 61,538 thousand), furniture and equipment amounting to TL 1,419 (31 December 2011: TL 2,654 thousand) and motor vehicles amounting to TL 18 thousand (31 December 2011:31 thousand). (**) Other comprised of the apartments, villas and flats obtained through barter transactions with construction companies in exchange for advertising service provided from Doğuş Yayın Grubu. Cumulative income recognised in other comprehensive income As at 31 December 2012, accompanying consolidated financial statements comprise revaluation surplus, net of tax amounting to TL 25,936 thousand related with disposal group related with Datmar classified as held for sale (31 December 2011: TL 25,936 thousand). 214

217 215 8 Acquisitions of subsidiaries and jointly controlled entities 8.1 Acquisition of Kivahan According to share transfer agreement dated 13 April 2012, the Group has decided to purchase 51 percent of shares at Kivahan Turizm Ticaret Anonim Şirketi. On 17 April 2012, the share transfer was finalised and the Group obtained control by acquiring 51 percent of shares and voting rights in Kivahan. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values. Under IFRS 3, brand name, Kivahan, amounting to TL 1,677 thousand has been recognised as an intangible asset arising from the acquisition of Kivahan. The fair value of the brand name acquired is based on the Multi-period Excess Earnings Method. The following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 3,619 Total consideration 3,619 Identifiable assets acquired and liabilities assumed Property and equipment 408 Intangible assets 1,775 Accounts receivable 97 Inventories 42 Other current assets 71 Cash and cash equivalents 35 Accounts payable (87) Loans and borrowings (63) Due to related parties (221) Other current liabilities (213) Deferred tax liabilities (335) Total net identifiable assets 1,509 Goodwill Goodwill has been recognised as a result of the acquisition as follows: Total consideration transferred 3,619 Non-controlling interests based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 739 Less: Value of net identifiable assets (1,509) Goodwill 2,849 Cash consideration transferred 3,619 Cash and cash equivalents acquired (35) Net cash outflow arising on acquisition 3,584 Goodwill reflects the deal rationale of the Group s ambition to become a major player in domestic market and acquire strong brand names. Doğuş Group Annual Report 2012

218 Doğuş Group 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.2 Acquisition of D Et With the share transfer agreement dated 17 April 2012, the Group purchased 51 percent of shares of D Et ve Et Ürünleri Gıda Pazarlama Anonim Şirketi from CNG Turizm Gıda İthalat İhracat Limited Şirketi and the Group obtained control and 51 percent voting rights in D Et. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values. Under IFRS 3, brand name, Nusr-et, amounting to TL 17,207 thousand has been recognised as an intangible asset arising from the acquisition of D Et. The fair value of the brand name acquired is based on the Multi-period Excess Earnings Method. The following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 10,755 Consideration payable 11,104 Total consideration 21,859 Identifiable assets acquired and liabilities assumed Property and equipment 91 Intangible assets 17,215 Inventories 6 Other current assets 699 Cash and cash equivalents 740 Accounts payable (76) Due to related parties (12) Other current liabilities (140) Deferred tax liabilities (3,344) Total net identifiable assets 15,179 Goodwill Goodwill has been recognised as a result of the acquisition as follows: Total consideration transferred 21,859 Non-controlling interests based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 7,438 Less: Value of net identifiable assets (15,179) Goodwill 14,118 Cash consideration transferred 10,755 Cash and cash equivalents acquired (740) Net cash outflow arising on acquisition 10,015 Goodwill reflects the deal rationale of the Group s ambition to become a major player in domestic market and acquire strong brand names. 216

219 217 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.3 Acquisition of Marina Dalmacija d.o.o and Marina Borik d.o.o According to share purchase agreement dated 20 April 2012, the Group has decided to purchase 100 percent of shares in Marina Dalmacija d.o.o. and Marina Borik d.o.o. from International Seaport AG. On 30 April 2012, the share transfer was finalised and the Group obtained control by acquiring 100 percent of shares and voting rights in Marina Dalmacija d.o.o and Marina Borik d.o.o.. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values. Under IFRS 3, intangible assets recognised arising from the acquisition of Dalmacija and Borik are stated below: Concession rights 43,246 Customer relationship 3,733 Total intangible assets recognised on acquisition 46,979 The fair value of above mentioned intangible assets arising from the acquisition has been determined upon completion of an independent valuation. The fair value of the concession rights acquired is based on the Multi-period Excess Earnings Method. The fair value of the customer relationship acquired is based on Greenfield Approach. The following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 130,009 Total consideration 130,009 Identifiable assets acquired and liabilities assumed Property and equipment 62,562 Intangible assets 47,002 Other non-current assets 353 Accounts receivable 4,420 Inventories 43 Cash and cash equivalents 3,009 Accounts payable (1,731) Loans and borrowings (33,353) Taxes payable on income (136) Other current liabilities (12,394) Deferred tax liabilities (13,992) Total net identifiable assets 55,783 Goodwill Goodwill has been recognised as a result of the acquisition as follows: Total consideration transferred 130,009 Less: Value of net identifiable assets (55,783) Goodwill 74,226 Cash consideration transferred 130,009 Cash and cash equivalents acquired (3,009) Net cash outflow arising on acquisition 127,000 Doğuş Group Annual Report 2012

220 Doğuş Group 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.3 Acquisition of Marina Dalmacija d.o.o and Marina Borik d.o.o (continued) Goodwill reflects the deal rationale of the Group s ambition to become a leading player in Croatian marina market in order to create a chain of marinas in all Mediterranean Region with D-Marine Brand. 8.4 Acquisition of Acropolis S.P.A According to share purchase agreement dated 13 December 2012, the Group purchased 51 percent of shares of Acropolis S.P.A. from Mr. Antonio Cacace and the Group has a proportionately consolidated joint venture with a portion of effective interest of 51 percent. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values and have been determined on a provisional basis. Under IFRS 3, intangible assets recognised arising from the acquisition of Acropolis are stated below: Brand name Capri 3,645 IL Riccio 977 Total intangible assets recognised on acquisition 4,622 The fair value of above mentioned intangible assets arising from the acquisition has been determined provisionally pending completion of an independent valuation. The fair value of the brand name acquired is based on Relief from Royalty Method. The following summarises the major classes of consideration transferred and the proportionately recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 84,867 Total consideration 84,867 Identifiable assets acquired and liabilities assumed Property and equipment 97,657 Intangible assets 4,956 Investments in equity securities 65 Other non-current assets 1,650 Accounts receivable 255 Inventories 2,311 Other current assets 790 Cash and cash equivalents 591 Other non-current liabilities (446) Accounts payable (2,077) Loans and borrowings (21,975) Due to related parties (1,619) Other current liabilities (2,560) Deferred tax liabilities (11,528) Total net identifiable assets 68,

221 219 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.4 Acquisition of Acropolis S.P.A (continued) Goodwill Goodwill has been recognised as a result of the acquisition as follows: Total consideration transferred 84,867 Less: Value of net identifiable assets (68,070) Goodwill 16,797 Cash consideration transferred 84,867 Cash and cash equivalents acquired (591) Net cash outflow arising on acquisition 84,276 Acropolis is the first overseas hotel investment of the Group and is seen as an important step towards the enlargement of the Group s hotel portfolio. Group s reputation in the European Region, which has arisen initially from the marina business, increased the Group s willingness to be more active in the hotel management as well. Goodwill associated with this transaction is understood to be related to the Group s willingness to be actively involved in new markets of interest. 8.5 Acquisition of Doors Holding A.Ş. On 14 November 2012, the Group signed a share purchase agreement to acquire percent shares of Doors Holding A.Ş. On 26 December 2012, the share transfer was finalised and the Group obtained control and percent voting rights in Doors Holding A.Ş. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values and have been determined on a provisional basis. Under IFRS 3, intangible assets recognised arising from the acquisition of Doors Holding A.Ş. are stated below: Brand names Kitchenette 60,443 Da Mario 13,804 Vogue 11,483 Gina 11,341 Tom s Kitchen 9,884 Anjelique 9,645 Ajia 483 Sponsorship contracts 62,747 Kitchenette franchise network 6,913 Total intangible assets recognised on acquisition 186,743 The fair value of above mentioned intangible assets arising from the acquisition has been determined provisionally pending completion of an independent valuation. The fair value of the brand name acquired is based on Relief from Royalty Method. The fair value of the sponsorship contracts and franchise network acquired are based on the Multi-period Excess Earnings Method. Doğuş Group Annual Report 2012

222 Doğuş Group 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.5 Acquisition of Doors Holding A.Ş. (continued) The following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 270,936 Consideration receivable (6,890) Total consideration 264,046 Identifiable assets acquired and liabilities assumed Property and equipment 38,461 Intangible assets 187,775 Deferred tax assets 541 Other non-current assets 287 Accounts receivable 3,488 Inventories 3,876 Due from related parties 182 Other current assets 4,760 Cash and cash equivalents 3,264 Other non-current liabilities (1,482) Accounts payable (12,181) Loans and borrowings (19,341) Due to related parties (194) Other current liabilities (11,826) Taxes payable on income (214) Deferred tax liabilities (37,995) Total net identifiable assets 159,401 Goodwill Goodwill has been recognised as a result of the acquisition as follows: Total consideration transferred 264,046 Non-controlling interests based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 41,046 Less: Value of net identifiable assets (159,401) Goodwill 145,691 Cash consideration transferred 270,936 Cash and cash equivalents acquired (3,264) Net cash outflow arising on acquisition 267,672 The goodwill is mainly attributable to the synergies of the Group and the prospective market share expected to be gained by acquiring the strong brands of its major rivals in the market and reflects the deal rationale of the Group s ambition to penetrate a promising domestic market and acquire strong brand names which are engaged in offering high-end fine dining and after dinner entertainment services to A and B customers in top locations. 220

223 221 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.6 Acquisition of Azumi Limited On 20 November 2012, the Group signed a share purchase agreement to purchase percent of shares of Azumi Limited. The Group has a proportionately consolidated joint venture with a portion of effective interest of percent. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values and have been determined on a provisional basis. Under IFRS 3, intangible assets recognised arising from the acquisition of Azumi Limited are stated below: Brand name Zuma 154,422 Roka 37,780 Total intangible assets recognised on acquisition 192,202 The fair value of above mentioned intangible assets arising from the acquisition has been determined provisionally pending completion of an independent valuation. The fair value of the brand name acquired is based on Relief from Royalty Method. The following summarises the major classes of consideration transferred and the proportionately recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 283,720 Consideration receivable (13,790) Total consideration 269,930 Identifiable assets acquired and liabilities assumed Property and equipment 5,640 Intangible assets 192,202 Other non-current assets 5,703 Accounts receivable 906 Inventories 1,395 Due from related parties 3,845 Other current assets 824 Cash and cash equivalents 12,256 Other non-current liabilities (371) Accounts payable (2,450) Due to related parties (402) Other current liabilities (4,729) Taxes payable on income (526) Deferred tax liabilities (42,475) Total net identifiable assets 171,818 Doğuş Group Annual Report 2012

224 Doğuş Group 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.6 Acquisition of Azumi Limited (continued) Goodwill Goodwill has been recognised as a result of the acquisition as follows: Total consideration transferred 269,930 Less: Value of net identifiable assets (171,818) Goodwill 98,112 Cash consideration transferred 283,720 Cash and cash equivalents acquired (12,256) Net cash outflow arising on acquisition 271,464 The goodwill is mainly attributable to the operational synergies, prospective market share expected to be gained and growth path in the international markets by acquiring the strong brands. 8.7 Acquisition of Aresta On 16 October 2012, the Group signed a share purchase agreement to purchase 60 percent of shares in Aresta Gıda. On 5 December 2012, the share transfer was finalised and the Group obtained control and 60 percent voting rights in Aresta Gıda. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values and have been determined on a provisional basis. Under IFRS 3, intangible assets recognised arising from the acquisition of Aresta Gıda is stated below: Brand name Go Mongo 6,509 Total intangible assets recognised on acquisition 6,509 The fair value of above mentioned intangible assets arising from the acquisition has been determined provisionally pending completion of an independent valuation. The fair value of the brand name acquired is based on Relief from Royalty Method. 222

225 223 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.7 Acquisition of Aresta (continued) The following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 5,207 Total consideration 5,207 Identifiable assets acquired and liabilities assumed Property and equipment 753 Intangible assets 6,577 Other non-current assets 11 Accounts receivable 56 Inventories 156 Other current assets 139 Cash and cash equivalents 459 Loans and borrowings (399) Accounts payable (558) Other current liabilities (556) Deferred tax liabilities (1,001) Total net identifiable assets 5,637 Goodwill Goodwill has been recognised as a result of the acquisition as follows: Total consideration transferred 5,207 Non-controlling interest based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 2,255 Less: Value of net identifiable assets (5,637) Goodwill 1,825 Cash consideration transferred 5,207 Cash and cash equivalents acquired (459) Net cash outflow arising on acquisition 4,748 The goodwill is mainly attributable to the operational synergies of Group and the prospective market share expected to be gained by acquiring the strong brands of its major rivals in the market. Goodwill reflects the deal rationale of Group s ambition to acquire a strong brand name which is engaged in Pan Asian gastronomy concepts and cuisines that are new to the Turkish market. 8.8 Acquisition of K&G Medmarinas Management S.A. According to share purchase agreement dated 31 December 2012, the Group purchased 51 percent of shares of K&G Medmarinas Management S.A. from Kiriacoulis Mediterranean Cruises Shipping S.A and the Group has a proportionately consolidated joint venture with a portion of effective interest of 51 percent. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values and have been determined on a provisional basis. Doğuş Group Annual Report 2012

226 Doğuş Group 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.8 Acquisition of K&G Medmarinas Management S.A. (continued) Under IFRS 3, intangible assets recognised arising from the acquisition of KG Med Marinas is stated below: Concession rights ( Gouvia ) 5,969 Customer relationship ( Gouvia ) 1,825 Total intangible assets recognised on acquisition 7,794 The fair value of above mentioned intangible assets arising from the acquisition has been determined provisionally pending completion of an independent valuation. The fair value of the customer relationship acquired is based on the Multi-period Excess Earnings Method. The fair value of the concession rights acquired is based on Greenfield Approach. The following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 14,271 Total consideration 14,271 Identifiable assets acquired and liabilities assumed Property and equipment 11,713 Intangible assets 7,796 Investments in equity securities 5,054 Other non-current assets 15 Accounts receivable 2,670 Other current assets 837 Cash and cash equivalents 809 Other non-current liabilities (616) Accounts payable (2,889) Taxes payable on income (415) Other current liabilities (3,437) Deferred tax liabilities (1,768) Total net identifiable assets 19,769 Bargain purchase gain Bargain purchase gain has been recognised as a result of the acquisition as follows: Total consideration transferred 14,271 Less: Value of net identifiable assets (19,769) Bargain purchase gain (5,498) Cash consideration transferred 14,271 Cash and cash equivalents acquired (809) Net cash outflow arising on acquisition 13,462 The bargain purchase gain arising from the difference between consideration transferred and the recognised amounts of identifiable assets acquired and liabilities assumed at the acquisition date is recognised under other income in profit or loss. 224

227 225 8 Acquisitions of subsidiaries and jointly controlled entities (continued) 8.9 Acquisition in Acquisition of additional interests in Doğuş GYO According to share purchase agreement dated 12 November 2010, the Group decided to purchase shares with nominal value of TL 23,914 thousand in Doğuş-GE Gayrimenkul Yatırım Ortaklığı Anonim Şirketi ( Doğuş GE ), which was previously a proportionately consolidated joint venture with a proportion of effective interest of percent held by the Group, representing 25.5 percent of the share capital from General Electric Capital Corporation for a consideration of USD 27,885 thousand (equivalent to TL 42,876 thousand). On 3 January 2011, the share transfer was finalised with a closing agreement and the Group obtained control by acquiring the additional 25.5 percent of shares in Doğuş GE. The following summarises the major classes of consideration transferred and identifiable assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 42,876 Total consideration 42,876 Identifiable assets acquired and liabilities assumed Investment property 6,505 Property and equipment 104,822 Intangible assets 7 Other non-current assets 332 Accounts receivable 10 Other current assets 1,146 Cash and cash equivalents 10,560 Accounts payable (618) Other current liabilities (326) Total net identifiable assets 122,438 Bargain purchase gain Bargain purchase gain has been recognised as a result of the acquisition as follows: Total consideration transferred 42,876 Non-controlling interest based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquiree 77,804 Less: Value of net identifiable assets (122,438) Bargain purchase gain (1,758) Cash consideration transferred 42,876 Cash and cash equivalents acquired (10,560) Net cash outflow arising on acquisition 32,316 The bargain purchase gain arising from the difference between consideration transferred and the recognised amounts of identifiable assets acquired and liabilities assumed at the acquisition date is recognised under other income in profit or loss. Doğuş Group Annual Report 2012

228 Doğuş Group 8 Acquisitions of subsidiaries and jointly controlled entities (continued) Acquisition of additional interests in Doğuş GYO (continued) Subsequent to this transaction, in February 2011, the Group has purchased further additional shares from the publicly traded shares in İstanbul Stock Exchange with a total nominal value of TL 29,577 thousand representing percent of the share capital of Doğuş GE for a total consideration of TL 55,010 thousand. Under IFRS 3, acquisitions of noncontrolling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill was recognised as a result. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Accordingly the effect of this transaction was recognised as an equity transaction in the accompanying consolidated financial statements. Group s ownership interest at 3 January ,234 Effect of increase in Group s ownership interest (Note 29.4) 55,207 Retained earnings (197) The Group s ownership interest after the transaction 152, Acquisition of additional interests in Marina Sibenik d.o.o. According to share purchase agreement dated 20 June 2011, the Group decided to purchase shares with a nominal value of HRK 36 thousand (equivalent to Euro 5 thousand and TL 24 thousand) in Marina Sibenik d.o.o., which was previously a proportionately consolidated joint venture with a proportion of effective interest of 40 percent held by the Group, representing 36 percent of the share capital from an individual shareholder for a consideration of Euro 7,200 thousand (equivalent to TL 16,914 thousand). On 7 July 2011, the share transfer was finalised and the Group obtained control by acquiring the additional 36 percent of shares in Marina Sibenik d.o.o. The following summarises the major classes of consideration transferred and the recognised amounts of identifiable assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 16,914 Total consideration 16,914 Identifiable assets acquired and liabilities assumed Property and equipment 48,245 Intangible assets 47 Other non-current assets 23 Accounts receivable 2,290 Due from related parties 1,351 Inventories 23 Cash and cash equivalents 2,357 Accounts payable (1,926) Due to related parties (1,496) Other current liabilities (137) Loans and borrowings (17,616) Deferred tax liabilities (6,013) Total net identifiable assets 27,

229 227 8 Acquisitions of subsidiaries and jointly controlled entities (continued) Acquisition of additional interests in Marina Sibenik d.o.o. (continued) Goodwill Goodwill has been recognised as a result of the acquisition as follows: Total consideration transferred 16,914 Non-controlling interest based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquire 10,862 Less: Value of net identifiable assets (27,148) Goodwill 628 Cash consideration transferred 16,914 Cash and cash equivalents acquired (2,357) Net cash outflow arising on acquisition 14, Acquisition of Star TV On 17 October 2011, the Group and Doğan Yayın Holding Anonim Şirketi ( Doğan Yayın ) signed a share purchase agreement. According to this agreement, the Group decided to purchase total 391,500 thousand shares in Işıl Televizyon Yayıncılık Anonim Şirketi ( Star TV ) representing share capital with a total nominal value of TL 391,500 thousand from Doğan Yayın for a consideration of USD 327,000 thousand. Upon approval of Competition Board and other regulatory authorities, on 3 November 2011, the share transfer was finalised with a closing agreement. Accordingly, Radio and Television Supreme Council ( RTÜK ) approved the share transfer. Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values and were determined on a provisional basis as at 31 December Based on revision works on the independent valuation report regarding the fair value of intangible assets of Işıl TV during the current year, the goodwill amount has been depreciated by TL 845 thousand. Under IFRS 3, intangible assets recognised arising from the acquisition of Star TV are stated below: Star TV brand name 232,429 Broadcasting license 140,407 Content library (movies and series) 20,365 Total intangible recognised on acquisition 393,201 The fair value of above mentioned intangible assets arising from the acquisition has been determined upon completion of an independent valuation. Doğuş Group Annual Report 2012

230 Doğuş Group 8 Acquisitions of subsidiaries and jointly controlled entities (continued) Acquisition of Star TV (continued) The following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date: Consideration transferred Cash paid 267,481 Notes payable (Note 37) 328,753 Total consideration 596,234 Identifiable assets acquired and liabilities assumed Property and equipment 10,422 Intangible assets 394,011 Accounts receivables 39,624 Other current and non-current assets 12,614 Inventories 4,140 Cash and cash equivalents 1,120 Accounts payable (15,221) Loans and borrowings (13,520) Other current and non-current liabilities (44,072) Deferred tax liabilities (16,788) Total net identifiable assets 372,330 Goodwill Goodwill has been recognised as a result of the acquisition as follows: Total consideration transferred 596,234 Non-controlling interests based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquiree 276 Less: Value of net identifiable assets (372,330) Less: Indemnification asset (*) (32,756) Goodwill 191,424 Cash consideration transferred 267,481 Cash and cash equivalents acquired (1,120) Net cash outflow arising on acquisition 266,361 (*) The Group has the right to reimburse the provision for litigation and claims brought through the acquisition of Star TV to Alp Görsel İletişim Anonim Şirketi, the previous shareholder of Star TV, when such legal cases end against the favor of the Group and create a possible cash outlow. The goodwill is mainly attributable to the synergies expected to be achieved from integrating Star TV into the Group s existing media business. 228

