Doğuş Holding Anonim Şirketi and its Subsidiaries Table of Contents

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2 Table of Contents Independent Auditors Report on Review of Consolidated Interim Financial Information Condensed Consolidated Interim Statement of Financial Position Condensed Consolidated Interim Statement of Comprehensive Income Condensed Consolidated Interim Statement of Changes in Equity Condensed Consolidated Interim Statement of Cash Flows Appendix: Supplementary Information - Convenience Translation to US Dollar

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5 Condensed Consolidated Interim Statement of Financial Position As at 30 June 2011 Currency: Thousands of Turkish Lira ( TL ) Notes 30 June December 2010 Assets Property and equipment 12 3,563,367 3,310,288 Intangible assets 13 1,026,210 1,114,392 Investments in debt securities 14 6,808,327 9,067,893 Investments in equity securities 42,719 73,144 Accounts receivable 49,368 13,741 Banking loans and advances to customers 15 11,157,585 12,476,609 Banking loans and advances to banks 1,138,481 1,375,606 Financial assets at fair value through profit or loss 99, ,718 Investment property 1,584,267 1,528,750 Other non-current assets 371, ,958 Deferred tax assets , ,683 Total non-current assets 25,972,230 29,763,782 Inventories 603, ,144 Accounts receivable 1,602,141 1,888,425 Due from related parties , ,791 Other current assets 1,626,440 1,549,220 Investments in debt securities 14 1,831,430 3,143,254 Banking loans and advances to customers 15 8,266,149 8,513,765 Banking loans and advances to banks 1,166,019 1,591,059 Financial assets at fair value through profit or loss 228, ,554 Cash and cash equivalents 16 5,681,523 2,010,936 Total current assets 21,211,552 19,522,148 Total assets 47,183,782 49,285,930 The accompanying notes are an integral part of these condensed consolidated interim financial statements. 1

6 Condensed Consolidated Interim Statement of Financial Position As at 30 June 2011 (continued) Notes 30 June December 2010 Equity Paid-in capital 2,055,292 2,055,292 Capital stock held by subsidiaries (98,755) (98,755) Share premium 159, ,350 Fair value reserve 189, ,725 Translation reserve 38,484 3,368 Hedging reserve (6,716) (7,859) Revaluation surplus 1,069,784 1,086,198 Legal reserves 294, ,507 Retained earnings 5,884,857 3,748,970 Total equity attributable to owners of the Company 9,586,305 7,701,796 Non-controlling interests Şahenk Family 101, ,291 Others 208, ,668 Total non-controlling interests 310, ,959 Total equity 17 9,897,221 7,980,755 Liabilities Long-term bank borrowings 18 5,623,560 6,271,098 Subordinated liabilities , ,764 Deposits , ,622 Bonds payable , Obligations under repurchase agreements 245, Deferred tax liabilities , ,889 Other non-current liabilities 754, ,754 Total non-current liabilities 7,721,503 7,803,127 Subordinated liabilities 20 1, Short-term bank borrowings 21 2,685,359 2,671,315 Short-term portion of long-term bank borrowings 18 1,018,482 1,018,001 Bonds payable , Deposits 22 19,427,397 23,429,175 Obligations under repurchase agreements 3,157,519 3,548,767 Accounts payable 1,099,184 1,141,354 Due to related parties 24 12,174 61,912 Taxes payable on income 11 62,189 99,279 Other current liabilities 1,601,662 1,532,245 Total current liabilities 29,565,058 33,502,048 Total liabilities 37,286,561 41,305,175 Total equity and liabilities 47,183,782 49,285,930 The accompanying notes are an integral part of these condensed consolidated interim financial statements. 2

