ABSOLUTE VALUE

2011 Annual Report 3.8 Portfolio value of TL 3.8 billion

221GLA (mall) of 221 thousand m2

Corporate Profile 2 • Milestones 3 • Vision, Mission and Targets 4 • Summary of Torunlar REIC’s Strategy 5 • Our Strengths 6 • An Assessment of Torunlar REIC’s Performance in 2011 8 • Chairman’s Evaluation on the Company’s Activities in 2011 12 • Board of Directors 18 • Senior Management 20 • Auditors 21 • Macroeconomic Outlook and Assessment of the Sector 22 • REICs in Turkey 26 • Outlook for the Construction and Real Estate Sectors in Turkey 27 • Developments in the Housing Segment 29 • Developments in the Retail Segment 31 • Developments in the Office Segment 33 • Torunlar REIC’s Assets 34 • Torunlar REIC’s Real Estate Portfolio Composition 36 • Together with the Community 64 • Our Awards 67 • Future Expectations… 70 • Corporate Governance Compliance Report 72 • Agenda of Torunlar GYO A.Ş. Ordinary General Assembly Meeting Dated 28 May 2012 85 • Proposal and Decision for Dividend Distribution 86 • 2011 Dividend Distribution Table 87 • Independent Auditor’s Report 88 • Consolidated Financial Statements at 31 December 2011 89 Torunlar REIC 2011 Annual Report P / 1 2.5 Net asset value of TL 2.5 billion

Housing, office, mall and mixed-use projects designed and developed with Torunlar REIC’s vision and experience in various cities of Turkey stand for “absolute value” for its investors, with their location, architecture, quality of construction and their comfort of living... For today and for the future... Torunlar REIC 2011 Annual Report P / 2

Corporate Profile

One of the sector’s leading participants A company that carries its experience into Turkey’s largest investor in domestic Operating in the Turkish real estate market the future with its vision shopping centers since 1977, Torunlar Group established Our Company’s experience and know- how The fundamental area where Torunlar REIC Toray Construction in 1996 as the is based on a clear understanding of - Turkey’s largest investor in domestic predecessor company of Torunlar REIC, urban development, demographic trends shopping centers - focuses on is the in order to expand its activities in the real and potential customer profiles in our development, implementation and asset estate market to retail, housing, and office target markets. This understanding is management of wide scope and top-notch and hotel development projects. The main accompanied by a wide network which shopping centers in urban areas such as function of Torunlar REIC, which became a provides us with the means to purchase İstanbul, Bursa, Antalya and Ankara. real estate investment company in 2008, land suitable for development at favorable is to invest into real estate development prices. We have priority access to a wide As of December 31st, 2011, Torunlar REIC projects for retail, housing, entertainment range of benefits thanks to our deeply had 11 properties, 3 real estate venues and office spaces. rooted relations with municipalities, local development projects, 3 plots of land and 4 suppliers, contractors, vendors and many subsidiaries in its portfolio, as well as five Going public in 2010 and quoted on the ISE other players in the sector. shopping centers currently in operation National 100 index, 25.16% of the shares and a total of 221,176 m2 of GLA (Gross in Torunlar REIC are publicly held. Torunlar Torunlar REIC optimizes a wide network Leasable Area). The projects under REIC ranks as the second largest REIC in consisting of national and international development include two shopping centers terms of portfolio size among ISE-listed retail brands creating a rich mix of tenants in Samsun and İstanbul (the project in REICs. at its shopping centers. Likewise, Torunlar İstanbul is entitled “Mall of İstanbul”, REIC boasts a wide customer base for its which is estimated to have a total of nearly Torunlar REIC is involved in all stages of housing development projects. Also taking 150,000 m2 of GLA), as well as mid-scale project development and management advantage of the established reputation investments made in regions not yet including the sourcing, land acquisition, of the Torun family in the Turkish market, saturated in terms of commercial real project financing, the permit process, Torunlar REIC continues to create value estate. In 2012, Torunlar REIC is expected design, the supervision of construction with the concept of quality and confidence, to add a project to be developed on the work, and sales and marketing. In addition, which its tenants, customers and other land of the former Ali Sami Yen stadium, the Company also manages completed participants of the Turkish real estate once necessary building permits are projects. Our services include managing market associate with the Torunlar name. received. As of December 31st, 2011, the the tenant mix, renovation and expansion Company’s total consolidated assets work within our shopping centers. We are amounted to TL 3.9 billion, 71.5% of which also in charge of other operations that is constituted of property and real estate aim to increase the number of visitors, projects, while 56.1% of the Company’s real raise occupancy rates and maximize rental estate portfolio comprises shopping income at the shopping centers. centers. The Company’s asset portfolio also includes land on which development projects with high growth potential can be performed, such as homes, offices, shopping centers and hotels. Torunlar REIC 2011 Annual Report P / 3

Milestones

1977 2007 • The Company becomes active in the • Korupark Shopping Mall, one of the Turkish construction and real estate largest shopping centers in Turkey, is markets, beginning to carry out small- opened. scale housing projects. • The Company begins project development efforts for Mall of İstanbul, 1996 one of the largest mixed-use projects in • Toray Construction is established. Turkey and Europe in terms of GLA, and which is expected to be completed in the 1997 second half of 2013. • The Company becomes a shareholder of Yeni Gimat A.Ş., the owner of ANKAmall 2008 2011 and Crowne Plaza Hotel in Ankara (the • The Company becomes Torunlar REIC • The Company begins Company currently holds 14.83% of Yeni (real estate investment company status). Gimat). • The Company completes the 1st and 2nd construction work and phases of the Korupark Residences, pre-sales for the Mall of 1999 Bursa’s first modern housing compound, İstanbul project. • Zafer Plaza, Torunlar’s first shopping and begins to sell the homes there. • The Company begins center project and Bursa’s first shopping construction work and center, is opened. 2010 pre-sales for the Korupark III • The Company opens the ANKAmall, • The Company carries out a public which was Turkey’s largest shopping offering on October 21st, 2010 as one Terrace Residences project. center at its opening date. of the largest ISE-listed real estate • The Company begins companies. construction work for the Torun 2004 • The Company begins construction work Tower project. • The Company opens Deepo Outlet on the Bulvar Samsun Shopping Mall. Center, the largest outlet in Antalya. • The Company delivers the houses and offices in the Nishİstanbul. 2005 • The Company opens the Torium • The Company receives a 44.6% stake Shopping Mall, İstanbul’s 4th largest in Netsel Turizm Yatırımları A.Ş. (Netsel shopping center and the 5th largest Marina) in Marmaris. shopping center in Turkey. • The Company purchases the land for • The Company participates in the Ali Sami Torun Tower. Yen stadium land project as the leading partner. Torunlar REIC 2011 Annual Report P / 4

Vision, Mission and Targets

Our Vision Our Mission Strategic targets To transform the Torunlar REIC brand • To be the most trustworthy brand in The Company aims to gain a competitive into the most preferred brand both on a developing living spaces such as homes, edge by pursuing the following strategies: global and national scale in the area of offices, hotels and shopping centers and • To produce retail-based mixed-use investment, development and management to become the name synonymous with projects and keep focusing on shopping of mixed-use life-style centers consisting concept of high-quality living centers of units such as shopping centers, homes, • To develop projects in which we build • To manage shopping centers actively and offices and hotels, as well as logistical residences, hotels, entertainment dynamically centers, commercial and industrial and business centers that cover the • To make use of opportunities in various buildings. To undertake investments with needs, preferences and interests of our regions and various types of real estate a high return and to ensure steady growth customers to the maximum extent while with high growth and development by prioritizing transparency and integrity at maximizing their benefits potential all times. • To attract and keep the best employees • To develop methods for crisis by offering them a rewarding and management and thus to turn crises into satisfying working environment opportunities • To lead the sector and to produce model projects • To create living spaces that help make life easier by making use of the technological developments in the real estate sector and other industries • To carry the sector to the future through the application of technology • To build the projects of the future by combining our international consultancy know-how with our local expertise • To keep a close view of value enhancing opportunities which offer the highest return to our shareholders • To strengthen our position in the sector and become a reliable Real Estate Investment Company, which is preferred by investors and which distributes maximum dividends • To adopt environmental standards during project development and construction and thus contribute to sustainability Torunlar REIC 2011 Annual Report P / 5

Summary of Torunlar REIC’s Strategy

Project Development Portfolio • An established track record in the development and execution of urban transformation projects • Carrying out value increasing activities such as land development and financing, and to determine potential areas for development • Utilizing opportunities arising in other asset classes • Successful joint initiatives • Accessing attractive investment opportunities • Achieving risk diversification Asset Management • Active asset management that aims to optimize occupancy rates and increase rental income • Asset renewal and expansion in parallel with increasing demand and improving consumer and market trends • Tenant satisfaction and reasonable income • To establish an appropriate tenant mix • To make use of the reputation and recognition of the Torunlar Group in the sector, to attract renowned Turkish/foreign tenants Strategic Vision • Primary focus is the development of shopping centers • Focusing on mixed-use projects • To create “living centers” with enlarged areas for resting and entertainment • To concentrate on city centers with limited availability of land • To develop urban housing projects located close to transportation networks like metro systems • To pursue opportunities in projects other than shopping centers Torunlar REIC 2011 Annual Report P / 6

Our Strengths

Torunlar REIC boasts a wealth of in all stages of the development cycle, Deeply experience and a deeply rooted past in a including land sourcing, financing and cost number of areas ranging from construction structure, permitting, design, construction to real estate development and investment. and marketing. Professional management Rooted Pursuing a consistent growth strategy teams with long-term local experience and since its foundation, the Company the ability to establish business relations A deeply rooted past in the successfully maintains its reputation as bring a significant competitive advantage area of property development one of the leaders of the Turkish real estate to the Company, thanks to their knowledge sector with respect to the design and of international standards and practices development of shopping centers. Such regarding technical vision, project design reputation affords the Company invaluable and construction techniques. knowledge and eases implementation

Torunlar REIC is directly and actively The Company adopts such an approach Successful involved in asset management after in shopping center management with the shopping centers it builds become suggestions and campaigns aiming to operational. For instance, the Company increase tenants’ turnover. The Company’s A proven performance in asset also carries out a series of operations success in increasing its rental share management aimed at maximizing visitor traffic and received from tenants’ turnover in addition occupancy rates in shopping centers to its fixed rental income places Torunlar through brand mixing, including leading REIC in a privileged position in the sector domestic and international brands, as well in terms of asset management. Within the as various areas for entertainment and framework of its housing sale strategies, social and educative activities. A total of on the other hand, the Company enters 570 stores operate in the shopping centers into cooperation with primary commercial managed by Torunlar REIC, with an average banks so that they are able to provide occupancy rate of 99%. housing loans to potential house buyers. Moreover, the Company also pursues a The strategies that allow the Company strategy of extending corporate financing to successfully overcome the impacts of to qualified buyers, and is thus able to sell the global economic recession are the its homes to buyers averse to taking out most apparent example of the Company’s banking loans. dynamic approach in asset management. Torunlar REIC 2011 Annual Report P / 7

Torunlar REIC’s projects still under The Company’s strong financial structure development and its strong financial brings the flexibility required to maximize Strong structure provide it with a competitive edge the Company’s growth potential and in terms of growth opportunities going finance its growth plans. The Company’s forward. As of December 31st, 2011, projects financing policy restricts its maximum Tremendous growth potential under development and land available credit/portfolio ratio to 40%, while its supported by a strong for new projects constitute 42% of the cautious financing strategy provides a financial structure Company’s real estate portfolio in terms of significant contribution to the Company value. in loan-related negotiations concerning real estate projects. The Company’s strong By adding projects that offer new and capital structure also allows the Company attractive development opportunities to sustain its project development efforts to its existing projects, Torunlar REIC even in times of macroeconomic volatility. permanently seeks for opportunities to expand its real estate portfolio. In addition Torunlar REIC is determined to manage its to new projects, the Company increases borrowing costs cautiously in the future its rental income through restoration and as well. For this reason, the Company will expansion activities. continue to draw on its shareholders’ equity to maximize its flexibility in its financing, investment and business activities.

Capital and Shareholder Structure 31 December 2011 37.41% Aziz Torun 83,788,309 37.41% 25.16% Aziz Free Float Torun Mehmet Torun 83,717,869 37.37% Yunus Emre Torun 70,440 0.031% 0.06% Torun Marketing JSC 63,396 0.028% Other Ali Coşkun 3,522 less than 0.01% 37.37% Mahmut Karabıyık 3,522 less than 0.01% Mehmet Torun Free Float 56,352,942 25.16% Total 224,000,000 100% Torunlar REIC 2011 Annual Report P / 8

An Assessment of Torunlar REIC’s Performance in 2011

Torunlar REIC demonstrated a strong which was opened on October 30th, 2010), 22% performance in 2011, in line with its targets which operated at a 99% occupancy rate. set forth in its roadmap for growth. The Company generated total income of 22% growth in total assets to Torunlar REIC is one of the leading TL 123.5 million from the shopping centers, TL 3.8 billion companies of its sector with TL 3.8 billion in including common areas. portfolio value and TL 2.5 billion in net asset value. With this result, the Company’s total Our shopping centers were visited by a portfolio value and net asset value increased total of 38 million people in 2011. This Total Portfolio Value (TL million) by 22% and 6.9% YoY, respectively. corresponds to a 32% YoY increase (a 4.3% 3,818.3 LfL increase excluding Torium, which was As of December 31st, 2011, Torunlar REIC opened in October 2010) in the total number commanded an 8.2% market share among of visitors. 3,135.7 the group of public REICs with a market cap

22% being equal to TL 889.3 million. The turnover generated by the tenants in our shopping centers increased by 50% YoY to The sum of the Company’s presales and reach TL 850.3 million. final sales increased by 83% YoY to reach 10 11 TL 425.2 million in 2011. Of this amount, With the inclusion of the ANKAmall, Torunlar TL 262.3 million stemmed from housing REIC now holds 5 shopping centers in its presales. portfolio with a total GLA of 221,176 m2.

The Company increased its rental income The total amount of capex undertaken by from the shopping centers on a like-for-like the Company in 2011 rose by 5% YoY to basis (LfL) by 21.8% (excluding Torium, TL 223.3 million.

Portfolio Breakdown (based on NAV)

Torium Residences 0.2% MOI 21.2%

Nishİstanbul 1.1% Korupark III 2.0% Korupark I-II 0.9%

Torun Tower 6.6%

ANKAmall 4.7% Torium Shopping Mall 14.9% Netsel Marina 1.0%

Bulvar Samsun 1.1% Korupark Shopping Mall 15.7% Deepo Antalya 6.1%

Money and Capital Market Instruments 17.2% Zafer Plaza 4.6%

Other 0.9% Land 1.8% Torunlar REIC 2011 Annual Report P / 9

Mall Performance December 2011 Bursa Zafer Plaza Bursa Korupark Antalya Deepo Outlet İstanbul Torium Total GLA (m2) 23,448 71,267 18,069 95,280 208,064 Rental Income+Common Area Income 8,900 51,525 14,968 48,094 123,487 (TL thousand) Income Growth (%) 5.95 29.39 9.61 NA 21.84 Footfall Growth (%) 7.0 2.1 2.7 NA 4.3 Number of Stores 127 182 81 180 570 Occupancy (%) 99 98 100 99 99

Mall sales turnover increased Footfall reaching 38 million Mall revenues reached TL 123.5 by 50% YoY in 2011. increased by 32% YoY. million with a rise of 73%.

Mall Sales Turnover (TL million) Footfall (million) Mall Revenues* (TL million) 850.3 38.0 123.5

28.7 567.5 25.5 71.3 430.4 50% 32% 47.5 73% 32% 13% 50%

09 10 11 09 10 11 09 10 11 *Rental and common area revenues (%)

The Company recorded an Korupark has a share of 41.7% Mall rental revenues’ share in income of TL 262.3 million in mall revenues breakdown. sales revenues breakdown from presales. Presales Income (TL million) Mall Revenues Breakdown Sales Revenues Breakdown 262.3 Zafer Plaza 7.2% Other 20.4%

Korupark 41.7%

Residence 23.2%

43.5 Deepo Antalya 12.1% 0.7 Mall Leases 56.5% 09 10 11 Torium 38.9% Torunlar REIC 2011 Annual Report P / 10

An Assessment of Torunlar REIC’s Performance in 2011

Key Indicators TL (000) 2011 2010 Change % Sales 162,909 232,928 -30.1 Residence 37,758 161,064 -76.6 Mall Rental 91,969 53,899 70.6 Other 33,182 17,965 84.7 Gross Profit 100,155 80,018 25.2 Gross Margin 61.5% 34.4% 27.1 p EBITDA 82,218 55,377 48.5 EBITDA Margin 50.5% 23.8% 26.7 p Net gain/(loss) from fair value ad- 182,534 166,660 9.5 justments on investment property Net Financial Interest Income 1,334 -20,975 106.4 FX Gain / Loss -122,414 3,562 -3,536.7 Net Profit 177,312 214,245 -17.2

Total Assets 3,943,551 3,203,839 23.1 Total Equity 2,532,906 2,369,083 6.9 Financial Debt 1,100,516 783,263 40.5 Net Debt 444,931 344,599 29.1

A 23% expansion in Torunlar REIC’s the presales of the projects, Mall of İstanbul EBITDA (TL million) balance sheet and Korupark III Terrace Residences, 82.2 Torunlar REIC’s total assets rose by 23% the Company’s liquid assets that mainly 71.7 from TL 3,204 million as of December 31st, comprise of cash and cash equivalents 2010 to TL 3,944 million by December 31st, and financial investments rose by TL 187.4 55.4 2011. Its shareholders’ equity/total assets million YoY from TL 468.1 million as of 23% 48% ratio was 64.2% as of that date, with a December 31st, 2010 to TL 655.5 million liabilities/total assets ratio of about 35.8%. as of December 31st, 2011. Of this amount, TL 597.3 million was invested in instruments 71.5% of the Company’s assets comprise with maturities of less than 90 days, while 09 10 11 investment properties and inventories, with TL 268.2 million was invested in FX deposit cash and cash equivalents accounting for accounts with interest rates of 4.17-5.52%. 16.6% of the total assets. Some 32% of the Company’s liquid assets EBITDA Margin (%) are kept as FX. 60 In 2011, the Company invested a total of 50 TL 223.3 million, predominantly in the The value of the Company’s properties held Mall of İstanbul and Korupark III Terrace for investment purposes only increased by Residences projects. 2.9% to TL 2,457 million in 2011 because of the transfers to inventories in the projects, 24 On the asset side of the balance sheet, the Mall of İstanbul and Nishİstanbul. the most important change is observed Under the inventories item, the value of in the Company’s cash. With the cash all homes and offices stood at TL 363.2 09 10 11 contribution of TL 262.2 million provided by million, of which TL 50.9 million was the Torunlar REIC 2011 Annual Report P / 11

2011/12 2010/12 Change Total net debt (000 TL) -444,931 -344,599 29.12% Average loan term (years) 5 5 0 Average overall interest rate* 5.07% 5.14% -0.06 p Leverage (financial loans as % of total assets) 27.9% 24.4% 3.50 p Net debt to equity ratio -17.6% -14.5% -3.00 p Net debt/Assets (%) -11.2% -10.8% -0.40 p Equity to assets ratio 64.2% 73.9% -9.70 p Loan to property value ratio (LTV) -14.9% -13.4% -1.50 p Interest coverage ratio (times) 61.6 -2.6 NM Net debt/EBITDA (times) 5.4 6.2 -0.8 * Excluding TL loans value of completed homes; TL 258.2 million Rental income accounted for 56.4% of the A 27 percentage point increase in Torunlar associated with the Mall of İstanbul; Company’s sales turnover in 2011. REIC’s EBITDA margin TL 31.3 million from Korupark III Terrace In the income statement, sales fell by 30% In 2011, Torunlar REIC’s EBITDA (earnings Residences; TL 4.1 million from the Ali Sami YoY to TL 162.9 million. The reason for this before interest, taxes, depreciation and Yen project; and TL 18.7 million from land fall was the income generated from the amortization, including FX gains or losses) owned by the Company and other projects. sale of homes in the Nishİstanbul project, that reflect the Company’s operational which was completed in 2010. Therefore, the performance increased by 48.5% to TL 82.2 In 2011, 8 homes from Korupark I and 56 ratio of the Company’s income generated million. The EBITDA margin, calculated by homes from Korupark II were delivered. from the sale of homes completed in 2011 excluding any increase / decrease in the As such, there are a total of 61 apartments in the Company’s turnover declined during value of properties, rose from 23.8% to available for sale in Phases I and II of the year. In 2011, rental income from 50.5%. Korupark. In Nishİstanbul, there are 8 shopping centers accounted for 56.4% of offices, 3 homes, 20 stores and 5 office the Company’s turnover with a further 23.1% The value of the Turkish Lira declined by premises that are not yet sold. derived from the sale of homes. If Torium, 19% against the Euro in 2011 and by 22% that was opened on October 30th, 2010, is against the US Dollar, leading to a net FX The Company has VAT receivables excluded, there would have been a 21.8% loss of TL 122.4 million. Despite the FX loss, amounting to TL 49.8 million. increase in rental income generated from the Company realized a net profit of TL 177.3 shopping centers. million thanks to the TL 182.5 million On the liabilities side, the most important increase in the value of our properties. item is the TL 1.1 billion of bank loans. 73.7% The Company’s gross profit margin rose of bank loans are long-term, with 66% of from 34.3% in 2010 to 61.4% in 2011. The the loans being denominated in USD terms, Korupark Shopping Mall recorded a gross Total Investment Expenditures (TL million) 30% being EU denominated and 3% being profit margin of 73.4% (2010: 74.5%), with a st TL denominated. As of December 31 , 2011, 74.9% gross margin in Antalya Deepo (2010: 223.3 the weighted average interest loan rate fell 68.6%), 72.9% in the Zafer Plaza (2010: 213.3 from 5.14% to 5.07%, excluding TL-based 72.9%) and a 49.5% gross margin for the loans. Korupark Residences (2010: 51.7%). 5% The Company’s net cash position stood at The Company’s operating expenses fell by TL 444.9 million with a net FX position deficit 15.6% to TL 24.5 million. Of this amount, of TL 859.9 million (EUR 118.9 million and TL 6 million is paid as charges, duties USD 301.4 million). and tax, while TL 10 million is spent for 10 11 marketing and advertisement. Torunlar REIC 2011 Annual Report P / 12

Chairman’s Evaluation on the Company’s Activities in 2011

Esteemed shareholders, principally the debt crisis in Europe, A strong political tensions in the Middle East and 2011 was a year of investment and growth North Africa, concerns over the monetary for Torunlar REIC in every sense. During and fiscal policies in the USA and the vision this period in which we worked and earthquake in Japan. produced more and approached our Our Company’s ability to dreams as we have never been, we The crisis has reached a new phase. As eliminate the risk of being obtained successful operating results and large banks that hold the government bills affected by economic volatility increased our income by eliminating the and bonds of troubled countries negative impacts of challenging encountered new toxic assets, the banking by launching the right projects macroeconomic circumstances all around sectors of some countries suffered at the right time - supported the globe. significant losses. These developments led by its strong vision and to increased financial stresses on an projections - when combined The uncertainty over the macroeconomic international scale. During this period, large outlook remains - but the expected corporate investors began to exit risky with our strong financial improvement proves elusive. assets and emerging markets, leading to a structure, provides us with a The last wave of the global financial crisis, contraction in international portfolio competitive advantage. which was essentially a result of excessive investments. borrowing through government bonds and which represents a threat for developed Consequently, the global economic growth economies, particularly in the Euro Zone, rate stood at around 3.6% in 2011 with the left its mark in 2011. The global economy contribution of developing countries. The was affected by a series of events in 2011, IMF projects a growth rate of 3.5% for the Torunlar REIC 2011 Annual Report P / 13

global economy for 2012. While solutions take a toll on Turkey’s tourism and export In 2011, we undertook our are sought for the crisis on international revenues, and accordingly, its current projected investments and platforms, the establishment of a complete account deficit. fiscal union among Eurozone countries started construction work on 4 appears as the only cure in the long-term. Faster growth for the construction sector projects after completing their The speed and the success of positive steps than the rest of the Turkish economy in development and licensing taken in this direction would shorten the 2011 phases. uncertainty, thus paving the way for a With the added value produced by the resolution to the crisis. construction sector, the plethora of sectors driven by the construction sector as well as Continued growth in Turkey’s GDP in 2011 its high employment potential, the sector Developed countries recorded 1.6% growth has always been one of the driving forces of in 2011, while developing countries the Turkish economy. Chalking up an 11.2% exhibited an average of 6.2% growth; growth rate in 2011, the construction sector Turkey was positively decoupled thanks to grew more rapidly than the rest of the its strong macroeconomic structure. The Turkish economy. After rapid growth in the Turkish economy was relatively unscathed last two years, the construction and real from this environment of slowing economic estate sectors are expected to grow growth and heightened instability; thanks moderately between 5-6% in 2012. Housing to vigorous domestic demand, the Turkish prices and rental income in the sector only economy demonstrated one of the posted very small growth in 2011. In 2012, strongest economic performances in the the activity and development in the sector is world, with a real growth rate of 8.5%. expected to continue and brand new homes Turkey maintained its financial discipline in will continue to be delivered as per the 2011, while the foreign trade deficit and recently issued, “Law on Disasters” and current account deficit continued to widen. “Law of Reciprocity”.