231 229 9 Revenues and cost of revenues For the years ended 31 December, revenues and cost of revenues of banking and finance segment and other corporate segments were as follows: Banking and finance segment Banking operations: Interest income 3,306,207 2,876,917 Interest expense (1,771,813) (1,542,616) Fees and commission income 616, ,548 Fees and commission expense (224,079) (212,673) Net operating income 1,927,229 1,768,176 Insurance operations: Technical gain 71,758 58,240 Technical loss (15,072) (28,137) Net technical gain 56,686 30,103 Gross profit for banking and finance segment 1,983,915 1,798,279 Other corporate segments Net revenues 7,005,137 6,347,459 Cost of revenues (6,198,342) (5,593,782) Gross profit for other industrial segments 806, ,677 Total gross profit 2,790,710 2,551, Administrative expenses For the years ended 31 December, general and administrative expenses comprised the following: Personnel expenses 706, ,568 Depreciation and amortisation 169, ,586 Rent expenses 66,037 67,824 Taxes and duties other than taxes on income 56,054 47,210 Telecommunication expenses 44,637 38,528 Insurance expenses 36,865 21,613 Electronic data processing expenses 26,264 27,563 Provision for employee severance indemnity 24,063 41,648 Consultancy expenses 22,048 32,945 Utility expenses 22,016 17,612 Gasoline expenses 10,698 10,240 Research and development expenses 6,675 7,152 Stationery expenses 8,898 5,318 Others 151,239 89,001 1,351,433 1,189,808 Doğuş Group Annual Report 2012

232 Doğuş Group 11 Impairment losses, net For the years ended 31 December, impairment losses, net comprised the following: Provision for banking loans and lease receivables (Note 25) 329, ,507 Provision for doubtful receivables (Note 22) 7,604 8,342 Impairment in property and equipment (Note 15) 3,659 34,088 Written-off non-current receivables ,307 Provision for general banking risk -- 27,216 Recoveries of provision for banking loans and lease receivables (Note 25) (53,342) (134,095) Reversal of impairment on property and equipment (Note 15) (5,305) (11,386) Recoveries of doubtful receivables (Note 22) (797) (1,423) Other provisions 16,111 11, , , Other income/expenses 12.1 Other income For the years ended 31 December, other income comprised the following: Fair value gain on investment property (Note 19) 184, ,214 Rental income 30,854 3,317 Gain on sale of property and equipment 19,768 19,017 Bargain purchase gain recognised on acquisition (Note 8) 5,498 1,758 Gain on partial disposal of proportionately consolidated joint venture (*) -- 2,163,189 Gain on sales of investment in equity securities (Note 18) -- 57,862 Fair value gain on trading property transferred to property and equipment -- 51,830 Others 93, , ,862 2,674,216 (*) On 1 November 2010, Doğuş Holding and BBVA signed a share purchase agreement. On 22 March 2011, according to this agreement, 26,418,840,000 shares in Garanti Bank representing 6.29 percent of the share capital of Garanti Bank owned by Doğuş Holding was transferred to BBVA for a consideration of USD 2,067 million including USD 5 million late payment interest (equivalent to TL 3,243,467 thousand). The approvals of BRSA, Capital Market Board, Republic of Turkey Prime Ministry Undersecretariat of Treasury, The Central Bank of Spain, The Dutch Central Bank, The National Bank of Romania and European Commission have been obtained between the period of 1 November 2010 and 22 March In addition, on 1 November 2010, Doğuş Holding and BBVA signed a shareholders agreement which was effective from the date of completion of aforementioned share purchase agreement. This new shareholders agreement replaced the previously signed shareholders agreement between GE Araştırma Müşavirlik Anonim Şirketi and Doğuş Holding dated 22 December According to the new shareholders agreement, Doğuş Holding and BBVA are the two equal joint venturers of Garanti Bank. Gain arising from this share sale transaction amounting to TL 2,163,189 thousand (after partial disposal of goodwill previously recognised as a result of acquisition of 4.65 percent shares from GE Araştırma Müşavirlik Anonim Şirketi in Garanti Bank in December 2007) was recognised under other income in profit or loss in the accompanying consolidated financial statements. 230

233 Other income/expenses (continued) 12.1 Other income (continued) Following this share sale transaction, the proportion of effective interest of Doğuş Holding and its subsidiaries in Garanti Bank decreased to percent from percent. Items in the consolidated statement of comprehensive income of Garanti Bank has been proportionately consolidated with the previous effective interest of percent till this share sale date in the accompanying consolidated statement of comprehensive income for the year ended 31 December Other expenses For the years ended 31 December, other expenses comprised the following: Loss from written-off property and equipment, and inventory (*) (1,417) (44,487) Fair value loss on investment property (Note 19) (3,660) -- Loss on sale of property and equipment (4,830) (1,299) Warranty provision expense (56,600) (39,498) Provision expense for technical reserves related to insurance operations (14,735) (10,901) After sales services expense (12,426) (9,435) Loss on sales of subsidiaries (**) (6,731) (545) Loss from deconstruction process of a hotel building (***) (Note 15) -- (27,331) Others (126,964) (108,079) (227,363) (241,575) (*) For the year ended 31 December 2011, loss from written-off property and equipment and inventory comprised loss arising from written-off property and equipment of Doğuş İnşaat with a net carrying value of TL 24,891 thousand and inventory amounting to TL 19,596 thousand due to the suspension of the construction project in Libya. (**) This amount comprised of sale of four subsidiaries ( N Radyo, İkibinondokuz, VYG Radyo and N Spor) with broadcasting licenses by TL 5,442 thousand and loss on control of Enmoda by 75 percent by TL 1,289 thousand. (***) In 2011, D Otel applied a plan for the renovation to change its concept to a luxury class hotel. Based on this plan, some parts of the Hotel Building were displaced. The Company obtained a valuation report where replacement cost method is used. Per this report, TL 27,331 thousand displacement cost was recognised in other expense in profit or loss. Doğuş Group Annual Report 2012

234 Doğuş Group 13 Net finance income / (costs) For the years ended 31 December, net finance costs comprised the following: Recognised in profit or loss Finance income Foreign exchange gains 247, ,909 Interest income on bank deposits 81,353 86,387 Interest income on trading securities 3,092 2,250 Other interest and similar items 5,680 5,628 Total finance income 337, ,174 Finance expense Foreign exchange losses (78,033) (465,853) Interest expense on borrowings (191,037) (128,968) Other interest and similar items (47,766) (45,525) Total finance expense (316,836) (640,346) Net finance income / (costs) recognised in profit or loss 20,513 (291,172) Interest income and interest expense recognised in profit or loss amounts included in finance income and finance expense relate only to the segments other than banking and finance since such amounts are reflected in revenues and cost of revenues in the results of the banking and finance segment. Recognised in other comprehensive income Change in fair value of available- for-sale financial assets 5,847 3,658 Change in translation reserve (10,347) 49,620 Effective portion of changes in fair value of cash flow hedges 2,402 (562) Income tax on other comprehensive income (1,169) (732) Finance income / (expense) recognised in other comprehensive income, net of tax (3,267) 51,984 Attributable to: Owners of the Company (2,991) 50,238 Non-controlling interests (276) 1,746 Finance income / (expense) recognised in other comprehensive income, net of tax (3,267) 51,984 Above mentioned finance income and finance expense recognised in other comprehensive income relate only to the segments other than banking and finance. 232

235 Taxation In Turkey, corporate income tax is levied at the rate of 20 percent (31 December 2011: 20 percent) on the statutory corporate income tax base, which is determined by modifying accounting income for certain exclusions and allowances for tax purposes. According to the Corporate Tax Law, 75 percent of the capital gains arising from the sale of tangible assets and investments owned for at least two years are exempted from corporate tax on the condition that such gains are reflected in the equity until the end of the fifth year following the sale. The remaining 25 percent of such capital gains are subject to corporate tax. There is also a withholding tax on the dividends paid and is accrued only at the time of such payments. The withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15 percent. In applying the withholding tax rates on dividend payments to the non-resident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account. Appropriation of retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax. The transfer pricing law is covered under Article 13 disguised profit distribution via transfer pricing of the Corporate Tax Law. The General Communiqué on disguised profit distribution via transfer pricing dated 18 November 2007 sets details about implementation. If a tax payer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm s length basis, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as a tax deductable for corporate income tax purposes. In Turkey, the tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provision for taxes shown in the consolidated financial statements reflects the total amount of taxes calculated on each entity that are included in the consolidation. Under the Turkish taxation system, tax losses can be carried forward to be offset against future taxable income for up to five years. Tax losses cannot be carried back. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns within four months following the close of the accounting year to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Investment allowance The Temporary Article 69 added to the Income Tax Law no.193 with the Law no.5479, which became effective starting from 1 January 2006, upon being promulgated in the Official Gazette no 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 at 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 at 31 December On the other side, the Article 19 of the Income Tax Law was annulled and the investment allowance practice was ended as at 1 January 2006 with effectiveness of the Article 2 and the Article 15 of the Law no.5479 and the investment allowance rights on the investment expenditures incurred during the period of 1 January 2006 and 8 April 2006 became unavailable. Doğuş Group Annual Report 2012

236 Doğuş Group 14 Taxation (continued) Investment allowance (continued) However, on 15 October 2009, the Turkish Constitutional Court decided to cancel the clause no.2 of the Article 15 of the Law no.5479 and the expressions of 2006, 2007, 2008 in the Temporary Article 69 related to investment allowance mentioned above that enables effectiveness of the Law as at 1 January 2006 rather than 8 April 2006, since it is against the Constitution. Accordingly, the time limitations for the investment allowances carried forward that were entitled to prior to mentioned date and the limitations related with the investment expenditures incurred between the issuance date of the Law promulgated and 1 January 2006 were eliminated. According to the decision of Turkish Constitutional Court, cancellation related with the investment allowance became effective with promulgation of the decision on the Official Gazette and the decision of the Turkish Constitutional Court was promulgated in the Official Gazette no 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 percent of investment expenditures that are realised between 1 January 2006 and 8 April 2006, within the context of the Article 19 of the Income Tax Law will have the right for investment allowance exemption. New treatment on investment incentive was introduced by the Law no 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 As per the new regulation, the investment allowances that cannot be benefited and transferred to future periods due to insufficient income level of the relevant year, can be used without any year limitation, however the investment allowance amount to be considered in the determination of taxable income, will not exceed 25 percent of the income of the relevant year. The Article 5 of the Law no regarding investment allowance exemption for taxation and the cancelation of the article was promulgated in the Official Gazette no dated 18 February Accordingly, taxpayers are allowed to benefit from the investment incentive without any limitation. Tax applications for foreign branches of Garanti Bank Turkish Republic of Northern Cyprus According to the Corporate Tax Law of the Turkish Republic of Northern Cyprus no.41/1976 as amended, the corporate earnings (including foreign corporations) are subject to a 10 percent (31 December 2011: 10 percent) corporate tax and 15 percent (31 December 2011: 15 percent) income tax. This tax is calculated based on the income that the taxpayers earn in an accounting period. Tax base is determined by modifying accounting income for certain exclusions and allowances for tax purposes. The corporations cannot benefit from the rights of offsetting losses, investment incentives and amortisation unless they prepare and have certified their statements of financial position, statements of comprehensive income and accounting records used for tax calculations by an auditor authorised by the Ministry of Finance. In cases where it is revealed that the earnings of a corporation were not subject to taxation in prior years or the tax paid on such earnings are understated, additional taxes can be charged in the next 12 years following the related taxation period. The corporate tax returns are filed in the tax administration office in April following the end of the accounting year to which they relate. The corporate taxes are paid in two equal instalments in May and October. 234

237 Taxation (continued) Tax applications for foreign branches of Garanti Bank (continued) Malta The corporate earnings are subjected to a 35 percent (31 December 2011: 35 percent) corporate tax. This rate is determined by modifying accounting income for certain exclusions and allowances for tax purposes. The earnings of the foreign corporations branches in Malta are also subject to the same tax rate that the resident corporations in Malta are subject to. The earnings of such branches that are transferred to their head offices are not subject to an additional tax. The prepaid taxes are paid in April, August and December in the related years. The prepayments can be deducted from the annual corporate tax calculated for the whole year earnings. The excess part of the corporate tax that is not covered by such prepayments is paid to the tax office in September. Luxembourg The corporate earnings are subject to a 21 percent (31 December 2011: 21 percent) corporate tax. This rate is determined by modifying accounting income for certain exclusions and allowances for tax purposes. An additional 5 percent of the calculated corporate tax is paid as a contribution for unemployment insurance fund. 3 percent of the taxable income is paid as municipality tax addition to corporate tax, the municipalities have right to increase this rate up to percent. The municipality commerce tax is currently 9 percent of the taxable income. The tax returns do not include any tax payable amounts. The tax calculations are done by the tax office and the amounts to be paid are declared to tax authorities through official letters called Note. The amounts and the payments dates of prepaid taxes are determined and declared by the tax office at the beginning of the taxation period. The corporations whose head offices are outside Luxembourg, are allowed to transfer the rest of their net income after tax following the allocation of 5 percent of it for legal reserves, to their head offices. Tax applications for foreign subsidiaries and joint ventures of the Group The Netherlands In the Netherlands, corporate income tax is levied at the rate of 20 percent (31 December 2011: 20 percent) for tax profits up to Euro 200,000 and 25 percent (31 December 2011: 25 percent) for the excess part over this amount on the worldwide income of resident companies, which is determined by modifying accounting income for certain exclusions and allowances for tax purposes for the related year. A unilateral decree for the avoidance of double taxation provides relief for resident companies from Dutch tax on income, such as foreign business profits derived through a permanent establishment abroad, if no tax treaty applies. There is an additional dividend tax of 5 percent computed only on the amounts of dividend distribution at the time of such payments. Under the Dutch taxation system, tax losses can be carried forward for nine years to offset against future taxable income. Tax losses can be carried back to one prior year. Companies must file their tax returns within nine months following the end of the tax year to which they relate, unless the company applies for an extension (normally an additional nine months). Tax returns are open for five years from the date of final assessment of the tax return during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. The corporate income tax rate for the Germany branch of Garanti Bank is 30 percent (31 December 2011: 30 percent). Romania The applicable corporate tax rate in Romania is 16 percent (31 December 2011: 16 percent). The taxation system in Romania is continuously developing and is subject to varying interpretations and constant changes, which may become rarely retroactive. In Romania, tax periods remain open for tax audits for seven years. Tax losses can be carried forward to offset against future taxable income for seven years. Doğuş Group Annual Report 2012

238 Doğuş Group 14 Taxation (continued) Tax applications for foreign subsidiaries and joint ventures of the Group (continued) Russia The applicable tax rate for current and deferred tax for Garanti Bank s consolidated subsidiary in Russia is 20 percent (2 percent federal and 18 percent regional) ( 31 December 2011: 20 percent). The taxation system in the Russian Federation is relatively new and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are often unclear, contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open for a longer period. Egypt As at 31 December 2012, enacted corporation tax rate is 20 percent (31 December 2011: 20 percent) for the subsidiaries registered in Egypt according to local tax law. Switzerland As at 31 December 2012, enacted corporation tax rate is 22.8 percent (31 December 2011: 22.8 percent) for the subsidiaries registered in Switzerland according to local tax law. Ukraine As at 31 December 2012, enacted corporation tax rate is 25 percent (31 December 2011: 25 percent) for the subsidiaries registered in Ukraine according to local tax law. Morocco The applicable corporate tax rate in Morocco is 35 percent (31 December 2011: 35 percent). Tax losses can be carried forward to offset against future taxable income for five years. Where the loss includes a claim for depreciation, that portion can be carried forward for indefinitely. Italy As at 31 December 2012, enacted corporation tax rate is 31.4 percent for the joint ventures registered in Italy according to local tax law. Greece As at 31 December 2012, enacted corporation tax rate is 20 percent for the joint ventures registered in Greece according to local tax law. United Kingdom As at 31 December 2012, enacted corporation tax rate is 24 percent for the joint ventures registered in the United Kingdom according to local tax law Income tax expense Tax recognised in profit or loss Income tax expense for the years ended 31 December comprised the following items: Current corporation and income taxes 396, ,793 Deferred tax (credit) / expense (172,128) 186,759 Total income tax expense 224, ,

239 Taxation (continued) 14.1 Income tax expense (continued) Tax recognised in other comprehensive income Tax recognised in other comprehensive income for the years ended 31 December comprised the following items: Income tax (expense) / credit on available-for-sale financial assets (49,639) 88,968 Income tax (expense) / credit on revaluation of land and buildings (Note 29.3) (1,845) 13,294 Total income tax (expense) / credit recognised in other comprehensive income (51,484) 102,262 Reconciliation of effective tax rate The reported income tax expense for the years ended 31 December are different than the amounts computed by applying statutory tax rate to profit before tax as shown in the following reconciliation: Amount % Amount % Reported profit before taxation 1,067,797 3,172,460 Taxes on reported profit per statutory tax rate (213,559) (20.00) (634,492) (20.00) Permanent differences: Disallowable expenses (13,771) (1.29) (83,918) (2.65) Tax exempt income 18, , General banking provision (5,443) (0.17) Current year losses for which no deferred tax asset was recognised (33,756) (3.16) (41,297) (1.30) Reversal of previously recognised tax losses (17,718) (1.66) (17,448) (0.55) Effect of different tax rates applied 44, , Others, net (8,356) (0.78) (39,651) (1.25) Income tax expense (224,469) (21.01) (436,552) (13.76) 14.2 Taxes payable on income In accordance with the tax legislation in Turkey, tax payments that are made in advance during the year are being deducted from the total final tax liability of the fiscal year. Accordingly, the taxation charge on income is not equal to the final tax liability appearing on the consolidated statement of financial position. Taxes payable on income as at 31 December comprised the following: Taxes on income 224, ,552 Add: Taxes carried forward 32,589 99,279 Add: Current taxes recognised in other comprehensive income (106) 6,268 Add: Deferred taxes on taxable temporary differences 172,128 (186,759) Less: Corporation taxes paid in advance (336,314) (316,652) Less: Change in joint venture rate in a proportionately consolidated joint venture due to partial disposal -- (6,099) Taxes payable on income 92,766 32,589 Doğuş Group Annual Report 2012

240 Doğuş Group 14 Taxation (continued) 14.3 Deferred tax assets and liabilities Deferred tax is provided in respect of taxable temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except for the differences relating to goodwill not deductible for tax purposes and the initial recognition of assets and liabilities which affect neither accounting nor taxable profit. Unrecognised deferred tax assets and liabilities As at 31 December 2011, deferred tax assets amounting to TL 164,026 thousand (31 December 2011: TL 205,032 thousand) have not been recognised with respect to the statutory tax losses carried forward and deductible temporary differences amounting to TL 158,453 thousand and TL 5,573 thousand, respectively (31 December 2011: TL 163,325 thousand and TL 41,707 thousand, respectively). Such losses carried forward expire until Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom. Recognised deferred tax assets and liabilities Deferred tax assets and deferred tax liabilities at 31 December are attributable to the items detailed in the table below: Assets Liabilities Assets Liabilities Revaluation on land and buildings -- (63,636) -- (61,791) Provisions 66, , Effect of percentage of completion method 66,223 (72,174) 36,554 (72,294) Employee severance indemnity and short term employee benefits 27, , Pro-rata basis depreciation expense -- (11,934) -- (29,864) Fair value gain from investment property -- (113,753) -- (90,765) Valuation difference of financial assets and liabilities 8, , Investment incentives Intangible assets -- (76,315) -- (16,788) Other temporary differences 50,319 (38,280) 48,138 (9,792) Subtotal 219,892 (376,092) 174,327 (281,294) Tax losses carried forward 118, , Total deferred tax assets/(liabilities) 338,348 (376,092) 237,863 (281,294) Set off of tax (44,094) 44,094 (80,851) 80,851 Deferred tax assets/(liabilities), net 294,254 (331,998) 157,012 (200,443) According to the Tax Procedural Law in Turkey, statutory losses can be carried forward maximum for five years. Consequently, 2017 is the latest year for recovering the deferred tax assets arising from such tax losses carried forward. The Group management forecasted to generate taxable income during 2013 and the years thereafter and based on this forecast, it has been assessed as probable that the deferred tax assets resulting from tax losses carried forward in the amount of TL 592,280 thousand (31 December 2011: TL 317,680 thousand) will be realisable; hence, such realisable deferred tax assets in the amount of TL 118,456 thousand (31 December 2011: TL 63,536 thousand) are recognised in the consolidated financial statements. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the currency income taxes relate to the same fiscal authority. 238

241 Taxation (continued) 14.3 Deferred tax assets and liabilities (continued) Movements in temporary differences during the year Movements in deferred tax assets / (liabilities) were as follows: Balance 1 January 2012 Recognised in profit or loss Recognised in other comprehensive income Acquired through business combinations Other Balance 31 December 2012 Revaluation on land and buildings (61,791) -- (1,845) (63,636) Provisions 57,408 8, ,318 Effect of percentage of completion method (35,740) 29, (5,951) Employee severance indemnity 20,531 6, ,299 Fair value gain from investment property (90,765) (22,988) (113,753) Pro-rata basis depreciation expense (29,864) 53, (35,582) -- (11,934) Valuation difference on financial assets and liabilities 11,279 47,304 (49,639) ,944 Investment incentives Intangible assets (76,315) -- (76,315) Other temporary differences 21,558 (6,459) (3,060) 12,039 Tax losses carried forward 63,536 54, ,456 Total deferred tax assets/(liabilities) (43,431) 172,128 (51,484) (111,897) (3,060) (37,744) Balance 1 January 2011 Recognised in profit or loss Recognised in other comprehensive income Acquired through business combinations Effect of change in joint venture rate Balance 31 December 2011 Revaluation on land and buildings (75,085) -- 13, (61,791) Provisions 42,084 22, (7,630) 57,408 Effect of percentage of completion method (14,729) (21,011) (35,740) Employee severance indemnity 18,542 3, (1,292) 20,531 Fair value gain from investment property (45,330) (45,435) (90,765) Pro-rata basis depreciation expense (8,342) (22,393) (29,864) Valuation difference on financial assets and liabilities 21,563 (95,504) 88, (3,748) 11,279 Intangible assets (16,788) -- (16,788) Investment incentives 3,616 (2,447) (752) 417 Other temporary differences 3,953 45, (6,013) (5,376) 38,346 Tax losses carried forward 135,522 (71,986) ,536 Total deferred tax assets 81,794 (186,759) 102,262 (22,801) (17,927) (43,431) Doğuş Group Annual Report 2012