7 Condensed Consolidated Interim Statement of Comprehensive Income For the Six-Month Period Ended 30 June 2011 Notes Six-month period ended 30 June 2011 Three-month period ended 30 June 2011 Six-month period ended 30 June 2010 Three-month period ended 30 June 2010 Revenues 4,856,262 2,481,064 4,007,415 2,151,545 Cost of revenues (3,582,887) (1,854,330) (2,619,482) (1,456,153) Gross profit 7 1,273, ,734 1,387, ,392 Administrative expenses 8 (615,431) (274,399) (575,384) (269,151) Selling, marketing and distribution expenses (104,961) (58,534) (90,391) (48,007) Impairment (losses) / gain, net 9 (170,678) (32,367) 6,383 20,365 Trading gain, net 103,498 32,530 37,290 58,235 Other operating income / (expense), net 6 2,290, ,771 (64,359) (40,185) Result from operating activities 2,776, , , ,649 Finance income 320, , ,763 93,779 Finance expense (527,772) (317,098) (343,691) (212,608) Net finance cost 10 (207,227) (60,364) (65,928) (118,829) Share of (loss) / profit of equity accounted investees (2,863) 1,886 18,171 8,354 Profit before income tax 2,565, , , ,174 Income tax expense 11 (298,550) (80,895) (132,605) (48,320) Profit for the period 2,267, , , ,854 Other comprehensive income Revaluation of property and equipment (1,979) (1,979) Change in fair value of available-for-sale financial assets (343,077) (58,193) (36,137) (89,761) Change in translation reserve 35,116 22,307 (59,688) (50,771) Effective portion of changes in fair value of cash flow hedges 1, (2,613) (1,553) Income tax on other comprehensive income 49,462 10,561 18,856 (3,102) Other comprehensive income / (expense) for the period, net of income tax (257,356) (25,265) (81,561) (147,166) Total comprehensive income for the period 2,010, , , ,688 Profit attributable to: Owners of the Company 2,247, , , ,850 Non-controlling interests 17 20,163 16,035 22,491 19,004 -Şahenk Family 3,443 3,414 3,635 3,844 -Others 16,720 12,621 18,856 15,160 Total comprehensive income attributable to: 2,267, , , ,854 Owners of the Company 1,990, , ,432 92,665 Non-controlling interests 19,528 15,560 21,117 18,023 -Şahenk Family 3,147 3,171 2,808 3,320 -Others 16,381 12,389 18,309 14,703 2,010, , , ,688 The accompanying notes are an integral part of these condensed consolidated interim financial statements. 3

8 Condensed Consolidated Interim Statement of Changes in Equity For the Six-Month Period Ended 30 June 2011 Attributable to owners of the Company Capital stock Fair Noncontrolling Paid-in capital held by subsidiaries Share premium value reserve Translation reserve Hedging reserve Revaluation surplus Legal reserves Retained earnings Total interests Total equity Balances at 1 January ,010,192 (53,655) 159, ,523 46,888 (8,226) 1,081, ,758 2,882,502 6,728, ,432 6,959,298 Total comprehensive income for the period Profit for the period , ,619 22, ,110 4 Other comprehensive income Net fair value losses from cash flow hedges, net of tax (2,613) (2,613) -- (2,613) Net fair value gains from available-for-sale portfolio, net of tax , , ,676 Transferred to net income from fair value increases, net of tax (36,256) (36,256) -- (36,256) Foreign currency translation differences for foreign operations (59,688) (59,688) -- (59,688) Change in revaluation surplus, net of tax , ,102 16,694 (1,374) 15,320 Total other comprehensive income (34,580) (59,688) (2,613) 2, ,102 (80,187) (1,374) (81,561) Total comprehensive income for the period (34,580) (59,688) (2,613) 2, , ,432 21, ,549 Transactions with owners, recorded directly in equity Increase in capital stock held by subsidiaries 45,100 (45,100) Adjustment to non-controlling interest for a new subsidiary of proportionately consolidated joint venture ,303 8,303 Dividends paid (32,823) (32,823) -- (32,823) Transfers ,306 (56,306) Change in non-controlling interests in consolidated subsidiaries ,865 16,865 Total transactions with owners 45,100 (45,100) ,306 (89,129) (32,823) 25,168 (7,655) Balances at 30 June ,055,292 (98,755) 159, ,943 (12,800) (10,839) 1,084, ,064 3,306,094 7,114, ,717 7,391,192 The accompanying notes are an integral part of these condensed consolidated interim financial statements.

9 Condensed Consolidated Interim Statement of Changes in Equity For the Six-Month Period Ended 30 June 2011 (continued) Attributable to owners of the Company Capital stock Fair Noncontrolling Paid-in capital held by subsidiaries Share premium value reserve Translation reserve Hedging reserve Revaluation surplus Legal reserves Retained earnings Total 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 period Profit for the period ,247,254 2,247,254 20,163 2,267,417 5 Other comprehensive income Net fair value gain from cash flow hedges, net of tax , , ,071 Net fair value losses from available-for-sale portfolio, net of tax (163,765) (163,765) -- (163,765) Transferred to net income from fair value increases, net of tax (66,177) (66,177) -- (66,177) Foreign currency translation differences for foreign operations , , ,526 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 (8,714) -- 10,570 1,856 (635) 1,221 Total other comprehensive income (294,836) 35,116 1,143 (16,414) -- 18,270 (256,721) (635) (257,356) Total comprehensive income for the period (294,836) 35,116 1,143 (16,414) -- 2,265,524 1,990,533 19,528 2,010,061 Transactions with owners, recorded directly in equity Acquisition of non-controlling interests in a previously proportionately consolidated joint venture with a change in control ,291 18,291 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 ,597 (58,597) Change in non-controlling interests in consolidated subsidiaries (3,058) (3,058) Total transactions with owners ,613 (129,637) (106,024) 12,429 (93,595) Balances at 30 June ,055,292 (98,755) 159, ,889 38,484 (6,716) 1,069, ,120 5,884,857 9,586, ,916 9,897,221 The accompanying notes are an integral part of these condensed consolidated interim financial statements.