The CBT has taken a series of measures We surpassed our targets for 2011. since the end of 2010 aimed at balancing Torunlar REIC’s strong financial structure, the current account deficit. Efforts to as well as its strong vision and projections suppress credit growth, as well as the have been instrumental to enhancing the devaluation of the TL and the increase of Company’s competitive edge under crisis excise duties served to cool down domestic circumstances. Based on these qualities, in demand. This trend that gained momentum 2011 our Company demonstrated its ability by the end of 2011, is expected to continue to eliminate the risk of being affected by in 2012, in parallel with a decline in Turkey’s economic volatility, by launching the right growth rate. projects at the right time.

The strong demand for Turkish assets In 2011, Torunlar REIC undertook its began to soften in line with trends in the projected investments and launched global capital markets, while the construction work on 4 projects after diminishing financing ability of European completing their development and licensing banks remained a key worry in connection phases. These projects include the Mall of to the current account deficit. Likewise, the İstanbul, which is expected to be Turkey’s ongoing headwinds in Europe will inevitably largest mixed-use project, as well as Torunlar REIC 2011 Annual Report P / 14

Chairman’s Evaluation on the Company’s Activities in 2011

Korupark Terrace Residences Phase III, In 2011, concerning our other projects… We are a leading REIC with a portfolio Torun Towers and the Samsun Bulvar • The Nishİstanbul project was completed dominated by shopping centers. Shopping Mall. The Company also initiated as the remaining units of the project What sets Torunlar REIC apart in the sector projected development studies for the Ali were shared among partners on July 15th, is its target of achieving high rental income, Sami Yen project. 2011. which is also one of the most significant components of the Company’s primary We began the presales of Korupark Terrace • ECE European Prime Shopping Centre strategy. In this context, our Company has a Residences in March 2011 and the Mall of SCS SICAF SIF A, B and C submitted an portfolio, 56.1% (in terms of real estate İstanbul in April 2011. Demand for these offer to purchase all shares in Yeni Gimat value) coming from shopping centers. projects was considerable and we exceeded İşyerleri A.Ş., 14.83% owned by Torunlar Having a total GLA of 221,000 m2 at the end our sales targets for 2011, selling more REIC, and the owner of ANKAmall and the of 2011, our Company aims to increase this homes than we expected. We notched up Crowne Plaza Hotel, for a price of to 407,000 m2 by 2014 through its ongoing TL 51.5 million of committed presales in the USD 525,000,000, subject to the investments. As a part of this approach, we Korupark Terrace Residences, TL 210.8 fulfillment of certain conditions, through currently generate a significant volume of million in the Mall of İstanbul and TL 262.3 Germany-based ECE Projektmanagement recurring rental income, which allows us to million in total. With the inclusion of TL 37.7 G.m.b.H & CO. KG, the company distribute dividends to our shareholders on million from the final sale of the apartments responsible for the management of a regular basis every year. in our inventories, we generated TL 300 ANKAmall - one of the largest shopping million from housing sales. Our rental centers in Ankara. ECE is currently Torunlar REIC is also responsible for the income amounted to TL 92.0 million and conducting due diligence work in Yeni operation of shopping centers, and has other sales revenues reached TL 33.2 Gimat. succeeded in maintaining a strong tenant million in total. As a result, our total profile thanks to its flexible and effective turnover in 2011 reached TL 425.2 million, • Continuing to pursue opportunities for management approach. Commanding a including presales and final sales. land development, our Company 99% occupancy rate, our shopping centers purchased a 14,163 m2 plot in the operate with a sound tenant mix. Our Torunlar REIC generated revenues of Maltepe district in the Anatolian side of tenants demonstrate a high level of loyalty TL 162.9 million from final sales and TL 82.2 İstanbul within a three-party consortium to us, thanks to our broad experience in the million in EBITDA (Earnings before Interest, for a price of USD 20,000,000, where it sector. Our target and expectation is to Tax, Depreciation and Amortization) in 2011. plans to develop a new housing project. win-win with our tenants. Based on this The Company’s EBITDA in 2011 marked an Half of this land is owned by our principle, we applied a number of policies increase of 48.5% over its EBITDA in 2010. Company and is included in our portfolio, such as fixing exchange rates, in order to Our rental income from the shopping with a value of TL 16,421,000. protect our tenants against the wide centers, which operate with a 99% exchange rate volatility observed in occupancy rate, increased by 21.8% YoY, • While we currently have a limited August-September 2011. In return, we higher than the sector average. By the end number of offices to let, we will be taking raised the ratio of turnover-based part in of 2011, our total assets amounted to TL 3.9 a very significant step in the office total rental income to protect our billion; the value of our portfolio increased market, as the projects, Torun Tower, Company’s financial performance. As long to TL 3.8 billion; and our market value Mall of İstanbul and Ali Sami Yen, which as our tenants’ turnover continue to reached TL 899 million. are important to us and offer increase at a steady rate, we will protect considerable potential thanks to their mutual benefits by controlling the potential central locations, are completed by the risks in fixed rental fees. This study is end of 2013. reviewed on a quarterly basis. Torunlar REIC 2011 Annual Report P / 15

Our flagship project: The Mall of İstanbul A project of prestige: Ali Sami Yen Torunlar REIC has broken new ground in the We pressed ahead with our development real estate sector and carried out projects efforts throughout 2011 for the mixed-use that bring innovation to the sector. The Mall “Ali Sami Yen-Mecidiyeköy” project, which of İstanbul, as the largest mixed-use project we added to our investment portfolio in a both in Turkey and in Europe, stands out as 65% partnership at the end of 2010. The an eye-catching project that will make a project excites us with its sale potential difference in the national and international thanks to its location and its design arena. concept, and which could be cited as a project of transformation in the region. We Designed by Torunlar REIC, the Mall of believe we have produced a design that İstanbul is, in our view, our flagship project. combines our experience with our vision, as We would claim that the Mall of İstanbul is this project includes an arrangement that High demand a “first” among mixed-use projects in will address the lack of green areas in the We began presales of the Turkey. The Mall of İstanbul, which can also region, as well as applying the flat office Korupark Terrace Residences be considered as a significant urban building concept. The new office concept, to transformation project, is made up by a be introduced in this project, will bring a and the Mall of İstanbul in shopping center of 150,000 m2 (including an breath of fresh air to the office concept in 2011 and we exceeded our entertainment area of 15,000 m2), as well as terms of scale and specifications, also sales targets for 2011, selling 2 homes with a total area of 122,000 m , placing Ali Sami Yen as a project of prestige more units than we expected offices with a total area of 32,000 m2 and a for us. hotel. With stores that will bring us in both of these projects. significant rental income, the project We plan to begin construction work for the includes a total of 1,114 homes and 116 project in the second quarter of 2012. office units. We started construction work for the project in March 2012.

Our shopping centers will create internal synergies under an approach of maintaining the interest of our guests through various themes and concepts, such as entertainment and sport. The project will benefit hugely from the advantages of its location, on the intersection of the E5 and TEM highways, its proximity to the airport and its central position in the rapidly developing western side of İstanbul. Torunlar REIC 2011 Annual Report P / 16

Chairman’s Evaluation on the Company’s Activities in 2011

The star of the Turkish real estate sector is earthquake risk and which are built to high The “Mall of İstanbul” project won 3 awards shining. standards, represents an important trigger in 2011 including the “Outstanding Success Besides strong political stability that allows for the growth in international demand for among the Projects of the Future” award in Turkey to overcome cyclical fluctuations homes, offices and shopping centers. The Global RLI Awards 2011, hosted by with a minimum of damage, Turkey offers Retail&Leisure International, one of the some unique advantages in terms of Looking at the trends from the perspective world’s leading magazines in the retail and economic growth, with a strong financial of shopping centers, there has been a rapid entertainment sector; and the grand awards system, flexible entrepreneurial profile, tendency towards larger retail spaces, in the Best Mixed-Use Project and the Best valuable human resources and strong where there is intensive competition among Shopping Center Development Project logistics facilities. The fact that the domestic and international retail brands, an categories at the “European Real Estate company profile in Turkey is dominated by increasing number of both foreign and Awards 2011”, one of the world’s most mid-scale and institutionalized companies domestic visitors and all aspects of modern reputable real estate contests. brings an advantage when it comes to life, such as shopping, dining, culture, art flexibility in management and decision- and entertainment are gathered under a The awards given to Mall of İstanbul are making processes. single roof. The new shopping center very precious in terms of proving the concept develops on the basis of creating distance covered by our country and sector. These advantages will also elevate Turkey centers which exceed expectations and For Mall of İstanbul, a thorough study was to a prime destination for international make a difference by hosting themed carried out in cooperation with specialized capital at such a challenging time, and set projects, and even museums. foreign architects and specialist consultants the stage for Turkey to be preferred by to present the four concepts - residence, corporate and individual investors. Our award winning innovation and shopping center, hotel and office - together sensitivity to the environment and in harmony and to create a project that Turkey’s high growth rate in recent years As Torunlar REIC, we act with an fits the living conditions of the future. These and its ability to develop real estate understanding of our social and international awards represent the fruits of projects to high standards reflect the environmental responsibilities for a our hard work. position Turkey has reached as a modern sustainable future, and we take great care country, and this offers great promise for to fulfill our responsibilities to the world we Demonstrating sensitivity to sound our sector. A number of international firms live in by designing projects which are in corporate governance have established regional centers and harmony with nature, which only consume As a publicly-held company, Torunlar REIC offices in Turkey, as part of a rapidly as much as needed and which demonstrate has a stakeholder group which includes growing trend. According to projections, sensitivity to the ecosystem. The LEED international investors. We are required to within the framework of the Law of Golden Certificate, awarded to Torium in develop and apply specific standards within Reciprocity that is expected to be enacted in 2011, is a clear sign of our environmental the framework of our corporate governance 2012, foreign investor demand for real sensitivity. The fact that Torium achieved approach and in compliance with the rules estate in Turkey is expected to increase another first in Turkey with its that aim to protect investors, which we, as a through a combination of both buying and environmentally friendly approach has REIC, are subject to. As a corporate renting transactions. further encouraged us. One of our primary partnership that takes pains to fully abide targets in future projects will be to maintain by business ethics, we perform all our In the context of the global real estate our environmentally friendly approach and activities in line with the principles of sector, İstanbul ranks 2nd in the world, after carry out leading and model projects. accountability and transparency. Moscow. The distance that has been covered in recent years when it comes to producing the buildings of the modern future, which offer safety in the face of Torunlar REIC 2011 Annual Report P / 17

In line with the principles of corporate Our Company is backed by strong financing As Turkey’s largest developer governance, and as we committed to our resources. Besides the resources we of local shopping centers, investors during the public offering, received from the public offering, our Torunlar REIC has adopted the principle of income from presales, our strong Torunlar REIC steers its distributing at least 50% of its net shareholders’ equity and our ability to growth plans with the target distributable profit in dividend, except at receive cost-efficient long-term loans of being one of the top 5 times that the Company requires funds for provide our Company with the necessary its investments in line with its growth plan, funds for our investments. Our Company companies in the housing and at times of extraordinary negative will sustain its efforts to develop new sector and one of the developments in general economic projects with a particular focus on leading companies in the circumstances. Our Board of Directors will commercial real estate. In this context, we development of mixed-use submit a resolution at the Annual General keep on evaluating investment alternatives Meeting to distribute TL 22.4 million from such as residence, office buildings and projects. our profit for the 2011 fiscal year to our shopping centers in İstanbul and other shareholders in dividend. cities, which are attractive in terms of real estate projects. We also launched a share buyback program, allocating TL 30 million for this process in In the coming period, we will continue to order to support the performance of our develop projects that produce added value shares and to protect small investors. We for the region and/or city where they are continue to conscientiously apply the developed. As Turkey’s largest developer of program. local shopping centers, Torunlar REIC steers its growth plans with the target of being Looking to 2012 with hope one of the top 5 companies in the housing After 2010 and 2011, which we view as the sector and one of the leading companies in “years that we ran towards our targets”, we the development of mixed-use projects. project that 2012 will be a “year in that we will walk towards our targets”, due to the I would like to take this opportunity to effect of the global conjuncture. We believe extend my gratitude on behalf of myself and this will be reflected to the housing and real in the name of our Board of Directors to all estate markets in the form of a relative loss our stakeholders, especially our of the pace, but not as a recession or shareholders, who have stood by us as we contraction. move towards the future with their trust, and our employees, who have made our The current double-digit rate of inflation is Company successful with their self- expected to start falling from May 2012 sacrificing efforts. because of the base effect, and all interest rates in markets are on course to decline to Yours sincerely, more reasonable levels in parallel with the improving outlook for inflation in the second half of the year. Average mortgage rates in 2012 are still expected to be higher than in 2011, but this does not represent an insurmountable risk. Aziz Torun Chairman of the Board of Directors and CEO Torunlar REIC 2011 Annual Report P / 18

Board of Directors

Aziz TORUN Ali COŞKUN Mehmet TORUN Chairman of the Board of Directors and CEO Vice Chairman of the Board of Directors Member of the Board of Directors

Born in Kemah, Erzincan in 1950, Mr. Torun Born in 1939 at Kemaliye – Başpınar, Mr. Coşkun Born in 1953 in Ağaçsaray, Kemah in Erzincan, graduated from the Faculty of Economics at graduated from the Department of Electrical Mehmet Torun - the younger of two brothers (the İstanbul University, in 1975. He also attended the Engineering at Yıldız Technical University. He other being Aziz Torun) - started his professional courses of the Sociology department in the completed a master’s degree in Managerial career working for his father Osman Torun in a Faculty of Literature in the same university until Economics. He is a certified public accountant small shop in 1962. He started his business life at his fourth year of study. with an honors degree from the Hamburg an early age, taking early steps for success. He is Wirtschaft Academie. He speaks German and married and has three children. He worked as an inspector at the Ministry of English. He is married and has two children. Labor and Social Security between 1976 and He is currently the Chairman of the Board of 1982. He also attended doctorate seminars at the Some of the companies he has worked in as the Directors of Torunlar Food Industry and Trade Faculty of Economics during this time. General Manager, or as a member of the Board of Inc., Torun Tea Inc., Tobaş Torun Bio Energy Inc., Directors, managing director, Chairman of the Torun Marketing Inc., Torunlar Oil Inc., National He left his job as an inspector in 1982 and Board and founder are Çanakkale Ceramics Inc., Foreign Trade Inc., Kütahya Sugar Factory Inc., all decided to work for the private sector. The Kale Porcelain Electrotechnical Industry Inc., of which are within the Torunlar Group. He is the Torunlar Group of Companies was founded soon Kalebodur Ceramics Ind. Inc., Turk Saudi Vice Chairman of the Board of Directors of Torun after. He currently serves as the Chairman of the Investment Holding Inc., Turk Sugar Factories Construction Industry and Trade Inc., Depa Board of Directors of Torunlar REIC. He is married Inc., Bisan Bicycle Industry and Trade Inc., Vegetable Oil Inc., Deputy Chairman of the Board and has two children. Coşkun Engineering Consulting Ltd. Co. and of Directors of Nokta Construction Inc. and Emsay Industry and Trade Inc. member of the Board of Directors of Netsel Tourism Inc. He is also a founding partner of He was a member of parliament for İstanbul for Torunlar Real Estate Investment Company. the 20th, 21st and 22nd parliamentary terms of the Republic. He served as the President of the Grand National Assembly National Defense Commission, as well as a member of the Planning and Budgeting Commission, and a member of the Trade, Industry, Energy, Mining, Science and Technology Commissions. He also served as the Minister for Trade and Industry in the 58th and 59th Governments. Torunlar REIC 2011 Annual Report P / 19

Yunus Emre TORUN Mehmet MUMCUOĞLU Prof. Dr. Ali ALP Member of the Board of Directors / Deputy CEO Independent Member of the Board of Directors Independent Member of the Board of Directors

Born in 1980, Yunus Emre Torun graduated with a Born in 1952 in Kayseri, Mr. Mumcuoğlu Born in Rize in 1964, Mr. Alp graduated from the 4-year Bachelor’s Degree in Economics in 2002 graduated from the Faculty of Business Faculty of Political Sciences of Ankara University from the Faculty of Economic and Administrative Administration of İstanbul University in 1974. He in 1987. He graduated with a Bachelor’s Degree Sciences at Marmara University. He received a has been working as the Deputy Chairman of the in business administration from Ankara diploma in Advanced English at UCLA in Board of Directors of TC Ziraat Bank Inc. since University in 1987, going on to complete a California, USA in 2003. He is currently a member 2005. He also held the posts of member of Board Master’s Degree in business management at of the Board of Directors of Torunlar Food of Directors of TC Ziraat Bank Inc., Managing Marmara University in 1991, and a Doctorate in Industry and Trade Inc. and Deputy CEO and a Director of the Board of Directors of TC Ziraat business administration at Ankara University in member of the Board of Directors of Torunlar Real Bank Inc. He speaks English and German. He is 1995. Since 2007, he has been working as a Estate Investment Company. He speaks English. married and has two children. professor in the Department of Business He is married and has one child. Administration at Economy and Technology University founded by the Union of Chambers and Commodities of Turkey. Prior to his current position, he was an associate professor at the same university. He has also been working as a part-time lecturer at Bilkent University since 2005. He worked as an Associate Professor of Finance and Accounting at Interuniversity Board and a visiting instructor at the University of Illinois at Urbana-Champaign. He conducted his doctorate research at the Maastricht School of Management.

Mahmut KARABIYIK Member of the Board of Directors

Born in Sincanlı, Afyon in 1961, Mr. Karabıyık graduated from the Law Faculty of İstanbul University in 1982. Following the legal internship he completed in 1983, he practiced law with a specialization in Commercial Law, Company law, Banking and Capital Markets Law, and Enforcement-Bankruptcy Law. Torunlar REIC 2011 Annual Report P / 20

Senior Management

Left to Right: Remzi AYDIN, İlham İnan DÜNDAR, Aziz TORUN, Yunus Emre TORUN, Yezdan KANAAT, İsmail KAZANÇ

Aziz TORUN Remzi AYDIN İsmail KAZANÇ Chairman of the Board of Directors and CEO Chief Construction Officer Chief Financial Officer

Aziz Torun’s CV is enclosed in the Board of Born in Elazığ in 1969, Mr. Aydın graduated from Born in Tekirdağ in 1972, Mr. Kazanç graduated Directors section. the Department of Civil Engineering at Fırat from the Department of Business Administration University in 1992. In 1993 he started his at Bilkent University in 1994. He completed a Yunus Emre TORUN professional career at Torunlar Group as a civil Master’s Degree in International Financial Member of the Board of Directors / Chief engineer. He has held various positions within Markets at the University of Southampton in Marketing Officer the group since then. He is currently responsible 2001. He worked at the Arab-Turkish Bank as an for project implementation at Torunlar REIC. assistant general manager between 2008 and Yunus Emre Torun’s CV is enclosed in the Board 2009, as a Treasury Department group manager of Directors section. Yezdan KANAAT at İşbank between 2006 and 2008, as a Treasury Chief Development Officer Department assistant manager at İşbank İlham İnan DÜNDAR between 2002 and 2006, and as an inspector at Chief Operating Officer / Shopping Mall Born in 1975 in İstanbul, Mrs. Kanaat graduated the inspection board at İşbank between 1994 and Management from the Department of Architecture at İstanbul 2002. Technical University (ITU) in 1998. She completed Born in Eskişehir in 1960, Mr. Dündar graduated an MBA in 1999, again at ITU. in 1984 from Kütahya Administrative Sciences College under the Faculty of Economics and She served as the group manager at Doğuş – GE Administrative Sciences at Anatolian University. REIC and an Assistant General Manager He earned a Business Administration responsible for project development between Specialization Certificate at İstanbul University’s 2006 and 2008, and as an assistant manager at Managerial Economics Institute in 1985. Garanti REIC between 2004 and 2006. She was in charge of investments at Garanti REIC between In 2007, he joined Torun Shopping Mall 2002 and 2004, an executive at Iktisat REIC Investment Management Inc. as general between 2000 and 2002 and a specialist at coordinator and became assistant general Yüksel Construction Inc. between 1998 and 2000. manager in charge of shopping mall management at Torunlar REIC in 2008. Torunlar REIC 2011 Annual Report P / 21

Auditors

Kadir BOY Mehmet Akif ULUSOY

Born in Geyve, Sakarya in 1956, Mr. Boy Born in Tavşanlı, Kütahya in 1961, Mr. Ulusoy graduated from the Faculty of Political Sciences graduated from the Faculty of Political Sciences at Ankara University in 1979. He was assigned to at Ankara University in 1982. He was assigned to the Tax Inspectors Board of the Ministry of the Tax Inspectors Board of the Ministry of Finance in 1980 where he was promoted to the Finance in 1983 as an Assistant Tax Inspector and position of Tax Inspector in 1983, and Chief Tax worked as a Chief Tax Inspector between 1993 Inspector in 1990. He gained professional and 2003. He also served as the Head of the Tax experience in the UK for one year in 1987-1988, Office and Head of the Provincial Treasury in and for 4 months in 1993. He was Vice Chairman İstanbul and İzmir between 1995 and 2006. He of the İstanbul Group of the Tax Inspectors Board was appointed as the Deputy Chief of the and Vice Chairman of the Board between 1990 Revenue Administration in 2007. He was and 1993. He became assistant head of the Tax subsequently assigned as a Financial Consultant and Revenue Office of İstanbul on 15 December at Turkey Nicosia Embassy. He speaks English. 1993. After six years in this post, he became the He is married with two children. Acting Head of the Tax and Revenue Office of İstanbul on 2nd March, 1999 and became Head of the Tax and Revenue Office of İstanbul on 12th January, 2000. He retired when he was Deputy Undersecretary of the Ministry of Finance for the term 2004-2005. He is married with one child. Torunlar REIC 2011 Annual Report P / 22

Macroeconomic Outlook and Assessment of the Sector

Global Economic Outlook Having notched up 5.2% growth in 2010, the 3.6% year of recovery in the post-crisis period, The outlook of the global economy the global economy is estimated to have After growing by 5.2% in worsened as uncertainty dominated markets grown by nearly 3.6% in 2011. According 2010, the global economy is as a result of a series of developments in the to the IMF’s “World Economic Outlook” second quarter of 2011, notably the public report, which was revised in April 2012, the estimated to have grown by debt crisis in the Euro Zone. world economy is expected to grow by 3.5% nearly 3.6% in 2011. in 2012. In the same report, the Eurozone The debt crisis that broke out in highly economy is projected to contract by 0.2% for indebted peripheral countries in the the year 2012. Eurozone such as Greece and Portugal gradually spread to central countries with a “contagion” effect, and its grip expanded to national banking sectors as well. When combined with the weakness of the recovery in economic activity and employment in the USA and other developed countries, this inevitably precipitated a decline in growth rates of developed countries.