242 Doğuş Group 15 Property and equipment Movements of property and equipment and related accumulated depreciation during the year ended 31 December 2012 were as follows: Acquired through business combinations Disposals Transfer to investment property (*) Transfer from investment property (**) Cost 1 January Additions Land and buildings 2,624, , ,670 (8,266) (41,651) 54, ,227 (3,089) 76,445 3,779,184 Furniture and equipment 1,059, ,291 51,493 (96,546) ,488 (4,769) -- 1,282,488 Leasehold improvements 465,084 42,655 35,323 (5,664) ,757 (774) ,381 Motor vehicles 248,192 96,211 1,484 (47,447) (355) ,424 Construction in progress 843, ,781 3,474 (7,938) (954,811) (1,736) ,575 Others 10,906 9, (5,472) (137) -- 15,372 Total cost 5,252, , ,050 (171,333) (41,651) 54, (10,860) 76,445 6,426,424 Transfers (***) Effects of movements in exchange rates Net revaluation change 31 December Less: Accumulated depreciation 1 January Current year charge Acquired through business combinations Disposals Transfer to investment property Transfer from investment property Transfers Effects of movements in exchange rates Net revaluation change 31 December Buildings 420,930 54,514 24,499 (668) (7,902) , ,100 Furniture and equipment 626, ,961 25,577 (74,303) (2,440) ,288 Leasehold improvements 159,611 42,984 17,898 (3,695) (833) ,965 Motor vehicles 72,008 36,335 1,277 (14,852) (386) -- 94,382 Others 7, (784) ,273 Total accumulated depreciation 1,286, ,236 69,632 (94,302) (7,902) (3,136) 12,230 1,531,008 Net book value 3,966, ,418 (77,031) (33,749) 54, (7,724) 64,215 4,895,416 Less: Impairment in value (44,177) (3,659) (1,133) 5, (43,661) Net carrying value 3,921, ,285 (33,749) 54, (7,721) 64,215 4,851,755 (*) Garanti Bank s certain land and buildings with a total net carrying value of TL 33,749 thousand were transferred to investment property. (**) Transfer from investment property includes a building which is used by Group companies with a total net carrying value of TL 54,690 thousand. (***) Transfer is mainly comprised of Energy and Tourism investments amounting to TL 652,732 thousand and TL 260,949 thousand respectively. 240

243 Property and equipment (continued) Movements of property and equipment and related accumulated depreciation during the year ended 31 December 2011 were as follows: Acquired through business combinations Disposals (*) Effect of change in joint venture rate Transfer to investment property (**) Cost 1 January Additions 31 December Land and buildings 2,863,726 38, ,822 (49,328) (87,730) (175,788) 27,220 (92,894) 68,415 55,242 10,339 (137,899) 2,624,784 Furniture and equipment 1,154, ,286 19,008 (90,786) (75,315) (117,299) -- (30,770) -- 18,385 18, ,059,531 Leasehold improvements 416,184 40,466 44,515 (21,039) (23,373) ,104 2, ,084 Motor vehicles 232,057 68,074 3 (40,854) (15,284) (1,195) , ,192 Construction in progress 281, ,369 4,850 (2,201) (2,497) (82,707) ,805 Others 7, (17) , ,906 Total cost 4,955, , ,198 (204,225) (204,199) (293,087) 27,220 (124,859) 68, ,663 (137,899) 5,252,302 Transfer from investment property (***) Transfer to asset held for sale Transfer from trading property (****) Transfers Effects of movements in exchange rates Net revaluation change Less: Accumulated depreciation 1 January Current year charge Acquired through business combinations Disposals Effect of change in joint venture rate Transfer to investment property Transfer from investment property Transfer to asset held for sale Transfer from trading property Transfers Effects of movements in exchange rates Net revaluation change 31 December Buildings 644,689 54, (6,954) (21,424) (87,476) -- (31,356) -- 1, (132,564) 420,930 Furniture and equipment 740, ,102 8,875 (49,424) (55,800) (117,299) -- (25,230) -- (1,672) 3, ,493 Leasehold improvements 141,577 45, (16,441) (12,123) (307) ,611 Motor vehicles 60,997 33,924 2 (18,819) (4,450) (1,131) , ,008 Others 6, (17) (167) -- 7,208 Total accumulated depreciation 1,594, ,508 9,709 (91,655) (93,797) (204,775) -- (57,717) ,305 (132,564) 1,286,250 Net book value 3,361, ,489 (112,570) (110,402) (88,312) 27,220 (67,142) 68, ,358 (5,335) 3,966,052 Less: Impairment in value (68,745) (34,088) -- 11,386 3,723 42, , (1,924) -- (44,177) Net carrying value 3,292, ,489 (106,679) (45,760) 27,220 (64,223) 68, ,434 (5,335) 3,921,875 (*) Disposals include property and equipment of Doğuş İnşaat with a net carrying value of TL 24,891 thousand which were written off due to the suspension of the project in Libya and property and equipment of a company in tourism segment with a net carrying value of TL 27,331 thousand which were written off due to the deconstruction process of a hotel building. (**) A hotel building -together with its furniture and equipments- of one of the subsidiary in the tourism segment with a total net carrying value of TL 45,760 thousand was transferred to investment property. (***) Transfer from investment property includes a building which is used by Group companies with a total net carrying value of TL 27,220 thousand. (****) A land of one of the subsidiary in the other segment which is previously classified as trading property with a total net carrying value of TL 68,415 thousand was transferred to land and buildings. Doğuş Group Annual Report 2012

244 Doğuş Group 15 Property and equipment (continued) The Group s land and buildings are revalued for the purpose of the consolidated financial statements. Independent third party appraisers conduct the appraisals periodically on the basis of fair market value. As at 31 December 2012, the revaluation surplus, net of non-controlling interests and deferred taxes, amounting to TL 1,101,531 thousand including the fair value differences of investment and trading properties till the date of the use of property change from property and equipment and land and buildings and the fair value differences of property and equipment until reclassified as asset held for sale (31 December 2011: TL 1,060,279 thousand) was recognised in other comprehensive income, and presented in revaluation surplus account within the equity. Had there been no revaluation on land and buildings, the balances of land and buildings as at 31 December would have been as follows: Historical cost Accumulated depreciation Net Book Value 31 December ,895,812 (286,627) 2,609, December ,625,126 (205,919) 1,419, Intangible assets At 31 December, intangible assets comprised the following: Goodwill 1,136, ,856 Intangible assets other than goodwill 1,284, ,188 2,421,421 1,610, Goodwill The movements in goodwill were as follows: Balance at the beginning of the year 784, ,437 Acquisition during the year (Note 8) 353, ,052 Disposals (*) -- (94,507) Adjustments for currency translation (1,901) 9,874 Balance at the end of the year 1,136, ,856 (*) Disposal of goodwill amounting to TL 94,507 thousand for the year ended 31 December 2011 is related to the partial disposal of the interest in a proportionately consolidated joint venture, Garanti Bank (See note 12.1). 242

245 Intangible assets (continued) 16.1 Goodwill (continued) At 31 December, goodwill comprised the following: Company Acquisition cost Net asset fair value Purchase date Shares acquired % Group share Cumulative adjustment for currency translation Cumulative impairment in value of goodwill Cumulative disposal 31 December 2012 net amount 31 December 2011 net amount Garanti Bank (Note 12.1) 789,884 7,215,640 Dec , (94,507) 359, ,850 Star TV (Note 8.9.3) 596, ,110 Nov , , ,424 Doors Holding A.Ş. (Note 8.5) 264, ,401 Dec , , Azumi (Note 8.6) 269, ,636 Dec , , NTV Radyo 98,877 12,081 Apr , ,158 87,158 Dalmacija (Note 8.3) 127,175 53,399 Apr , , G Netherlands 159,049 61,685 Dec ,781 26,850 (38,772) (78,633) 37,713 39,187 Enformasyon 40,091 10,783 Jul , ,100 30,100 Doğuş İnşaat 89,076 1,491,894 Dec , ,983 27,983 Garanti Holding B.V. 27,844 39,960 Dec ,084 2, ,087 18,796 Acropolis (Note 8.4) 84, ,470 Dec ,070 (33) , D Marin Göcek 54,867 40,369 Dec , ,498 14,498 D Et (Note 8.2) 21,859 15,179 Apr , , Star TV (*) (formerly, named as Kapital Radyo) 9, Dec ,176 9,176 G Netherlands -- (43,392) May (2,637) ,170 3,321 Kivahan (Note 8.1) 3,619 1,509 Apr , DOAŞ 2, Dec ,735 2,735 Aresta (Note 8.7) 5,207 5,637 Dec , , Marina Sibenik d.o.o. (Note 8.9.2) 16,914 45,239 Jul , Borik (Note 8.3) 2,834 2,384 Apr , ,143 (38,772) (173,140) 1,136, ,856 (*) Kapital Radyo merged with Star TV on 29 June Doğuş Group Annual Report 2012

246 Doğuş Group 16 Intangible assets (continued) 16.1 Goodwill (continued) Impairment testing for goodwill The recoverable amount of goodwill related with Garanti Bank and DOAŞ are determined based on their quoted share prices. The valuations of the fair value of equities of NTV Radyo, Enformasyon and Kapital Radyo are performed internally. The income approach (discounted cash flow method) is used to determine the fair value of equities. 5-year business plan prepared by management is used for valuation of NTV Radyo and Enformasyon. The valuation of the fair value of equity for G Netherlands and Garanti Holding B.V. is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of G Netherlands and Garanti Holding B.V.. six-year business plan prepared by management is used for valuation. The valuation of the fair value of equity for Doğuş İnşaat is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of Doğuş İnşaat. 7-year business plan prepared by management is used for valuation. The valuation of the fair value of equity for D Marin Göcek is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of D Marin Göcek. 35-year business plan prepared by management is used for valuation. The valuation of the fair value of equity for Marina Sibenik d.o.o. is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of Marina Sibenik d.o.o.. 26-year business plan prepared by management is used for valuation. The valuation of the fair value of equity for Star TV is performed by an independent valuation company. The income approach (discounted cash flow method) is used to determine the fair value of equity of Star TV. 10-year business plan prepared by management is used for valuation. The fair value of Acropolis, Aresta, Azumi, Doors and KG Med Marinas have been determined provisionally pending completion of an independent valuation. Key assumptions used in discounted cash flow projections Key assumptions used in calculation of recoverable amounts are average discount rates and terminal growth rates. These assumptions are as follows: Discount rate Terminal growth rate D Marin Göcek 9.00 percent -- Doğuş İnşaat 8.30 percent 2.00 percent Enformasyon percent 3.00 percent G Netherlands percent 2.75 percent Garanti Holding B.V percent 2.75 percent Kapital Radyo percent 4.00 percent Marina Sibenik d.o.o percent -- NTV Radyo percent 3.00 percent Star TV percent 4.00 percent Discount rates used in discounted cash flows are the weighted average cost of capital ( WACC ) of the relevant entities. As a result of the impairment testing on entity basis, no impairment loss is recognised during the year ended 31 December

247 Intangible assets (continued) 16.2 Intangible assets other than goodwill Movements of intangible assets other than goodwill and related accumulated amortisation during the year ended 31 December 2012 were as follows: Acquired through business combinations Effects of movements in exchange rates Cost 1 January Additions Disposals 31 December Concession rights 274, , ,591 Concession rights-tüvturk (a) 253, ,920 Concession rights-d Marin Göcek (b) 20, ,454 Concession rights-gouvia Marina (l) , ,969 Concession rights- Dalmacija and Borik (e) , ,246 Customer relationship 1,890 5, ,448 Customer relationship-d Marin Göcek (b) 1, ,890 Customer relationship-dalmacija and Borik (e) , ,733 Customer relationship-gouvia Marina (l) , ,825 Brand name 232, , ,729 Brand name - Star TV (d) 232, ,429 Brand name - Nusr-et (f) , ,207 Brand name - Kivahan (g) , ,677 Brand name Go Mongo (k) , ,509 Brand name- Kitchenette (i) , ,443 Brand name-da Mario (i) , ,804 Brand name- Gina (i) , ,341 Brand name- Vogue (i) , ,483 Brand name- Anjelique (i) , ,645 Brand name- Ajia (i) Brand name- Tom s Kitchen (i) , ,884 Brand name-zuma (j) , ,422 Brand name-roka (j) , ,780 Brand name-capri (h) , ,645 Brand name- IL Riccio (h) Broadcasting rights 281, (1,485) ,643 Broadcasting rights A Yapım (c) 140, (1,485) ,236 Broadcasting rights-star TV (d) 140, ,407 Content library (movies and series) - Star TV (d) 20, ,365 Franchise Network - Kitchenette (i) , ,913 Sponsorship contract (i) , ,747 Other intangible assets 99,638 35,882 1,565 (1,295) (269) 135,521 Total cost 909,473 36, ,298 (2,780) (269) 1,407,955 Acquired through business combinations Effects of movements in exchange rates Less: Accumulated amortisation 1 January Current year amortisation Disposals 31 December Concession rights 45,107 19, ,978 Concession rights-tüvturk (a) 44,569 18, ,076 Concession rights-d Marin Göcek (b) ,076 Concession rights- Dalmacija and Borik (e) Customer relationship Customer relationship-d Marin Göcek (b) Customer relationship-dalmacija and Borik (e) Content library (movies and series) - Star TV (d) -- 4, ,073 Other intangible assets 39,092 14, (221) 60 53,733 Total accumulated amortisation 84,285 38, (221) ,107 Net carrying value 825, ,298 (2,559) (329) 1,284,848 Doğuş Group Annual Report 2012

248 Doğuş Group 16 Intangible assets (continued) 16.2 Intangible assets other than goodwill (continued) Movements of intangible assets other than goodwill and related accumulated amortisation during the year ended 31 December 2011 were as follows: Cost 1 January Additions Acquired through business combinations Disposals Effects of movements in exchange rates 31 December Concession rights 274, ,023 Concession rights-tüvturk (a) 253, ,569 Concession rights-d Marin Göcek (b) 20, ,454 Customer relationship-d Marin Göcek (b) 1, ,890 Brand name - Star TV (d) , ,429 Broadcasting rights 140, , ,128 Broadcasting rights - A Yapım (c) 140, ,721 Broadcasting rights - Star TV (d) , ,407 Content library (movies and series) - Star TV (d) , ,365 Other intangible assets 79,188 19,967 1,205 (188) (534) 99,638 Total cost 495,822 19, ,406 (188) (534) 909,473 Current Acquired Effects of year through business movements in Less: Accumulated amortisation 1 January amortisation combinations Disposals exchange rates 31 December Concession rights 31,157 13, ,107 Concession rights -TÜVTURK (a) 31,157 13, ,569 Concession rights -D Marin Göcek (b) Customer relationship -D Marin Göcek (b) Other intangible assets 27,710 10, (24) ,092 Total accumulated amortisation 58,867 24, (24) ,285 Net carrying value 436, ,059 (164) (1,209) 825,

249 Intangible assets (continued) 16.2 Intangible assets other than goodwill (continued) (a) The partnership established by the Group, Akfen Holding Anonim Şirketi and TÜV-SÜD Teknik Güvenlik ve Kalite Denetim Ticaret Limited Şirketi, obtained the right to tender vehicle inspection services for 20 years as at 20 December Following the completion of taking the advice of 1st Circuit of State, the Concession Agreement, regarding the privatisation of vehicle inspection services with the Privatisation Administration was signed on 15 August 2007, and TÜVTURK Kuzey and TÜVTURK Güney have started their operations. In 2009, Akfen Holding Anonim Şirketi transferred its shares to Test Taşıt Muayene İstasyonları Yapım ve İşletim Anonim Şirketi. As at 31 December 2012, 194 vehicle inspection stations are operating in 81 cities. (b) According to share transfer agreement dated 27 October 2009, the Group decided to purchase D Marin Göcek from Turkon Holding Anonim Şirketi. On 7 December 2010, the share transfer was finalised with a closing agreement and the Group obtained control by acquiring 100 percent of shares and voting rights in D Marin Göcek. Under IFRS 3, customer relationships amounting to TL 1,890 thousand and concession rights amounting to TL 20,454 thousand were recognised as intangible assets arising from the acquisition of D Marin Göcek at the date of acquisition. (c) Following the tender organised by Saving Deposits Insurance Fund on 18 June 2008; the transfer of the commercial and economic assets of Kral TV and Kral FM to A Yapım Televizyon Programcılık Anonim şirketi ( A Yapım ), a consolidated entity operating in media business, was started and Competition Authority approvals were obtained. Radio Television Supreme Council approved the process and A Yapım took over Kral TV and Kral FM on 16 October 2008 and recognised the amounts paid as broadcasting rights under intangible assets. (d) See note (e) See note 8.3. (f) See note 8.2. (g) See note 8.1. (h) See note 8.4. (i) See note 8.5. (j) See note 8.6. (k) See note 8.7. (l) See note 8.8. Doğuş Group Annual Report 2012

250 Doğuş Group 17 Investments in debt securities At 31 December, debt securities available-for-sale and held-to-maturity comprised the following: Face value Carrying value Interest rate range % Latest maturity Carrying value Debt and other instruments available for-sale: Government bonds indexed to 2,155,645 3,117, ,665,191 consumer price index Government bonds in TL 1,825,103 1,944, ,131,962 Government bonds at floating rates (a) 1,890,928 1,942, ,599,561 Discounted government bonds in TL 1,045,453 1,022, ,295 Bonds issued by financial institutions 797, , ,987 Bond issued by foreign governments 229, , ,197 Bonds issued by corporations (b) 78,749 81, ,024 Euro bonds 61,415 72, ,086 Others 7,130 6,081 Total securities available for-sale 9,267,719 7,464,384 Debt and other instruments held-tomaturity: Government bonds at floating rates (a) 212, , ,537 Euro bonds (c) 104, , ,102 Government bonds in TL 6,302 6, ,316 Bonds issued by financial institutions 3,282 4, Bonds issued by corporations Total held to maturity portfolio 335,337 1,082,955 Accrued interest income 1,171 63,419 Total held-to-maturity portfolio 336,508 1,146,374 Total investments in debt securities 9,604,227 8,610,758 Current investments in debt securities 3,936, ,881 Non-current investments in debt securities 5,667,402 7,815,877 9,604,227 8,610,758 (a) The interest rates applied on these securities are floating quarterly based on interest rates of government bond bids of the government. (b) Bonds issued by corporations include credit linked notes with a total face value of USD 102,054 thousand (31 December 2011: USD 102,586 thousand) and carrying value amounting to TL 183,372 thousand (31 December 2011: TL 194,132 thousand). (c) As per the legislation on capital adequacy (Basel II) effective from 1 July 2012, the risk weighting of securities in foreign currencies issued by the Turkish Treasury increased from 0 percent to 100 percent. Accordingly, in the current period, Garanti Bank sold a part of its Eurobonds with a total face value of USD 142,655 thousand from its held-to-maturity portfolio as per the exception granted by IAS 39 for the sale of securities originally classified under the securities held-to-maturity in cases where the regulatory capital requirement increases. 248

251 Investments in debt securities (continued) Interest income from debt and other fixed or floating instruments is reflected in interest on securities, whereas gains and losses arising from changes in the fair values of available-for-sale assets are deferred as a separate component of equity. There are no impairment losses provided on investment securities as at 31 December 2012 (31 December 2011: TL 29). At 31 December 2012, government bonds and treasury bills include securities pledged under repurchase agreements with customers amounting to TL 3,687,302 thousand (31 December 2011: TL 3,012,448 thousand). The following table summarises the securities that were deposited as collaterals with respect to various banking, insurance and asset management transactions: 31 December December 2011 Face value Carrying value Face value Carrying value Collateralised to foreign banks 3,134,268 3,538,633 2,672,988 2,849,424 Deposited at Istanbul Stock Exchange 1,868,032 2,314,888 1,512,702 1,691,420 Deposited at central banks for repurchase transactions 392, , , ,920 Deposited at Central Bank of Turkey ( CBT ) for interbank transactions 296, , , ,014 Deposited at Clearing Bank ( Takasbank ) 43,342 52,831 37,899 46,881 Deposited at CBT for foreign currency money market transactions 23,950 24,197 23,950 24,188 Others 9,112 7,431 5,758,218 6,713,242 5,364,206 5,890, Investments in equity securities At 31 December, the Group held equity investments in the following companies: Equity accounted investees Carrying value % of ownership Carrying value % of ownership VDF Tüketici 45, , LPD Holding 33, , Hedef Medya 21, VDF Servis Holding 11, , Yüce Auto 8, , Zea Marina S.A. 3, Enmoda 3, Lefkas 1, Other equity investments Adriatic Croatia International Club d.d. 7, IMKB Takas ve Saklama Bankası Anonim Şirketi ( Takasbank ) 2, , Garanti Konut Others 73 1,391 Total 139,577 54,554 Doğuş Group Annual Report 2012