10 Condensed Consolidated Interim Statement of Cash Flows For the Six-Month Period Ended 30 June 2011 Notes 30 June June 2010 Cash flows from operating activities Profit for the period 2,267, ,110 Adjustments for Impairment losses / (gain) 9 170,678 (6,383) Provision for and reversal of employee severance indemnity, net 5 25,776 4,006 Depreciation and amortization 5 139, ,503 Technical reserves relating to insurance operations 5 5,347 4,452 Gain on sales of property and equipment 12 (5,020) (5,706) (Gain) / loss on partial sales of proportionately consolidated joint venture 6 (2,163,189) 24,311 Bargain purchase gain recognised on acquisition 6 (1,953) -- Fair value gain on trading property transferred to property and equipment 5 (51,830) -- Gain on sales of investment in equity securities (57,862) -- Share of loss / (profit) of equity accounted investees 5 2,863 (18,171) Change in accrued interest expense, net 5 76, ,624 Provision for taxes on income , ,185 Deferred tax charge / (benefit) ,766 (64,580) Warranty provision 5 19,205 14, ,451 1,008,268 Changes in operating assets and liabilities Change in deposits 1,597,779 1,830,057 Change in banking loans and advances to banks (150,395) (169,047) Change in balances with Central Bank (290,098) 197,307 Change in banking loans and advances to customers (4,128,217) (2,690,813) Change in financial assets at fair value through profit or loss (103,294) (335,830) Change in other assets (181,655) (432,021) Change in inventories (57,546) (57,754) Change in accounts receivable 77,554 (193,956) Change in due from related parties (78,706) (2,578) Change in obligations under repurchase agreement 411,819 (1,703,083) Change in accounts payable 77, ,995 Change in bonds payable 863, Change in due to related parties (49,738) 3,191 Change in other liabilities 462,565 48,859 (822,208) (2,345,405) Taxes paid 11 (159,633) (197,467) Interest paid (840,009) (847,867) Interest received 1,531,555 1,627,495 Warranties paid (14,686) (14,015) Employee termination indemnity paid (4,415) (4,222) Net cash flows used in operating activities (309,396) (1,781,481) Cash flows from investing activities Increase in interest in consolidated subsidiaries 17 (7,956) (1,544) Decrease in interest in consolidated subsidiaries 17 20,385 18,409 Acquisition of a subsidiary -- (75,787) Acquisition of additional interest with a change in control 6 (87,326) -- Proceeds from partial sale of proportionately consolidated joint venture, net of cash disposed of 2,833,275 72,255 Proceeds from sales of investment in equity securities 77, Increase / (decrease) in investments in debt securities 395,515 (82,311) Acquisitions of investment property (648) (30,379) Acquisitions of property and equipment and intangible assets (390,217) (445,983) Proceeds from sales of property and equipment and intangible assets 31,442 18,208 Cash flows provided from / (used in) investing activities 2,872,337 (527,132) Cash flows from financing activities Dividends paid (71,040) (32,823) Change in short-term bank borrowings, net 759,400 (97,714) Change in long-term bank borrowings, net 258, ,690 Change in subordinated liabilities 16,897 (3,776) Cash flows provided by financing activities 963, ,377 Net increase / (decrease) in cash and cash equivalents 3,526,496 (1,470,236) Cash and cash equivalents at 1 January 2,562,163 3,481,405 Cash and cash equivalents at 30 June 16 6,088,659 2,011,169 The accompanying notes are an integral part of these condensed consolidated interim financial statements. 6

11 Notes to the condensed consolidated interim financial statements Notes Description Pages 1 Reporting entity 8 2 Basis of preparation 8 3 Significant accounting policies 9 4 Financial risk management 9 5 Segment reporting 15 6 Acquisitions and disposal of ownership interest in jointly controlled entities 20 7 Revenues and cost of revenues 22 8 Administrative expenses 22 9 Impairment losses / (gain), net Net finance costs Taxation Property and equipment Intangible assets Investments in debt securities Banking loans and advances to customers Cash and cash equivalents Capital and reserves Long-term bank borrowings Bonds payable Subordinated liabilities Short-term bank borrowings Deposits Commitments and contingencies Related party disclosures Group enterprises Significant events Subsequent events 56 Appendix: Supplementary information 7