Emerging markets, on the other hand, which have served as the driving force of the global recovery in the post-crisis period, were affected by the slowing global economic activity in this environment of uncertainty caused by developed countries, and recorded lower growth rates than in the previous year, despite their stronger economic fundamentals when compared to developed countries. Torunlar REIC 2011 Annual Report P / 23

Turkish Economic Indicators 2011 2012 Base Case Best Case Worst Case Real growth (GDP, %) 8.50 4.00 6.00 2.00 Inflation (CPI, %) 10.45 6.50 4.50 8.50 Producer Price Index (PPI, %) 11.09 6.00 4.80 7.30 TL/USD (year-end) 1.92 1.75 1.60 2.00 TL/EUR (year-end) 2.47 2.36 2.16 2.70 USD/EUR (year-end) 1.29 1.35 1.35 1.35 CBT weekly repo rate (%) 5.75 5.75 6.00 CBT overnight repo rate (%) 12.50 10.00 12.50 Mortgage loan average monthly interest rate (year-end, %) 1.20 1.00 Mortgage loan growth (%) 21.40 15.00 Construction sector growth rate (%) 11.20 5.00 6.00 Residential construction permits (growth, %) -30.00 5.00 10.00 Residential prices and rents growth (%) at par with inflation at par with inflation Commercial real estate investment growth (%) 10.00 8.00 10.00

Outlook for the Turkish Economy Inflation back in double digit territory The rate of CPI inflation reached 10.45% Turkey continued to grow, but at a slower in 2011. The reflection of exchange rate 8.5% pace. movements on basic commodity prices Following its strong 9.2% growth in 2010, put upward pressure on inflation. The PPI Following the strong 9.2% the Turkish economy notched up an 11.9% increased by 13.33%, driven by the rise in growth in 2010, the Turkish growth rate in Q1/2011, exceeding market industrial sector index in 2011. economy grew by 8.5% in expectations. With this result, Turkey 2011. demonstrated one of the highest growth The actual end-year inflation rate performances in the world. However, considerably exceeded the 5.5% target; economic growth did start to lose some accordingly, the CBT began to apply tight of its momentum by the second quarter, monetary policies in October 2011. with the growth rate inching back from 9.1% in Q2 and 8.4% in Q3. Turkey’s GDP A downturn in the Consumer Confidence growth, which was predominantly driven Index by domestic demand, stood at 8.5% for the The consumer confidence index provides full year. a general idea about the economy by indicating consumers’ spending habits and their view regarding the economy. The index edged up from 91 at the end of 2010 to 92 by the end of 2011 on the back of the recovery observed in the Turkish economy. Torunlar REIC 2011 Annual Report P / 24

Macroeconomic Outlook and Assessment of the Sector

ING Mortgage Barometer TurkStat Consumer Confidence Index-ING Mortgage TurkStat Consumer Barometer Confidence Index 100 96.4 93.6 93.5 93.7 95 94.8 93.2 91.3 93.4 92.0 90.4 92.5 92.3 90 91.0 91.3 91.7 91.0 89.0 86.0 89.7 87.5 87.4 86.0 85 84.0 84.0 80.0 82.0 80 81.0 83.0 78.0 79.0 78.0 75 76.0 78.0 75.0 76.0 76.0 75.0 74.0 70 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12

A fall in the rate of unemployment In 2011, the ongoing economic difficulties Turkey’s impressive growth performance in the Eurozone - our largest export Current has brought a significant decline in market - and the political developments unemployment. The rate of unemployment in the Middle East and North Africa, which fell from 11.9% at the end of 2010 to 9.8% are considered to be alternative markets account by the end of 2011, another indicator of for Turkey, were the primary factors to Turkey’s position as one of the world’s negatively affect Turkey’s exports. deficit best performing countries when compared alongside other countries suffering from The Turkish economy’s structural The current account deficit high levels of unemployment. One of the dependence on imports of intermediate widened to USD 77.1 billion in Turkish government’s priorities has been goods, in particular, as well as Turkey’s 2011, equal to 10% of Turkey’s to bring down unemployment; to this end, dependence on foreign resources for its GDP. The foreign trade the government introduced new incentives energy needs, especially oil and natural aimed at supporting private sector gas, has a negative impact on the current deficit was the major factor investments and performed a preliminary account deficit. Turkey’s current account contributing to the increase in study for flexible working hours. deficit rose from USD 46.6 billion in 2010 the current account deficit. to USD 77.1 billion in 2011, reaching 10% of The foreign trade deficit and the current Turkey’s GDP. The current account deficit account deficit must be watched carefully. widened by 65.3% when compared to its According to TurkStat data, Turkey’s level at the end of 2010. The foreign trade exports rose by 18.5% to USD 134,954 deficit, which widened by 47.7% in 2011, million in 2011. Imports, on the other hand, was the major driving force of the increase rose by 29.8% to USD 240,833 million. in the current account deficit. As a result, Turkey’s foreign trade deficit widened to USD 105,879 million in 2011. In 2011, foreign direct investments The export/import coverage fell from 61.4% rose to USD 15.7 billion, while portfolio in 2010 to 56% in 2011. investments amounted to USD 22.1 billion. In 2011, the increase rate is 68.8% for foreign direct investments and 37.3% for portfolio investments. Torunlar REIC 2011 Annual Report P / 25

The positive trend in the budget On October 26th, 2011, the CBT announced performance continues in 2011. a 5-article action plan, which includes price The budget closed the year 2011 with a stability aimed at significantly increasing The ISE 100 deficit of TL 17.4 billion, only half of the the value of the Turkish Lira, as well as Having closed 2010 at targeted deficit. The primary surplus interest policy, FX reserve policy, required 66,004.48 points with a realized at TL 24.7 billion - about double reserves policy and financial stability. record gain, the ISE 100 Index the target, and the projected amount. began to fall in 2011 and Accordingly, Turkey’s budget deficit/GDP In its November meeting, the Monetary ratio was barely half of that specified in Policy Committee made a decision to keep closed the year at 51,266.52 the Maastricht criterion, while the primary the weekly repurchase auction interest rate points. surplus was about 2% of the GDP. at 5.75%, the overnight borrowing interest rate at 5%, the overnight lending interest CBT’s policies left their mark in 2011. rate at 12.5% and the borrowing interest The CBT adopted a series of measures rate - offered to market making banks throughout the year aimed at limiting the through repurchase within the framework negative impacts of fluctuations in the FX of open market transactions - at 12%. market and global economic developments on domestic economic activity, and The CBT continued to apply the floating to prevent a worsening of inflation exchange regime in 2011, while keeping a expectations. close watch on changes in exchange rates, and intervening in the markets by selling or In 2011, the required reserves ratio buying FX, when price formations that were continued to be used as an active policy deemed to negatively affect the economy instrument in order to manage the Turkish were observed. Lira and FX liquidity and strengthen the CBT’s reserves. Also, necessary measures A weak performance for the ISE were undertaken with the contribution Having closed 2010 at 66,004.48 points of other institutions in order to ensure with a record-high gain, the ISE 100 Index that the banking loan volume grows at a began to decline in 2011 and closed the reasonable rate. year at 51,266.52 points. The Index lost 22% of its value in TL terms and 36% in In parallel with the fall in global risk USD terms in the last one year, with a loss appetite in the second half of 2011, there of 17% in TL terms and 29% in USD terms in was a rapid surge in capital outflows from the last six months of the year. Concerns emerging markets and accordingly, the and uncertainty surrounding the global Turkish Lira was excessively devalued. In economy for the coming period have taken response to the inflationary impact of this, their toll on expectations for the ISE’s the CBT sharply raised the lending interest performance in 2012. rate. Torunlar REIC 2011 Annual Report P / 26

REICs in Turkey

Real Estate Investment Companies (REICs) amount of money, plays an effective role in The “Communique on Undertaking in Turkey were first founded in 1995. In the entry of those REICs, which had only been Amendments to the Communique on line with the communiques of the Capital founded recently or are in the process of the Principles of Real Estate Investment Markets Board (CMB), they were offered transformation, into the sector. Companies” (Serial VI, No. 29) was to the public and listed on the ISE in 1997. published in the Official Gazette dated: Real Estate Investment Companies (REICs) As of the first quarter of 2012, there were July 28th, 2011 and no. 28008. Some of are capital markets institutions operating 24 publicly-held REICs and 5 REICs which the amendments undertaken with this in compliance with the communiques had recently received establishment communique are listed below: issued by the Capital Markets Board licenses. • The practice of the portfolio statement, (CMB). According to a change in legislation As of December 31st, 2011, the ISE Real which is issued every quarter and which that entered into effect as of January 1st, Estate Investment Companies Index states the Company’s net asset value, 2010, REICs are legally required to file (XGMYO) stood at 29,849 points, while was terminated after the portfolio an application with the board to offer the ISE 100 index was at 51,266 points. statement dated: 30.06.2011 was 25% of their shares to the public, within During the course of 2011, the ISE National announced to the public. The Company’s a maximum period of three months 100 Index slid by 22%, the Real Estate portfolio information as of 31.12.2011 following their establishment. The reason Investment Companies Index by 17%, while is stated in its financial statements for this requirement is that REICs, due to the value of Torunlar REIC shares fell by announced to the public as per the the nature of certain legal and regulatory 37% in TL terms. “Communique on the Principles for requirements that they are subject to, are Financial Reporting in Capital Markets” transparent and accountable corporations. 31.12.2011 31.12.2010 Change % (Serial XI, No. 29). ISE 100 51,266 66,004 (22.3) • Limitations on investments and other The fact that REICs are publicly-held (XU100) activities which had been calculated ISE REIC offers significant advantages both for 29,849 36,063 (17.2) based on the portfolio value are now the sector and for investors. By going (XGMYO) calculated based on the “total assets in public, companies operating in this sector TRGYO 3.97 6.34 (37.3) the balance sheet”, while information strengthen their financing facilities, which regarding the audit of portfolio allow them to develop comprehensive real The average daily trading volume of limitations is stated in the Board of estate projects. By becoming shareholders Torunlar REIC shares was TL 805,177 in Directors’ Annual Report. of REICs, investors, on the other hand, 2011, while the shares closed the year • The 10% limit applied to land purchased indirectly become partners of such projects 2011 at a share price of TL 3.97 - a 64.8% at least 5 years ago and on which no which they could not otherwise carry out discount to the REIC’s net asset value project has been yet developed, was with their personal savings. of TL 11.30 per share. As of December revised to 20% of the total assets under 31st, 2011, the sum of market caps of the the new communique. Although the real estate investment sector 24 REIC’s operating in the sector was • The upper limit of loans that can be is new to our country, tax incentives TL 10,840,900,000. Accordingly, Torunlar raised to REICs which had been set at granted by the government allow the REIC commanded an 8.2% share in the three times a company’s net asset value inflow of a significant volume of corporate sector in terms of market value. is set at five times a company’s non- capital into the sector. This is underpinned consolidated shareholders’ equity under significantly by the fact that property REICs TL million the new communique. occupies an importance place in the Emlak Konut REIC 4,875.0 • REICs are now offered an opportunity investment habits of the Turkish public. SAF REIC 1,179.2 to invest in foreign capital market Torunlar REIC 889.3 instruments, no longer subject to the Given the high level of demand in the real Akmerkez REIC 629.8 condition that such instruments are estate sector, corporate capital is required to İş REIC 600.0 based on real estate. meet such demand; the fact that REICs allow Sinpaş REIC 594.0 small investors to undertake investments Other REICs 2,073.6 in real estate properties, even with a small Total Market Value (sector) 10,840.9 Torunlar REIC 2011 Annual Report P / 27

Outlook for the Construction and Real Estate Sectors in Turkey

An analysis of the global construction and employed in the construction sector as a index, accounted for nearly 20% of housing real estate sector shows the sector was proportion of total employment rose to costs. dominated by “recession” in developed 7.6%. countries in 2011, while real estate sector In 2011, foreigners bought USD 2 billion investments in developing countries began The housing sector is the driving force of worth of property in Turkey, falling from to gain some slight momentum when the growth in the Turkish construction the USD 2.5 billion of property that was compared to the pre-crisis period. sector, with its 58% share of all building sold to foreigners last year. This decline permits issued in 2011 and its significant was a result of the deepening of problems The Turkish construction sector is contribution to a number of products (steel, in the global economy and the mounting very sensitive to changes in consumer cement, glass, household appliances). In disagreements over the law of reciprocity confidence, which is affected by GDP 2011, the number of building permits fell regarding the sale of property to foreigners growth, appreciation or devaluation of the by 29% due to the increase in housing loan in Turkey. TL and the level of interest rates. In 2010, interest rates (from 1.16% in September the Turkish economy demonstrated a to 1.48% in December) and the high base 2011 was an active year also for the rapid 9.2% growth in the post-crisis period effect in 2010. The reason for the increase commercial real estate sector. Investments and, as a result, the construction sector in interest rates was the policies applied by in shopping centers and office space exhibited a rapid 17.1% growth. the Central Bank as well as banks’ funding- gained momentum in parallel with Turkey’s related concerns. economic growth and the rise in consumer In 2011, the performance of the Turkish confidence and retail expenditure in economy exceeded expectations, with The number of building permits issued, Turkey, as well as the rise in demand positive results achieved as a country with which stood at 518,000 in 2009 and from foreigners’ and expectations in the minimum bubble risk in terms of property 916,000 in 2010, fell by 29% YoY to business world. prices and the structure of the financial 645,000 in 2011. system. Despite policies aimed at keeping Some legal measures that are expected economic growth under control, Turkey’s The Building Construction Cost Index to enter into effect in 2012 may inject growth rate was 8.5% in 2011. In 2011, the (where 2005 is the Base Year=100) significant momentum to the growth of the construction sector again demonstrated increased by 13.7% YoY in 2011. Materials, real estate development sector. a higher growth rate than the Turkish which are included in the construction cost economy. With 14.8% growth in the first quarter, the construction sector once again became one of Turkey’s leading Construction Sector Growth Rate GDP sectors. Having grown by 13.2% in the Construction

second quarter, the sector maintained its 18.5 17.1

double-digit growth rate at 10.6% in the 14.1 13.9 11.2 9.2 9.3 third quarter. The most important driving 9.4 8.4 7.8 8.5 6.8 6.9 6.2 5.7 5.3 4.9 force behind the strong growth of the 4.7 construction sector is the construction -3.4 -3.1 -0.7 -8.1 -4.8 -16.1 -5.7 -17.4 expenditures undertaken by the public sector. In 2011, the sector grew at an annual rate of 11.2%. The number of people employed in the construction sector reached a record high 1.9 million. 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Accordingly, the number of the people Source: TurkStat Torunlar REIC 2011 Annual Report P / 28

Outlook for the Construction and Real Estate Sectors in Turkey

Law of Reciprocity Land Development Law estate developers/investors to enter the The Turkish government is working on a Another draft law (known as 2B Law) Turkish market and on occupier demand - draft legislation which is expected to be concerns the utilization of vacant land that particularly in the office market - driven by ratified by Parliament in April 2012, which is unable to meet forestry area conditions the expected increase in number of foreign will amend the existing regulation requiring as land for commercial and residential companies in Turkey. the condition of reciprocity for acquisition development. One of the major obstacles of property by non-Turkish individuals. The to development activity, particularly in Disaster Preparation Bill amended law will allow any non-Turkish central locations of major cities, is the It is claimed that 40% of Turkey’s 19.2 individual to buy residential property in limited availability of land. The law will million homes need to be demolished Turkey, which will significantly broaden the significantly increase the area of land or restored because they do not comply investor base for residential sales. The new available for development (estimated at with earthquake resistant building regulation is expected to be particularly 492,000 ha). With the amendment to the standards and/or lack of building permits. important for potential investors from law, the government expects to eliminate The bill aims to achieve the objectives the Gulf region, Russia and former Turkic the conflicts between public institutions of preventing possible loss of life and Republics, which are believed to account like municipal institutions and land property due to natural disasters, for much of the potential investor base. owners/tenants, and generate TL 11-15 particularly earthquakes, as such ensuring According to the GYODER (Association of billion in revenue. sound and organized urbanization which Real Estate Investment Companies), total respects property rights, brings maximum investments by non-Turkish buyers of Commercial Code social benefit with lower costs and uses residential property reached USD 7.3 billion The new Commercial Code, which was resources in a planned, healthy and between 2005 and 2010. The new law that approved in January 2011 and will enter into efficient manner. Once the bill is ratified, will pave the way for the sale of property to effect in January 2013, will considerably it is planned to be implemented in areas foreigners is expected to attract the most reduce bureaucracy, introduce measures deemed to be of high disaster risk. It is investment from investors in Azerbaijan, to protect minorities in partnerships anticipated that this process will set the the United Arab Emirates, Kazakhstan, and simplify procedures in establishing stage for partnerships between relevant Kuwait, Qatar and Saudi Arabia, and set the companies, while imposing an obligation government bodies and the private sector, stage for an estimated USD 26.5 billion in on all companies to comply with with large scale urban transformation investment between 2012 and 2016. international accounting standards. The projects expected to come to the agenda, law, in that sense, will both have a positive paving the way for new investment areas impact on the potential of global real and the development of healthy cities.

Construction Permit and Building Occupancy Permit (unit) Construction Permit Building Occupancy Permit 449,120 216,258 175,666 175,053 175,728 165,743 160,135 162,040 148,951 148,346 144,948 135,571 131,015 128,172 130,593 125,975 121,403 119,822 120,846 113,994 113,802 108,967 101,900 94,648 92,304 91,639 94,788 89,948 87,620 87,955 91,463 86,564

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Source: TurkStat Torunlar REIC 2011 Annual Report P / 29

Developments in the Housing Segment

Despite measures to cool down the The rate of credit expansion has slowed economy and moves to monitor the down due to increasing interest rates, 10.25% expansion of housing loans, along with the banks’ diminishing appetite to supply rise in mortgage rates, demand for new credit and the weakening in consumer Turkey’s New House Price housing projects persists; housing sales confidence. Index (TKYFE) increased by continued and the supply of new branded 10.25% YoY by the end of 2011 homes accelerated. According to the title Prices of existing homes continued to rise. deed registry, sales of homes increased According to the New House Price Index (2010=100). from 357,000 in 2010 to 419,000 in 2011, 2011, a study jointly compiled by REIDIN. corresponding to a 17% YoY increase. com and GYODER, Turkey’s Composite Housing Sales Price Index increased by Although appetite for housing loans had 7.77% YoY in December 2011 (where 2007 slowed down somewhat by the second is the Base year and June=100). Turkey’s half of the year, a total of TL 69.5 billion in New House Price Index (TKYFE), a separate housing loans had been extended by the measure, calculated on the results of CBT’s end of 2011, corresponding to a 21.5% YoY analysis of the assessment reports of the increase. The average monthly mortgage homes in 26 cities, which were built within rate rose from 1.05% in 2010 to 1.15% in the last two years, exhibited an increase of 2011. The average term of the housing 10.25% YoY during 2011. loans was 67 months (5.6 years) in 2011. The volume of housing loans is expected to increase by 12% in 2012, with its ratio in GDP set to remain broadly the same.

Residential Sales (unit) Turkey İstanbul Ankara 194,743 118,867 116,229 111,913 113,088 112,168 97,517 108,861 109,333 107,308 91,071 90,270 92,516 85,857 101,754 83,697 56,909 29,411 28,346 25,254 34,042 24,360 22,767 26,091 22,896 21,690 24,249 23,757 18,494 21,485 22,003 22,434 23,783 21,386 18,994 20,922 15,814 17,857 22,343 16,720 16,320 18,768 18,756 18,026 16,348 15,705 13,867 15,977 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Source: TurkStat Torunlar REIC 2011 Annual Report P / 30

Developments in the Housing Segment

Housing demand is closely linked to household size and a 12% increase in the 644,000 GDP growth, the increase in population, average purchasing power. As previously contraction in household size, pent-up launched projects reach completion, there The rate of home ownership in demand and purchasing power. The rate will be supply of all types of new homes Turkey stands at 61%. Annual of home ownership in Turkey stands at in 2012, but at a slower pace. In 2012, demand for new housing is 61%. Annual housing demand is forecasted housing prices are expected to increase at at 644,000 units between 2012 and 2016 a rate close to the rate of inflation, as the projected at 644,000 units under the assumption of a 1% annual projected high housing demand is expected between 2012 and 2016. increase in population, an average GDP to be broadly matched by the supply of new growth rate of 4.5%, an urbanization rate homes to the market. of 1.7%, a 1.7% annual contraction in

Interest Rate on Mortgages Mortgage Loans and Interest Rates (TL thousand) Mortgage Loans 6,.00 25.00% 5.00 20.67% 18.12% 18.61% 20.00%

4.00 17.47% 11.05% 5,210 12.93% 18.17% 4,822 16.19% 11.49% 4,633 14.40% 15.00% 3.00 10.47% 12.48% 2.00 12.06% 3,761 9.86% 3,085 11.68% 10.00% 2,909 2,851 2,822 9.53% 1.00 2,354 5.00% 1,610 1,186 1,165 1,487 -0,507 -0,093 0.00 1,365 -1.00 0.00% Jul 10 Jul 11 Apr 11 Oct 10 Jan 11 Oct 11 Jan 12 Jun 11 Feb 11 Feb 12 Mar 11 Aug 10 Sep 10 Nov 10 Dec 10 Aug 11 Sep 11 Nov 11 Dec 11 May 11 Source: CBT

New House Price Index-Construction Cost Index 125.0 120.0 121.1 122.2 115.0 116.9 115.3 110.0 112.1 112.7 105.8 107.4 110.5 105.0 103.4 103.8 106.6 100.0 101.6 103.6 99.5 95.0 97.8 90.0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11

CBT Turkey House Price Index TurkStat Construction Cost Index Torunlar REIC 2011 Annual Report P / 31

Developments in the Retail Segment

The total turnover of the retail sector grew The number of malls increased from With the addition of 38 new by 17% in 2011. However, the decline in 264 at the end of 2010 to 302 by the shopping centers and a total consumer tendency indices on both a end of 2011. With the addition of 38 new 2 monthly and annual basis indicates that shopping centers and a total retail area of retail area of 1,201,500 m in domestic demand continues to fall, but at a 1,201,500 m2 in 2011, the total GLA of all 2011, the total GLA in all the moderate pace. the shopping centers throughout Turkey shopping centers throughout 2 reached 7,630,500 m . The total GLA of the Turkey reached 7,630,500 m2. In 2011, all sub-sectors increased their shopping centers in Turkey increased by turnover at a higher rate than the growth 950,000-1,000,000 m2 in the 2007-2008 rate that they demonstrated in 2010. period, and by 800,000-850,000 m2 in the 2009-2010 period. There are shopping The footfall index rose by 5% in 2011 centers in only 49 of Turkey’s 81 cities. when compared to the average footfall index in 2010. The number of visitors to In 2011, the increase of GLA in total, as well shopping centers increased as the weather as in all sub-sectors, exceeded the rates of cooled down in October, November and, in increase in 2010. The total number of stores particular, in December, while the increase in all shopping centers rose to 62,000. in visitor numbers was positively reflected to the turnover of the shopping centers.