252 Doğuş Group 18 Investments in equity securities (continued) Equity participations other than Adriatic Croatia which is a listed company, do not have a quoted market price in an active market and other methods of reasonably estimating their values would be inappropriate and impracticable, accordingly they are stated at cost, adjusted for the effects of inflation until 31 December percent shares of a previously consolidated subsidiary, Garanti Sigorta Anonim Şirketi, owned by Garanti Bank were sold to Eureko BV on 21 June After the sale, the remaining 20 percent was reclassified to investments in equity accounted investees and accounted under equity method of accounting. Subsequent to this sale, at 1 October 2007 the legal name of the company was changed as Eureko Sigorta. On 31 May 2011, in accordance with the shareholders agreement dated 21 June 2007, Garanti Bank has decided to use the option regarding sale of its 20 percent shares in Eureko Sigorta to Eureko B.V. and signed a share purchase agreement with Eureko B.V.. Following the receipt of legal approvals required under the agreement, the related shares have been transferred for a consideration of Euro 16,765 thousand. Gain amounting to TL 22,222 thousand related to this sale has been recognised under other income in profit or loss in the accompanying consolidated financial statements for the year ended 31 December On 3 June 2011, the Group sold its investments in Doğan TV Yayıncılık Anonim Şirketi and DTV Haber Görsel ve Yayıncılık Anonim Şirketi for a consideration of TL 40,000 thousand and a gain of TL 35,640 thousand related to this sale has been recognised under other income in profit or loss in the accompanying consolidated financial statements. The Group has sold 75 percent shares of Enmoda which was previously wholly owned subsidiary, on 2 April Enmoda is accounted for using the equity method in the consolidated financial statements starting from 2 April The summary financial information for equity accounted investees, not adjusted for the percentage ownership held is presented below: Total assets Equity 2012 Property, equipment and intangible assets Profit / (loss) for the year VDF Tüketici 2,341,190 92,536 5,653 29,278 LPD Holding 460,519 72,948 3,672 60,201 VDF Servis Holding 130,771 22,714 1,707 8,893 Yüce Auto 82,280 17, ,684 Zea Marina S.A. 54,544 25,042 30,131 1,792 Lefkas 27,524 14,896 22,222 (731) Hedef Medya 7,060 5,916 1,327 2,527 Enmoda 7, ,522 (3,859) Total 3,110, ,999 67, ,

253 Investments in equity securities (continued) Total assets Equity 2011 Property, equipment and intangible assets Profit / (loss) for the year VDF Tüketici 1,735,771 63,258 4,451 15,168 LPD Holding 391,126 12,747 1,495 (6,266) VDF Servis Holding 101,376 13,821 1,317 5,383 Yüce Auto 61,472 16, ,493 Total 2,289, ,336 7,713 16,778 Garanti Konut was established as per the decision made during the Board of Directors meeting of Garanti Bank on 15 September 2007 to provide consultancy and outsourcing services to banks, housing finance and mortgage finance companies. Its legal registration process was completed on 3 October Garanti Bank owns 100 percent of the company shares. Share capital of Garanti Konut amounting to TL 750 thousand in total (the Group s interest amounting to TL 180 thousand) is paid. This company is not consolidated in the accompanying consolidated financial statements as it does not currently have material operations compared to the consolidated performance of the Group; instead it is recorded under investments in equity participations and measured at cost. At the Garanti Bank s Board of Directors meeting held on 3 June 2009, it was decided to participate in the capital increase of Kredi Garanti Fonu Anonim Şirketi ( Kredi Garanti ) by TL 4,000 thousand (the Group s interest amounting to TL 1,209 thousand) and to subscribe for future capital increases up to TL 4,000 thousand (the Group s interest amounting to TL 1,209 thousand) in restructuring of the company to build a three-shareholder structure including the Turkish Union of Chambers and Commodity Exchanges ( TOBB ), the Small and Medium Size Enterprises Development Organization ( KOSGEB ) and the banks. As per this decision, Garanti Bank paid TL 2,000 thousand (the Group s interest amounting to TL 605 thousand) of its capital commitment of TL 4,000 thousand at 15 October 2009 for the capital increase of Kredi Garanti decided on 11 September The remaining balance was paid in two tranches in July 2011 and September 2012, by TL 1,000 thousand (the Group s interest amounting to TL 240 thousand) each. 19 Investment property As at 31 December, the movements in investment property were as follows: Balance at 1 January 1,903,086 1,528,750 Additions 133,918 76,595 Transfer from trading property -- 6,482 Transfer from property and equipment (Note 15) 33,749 45,760 Acquired through business combinations (Note 8.9.1) -- 6,505 Transfer to property and equipment (Note 15) (54,690) (27,220) Effects of movements in exchange rates (7,236) Fair value changes recognised in profit or loss (Note 12) 180, ,214 Balance at 31 December 2,189,168 1,903,086 The Group obtained independent appraisal reports for each item of investment properties and stated them at their fair values. Doğuş Group Annual Report 2012

254 Doğuş Group 20 Other non-current assets At 31 December, other non-current assets comprised the following: Value Added Tax ( VAT ) receivables 171, ,234 Prepaid expenses and similar items 84,152 76,633 Derivative financial assets 81,854 83,027 Other advances given 65,174 37,810 Progress billings 39,027 46,586 Advances given for property and equipment 31,637 35,235 Others (*) 114,845 57, , ,600 (*) As at 31 December 2012, others include cash retensions amounting to TL 35,506 thousand (31 December 2011: TL 51,705 thousand). 21 Inventories At 31 December, inventories comprised the following: Goods in transit 243, ,476 Trading goods 189, ,473 Spare parts 71,626 66,931 Raw materials (*) 46,519 40,834 Trading property, net of impairment 34,010 28,943 Other inventory 47,606 39, , ,069 (*) As at 31 December 2012 and 2011, raw materials are mainly composed of construction materials in various construction projects of Doğuş İnşaat. 22 Accounts receivable At 31 December, accounts receivable comprised the following: Premiums receivable 816, ,127 Factoring receivables 438, ,735 Trade receivables 389, ,270 Due from customers for contract work (Note 23) 218, ,305 Doubtful receivables 154, ,625 Contracts receivable 136, ,611 Others (*) 162, ,291 Total accounts receivable 2,316,067 1,769,964 Allowance for doubtful receivables (155,946) (156,046) Accounts receivable, net 2,160,121 1,613,918 Current accounts receivable 1,251, ,242 Non current accounts receivable 908, ,676 2,160,121 1,613,918 (*) As at 31 December 2012, other receivables includes indemnification asset amounting to TL 19,215 thousand (31 December 2011: TL 32,756 thousand) and cash consideration receivables from Azumi Limited and Doors Holding A.Ş. amounting to TL 20,680 thousand. 252

255 Accounts receivable (continued) Movements in the allowance for doubtful receivables during the years ended 31 December were as follows: Balance at the beginning of the year 156, ,189 Provision for the year 7,604 8,342 Acquired through business combinations 215 9,896 Recoveries (797) (1,423) Exchange rate differences on foreign currency balances (7,122) 24,042 Balance at the end of the year 155, ,046 At 31 December 2012, the Group held letters of guarantee amounting to TL 23,484 thousand (31 December 2011: TL 22,649 thousand) as collateral against its receivables. The Group s exposure to credit and currency risks and impairment losses related to account receivables are disclosed in Note Due from/due to customers for contract work At 31 December, the details of uncompleted contracts were as follows: Total costs incurred on uncompleted contracts 3,067,389 3,322,609 Estimated earnings/(costs) 331, ,617 Total estimated revenue on uncompleted contracts 3,398,545 3,760,226 Less: Billings to date (3,203,528) (3,585,445) Net amounts due from customers for contract work 195, ,781 Due from customers for contract work and due to customers for contract work were included in the accompanying consolidated statement of financial position under the following captions: Due from customers for contract work (Note 22) 218, ,305 Due to customers for contract work (Note 37) (23,209) (37,524) 195, ,781 Doğuş Group Annual Report 2012

256 Doğuş Group 24 Other current assets At 31 December, other current assets comprised the following: Reserve deposits at central banks 3,231,281 1,709,890 Taxes and funds to be refunded 187, ,937 Derivative financial assets 91, ,724 Prepaid expenses and similar items 66,321 96,041 Advances given for inventory 41,178 76,271 Others 113, ,900 3,731,180 2,413,763 Reserve deposits at central banks At 31 December 2012, reserve deposits at the Central Bank of Turkey are kept as minimum reserve requirement. These funds are not available for the daily business of Garanti Bank and its subsidiaries. As required by the Turkish Banking Law, these reserve deposits are calculated on the basis of liabilities in TL, foreign currencies and gold taken at the rates determined by the Central Bank of Turkey. The reserve deposits do not earn interest. The reserve deposits at the Central Bank of the Netherlands, as required by the Dutch Banking Law, are calculated as 1 percent on all customer deposits with an original maturity less than 2 years and 1 percent on bank deposits of non-eu banks with an original maturity less than 2 years. Garanti banks operating in Romania are obliged to keep minimum reserve requirements in accounts held with Romanian Central Bank ( NBR ). The reserve requirements are to be held in RON for RON liabilities and in Euro or USD for foreign currency liabilities. Currently, in line with stipulations of related legislation in force, the rates for reserve requirements are 15 percent for RON denominated liabilities with a remaining maturity less than 2 years and 20 percent for foreign currency denominated liabilities with an remaining maturity less than 2 years excluding Romanian banks fundings (31 December 2011: 15 percent for RON and 25 percent for foreign currency). The interest rates paid by the NBR to banks for reserve requirements are subject of permanent update, currently the rates are 1.30 percent for RON reserves, 0.56 percent for Euro reserves and 0.50 percent for USD reserves. The reserve deposits at the Central Bank of Russia are not available for the daily business, as required by the Russian Banking Law, these reserve deposits are calculated on the basis of Russian Ruble ( RUB ) and foreign currency liabilities taken at the rates determined by the Central Bank of Russia. In accordance with the current legislation, the reserve deposit rates for RUB and foreign currency liabilities legal entities-nonresidents, including banks-nonresident (RUB and foreign currency liabilities) are 5.5 percent (31 December 2011: 5.5 percent), individuals (RUB and foreign currency liabilities) and other liabilities are 4.0 percent (31 December 2011: 4.0 percent). 254

257 Banking loans and advances to customers At 31 December, outstanding loans were as follows: Consumer loans 8,159,674 6,898,738 Service sector 2,135,105 2,098,814 Energy 1,808,645 1,498,618 Construction 1,547,342 1,368,165 Transportation and logistics 1,143,323 1,028,575 Food 968,667 1,109,975 Textile 887, ,615 Metal and metal products 831, ,813 Tourism 786, ,412 Transportation vehicles and sub-industry 639, ,815 Financial institutions 537, ,142 Agriculture and stockbreeding 495, ,068 Data processing 460, ,453 Chemistry and chemical product 390, ,970 Electronic, optical and medical equipment 294, ,389 Stone, rock and related products 261, ,997 Mining 248, ,297 Machinery and equipment 238, ,091 Durable consumption 141, ,740 Plastic products 135, ,056 Paper and paper products 85,327 98,974 Others 938, ,302 Total performing loans 23,135,193 20,934,019 Non-performing loans and lease receivables (Note 41.2) 725, ,110 Total gross loans 23,860,946 21,463,129 Finance lease receivables, net of unearned income 624, ,681 Accrued interest income on loans and lease receivables 296, ,574 Allowance for possible losses on loans and lease receivables (Note 41.2) (817,419) (595,825) Banking loans and advances to customers, net 23,964,214 21,766,559 Short-term banking loans and advances to customers 9,573,341 9,116,509 Long-term banking loans and advances to customers 14,390,873 12,650,050 23,964,214 21,766,559 As at 31 December 2012, interest rates on loans granted to customers range between 1 percent - 53 percent (31 December 2011: 1 percent - 53 percent) per annum for the foreign currency loans and 2 percent - 23 percent (31 December 2011: 1 percent - 26 percent) per annum for the TL loans. Doğuş Group Annual Report 2012

258 Doğuş Group 25 Banking loans and advances to customers (continued) The provision for possible losses is comprised of amounts specifically identified as being impaired and non-performing loans and advances and a further portfolio-basis amount considered adequate to cover the residual inherent risk of loss present in the lending relationships presently performing in accordance with agreements made with borrowers. The amount of the portfolio basis allowance is TL 141,712 thousand (31 December 2011: TL 94,737 thousand). Movements in the allowance for possible losses on loans and lease receivables during the years ended 31 December were as follows: Balance at the beginning of the year 595, ,285 Provision for the year 329, ,507 Write-offs (49,949) (68,065) Effect of change in joint venture rate -- (138,807) Recoveries (53,342) (134,095) Exchange rate difference on foreign currency balances (4,278) -- Balance at the end of the year 817, ,825 The finance lease receivables are secured by way of the underlying assets. At 31 December, banking loans and advances to customers included the following finance lease receivables: Finance lease receivables, net of unearned income 624, ,681 Add: Non-performing lease receivables 66,844 62,329 Less: Allowance for possible losses from finance lease receivables (26,789) (22,359) Finance lease receivables, net 664, ,651 Accrued interest on lease receivables 4,220 3,459 Analysis of finance lease receivables, gross Due within 1 year 270, ,324 Due between 1 and 5 years 472, ,189 Due after 5 years 25,280 52,543 Finance lease receivables, gross 767, ,056 Unearned income (103,595) (97,405) Finance lease receivables, net 664, ,651 Analysis of finance lease receivables, net Due within 1 year 244, ,758 Due between 1 and 5 years 399, ,384 Due after 5 years 20,543 45,509 Finance lease receivables, net 664, ,

259 Banking loans and advances to banks At 31 December, banking loans and advances to banks comprised the following: TL Foreign currency Total Total Loans and advances-demand: Domestic banks Foreign banks 35, , , ,269 35, , , ,222 Loans and advances-time: Domestic banks 128, , , ,498 Foreign banks 452, ,726 1,392,746 2,596, ,763 1,262,316 1,843,079 3,006,270 Total loans and advances-demand and time 615,946 1,624,548 2,240,494 3,635,492 Placements at money markets ,629 Accrued interest income 5,009 7,855 12,864 11,114 Total loans and advances to banks 621,195 1,632,403 2,253,598 3,648,235 Short-term loans and advances to banks 1,128,628 2,444,856 Long-term loans and advances to banks 1,124,970 1,203,379 2,253,598 3,648,235 At 31 December 2012, interest rate range was ranging between 1 percent - 6 percent per annum (31 December 2011: 1 percent - 15 percent) and 5 percent - 13 percent per annum (31 December 2011: 5 percent - 13 percent) for foreign currency time deposits and TL time deposits, respectively. At 31 December 2012, deposits at foreign banks included blocked accounts of TL 1,378,576 thousand (31 December 2011: TL 1,911,743 thousand) held against the securitisations, funding and insurance business of Garanti Bank. Doğuş Group Annual Report 2012

260 Doğuş Group 27 Financial assets at fair value through profit or loss At 31 December, financial assets at fair value through profit or loss comprised the following: Debt and other instruments at fair value Face value Carrying value Interest rate range % Latest maturity Carrying value Discounted government bonds in TL 21,213 20, ,692 Government bonds in TL 16,259 17, ,610 Gold -- 10, ,253 Bonds issued by financial institutions 7,670 7, Investment fund -- 7, ,315 Bonds issued by corporations 4,023 4, ,762 Eurobonds 2,972 3, ,906 Government bonds floating 2,097 2, ,631 Government bonds consumer price index 1,015 1, ,401 Others ,728 98,782 Loans held at fair value 53, Listed shares 4,172 1,795 Total 132, ,577 Current financial assets at fair value through profit or loss 53,508 55,051 Non-current financial assets at fair value through profit or loss 78,604 45,526 Total 132, ,577 Income from debt and other instruments held at fair value is reflected in profit or loss as interest income on securities. Gains and losses arising from trading of financial assets at fair value through profit or loss are recorded in net trading gains/ (losses). Gains and losses from derivative financial instruments and changes in fair value of other trading instruments are reflected in net trading gains/(losses) including the effective portion of fair value hedges, whereas, gains and losses arising from changes in the effective portion of the fair value of cash flow hedges are reflected as a separate component of equity. Net gain from trading of financial assets is comprised of the following: Derivative transactions (105,356) 98,087 Fixed/floating securities 146,169 78,869 Trading gain, net 40, ,956 As at 31 December 2012, financial assets at fair value through profit or loss amounting to TL 53,623 thousand (31 December 2011: TL 882 thousand) are blocked against asset management operations and securitisations. As at 31 December 2012, government bonds and treasury bills include securities pledged under repurchase agreements with customers amounting to TL 4,746 thousand (31 December 2011: TL 488). For the year ended 31 December 2012, the impairment losses for the financial assets at fair value through profit or loss is TL 2 thousand (31 December 2011: TL 587 thousand). 258

261 Cash and cash equivalents At 31 December, cash and cash equivalents comprised the following: Cash at banks 1,550,266 2,854,818 Balances with central banks excluding reserve deposits 780, ,503 Cash at branches of the Group banks 301, ,939 Other liquid assets and cheques 767 1,906 Cash on hand 1,677 1,148 Total cash and cash equivalents 2,635,107 3,679,314 At 31 December, cash and cash equivalents disclosed in the consolidated statement of cash flows comprised the following: Cash at banks 1,550,266 2,854,818 Loans and advances to banks and balances with central banks excluding reserve deposits with original maturity periods of less than three months 1,129,378 1,923,636 Cash at branches of the Group banks 301, ,939 Other liquid assets and cheques 767 1,906 Cash on hand 1,677 1,148 Cash and cash equivalents in the statement of cash flows 2,984,035 5,031,447 Doğuş Group Annual Report 2012

262 Doğuş Group 29 Capital and reserves 29.1 Paid in capital As at 31 December 2012, the share capital of Doğuş Holding amounted to TL 2,055,292 thousand ( 31 December 2011: TL 2,055,292 thousand) in the consolidated financial statements. The paid-in capital of Doğuş Holding comprises 856,027,050 shares (31 December 2011: 856,027,050 shares) of TL 1 each. At 31 December, the shareholding structure of Doğuş Holding based on the number of shares is presented below: Thousands of shares % Thousands of shares % Ferit Şahenk 278, , Filiz Şahenk 260, , Deniz Şahenk 148, , Doğuş Arge 87, , Garanti Turizm 40, , DOAŞ 31, , Doğuş Yeme İçme (*) , Doğuş Sigorta 4, , Antur 3, , Doğuş Turizm Others , , (*) On 24 July 2012, one of Doğuş Group s consolidated subsidiary, Doğuş Yeme İçme, merged with Doğuş Holding. After the merger, the nominal share capital of Doğuş Holding has decreased by TL 5,264 thousand. On 24 July 2012, retained earnings amounting to TL 5,264 thousand has been transferred to share capital and the corresponding shares have been distributed to the existing shareholders of Doğuş Holding proportionally Legal reserves The legal reserves are generated by annual appropriations amounting to 5 percent of income disclosed in the Group s statutory accounts until it reaches 20 percent of paid-in share capital (first legal reserve). Without limit, a further 10 percent of dividend distributions in excess of 5 percent of paid-in capital is to be appropriated to increase legal reserves (second legal reserve). The legal reserves are restricted and are not available for distribution as dividend unless they exceed 50 percent of share capital. In the consolidated financial statements, total legal reserves, net of non-controlling interests is TL 359,467 thousand as at 31 December 2012 (31 December 2011: TL 284,281 thousand). 260

263 Capital and reserves (continued) 29.3 Revaluation surplus For the years ended 31 December, the movements of revaluation surplus were as follows: Balance at the beginning of the year 1,060,279 1,086,198 Revaluation increase / (decrease) in land and buildings (Note 15) 64,215 (5,335) Transfer to retained earnings due to partial disposal of a proportionately consolidated joint venture -- (7,700) Deferred taxes on revaluation surplus (1,845) 13,294 Non-controlling interest portion of revaluation changes, net of deferred taxes (3,259) (985) Depreciation effect on revaluation surplus of prior year (17,859) (25,193) Balance at the end of the year 1,101,531 1,060, Non-controlling interests For the years ended 31 December, movements of the non-controlling interests were as follows: Balance at the beginning of the year 350, ,959 Acquisition of non-controlling interests in previously proportionately consolidated joint ventures with change in control (Note and Note 8.9.2) -- 88,666 Acquisition of non-controlling interests through business combinations (Note 8.1, Note 8.2, Note 8.5, Note 8.7 and Note 8.9.3) 51, Acquisition from non-controlling interests in a consolidated subsidiary (Note 8.9.1) -- (55,207) Adjustment to non-controlling interests for share transfer of a subsidiary of a proportionately consolidated joint venture -- (1,028) Release of non-controlling interests through dividend distribution (32,445) (2,804) Effect of share capital increase 2,543 8,767 Change in non-controlling interest in consolidated subsidiaries (39,906) (12,700) Non-controlling interest of changes in revaluation surplus 3, Non-controlling interest of profit for the year 99,325 44,144 Balance at the end of the year 434, , Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. Garanti Bank had applied net investment hedge accounting for the exchange rate differences on the net investment risks on its foreign subsidiaries and its related financial liabilities denominated in foreign currencies in the previous periods. Garanti Bank prospectively discontinued this application as of 1 January 2009 within the framework of IFRIC 16 Comment on Hedges of a Net Investment in a Foreign Operation, effective for annual periods beginning on or after 1 October Doğuş Group Annual Report 2012

264 Doğuş Group 30 Loans and borrowings At 31 December, loans and borrowings comprised the following: Non-current liabilities Long-term bank borrowings 6,416,278 5,800,088 Finance lease liabilities 95,081 31,621 6,511,359 5,831,709 Current liabilities Short-term portion of long term bank borrowings 1,701,439 1,879,951 Short-term bank borrowings 3,203,049 2,756,208 Finance lease liabilities 39,445 21,400 4,943,933 4,657,559 As at 31 December, the Group s total bank borrowings and finance lease liabilities are as follows: Bank borrowings 11,320,766 10,436,247 Finance lease liabilities 134,526 53,021 11,455,292 10,489,268 This note provides information about the contractual terms of the Group s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group s exposure to interest rate, foreign currency and liquidity risk, see Note 41. Terms and debt repayment schedule At 31 December, the terms and conditions of outstanding loans and borrowings were as follows: 2012 Nominal Year of Face Carrying Currency interest rate maturity value amount Secured bank borrowings USD (Libor ) ,257,242 3,323,790 Secured bank borrowings Euro (Euribor ) , ,619 Unsecured bank borrowings USD (Libor ) ,339,085 3,285,358 Unsecured bank borrowings Euro (Euribor ) ,155,728 2,143,590 Unsecured bank borrowings Other ,958,587 1,959,409 Finance lease liabilities USD ,430 64,537 Finance lease liabilities Euro ,194 19,850 Finance lease liabilities Other ,927 50,139 11,449,816 11,455, Nominal Year of Face Carrying Currency interest rate maturity value amount Secured bank borrowings USD (Libor ) ,605,538 5,616,978 Secured bank borrowings Euro (Euribor ) ,261,249 2,265,336 Secured bank borrowings Other ,832,727 1,851,290 Unsecured bank borrowings USD (Libor ) , ,685 Unsecured bank borrowings Euro (Euribor ) , ,776 Unsecured bank borrowings Other ,832 35,182 Finance lease liabilities USD ,748 2,748 Finance lease liabilities Euro ,782 6,540 Finance lease liabilities Other ,696 43,733 10,448,287 10,489,