12 1 Reporting entity Doğuş Holding Anonim Şirketi ( Doğuş Holding or the Company ) was established in 1975 to invest in and coordinate the activities of companies operating in different industries, including banking and finance, automotive, construction, tourism, media, real estate and energy and is registered in Turkey. Doğuş Holding is owned and managed by the members of Şahenk Family. As at 30 June 2011, Doğuş Holding has 73 (31 December 2010: 72) subsidiaries ( the Subsidiaries ), 41 (31 December 2010: 42) joint ventures ( the Joint Ventures ) and 8 (31 December 2010: 9) associates ( the Associates ) (referred to as the Group or Doğuş Group herein and after). The condensed consolidated interim financial statements of Doğuş Group as at and for the sixmonth period ended 30 June 2011 comprises Doğuş Holding and its subsidiaries and the Group s interest in associates and jointly controlled entities. As explained in more detail in note 25, 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, Rixos, Neckerman Reisen, Hyatt International Ltd., HMS International Hotel GMBH, Emporio Armani, Guccio Gucci Spa, CNBC, Condé Nast New Markets Europe/Africa NC (Vogue), Loro Piana and Aldiana GMBH. 2 Basis of preparation (a) Statement of compliance Doğuş Group entities operating in Turkey maintain their books of account and prepare their statutory financial statements in Turkish Lira ( TL ) in accordance with the Accounting Practice Regulations as promulgated by the Banking Regulatory and Supervision Agency ( BRSA ) applicable to Türkiye Garanti Bankası Anonim Şirketi ( Garanti Bank ), Turkish insurance legislation and accounting principles applicable to insurance business, and accounting principles per Turkish Uniform Chart of Accounts and per Capital Market Board of Turkey applicable to entities operating in other businesses. Doğuş Group s foreign entities maintain their books of account and prepare their statutory financial statements in accordance with the generally accepted accounting principles and the related legislation applicable in the countries they operate. The accompanying condensed consolidated interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, and do not include all of the information required for full consolidated annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December

13 2 Basis of preparation (continued) (b) Estimates The preparation of interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December Significant accounting policies (a) The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the six-month period ended 30 June 2011, and have not been applied in preparing these condensed consolidated interim financial statements. None of these will have an effect on the consolidated financial statements of the Group. 4 Financial risk management The Group has exposure to the following risks from its use of financial instruments: Liquidity risk Market risk Credit risk Operational risk The Group s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 31 December

14 4 Financial risk management (continued) (a) Market risk Currency risk for banking and finance segment Garanti Bank and its subsidiaries are exposed to foreign 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, Romania and Russia. The measurement currencies of these foreign operations are Euro and American Dollar ( USD ). As the currency in which Garanti Bank presents its consolidated financial statements is TL, its 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 and 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. Currency risk for corporate segments The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily USD, but also Euro, Swiss Francs ( CHF ), Sterling ( GBP ), Bulgarian Leva ( BVL ), Libyan Dinar ( LYD ), Japanese Yen ( JPY ), Croatian Kuna ( HRK ), Romanian Leu ( RON ) and Ukranian Hryvnia ( UAH ). The currencies in which these transactions primarily are denominated are TL, Euro and USD. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. The Group is exposed to currency risk through the impact of rate changes on the translation of foreign currency denominated payables and bank borrowings from financial institutions. Such risk is monitored by the Board of Directors and limited through taking positions within approved limits as well as using derivative instruments where necessary. To minimize risk arising from foreign currency denominated statement of financial position items, the Group sometimes utilises derivative instruments as well as keeping part of its idle cash in foreign currencies. 10

15 4 Financial risk management (continued) (a) Market risk (continued) At 30 June 2011, the currency risk exposure of the Group in TL thousand equivalents was as follows: 30 June 2011 USD Euro Other currencies Total Foreign currency monetary assets Investments in debt securities 807, ,421 43,797 1,282,607 Other non-current assets 49,708 32,868 51, ,011 Accounts receivable 505,805 84, , ,050 Due from related parties ,568 1,568 Other current assets 937, ,180 60,131 1,245,277 Banking loans and advances to banks and customers 6,915,649 3,707, ,041 10,993,189 Financial assets at fair value through profit or loss 15, , , ,481 Cash and cash equivalents 3,128, ,058 31,769 3,312,864 Total foreign currency monetary assets 12,360,069 4,756, ,983 17,946,047 Foreign currency monetary liabilities Long-term bank borrowings 3,285,410 1,320, ,605,518 Subordinated liabilities 196,836 54, ,901 Other non-current liabilities 81,177 3,632 34, ,117 Bonds payable 311, ,792 Short-term bank borrowings 918,532 1,050, ,968,612 Short-term portion of long-term bank borrowings 626, , ,119 Deposits 5,106,251 3,607, ,273 9,288,516 Obligations under repurchase agreements 595, ,324 36, ,867 Accounts payable 20, ,135 75, ,879 Due to related parties ,404 2,990 Other current liabilities 121, ,789 98, ,489 Total foreign currency monetary liabilities 11,264,641 6,774, ,928 18,860,800 Gross statement of financial position exposure 1,095,428 (2,017,236) 7,055 (914,753) Off balance sheet exposure (394,839) 1,097, , ,856 Net exposure 700,589 (919,884) 145,398 (73,897) 11