Sales and Footfall Indices

143 20.00 136 132 129 15.00 119 115 112 112 110 10.00 108 108 106 106 104 103 102 101 102 100 100 99 97 97 97 95 95 5.00

Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 0.00 Source: CBT Interest Rate on Cash Loans Sales Turnover Index (General) Footfall Index (General) Torunlar REIC 2011 Annual Report P / 32

Developments in the Retail Segment

Mall GLA Development End-2009 End-2010 End-2011 Under Construction Total* # 81 93 104 29 133 İstanbul GLA (million m2) 2.29 2.66 3.08 1.12 4.20 # 155 171 198 37 235 Other Cities GLA (million m2) 3.41 3.87 4.55 0.98 5.53 # 236 264 302 66 368 Turkey GLA (million m2) 5.70 6.53 7.63 2.10 9.73 *End-2013 Source: Jones Lang LaSalle

According to the AYD (Council of Shopping Because of Turkey’s attractive economic Centers in Turkey), a total of 1.3 billion growth and rising consumer expenditure, people visited shopping centers in 2011, both international and domestic retailers and the shopping centers attained a have demonstrated vigorous demand in the total turnover of TL 39.2 billion (24% YoY Turkish market in 2011. Due to the impacts increase). In 2010, annual turnover had of the slowdown of the European economy increased by 32% YoY to TL 27.8 billion and the political uncertainty in the Middle (2009: TL 21 billion). East and Northern Africa, Turkey became one of the most attractive markets for the Efficiency per unit retail area increased in growth of retailers. line with the number of stores. Average Efficiency turnover rose by 14% from TL 412/m2 in A total of 66 shopping centers with a 2010 to TL 468/m2 in 2011. total GLA of 2,096,000 m2 are expected Efficiency per unit retail area to become operational by the end of increased in line with the The most positive development was 2013. With the addition of the shopping number of stores. Average observed in non-food retail; however, centers currently under construction, there is a possibility that efficiency may the total number of shopping centers in turnover rose by 14% from fall seasonally in the coming period due to Turkey is set to reach 368 with a total GLA 2 TL 412/m in 2010 to TL 468/ ongoing sectoral investments. of 9,726,500 m2. Turkey’s retail density m2 in 2011. stands at 103 m2 per 1,000 people. The The organized retail market, where retail density is expected to increase to employment has been increasing at an 124 m2 per 1,000 people in 2013. annual rate of 12%, has played a key role in bringing down unemployment in Turkey, particularly the rate of youth unemployment and unemployment among women, to its lowest level of the last decade. The seasonal fluctuation in the ready-wear retail market remained at a level which will not disturb the general trend. Torunlar REIC 2011 Annual Report P / 33

Developments in the Office Segment

Despite the deterioration in the global and İstanbul’s central regions still remain the Side outside the CBD, with an 18% market European economies, the activity in the key areas of interest for office demand. share. In line with the positive economic İstanbul office market continued. Since Izmir and Ankara, on the other hand, are outlook, the increase in rental transactions İstanbul was chosen as the operational witnessing higher levels of activity with volume is expected to continue with rents hub of multinational companies for their each passing day. Vacancy rates in İstanbul, set to increase to a certain extent, in parallel operations in the Middle East, Northern home to a vigorously developing project with such momentum in 2012. Africa and countries in the CIS, it is also portfolio, are low since a larger portion Turkey’s most developed and active office of the İstanbul’s current stock comprises Due to the effect of recently completed market. In line with the rapid economic old buildings and/or buildings that do not projects, the occupancy rate of A-class office growth seen in 2011, there has been an comply with current regulations. space in İstanbul rose to 9.1% by the end increase in demand for renting new offices, of 2011. Although the CBD has the lowest a decline of the vacancy rates of A-class Most of the A-class office space in İstanbul vacancy rate when compared to other sub- office space in particular, a limited increase is situated in the Central Business District markets; its vacancy rate rose from 2.8% in in rents and a tangible increase in demand (CBD) and on the European side and Asian early 2011 to 4% in Q4/2011. from foreign companies along with the sides outside the CBD. Although a certain recently developing office sub-regions. new supply is seen in İstanbul office market, According to Colliers, in Q4/2011, average there is still a supply shortage of A-class rents for A-class office space was USD 45.3 Because of the devaluation of the TL, some office space in the market. However, this per m2 per month in Taksim, USD 35.3 per purchase transactions were suspended or situation is expected to be compensated m2 per month in Etiler, USD 26.9 per m2 negotiations in rental transactions were by the strong and high-quality projects per month in Maslak, USD 32.7 per m2 per extended. Accordingly, office rents are not currently planned. month in Levent, USD 29.3 per m2 per month expected to increase in FX terms in the in Gayrettepe, USD 35 per m2 per month in coming period. The supply of office space In the last quarter of 2011, A-class office Şişli, USD 21.8 per m2 per month in Kavacık continues to expand rapidly. In the first stock in İstanbul stood at 2.88 million m2, and USD 18.4 per m2 per month in Ümraniye. three quarters of 2011, A-class office supply marking an increase of 13% (about in İstanbul expanded by 227,000 m2 and 320,000 m2) when compared to the same In 2011, the Royal Bank of Scotland building was estimated to have increased by an period of the previous year. in Etiler was sold with a 7.5% gross yield; additional 190,000 m2 in the last quarter. the Akbank Towers, with 29,000 m2 of office In addition to existing office regions, office The Central Business District (CBD) is home space in Maslak, were sold for USD 95 supply is increasing rapidly in Ataşehir, to the highest concentrations of offices million and the AG Plaza with 25,500 m2 of which is tipped to be a key financial center space, accounting for 40% of the city’s total space in Eyüp was sold for Euro 45 million. in Turkey in the future, and in Kartal and office space. This is followed by the areas Kağıthane, which are currently undergoing outside the CBD on the Asian side (31%) and A high level of supply is expected to enter an urban transformation. There is also high the European side (29%). the market in 2013, which is known to have demand for rentals. Foreign companies a total office area of about 682,000 m2. It continue to rent offices. However, both In 2011, as far as rental transactions are is currently under construction. With the domestic and foreign companies are concerned, areas outside the CBD on the delivery of new offices, the area of total increasingly seeking smaller offices. Asian Side accounted for the highest share, A-class office stock in İstanbul is expected at 50%, followed by the CBD itself, with a to reach around 3.6 million m2 by the end of 32% share, followed by the city’s European 2013.

A-class Office Stock End-2011 Sub Market Existing Projects GLA (m2) Pipeline Projects GLA (m2)* CBD 1,160,000 303,000 Europe Non CBD 770,000 195,000 Asia 950,000 184,000 * For completion by end-2013 Source: Jones Lang LaSalle Torunlar REIC 2011 Annual Report P / 34

Torunlar REIC’s Assets

As of 31st December, 2011, Torunlar REIC’s total assets reached TL 3.9 billion and its portfolio value reached TL 3.8 billion. Torunlar REIC 2011 Annual Report P / 35

(%)

Buildings38

Projects30

Participations13

Money and Capital Markets 17Instruments

Land2 Torunlar REIC 2011 Annual Report P / 36

Torunlar REIC’s Real Estate Portfolio Composition (%)

Hotel1

Our Operating Assets

İstanbul • Torium Shopping Mall • Nishİstanbul Ankara Marina1 • ANKAmall Bursa • Korupark Shopping Mall • Korupark Residences • Zafer Plaza Shopping Mall Antalya • Deepo Outlet Center Land2 Muğla • Netsel Marina

Our Projects

İstanbul • Mall of İstanbul Completed3 • Ali Sami Yen Project Units for Sales • Torun Tower Bursa • Korupark Terrace Samsun • Bulvar Samsun Shopping Mall 37Ongoing Projects

56Malls Torunlar REIC 2011 Annual Report P / 37

Portfolio Value (TL million)

2010 2011 Landbank 24.4 70.0 Zafer Plaza Shopping Mall 143.2 176.8 Korupark Shopping Mall 540.5 600.2 Torium Shopping Mall 549.9 567.3 Korupark I-II 50.1 35.6 Nishİstanbul 41.7 40.3 Torium Residences 7.1 8.0 MOI 637.3 810.2 Korupark III 50.4 74.7 Torun Tower 237.7 253.3 ANKAmall 139.5 181.0 Netsel Marina 29.0 37.7 Bulvar Samsun Shopping Mall 16.1 41.4 Deepo Outlet Center Antalya 208.8 232.4 Cash 438.7 655.6 Other 21.4 33.8 Total 3,135.7 3,818.3

The value of real properties and subsidiaries refer to the valuation reports dated 31.12.2011 as prepared by Standart Real Estate Valuation Applications JSC, and stand for the fair values. Torunlar REIC 2011 Annual Report P / 38

TORIUM SHOPPING MALL

Project Details Appraisal value (Dec 2011) TL 567.3 million (USD 298.6 million) Ownership Torunlar REIC (100%) Average lease term as Operational date October 30th, 2010 of Dec 2011 4 years

Investment cost TL 221 million 2 GLA / GSA 95,280 m GLA retail Occupancy (%) 99% as of Dec 2011 5,723 m2 GSA residential Number of stores 180 Leasehold/Freehold status Freehold Anchor tenants Migros, Elektroworld, C&A, H&M, M&S, Teknosa, Tekzen, YKM, Zara Rental income +common area income TL 48.1 million Footfall 10,179,530 Torunlar REIC 2011 Annual Report P / 39

As a shopping center and housing mixed- galleries, a well-illuminated front that takes use project, Torium is located in İstanbul’s maximum advantage of daylight, splendid most densely-populated residential area, ponds and rich landscaping. and is within ten minutes of nearly three and a half million people living in the Beylikdüzü, By continuously organizing events aimed at Esenyurt, Gürpınar, Bahçeşehir, Küçük ensuring its visitors experience its unique Çekmece, Florya, and Büyükçekmece features, Torium also represents a “first” as regions. Opened in October 2010 on the Turkey’s first environmentally friendly D100 (E5) Highway on the Haramidere shopping center. Junction, it enjoys easy accessibility thanks to the connecting roads around it and Evaluation of 2011 comprehensive public transport links. The In 2011, its first full operating year, Torium number of visitors to Torium will increase kept the daily number of visitors in the thanks to the Avcılar-Beylikdüzü metrobus 800-1,000 interval by continuously hosting line, which is currently under construction. and organizing campaigns and events. The number of visitors gradually increased Drawing attention as Torunlar REIC’s first beginning as from September 2011, and by shopping center investment in İstanbul, the end of the year the total number of Torium is the fourth largest shopping center visitors had reached 10.2 million. in İstanbul and the fifth largest in Turkey. With a total construction area of 256,000 m2, In 2011, Torium’s rental and common area Torium is pioneering a new concept in the incomes reached TL 48.1 million. Most (70%) retailing and shopping center sector, where of the rents collected from the stores in the one quarter of the leasable area is allocated shopping centers are denominated in USD to entertainment and the food court. terms. Snowpark, Turkey’s first and only snow facility, is already well known throughout In 2011, customer-oriented sales campaigns Turkey as a fun-packed sports complex (car-home-vacation), support campaigns for covering 4,500 m2. Torium is well on its way tenants (point earning campaign), special to becoming one of İstanbul’s most popular days and holiday events, special events centers with its indoor 3,500 m2 ‘Starpark’ specific to Torium (Snowfest, “Young bands amusement center designed to appeal to all are competing”), Cinema events (“not citrus ages, the Cinetech Cinemas with 9 screens but students” campaign and the Minitech and 1,766 seats, and its 12-lane bowling campaign) were organized in Torium. alley. Despite mounting competition in the region Aiming to appeal to the young and working with the opening of Akbatı shopping center population in its region, Torium has a in 2011, Torium’s biggest strengths are the comprehensive mix of shops. Wide facades Torun Shopping Center Inc.’s -shopping have been provided to shops in the center management company of Torunlar shopping centers for the first time with axis REIC- management skills, knowledge and intervals of 11 meters, while brands are expertise in relations with tenants. represented in large spaces. In 2012, a total of 13 million visitors are Another significant feature of the shopping expected, paving the way to a 20% YoY center is the open bazaar floor. This level increase in turnover. provides visitors with a comfortable environment with a café, bowling alley and Torunlar REIC also began sales of the Torium outdoor seating areas. It is a refreshing Residences, which are located in the same shopping center with wide atrium and complex with Torium. Torunlar REIC 2011 Annual Report P / 40

NISHİSTANBUL

Project Details Number of residences / Sellable area (m2) 585/53,204 Ownership Torunlar REIC (60%) Number of offices / Leasehold/Freehold Sellable area (m2) 63/16,925 status Freehold Number of retail units Start of construction H2 2008 / Leasable area (m2) 52/10,937 Operational date November 2010 Appraisal value (*)(**) TL 40.3 million (Dec 2011) (USD 21.2 million)

*Sections that have not yet been sold **share among REICs Torunlar REIC 2011 Annual Report P / 41

Nishİstanbul is a mixed-use project Thanks to its central location, the project consisting of housing, office and retail offers both living and business areas. space located adjacent to the E5 highway and 1.5 km from the Atatürk Airport at The office units, with areas of 270 m2 to Yenibosna, Bahçelievler on the European 1,080 m2, are highly attractive to companies side of İstanbul. The project is run by the dealing in international trade due to their Torunlar-Özyazıcı Project Partnership. proximity to the airport. Torunlar REIC commands a 60% share in the project.

585 homes were built and put up for sale at Nishİstanbul, which comprises three apartment blocks, one office block and stores. Construction work on the project was completed in October 2010. Torunlar REIC 2011 Annual Report P / 42

ANKAMALL

Project Details Migros, Koçtaş, Tepe Home, Electro Anchor tenants World, Boyner, Mudo City, Ownership Yeni Gimat in which Torunlar REIC holds (14.83%) Marks&Spencer, LCW Operational date 1999 Appraisal value TL 181 million (REIC share) (Dec 2011) (USD 95.3 million) Leasable area (m2) 88,421 (Torunlar REIC's share 13,112) NOI TL 62 million Occupancy (%) 100% (as of December 2010) Leasehold/Freehold Number of stores 315 status Freehold Rental income +common area income TL 90.6 million Torunlar REIC 2011 Annual Report P / 43

Located in Yenimahalle at the intersection Evaluation of 2011 between the İstanbul and Konya highways, ANKAmall is owned by the company, Yeni ANKAmall is directly accessed over a Gimat, which was originally established as a pedestrian walkway that connects the cooperative with more than 1,000 investors. Akköprü Metro Station to the shopping As of December 31st, 2011, Torunlar REIC was center. In terms of GLA, it is the largest the largest shareholder of this company with Shopping Center in Ankara and the fourth a 14.83% share. largest in Turkey. The ANKAmall Shopping Center boasts significant competitive In ANKAmall, rents are charged in USD strength through its tenant mix, central terms. Rental income from the mall rose by location, ease of transportation, and its 25.8% YoY to TL 90.6 million in 2011. free- of-charge car park with a capacity for 6,000 vehicles and 315 stores. The mall also On July 15th, ECE European Prime Shopping hosts the Crowne Plaza Hotel, with its 21 Centre Funds submitted an offer of USD 525 floors and 280 rooms. million to buy all the shares of the Crowne Plaza Hotel and ANKAmall, in which Torunlar REIC holds a 14.83% stake in.

Torunlar REIC 2011 Annual Report P / 44

KORUPARK SHOPPING MALL

Project Details Appraisal value TL 600.2 million Ownership Torunlar REIC (100%) (Dec 2011) (USD 315.9 million) Average lease term as Operational date H2 2007 of Dec 2011 1.8 year Leasable area (m2) 71,267 Average LTM NOI (per TL 44.10 Occupancy (%) 98% (as of Dec 2011) TL/m2/month) Number of stores 189 Leasehold/Freehold status Freehold (34% of GLA): Tesco Kipa, Koçtaş, Rental income Anchor tenants Beymen, C&A, Boyner and Electro TL 51.5 million World +common area income Footfall 10,322,773 Torunlar REIC 2011 Annual Report P / 45

Opened in May 2007 as Torunlar REIC’s Shopping Mall has proven that it is not only a second investment in Bursa, Korupark is shopping center, but a center for living. among the fifteen largest shopping centers in Thanks to its size, comprehensive store mix, Turkey. Located in the west of the city near refreshing architecture and an approach the new development axis, and with aimed at unconditional customer satisfaction, connections to highways. Korupark can easily Korupark is one of the most important centers be accessed by public transport, with bus, of attraction in the Southern Marmara region, minibus and light rail connections. It is particularly Bursa. situated on the Mudanya road, which connects the city to the seashore and the Continuing to add new rings to its strong İstanbul-South Marmara-Aegean highways, brand mix, Korupark was a finalist at the and the ferry dock. The development is in a “2010 ICSC European Shopping Center luxury area adjacent to the new residential Awards”, which is one of the most renowned districts. awards in the area of commercial real estate, as well as the recipient of the honorable Boasting the longest frontage to the main mention in the category of “Marketing boulevard of any shopping center in Turkey, Campaign of the Year” at “AMPD Awards Korupark is also a mixed project. Generally, 2010” and the winner of the “AMPD Awards the Korupark Residences has attracted 2011 - Jury Special Award”. With its quality families of A- or B- socioeconomic status; the and the store mix that it renewed as a result development, the first and second phases of of the sector-based evaluations, Korupark which have been completed, is considered to maintains its sector leadership in Bursa. A be one of the most prestigious residential number of reputable national and developments in Bursa. This is one of the international brands have sought to take their factors that increase the appeal of the place in Korupark. shopping center. In Korupark, most (87%) of rents are in Korupark stands out as Bursa’s most denominated in Euro terms. Rental and prestigious shopping center, with many common area income rose by 29.3% YoY to national and international brands opening TL 51.5 million in 2011. their first stores in Bursa here. With 51% of the brands being national, and 46% being The rate of covering common area expenses international chain brands, along with 3% rose from 87.83% in 2010 to 94.25% in 2011. being local brands, the mall includes a store mix that all of Turkey, and not just a region, Korupark’s net operating income increased by can take as a reference. 27.52%, closing 2011 with a level of income that exceeded its target. Korupark has three floors of stores and two car parks, one being an underground car park The turnover generated by Korupark (2,000-vehicle capacity) and one car park Shopping Mall in 2011 rose by 14.71% to being located above ground (420-vehicle TL 344.6 million. The total number of visitors capacity). in 2011 was 10,332,773, some 2.12% higher than the number of visitors in 2010. Korupark also includes a hypermarket (12,000 m2), a construction market (5,127 m2) With the opening of BursaRay, a light rail and an area of 5,317 m2 which includes a system, on December 15th, 2011, the total multiplex cinema (nine screens in total) and number of visitors is expected to increase by an entertainment area (an entertainment park 10% in 2012. The opening of the BursaRay and a play center for children). system has removed difficulties associated with transportation to Korupark. With Evaluation of 2011 BursaRay, even those visitors coming from With the new brands and new shopping the other side of Bursa can easily access habits that it has brought to the people of Korupark without a change of trains or Bursa, as well as with the organizations it busses. hosted, since its opening the Korupark Torunlar REIC 2011 Annual Report P / 46

KORUPARK RESIDENCES I-II

Project Details Operational date February 2008 Ownership Torunlar REIC (100%) TL 123.3 million Total investment Leasehold/Freehold (USD 85 million) Freehold status Units sold (%) 92% (as of Dec 2011) Start of construction May, 2006 Appraisal value TL 35.6 million Phase I: January 2008 (remaining units) (USD 18.7 million) (Dec 2011) Date of completion Phase II: December 2008 Torunlar REIC 2011 Annual Report P / 47

Korupark Residences, located on the The construction works of the Korupark 2nd Bursa-Mudanya road, form part of the mixed Phase Residences, which consist of 7 Blocks project along with the shopping center. Built (403 units – Gross area of 66,721 m2), began in two separate phases as the first enclosed in 2007 and was 100% completed. private housing estate in Bursa, Korupark Residences are in the new development area There were 60 units (Gross 14,664 m2) left of Bursa, with an increasing value every day. for sale as of 31st December, 2011.

The 1st Phase of the Korupark Residences consists of six Blocks (343 units – Gross area of 57,119 m2).

Torunlar REIC 2011 Annual Report P / 48

ZAFER PLAZA SHOPPING MALL

Project Details Average lease term as 1.8 years Ownership Torunlar REIC (72.26%) of Dec 2011 Average LTM NOI Operational date 1999 TL 50.90 (per TL/m2/month) Leasable area (m2) 23,449 (REIC share 16,944) Leasehold/Freehold Occupancy (%) Freehold 99% (as of Dec 2011) status Number of stores 127 Rental income TL 8.9 million 8% anchors and department stores +common area income* Anchor tenants (23% of GLA): Migros, M&S, YKM, Footfall 12,442,061 Teknosa and Boyner *Of the total income generated by Zafer Plaza in 2011, Torunlar REIC’s income Appraisal value TL 176.8 million should actually be TL 15.5 million as per its 72.26% share. However, of this (Dec 2011) (USD 93 million) amount, TL 8.9 million was registered as segment revenue in 2011, while the remaining amount was kept at Zafer Plaza Management Inc. in reserve. Torunlar REIC 2011 Annual Report P / 49

Zafer Plaza, the first shopping center in are starting to move into the area. The tram Bursa, which is Turkey’s fifth largest city, line from Cumhuriyet Boulevard to Zafer opened its doors in October 1999. It is Plaza has also helped make shopping center located in the city center, where vehicle and more accessible. pedestrian traffic is busiest. In order to preserve the architectural texture of the Evaluation of 2011 area, 6 floors were built under the street With a total of six shopping centers, Bursa level, with 3 floors for car park and 3 for ranks 4th following İstanbul, Ankara and shops. The glass pyramid located in the Izmir. There is a total gross leasable area of middle of the building, to bring daylight into 143 m2 per 1,000 inhabitants in Bursa, the entire shopping center, has become one exceeding Turkey’s average of 103 m2. of the symbols of the city. With the advantage of being located in the Torunlar REIC owns 72.26% of the shares in city center, and therefore easily accessible Zafer Plaza, while 18.93% of the shares are from every corner of the city, Zafer Plaza held by the Bursa Metropolitan Municipality attracts the highest number of visitors of and 8.81% by various shareholders. Zafer any shopping center in Bursa. Plaza Management Inc., established according to the principles of a pool Having increased its visitor numbers by protocol, manages its operations. 7.04% in 2011, Zafer Plaza remains Bursa’s most popular shopping center with a total of Zafer Plaza was named the “Best Shopping 12,442,061 visitors. Center” by the Trade Council of Shopping Centers and Retail Centers (AMPD) in 2000. Having been transformed into a complete living center, as well as one of Bursa’s Through renovations in 2009, the total area centers of art and culture, the Zafer Plaza of the shopping center was increased from has maintained its dynamism with various 54,000 m2 to 57,122 m2. The shopping center activities for 12 years, making a difference in is located on the intermediate station of the the sector by attaching importance to social metro, tram and other mass transport lines. responsibility projects.