265 Loans and borrowings (continued) The present value of the redemption schedules of the Group s bank borrowings and finance lease liabilities according to original maturities as at 31 December are as follows: ,657, ,943,933 1,248, ,177, , and over 5,333,452 3,730,598 11,455,292 10,489,268 In December 2012, one of Garanti Bank s consolidated subsidiaries signed a loan agreement with European Fund for Southeast Europe ( EFSE ) in the amount of Euro 5.99 million with a maturity of five years for the financing of micro and small enterprises. In November 2012, Garanti Bank signed a loan agreement with European Bank for Reconstruction and Development ( EBRD ) ( EBRD-V ) in the amount of USD million with a maturity of five years for the financing of the women entrepreneurs. In August 2012, Garanti Bank completed a securitization (the DPR Securitisation-XIV ) transaction by issuance of certificates, a tranche of USD 95.8 million with 14 years maturity, granted directly by Overseas Private Investment Corporation ( OPIC ) to finance credit needs of small and medium size enterprises ( SMEs ) across Turkey. In December 2011, Garanti Bank signed a credit agreement with European Bank for Reconstruction and Development ( EBRD ) ( EBRD-IV ) for a loan in the amount of Euro 9.58 million with a maturity of five years for financing of SMEs in agribusiness. In June 2011, Garanti Bank completed a securitisation (the DPR Securitisation-XIII ) transaction, arranged by SMBC Nikko Securities America Inc., WestLB AG and Wells Fargo Securities LLC in the amount of USD 53.9 million with five years maturity and by Standard Chartered Bank in the amount of Euro 12 million with five years maturity. In December 2010, Garanti Bank completed a securitisation (the DPR Securitisation-XII ) transaction, with the involvement of European Investment Bank ( EIB ) in the amount of Euro 18 million with 12 years maturity, by European Bank for Reconstruction and Development ( EBRD ) in the amount of Euro 18 million with 12 years maturity, by West LB in the amount of Euro 24 million with five years maturity. In September 2010, Garanti Bank signed a loan agreement with EBRD (EBRD-III) in the amount of Euro 12 million which consists of 2 tranches for the financing of SMEs. The first tranche in the amount of Euro 4.8 million with five years maturity has been financed by EBRD while the second tranche in the amount of Euro 7.2 million with one year maturity by Standard Chartered Bank. In June 2010, Garanti Bank drew a second loan tranche worth of USD 14.4 million (equivalent of Euro 12 million) with a maturity of 12 years, within the Euro 35.9 million framework agreement signed with EIB (EIB I) on 25 November The fund will be used for the financing of the investment and working capital needs of SMEs located in Turkey. In December 2009, Garanti Bank had been granted another funding by EIB again for the financing of SME loans in the amount of USD 35.4 million (equivalent of Euro 24 million) with a maturity of 12 years. In May 2010, Garanti Bank signed a credit agreement with EBRD (EBRD-II) for a loan in the amount of USD 14.4 million which consists of two tranches. The loan, which is funded directly by EBRD with the 5-year tranche of USD 11.5 million and by the Clean Technology Fund which is established by the International Bank for Reconstruction and Development (the World Bank) in consultation with other international financial institutions, developed and developing countries and development partners, with the 15-year tranche of USD 2.9 million, will be utilised for the financing of the energy efficiency needs of the small sized enterprises. Doğuş Group Annual Report 2012

266 Doğuş Group 30 Loans and borrowings (continued) In December 2009, Garanti Bank signed a credit agreement with Overseas Private Investment Corporation (OPIC) for a facility for the financing of SMEs in the amount of USD 24 million with a maturity of 10 years. In November 2009, Garanti Bank signed a credit agreement with EBRD (EBRD-I) for a facility of Euro 12 million. The facility, which is comprised of 3 tranches, will be on lent to small-sized enterprises. Euro 5.6 million of the facility is funded from EBRD s own sources and has a maturity of five year while Euro 3.5 million of the facility is funded by the Netherlands Development Finance Company (FMO) with a maturity of three years. Euro 2.9 million of the facility is provided by a group of 6 banks from 4 countries with a maturity of one year. In August 2008, Garanti Bank completed a securitisation (the DPR Securitisation-IX ) transaction by issuance of certificates; a tranche of Euro 48 million with 10 years maturity from EIB. In June 2007, Garanti Bank completed a securitisation (the DPR Securitisation-VIII ) transaction by issuance of certificates; three tranches of USD 132 million with 10 years maturity wrapped by Ambac Assurance Corp., Financial Guaranty Insurance Corp. and XL Capital Assurance and a tranche of USD 12 million with 8 years maturity and no financial guarantee. In January 2007, Garanti Bank borrowed TL million from Deutsche Bank AG, London with a maturity of ten years at percent annual fixed interest rate through a secured financing transaction. Accordingly, Garanti Bank pledged USD 71.9 million of cash collateral to Deutsche Bank AG, London. Subsequently, Garanti Bank has entered into two more secured financing transactions with the same counterparty under the same collateral conditions and borrowed in total TL 63.7 million in two separate transactions on 28 June and 3 July 2007 with maturity of 10 years for each and pledged USD 24 million of cash collateral for each. The funding costs are percent and percent, respectively. The cash collaterals earn annually USD libor floating interest rate. In December 2006, Garanti Bank completed a securitisation (the DPR Securitisation-VII ) transaction by issuance of certificates: USD 95.8 million tranche with a maturity of 10 years and USD 24 million tranche with a maturity of eight years. Both of the series were issued on an unwrapped basis. In May 2006, Garanti Bank completed a securitisation (the DPR Securitisation-VI ) transaction by issuance of certificates: Euro 71.9 million with a guarantee issued by MBIA Insurance Corp. with maturity of five years, USD 71.9 million with no financial guarantee and a maturity of seven years and USD 53.9 million with a guarantee issued by Ambac Assurance Corporation with maturity of 10 years. In November 2005, Garanti Bank completed a securitisation (the DPR Securitisation-V ) transaction by issuance of certificate: USD 36 million with a guarantee issued by CIFG Inc. with a maturity of seven years, USD 59.9 million with a guarantee issued by XL Capital Assurance with a maturity of eight years and USD 29.9 million with no financial guarantee and a maturity of 8 years. The XL Capital Assurance wrapped tranche was refinanced by the issuance of unwrapped notes in April 2009, with the maturity profile of the new series being kept identical to the refinanced series. In September 2005, Garanti Bank completed a securitisation (the DPR Securitisation-IV ) transaction by issuance of certificate: USD 35.9 million with a guarantee issued by Financial Guaranty Insurance Corp. with a final maturity of 7 years, USD 35.9 million with a guarantee issued by Financial Security Assurance with a final maturity of eight years, USD 39.5 million with a financial guarantee issued by Assured Guaranty Corporation with a final maturity of 8 years, USD 26.3 million with a financial guarantee issued by Radian Asset Assurance Incorporation with a final maturity of 7 years, USD 6 million with no financial guarantee and a final maturity of 7 years. In May 2005, Garanti Bank completed a securitisation (the DPR Securitisation-III ) transaction by issuance of certificate: USD 71.9 million with a guarantee issued by MBIA Insurance Corporation, a final maturity of 8 years. 264

267 Loans and borrowings (continued) The DPR securitisation is a way of securitising Garanti Bank s payment orders created via SWIFT MT 103 or similar payment orders in terms of USD, Euro and GBP accepted as derived primarily from Garanti Bank s trade finance and other corporate businesses and paid through foreign depository banks. Finance lease liabilities As at 31 December 2012, finance lease liabilities are payable as follows: 2012 Future minimum lease payments Interest Present value of minimum lease payments Less than one year 47,640 (8,195) 39,445 Between one and five years 110,098 (15,017) 95, ,738 (23,212) 134,526 As at 31 December 2011, finance lease liabilities are payable as follows: 2011 Future minimum lease payments Interest Present value of minimum lease payments Less than one year 27,434 (6,034) 21,400 Between one and five years 37,379 (5,758) 31,621 64,813 (11,792) 53, Bonds payable At 31 December, bonds payable comprised the following: Latest Interest Carrying Carrying maturity rates % value value Bonds payable of TL 501 million , ,595 Bonds payable of USD 180 million , Bonds payable of USD 144 million , Bonds payable of USD 120 million , ,371 Bonds payable of USD 72 million month libor , ,761 Bonds payable of TL 30 million , Bonds payable of TL 18 million , Bonds payable of TL 18 million , Bonds payable of TL 12 million ,546 Bonds payable of TL 24 million -- 22,427 1,423, ,154 Accrued interest on bonds payable 43,405 33,068 1,467, ,222 Short-term bonds payable 513, ,203 Long-term bonds payable 953, ,019 1,467, ,222 The total face value of the bonds and bills issued by Garanti Bank in domestic market reached to TL 501 million as at 31 December The issuances are authorised by the Turkish Capital Markets Board. In December 2012, one of Garanti Bank s consolidated subsidiaries issued bills with a total face value of TL 18,561 thousand, interest rate of 6.71 percent and a maturity of 178 days. Doğuş Group Annual Report 2012

268 Doğuş Group 31 Bonds payable (continued) In October 2012, one of Garanti Bank s consolidated subsidiaries issued bills with a total face value of TL 11,975 thousand, interest rate of 7.57 percent and a maturity of 189 days. In September 2012, Garanti Bank issued USD 180 million 10-year fixed-rate notes with a maturity date of 13 September 2022 and a coupon rate of 5.25 percent and USD 144 million 5-year fixed-rate notes with a maturity date of 13 September 2017 and a coupon rate of 4.00 percent in the international markets. In July 2012, one of Garanti Bank s consolidated subsidiaries issued bills with a total face value of TL 29,938 thousand, interest rate of 9.06 percent and a maturity of 178 days. In May 2012, one of Garanti Bank s consolidated subsidiaries issued two-year-floating-rate notes with a total face value of TL 18,490 thousand, a maturity date of 8 May 2014 and a coupon rate of percent in domestic market. In August 2011, one of Garanti Bank s consolidated subsidiaries issued bills with a total face value of TL 23,950 thousand, interest rate of 8.75 percent and a maturity 179 days. Such bills matured in January In April 2011, Garanti Bank issued USD 120 million 10-year fixed-rate notes with a maturity date of 20 April 2021 and coupon rate of 6.25 percent and USD 72 million 5-year floating-rate notes with a maturity date of 20 April 2016 and a coupon rate of 3-month libor percent in the international markets. Garanti Bank and/or its consolidated subsidiaries repurchased some of the Group s own Turkish Lira securities with a total face value of TL 42,432 thousand ( 31 December 2011: TL 98,423 thousand) and foreign currency securities with a total face value of TL 5,477 thousand ( 31 December 2011: TL 4,482 thousand), and netted off such securities in the accompanying consolidated financial statements as at 31 December

269 Subordinated liabilities At 31 December, subordinated liabilities comprised the following: Latest Interest Carrying Carrying Maturity rates % value value Subordinated debt of Euro 12 million 2021 Euribor ,794 28,999 Subordinated deposits ,386 9,516 Subordinated debt of USD 120 million ,323 35, ,838 Accrued interest on subordinated liabilities 429 6,903 35, ,741 Short-term subordinated liabilities -- 1,871 Long-term subordinated liabilities 35, ,870 35, ,741 As at 31 December 2012, subordinated deposits obtained by one of Garanti Bank s consolidated subsidiaries amounted approximately to Euro 3 million (equivalent of TL 7,386 thousand) ( 31 December 2011: Euro 4 million, equivalent of TL 9,516 thousand). On 23 February 2009, Garanti Bank obtained a 12-year subordinated loan of Euro 12 million due March 2021 from Proparco (Societe de Promotion et de Participation pour la Cooperation Economique SA), a company of the French Development Agency Group, with an interest of Euribor+3.5 percent and a repayment option for Garanti Bank at the end of the seventh year. On 5 February 2007, Garanti Bank had obtained a 10-year subordinated fixed-rate notes of USD 120 millions due in February 2017 with a repayment option for Garanti Bank at the end of the fifth year. Garanti Bank repaid this debt benefiting from its early repayment option on 6 February 2012 following the necessary permissions received from the BRSA. 33 Other non-current liabilities At 31 December, other non-current liabilities comprised the following: Deferred income 275, ,126 Long-term advances received 154, ,007 Derivative financial liabilities 144, ,055 Provision for general banking risks 107, ,775 Reserve for severance payments 92,128 67,379 Insurance business related provisions 52,932 38,197 Provision for non-cash loans 41,241 30,666 Others (*) 109, , , ,961 As at 31 December 2012, advances received include long-term portion of the upfront sub-operation fees amounting to TL 199,208 (31 December 2011: TL 213,926 thousand) due to the collections in cash from the sub-operators of TÜVTURK Kuzey and TÜVTURK Güney for the vehicle inspection stations that were opened before 31 December As at 31 December 2012, a general provision amounting to TL 107,775 thousand (31 December 2011: TL 107,775 thousand) is provided by Garanti Bank in line with conservatism principle considering the circumstances which may arise from any changes in economy or market conditions under the name of provision for general banking risks. (*) As at 31 December 2012, others include indemnification liability amounting to TL 19,215 thousand (31 December 2011: TL 32,756 thousand). Doğuş Group Annual Report 2012

270 Doğuş Group 33 Other non-current liabilities (continued) 33.1 Insurance business related provisions Reserve for unearned premiums, net Gross 27,152 25,404 Reinsurers share (4,752) (11,589) 22,400 13,815 Provision for claims, net Gross 13,261 6,030 Reinsurers share (3,153) (2,014) 10,108 4,016 Life mathematical reserves 20,424 20,366 52,932 38, Reserve for severance payments For the years ended 31 December, the movements in the reserve for severance payments were as follows: Balance at the beginning of the year 67,379 41,257 Provision for the year (Note 10) 38,676 41,648 Acquired through business combinations Reversal of employee severance indemnity (4,139) (199) Paid during the year (9,788) (10,159) Effect of change in joint venture rate -- (5,572) Balance at the end of the year 92,128 67,379 The reserve has been calculated by estimating the present value of future probable obligation of the Group arising from the retirement of the employees. Statistical valuation methods were developed to estimate the enterprise s obligation under defined benefit plans. Accordingly, the following statistical assumptions were used in the calculation of the total liability: % % Discount rate Interest rate Expected rate of salary/limit increase The range of turnover rate to estimate the probability retirement The computation of the liability is predicated upon retirement pay ceiling announced by the Government. As at 31 December 2012, the ceiling amount was TL 3.03 thousand ( 31 December 2011: TL 2.73 thousand). 268

271 Retirement benefit obligation Defined benefit plan As a result of the changes in legislation described below, Garanti Bank will transfer a substantial portion of its pension liability under defined benefit plan ( the Plan ) to SSF. This transfer, which will be a settlement of Garanti Bank s obligation in respect of the pension and medical benefits transferable to SSF, was originally set to be within three years from the enactment of the New Law in May 2008, however, has been postponed for two years as per the decision of the Council of Ministers published on 9 April 2011 as further explained below. The actual date of the transfer has not been specified yet. However, in its financial statements for the year ended 31 December 2007, Garanti Bank has modified the accounting required by IAS 19 Employee Benefits as Garanti Bank believes that it is more appropriate to measure the obligation, in respect of the benefits that will be transferred to SSF, at the expected transfer amount prior to the date on which the transfer and settlement will occur. The expected transfer amount is calculated based on the methodology and actuarial assumptions (discount rate and mortality tables) prescribed in the New Law. As such, this calculation measures the liability to be transferred at the expected settlement amount i.e., the expected value of the payment to be made to SSF to assume that obligation. The obligation with respect to the excess benefits is accounted for as a defined benefit plan under IAS 19. (i) Pension and medical benefits transferable to SSF As per the provisional Article no.23 of the Turkish Banking Law no.5411 as approved by the Turkish Parliament on 19 October 2005, pension funds which are in essence similar to foundations are required to be transferred directly to SSF within a period of three years. In accordance with the Banking Law, the actuarial calculation of the liability (if any) on the transfer should be performed regarding the methodology and parameters determined by the commission established by Ministry of Labor and Social Security. Accordingly, Garanti Bank calculated the pension benefits transferable to SSF in accordance with the Decree published by the Council of Ministers in the Official Gazette no dated 15 December 2006 ( the Decree ) for the purpose of determining the principles and procedures to be applied during the transfer of funds. However, the said Article was vetoed by the President and at 2 November 2005 the President initiated a lawsuit before the Turkish Constitutional Court in order to rescind certain paragraphs of the provisional article no.23. Garanti Bank obtained an actuarial report regarding its obligations at 31 December This report, which was dated 12 February 2007, is from an actuary, who is registered with the Undersecretariat of the Treasury regarding this Fund in accordance with the Decree. Based on this Decree, the actuarial statement of financial position of the Fund has been prepared using a discount rate of percent and the CSO 1980 mortality table. Based on the actuarial report, the assets of the plan exceed the amount that would be required to be paid to transfer the obligation at 31 December In accordance with the existing legislation at 31 December 2006, the pension and medical benefits within the social security limits were subject to transfer and the banks were not required to provide any excess social rights and payments. On 22 March 2007, the Turkish Constitutional Court reached a verdict with regards to the suspension of the execution of the first paragraph of provisional article no.23 of the Turkish Banking Law, which requires the transfer of pension funds to SSF, until the decision regarding the cancellation thereof is published in the Official Gazette. The Constitutional Court stated in its reasoned ruling published in the Official Gazette numbered 26731, dated 15 December 2007 that the reason behind this cancellation was the possible loss of antecedent rights of the members of pension funds. Following the publication of the verdict, the Grand National Assembly of Republic of Turkey ( Turkish Parliament ) worked on the new legal arrangements by taking the cancellation reasoning into account. At 17 April 2008, the New Law has been accepted by the Turkish Parliament and the New Law has been enacted at 8 May 2008 following its publishing in the Official Gazette no Doğuş Group Annual Report 2012

272 Doğuş Group 34 Retirement benefit obligation (continued) Defined benefit plan (continued) (i) Pension and medical benefits transferable to SSF (continued) In accordance with the New Law, members of the funds established in accordance with the Social Security Law should be transferred to SSF within three years following its enactment date. The transfers are to take place within the three-year period starting from 1 January Subsequently, the transfer of the contributors and the persons receiving monthly or regular income and their right-holders from such funds established for employees of the banks, insurance and reinsurance companies, trade chambers, stock markets and unions that are part of these organisations subject to the provisional article 20 of the Social Security Law no.506 to the SSF, has been postponed for two years. The decision was made by the Council of Ministers on 14 March 2011 and published in the Official Gazette no dated 9 April 2011 as per the decision of the Council of Ministers, numbered 2011/1559, and as per the letter no. 150 of the Ministry of Labor and Social Security dated 24 February 2011 and according to the provisional article 20 of the Social Security and Public Health Insurance Law no On 19 June 2008, Cumhuriyet Halk Partisi had applied to the Constitutional Court for the cancellation of various articles of the Law including the first paragraph of the provisional Article 20. At the meeting of the Constitutional Court on 30 March 2011, it was decided that the article 73 and the first paragraph of the provisional Article 20 added to the law no are not contradictory to the Constitutional Law, and accordingly the dismissal of the cancellation request has been denied with the majority of votes. Garanti Bank obtained an actuarial report dated 27 December 2012 from an independent actuary reflecting the principles and procedures on determining the application of transfer transactions in accordance with the New Law. The actuarial statement of financial position of the Fund has been prepared using a discount rate of 9.80 percent and the CSO 1980 mortality table, and the assets of the plan exceed the amount that would be required to be paid to transfer the obligation at 31 December Garanti Bank s obligation in respect of the pension and medical benefits transferable to SSF has been determined as the value of the payment that would need to be made to SSF to settle the obligation at the reporting date in accordance with the related article of the New Law. The pension disclosures set out below therefore reflect the methodology and actuarial assumptions specified in the New Law. This calculation measures the benefit obligation at the expected transfer amount i.e., the estimated amount Garanti Bank will pay to SSF to assume this portion of the obligation. 270

273 Retirement benefit obligation (continued) Defined benefit plan (continued) (i) Pension and medical benefits transferable to SSF (continued) The pension benefits are calculated annually, as per the calculation as at 31 December 2012, the present value of funded obligations amount to TL 26,640 thousand (2011: TL 21,739 thousand) and the fair value of the planned assets amount to TL 354,246 thousand (2011: TL 295,505 thousand) Present value of funded obligations - Pension benefits transferable to SSF (obligation measured at the expected transfer amount) (109,705) (90,138) - Medical benefits transferable to SSF (obligation measured at the expected transfer amount) 88,549 73,198 - General administrative expenses (5,484) (4,799) (26,640) (21,739) Fair value of plan assets 354, ,505 Asset surplus in the plan (*) 327, ,766 (*) Asset surplus in this plan will be used as plan assets of the excess benefit plan. At 31 December, plan assets consist of the following: Securities 216, ,506 Cash and due from banks 113,882 8,374 Land and buildings 23,356 23,411 Other 96 2, , ,505 (ii) Excess benefits not transferable to SSF The other social rights and payments representing benefits in excess of social security limits are not subject to transfer to SSF. Therefore these excess benefits are accounted as an ongoing defined benefit plan. At 31 December, asset surplus on present value of defined benefit obligation is as follows: Present value of defined benefit obligation - Pension (102,090) (63,351) - Health (25,667) (33,017) Fair value of plan assets (*) 327, ,766 Asset surplus over present value of defined benefit obligation 199, ,398 (*) Plan assets are composed of asset surplus in the plan explained in section (i). Doğuş Group Annual Report 2012