16 4 Financial risk management (continued) (a) Market risk (continued) At 31 December 2010, the currency risk exposure of the Group in TL thousand equivalents was as follows: 31 December 2010 Other USD Euro currencies Total Foreign currency monetary assets Investments in debt securities 1,358, ,637 48,979 1,772,559 Other non-current assets 157,753 27,413 48, ,369 Accounts receivable 483,433 75,776 95, ,568 Due from related parties ,135 1,135 Other current assets 522, ,731 87,017 1,241,575 Banking loans and advances to banks and customers 7,716,973 4,165, ,790 12,291,053 Financial assets at fair value through profit or loss 5,527 5,680 26,020 37,227 Cash and cash equivalents 580, ,939 22, ,468 Total foreign currency monetary assets 10,825,807 5,630, ,681 17,193,954 Foreign currency monetary liabilities Long-term bank borrowings 3,485,652 1,570,083 16,438 5,072,173 Subordinated liabilities 236,574 59, ,764 Other non-current liabilities 241,599 4,906 2, ,936 Short-term bank borrowings 789, ,223 1,995 1,741,671 Short-term portion of long-term bank borrowings 646, , ,328 Deposits 5,806,373 4,187, ,577 10,497,719 Obligations under repurchase agreements 358,934 31,058 32, ,786 Accounts payable 29, ,988 83, ,299 Due to related parties ,221 3,221 Other current liabilities 115,378 61, , ,534 Total foreign currency monetary liabilities 11,709,270 7,399, ,928 19,855,431 Gross statement of financial position exposure (883,463) (1,768,767) (9,247) (2,661,477) Off balance sheet exposure (1,413,390) 546, ,007 (753,601) Net exposure (2,296,853) (1,221,985) 103,760 (3,415,078) For the purposes of the evaluation of the table above, the figures represent the TL equivalent of the related hard currencies. Sensitivity analysis: A 10 percent weakening of TL against the above currencies at 30 June 2011 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, remained constant. The analysis is performed on the same basis for 31 December June 2011 Equity Profit or loss USD (2,815) 72,874 Euro (1,504) (90,484) Others (153) 14, December 2010 USD (9,080) (220,605) Euro (2,436) (119,763) Others (327) 10,703 12

17 4 Financial risk management (continued) (a) Market risk (continued) A 10 percent strengthening of TL against the above currencies at 30 June 2011 would have had the equal but the opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. Interest rate risk for banking and finance segment The market risk arising from trading transactions is calculated via Value at Risk ( VaR ) by Garanti Bank. In addition to this, stress tests and scenario analysis are performed. The interest rate risk of the statement of financial position is monitored with methods such as static duration, gap and sensitivity analysis. 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. As a part of the duration-gap analysis, Garanti Bank-only sensitivity analysis for a +/-1 point change in the present values of interest sensitive statement of financial position items excluding trading and available-for-sale portfolios and for a +/-5 point change in the foreign currency exchange rates used for foreign currency position and derivative transactions is provided in the table below: 30 June December 2010 Sensitivity analysis for TL interest rates: Stress applied Change in portfolio value Change in portfolio value (+) 1 % (9,793) (37,608) (-) 1 % 9,790 38,627 Sensitivity analysis for FC interest rates: Stress applied Change in portfolio value Change in portfolio value (+) 1 % (70,196) (69,815) (-) 1 % 77,276 77,117 Sensitivity analysis for FX rates: Stress applied Change in foreign exchange result Change in foreign exchange result (+) 5 % 4,668 (3,035) (-) 5 % 1,518 9,378 There are internal limits set to manage interest rate risk for non-trading portfolios approved by the Board of Directors. The structural interest rate risk limit is calculated based on the present value change in interest rate sensitive assets and liabilities, except trading portfolio, resulting from stress test applied as predefined point increase for interest rates. The single transaction limits are defined for asset-liability management dealers. 13

18 4 Financial risk management (continued) (a) Market risk (continued) Interest rate risk for banking and finance segment (continued) The consolidated value at market risks as at 30 June 2011 and 31 December 2010 are calculated as per the statutory consolidated financial statements of Garanti Bank prepared for BRSA reporting purposes within the scope of Regulation on Measurement and Assessment of Capital Adequacy Ratios of Banks published in Official Gazette no dated 1 November 2006, are as follows: 30 June December 2010 Average Highest Lowest Average Highest Lowest Interest rate risk 873, , ,156 1,115,381 1,223, ,637 Common share risk 51,470 69,461 25,644 66,874 74,878 58,730 Currency risk 291, , , , , ,162 Option risk 139, , , , ,499 68,664 Commodity risk 4,686 14, Total value at risk 1,360,959 1,603,177 1,050,969 1,504,407 1,717,455 1,247,193 Interest rate risk for corporate segments Cash flow sensitivity analysis for variable rate financial 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 31 December Profit or loss Equity 100 bp 100 bp 30 June 2011 Increase Decrease Increase Decrease Variable rate financial instruments 11,613 (11,613) 2,476 (2,660) Cash flow sensitivity (net) 11,613 (11,613) 2,476 (2,660) Profit or loss Equity 100 bp 100 bp 31 December 2010 Increase Decrease Increase Decrease Variable rate financial instruments 8,024 (8,024) 3,794 (3,994) Cash flow sensitivity (net) 8,024 (8,024) 3,794 (3,994) 14