Hosting brands that address all income The turnover of the Zafer Plaza Shopping groups, Zafer Plaza remains at the focus of and Living Center increased by 9.49%, trends at all times with its prestigious and almost equal to the annual growth in updated brand mix and with its two turnover in the sector as a whole, and department stores. reached TL 132 million. The center’s average monthly turnover per m2 rose by 7.57% YoY A brand mix which addresses young people, to TL 539 in 2011. renewed store decorations, a focus on technology, an entertainment park for Rental and common area income rose by children and young people and the Cinetech 23.2% YoY to TL 21.5 million in 2011 (TL 15.5 multiplex 6-screen cinema all serve to million for Torunlar REIC’s 72.26% share). enhance Zafer Plaza’s competitive strength. The contract renewal negotiations will begin in April 2012. Most (62%) of the rents are There is also a rapid change taking place collected in USD terms. around Zafer Plaza. Since the last quarter of 2010, work started on the construction of Zafer Plaza’s net operating income 2,750 homes being built as part of the urban increased by a significant 32% YoY in 2011. transformation project, just 200 m from the The average store occupancy rate stood at shopping center. Building restoration work 98.45% in 2011. has enhanced the appeal of the Kükürtlü and Çekirge districts for young families, who Torunlar REIC 2011 Annual Report P / 50

DEEPO OUTLET CENTER

Project Details Appraisal value TL 191.5 million Ownership Torunlar REIC (100%) (Dec 2011) (USD 100.8 million) Average lease term as Operational date October 24th, 2004 of Dec 2011 3 years Leasable area (m2) 18,069 Average LTM NOI TL 51.10 Occupancy (%) 100% (as of Dec 2011) (per TL/m2/month) Number of stores 82 Leasehold/Freehold status Freehold LCW, Ayakkabı Dünyası, Mudo Rental income Anchor tenants Outlet, Collezione, Sarar, Aydınlı TL 14.9 million Group +common area income Footfall 4,552,305 Torunlar REIC 2011 Annual Report P / 51

As the largest outlet in the Mediterranean A mass transportation line was established Region, the Deepo Outlet Center is located between Deepo and the hotel zone as a next to the airport in Antalya, one of result of our efforts. Another shuttle service Turkey’s key tourist destinations. The center with a regular schedule is offered was converted from wholesale warehouses throughout the summer between the hotel with a modern outlet concept where the zone and Deepo. climate conditions were taken into consideration to highlight the two main The enriched amusement park and 5D galleries and facilitate shopping. Opened in cinema in the atrium area have enhanced 2004, Deepo Antalya is on the Isparta-Konya Deepo’s popularity among children and highway intersection, and on the route to young people. Antalya Deepo Expansion Project touristic destinations such as Alanya, Manavgat and Side. The shopping center is Other social activities take place in the Ownership Torunlar REIC + surrounded by a concentration of commerce 400 m2 chess club, where national Hastalya and business centers. tournaments are held. Estimated construction Q3 / 2012 Its distance from other major cities, coupled Evaluation of 2011 beginning date with the concentration of touristic activity in In 2011, Deepo attracted a total of 4,552,305 Estimated the area means Antalya is an ideal location visitors, some 2.6% higher than the number construction Q1 / 2013 of the sale of end of season stock. The of visitors in 2010. The summer season was completion date increasing success of the project each year a very strong period for the tourism sector, Estimated has increased Deepo’s appeal for many and a total of 231,000 tourists visited Deepo, operation Q1 / 2013 national and international brands. some 64% higher than in the previous year. beginning date In August, Deepo attracted the highest Gross leasable Making best use of the advantage of its number of visitors in its history. area (m2) 26,651 prime location just adjacent to Antalya Estimated capex TL 37 million Airport, Deepo makes a difference through The center’s turnover per unit area was (USD 19.5 million) the departure boards and airline check-in TL 606 per m2, some 16% higher than in Partially owned, desks placed in the building, allowing 2010. An analysis of 2011 reveals that, March Renting/ Ownership status partially rented from visitors to spend their time at Deepo while (due to the effect of the increase of the Hastalya waiting for their flights. number of Iranian tourists because of the Nawruz Holiday) and June, July and August Current status Zoning process A sound knowledge of the region, the were the best months for Deepo in terms of establishment of proper tourism-related turnover. The sum of the turnover declared strategies and the creation of a store mix by stores increased by 16% YoY and the that best fits the shopping habits of people center’s total turnover reached TL 118.8 in the region are other factors that provide million. Deepo with a competitive advantage. Deepo attracts about 5,000,000 visitors every year; In Antalya Deepo, most (80%) of the rents 25% of these are domestic, and 35% are are collected in Euro terms. In 2011, the sum foreign tourists. Seasonal breakdowns are of rental and common area incomes reached homogeneous. TL 15 million.

Deepo, the only mall circulating Antalya City The zoning status of the region is expected Maps to tourists at the airport, managed to to be approved in 2012. The expansion appear on the must-see schedules of both project is planned to be launched by the end domestic and foreign tourists with this of 2012. initiative. Ticketed passengers may also use the shuttle service between the airport and Deepo until their flights. Torunlar REIC 2011 Annual Report P / 52

NETSEL MARINA

Project Details Number of stores 75 Ownership Torunlar REIC (44.6%) Anchor tenants Migros, Lacoste, Sisley, Tommy Operational date 1989 Hilfiger, Paul&Shark, Stefanel, Mudo Land 37,478 m2 Appraisal value TL 37.7 million (REIC share) (USD 19.8 million) Capacity 770 yachts Mall rental revenue TL 2 million Leasable area (m2) 7,692 (REIC’s share 3,431) Total rental revenue TL 15.9 million Mall occupancy (%) 82% (as of December 2011) Leasehold/Freehold status Freehold Torunlar REIC 2011 Annual Report P / 53

One of Turkey’s three largest marinas, the yachts and 1,200 guests. Held in the last Marmaris Netsel Marina boasts a modern week of October each year, the event brings infrastructure that is constantly under a great atmosphere and is a significant improvement. A key stop on “blue voyage” promotion opportunity for the marina. itineraries, Netsel Marina serves a location which is home to some of Turkey’s highest In the shopping center, special-theme days levels of yachting traffic. Operated as a joint (such as Valentine’s Day, Mother’s Day, etc.) venture between Torunlar REIC and Koç are routinely celebrated; moreover, a Group, the marina is backed by a brand that number of tournaments are held, which has been established for 22 years. encourage the people of Marmaris to visit the shopping center. The New Year’s Eve Netsel Marina is one of the few marinas Party, organized every year, is the most where international yachtsmen and women widely attended event. An average of 1,000 can conduct their passport and customs people attend the New Year’s Eve Party procedures. More than 70 cruisers and every year. 100,000 passengers arrive at the Marmaris Cruise Port each year, which is located With a GLA of 7,692 m2, the shopping center adjacent to the Netsel Marina. Passengers receives an average of 2,500-3,000 visitors who pass through the Netsel Marina on their every day. The turnover of the shopping way to Marmaris may use the services and center rose by 24.5% in 2011 to TL 2.4 resting facilities offered by the marina. One million, with its occupancy rate increasing of the largest marinas in Turkey, Netsel’s from 75% in 2010 to 82% in 2011. The total 6,400 m2 retail area offers the following: rental income collected from the shopping center rose by 24.8% to TL 2.1 million in • Migros 2011. • 9 restaurants and bars which are distinctive and well known venues among With restoration investments, Netsel Marina yachting aficionados in the Mediterranean aims to strengthen its competitive edge. In region this context, the marina’s floating pontoons • 40 stores including national and have been renovated in a 4-year program. At international brands the end of this 4-year period (covering • An amphitheater 2009-2012), all of the marina’s floating • A launderette pontoons will have been renewed. The sum • A car park of investments made in 2011 amounted to • ATM units TL 645,750, with the renovation of the • Offices belonging to yacht chartering floating pontoons (TL 395,385) accounting companies and their agencies for the largest investment item.

The Marmaris Netsel Marina has a capacity Repair work was undertaken on the social for a total of 770 boats, 720 located in the facilities. The work in 2012, in particular, is sea and 50 on land. expected to provide a significant contribution to the restoration of the Evaluation of 2011 marina’s appearance. The swimming pool At the marina, various activities are was renewed and has proven a hit with its organized to stimulate visitor interest. The guests. biggest of these is the Marmaris Contest Week, with the participation of about 150 Torunlar REIC 2011 Annual Report P / 54

MALL OF İSTANBUL

Project Details 153,963 m2 GLA mall, Number of residences 2 Ownership Torunlar REIC (100%) / GSA-GLA 122,000 m GSA residence, 32,000 m2 GSA office Start of construction March 2011 Appraisal value TL 810.2 million Estimated date of (USD 426.4 million) (Dec 2011) completion H2 2013 Leasehold/Freehold Estimated operational status Freehold date Q4 2013 Current status Under construction Estimated investment TL 695 million (USD 370 million) Torunlar REIC 2011 Annual Report P / 55

Expected to be Turkey’s largest mixed-use The Mall of İstanbul project is one of the project comprising a shopping center, most important investments in Torunlar housing and offices, the Mall of İstanbul REIC’s portfolio. The project is currently also attracts attention as an urban under construction, while the presales of transformation project. offices and homes in the project continue at full pace. The Mall of İstanbul project is The Mall of İstanbul Project is being built monitored in three categories: as a next to the Mahmutbey Toll Booths located shopping center, as homes and as offices. on the TEM Motorway. Five kilometers (3 100% of the excavation work and 50% of miles) from Atatürk International Airport, the rough construction work has been Mall of İstanbul is close to a metro line, completed. which is still in the development stage (the project design of which is completed). The project’s presales began on April 23rd, 2011 and have attracted high demand. As of The Mall of İstanbul was designed as 31st December, 2011, some 541 (55,421 m2) İstanbul’s new lifestyle center. The total of the 1,114 homes and 40 (7,239 m2) of the construction covers an area of 656,000 m2. 116 offices had been sold during the The shopping center is planned to have a presales process. GLA of 153,963 m2, 11,558 m2 of which will be allocated for an entertainment area for For the project financing, Torunlar REIC children, as well as a cinema complex and a signed a USD 250 million loan agreement conference hall/theater. We aim for the with İşbank on May 31st, 2011. The loan will project to include 122,000 m2 of residential have a maturity of 10 years with a three area, 32,000 m2 in office space and a year grace period. five-star, 300-room hotel in the other parcel.

The construction permit for the project was issued on 18th March, 2011; construction work commenced in late March. An investment budget of USD 370 million was allocated to the project, which is scheduled to be completed in the second half of 2013. Torunlar REIC 2011 Annual Report P / 56

MECİDİYEKÖY ALİ SAMİ YEN PROJECT

Project Details Land acquired Revenue share (45%) 2 Ownership Torunlar REIC (65%), Aşçıoğlu Land area (m ) 34,640 (30%), Kapıcıoğlu (5%) 57,500 m2 (37,375 m2)* Residence, Leasehold/Freehold 2 2 2 Revenue share Sellable area (m ) 65,200 m (42,380 m )* Office, status 6,000 m2 (3,900 m2)* Retail Estimated start of Number of residences 409 construction Q2 2012 TL 300 million (USD 195 million / Estimated date of Appraisal value TL 195 million (USD 125 million)* completion H2 2014 (Dec 2010) Estimated operational Current status date H2 2014 Under project development TL 355 million * Torunlar REIC’s share Estimated investment (USD 189.1 million)/TL 231 million (USD 123 million)* Torunlar REIC 2011 Annual Report P / 57

The mixed-use project is to be developed Mecidiyeköy will gain a modern city square on the Ali Sami Yen Stadium in with this project to be built on the former Mecidiyeköy, İstanbul as a joint venture of Ali Sami Yen Stadium plot. Areas below the Torunlar-Aşçıoğlu-Kapıcıoğlu partnership, ground floor level are planned as office where Torunlar REIC holds 65% of the floors with gardens and terraces. The shares. centerpiece of the project is designed to be a city square with restaurants and cafés on The project, spread over a construction a 10,000 m2 area. On the other side, the area of over 200,000 m2, consists of 3 car outdoor shopping street situated at the parks and three 40-storey tower blocks. west of the plot is planned to enhance the Two of these will be residential blocks, integration of the project with the city. while the third block will consist of A-class office space with flat offices. The tower Depending on the permit process, we plan blocks were designed in different positions to begin the construction work in the on the lot, inspired by the “tropism” second quarter of 2012, while aiming to concept, referring to the plants that orient commence presales in the same year. themselves towards the sun. With this design, all facades of the three blocks will enjoy different panoramic views of the city, from the Bosphorus to the Sea of Marmara. Meeting all the requirements of modern life, all of the apartments will enjoy magnificent views of İstanbul, and be of varying sizes ranging from 1 bedroom apartments to larger 4 bedroom apartments. Torunlar REIC 2011 Annual Report P / 58

TORUN TOWER

Project Details Estimated investment TL 157.9 million Ownership Torunlar REIC (100%) (USD 84 million) Estimated start of Appraisal value TL 253.3 million construction November 2011 (Dec 2011) (USD 133.3 million) Leasehold/Freehold Estimated date of Freehold completion Q4 2013 status Estimated operational Current status Under construction date Q4 2013 Torunlar REIC 2011 Annual Report P / 59

The Torun Tower will be located next to the A-class office space will be located on the main Büyükdere Boulevard in Şişli, in the ground, whereas offices enhanced by heart of İstanbul. It is easily accessible garden space, along with retail areas and from the metro station. meeting areas, will be located underground. With its modern architecture Our Company aims to ensure that the Torun and construction technology, the building Tower is an A-class office project. The is planned to be a symbol of İstanbul. Torun Tower, which is aimed to be built on a construction area of 92,899 m2, is Construction work on the Torun Tower planned to consist of a 35-storey tower. project in Gayrettepe began in 2011. The construction land belongs to Torunlar Following the receipt of the building permit REIC. The tower is planned to include a for the Torun Tower project, agreements total of 44,760 m2 of A-class office space, were signed for revetment, excavation and with underground office space of 8,000 m2 rough construction work; 75% of the and retail units with an area of 2,415 m2. excavation work has been completed. Torunlar REIC 2011 Annual Report P / 60

KORUPARK TERRACE

Project Details Appraisal value TL 74.7 million Ownership Torunlar REIC (100%) (Dec 2011) (USD 39.3 million) Leasehold / Freehold Estimated start of Freehold construction April 2011 status Number of residences Estimated operational 680/102,260 m2 Residences date Q4 2012 /GSA Current status Under construction Estimated investment TL 90 million (USD 47.8 million) Torunlar REIC 2011 Annual Report P / 61

The Korupark Terrace project is designed Construction work on the project, which as a luxurious residential area on the land will have a residential area of 102,260 m2, adjacent to the Korupark Shopping Mall began on April 22nd, 2011. Phase III was and Korupark Residences. planned in two separate phases. Rough construction work for the first phase was The Korupark Terrace Residences, which completed, while more detailed work is still consist of 7 blocks and 680 homes, offer a under way. The rough construction of the range of apartments ranging from 1 second phase is currently under way. The bedroom studios to 4 bedroom apartments, project is expected to be completed on with apartments facing interior landscaping October 31st, 2012 and deliveries will be as well as high and low block options. concluded by the end of 2012.

Launched in 2011, presales of Phase III of the Korupark Residences are based in TL terms. As of December 31st, 2011, a total of 218 apartments (with a total area of 27,558 m2) had been sold during the presales process. Torunlar REIC 2011 Annual Report P / 62

BULVAR SAMSUN SHOPPING MALL

Project Details Construction permit: Sept. 2010 Ownership Torunlar REIC (40%) Completion date Start of construction: Nov. 2010 End of construction: June 2012 Leasehold/Freehold Freehold status Capex TL 29 million (USD 15.4 million) TL 11.6 million (USD 6.1 million)* Current status Under construction Appraisal value TL 41.4 million (USD 21.8 million) Land: 17,400 m2 Total construction area: 37,500 m2 *Torunlar REIC’s share Area breakdown Gross Leasable Area Mall: 14,950 m2 Office: 950 m2 Torunlar REIC 2011 Annual Report P / 63

The Bulvar Samsun Shopping Mall will be The shopping center is located south of developed on the land of a former cigarette downtown, surrounded by residential and factory in Samsun. Through its stake in the commercial buildings. Representing a TTA Real Estate Investment and conversion and restoration of the old Management Inc., Torunlar REIC owns 40% warehouses of the old cigarette factory, the of the shares in the project. The project’s project is located between the two main other shareholder is Turkmall Real Estate. squares, currently home to many modern stores. The plot is easily accessible from The land is being developed under leasing highways and connecting roads. rights provided by the municipality for a term of 30 years. With a GLA of 14,943 m2 Launched in 2011, the project is targeted on a plot of 17,401 m2, the Bulvar Samsun for completion in June 2012. Shopping Mall will be the first shopping center in the Samsun city center. Torunlar REIC 2011 Annual Report P / 64

Together with the Community

Torunlar REIC is present at every stage of Age of the Dinosaur Exhibition and Torium’s own technical staff. The life with its approach to communication Breaking new ground and setting itself exhibition area was decorated with large that reflects its social responsibility and apart with its innovative approach, Torium natural and artificial plants and equipped its tendency to share with the community… set up the “Age of the Dinosaur Exhibition” with special lighting and sound effects in In 2011, Torunlar REIC stepped up its - the world’s most famous moving an effort to reflect the natural habitat of investments in communication and its dinosaurs’ exhibition - between March 10th dinosaurs in the most realistic atmosphere. brand and pursued a comprehensive and June 12th, 2011. communication strategy based on the In the exhibition, that was aimed diversification of communication channels. The “Age of the Dinosaur Exhibition” is particularly at new generation visitors for Supported by various activities and efforts, a joint activity carried out by Britain’s the purpose of “entertaining science and these comprehensive communication Natural History Museum and the Japanese entertaining education”, we fulfilled our efforts served to enhance the Company’s company, “Kokoro”. The Natural History social responsibilities by offering free entry recognition and brand value. Museum, in the UK, is one of the world’s to the exhibition, including transportation leading centers of science and research, and meals, to certain groups including the Creating warm and modern “living spaces” where more than 300 scientists work, disabled, those receiving education with with its housing, office and shopping and which has been producing and social aid and retired teachers. center projects, Torunlar REIC undertakes sharing information on natural life for activities that aim to stress that shopping more than 350 years, and is also world A strong media plan was prepared for the centers make significant contribution, not famous attraction for visitors to the project; the campaign was strongly and only to entertainment and shopping, but UK. The Japanese company, “Kokoro”, widely announced through the effective also to other areas, such as education, is the world’s most successful robot and intensive use of all available channels. culture, the arts and sports, and to raise manufacturer. With the help of visual-written media and the reputation of shopping centers among Internet news, the project reached a PR visitors. Torunlar REIC conducts social The exhibition, which particularly drew the value of USD 3,428,639. responsibility projects at its shopping attention of children and young people centers that form a part of daily life. With aged between 8 and 18, allowed young its investments in communication and its people to make a fascinating journey in the brand, Torunlar REIC makes a difference to history of nature by means of animatronic the sector and strengthens its reputation robots, and to recognize the high level that and brand image in the eyes of the technology has reached in animation. The community. “Age of the Dinosaur Exhibition” attracted a total of 112,465 visitors.

Brought to Turkey in cooperation with ICT, preparations for the exhibition were completed within 20 days. The exhibition was held on an area of 750 m2, after comprehensive work was conducted by the Natural History Museum’s technical staff, who are expert in organizing exhibitions, Torunlar REIC 2011 Annual Report P / 65

Bursa Classic Car Tour started at Korupark 2nd Friendship Festival between Russian, “Young bands are competing” As a result of the last year’s Classic Car Turkish and Ukrainian Cultures held at Held in cooperation with Doğulu Müzik Tour, which was jointly organized by the Deepo between December 10th-18th and under the sponsorship of Torium, the Osmangazi Rotary Club and the İstanbul The Deepo Outlet Shopping Center hosted event, “Young bands are competing”, was Classic Car Club, a cytocentrifuge device an important festival on December 10th- held on the stand, which was set up in was donated to the Department of 18th with the contributions of the Russian Torium’s open bazaar floor, for a period of Children’s Health and Pediatrics at Uludağ Association of Friendship and Culture and 6 weeks from June 24th to July 30th, 2011. University. The second stage of the project, Ukrainian Family Association. The first of In the contest, which was supported by which was implemented with the target the Friendship Festival was held in 2010 social media and in which a total of 200 of saving children suffering from cancer and the second in 2011. The festival, which applications were submitted by young through early diagnosis, started at the aims to bind Russian, Turkish and Ukrainian people who create music in Pop, Rock, Jazz, Korupark Shopping Mall again this year. people together in terms of national, social Blues and Funk, 40 groups that passed the and cultural aspects and strengthen their pre-selection keenly competed with each Organized jointly by the Osmangazi Rotary relations, was turned to a carnival with other in a spirit of excitement in a highly Club and the Classic Car Club, based in a wide range of activities and surprises, entertaining Final. İstanbul and Bursa’s Korupark Shopping and with the participation of domestic and Mall, the “2nd Bursa Classic Car Tour” was foreign guests. Attracting about 10,000 A gift check worth TL 2,000 was handed to another meaningful event. At the end of visitors, the festival won wide acclaim for each member of the winning group, with a the “Bursa Classical Automobile Tour” promoting and binding cultures by bringing check of TL 1,000 handed to each member project, which was launched to save together the citizens of the three countries of the second group and a check worth children suffering from cancer through who live in Antalya. TL 500 to each member of the third group. early diagnosis and which was held for the Moreover, Doğulu Müzik offered all groups 2nd time this year, a microtome device was ranked in the top five the chance to make donated to the Department of Children’s a single. Health and Pediatrics at Uludağ University, with the support of sponsors. Torunlar REIC 2011 Annual Report P / 66

Together with the Community

Torium ushers in the İstanbul Shopping Santa Claus hands New Year gifts to the Torunlar REIC hosts social Fest children responsibility projects in its Held in İstanbul between March 18th and At the end of the year, the gifts and New April 26th, 2011, the “İstanbul Shopping Year wishes, were written or depicted shopping centers that are a Fest” shopping festival opened its doors at by children in need in closed envelopes, part of daily life. Torium. During İstanbul Shopping Fest, that hanging them on Christmas trees in the lasted for 40 days, stores in Torium offered Zafer Plaza and Korupark, and then, their visitors their new season products the visitors or employees of Zafer Plaza with discounts of up to 30% and various bought and handed them to the children, surprises. Those visitors who experienced contributing to their happy New Year the excitement of the festival when celebration. shopping at Torium also had the chance to win various presents and discount checks. After having lunch at Burger King and McDonald’s, children received their gifts with joy and pleasure. Within the framework of the project, which was conducted for a second time in cooperation with Hürriyet Bursa, Radyo Aktif, Korupark and Zafer Plaza, the wishes of children with special needs - ranging from dolls to clothes, book sets to ornamental evening gowns, radio controlled cars to mp3 players and shoes to train sets came true. Torunlar REIC 2011 Annual Report P / 67

Our Awards

Torium became Turkey’s first shopping Identifying high performance buildings, Torium: In the final of the “Shopping center to receive LEED certification. which are healthier, more environmentally Center Oscars” Torium’s environmentally friendly friendly, more economical and more Torium is qualified for the final at the “ICSC activities, as well as practices encouraging profitable thanks to their lower operating European Shopping Center Awards”, one energy saving were approved by the US costs when compared to classical of the most prestigious awards in the area Green Building Council. buildings, the LEED green building rating of commercial real estate. Winners of these system is a voluntary standard. Buildings awards, also known as “Mall Oscars”, Torium, Torunlar REIC’s first shopping are evaluated and rated on the basis of 6 will be announced at the ICSC European center investment in İstanbul became the primary criteria, such as sustainable areas, Conference 2012, which will be held in first and only shopping center in Turkey to water efficiency, energy and atmosphere, Berlin in April. gain the, “LEED” (Leadership in Energy and materials and resources, indoor quality and Environmental Design) certification, which innovation in design. By receiving a high In 2011, Torium was selected as one of is deemed to be one of the world’s most rating in the LEED certification process, in the finalists in the “Large” category in important green building certifications. which buildings are evaluated based on 4 the “European Shopping Center Awards”, With its environmentally friendly practices, different levels, Torium became one of the which are also known as the “Shopping Torium succeeded in being one of the largest buildings in Europe to warrant the Center Oscars” and which have been largest buildings in Europe to hold the golden level certification. organized by the International Council of Golden LEED certification. Shopping Centers since 1977. In any part of the world, ensuring that a building as large as Torium receives the LEED certification require unstinting levels of devotion and intensive efforts. Torium, which is built on an area of 256,000 m2, is a model project for both the world and Turkey.