274 Doğuş Group 34 Retirement benefit obligation (continued) Defined benefit plan (continued) (ii) Excess benefits not transferable to SSF (continued) As per the actuarial calculation performed as at 31 December 2012 as detailed above, the asset surplus over the fair value of the plan assets to be used for the payment of the obligations also fully covers the benefits not transferable and still a surplus of TL 199,849 thousand (2011: TL 177,398 thousand) remains. However, Garanti Bank s management, acting prudently, did not consider the health premium surplus amounting TL 88,549 thousand ( 31 December 2011 TL 73,198 thousand) as stated above that resulted from the present value of medical benefits and health premiums transferable to SSF. However, despite this treatment, there is no excess obligation that needs to be provided against as at 31 December Asset surplus over present value of defined benefit obligation 199, ,398 Net present value of medical benefits and health premiums transferable to SSF (88,549) (73,198) Present value of defined benefit obligation 111, ,200 The pension benefits are calculated annually by an independent actuary. Expenses recognised regarding this benefit plan in profit or loss for the years ended 31 December 2012 and 2011 are as follows: Total contribution payment 36,646 32,926 36,646 32,926 Principal actuarial assumptions used at 31 December are as follows: Discount rates (*) Inflation rates (*) Future real salary increase rates percent 40 percent Medical cost trend rates above inflation above inflation Future pension increase rates (*) (*) As at 31 December, the above mentioned rates are effective rates, whereas the rates applied for the calculation differ according to the employees years in service. Assumptions regarding future mortality are based on published statistics and mortality tables. The average life expectancy of an individual retiring at age 60 is 17 for males, and at age 58 for females is

275 Retirement benefit obligation (continued) Defined benefit plan (continued) (ii) Excess benefits not transferable to SSF (continued) The sensitivity analysis of defined benefit obligation of excess liabilities at 31 December is as follows: 2012 Percentage of change in defined benefit obligation Assumption change Pension benefits % Medical benefits % Overall % Discount rate +1% (15.1) (16) (15.3) Discount rate -1% Medical inflation +10% of CPI Medical inflation -10% of CPI -- (8.0) (1.6) 2011 Percentage of change in defined benefit obligation Assumption change Pension benefits % Medical benefits % Overall % Discount rate +1% (11.9) (13.7) (12.5) Discount rate -1% Medical inflation +10% of CPI Medical inflation -10% of CPI -- (7.3) (2.5) 35 Deposits At 31 December, deposits comprised the following: Banking deposits from banks 1,337, ,686 Banking customer deposits 22,044,678 21,291,385 23,381,995 22,033,071 Short-term deposits 23,026,609 21,629,065 Long-term deposits 355, ,006 23,381,995 22,033, Banking deposits from banks At 31 December, banking deposits from banks comprised the following: Payable on demand 317, ,156 Term deposits 1,017, ,294 1,335, ,450 Accrued interest expenses 1,719 2,236 1,337, ,686 At 31 December 2012, banking deposits from banks include both TL accounts in the amount of TL 247,218 thousand (31 December 2011: TL 161,274 thousand) and foreign currency denominated accounts in the amount of TL 1,088,380 thousand (31 December 2011: TL 578,176 thousand). As at 31 December 2012, interest rates applicable to TL bank deposits and foreign currency bank deposits varied within ranges of 3 percent - 10 percent and 1 percent - 7 percent (31 December 2011: 6 percent - 13 percent and 1 percent - 8 percent), respectively. Doğuş Group Annual Report 2012

276 Doğuş Group 35 Deposits (continued) 35.2 Banking customer deposits At 31 December, banking customer deposits comprised the following: Demand Time Total Total Foreign currency 2,401,238 7,352,921 9,754,159 9,403,287 Saving 849,014 7,113,469 7,962,483 7,247,186 Commercial 941,652 2,492,442 3,434,094 3,750,114 Gold and other precious metal 550,112 17, , Public and other 177,679 65, , ,335 4,919,695 17,041,780 21,961,475 21,187,922 Accrued interest expenses 17 83,186 83, ,463 4,919,712 17,124,966 22,044,678 21,291,385 At 31 December 2012, interest rates applicable to TL deposits and foreign currency deposits varied between 4 percent - 14 percent (31 December 2011: 6 percent - 13 percent) and 1 percent - 11 percent (31 December 2011: 1 percent - 8 percent), respectively. 36 Obligations under repurchase agreements The Group s proportionately consolidated joint ventures in banking and finance segment raise funds by selling financial instruments under agreements to repay the funds by repurchasing the instruments at future dates at the same price plus interest at a predetermined rate. Repurchase agreements are commonly used as a tool for short-term financing of interestbearing assets, depending on the prevailing interest rates. At 31 December, assets sold under repurchase agreements are as follows: 2012 Carrying value Fair value of underlying assets Carrying amount of corresponding liabilities Range of repurchase dates Repurchase price Investments in debt securities 3,687,302 3,687,302 3,374,001 Jan 13-Oct 13 3,384,627 Financial assets at fair value through profit or loss 4,746 4,746 4,612 Jan 13 4,612 3,692,048 3,692,048 3,378,613 3,389,239 Current portion of obligations 3,378,613 Non-current portion of obligations -- 3,378, Investments in debt securities 3,012,448 3,014,193 2,810,808 Jan 12-May 14 2,833,787 Financial assets at fair value through profit or loss Jan ,012,936 3,014,681 2,811,289 2,834,268 Current portion of obligations 2,525,166 Non-current portion of obligations 286,123 2,811,289 As at 31 December 2012, accrued interest on obligations under repurchase agreements amounting to TL 3,720 thousand (31 December 2011: TL 5,966 thousand) is included in the carrying amount of the corresponding liabilities. In general, the carrying values of such assets are more than the corresponding liabilities due to the margins set between parties, since such funding is raised against assets collateralised. The proceeds from the sales of securities under repurchase agreements are treated as liabilities and recorded as obligations under repurchase agreements. As at 31 December 2012, the maturities of the obligations varied from one day to 10 months and interest rates varied between 1 percent - 7 percent (31 December 2011: 1 percent - 13 percent, with maturities varying from one day to twenty nine months). 274

277 Accounts payable At 31 December, accounts payable comprised the following: Trade payables 614, ,069 Payables to insurance and reinsurance companies 810, ,643 Notes payable (*) 313, ,431 Due to customers for contract work (Note 23) 23,209 37,524 Others 141,964 60,490 1,903,970 1,542,157 Current portion of accounts payable 1,057, ,724 Non-current portion of accounts payable 846, ,433 1,903,970 1,542,157 (*) As at 31 December 2012, consideration payable arising from the acquisition of Star TV amounting to USD 176,000 thousand (equivalent of TL 328,753 thousand using the official exchange rate prevailing on the acquisition date) is included in the notes payable (See note 8.9.3). 38 Other current liabilities At 31 December, other current liabilities comprised the following: Blocked accounts against expenditures of card holders 946, ,385 Withholding taxes and duties payable 165, ,157 Expense accruals 127,733 83,845 Import deposits and advances received 125,871 72,961 Derivative financial liabilities 82, ,323 Other short term provisions 81,640 65,278 Short-term employee benefits 60,250 49,422 Deferred income 59,750 38,667 Transfer orders 24,479 42,393 Blocked accounts 4,416 16,491 Others 135, ,388 1,814,657 1,635, Commitments and contingencies Commitments and contingent liabilities are discussed separately for segments other than banking and finance and banking and finance segment in the following paragraphs Segments other than banking and finance Commitments and contingent liabilities arising in the ordinary course of business for the entities operating in the segments other than banking and finance comprised the following items as at 31 December: Letters of guarantee Given to suppliers 692, ,899 Obtained from banks and given to government organisations 715, ,878 Given to banks 108, ,952 Given to customs administrations 4,510 14,913 Given to others 86, ,526 Total letters of guarantee 1,607,302 1,629,168 Sureties given 73,271 68,739 Doğuş Group Annual Report 2012

278 Doğuş Group 39 Commitments and contingencies (continued) 39.1 Segments other than banking and finance (continued) The Group, as a guarantor, has given its equity holdings in some group companies with a total nominal amount of TL 518,020 thousand (31 December 2011: TL 524,110 thousand) and property equipment at an amount of TL 838,107 thousand (equivalent of USD 239,600 thousand, Euro 145,000 thousand and TL 70,000 thousand) (31 December 2011: TL 622,812 thousand, equivalent of USD 134,600 thousand and Euro 122,150 thousand and TL 70,056 thousand) as collateral. In terms of the related borrowing agreements, one of the tourism segment consolidated subsidiaries profit from hotels has been attached. Litigation and claims On 27 April 2010, Doğuş İnşaat and its consortium partners (together as the Consortium) terminated the Marmaray CR1 Contract with DLH General Directorate of the Ministry of Transportation (later changed as the Ministry of Transportation Maritime and Communication). The Group had recognised TL 15,405 thousand loss from the contract in cost of sales in On 13 July 2010, the Consortium submitted a Request for Arbitration to the International Chamber of Commerce ( ICC ) Secretariat, thereby commencing arbitration against DLH seeking for a relief for its termination and the recovery of its losses in connection with the Contract Banking and finance segment In the ordinary course of banking and finance activities, the entities included in the banking and finance segment undertake various commitments and incur certain contingent liabilities that are not presented in the consolidated financial statements, including letters of guarantee, acceptance credits and letters of credit. At 31 December, commitments and contingent liabilities comprised the following items: Letters of guarantee 4,007,267 3,625,169 Letters of credit 1,427,227 1,485,756 Acceptance credits 172, ,474 Other guarantees and endorsements 15,879 16,822 5,623,028 5,251, As at 31 December 2012, commitments for unused credit limits for credit cards, overdrafts, cheques and loans to customers, and commitments for credit linked notes amounted approximately to TL 6,695,308 thousand (31 December 2011: TL 6,585,184 thousand) in total. As at 31 December 2012, commitments for the derivative transactions carried out on behalf of customers in the Turkish Derivatives Exchange amounted to TL 106,175 thousand (31 December 2011: TL 87,245 thousand) in total. As at 31 December 2012, the securies acquired under security borrowing transactions include shares with a total market value of TL 4,910 thousand (31 December 2011: Euro 56,369 thousand and TL 3,603 thousand), and a total carrying value of TL 4,910 thousand (31 December 2011: TL 176,706 thousand) (31 December 2011: with a latest maturity of July 2028 for eurobonds). As at 31 December 2012, commitments for purchases and sales of foreign currencies under spot, forwards, swaps, future rate agreements, options and forward agreements for gold trading amounted to TL 12,867,231 thousand (31 December 2011: TL 10,509,375 thousand), approximately 94 percent of which are due within a year.

279 Commitments and contingencies (continued) 39.2 Banking and finance segment (continued) The following tables summarise the contractual amounts of the forward exchange, swap, futures and options contracts, showing the details of the remaining periods to maturity. Foreign currency amounts are translated at rates ruling at the reporting date. Monetary items denominated in a foreign currency are economically hedged using foreign currency derivative contracts. All gains and losses on foreign currency contracts are recognised in profit or loss, except for contracts of cash flow hedges as stated above. 31 December 2012 Notional amount with remaining life of Up to 1 month 1 to 3 months 3 to 6 months 6 to 12 months Over 1 year Total Interest rate derivatives Interest rate options , , , ,928 Purchases , ,125 61, ,464 Sales , ,125 61, ,464 Interest rate swaps 28 1, , , ,883 Purchases 12 1, ,941 77,463 Sales ,062 92,572 94,420 Interest rate futures Purchases Sales Other derivatives Securities, shares and index options 7,153 9,465 42, ,174 Purchases 3,571 4,311 20, ,535 Sales 3,582 5,154 21, ,639 Other forward contracts 6,283 3,219 3,668 4, ,599 Purchases 5,161 3,219 3,219 4, ,028 Sales 1, ,571 Other future contracts -- 12,564 20,055 8, ,267 Purchases Sales -- 12,438 20,055 8, ,141 Other swap contracts 546,781 2,518 5,539 9,641 1, ,059 Purchases 96,852 1,581 2,809 2, ,590 Sales 449, ,730 7, ,469 Currency derivatives Spot exchange contracts 701, ,903 Purchases 550, ,667 Sales 151, ,236 Forward exchange contracts 572, , , ,808 62,424 1,147,507 Purchases 343, , ,244 76,780 35, ,253 Sales 229,337 84,168 33,356 94,028 27, ,254 Currency/cross currency swaps 3,418, , , , ,561 5,356,355 Purchases 1,573, , , , ,739 2,926,895 Sales 1,844, ,395 52, , ,822 2,429,460 Options 2,213, , , , ,794 4,352,917 Purchases 1,114, , , ,021 59,498 2,215,238 Sales 1,098, , , ,681 63,296 2,137,679 Foreign currency futures -- 6, ,639 Purchases Sales -- 6, ,639 Subtotal purchases 3,687, , ,045 1,168, ,876 6,822,259 Subtotal sales 3,778, , , , ,804 6,044,972 Total of transactions 7,466,529 1,443,954 1,316,757 1,855, ,680 12,867,231 Doğuş Group Annual Report 2012

280 Doğuş Group 39 Commitments and contingencies (continued) 39.2 Banking and finance segment (continued) 31 December 2012 Notional amount with remaining life of Up to 1 month 1 to 3 months 3 to 6 months 6 to 12 months Over 1 year Interest rate derivatives Interest rate options , ,881 Purchases , ,881 Sales Interest rate swaps 12,385 30,593 18,787 4,685 48, ,320 Purchases 7,210 8,187 9,202 2,024 23,268 49,891 Sales 5,175 22,406 9,585 2,661 25,602 65,429 Interest rate futures Purchases Sales Other derivatives Securities, shares and index options 14,559 10,975 6,195 8,961 2,690 43,380 Purchases 12,506 6,327 5,229 6,870 1,345 32,277 Sales 2,053 4, ,091 1,345 11,103 Other forward contracts 55,017 13,472 2, ,144 Purchases 7,623 3, ,088 Sales 47,394 10,236 2, ,056 Currency derivatives Spot exchange contracts 363, ,714 Purchases 146, ,597 Sales 217, ,117 Forward exchange contracts 587, , , ,652 62,261 1,187,726 Purchases 319, , ,488 86,749 42, ,079 Sales 267,624 55,267 25, ,903 19, ,647 Currency/cross currency swaps 1,469,744 1,704, , , ,618 4,895,220 Purchases 544, , , ,982 91,341 1,589,824 Sales 924,889 1,503, , , ,277 3,305,396 Options 963, , ,584 1,021, ,209 3,604,420 Purchases 549, , , ,836 75,510 1,924,610 Sales 413, , , ,058 75,699 1,679,810 Foreign currency futures -- 15, ,450 Purchases -- 1, ,280 Sales -- 14, ,170 Subtotal purchases 1,587, , ,612 1,021, ,817 4,658,542 Subtotal sales 1,878,221 1,948, , , ,712 5,850,833 Total of transactions 3,465,561 2,629,109 1,718,207 1,892, ,529 10,509,375 Total 278

281 Commitments and contingencies (continued) 39.3 Commitments and contingencies applicable to the business segments As at 31 December 2012, commitment for uncalled capital of subsidiaries amounted to TL 37,017 thousand (31 December 2011: TL 148,645 thousand). 40 Related party disclosures For the purpose of the consolidated financial statements, the shareholders, key management personnel and the Board members, and in each case, together with their families and companies controlled by/affiliated with them; and associates, investments and joint ventures are considered and referred to as the related parties. A number of transactions are entered into with the related parties in the normal course of business. Most of the related party activity is eliminated at consolidation and the remaining activity is not material to the Group Related party balances At 31 December, the Group had the following balances outstanding from its related parties: 2012 Joint Ventures Other Total Accounts receivable Other non-current assets 3, ,814 Due from related parties , ,732 Cash and cash equivalents 110, ,952 Long-term borrowings 199, ,232 Short-term bank borrowings 79, ,385 Deposits , ,929 Accounts payable Due to related parties 1,232 8,233 9,465 Letters of guarantee 73, , Joint Ventures Other Total Other non-current assets Accounts receivable Due from related parties 2, , ,134 Banking loans and advances to customers 1, ,708 Cash and cash equivalents 942, ,597 Long-term borrowings 293, ,880 Other non-current liabilities 83, ,914 Short-term bank borrowings 10, ,208 Short-term portion of long-term borrowings 1, ,444 Deposits -- 83,967 83,967 Accounts payable Due to related parties 869 5,950 6,819 Letters of guarantee 210, ,432 Doğuş Group Annual Report 2012

282 Doğuş Group 40 Related party disclosures (continued) 40.2 Related party transactions For the years ended 31 December, the revenues earned and expenses incurred by the Group in relation to transactions with its related parties as summarised below: 2012 Joint Ventures Other Total Revenues 40,731 6,651 47,382 Cost of revenues (398) -- (398) Administrative expenses (2,089) -- (2,089) Selling, marketing and distribution expenses (442) -- (442) Net finance income / (costs) 13,785 (5,916) 7,869 Other income Other expenses (3,047) -- (3,047) 2011 Joint Ventures Other Total Revenues 36,791 4,295 41,086 Cost of revenues (448) -- (448) Administrative expenses (2,412) -- (2,412) Selling, marketing and distribution expenses (378) -- (378) Net finance income / (costs) 37,780 (3,778) 34,002 Other income Other expenses (427) -- (427) No impairment losses have been recorded against balances outstanding during the year with related parties and no specific allowance has been made for impairment losses on balances with the related parties as at 31 December 2012 (31 December 2011: None) Transactions with key management personnel On a consolidated basis, key management costs included in general and administrative expenses for the year ended 31 December 2012 amounted to TL 138,617 thousand (31 December 2011: TL 114,297 thousand). 280

283 Financial instruments 41.1 Liquidity risk As at 31 December, the following tables provide an analysis of monetary assets and monetary liabilities of the Group into relevant maturity groupings based on the remaining periods to repayment: Monetary assets Up to 1 month 1 to 3 months to 12 months Over 1 year Turkish Lira Investments in debt securities 5, ,768 3,674,878 4,691,864 8,599,495 Other non-current assets , ,759 Accounts receivable 355, , , ,950 1,595,183 Due from related parties 337, ,762 Other current assets 111, ,705 71, ,968 Banking loans and advances to banks 100,569 16, , , ,195 Banking loans and advances to customers 3,644,602 1,287,086 1,534,206 6,866,829 13,332,723 Financial assets at fair value through profit or loss 11,889 2,061 28,645 69, ,316 Cash and cash equivalents 473,557 17,939 1, ,099 Total TL monetary assets 5,041,699 1,907,624 5,662,508 13,281,669 25,893,500 Foreign Currencies Investments in debt securities 7,314 6,742 15, ,538 1,004,732 Other non-current assets , ,322 Accounts receivable 99,906 87, ,652 82, ,938 Due from related parties , ,970 Other current assets 3,298,781 61,908 25, ,386,212 Banking loans and advances to banks 528,231 87, , ,424 1,632,403 Banking loans and advances to customers 486, ,433 1,785,229 7,524,044 10,631,491 Financial assets at fair value through profit or loss 10, ,883 19,796 Cash and cash equivalents 1,991, , ,142,008 Total foreign currency monetary assets 6,423,724 1,080,065 2,586,907 9,477,176 19,567,872 Total monetary assets 11,465,423 2,987,689 8,249,415 22,758,845 45,461,372 Total Doğuş Group Annual Report 2012

284 Doğuş Group 41 Financial instruments (continued) 41.1 Liquidity risk (continued) Monetary liabilities Up to 1 month 1 to 3 months to 12 months Over 1 year Turkish Lira Loans and borrowings 518, , , ,588 1,968,443 Bonds payable 187,249 77, ,084 17, ,972 Other non-current liabilities , ,794 Deposits 10,393,658 1,459,671 78, ,932,724 Obligations under repurchase agreements 2,882, , ,932,959 Accounts payable 137, , , ,371 1,186,347 Due to related parties 6, , ,933 Other current liabilities 1,277,454 36, , ,474,759 Total TL monetary liabilities 15,403,254 1,796,299 1,245,466 2,330,912 20,775,931 Foreign Currencies Loans and borrowings 585, ,325 2,598,023 5,712,771 9,486,849 Bonds payable , ,202 Subordinated liabilities ,609 35,609 Other non-current liabilities , ,274 Deposits 8,733,672 1,140,596 1,220, ,713 11,449,271 Obligations under repurchase agreements 140, , , ,654 Accounts payable 68, , ,176 73, ,623 Due to related parties Other current liabilities 142,529 64, , ,898 Total foreign currency monetary liabilities 9,672,172 2,069,716 4,557,388 7,349,636 23,648,912 Total monetary liabilities 25,075,426 3,866,015 5,802,854 9,680,548 44,424,843 Total Liquidity (gap)/position (13,610,003) (878,326) 2,446,561 13,078,297 1,036,

285 Financial instruments (continued) 41.1 Liquidity risk (continued) Monetary assets Up to 1 month 1 to 3 months to 12 months Over 1 year Turkish Lira Investments in debt securities 46, , ,533 6,533,462 7,294,106 Other non-current assets , ,841 Accounts receivable 22, ,459 41, , ,170 Due from related parties , ,037 Other current assets 242, ,483 95, ,352 Banking loans and advances to banks 89,446 13,496 73, , ,434 Banking loans and advances to customers 2,987,799 1,191,091 1,585,817 5,531,421 11,296,128 Financial assets at fair value through profit or loss 13,980 7,901 12,639 34,986 69,506 Cash and cash equivalents 567,416 17, ,282 Total TL monetary assets 3,970,212 2,190,986 2,250,900 13,491,758 21,903,856 Foreign Currencies Investments in debt securities ,828 1,282,415 1,316,652 Other non-current assets , ,759 Accounts receivable 86, , ,133 4, ,748 Due from related parties Other current assets 1,780,617 84,736 73, ,938,411 Banking loans and advances to banks 1,834, , , ,978 3,039,801 Banking loans and advances to customers 572,107 1,070,590 1,709,105 7,118,629 10,470,431 Financial assets at fair value through profit or loss 19, ,540 31,071 Cash and cash equivalents 3,064,275 29, ,094,032 Total foreign currency monetary assets 7,358,674 1,563,131 2,420,847 9,304,350 20,647,002 Total monetary assets 11,328,886 3,754,117 4,671,747 22,796,108 42,550,858 Total Doğuş Group Annual Report 2012