19 5 Segment Reporting The Group has five reportable segments, as described below, which are largely organised and managed separately according to nature of products and services provided, distribution channels and profile of customers. Almost each entity included in the Group operates in one specific industry. Accordingly, all the financial statement components of an entity concerned are considered related only to its specific industry. The Group s main business segments are as follows: Banking and finance: Entities operating in the banking and finance segment are mainly involved in retail banking, insurance, leasing and factoring businesses. Construction: Entities operating in the construction segment are mainly involved in the constructions of buildings, infrastructure and related civil engineering businesses. Automotive: Entities operating in the automotive segment are exclusively involved in the importation, distribution and retailing of Volkswagen, Audi, Seat, Porsche, Bentley, Scania, Lamborghini, Krone and Meiller brand motor vehicles and spare parts and after sales services in Turkey. Tourism: Entities operating in the tourism segment are involved in hotel and marina investments, hotel management, ticket sales, hotel reservation, and tour/conference organisation services. Others: Entities operating in other operations segment are mainly involved in media, real estate, energy and several service businesses. Doğuş Holding is included in the other industrial segment as well. 15

20 5 Segment reporting (continued) 5.1 Business segments June 2011 Banking and finance Construction Automotive Tourism Others Total Revenues Total external revenue 1,745, ,763 2,591,299 92, ,888 4,913,163 Intersegment revenue 1,810 26,804 4,210 4,729 19,348 56,901 Net segment revenue 1,743, ,959 2,587,089 87, ,540 4,856,262 Gross profit 881,713 30, ,083 17,185 25,805 1,273,375 Result from operating activities 651,169 17, ,799 (16,573) 1,993,350 2,776,057 Interest income -- 1,884 1, ,040 18,235 Interest expense -- (2,930) (22,818) (19,953) (52,814) (98,515) Share of profit / (loss) of equity accounted investees 1, (2,347) -- (2,300) (2,863) Income tax (expense) / benefit (133,486) 2,050 (22,719) 1,959 (146,354) (298,550) Profit / (loss) for the period attributable to the owners of the Company 509,545 13,544 53,263 (61,735) 1,732,637 2,247, June 2011 Other information Segment assets 36,526,102 1,318,805 1,700,251 1,593,872 6,002,033 47,141,063 Investments in equity securities 4, , ,775 42,719 Total assets 36,530,893 1,318,805 1,736,404 1,593,872 6,003,808 47,183,782 Segment liabilities 31,925,049 1,021,951 1,240, ,507 2,713,533 37,286,561 Total liabilities 31,925,049 1,021,951 1,240, ,507 2,713,533 37,286, June 2011 Capital expenditure 40,163 24,582 33,801 80, , ,738 Depreciation 30,657 39,407 14,282 26,354 16, ,265 Non-cash expenses other than depreciation 93,103 8,252 41,997 13, , ,380

21 5 Segment reporting (continued) 5.1 Business segments (continued) June 2010 Banking and finance Construction Automotive Tourism Others Total Revenues Total external revenue 1,957, ,643 1,524,905 82, ,482 4,033,494 Intersegment revenue 2,180 7, ,136 11,300 26,079 Net segment revenue 1,955, ,632 1,524,453 77, ,182 4,007,415 Gross profit / (loss) 1,127,720 12, ,579 (137) 22,680 1,387,933 Result from operating activities 743,868 5,303 88,498 (25,566) (110,631) 701,472 Interest income 723 2,866 2, ,436 14,859 Interest expense (687) (2,620) (24,052) (11,827) (41,348) (80,534) Share of profit of equity accounted investees 2, , ,171 Income tax (expense) / income (152,928) (4,174) (12,506) (3,736) 40,739 (132,605) Profit / (loss) for the period attributable to owners of the Company 610,744 1,914 51,617 (46,737) (118,919) 498, December 2010 Other information Segment assets 41,022,748 1,212,757 1,546,512 1,494,482 3,936,287 49,212,786 Investments in equity securities 24, , ,152 73,144 Total assets 41,046,879 1,212,757 1,586,373 1,494,482 3,945,439 49,285,930 Segment liabilities 35,843, ,070 1,157, ,889 2,918,924 41,305,175 Total liabilities 35,843, ,070 1,157, ,889 2,918,924 41,305, June 2010 Capital expenditure 23,792 56,756 12, , , ,251 Depreciation 27,800 13,172 9,850 27,632 18,397 96,851 Non-cash expenses other than depreciation 176,292 19,458 17,277 14,542 29, ,268