Torunlar REIC 2011 Annual Report P / 68

Our Awards

Practices that make Torium a green building Torium demonstrates a necessary sensitivity for a cleaner environment by lowering its CO2 emission on the back of its convenient project location, ease of accessibility through public transportation, a free-of-charge shuttle service and practices that encourage the use of environmentally friendly low-emission methods.

While 50% of the car parking is underground to alleviate the burden of cooling the building and to lower the environmental impact by reducing the effect of the heat island, green roofing manufactured from high sun board material are used. A 45% saving is also achieved in water consumption owing to materials used in water Torium is qualified for the efficiency in building and recycling units. final in the “ICSC European Shopping Center Awards”, Waste water in the cooling towers is used for all toilets and urinals. Moreover, sensor- installed batteries and drip irrigation devices with moisture sensors are used in one of the most prestigious landscaping, contributing to water saving. awards in the area of commercial real estate. In Torium, where every effort is made to save energy, the rate of energy saving is 33%. A combination of natural air-conditioning, lighting and cooling practices, as well as heat recycling systems, a 100% efficiency condensed boiler, pumps and fans with frequency converter, Lowe windows and roof-type air conditioning units help lower energy consumption at Torium.

Furthermore, the energy used to cool Snowpark - the largest enclosed snow park in Turkey - allows for significant energy savings, being used to heat the building in winter months.

Recycled local materials, accounting for 37% of construction costs, were used to reduce the consumption of natural resources at Torium, where the cooling systems do not use CFC’s which would damage the ozone layer.

Metal, plastic, paper, glass and cardboard wastes are collected in separate containers which are easily accessible in the building at Torium in a controlled manner and shipped to recycling facilities. 30% more fresh air is injected into the building, in accordance with the international ASHRAE (American Society of Heating, Refrigerating and Air-Conditioning Engineers) standards, to ensure healthy environments for the visitors. Indoor air quality is monitored by CO2 sensors in high density areas.

Within the framework of work to raise environmental awareness starting with construction, a series of measures were put in practice to ensure the health and comfort of workers at the construction site as well as visitors to the building. In Torium, where low emission paint, adhesive, coating and filling materials are used, highly efficient filters are also installed in the air conditioning plants. Torunlar REIC 2011 Annual Report P / 69

Three international grand awards to Mall With its project entitled “Unobstructed of İstanbul Area”, the Korupark Shopping Mall was Designed by Torunlar REIC as one of handed the jury special award at 14th Turkey’s largest mixed use projects, the AMPD Awards. “Mall of İstanbul” was deemed worthy In the AMPD 2011-2012 Awards, organized of the “Highly Commended Project of the by the Trade Council of Shopping Centers Future” award at the Global RLI Awards & Retailers (AMPD) to determine the best 2011, which was held by Retail&Leisure shopping centers and retailers of the year International, one of the world’s leading within the framework of the “14th AMPD magazines in the retail and entertainment Retail Summit”, the Korupark Shopping sector. Mall in Bursa was deemed worthy of the 3 awards jury special award with its “Unobstructed The Global RLI Awards organization awards Area” project, with which Korupark Designed as a unique project projects with innovative thoughts and received an ‘unobstructed area’ flag in the at global standards with the approaches throughout the world every category, “Social Responsibility Project of quality of life it promises, year. Designed as a unique project meeting the Year”. the “Mall of İstanbul” was global standards with the quality of life it promises, “Mall of İstanbul” is a platform For the first time in Turkey, public deemed worthy of three which fits the living conditions of the future buildings and public places began to international grand awards. by offering four different concepts together be audited by the Bursa City Council, and in harmony with each other: residence, while the “Unobstructed Area” concept shopping center, hotel and office. began to be used along with this project in order to encourage institutions. The Mall of İstanbul was also handed Within the framework of the project, the the grand awards in the Best Mixed Korupark Shopping Mall was one of the Use Development Project and the Best audited buildings and became the first Retail Development Project categories at and only shopping center to receive the “European Property Awards 2011”, one “Unobstructed Area” flag as its current of the world’s most reputable real estate physical conditions are suitable for the contests. handicapped. Torunlar REIC 2011 Annual Report P / 70

Future Expectations…

In line with its growth plans, Torunlar While construction work for the Torun GLA breakdown by city 2011 REIC’s expectations and targets for its Tower and Mall of İstanbul projects is İstanbul 44% projects in 2012 are summarized below: under way, the Company plans to start construction and presales of the Ali Sami Bursa 42% In 2012, the Company aims to generate Yen project in Mecidiyeköy in Q2/2012. TL 278.9 million in final sales revenues. The Company plans to complete During the 2012-2014 period, the Company construction of Phase III of Korupark Antalya 7% plans to invest a total of TL 1.1 billion, Terrace Residences in Q4/2012 and Ankara 6% excluding the purchase of Paşabahçe’s generate TL 104 million in final sales former Tekel land. revenues in 2012. Muğla 1%

Thanks to our strong financial position, we The Company plans to open the Bulvar offer various payment options depending Samsun Shopping Mall in June 2012. on the cash advances in the Mall of İstanbul and Korupark Terrace Residences A 10% annual increase is expected in rental projects. income. GLA breakdown by city 2014 The fixed exchange rate (USD=1.70 TL, Thanks to its sound cash position, EUR=2.35 TL) applied to FX based rents the Company continues to consider İstanbul 65% collected from the stores in Torium and opportunities for the purchase (Maltepe) Zafer Plaza will be gradually abolished. and auction (Paşabahçe’s former Tekel land) in acquiring new land. Bursa 25%

GLA+GSA (m2) 2011 2012 2013 2014 Antalya 5% Retail 221,176 227,156 407,770 407,770 Residence 26,331 128,591 260,532 297,907 Ankara 2% Office 2,150 2,530 72,204 114,584 Samsun 2% Hotel 2,907 2,907 2,907 2,907 Muğla 1% Marina 3,431 3,431 3,431 3,431 Other 4,140 4,140 6,555 12,555 Total 260,135 368,755 753,399 839,154 Land 78,654 78,654 78,654 78,654 Torunlar REIC 2011 Annual Report P / 71

Corporate Governance Compliance Report Torunlar REIT 2011 Annual Report P / 72

Corporate Governance Compliance Report

1- Corporate Governance Compliance Declaration: The Torunlar Real Estate Investment Company adopts “Corporate Governance Principles” set out by the Capital Markets Board (CMB) on July 4th, 2003 with decision no. 35/385, declared to public in July 2003, and revised in February 2005. The Company also adheres to the “Communiqué (Serial: IV No. 56) on the Determination and Implementation on Corporate Governance Principles”, which was published in the Official Gazette dated: 30.12.2011 and no. 28158. Torunlar is aware of the benefits the implementation of these principles will bring to the Company, its stakeholders and ultimately to the country. Work regarding the adaptation to the “Corporate Governance Principles” published by the Capital Markets Board continues. We understand that the means of reaching our company’s vision, mission and our strategic objectives necessitates the implementation of the Corporate Governance Principles. Principles of fairness, transparency, responsibility and accountability, which are the main principles of corporate governance, have been adopted by our company. A Corporate Governance Committee was formed within our company in the framework of compliance with Capital Markets legislation and Corporate Governance Principles. In our Board of Directors meeting held on 24.05.2010, Ali Alp, an independent member of the board of directors, along with Şerife Cabbar and Lütfü Vardı, were elected to membership of the Corporate Governance Committee and Mehmet Mumcuoğlu, an independent member of the board of directors, along with Ali Coşkun and Mahmut Karabıyık were elected as members of the Audit Committee. The Corporate Governance Compliance Report for the period 01.01.2011 – 31.12.2011 of our company, which has adopted the principles reliability, transparency and of promoting Turkey and the Turkish Real Estate Investment Company Sector on an international platform, is presented below. The report, which was prepared according to the Corporate Governance principles adopted by the Capital Markets Board (CMB), is available in our annual report in addition to the Investor Relations Section of our company’s web page.

Aziz TORUN Chairman of the Board of Directors and CEO Torunlar REIT 2011 Annual Report P / 73

Corporate Governance Compliance Report

SECTION 1 SHAREHOLDERS 2. Investor Relations Department In order to manage the processes of providing proper and timely information to domestic and foreign investors and follow-up of public offering transactions, the Investors Relations Department reporting to the CFO has been set up. It is among the duties of this department to prepare documents for shareholders to utilize during the General Assembly meetings and to ensure easy access of shareholders to these documents. The department also answers incoming inquiries and information requests concerning the Company. It informs Torunlar REIC shareholders and broker analysts preparing reports of the Company through all possible means of communications (face-to-face discussions, participation in conferences, meetings, web page, telephone calls, e-mails, investor bulletins, investor presentations, etc.) about the Company. Questions forwarded to the Investor Relations Department are answered in accordance with our Company’s Disclosure Policy. On January 25th, 2011, Dr. Haluk Yükler was appointed as the Director of the Investor Relations Department. All shareholders seeking information about our company may send an e-mail to [email protected] to relay their requests for information. All other communications channels are also available for shareholders. Those who wish to be regularly informed of Torunlar REIC and its projects should register their e-mail addresses in our system after clicking on the “Investor Feedback” link on our company’s website at ‘‘www.torunlargyo.com.tr’’. Assistant General Manager in Charge of Finance: İsmail Kazanç Address: Rüzgarlıbahçe Mah. Selvi Çıkmazı No.4 34805 Beykoz-Istanbul Turkey Phone: +90 216 425 20 07 Fax: +90 216 425 03 12 E-mail: [email protected] Investor Relations Director: Dr. Haluk Yükler Address: Rüzgarlıbahçe Mah. Selvi Çıkmazı No 4 34805 Beykoz-Istanbul Turkey Phone: +90 216 425 20 07 Fax: +90 216 425 20 07 E-mail: [email protected] 3. Shareholders’ Right to Information Disclosure The disclosure policy of Torunlar REIC requires that all shareholders and investors be treated equally and that information that has the same content be shared correctly and simultaneously. Information requests from shareholders concerning transactions that are not yet publicly available are assessed according to this policy and any private disclosure specific to a person is never permitted. Verbal and written requests for information from shareholders are answered according to the Capital Markets Legislation and Istanbul Stock Exchange Legislation. Shareholders’ right to obtain information is treated with utmost care. Information is announced to the public through the Public Disclosure Platform and the press. To ensure that shareholders access public information more easily and in accordance with Corporate Governance Principles, Section II, Article 1.11.5, all the public disclosure is released on the Company’s website (www.torunlargyo.com.tr) in Turkish and English. Local and foreign investors are generally informed at the time of general meetings, capital increases and the public announcement of financial statements or afterwards through e-mail or face-to-face meetings. Requests by telephone are answered immediately and those by e-mail in the shortest possible time. Torunlar REIT 2011 Annual Report P / 74

Corporate Governance Compliance Report

There is no unanswered written inquiry from shareholders made to our company within the period. In addition to phone calls, questions asked by 80 domestic investors were answered through e-mail, while shareholders generally requested information on such subjects as the share price performance, capital increase through bonus issues, the dates of general board meetings and their agendas, dividends and stock repurchases. Requests, complaints and suggestions forwarded by shareholders were submitted to the senior management. The Company conducted face-to-face negotiations with a total of 130 foreign investors, who represent foreign funds. They requested information on subjects such as the shopping centers owned by the company, tenants and store numbers, gross leasable area, progress of projects developed within the year and year-end sales targets. A total of two analyst meetings were held: one on April 7th, 2011 for the end-2010 financials and one on August 25th, 2011 for financials as of June 30th, 2011 In 2011, 12 investment banks began to monitor our company closely for purchase potential. Seven of them are foreign banks. In addition, analysts’ questions are also answered by telephone or e-mail. All announcements and press releases made by the Company to the Public Disclosure Platform are simultaneously shared with analysts and investors in Turkish and English. During the period 01.01.2011 – 31.12.2011 there were 46 special case announcements regarding our company. All material event disclosures about our company are also made on time to the Public Disclosure Platform. Work has been completed on the electronic medium required for shareholders to exercise their rights. It is possible to reach the financial reports through our website and financial and administrative information through the other links. 4. General Meeting Information While the agenda is set for the general meetings, it is ensured that each item is clear and understandable so as not to cause any confusion. Care is taken so that all issues that need to be discussed as required by the legislation are covered in the agenda items. The 2010 Annual General Meeting was held at the Conference Hall of the Torium Shopping Center, located on Saadetdere Mah., E5 Üzeri Haramidere Esenyurt Istanbul, on May 25th, 2011 under the supervision of a government observer Mr. Fevzi ÜLKER assigned with the authorization letter No. 32091 dated May 24th, 2011 of the Istanbul Provincial Directorate of Industry and Commerce. Invitations to the meeting were carried out by announcing the meeting in the Turkish Trade Registry Gazette and in a national newspaper as stipulated by the law and the Company’s articles of association and in a manner that it includes the agenda and by directly notifying some of the shareholders by receiving their signatures in return. Moreover, the meeting was announced on the Public Disclosure Platform in accordance with the Capital Markets Board’s “Communiqué on the Principles of Signing Information, Documents and Announcements at the Electronic Environment and their Submittal to the Public Disclosure Platform”, Serial: VIII and No. 61, which was published on the Official Gazette no. 27243 and dated: May 30th, 2009, as well as in accordance with the legislation that is prepared based on such communiqué. Of the Company’s 224,000,000 shares that represent a capital value of TL 224,000,000, a total of 193,726,883 shares (shareholders who hold 88,165,697 shares that represent a capital value of TL 88,165,697 participated at the meeting in person, while shareholders who hold 105,560,916 shares that represent a capital value of TL 105,560,916 participated at the meeting in proxy) were represented at the Annual General Meeting, thus providing the quorum stipulated in the law and the Company’s articles of association. Our board of directors decision No.2011/31 dated 26.05.2011 concerning minutes of the meeting and authority to represent and bind were registered on 26.05.2011 and published on pages 626-631 of the Trade Registry Gazette of Turkey No. 7837 dated 15.06.2011. Torunlar REIT 2011 Annual Report P / 75

Corporate Governance Compliance Report

During the Annual General Meeting, the balance sheet, statement of income, the board of directors’ annual report, the auditors and independent audit reports pertaining to 2010 were read out and accepted unanimously. A unanimous decision was made to distribute all of the distributable profit for 2010. Members of the Board of Directors and Auditors were unanimously cleared individually. Amendments in articles 6, 21 and 27 of the Company’s articles of association were unanimously decided. The General Board was informed of the following issues: • immovable properties that were bought for a price which was higher than the value set forth in the valuation report; • the profit distribution policy which was set up in accordance with the Corporate Governance policy; • the Company’s information policy and ethics; • donations and aids made by the Company in 2010; • guarantees, securities and pledges given by the Company in 2010; and • the independent audit contract signed by the Company for 2011. To serve until the first ordinary general assembly meeting to be held, Aziz TORUN and Ali COŞKUN on behalf of A group shareholders, Mehmet TORUN and Yunus Emre TORUN on behalf of B Group shareholders, Mehmet Mumcuoğlu and Prof. Dr. Ali ALP as Independent Board members, and Mahmut KARABIYIK as the member of the board of directors to be elected by the General Assembly were elected. Kadir BOY and Mehmet Akif ULUSOY were elected as Auditors to serve until the first ordinary general assembly meeting to be held. The General Board Meeting was held at the Company’s head office on September 12th, 2011 under the supervision of a government observer Mr. Ferit ÖZTÜRK assigned with the authorization letter No. 10548 dated September 9th, 2011 of the Istanbul Provincial Directorate of Industry and Technology. Invitations to the meeting were performed by announcing the meeting in the Turkish Trade Registry Gazette and on a national newspaper as stipulated by the law and the Company’s articles of association and in a way that it includes the agenda and by directly notifying some of the shareholders by receiving their signatures in return. Moreover, the meeting was announced on the Public Disclosure Platform in accordance with the Capital Markets Board’s “Communiqué on the Principles of Signing Information, Documents and Announcements at the Electronic Environment and their Submittal to the Public Disclosure Platform”, Serial: VIII and No. 61, which was published on the Official Gazette no. 27243 and dated: May 30th, 2009, as well as in accordance with the legislation that is prepared based on such communiqué. Of the Company’s 224,000,000 shares that represent a capital value of TL 224,000,000, a total of 192,585,454 shares (shareholders who hold 88,208,505 shares that represent a capital value of TL 88,208,505 participated at the meeting in person, while shareholders who hold 104,377,049 shares that represent a capital value of TL 104,377,049 participated at the meeting in proxy) were represented at the General Board meeting, thus providing the quorum stipulated in the law and the Company’s articles of association. The minutes of the meeting were approved on September 15th, 2011 and promulgated on pages 476 and 477 of the Turkish Trade Registry Gazette no. 7904 and dated: September 21st, 2011. In the Extraordinary General Meeting, the Repurchase Program which was accepted with the Board of Directors’ decision no. 2011/40 and dated: August 26th, 2011 was approved by the General Board and the Board of Directors was authorized to put this decision in practice in accordance with the Capital Markets Board’s Resolution no. 22/696 and dated: July 14th, 2011, which was published in the CMB’s Press Release no. 2011/32 (the resolution is entitled “Principles to be Applied for ISE-Quoted Companies Repurchasing their Own Shares”). Minutes of the General Assembly can be reached on the company Internet (web) site. Torunlar REIT 2011 Annual Report P / 76

Corporate Governance Compliance Report

5. Voting Rights and Minority Rights As indicated in article 9 of the articles of association; no privileged security can be issued other than the shares having the privilege to nominate candidates for the election of members of the board of directors. No privilege can be created after going public, including the privilege to nominate candidates for the board of directors. The management of the company and the authority to represent and bind towards third parties is undertaken by a board of directors consisting of 7 (seven) members, elected for a period of one year by the general assembly in the framework of the provisions of the Turkish Commercial Code, holding the qualifications indicated in the Turkish Commercial Code and Capital Markets Legislation. In the framework of the principles in article 13 of the Articles of Association, A and B group shares have the privilege to nominate candidates for the election of members of the board of directors. Two of the board of directors members are elected from among candidates indicated by A Group shareholders, two from among those indicated by B Group shareholders and the other three members from among candidates nominated at the General Assembly by the General Assembly. There is no privileged voting right in the meetings of the general assembly and the articles of association of our company. Shareholders or their proxies present at the general assembly meetings each has the right to vote once for each share. There is no participation relationship between shareholders and our company. There is no cumulative voting method in the articles of association of our company. There is no member representing minority shares in our board of directors. Individuals who have the right to vote at the meetings of the general assembly may personally exercise their votes or may assign a person who may/may not be a shareholder in the company as a proxy. Representatives who are shareholders have the right to vote for each share they represent in addition to their own shares. Voting is conducted by open ballot by raising hands for the agenda items during the meeting of the general assembly. 6. Dividend Policy and Timing As required by article 36 of the articles of association and indicated in the relevant framework of the Turkish Commercial Code and Capital Markets Law, dividend distribution and its timing are decided by the general assembly. The distribution of dividends is an issue deemed to be important by Torunlar REIC for the interest of the shareholders. The delicate balance between our company’s growth strategies and dividend distribution is carefully managed. In case of any change in this policy, the public will be duly informed. There is no privileged share in dividend distribution. 7. Transfer of Shares As indicated in article 8 of the articles of association; in case A or B Group shareholders wish to sell shares they hold other than Group C, the shareholder who wishes to sell (SELLER) will notify his wish to sell firstly to shareholders in the share group he wants to sell by registered letter. It is mandatory for this written request to include the amount of the shares he wishes to sell and the sales price information. Unless shareholders who receive this notification inform their intent to buy to reach the other side within 7 work days by registered letter, SELLER shall notify his intent to sell shares to other shareholders who have the privilege to nominate candidates to the board of directors by registered letter. It is mandatory in this notification as well for the SELLER to include the amount of the shares he wishes to sell and the sales price information. Unless shareholders who receive this notification inform their intent to buy to reach the SELLER within 7 work days by registered letter, SELLER is authorized to sell to third persons. However, this sale may not take place under more favorable conditions than what he offered to shareholders in terms of price or payment conditions. Share transfers performed contrary to the provisions of this paragraph will not be recorded in the share book by the board of directors. Transfer of C group shares may not be restricted. There is no provision in the company articles of association restricting the share transfer of the C group shares to be offered to the public. The articles of association are published in Turkish on the Company’s website at www.torunlargyo.com.tr. Torunlar REIT 2011 Annual Report P / 77