286 Doğuş Group 41 Financial instruments (continued) 41.1 Liquidity risk (continued) Monetary liabilities Up to 1 month 1 to 3 months to 12 months Over 1 year Turkish Lira Loans and borrowings 427,068 17, ,961 1,080,977 1,906,151 Bonds payable 183, , ,203 Other non-current liabilities , ,666 Deposits 9,536,513 1,574, , ,393,629 Obligations under repurchase agreements 1,997, ,997,581 Accounts payable 11,035 2,826 38, , ,289 Due to related parties , ,850 Other current liabilities 945,498 14, , ,332,054 Total TL monetary liabilities 13,101,365 1,609,388 1,407,303 2,362,367 18,480,423 Foreign Currencies Loans and borrowings 222, ,783 3,055,694 4,750,732 8,583,117 Bonds payable , ,019 Subordinated liability , , ,741 Other non-current liabilities , ,295 Deposits 7,969,343 1,078,899 1,187, ,547 10,639,442 Obligations under repurchase agreements 236, , , ,708 Accounts payable 516,972 60,880 25, , ,868 Due to related parties Other current liabilities 45,596 71, , ,256 Total foreign currency monetary liabilities 8,991,511 2,056,299 4,457,851 6,536,754 22,042,415 Total monetary liabilities 22,092,876 3,665,687 5,865,154 8,899,121 40,522,838 Total Liquidity (gap)/position (10,763,990) 88,430 (1,193,407) 13,896,987 2,028,

287 Financial instruments (continued) 41.1 Liquidity risk (continued) Segments other than banking and finance The following tables are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements: Carrying amount Contractual cash flows 6 months or less 31 December months 1-2 years 2-5 years More than 5 years Non-derivative financial liabilities Secured bank borrowings 3,932,409 (4,375,981) (295,555) (228,420) (515,353) (1,729,428) (1,607,225) Unsecured bank borrowings 1,190,251 (1,197,178) (828,610) (48,248) (188,528) (53,417) (78,375) Finance lease liabilities 134,526 (157,738) (32,447) (22,406) (35,021) (44,202) (23,662) Accounts payable 1,027,713 (947,199) (623,075) (315,254) (5,399) (3,471) -- Derivative financial liabilities Interest rate swap used for hedging 9,393 (9,380) (1,601) (1,518) (2,669) (3,592) -- 6,294,292 (6,687,476) (1,781,288) (615,846) (746,970) (1,834,110) (1,709,262) Carrying amount Contractual cash flows 6 months or less 31 December months 1-2 years 2-5 years More than 5 years Non-derivative financial liabilities Secured bank borrowings 3,907,636 (4,500,683) (575,436) (888,080) (568,269) (1,264,268) (1,204,630) Unsecured bank borrowings 702,642 (725,268) (103,947) (169,649) (283,695) (167,977) -- Finance lease liabilities 53,021 (64,813) (11,347) (10,174) (19,281) (24,011) -- Accounts payable 945,729 (949,934) (312,662) (315,326) (318,168) (3,778) -- Derivative financial liabilities Forward contracts 2,989 (14,495) (14,495) Interest rate swap used for hedging 12,571 (15,676) (2,276) (2,175) (3,894) (6,993) (338) 5,624,588 (6,270,869) (1,020,163) (1,385,404) (1,193,307) (1,467,027) (1,204,968) Doğuş Group Annual Report 2012

288 Doğuş Group 41 Financial instruments (continued) 41.1 Liquidity risk (continued) Contractual maturity analysis of liabilities of Garanti Bank and its subsidiaries, based on their proportionate interest, according to remaining maturities The remaining maturities table of the contractual liabilities includes the undiscounted future cash outflows for the principal amounts of Garanti Bank and its subsidiaries financial liabilities, based on their proportionate interest, as per their earliest likely contractual maturities. Carrying amount Nominal principal outflows Demand 31 December 2012 Up to 1 month 1-3 months 3-12 months 1-5 years More than 5 years Deposits 23,381,995 23,296,938 5,237,475 13,842,519 2,584,800 1,281, ,778 4,831 Obligations under repurchase agreements 3,378,613 3,374, ,021, , , Bonds payable 1,467,174 1,423, ,172 77, , , ,758 Bank borrowings 6,198,106 6,122, , ,075 2,313,080 1,961, ,924 Subordinated liabilities 35,609 35, ,545 18,635 Total financial liabilities 34,461,497 34,253,533 5,237,475 17,765,493 3,176,989 4,061,704 2,718,724 1,293,148 Carrying amount Nominal principal outflows Demand 31 December 2011 Up to 1 month 1-3 months 3-12 months 1-5 years More than 5 years Deposits 22,033,071 21,927,342 4,868,952 12,635,572 2,582,116 1,441, ,691 40,025 Obligations under repurchase agreements 2,811,289 2,805, ,230, , , Bonds payable 896, , , , , ,132 Bank borrowings 5,825,969 5,755, , ,944 2,144,279 1,980, ,401 Subordinated liabilities 268, , ,091 3, ,185 Total financial liabilities 31,835,292 31,613,204 4,868,952 15,528,610 3,169,916 3,915,816 2,762,167 1,367, Credit risk Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows: Cash and cash equivalents (*) 2,633,430 3,678,166 Accounts receivable 2,160,121 1,613,918 Due from related parties 392, ,134 Banking loans and advances to customers and banks 26,217,812 25,414,794 Investments in debt securities 9,604,227 8,610,758 Financial assets at fair value through profit or loss 132, ,577 Other current assets (**) 3,436,057 2,110,514 Other non-current assets (**) 235, ,688 44,812,217 41,971,549 (*) Cash on hand is excluded from cash and cash equivalents. (**) Non-financial instruments such as advances given, taxes and funds to be refunded, VAT receivables and prepaid expenses and similar items are excluded from other current assets and other non-current assets. 286

289 Financial instruments (continued) 41.2 Credit risk (continued) Exposure to credit risk for segments other than banking and finance The maximum exposure to credit risk for account receivables at the reporting date by type of customer was as follows: Contract receivables 356, ,254 Advertising agencies 202, ,142 End-users 144, ,956 Retailers 69,896 37,933 Tourism agencies 1, Other 51,046 53, , ,454 The maximum exposure to credit risk for account receivables at the reporting date by geographic concentration was as follows: Carrying amount Turkey 562, ,214 Libya 153, ,116 Ukraine 84, ,959 Euro zone 1,808 88,695 Morocco 248 9,449 Other 23,296 5, , ,454 Impairment losses The aging of account receivables at the reporting date was: Gross Impairment Gross Impairment Not past due 524, ,075 (516) Past due 0-30 days 95, ,766 (1,799) Past due days 12, ,379 (1,441) Past due days 85, ,514 (597) More than one year 264,559 (155,946) 157,766 (151,693) Total 981,562 (155,946) 893,500 (156,046) Doğuş Group Annual Report 2012

290 Doğuş Group 41 Financial instruments (continued) 41.2 Credit risk (continued) Exposure to credit risk for banking and finance segment Banking loans and advances to customers Individually impaired 725, ,110 Allowance for impairment (675,707) (501,088) Carrying amount 50,046 28,022 Portfolio basis allowance (141,712) (94,737) (141,712) (94,737) Past due but not impaired 287, , , ,749 Neither past due nor impaired 23,041,514 21,089,935 Loans with renegotiated terms 726, ,590 Carrying amount 23,767,915 21,615,525 Total carrying amount 23,964,214 21,766,559 At 31 December 2012 and 2011, Garanti Bank has no allowance for loans and advances to banks. Garanti Bank developed a statistical-based internal risk rating model for its credit portfolio of corporate/commercial/ medium-size companies. This internal risk rating model has been in use for customer credibility assessment since 2003 and is currently being reviewed and updated. Risk rating has become a requirement for loan applications, and ratings are used both to determine credit authorization limits and in credit assessment process. The concentration table of the cash and non-cash loans for Garanti Bank according to the risk rating system for its customers defined as corporate, commercial and medium-size enterprises is presented below. 31 December December 2011 % % Above average Average Below average

291 Financial instruments (continued) 41.2 Credit risk (continued) Sectoral and geographical concentration of impaired loans for banking and finance segment An analysis of concentrations of non-performing loans and lease receivables at the reporting date is shown below: Consumer loans 309, ,047 Transportation vehicles and sub-industries 61,721 22,467 Service sector 60,107 24,322 Textile 48,619 41,764 Construction 35,029 21,232 Metal and metal products 32,084 31,785 Transportation and logistics 27,649 8,994 Food 24,432 17,877 Agriculture and stockbreeding 19,697 18,580 Durable consumption 8,962 6,976 Paper and paper products 8,621 7,444 Tourism 8,079 6,325 Energy 5,305 9,361 Chemistry and chemical products 5,230 3,651 Others 70,990 51,285 Total non-performing loans, factoring and finance lease receivables 725, , Turkey 586, ,927 Romania 92,885 71,285 Ukraine 15,993 16,700 England 11, Others 17,994 12,198 Total non-performing loans and finance lease receivables 725, ,110 Past due but not impaired loans for banking and finance segment These are loans where contractual interest or principal payments are past due but the Group believes that impairment is not appropriate on the basis of the level of collateral available and the customer s current activities, assets and financial position. An estimate of the fair value of collateral held against non-performing loans and receivables at the reporting date is as follows: Mortgages 162,033 88,442 Promissory notes 151,474 66,880 Pledge assets 75,515 40,947 Cash collateral 2, Unsecured 334, , , ,110 The amounts reflected in the tables above represent the maximum accounting loss that would be recognised at the reporting date if counterparties failed completely to perform as contracted and any collateral or security proved to be of no value. The amounts, therefore, greatly exceed expected losses, which are included in the allowance for uncollectibility. Doğuş Group Annual Report 2012

292 Doğuş Group 41 Financial instruments (continued) 41.3 Market risk (i) Interest rate risk Profile As at 31 December, the interest rate profile of the Group s interest-bearing financial instruments other than banking and finance segment was as follows: Fixed rate instruments Financial assets 1,186,421 2,660,753 Financial liabilities (810,264) (718,731) Interest rate swap, fixed leg (75,290) (103,728) 300,867 1,838,294 Variable rate instruments Financial liabilities (4,446,922) (3,944,568) Interest rate swap, variable leg 75, ,728 (4,371,632) (3,840,840) Cash flow sensitivity analysis for variable rate instruments for segments other than banking and finance segment A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. This analysis is performed on the same basis for Profit or loss Equity 100 bp 100 bp 31 December 2012 increase decrease increase decrease Variable rate instruments 9,500 (9,746) 509 (577) Cash flow sensitivity (net) 9,500 (9,746) 509 (577) Profit or loss Equity 100 bp 100 bp 31 December 2011 increase decrease increase decrease Variable rate instruments 2,256 (2,280) 4,149 (4,327) Cash flow sensitivity (net) 2,256 (2,280) 4,149 (4,327) 290

293 Financial instruments (continued) 41.3 Market risk (continued) (i) Interest rate risk (continued) The following table indicates the effective interest rates by major currencies for the major components of the consolidated statements of financial position of the Group for the years ended 31 December: 2012 USD % Euro % TL % Other currencies % Assets Banking loans and advances to banks Debt and other fixed or floating income instruments Banking loans and advances to customers Liabilities Deposits Foreign currency Bank Saving Commercial Public and other deposits Obligations under repurchase agreements Bonds payable Loans and borrowings USD % Euro % TL % Other currencies % Assets Banking loans and advances to banks Debt and other fixed or floating income instruments Banking loans and advances to customers Liabilities Deposits Foreign currency Bank Saving Commercial Public and other deposits Obligations under repurchase agreements Bonds payable Loans and borrowings (ii) Currency risk The Group is exposed to currency risk through transactions in foreign currencies and through its investment in foreign operations. Main foreign operations of the banking and finance segment are in the Netherlands, Romania and Russia. The measurement currencies of these operations are Euro, RON and USD. As the currency in which the Group presents its consolidated financial statements is TL, the consolidated financial statements are affected by currency exchange rate fluctuations against TL. Doğuş Group Annual Report 2012

294 Doğuş Group 41 Financial instruments (continued) 41.3 Market risk (continued) (ii) Currency risk (continued) At 31 December, the currency risk exposures of the Group in TL thousand equivalents are as follows: USD Euro 2012 Other currencies Foreign currency monetary assets Investments in debt securities 594, ,615 46,093 1,004,732 Other non-current assets 82,048 36,804 13, ,322 Accounts receivable 354, ,840 68, ,938 Due from related parties 46,836 2,933 4,201 53,970 Other current assets 1,322,920 1,248, ,519 3,386,212 Banking loans and advances to banks and customers 7,762,725 4,083, ,316 12,263,894 Financial assets at fair value through profit or loss 8,025 1,625 10,146 19,796 Cash and cash equivalents 1,454, ,228 48,156 2,142,008 Total foreign currency monetary assets 11,625,903 6,519,671 1,422,298 19,567,872 Foreign currency monetary liabilities Loans and borrowings 6,673,685 2,772,059 41,105 9,486,849 Bonds payable 936, ,202 Subordinated liabilities -- 35, ,609 Other non-current liabilities 99, ,032 36, ,274 Deposits 6,228,353 4,180,388 1,040,530 11,449,271 Obligations under repurchase agreements 332,455 76,507 36, ,654 Accounts payable 432, ,118 21, ,623 Due to related parties Other current liabilities 108, ,804 98, ,898 Total foreign currency monetary liabilities 14,810,583 7,563,517 1,274,812 23,648,912 Gross statement of financial position exposure (3,184,680) (1,043,846) 147,486 (4,081,040) Off balance sheet exposure 454,034 (168,388) 17, ,803 Net exposure (2,730,646) (1,212,234) 164,643 (3,778,237) Total 292

295 Financial instruments (continued) 41.3 Market risk (continued) (ii) Currency risk (continued) USD Euro 2011 Other currencies Foreign currency monetary assets Investments in debt securities 886, ,349 46,650 1,316,652 Other non-current assets 30,869 31,930 54, ,759 Accounts receivable 297, , , ,748 Due from related parties Other current assets 110,914 1,423, ,002 1,938,411 Banking loans and advances to banks and customers 8,515,829 4,336, ,961 13,510,232 Financial assets at fair value through profit or loss 10,023 1,825 19,223 31,071 Cash and cash equivalents 2,532, ,791 35,021 3,094,032 Total foreign currency monetary assets 12,384,245 6,919,672 1,343,085 20,647,002 Foreign currency monetary liabilities Loans and borrowings 5,987,411 2,571,652 24,054 8,583,117 Bonds payable 384, ,019 Subordinated liabilities 229,595 39, ,741 Other non-current liabilities 80,385 10,175 36, ,295 Deposits 5,374,816 4,179,255 1,085,371 10,639,442 Obligations under repurchase agreements 720,664 54,183 38, ,708 Accounts payable 364, ,691 61, ,868 Due to related parties Other current liabilities 155,412 33, , ,256 Total foreign currency monetary liabilities 13,296,634 7,383,566 1,362,215 22,042,415 Gross statement of financial position exposure (912,389) (463,894) (19,130) (1,395,413) Off balance sheet exposure (131,884) (416,719) 168,101 (380,502) Net exposure (1,044,273) (880,613) 148,971 (1,775,915) Total For the purposes of the evaluation of the table above, the figures represent the TL equivalent of the related hard currencies. Doğuş Group Annual Report 2012

296 Doğuş Group 41 Financial instruments (continued) 41.3 Market risk (continued) (ii) Currency risk (continued) Sensitivity analysis A 10 percent weakening of TL against the above currencies at 31 December would have increased (decreased) profit or loss before tax and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for Equity Profit or loss 31 December 2012 USD (1,910) (271,155) Euro (1,172) (120,051) Others (148) 16, December 2011 USD (169) (104,258) Euro (73) (87,988) Others (9) 14,906 A 10 percent of strengthening of TL against the above currencies at 31 December would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant Fair value information Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale of liquidation, and is best evidenced by a quoted market price. The estimated fair values of financial instruments have been determined using available market information by the Group, and where it exists, using appropriate valuation methodologies. However, judgment is necessarily required to interpret market data to determine the estimated fair value. Turkey has shown signs of an emerging market and has experienced a significant decline in the volume of activity in its financial market. While the management of the Group has used available market information in estimating the fair values of financial instruments, the market information may not be fully reflective of the value that could be realised in the current circumstances. Management has estimated that the fair values of certain financial assets and financial liabilities are not materially different than their recorded values except for loans and advances to customers and investment securities. These financial assets and financial liabilities include loans and advances to banks, obligations under repurchase agreements, loans and advances from banks, and other short-term assets and liabilities that are of a contractual nature. Management believes that the carrying amounts of these particular financial assets and liabilities approximate their fair values, partially due to the fact that it is a practice to renegotiate interest rates to reflect current market conditions. 294

297 Financial instruments (continued) 41.4 Fair value information (continued) As at 31 December 2012, the fair value of banking loans and advances to customers was TL 23,813,544 thousand (31 December 2011: TL 21,598,381 thousand), whereas the carrying amount was TL 23,964,214 thousand (31 December 2011: TL 21,766,559 thousand). As at 31 December 2012, the fair value of investment in debt securities was TL 9,628,368 thousand (31 December 2011: TL 8,666,628 thousand), whereas the carrying amount was TL 9,604,227 thousand (31 December 2011: TL 8,610,758 thousand). The table below analyses financial instruments carried at fair value as at 31 December, by valuation method: 2012 Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss 77,889 53,212 1, ,112 Derivative financial assets 1, , ,030 Debt and other instruments available-for-sale 8,726,197 3, ,934 9,267,719 Financial assets at fair value 8,805, , ,945 9,572,861 Derivative financial liabilities , ,230 Financial liabilities at fair value , , Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss 91, , ,577 Derivative financial assets 1, , ,751 Debt and other instruments available-for-sale 6,071, ,392,859 7,464,384 Financial assets at fair value 6,164, ,612 1,401,882 7,817,712 Derivative financial liabilities , ,378 Financial liabilities at fair value , ,378 Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) 42 Use of estimates and judgments Management discussed with the Audit Committee the development, selection and disclosure of the Group s critical accounting policies and estimates, and the application of these policies and estimates. These disclosures supplement the commentary on basis of preparation (see note 2(d)). Key sources of estimation uncertainty Allowance for credit losses Assets accounted for at amortised cost are evaluated for impairment on a basis described in accounting policy note 3(m). Doğuş Group Annual Report 2012

298 Doğuş Group 42 Use of estimates and judgments (continued) Key sources of estimation uncertainty (continued) Allowance for credit losses (continued) The specific counterparty component of the total allowances for impairment applies to claims evaluated individually for impairment and is based upon management s best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgment about counterparty s financial situation and the net realisable value of any underlying collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by the credit risk function. Portfolio-basis assessed impairment allowances cover credit losses inherent in portfolios of claims with similar economic characteristics when there is objective evidence to suggest that they contain impaired claims, but the individual impaired items cannot yet be identified. A component of portfolio-basis assessed allowances is for country risks. In assessing the need for collective loan loss allowances, management considers factors such as credit quality, portfolio size, concentrations, and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on how well these estimate future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances. Determining fair values The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in significant accounting policies and Note 4. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. Critical accounting judgments in applying the Group s accounting policies Critical accounting judgments made in applying the Group s accounting policies include: Financial asset and liability classification The Group s accounting policies provide scope for assets and liabilities to be designated on inception into different accounting categories in certain circumstances: In classifying financial assets or liabilities as trading, the Group has determined that it meets the description of trading assets and liabilities set out in accounting policy 3(d) financial instruments. In designating financial assets or liabilities at fair value through profit or loss, the Group has determined that it has met one of the criteria for this designation set out in accounting policy 3(d) financial instruments. In classifying financial assets as held-to-maturity, the Group has determined that it has both the positive intention and ability to hold the assets until their maturity date as required by accounting policy 3(d) financial instruments. 296

299 Use of estimates and judgments (continued) Critical accounting judgments in applying the Group s accounting policies (continued) Securitisations In applying its policies on securitised financial assets, the Group has considered both the degree of transfer of risks and rewards on assets transferred to another entity and the degree of control exercised by the Group over the other entity: When the Group, in substance, controls the entity to which financial assets have been transferred, the entity is included in these consolidated financial statements and the transferred assets are recognised in the Group s consolidated statement of financial position. When the Group has transferred financial assets to another entity, but has not transferred substantially all of the risks and rewards relating to the transferred assets, the assets are recognised in the Group s consolidated statement of financial position. When the Group transfers substantially all the risks and rewards relating to the transferred assets to an entity that it does not control, the assets have been derecognised from the Group s consolidated statement of financial position. Details of the Group s securitisation activities are given in Note 30. Doğuş Group Annual Report 2012