22 5 Segment reporting (continued) 5.2 Interests in joint ventures Joint ventures are proportionately consolidated in the accompanying condensed consolidated interim financial statements. As at 30 June 2011 and 31 December 2010, the Group's share in the assets and liabilities of the joint ventures using the proportionate consolidation method is as follows: 30 June 2011 Banking and finance Construction Automotive Tourism Other Total assets 36,530, , ,493 36, ,511 Total liabilities 31,925, , ,230 18, , December 2010 Banking and finance Construction Automotive Tourism Other Total assets 41,046, , ,792 28, ,793 Total liabilities 35,843, , ,718 12, ,735 For the six-month period ended 30 June, the Groups share in the profit or loss of the joint ventures using the proportionate consolidation method is as follows: 2011 Banking and finance Construction Automotive Tourism Other Profit/(loss) for the period 509,545 15,502 (1,449) (369) (2,966) 2010 Banking and finance Construction Automotive Tourism Other Profit/(loss) for the period 610,744 (1,323) 1,575 (3,910) (15,511) 18

23 5 Segment reporting (continued) 5.3 Non-cash (income) / expenses other than depreciation Non-cash (income) / expenses other than depreciation for the six-month period ended 30 June 2011 were as follows: Banking and finance Construction Automotive Tourism Others Total Provision for doubtful receivables , ,017 Accrued interest and other accruals 23,278 6,997 14,840 11,693 20,015 76,823 Provision for loans 81, ,744 Provision for general banking risks 27, ,216 Provision for employee severance indemnity 18,700 1, ,162 4,700 25,893 Warranty provision , ,205 Amortisation of other intangible assets 1, , ,270 12,381 Insurance technical reserves and provisions 5, ,347 Recoveries of loan losses (74,977) (74,977) Reversal of impairment in tangible asset (4,335) (4,335) Fair value gain on trading property transferred to property and equipment (51,830) (51,830) Recoveries of doubtful receivables (1,156) (215) (310) (1,681) Reversal of employee severance indemnity (45) (72) -- (117) Others 14, (1,753) 12,694 Total 93,103 8,252 41,997 13, , ,380 Non-cash (income) / expenses other than depreciation for the six-month period ended 30 June 2010 were as follows: Banking and finance Construction Automotive Tourism Others Total Accrued interest and other accruals 178,309 19,352 (10,547) 14,046 24, ,624 Provision for loans 112, ,442 Warranty provision , ,917 Amortisation of other intangible assets 1, , ,652 Insurance technical reserves and provisions 4, ,452 Provision for employee severance indemnity ,173 4,328 Provision for doubtful receivables ,307 Recoveries of loan losses (122,924) (122,924) Reversal of impairment in tangible assets (1,195) (1,195) Reversal of employee severance indemnity (230) (92) (322) Recoveries of doubtful receivables (162) (61) (223) Others 2, ,718 4,210 Total 176,292 19,458 17,277 14,542 29, ,268 19

24 6 Acquisitions and disposal of ownership interests in jointly controlled entities 6.1 Acquisition of additional interests in Doğuş Gayrimenkul Yatırım Ortaklığı Anonim Şirketi ( 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. 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. On 21 March 2011, Doğuş GE has changed its legal name as Doğuş Gayrimenkul Yatırım Ortaklığı Anonim Şirketi. 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 97,886 Total consideration 97,886 Identifiable assets acquired and liabilities assumed (Representing the additional interest acquired) Investment property 6,505 Property and equipment 100,514 Intangible assets 7 Other non-current assets 332 Accounts receivables 10 Other current assets 1,146 Cash and cash equivalents 10,560 Accounts payable (618) Other current liabilities (326) Total net identifiable assets 118,130 20

25 6 Acquisitions and disposal of ownership interests in jointly controlled entities (continued) 6.1 Acquisition of additional interests in Doğuş Gayrimenkul Yatırım Ortaklığı Anonim Şirketi ( Doğuş GYO ) (continued) Bargain purchase gain Bargain purchase gain has been recognised as a result of the acquisition as follows: Total consideration transferred 97,886 Non-controlling interest based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquiree 18,291 Less: Value of net identifiable assets (118,130) Bargain purchase gain (1,953) Cash consideration transferred 97,886 Cash and cash equivalents acquired (10,560) Net cash outflow arising on acquisition 87,326 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 operating income / (expense), net in profit or loss. 6.2 Partial disposal of interest in Garanti Bank 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 has been 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, Doguş Holding and BBVA signed a shareholders agreement which was effective from the date of completion of aforementioned share purchase agreement. This new shareholders agreement has replaced the previously signed shareholders agreement between GE Araştırma Müşavirlik Anonim Şirketi and Doğuş Holding dated 22 December 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) is recognised under other operating income / (expense), net in profit or loss in the accompanying condensed consolidated financial statements. 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 condensed consolidated statement of comprehensive income for the six-month period ended 30 June