Corporate Governance Compliance Report

SECTION 2 PUBLIC DISCLOSURE AND TRANSPARENCY 8. Company Disclosure Policy The public is informed correctly and in a timely manner by observing the issues included in the Capital Markets Board Communiqué Concerning Principles for the Public Disclosure of Material Events (Series: VIII, No: 54). Meanwhile, all kinds of important information that could affect the decisions of the shareholders and other interest owners are also disclosed to the public. For ease of access by our shareholders, this information is also announced on our website. The Company Disclosure Policy that provides information in a timely, correct, complete, understandable, interpretable and a low cost manner to the public has been approved within this term and shall be submitted to the information of the General Assembly. The Company’s disclosure policy is published on its website at www.torunlargyo.com.tr . Within this scope, the Investor Relations Department is conducting the communications with shareholders and all other interested parties in a way to safeguard the rights and interest of our company and to prevent asymmetry in the sharing of information and to ensure its dissemination for in a timely, correct, understandable and comprehensible way. 9. Material Event Disclosures In addition to all other subjects required by Capital Markets Board regulations, information concerning events that could result in a major change in the financial position and/or operations of the Company is immediately announced to the public. However, no announcement made to the public may contain any information that could compromise the competitive strength of the Company or which could compromise the interests of shareholders and stakeholders, or include trade secrets of the Company. Torunlar REIC makes public announcements in accordance with the regulations and directives of the Capital Markets Board and the Istanbul Stock Exchange. In accordance with the Capital Markets Board Communiqué Concerning Principles for the Public Disclosure of Material Events (Series: VIII, No: 54) there were 46 material event disclosures of our company during the period, 01/01/2011-31/12/2011 excluding news of Torunlar REIC by the Settlement and Custody Bank, Central Registry Agency, or persons, institutions and institutions. All of the Company’s material event disclosures are submitted to the Istanbul Stock Exchange over the Public Disclosure Platform system. The disclosures are also published on the Company’s website. Periodical financial statements, footnotes and interim annual reports are issued to indicate the true financial position of the Company and are thus disclosed to the public. Financial statements are prepared within the framework of the Capital Markets Board Communiqués, in accordance with national/international accounting standards and in a consolidated manner. Our annual report is prepared in sufficient detail so that anyone seeking information about our company will reach relevant information and will be updated at every quarter according to the legislation / requirements. Our company selects an independent audit company every year and this independent audit company is reshuffled at required intervals. No consulting services are received from the company providing independent audit services. Again in line with the Capital Markets Board Corporate Governance Principles, the “Dividend Distribution Policy”, the “Information Policy” and the “Company’s Ethics” are published on the Company’s website. All news and rumors about the company circulating in the national media including TV, printed press, Internet and Radio, are monitored by media monitoring companies and reported to the senior manager and to relevant company employees on a daily basis. In the event that an unsubstantiated news story is published concerning the Company, the Investor Relations department will evaluate it. Following any disclosure requested by the Capital Markets Board or the Istanbul Stock Exchange, or if necessary without awaiting the disclosure request, the necessary notifications are made in accordance with Torunlar REIC policy. 10. Company Website and Contents The Company’s website can be accessed from www.torunlargyo.com.tr . The main sections contained on our website are Torunlar REIC, Portfolio, Investor Relations, Real Estate Investment Sector and News. Under the Investor Relations tab of the Company’s website, the following can be accessed: the corporate governance principles compliance report, most recent status of the articles of association, periodical financial statements and reports, portfolio tables, prospectus, public offer circulars, valuation reports, analyst reports, material event disclosures, capital increase statement, dividend distribution policy, information policy, ethics, company valuation report, general assembly information and short-cut links are provided on the Internet site. The Internet site is regularly updated to reflect the current status of the company and the management structure. All information inquiries relayed by way of the Internet site are answered promptly by the company. Torunlar REIT 2011 Annual Report P / 78

Corporate Governance Compliance Report

11. Disclosure of Real Person Ultimate Controlling Shareholder(s) Shareholding and Capital Structure after IPO: Our shares that were offered to the public have been traded at ISE since October 21st, 2010. Name/Company Title Group Type Share (%) Amount (TL) Aziz TORUN A To the name 20.03% 44,870,280 Aziz TORUN C To the name 17.37% 38,918,029 Torun Pazarlama A.Ş. A To the name 0.01% 31,698,00 Ali COŞKUN A To the name 0.002% 3,522 Mehmet TORUN B To the name 20.02% 44,835,060 Mehmet TORUN C To the name 17.36% 38,882,809 Yunus Emre TORUN B To the name 0.02% 35,220 Yunus Emre TORUN C To the name 0.02% 35,220 Torun Pazarlama A.Ş. B To the name 0.01% 31,698,00 Mahmut KARABIYIK B To the name 0.002% 3,522 New shareholders after the IPO C To the name 25.16% 56,352,942 Total Capital 100.00 224,000,000

In accordance with the Capital Markets Board Communiqué Series: VIII, No: 54, in case the chairman and members of the board of directors of our company, general manager and assistant general managers, other individuals with authority in the Company and shareholders who directly or indirectly possess 5% or more of the capital or total voting rights or those acting with the aforementioned persons buy or sell Torunlar REIC shares, they must make material event disclosures. 12. Disclosure of People with Access to Insider Information The names of members of the board of directors, auditors and persons in top management of our company and changes made within the year are included in the annual report. Company officials who have access to insider information as of December 31st, 2011: Name Position Aziz TORUN Chairman of the Board of Directors and CEO Ali COŞKUN Vice-Chairman of the Board Mehmet TORUN Member of the Board of Directors Yunus Emre TORUN Member of the Board of Directors – Assistant General Manager Mahmut KARABIYIK Member of the Board of Directors Mehmet MUMCUOĞLU Independent Member of the Board of Directors Prof Dr. ALİ ALP Independent Member of the Board of Directors Kadir BOY Statutory Auditor Mehmet Akif ULUSOY Statutory Auditor Emre TORUN Assistant General Manager Yezdan KANAAT Assistant General Manager Remzi AYDIN Assistant General Manager İsmail KAZANÇ Assistant General Manager İlham İnan DÜNDAR Assistant General Manager

The list of those with access to insider information is published every quarter in the interim annual reports. Torunlar REIT 2011 Annual Report P / 79

Corporate Governance Compliance Report

SECTION 3 STAKEHOLDERS 13. Disclosure to Stakeholders Torunlar REIC corporate governance practices safeguard the rights of the stakeholders governed by legislation, legal regulations and mutual agreements. Company employees, shareholders, affiliates or third persons or institutions in a business relationship can notify their suggestions in these matters or violations directly to the Company executives. Open and honest channels of communication are established with company employees and other stakeholders and utmost care is taken for them to be informed of issues that are of interest to them. Stakeholders are informed about company issues that are of interest to them. Potential investors who are considering buying our Company’s shares are able to directly contact our Investor Relations Department and relay their requests for information. Torunlar REIC Investor Relations informs investors about the Company through e-mails, telephone calls or meetings. Rights of all stakeholders are protected within the framework of the ethical rules published by the board of directors. 14. Stakeholders’ Participation in the Company Management The principle is to keep all channels of communication open and to eliminate all obstacles that could occur in front of the participation of stakeholders in the management. All the persons, groups or institutions that are impacted by our operations or those who affect our operations are our stakeholders. Their comments and assessments are invaluable to us. Within this scope as indicated in the ethical rules, the company policy is determined and updated by regular communication with employees and by considering their wishes as well. Regular coordination meetings are held with the participation of company employees under the chairmanship of the general manager. These meetings play an important role in the decision making process of the senior management of the company. No model was created for the participation into the management of the other stakeholders. 15. Human Resources Policy The Company’s human resources policy aims to ensure the recruitment of a high quality workforce in line with our objectives and strategies. Our corporate organization is set up so as to increase the efficiency of our labor force. We create healthy and safe working conditions for our employees, as required by the law, and improve on them to the extent of our capacity. In recruitment, priority is placed on the qualifications required in the vacant position(s). We provide training programs to ensure personal and professional development of our employees. Equal opportunities are offered to employees for their personal development; also, career opportunities are provided to employees. The Company does not practice any discrimination against employees on the basis of gender, age, ethnic origin or religion. 16. Customer and Supplier Relations Our company has always placed emphasis on developing cooperation with stakeholders who adhere to ethical rules. Honest and equal treatment is ensured in relations with customers. Reliability of agreements is highlighted and commitments are honored in due time. Efforts are made to establish trust-based long-term relationships with suppliers. Torunlar REIT 2011 Annual Report P / 80

Corporate Governance Compliance Report

17. Corporate Social Responsibility In all its operations, our company acts with due care for social responsibility, compliance with laws and environmental values. No lawsuit was filed against the company during this period for environmental damages. No donations or aid were provided between 01/01/2011 and 31/12/2011. In TRN, the following donations and aids worth TL 1,056,628.87 were undertaken between 01/01/2011 and 31/12/2011: - The donations of computers worth TL 39,712.86 to the Ministry of National Education - The donation of construction materials worth TL 500,522.19 to Akdeniz University - Food aid worth TL 21,119.94 to Büyükçekmece Municipality for people in need - Clothing aid worth TL 495,273.88 to students in need through the Erzincan Governorship, Social Aid and Solidarity Foundation In TTTA, the following donations and aid worth TL 13,018 were provided between 01/01/2011 and 31/12/2011 - The donation of computers and fixtures to the Ladik Municipality’s Library for Children 18. Structure and Formation of the Board of Directors and Independent Members The management, authority to represent and bind towards third persons is left to the board of directors consisting of 7 (seven) members elected by the general assembly under the provisions of the Turkish Commercial Code for a period of one year, holding the qualifications indicated in the Turkish Commercial Code and Capital Markets Board Legislation. A and B group shares have the privilege to nominate candidates for the election of members of the board of directors. Two of the board of directors members are elected from among candidates nominated by A Group shareholders, two from among those nominated by B Group shareholders and the other three members from among candidates nominated at the General Assembly meeting by the General Assembly. Two of the 3 members elected by the General Assembly are elected from among the independent candidates. TORUNLAR GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. – Members of the Board of Directors Name Position Aziz TORUN Chairman of the Board of Directors and CEO Ali COŞKUN Vice-Chairman of the Board Mehmet TORUN Member of the Board of Directors Yunus Emre TORUN Member of the Board of Directors-Chief Marketing Officer Mahmut KARABIYIK Member of the Board of Directors Mehmet MUMCUOĞLU Independent Member of the Board of Directors Prof. Dr. Ali ALP Independent Member of the Board of Directors

Members of the Board of Directors have been elected during the Annual General Meeting held on May 25th, 2011 to serve until the next Annual General Meeting. In accordance with its Principles of Corporate Governance, Torunlar REIC considers that the presence of independent members of the board of directors will provide a significant contribution to the development and strengthening of the Company’s activities and for the development of a more professional management concept. There were no events in 2011which would revoke the independence of current independent members. Torunlar REIT 2011 Annual Report P / 81

Corporate Governance Compliance Report

Restrictions on directors have been indicated in article 21 of the articles of association; “Members of the board of directors are entitled to conduct any commercial transactions within the scope of the company’s line of business with the Company in person or indirectly on behalf of themselves or others if they are permitted by the general assembly or can conduct any commercial transactions within the scope of the company’s line of business on account of themselves or others, or can join a company involved in the same kind of commercial transactions in the capacity of an unlimited liable partner.” If in the last two years any employment, capital or commercial relationships, whether directly or indirectly, are established or if any cognation or affinity by marriage up to third degree including spouses are present between the members of the board of directors and any parties who are party to the resolutions to be made by the board of directors, any member of the board of directors in such condition is obliged to report this to the board of directors with its grounds and have it recorded in the minutes of the meeting. The members of the board of directors shall not participate in the negotiations on issues in favor of their own personal interests or interests of their relatives by blood or by marriage up to third degree including spouses or lineal consanguinity. Any members who violate this provision shall compensate any damages incurred by the company as a result of such relevant transaction he/she is involved in. If they are not independent from persons who are party to any resolutions to be made by the board of directors in the meaning of sub- clause (g), paragraph 1, article 4 of the Communiqué of Principles on Real Estate Investment Companies, the members of the board of directors are obliged to report this to the board of directors with its grounds and have it recorded in the minutes of the meeting. The entirety of the members of the board of directors is acting in accordance with these provisions. 19. Qualifications of the Members of the Board of Directors While the basic qualifications of the BOD members meet CMB Corporate Governance Principles, Section IV, articles 3.11.1, 3.1.2 and 3.1.5, they are highly qualified, knowledgeable and skillful professionals with specific work experience and a relevant background. The CVs of our Board members are available on our website and in the annual report. 20. Company’s Vision, Mission and Strategic Objectives Vision: To transform the Torunlar REIC brand into the most preferred brand both on a global and national scale in the area of investment, development and management of mixed-use life-style centers consisting of units such as shopping centers, residences, offices and hotels, as well as logistics centers, commercial and industrial buildings. To undertake investments with a high return and to ensure steady growth by prioritizing transparency and trustworthiness at all times. Mission • To be the most trustworthy brand in developing living spaces for people, such as houses, offices, hotels and shopping centers and to become the name synonymous with the high-quality life concept, • To develop projects in which we build residences, hotels, entertainment and business centers that meet the needs, preferences and interests of our customers to the maximum extent while maximizing their benefits, • To attract and maintain the best employees by offering them a rewarding and satisfying working environment. Torunlar REIT 2011 Annual Report P / 82

Corporate Governance Compliance Report

Strategic targets: The Company aims to obtain a competitive edge by pursuing the following strategies: • To produce retail-based mixed-use projects and to keep focusing on shopping centers, • To manage shopping centers actively and dynamically, • To keep view of the developments in the real estate sector, • To make use of opportunities in various regions and various types of real estate with high growth and development potential, • To develop methods for crisis management and thus to turn crises into opportunities, • To lead the sector and to produce model projects, • To create living spaces that make life easier by making use of the technological developments in the real estate sector and other industries, • To carry the sector beyond the time by using the technology, • To build the projects of the future by combining our international consultancy know-how with our local expertise, • To keep close view of value increasing opportunities to offer the highest return to our shareholders, • To strengthen our position in the sector and to become a reliable Real Estate Investment Company, which is preferred by investors and which distributes the highest dividends. 21. Risk Management and Internal Control Mechanism Risk management has been placed among duties of the Executive Committee with the purpose of systematically managing the risks our company is exposed to. In order to represent the risk management system towards the Board of Directors Aziz TORUN has been elected to be the Chairman of the Executive Committee, while Yunus Emre TORUN, Yezdan KANAAT, İlham İnan DÜNDAR, Remzi AYDIN and İsmail KAZANÇ were elected as Members of the Executive Committee. An Audit Committee Tasks and Working Principles Directive was prepared and an Audit Committee was formed in order to ensure the application efficiency of the internal and external auditing process in the company, its added value and the functioning and adequacy of the accounting, financial reporting and internal control related internal systems. Independent member of the board of directors Mehmet MUMCUOĞLU was elected as the chairman of the Audit Committee and Ali COŞKUN and Mahmut KARABIYIK were elected as members of the Audit Committee. 22. Authorities and Responsibilities of the Members of the Board of Directors and Managers It was defined in article 16 of the company’s articles of association; The Board of Directors is obliged to perform the duties it is assigned with Turkish Commercial Code, the Capital Market Legislation and these present articles of association. Any and all business and transactions which don’t require the resolution of the General Assembly according to the relevant legislation and these articles of association shall be executed by the Board of Directors. Particularly the Board of Directors; • Determines and discloses to the public the mission and vision of the Company, • Continuously and effectively reviews the Company’s degree of achieving targets, operation and past activity, • Determines the levels of accomplishment of the Company’s activities, approved annual financial and business plans and establishes the times and conditions for those, • Establishes a risk management and internal auditing system which shall minimize the effects of the risks which the Company may encounter and takes the necessary measures for this system to operate properly; monitors the compliance of the Company’s activity with the legislation, the articles of association, internal regulations and the policies established, • Establishes the Company’s approach to the shareholder and public relations; offers solutions to any disputes which may arise between the Company and the shareholders and/or its employees, • Ensures full compliance with the legislations, the provisions of the articles of association, internal regulations and the policies established in exercising of rights by the shareholders and keeps in close cooperation with the corporate management committee and the investor relations department established in its organization for this purpose; • Determines and approves the annual business program, budget and payroll and addresses and decides for any changes required in the above, Torunlar REIT 2011 Annual Report P / 83

Corporate Governance Compliance Report

• Ensures that balance sheets and income statements, periodic financial statements and annual reports are issued in accordance with the legislation and the international standards including the Capital Market Board Corporate Governance Principles, elaborated accurately and fairly and presented to the necessary bodies, • Determines the disclosure policy of the Company, • Takes the necessary measures to ensure the compliance of the Company’s structure with current conditions; organizes on-the-job training and career plans of managers and other employees; determines the principles for measuring their performance and rewarding, • Determines the code of conduct for the Company and its employees; takes incentives and measures in order to ensure that qualified personnel serve for the Company for a long period, • Ensures that the general assembly meetings are held in accordance with the law and the articles of association, • Controls the execution of the resolutions of the general assembly, • Determines the committees to be established within the body of the Company and their working principles; appoints their members and ensures their effective and efficient operation. When performing the duties and responsibilities charged on it by both law and these articles of association, the Board of Directors, without sacrificing its own responsibility, can assign these partially to committees within the body of the Company by stating expressly their tasks. In the framework of this article, the company is managed and represented to the outside by the Board of Directors. The Board of Directors executes the duties assigned to it by the Turkish Commercial Code, Capital Markets Law and other relevant legislation and the General Assembly. 23. Fundamental Activities of the Board of Directors According to article 19 of the company articles of association, the Board of Directors convenes with the call of the chairman or the vice chairman when it is deemed necessary for the operations of the Company. But it is required to convene at least once a month. Each of the members of the board of directors or auditors can also request the board to be convened for meeting by applying to the chairman or the vice chairman in writing. If the chairman or the vice chairman still doesn’t call the Board to a meeting, the members shall be entitled to call ex officio. The chairman is responsible for ensuring the board’s meetings, calls and negotiations are properly made and the resolutions made are written to minutes; it fulfills this responsibility through the Secretariat of the Board of Directors. Each member has one voting right at meetings. Right to vote is exercised in person. Unless one of the members requests a meeting, resolutions can also be made such that members notify their consents in writing for a proposal made by one member. The meeting agenda of the board of directors is determined by the negotiation of the chairman of the board of directors with the other members of the board of directors and the general manager. The meeting agenda can be directly determined by the chairman of the board of directors in emergencies. Agendas can be amended with the resolution of the board of directors. The place of the meeting is the head office of the Company. But the board of directors can also convene at another place provided that it decides so. The board of directors convenes with at least four members and makes its resolutions with the majority of the participants of the meeting. In case of equality of votes, such issue is left for the next meeting. A proposal which also receives equal number of votes at that meeting is deemed to be rejected. Votes at board of directors are exercised as affirmative or negative. A negative voter writes his/her reasonable and detailed refusal grounds under the resolution, signs and notifies to the company’s auditors. Detailed grounds for negative votes of independent members who exercise negative votes are disclosed to public on the website of the company. Members who are absent in the meeting shall not vote by way of writing, appointing attorneys or other ways. It is essential for the members of the board of directors to participate in the meetings in person. The opinions of a member who fail to participate in a meeting but notify his/her opinions in writing are presented to the information of other members. During the fiscal period of 01.01.2011 – 31.12.2011 the Board of Directors met 54 times. Decisions of the Board of Directors must be taken unanimously. The Capital Markets Board’s Communiqué on Real Estate Investment Companies (Article 21) makes it mandatory that unless taken unanimously, specific decisions must be disclosed to the public with a material event announcement to be submitted to the Istanbul Stock Exchange. To date no case that requires a material event disclosure in this matter has been experienced. Torunlar REIT 2011 Annual Report P / 84

Corporate Governance Compliance Report

24. Prohibition of Engaging in Transactions and Competing with the Company According to article 20 of the Communiqué Concerning Principles on Real Estate Investment Companies, If the members of the board of directors are not independent from persons who are party to any resolutions to be made by the board of directors in the meaning of subclause (g), paragraph 1, article 4 of the Communiqué of Principles on Real Estate Investment Companies, the members of the board of directors are obliged to report this to the board of directors with its grounds and have it recorded in the minutes of the meeting. 25. Ethical Rules The Company’s ethical rules which were accepted with the board of directors’ decision were also approved by the General Board. Ethical rules, which were set forth within the minutes of the General Board, were announced together with these minutes at the Public Disclosure Platform and published in Turkish on the Company’s website at www.torunlargyo.com.tr. 26. Number, Structure and Autonomy of the Committees Formed by the Board of Directors Executive Committee: Risk management has been included among the duties of the Executive Committee for the purpose of systematically managing the risks that the company is exposed to. . In order to represent the risk management system towards the Board of Directors Aziz TORUN has been elected to be the Chairman of the Executive Committee, while Yunus Emre TORUN, Yezdan KANAAT, İlham İnan DÜNDAR, Remzi AYDIN and İsmail KAZANÇ were elected as Members of the Executive Committee. Audit Committee: An Audit Committee Tasks and Working Principles Directive was prepared and an Audit Committee was formed in order to ensure the application efficiency of the internal and external auditing process in the company, its added value and the functioning and adequacy of the accounting, financial reporting and internal control related internal systems. Independent member of the board of directors Mehmet MUMCUOĞLU was elected as the chairman of the Audit Committee and Ali COŞKUN and Mahmut KARABIYIK were elected as members of the Audit Committee. Corporate Governance Committee: The Corporate Governance Committee Tasks and Working Principles Directive was prepared in order to ensure compliance to the company’s corporate governance principles, to monitor and develop them and the Corporate Governance Committee was established. Independent member of the board of directors Ali ALP was elected as chairman of the Corporate Governance Committee and Şerife CABBAR and Lütfi VARDI were elected as members of the Corporate Governance Committee. 27. Financial Rights Provided to the Board of Directors Honoraria of the members of the Board of Directors are determined by the General Assembly and it was decided during the Ordinary General Assembly Meeting held on 25.05.2011 that members of the Board of Directors be paid monthly remuneration of net 2,500 TL and auditors net 2,000 TL. There have been no transactions that might lead to conflict of interest such as extending loans to members of the BOD or executives or providing collateral on their behalf during the period. Torunlar REIT 2011 Annual Report P / 85

Agenda of Torunlar GYO A.Ş. Ordinary General Assembly Meeting Dated 28 May 2012

1. Opening and election of the Presiding Committee, 2. Authorization of the Presiding Committee to sign the minutes of the General Assembly, 3. Reading of and deliberations on the Board of Directors’ Report on the operations and accounts of the year 2011, 4. Reading of and deliberations of the Auditors’ Report and the summary statement of the independent external auditing firm Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş., 5. Approval, approval after modification or refusal of Board of Directors’ submission of 2011 Financial Statements, 6. Approval, approval after modification or refusal of the proposal concerning the distribution of profit, 7. Discharge of the Members of the Board of Directors from liability in respect of their operations in the year 2011, 8. Discharge of the Auditors from liability in respect of their operations in the year 2011, 9. Re-election or replacement of the Members of the Board of Directors and assignment of their term of office, 10. Re-election or replacement of the Auditors and assignment of their term of office, 11. Decision on the monthly honorarium of the Chairman and Members of the Board of Directors, and the monthly gross remuneration of the Auditors, 12. Discussion, approval or refusal of the amendment draft texts relating to Articles 3, 6, 13, 20, 22, 24, 27, 32, 35 and 42 of the company’s Articles of Association (as of the publication date the approval of the Ministry of Customs and Trade still pending), 13. Informing our shareholders on the company remuneration policy adopted by the Board of Directors in pursuance of Corporate Governance Principles, 14. Informing our shareholders on the Regulations for the working principles of the auditing committee, corporate governance committee, nomination committee, risk committee and remuneration committee adopted by the Board of Directors in pursuance of Corporate Governance Principles, 15. Approval of the independent external auditing firm elected by the Board of Directors as per the Capital Markets Board communiqué on Independent Audit Standards in the Capital Markets, 16. Informing our shareholders about share buyback programme, 17. Informing our shareholders about transactions with related parties in 2011 within the scope of the Capital Markets Board legislation, 18. Informing the General Assembly on the details of securities, pledges and mortgages granted in pursuance of the Capital Markets Board’s 09/09/2009 dated resolution No. 28/780, 19. Proposal to grant permission to the Members of the Board of Directors to perform directly or on behalf of others, the transactions that fall within the scope of the company’s activities, to become shareholders in companies performing such transactions and to conduct other transactions as set forth in Articles 334-335 of the Turkish Commercial Code, 20. Wishes and requests, 21. Closing. Torunlar REIT 2011 Annual Report P / 86

Proposal and Decision for Dividend Distribution

TORUNLAR REIC BOARD OF DIRECTORS RESOLUTION

Resolution no : 2012/10 Date : 05.04.2012

Board of directors : 1- AZİZ TORUN 2- ALİ COŞKUN 3- MEHMET TORUN 4- YUNUS EMRE TORUN 5- MAHMUT KARABIYIK 6- MEHMET MUMCUOĞLU 7- PROF. DR. ALİ ALP Agenda : Proposal for dividend distribution for 2011 Decision : The Board of Directors convened at the company’s head office at the request of the Chairman.