300 Doğuş Group 43 Group enterprises The major changes in Group enterprises during the year ended 31 December 2012 are summarised in the following paragraphs: Establishment of new entities On 5 January 2012, Doğuş Holding has established Doğuş Cennet Koyu Sağlıklı Yaşam Hizmetleri Ticaret Anonim Şirketi. The area of operation of the entity was healthcare counseling and hospitality, but at the reporting date it is a non operating company. On 24 January 2012, Doğuş Yayın Grubu has established Star Yapım ve Prodüksiyon Hizmetleri Anonim Şirketi. The area of operation of the entity is producing radio and television programs. On 14 February 2012, Doğuş Holding has established D Marine Investments Holding Coöperatief U.A. in the Netherlands. The area of operation of the entity is marina management. On 15 February 2012, Doğuş Holding has established D Marine Investments Holding B.V. in the Netherlands. The area of operation of the entity is marina management. On 29 February 2012, Doğuş Holding has established Doğuş Perakende Satış, Giyim ve Aksesuar Ticaret Anonim Şirketi. The area of operation of the entity is retail services. On 12 March 2012, Doğuş Holding has established Nahita Restoran İşletmeciliği ve Yatırım Anonim Şirketi. The area of operation of the entity is establishment and management of restaurants and cafes. On 13 March 2012, Doğuş Yayın Grubu has established HD Yayıncılık ve Medya Hizmetleri Anonim Şirketi. The area of operation of the entity is radio and television broadcasting activities. On 17 April 2012, Doğuş Holding has established D Marina İşletmeciliği Turizm ve Yönetim Hizmetleri Anonim Şirketi. The area of operation of the entity is marina management. On 15 May 2012, Doğuş Yayın Grubu has established VYG Radyo ve Televizyon Yayıncılık Anonim Şirketi. The area of operation of the entity is producing radio and television programs. On 15 May 2012, Doğuş Yayın Grubu has established N Spor Radyo ve Televizyon Yayıncılık Anonim Şirketi. The area of operation of the entity is producing sport radio and television programs. On 16 May 2012, Doğuş Yayın Grubu has established Doğuş Video ve Dijital Yayıncılık Anonim Şirketi. The area of operation of the entity is producing social websites and digital games. On 22 May 2012, Doğuş Yayın Grubu has established Kral Pop Avrupa Radyo ve Televizyon Yayıncılığı Anonim Şirketi. The area of operation of the entity is producing radio and television programs. On 20 June 2012, Doğuş Holding and SK Planet Co. Ltd. have jointly established Doğuş Planet Elektronik Ticaret ve Bilişim Hizmetleri Anonim Şirketi. The area of operation of the entity is e-commerce. On 25 June 2012, Doğuş Group has established Doğuş Enerji Toptan Elektrik Ticaret Anonim Şirketi. The area of operation of the entity is purchasing and selling of electricity. 298

301 Group enterprises (continued) Establishment of new entities (continued) On 19 July 2012, Doğuş İnşaat has established Dogus Construction LLC in the Qatar. The area of operation of the entity is construction. On 15 August 2012, Doğuş İnşaat has established Dogus Oman LLC in the Oman. The area of operation of the entity is construction. On 15 August 2012, Doğuş Holding has established D Eğlence Bar Restoran İşletmeciliği ve Yatırım Anonim Şirketi. The area of operation of the entity is establishment and management of restaurants and cafes. On 27 September 2012, Doğuş Holding has established Doğuş Tarımsal Projeler Araştırma Geliştirme Hizmetleri Anonim Şirketi. The area of operation of the entity is research and development activities of agricultural products. On 2 October 2012, Doğuş Holding has established Doğuş Otel İşletmeciliği ve Yönetim Hizmetleri Anonim Şirketi. The area of operation of the entity is hotel management. On 9 October 2012, Doğuş Holding has established IMG Doğuş Spor Moda ve Medya Hizmetleri ve Ticaret Anonim Şirketi. The area of operation of the entity is sports activities. On 27 November 2012, Group has established Dream International Coöperatif U.A. in the Netherlands. The area of operation of the entity is investing. On 28 November 2012, Group has established Dream International B.V. in the Netherlands. The area of operation of the entity is investing. On 14 December 2012, Doğuş Holding has established D Koruma ve Güvenlik Hizmetleri Anonim Şirketi. The area of operation of the entity is security and protection activities. Change in structure/title On 3 April 2012, Doğuş Yeni İnternet Reklam ve Pazarlama Hizmetleri Anonim Şirketi has changed its legal name as Doğuş Yeni İnternet Reklam Pazarlama ve Turizm Hizmetleri Anonim Şirketi. On 3 April 2012, Doğuş E Alışveriş ve Ticaret Anonim Şirketi has changed its legal name as Enmoda E Alışveriş ve Ticaret Anonim Şirketi. On 2 May 2012, Atami Turizm İşletmeciliği ve Ticaret Anonim Şirketi has changed its legal name as D Otel Bodrum Sağlıklı Yaşam Hizmetleri Ticaret Anonim Şirketi. On 16 May 2012, E2 Radyo ve Televizyon Yayıncılığı Anonim Şirketi has changed its legal name as Star Avrupa Radyo ve Televizyon Yayıncılığı Anonim Şirketi. On 17 August 2012, Doğuş Uydu Haberleşme ve Teknik Hizmetler Anonim Şirketi has changed its legal name as Uydu Dijital İnternet Teknolojileri Anonim Şirketi. Doğuş Group Annual Report 2012

302 Doğuş Group 43 Group enterprises (continued) Liquidation of entities On 10 January 2012, liquidation of Doğuş Investment was finalised. On 6 February 2012, Garanti Bank has ended its operations with T-2 Capital Finance Company, one of its special purpose entities. On 14 May 2012, liquidation of Doğuş Mandalina Razvitak was finalised. On 27 June 2012, liquidation of Doğuş İnşaat d.o.o. was finalised. On 24 September 2012, liquidation of Doğuş Poland was finalised. On 1 October 2012, liquidation of Ayson Hydro Gradenje d.o.o was finalised. Doğuş Auto Mısr LLC, Doğuş Auto Mısır JS, Doğuş Finance Ukraine and Doğuş Prestige are under liquidation as at 31 December Sale of subsidiaries Four subsidiaries of Doğuş Yayın Grubu, N Radyo, İkibinondokuz, VYG Radyo and N Spor, were sold to Frekans Radyo ve Televizyon Yayıncılık Anonim Şirketi ( Frekans ) on 25 December The share purchase and sales agreement have been signed between Doğuş Yayın Grubu and Frekans on 25 December Mergers On 29 June 2012, Kapital Radyo merged with Star TV. On 24 July 2012, Doğuş Yeme İçme merged with Doğuş Holding. 300

303 Significant events 44.1 Garanti Bank won the tender for Turkish Airlines Frequent Flyer Program Miles&Smiles Co-Branded Credit Card dated 16 January 2012 and accordingly, Garanti Bank and Türk Hava Yolları Anonim Ortaklığı ( THY ) signed an agreement on 6 April 2012 to cooperate for 5 years on this matter On 25 January 2012, Doğuş Holding and SK Planet Co. Ltd. have signed a memorandum of understanding to establish new internet partnership in the field of e-commerce. On 6 December 2012, Group and Solaris Partners Pte has applied to the Turkish Competition Authority to establish a jointly control entity, Doğuş SK Girişim Sermayesi Yatırım Ortaklığı Anonim Şirketi At the meeting of Garanti Bank s Board of Directors held on 14 July 2011, it has been resolved to issue TL denominated bank bills up to an amount of TL 239,500 thousand (Group share) in various maturities in the domestic market. Accordingly, the related approvals were obtained, and the issuance of TL denominated bank bills amounting TL 155,675 thousand (Group share) with 176-days maturity and annual compound interest rate of percent, and TL 83,825 thousand (Group share) with 92-days maturity and annual compound interest rate of percent was started on 23 January 2012 and completed on 26 January On 6 February 2012, Garanti Bank has repaid the subordinated debt of USD 120 million (Group share) obtained on 5 February 2007 with a maturity of ten years and interest rate of 6.95 percent, using the repayment option. The necessary permissions were obtained from BRSA It was announced on 14 February 2012 that Garanti Bank has applied to BRSA and CMB for the issuance of bank bonds and/ or debentures in TL currency with varying maturity dates, up to the aggregate amount of TL 1,198 million (Group share). In this regard, BRSA notified that the application for the issuance of bank bonds and/or debentures in TL currency up to the aggregate amount of TL 1,198 million (Group share), including all unmatured and domestically issued TL denominated bonds in the amount of TL 599 million (Group share) has been approved On 17 February 2012, the Turkish Constitutional Court decided to cancel the Article 5 of the Law no regarding investment allowance exemption for taxation and the cancelation of the article was promulgated in the Official Gazette no dated 18 February Accordingly, taxpayers are allowed to benefit from the investment incentive without any limitation On 15 March 2012, Doğuş Group has acquired 97 percent shares of Atami Turizm İşletmeciliği ve Ticaret Anonim Şirketi. The closing agreement regarding the acquisition has been signed on 15 March The ultimate aim of the Group in the acquisition is to renovate the hotel building to be used for healthcare and hospitality Dogus Management Services Limited and Abraaj General Partner VIII Limited have entered into a Capital Commitment and Subscription Agreement (Abraaj Buyout Fund IV) dated 19 March 2012 for investment purposes On 21 March 2012, a sales agreement has been signed between the Group and Vipindirim Elektronik Hizmetler ve Ticaret Anonim Şirketi regarding the sale of 75 percent ownership rights of Doğuş E Alışveriş ve Ticaret Anonim Şirketi, which is the Company for the Internet portal enmoda, a portal for private online shopping The Group management has decided to take the necessary actions regarding the sales of two touristic premises located in Side, Antalya, namely Aldiana Side (a holiday village) and Paradise Side Beach (an apart hotel) On 24 February 2012, Doğuş Holding and Doğuş Arge have entered into a share purchase and sale agreement to buy 40 percent of the shares of Hedef Medya and its subsidiary Altın Mecralar. By the approval of Competition Board, the closing has been realised on 4 April Doğuş Group Annual Report 2012

304 Doğuş Group 44 Significant events (continued) The Group has entered into a distribution agreement with Hublot and franchise agreement with Porsche Design, on 9 July 2012 and 10 July 2012, respectively On 16 July 2012, advance payment amounting to Euro 54,698 thousand has been made by Istanbul Municipality for the construction of Üsküdar-Ümraniye-Çekmeköy Metro and electromechanical works to Doğuş İnşaat Doğuş İnşaat has been awarded for the construction of Konya-Akşehir-Afyon Road by The Republic of Turkey General Directorate of Highways. The construction contact has been signed on 10 July Significant terms of the project are as follows: Customer: Republic of Turkey General Directorate of Highways Contract value: TL 86,225 thousand Doğuş İnşaat share: 100 percent Date of contract: 10 July 2012 Date of completion: March On 24 July 2012, Doğuş Holding has repaid its five year club loan amounting to USD 300 million on its maturity At the meeting of the Garanti Bank s Board of Directors held on 18 July 2012, it has been resolved to issue USD denominated eurobonds up to an amount of USD 359,250 thousand (Group share) in various maturities in the foreign market. Accordingly, the related approvals were obtained, and the issuance of USD denominated bonds amounting to USD 143,700 thousand (Group share) due 13 September 2017 with an annual compound interest rate of percent and a coupon rate of 4.00 percent, and USD 179,625 thousand (Group share) due on 13 September 2022 with an annual compound interest rate of percent and a coupon rate of 5.25 percent have been completed as of 7 September On 5 September 2012, Doğuş Holding has obtained a dual-tranche club loan with three years maturity amounting to USD 160 million and Euro 75 million. The proceeds of the term loan will be used for general financing purposes Garanti Bank s representative office in Moscow has ceased to operate effective from 1 October 2012 following the permission of the related authorities in this country At the Board of Directors meeting of Garanti Bank held on 11 October 2012, the following resolutions has been taken; Increasing the paid-in capital of Garanti Holding BV operating in the Netherlands by Euro 4.7 million (Group share) and, Granting a secondary subordinated loan amounting to Euro 2.4 million (Group share) to Garanti Bank SA (a subsidiary of Garanti Holding BV) operating in Romania Regulation about procedures regarding with the listing process of frequency lines of Terrestrial Broadcasts prepared with the aim of performing of frequency plans, licensing of all terrestrial broadcasts and determination of bidding during the process were put in effect with the publication of official gazette dated 9 November In accordance with the regulation, type of broadcasting license, technical information and number of frequency line will be announced through the Trade Registry upon approval by RTUK under basis of frequency plans. The life of broadcasting license will be limited to the ten years duration. 302

305 Significant events (continued) On 21 November 2012, Uydu Dijital İnternet Teknolojileri Anonim Şirketi ( Uydu Dijital ) and World Wide Entertainment Medya Ticaret Anonim Şirketi ( World Wide ) have jointly established a new partnership agreement. According to this agreement, Uydu Dijital has purchased total 270 thousand shares in World Wide representing share capital with a total nominal value of TL 270 thousand (equivalent to 30 percent share) On 23 November 2012, Garanti Bank has signed a syndicated loan agreement with 1 year maturity, comprising two separate tranches in the amount of USD 73,886 thousand (Group share) and Euro 147,412 thousand (Group share) in London. The loan which will be used for trade finance purposes has been executed with commitments received from 37 banks from 18 countries. The all-in cost has been realised as Libor+1.25 percent and Euribor+1.25 percent, respectively On 7 December 2012, Group, D Marine Investments Holding BV, Latsis Group and Lamda Development SA have signed a joint venture agreement for the partnership at Flisvos Marina in Athens. The share transfer has not been finalised and the closing agreement has not been signed as at the reporting date. 45 Subsequent events 45.1 As a result of the investigation of the Turkish Competition Board initiated based on its decision no /1438-M dated 2 November 2011, the Turkish Competition Board imposed an administrative fine with its summary decision dated 8 March 2013, amounting to TL 213,385 thousand (the Group share TL 38,329 thousand) against the economic group composed of Garanti Bank, GÖSAŞ and Garanti Konut with an option to pay 75 percent of such administrative fine which is TL 160,038 thousand (the Group share TL 38,329 thousand) in accordance with the Article 17 of the Law on Misdemeanors no with the right to appeal to Ankara Administrative Courts, on the ground that the Article 4 of the aforementioned Law was violated. The full decision of the Turkish Competition Board has not been notified yet On 21 March 2013, Antur has established Alantur Turizm ve Ticaret Anonim Şirketi. The area of operation of the entity is hotel management On 21 March 2013, Nahita has acquired 70 percent of shares of Mezzaluna Gıda İşletmecilik Sanayi ve Ticaret Anonim Şirketi At Board of Directors Meeting held on 22 March 2013, Doğuş Gayrimenkul has decided to transfer Gebze Center AVM to Doğuş GYO through partial de-merger On 28 March 2013, Doğuş Holding and Solaris Partners Pte have jointly established Doğuş SK Girişim Sermayesi Yatırım Ortaklığı Anonim Şirketi On 3 April 2013, Doğuş Holding has acquired 70 percent of shares of Vitapark Spor Turizm Hizmet İnşaat ve Ticaret Anonim Şirketi On 9 April 2013, Garanti Bank and Fibabanka Anonim Şirketi ( Fibabanka ) have signed an agreement in order to let Fibabanka to benefit from Bonus Credit Card Program, which is created and operated by Garanti Bank, and to issue Bonus Credit Cards. Within the context of such agreement, Fibabanka will be able to issue Bonus Credit Cards by using the name Bonus together with its own name and logo, and market to its customers. Doğuş Group Annual Report 2012

306 Doğuş Group 45 Subsequent events (continued) 45.8 As a result of the inspections held by the Istanbul Large-Scale Taxpayers Office of the Tax Inspection Board regarding the banking and insurance transaction tax (BITT), it was claimed that the payments made under the name of service fee by Garanti Bank s contracted merchants to an institution other than Garanti Bank itself in the years 2007, 2008, 2009 and 2010, should have been collected by Garanti Bank, because of this application Garanti Bank undercalculated the BITT, and accordingly, the tax audit reports for the relevant years were prepared. The tax audit report and tax/penalty notifications for the year 2007 were sent to Garanti Bank. The audit reports for other years are also expected to be notified. The total tax assessment including fines for the years 2007, 2008, 2009 and 2010 is estimated to be approximately at the level of TL 8,694 thousand (Group share). In accordance with the conciliation provisions of the Tax Procedure Law, Garanti Bank has reached an agreement to pay the fined tax assessment in the amount of TL 3,165 thousand (Group share) following the negotiations with Large Taxpayers Office Commission of Conciliation and legal process for this issue has been finalised on 12 April Doğuş İnşaat has given the lowest price in the tender of Tokat Niksar Road Project of which the terms are described below. The process to sign the contract with the employer is currently underway. Customer: Contract value: Doğuş İnşaat share: Type: Duration: Republic of Turkey General Directorate of Highways TL 326,900 thousand 50 percent 49 km road project 830 days 304

307 Supplementary Information Convenience Translation to US Dollar 31 December Appendix Ī- The US Dollar ( USD ) amounts shown in the consolidated statement of financial position and consolidated statement of comprehensive income on the following pages have been included solely for the convenience of the reader. For the current year s consolidated financial statements, USD amounts are translated from TL consolidated financial statements using the official TL exchange rate of TL/USD prevailing on 31 December For the prior year s consolidated financial statements, USD amounts are translated from TL consolidated financial statements using the official TL exchange rate of TL/USD prevailing on 31 December Such translation should not be construed as a representation that the TL amounts have been converted into USD pursuant to the requirements of IFRSs or Generally Accepted Accounting Principles in the United States of America or in any other country. Doğuş Group Annual Report 2012

308 Doğuş Group Consolidated Statement of Financial Position As at 31 December 2012 Appendix I.1 Amounts translated into thousands of USD for convenience purposes only 31 December December 2011 Assets Property and equipment 2,721,729 2,076,275 Intangible assets 1,358, ,371 Investments in debt securities 3,179,290 4,137,793 Investments in equity securities 78,300 28,881 Accounts receivable 509, ,062 Banking loans and advances to customers 8,072,968 6,697,046 Banking loans and advances to banks 631, ,079 Financial assets at fair value through profit or loss 44,095 24,102 Investment property 1,228,076 1,007,510 Other non-current assets 329, ,375 Deferred tax assets 165,070 83,124 Assets held for sale 17,267 16,186 Total non-current assets 18,336,027 16,132,804 Inventories 354, ,917 Accounts receivable 701, ,360 Due from related parties 220, ,600 Other current assets 2,093,111 1,277,866 Investments in debt securities 2,208, ,817 Banking loans and advances to customers 5,370,437 4,826,359 Banking loans and advances to banks 633,136 1,294,328 Financial assets at fair value through profit or loss 30,017 29,144 Cash and cash equivalents 1,478,238 1,947,861 Assets held for sale 35,952 35,285 Total current assets 13,126,528 10,851,537 Total assets 31,462,555 26,984,

309 307 Consolidated Statement of Financial Position (continued) As at 31 December 2012 Amounts translated into thousands of USD for convenience purposes only 31 December December 2011 Equity Paid-in capital 1,152,974 1,088,089 Capital stock held by subsidiaries (53,030) (52,282) Share premium 89,392 84,361 Fair value reserve 138,599 6,306 Translation reserve 19,101 24,060 Hedging reserve (3,125) (4,270) Revaluation surplus 617, ,321 Legal reserves 201, ,501 Retained earnings 3,895,757 3,364,421 Total equity attributable to owners of the Company 6,059,256 5,222,507 Non-controlling interests Şahenk Family 58,685 56,446 Others 184, ,878 Total non-controlling interests 243, ,324 Total equity 6,302,896 5,407,831 Liabilities Loans and borrowings 3,652,731 3,087,357 Bonds payable 534, ,303 Subordinated liabilities 19, ,283 Deposits 199, ,884 Obligations under repurchase agreements ,476 Accounts payable 474, ,285 Deferred tax liabilities 186, ,116 Other non-current liabilities 548, ,683 Total non-current liabilities 5,616,821 4,817,387 Loans and borrowings 2,773,439 2,465,752 Bonds payable 288, ,165 Subordinated liabilities Deposits 12,917,429 11,450,614 Obligations under repurchase agreements 1,895,329 1,336,845 Accounts payable 593, ,146 Due to related parties 5,310 3,610 Taxes payable on income 52,040 17,253 Other current liabilities 1,017, ,747 Total current liabilities 19,542,838 16,759,123 Total liabilities 25,159,659 21,576,510 Total equity and liabilities 31,462,555 26,984,341 Doğuş Group Annual Report 2012

310 Doğuş Group Consolidated Statement Comprehensive Income For the Year Ended 31 December 2012 Appendix I.2 Amounts translated into thousands of USD for convenience purposes only Revenues 6,170,771 5,256,585 Cost of revenues (4,605,243) (3,905,558) Gross profit 1,565,528 1,351,027 Administrative expenses (758,125) (629,895) Selling, marketing and distribution expenses (165,456) (128,448) Impairment losses, net (167,167) (144,788) Trading gain, net 22,895 93,682 Other income 187,289 1,415,753 Other expenses (127,546) (127,892) Result from operating activities 557,418 1,829,439 Finance income 189, ,856 Finance costs (177,738) (339,005) Net finance income / (costs) 11,507 (154,149) Share of profit of equity accounted investees 30,085 4,237 Profit before income tax 599,010 1,679,527 Income tax expense (125,922) (231,114) Profit for the year 473,088 1,448,413 Other comprehensive income Revaluation of property and equipment 36,023 (2,824) Change in fair value of available-for-sale financial assets 159,747 (297,412) Change in translation reserve (6,393) 22,276 Effective portion of changes in fair value of cash flow hedges 1,400 (110) Income tax on other comprehensive income (28,881) 54,138 Other comprehensive income for the year, net of income tax 161,896 (223,932) Total comprehensive income for the year 634,984 1,224,481 Profit attributable to: Owners of the Company 417,370 1,425,043 Non-controlling interests 55,718 23,370 -Şahenk Family 8,996 4,400 -Others 46,722 18, ,088 1,448,413 Total comprehensive income attributable to: Owners of the Company 577,436 1,200,591 Non-controlling interests 57,548 23,890 -Şahenk Family 9,135 3,208 -Others 48,413 20, ,984 1,224,

311 Doğuş Holding A.Ş. Huzur Mahallesi, Maslak Ayazağa Caddesi, No: Şişli, İstanbul - Turkey Phone: +90 (212) Fax: +90 (212)