26 7 Revenues and cost of revenues For the six-month and three-month period ended 30 June, revenues and cost of revenues of banking and finance segment and other corporate segments were as follows: Six-month period ended 30 June 2011 Three-month period ended 30 June 2011 Six-month period ended 30 June 2010 Three-month period ended 30 June 2010 Banking and finance segment Banking operations: Interest income 1,373, ,506 1,583, ,074 Interest expense (739,868) (341,425) (731,071) (370,883) Fees and commission income 340, , , ,443 Fees and commission expense (99,608) (47,056) (91,670) (46,077) Net operating income 874, ,110 1,104, ,557 Insurance operations: Technical gain 30,083 13,967 28,222 14,434 Technical loss (22,621) (3,110) (4,858) (2,388) Net technical gain 7,462 10,857 23,364 12,046 Gross profit for banking and finance segment 881, ,967 1,127, ,603 Other corporate segments Net revenues 3,112,452 1,691,506 2,052,096 1,200,594 Cost of revenues (2,720,790) (1,462,739) (1,791,883) (1,036,805) Gross profit for other corporate segments 391, , , ,789 Total gross profit 1,273, ,734 1,387, ,392 8 Administrative expenses For the six-month and three-month period ended 30 June, general and administrative expenses comprised the following: Six-month period ended 30 June 2011 Three-month period ended 30 June 2011 Six-month period ended 30 June 2010 Three-month period ended 30 June 2010 Personnel expenses 320, , , ,192 Depreciation and amortisation 69,327 33,205 68,454 26,970 Rent expenses 31,370 14,773 26,623 13,731 Provision for employee severance indemnity 25,893 7,658 4,328 1,578 Taxes and duties other than taxes on income 22,462 10,771 25,235 13,643 Telecommunication expenses 18,364 8,538 22,258 10,245 Electronic data processing expenses 10,920 5,497 11,942 6,691 Insurance expenses 10,765 4,763 10,297 5,244 Utility expenses 10,229 4,683 10,513 3,957 Gasoline expenses 3,908 2,074 4,110 2,500 Research and development expenses 2,686 1,656 4,391 2,447 Stationery expenses 2,599 1,166 2,666 1,393 Others 86,202 43,027 48,650 18, , , , ,151 22

27 9 Impairment losses / (gain), net For the six-month and three-month period ended 30 June, impairment losses / (gain), net comprised the following: Six-month period ended 30 June 2011 Three-month period ended 30 June 2011 Six-month period ended 30 June 2010 Three-month period ended 30 June 2010 Provision for doubtful receivables 130,017 9,034 1, Provision for banking loans 81,744 30, ,442 40,926 Provision for general banking risks 27, Recoveries of provision for banking loans (74,977) (9,159) (122,924) (57,006) Reversal of impairment in tangible assets (4,335) (614) (1,195) (320) Recoveries of doubtful receivables (1,681) (525) (223) (85) Other provisions / (recoveries) 12,694 3,258 4,210 (4,721) 170,678 32,367 (6,383) (20,365) 10 Net finance costs For the six-month and three-month period ended 30 June, net finance costs comprised the following: Six-month period ended 30 June 2011 Three-month period ended 30 June 2011 Six-month period ended 30 June 2010 Three-month period ended 30 June 2010 Recognised in profit or loss Finance income Foreign exchange gains 302, , ,904 88,458 Interest income on bank deposits 16,940 14,151 9,979 5,345 Interest income on trading securities , Other interest and similar items ,444 (420) Total finance income 320, , ,763 93,779 Finance expense Foreign exchange losses (429,257) (258,286) (263,157) (168,783) Interest expense on borrowings (68,081) (39,678) (59,677) (32,824) Other interest and similar items (30,434) (19,134) (20,857) (11,001) Total finance expense (527,772) (317,098) (343,691) (212,608) Net finance costs recognised in profit or loss (207,227) (60,364) (65,928) (118,829) 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. 23

28 10 Net finance costs (continued) Six-month period ended 30 June 2011 Three-month period ended 30 June 2011 Six-month period ended 30 June 2010 Three-month period ended 30 June 2010 Recognised in other comprehensive income Change in fair value of available- for-sale financial assets 2, ,630 (28) Change in translation reserve 38,386 24,551 (15,926) (16,653) Effective portion of changes in fair value of cash flow hedges (2,632) (1,563) Income tax on other comprehensive income (464) (21) 926 (6) Finance income / (costs) recognised in other comprehensive income, net of tax 41,154 24,641 (13,002) (18,250) Attributable to: Owners of the Company 39,663 23,610 (11,999) (17,107) Non-controlling interests 1,491 1,031 (1,003) (1,143) Finance income / (costs) recognised in other comprehensive income, net of tax 41,154 24,641 (13,002) (18,250) Interest income and interest expense recognised in other comprehensive income included in finance income and finance expense relate only to the segments other than banking and finance. 11 Taxation In Turkey, corporate income tax is levied at the rate of 20 percent (31 December 2010: 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. 24