The board of directors decided in its meeting on 05.04.2012 and no. 2012/10 to submit dividend distribution in the annexed table for the approval of the shareholders in the ordinary general meeting of the fiscal 2011.

As per the financial statements issued in accordance with the provisions of the Capital Markets Board communique Serial: XI No: 29, the net profit of our company is TL 177,312 thousand, while statutory net profit is TL 25,853 thousand as per the financial statements issued in accordance with the Tax Procedural Code. Out of our TL 25,853 thousand tax-based net profit, 5% first legal reserve will be set aside as TL 1,293 thousand. As a result of the comparison between CMB based distributable net profit and tax-based net distributable profit, 96% of net distributable profit can be distributed in cash after setting aside a second legal reserve.

Out of net distributable profit of TL 24,560,124.19 calculated as 2011 fiscal net profit less first legal reserve, TL 22,400,000 totaling TL 11,200,000 first dividend (5% of paid-up capital) and TL 11,200,000 second dividend will be distributed after setting aside TL 1,120,000 second legal reserve (total dividend less 5% of paid-up capital divided by 10) and TL 1,040,124.19 extraordinary reserve.

The board of directors will propose to the Ordinary General Assembly TL 22,400,000 as the distribution of net income for 2011 after setting aside the said legal reserves and extraordinary reserves.

If the General Assembly resolves to distribute dividend, dividend distribution will be completed by the day-end on 31.05.2012.

We hereby declare that the above-mentioned disclosure abides by the principles laid down in the communique Serial: VIII, No: 54 of the Capital Markets Board, that it fully reflects the information available to us in this regard, that this information is in accordance with our books, records and documents, that we spend our best efforts to obtain entirely and accurately information related to this matter and that we will be held responsible for this disclosure. Torunlar REIT 2011 Annual Report P / 87

2011 Dividend Distribution Table

TORUNLAR REIC 2011 Dividend Distribution Table (000 TRY) 1. Paid up/Issued Capital 224,000 2. Total Legal Reserve (as per statutory records) 8,097 Any privilege in dividend distribution if any according to the articles of association 2011 CMB Statutory 3. Pre-tax profit 177,312 25,853 4. Tax provision (-) 5. Net profit (=) 177,312 25,.853 6. Previous year losses (-) 7. First legal reserve (-) 1,293 1,293 8. Net distributable profit (=) 176,019 24,560 9. Donations within the year (+) 1,062 10. Net distributable profit including donation for distribution of first dividend 177,081 11. First dividend to the shareholders 11,200 -Cash 11,200 -Bonus shares -Total 12. Dividend to privileged shareholders - 13. Dividend to the BOD members, employees 14. Dividend to the holders of the usufructuary shares 15. Second dividend to the shareholders 11,200 16. Second legal reserve 1,120 - 17. Statutory reserves 18. Special reserves 19. EXTRAORDINARY RESERVE 152,499 1,040 20. Other sources to be distributed - Previous year profit - Extraordinary reserves - Other distributable reserves according to the law and articles of association

INFORMATION ABOUT DIVIDEND TO BE DISTRIBUTED DIVIDEND PER SHARE GROUP TOTAL DIVIDEND AMOUNT (TRY) DIVIDEND PER SHARE FOR 1 TRY NOMINAL VALUE AMOUNT (TRY) SHARE (%) GROSS 22,400.000.00 0.1 10.0 NET 22,400.000.00 0.1 10.0 THE RATIO OF DISTRIBUTED PROFIT TO THE DISTRIBUTABLE PROFIT INCLUDING DONATIONS TOTAL DISTRIBUTION THE RATIO OF DISTRIBUTED PROFIT TO THE DISTRIBUTABLE PROFIT TO SHAREHOLDERS (TRY) INCLUDING DONATIONS (%) 22,400,000.00 12.6 Torunlar REIT 2011 Annual Report P / 88

Independent Auditor’s Report

To the Board of Directors of Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. 1. We have audited the accompanying consolidated financial statements of Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. and its subsidiaries (collectively referred to as the “Group”) which comprise the consolidated balance sheet as of 31 December 2011 and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements 2. The Group management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the financial reporting standards issued by the Capital Markets Board (“CMB”). This responsibility includes: designing, implementing and maintaining internal control relevant to the proper preparation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility 3. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the auditing standards issued by the CMB. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance on whether the consolidated financial statements are free from material misstatement. An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s 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, the auditor considers internal control relevant to the Group’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 Group’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 opinion. Opinion 4. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. as of 31 December 2011, and of its financial performance and its cash flows for the year then ended in accordance with the financial reporting standards issued by the CMB (Note 2). 5. The financial reporting standards described in Note 2 (defined as “CMB Financial Reporting Standards”) to the financial statements differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting for the period between 1 January - 31 December 2005. Accordingly, the accompanying consolidated financial statements are not intended to present the consolidated financial position, consolidated financial performance and consolidated cash flows of the Group in accordance with IFRS.

Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. a member of PricewaterhouseCoopers

Haluk Yalçın, SMMM Partner İstanbul, 5 April 2012 Torunlar REIT 2011 Annual Report P / 89

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Index to the Consolidated Financial Statements at 31 December 2011

CONTENTS PAGE CONSOLIDATED BALANCE SHEETS...... 90 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME...... 92 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY...... 93 CONSOLIDATED STATEMENTS OF CASH FLOW...... 94 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS...... 95-156

NOTE 1 COMPANY’S ORGANISATION AND NATURE OF OPERATIONS...... 95 NOTE 2 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS ...... 98 NOTE 3 SEGMENT REPORTING...... 117 NOTE 4 CASH AND CASH EQUIVALENTS...... 118 NOTE 5 FINANCIAL LIABILITIES...... 120 NOTE 6 OTHER FINANCIAL LIABILITIES...... 122 NOTE 7 TRADE RECEIVABLES AND PAYABLES...... 122 NOTE 8 INVESTMENT PROPERTIES...... 124 NOTE 9 INVENTORIES...... 126 NOTE 10 PROPERTY, PLANT AND EQUIPMENT...... 127 NOTE 11 OTHER ASSETS AND LIABILITIES...... 128 NOTE 12 INVESTMENTS IN ASSOCIATES...... 130 NOTE 13 GOODWILL...... 130 NOTE 14 COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES...... 131 NOTE 15 EQUITY...... 132 NOTE 16 REVENUE AND COST OF REVENUE...... 135 NOTE 17 MARKETING, SELLING AND DISTRIBUTION, GENERAL ADMINISTRATIVE EXPENSES...... 136 NOTE 18 EXPENSES BY NATURE...... 137 NOTE 19 OTHER INCOME/EXPENSES ...... 138 NOTE 20 FINANCIAL INCOME/EXPENSES...... 138 NOTE 21 EARNINGS PER SHARE...... 139 NOTE 22 TAX ASSETS AND LIABILITIES...... 139 NOTE 23 BALANCES AND TRANSACTIONS WITH RELATED PARTIES...... 140 NOTE 24 FINANCIAL RISK MANAGEMENT...... 141 NOTE 25 FINANCIAL INSTRUMENTS...... 152 NOTE 26 SUBSEQUENT EVENTS...... 153 NOTE 27 OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE FINANCIAL STATEMENTS OR OTHER ISSUES REQUIRED FOR THE CLEAR UNDERSTANDING OF FINANCIAL STATEMENTS...... 154 NOTE 28 ADDITIONAL NOTES: CONTROL OF COMPLIANCE WITH THE PORTFOLIO LIMITATIONS...... 154 Torunlar REIT 2011 Annual Report P / 90

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Consolidated Balance Sheets at 31 December 2011 and 2010 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) 31 December 31 December Notes 2011 2010

ASSETS

Current assets 841,271 572,789

Cash and cash equivalents 4 597,388 438,664 Financial investments 5 58,197 - Trade receivables 7 71,081 49,706 Due from related parties 23 3,307 35,417 Other trade receivables 7 67,774 14,289 Inventories 9 100,805 43,061 Advances given 11 9,742 1,759 Other current assets 11 4,058 39,599

Non-current assets 3,102,280 2,631,050

Financial investments 5 - 29,459 Trade receivables 7 60,079 4,729 Advances given 11 108,063 61,750 Inventories 9 262,406 6,992 Investments in associates 12 164,189 125,458 Investment properties 8 2,457,490 2,388,865 Tangible assets 10 874 1,115 Intangible assets 86 82 Other non-current assets 11 49,093 12,600

Total assets 3,943,551 3,203,839

The accompanying notes form an integral part of these consolidated financial statements. Torunlar REIT 2011 Annual Report P / 91

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Consolidated Balance Sheets at 31 December 2011 and 2010 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) 31 December 31 December Notes 2011 2010

LIABILITIES AND EQUITY

Current liabilities 388,394 282,544

Financial liabilities 5 289,143 231,141 Finance lease liabilities - 20 Other financial liabilities 6 1,313 3,877 Advances received 11 52,383 3,110 Trade payables 7 38,864 34,536 Due to related parties 23 6,803 3,501 Other trade payables 7 32,061 31,035 Current income taxes payable 409 - Other current liabilities 11 6,282 9,860

Non-current liabilities 1,022,251 552,212

Financial liabilities 5 811,373 552,122 Advances received 11 210,785 - Provision for employment termination benefits 85 90 Other non-current liabilities 11 8 -

Total equity 2,532,906 2,369,083

Share capital 15 224,000 224,000 Share premium 15 301,770 301,770 Restricted reserves 15 3,947 3,127 Treasury shares 15 (836) - Retained earnings 15 1,826,713 1,625,941 Net profit of the year 15 177,312 214,245

Total liabilities and equity 3,943,551 3,203,839

Consolidated financial statements as of 31 December 2011 were authorized for issue by Assistant General Manager İsmail Kazanç and Accounting Manager Lütfü Vardı on 5 April 2012 on behalf of Board of Directors.

The accompanying notes form an integral part of these consolidated financial statements. Torunlar REIT 2011 Annual Report P / 92

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Consolidated Statements of Comprehensive Income for the Years Ended 31 December 2011 and 2010 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) 1 January- 1 January- Notes 31 December 2011 31 December 2010

Revenues 16 162,909 232,928 Cost of revenues (-) 16 (62,754) (152,910)

Gross profit 100,155 80,018

General administrative expenses (-) 17 (13,777) (23,498) Marketing, selling and distribution expenses (-) 17 (10,738) (5,542) Net gain from fair value adjustments on investment properties 19 182,534 166,660 Other income 19 1,747 540 Other expenses (-) 19 (7,333) (1,069)

Operating profit 252,588 217,109

Share of profit of associates accounted under equity method 12 45,227 14,725 Financial income 20 52,203 23,077 Financial expenses (-) 20 (170,905) (39,392)

Profit before tax from continuing operations 179,113 215,519

Tax expense from continuing operations (-) 22 (1,801) (1,274)

Profit for the year from continuing operations 177,312 214,245

Other comprehensive income - -

Total comprehensive income 177,312 214,245

Earnings per share (in full TL) 21 0,79 1,16

The accompanying notes form an integral part of these consolidated financial statements. Torunlar REIT 2011 Annual Report P / 93

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Consolidated Statements of Changes in Equity for the Years Ended 1 January - 31 December 2011 and 2010 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) Share Treasury Share Restricted Retained Net income Total capital shares premium reserves earnings for the year equity

1 December 2010 176,100 - - 3,127 1,090,300 535,641 1,805,168

Transfers - - - - 535,641 (535,641) - Capital contributions 47,900 - 301,770 - - - 349,670 Total comprehensive income - - - - - 214,245 214,245

31 December 2010 224,000 - 301,770 3,127 1,625,941 214,245 2,369,083

1 January 2011 224,000 - 301,770 3,127 1,625,941 214,245 2,369,083

Transfers - - - 820 213,425 (214,245) - Acquisition of treasury shares - (836) - - - - (836) Dividend distribution - - - - (12,653) - (12,653) Total comprehensive income - - - - - 177,312 177,312

31 December 2011 224,000 (836) 301,770 3,947 1,826,713 177,312 2,532,906

The accompanying notes form an integral part of these consolidated financial statements. Torunlar REIT 2011 Annual Report P / 94

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Consolidated Statements of Cash Flows for the Years Ended 1 January - 31 December 2011 and 2010 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) 1 January - 1 January - Notes 31 December 2011 31 December 2010

Cash flows from operating activities:

Total comprehensive income 177,312 214,245

Adjustments to reconcile net cash generated from operating activities to income before tax:

Taxation 1,801 1,274 Net gain from fair value adjustment on investment properties 8,19 (182,534) (166,660) Unrealised foreign exchange losses 126,481 4,804 Interest income 20 (49,639) (18,233) Interest expense 20 48,305 39,208 Share of profit of associates accounted under equity method 12 (45,227) (14,725) Provision expense for doubtful receivables 7 422 85 Loss on derivative financial instruments (2,564) (969) Depreciation 18 291 183 Provision for employment termination benefits (5) 85 Goodwill transferred to income statement 13 - 8,250 Other financial income / (expenses) 20 - (129)

Net cash before changes in assets and liabilities: 74,643 67,418

Changes in working capital:

Change in trade receivables (109,257) 8,738 Change in receivables from related parties 32,110 18,879 Change in inventories (80,381) 49,879 Advances given (54,296) (61,750) Change in trade payables 1,006 22,423 Change in payables to related parties 3,302 3,494 Advances received 260,058 (61,923) Change in other assets (952) (19,444) Change in other liabilities (3,570) 5,499 Taxes paid (1,392) (833)

Net cash generated from operating activities 121,271 32,380

Purchase of investment properties (107,699) (131,682) Disposal of investment properties 8 - 5,907 Purchase of tangible assets 10 (16) (874) Purchase of intangible assets (38) (98) Dividends received from associates 12 6,496 4,745

Net cash used in investing activities (101,257) (122,002)

Increase in financial investment (28,738) (29,459) Interest paid 1,257 (26,978) Increase in bank borrowings 575,540 281,031 Bank borrowings paid (399,047) (120,919) Dividend distribution (12,653) - Acquisition of treasury shares (836) - Increase in due to related parties - 1,982 Capital increase and share premium - 349,670

Net cash generated from financing activities 135,523 455,327

Net increase in cash and cash equivalents 155,537 365,705

Cash and cash equivalents at beginning of the year 4 438,664 72,639

Exchange losses on cash and cash equivalents 3,187 320

Blocked deposits - (121,447)

Cash and cash equivalents at end of the period 4 597,388 317,217

The accompanying notes form an integral part of these consolidated financial statements. Torunlar REIT 2011 Annual Report P / 95

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 1 - COMPANY’S ORGANISATION AND NATURE OF OPERATIONS

Torunlar Gayrimenkul Yatırım Ortaklığı Anonim Şirketi (“Torunlar REIC” or “the Company”) has been incorporated on 20 September 1996, which was registered as Toray İnşaat Sanayi ve Ticaret A.Ş. in İstanbul, Turkey. With a change in the Articles of Association published on Trade Registry Gazette on 25 January 2008, the Company has been converted into Real Estate Investment Company (“REIC”) with the trade name Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. and was registered on 21 January 2008, the company’s stocks have been traded at the Istanbul Stock Exchange since 21 October 2010. As of 31 December 2011, the total number of employees of Torunlar REIC, its Subsidiaries, Joint Ventures and Associates (together referred to as the “Group”) is 105 (31 December 2010: 132). Total number of employees of Torunlar REIC is 79 (31 December 2010:34) and the main shareholders of Torunlar REIC are the Torun family members (Note 15).

The Company is registered in İstanbul Trade Registry Office in Turkey in the below address:

Rüzgarlıbahçe Mahallesi Selvi Çıkmazı Sokak No: 4 Beykoz 34805 İstanbul / Türkiye

The Company’s main scope of operation is to engage in written objectives and subjects stipulated in the Communique on real estate investment companies published by the Capital Markets Board of Turkey (“CMB”) such as investing in real estate, capital market instruments based on real estate, real estate projects and capital market instruments.

Subsidiaries

The Subsidiaries of Torunlar REIC operate in Turkey and the natures of their business are as follows (Note 2):

Subsidiary Nature of business

Toray İnşaat Danış Yapı Adi Ortaklığı (“Toray Danış”) Construction/Contracting TRN Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. (“TRN”) Real Estate Project Development and Management

Toray Danış

The Subsidiary has been incorporated as an ordinary partnership between Torunlar REIC and Danış Yapı Madencilik Nakliyat Petrol Gıda Oto Tamiri ve Yedek Parça Sanayi ve Ticaret Ltd. Şti. on 9 October 2007, for the use of land situated in İstanbul Küçükçekmece Kayabaşı, which has been awarded by a tender of the Housing Development Administration of Turkey (“TOKİ”) to the ordinary partnership for the use of the land as the excavation molding area. The company’s operation has been terminated and is in the process of liquidation.

TRN

In accordance with the Extraordinary General Assembly Meeting held on 9 March 2010, the Company has transferred Antalya Deepo Mall located in Antalya City, Centre County, Koyunlar Village which was unfavourable for it to retain in its investment portfolio due to its current zoning situation, to a newly incorporated subsidiary of the Company, TRN Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. (“TRN”) by “spin- off ”. Additionally, the immovables located in Antalya city Koyunlar village, which are not included in the shopping mall concept, however considered to be useful to maintain the conceptual integrity and to enable the implementation of additional projects for a future potential parcellation plan are also transferred to TRN. The incorporation of TRN was approved by İstanbul Trade Register as at 31 March 2010. Torunlar REIT 2011 Annual Report P / 96

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Joint Ventures

The joint ventures of Torunlar REIC operate in Turkey and the nature of their business, the business segment and joint venture partners are as follows (Note 2):

Joint venture Nature of business Joint venture partner

Torunlar Özyazıcı Real estate Özyazıcı İnşaat Elektrik, Makine, Proje Ortaklığı (“Torunlar Özyazıcı”) projects Müşavirlik ve Taah. Ltd. Şti.

TTA Gayrimenkul Yatırım Geliştirme ve Shopping mall and Anaterra Gayrimenkul Yatırım Yönetim A.Ş.(“TTA”) hotel project İnşaat ve Ticaret A.Ş.

Torunlar Aşçıoğlu Kapıcıoğlu Real estate Aşçıoğlu İnşaat Taah. Turizm Proje Ortaklığı (“Torunlar Aşçıoğlu Kapıcıoğlu”) projects Ticaret A.Ş. Kapıcıoğlu İnşaat Sanayii ve Ticaret A.Ş.

Torunlar Özyazıcı

Torunlar Özyazıcı has been incorporated as an ordinary partnership with a joint venture agreement on 26 January 2009. The subject of the joint venture is to conduct construction and sales of the housing development project Nishistanbul in Yenibosna İstanbul. This project includes 63 offices, 585 residences and 52 shops in 4 blocks each with 17 floors.

In accordance with the revenue sharing agreement signed between Torunlar Özyazıcı and land owner of the project, 31% of total project revenues will be distributed to the land owner and the remaining 69% portion will be shared between the joint venturers as 60% Torunlar REIC and 40% Özyazıcı İnşaat Elektrik, Makine, Müşavirlik ve Taah. Ltd. Şti.. After the completion of the project, it is planned to be liquidated within the year 2012.

TTA

TTA Gayrimenkul Yatırım ve Yönetim A.Ş. has been incorporated on 7 January 2010 following the win of the tender related to the old cigarette factory and its auxiliary buildings which are located in Samsun, İlkadım district, 205 lot, 2,8,9,10,11,12,13,14 parcels and 376 lot, 1 parcel and 377 lot, 5 parcel whose ownership is registered to Samsun Metropolitan Municipality. The project includes, by the approval of Samsun Cultural and Natural Heritage Protection Regional Committee; the renovation as shopping mall and/or hotel; constructing two storey underground car park and facilitating the right of operation to Samsun Metropolitan Municipality; operating for 30 years with a limited incorporeal right (permanent and individual usufruct right) on land registry by the same term and providing a certain share of the revenue of shopping mall and/or hotel to Samsun Metropolitan Municipality; delivering the project to Samsun Metropolitan Municipality at the end of the 30 year term.

In August 2011, 450,000 shares which were previously owned by Turkmall Gayrimenkul Geliştirme Yönetim ve Yatırım A.Ş. and valued nominally as TL450,000 and 50,000 shares which were previously owned by Ahmet Demir and valued nominally as TL50,000 were transferred to Anaterra Gayrimenkul Yatırım İnşaat ve Ticaret A.Ş. After the transfer, the shareholding structure of TTA is 40% Torunlar GYO, 8% Torunlar Gıda Sanayi Ticaret A.Ş., 1% Aziz Torun, 1% Mehmet Torun and 50% Anaterra Gayrimenkul Yatırım İnşaat ve Ticaret A.Ş. Torunlar REIT 2011 Annual Report P / 97

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership

The joint venture group including the Company has won the tender regarding the income sharing project in exchange for the sale of the land on which Ali Sami Yen Stadium is located. The land is located on the land in Dikilitaş Neighborhood, Şişli District, İstanbul Province located in the Plate 58, Block 1199, Lot 384. The Project that will be applied on the land comprised touristic and commercial real estate developments as well as recreational area and the costs of construction are to be borne by Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership. For this purpose, Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership has been formed on 18 October 2010. The partnership shares are as follows: 65% Torunlar REIC, 35% Aşçıoğlu A.Ş. and 5% Kapıcıoğlu A.Ş.. An Income Sharing in Exchange for the Sale of Land contract has been signed with The Republic of Turkey Prime Ministry Housing Development Administration on 10 November 2010 in the scope of the mentioned Project. As of the preparation date of the financial statements, the project is at the licencing phase and construction has not commenced yet.

Associates

The Associates of Torunlar REIC are incorporated in Turkey and their primary operations and nature of businesses are stated below:

Associate Nature of business

Yeni Gimat İşyerleri İşletmesi A.Ş. (“Yeni Gimat”) Owner of Ankamall Shopping Mall and Crowne Plaza Hotel Netsel Turizm Yatırımları A.Ş. (“Netsel”) Management of Marmaris Marina

Yeni Gimat

Yeni Gimat has been incorporated by participation of 1,049 individual shareholders as founding members on 30 July 1999. The entity owns Ankamall Shopping Mall since 2006 and Ankara Crowne Plaza Hotel since 2007. The number of shareholders that is A group (registered) of Yeni Gimat is 907 as of 31 December 2010 (31 December 2010:927). While the Company owns 14.83% of Yeni Gimat shares and Torunlar family members also own another 5% of Yeni Gimat, as a result the Company has significant influence on Yeni Gimat and is also represented in the Board of Directors. The investment in Yeni Gimat is accounted for by equity method in the consolidated financial statements.

Netsel

Netsel has been incorporated by Net Turizm Ticaret and Sanayi A.Ş. and Yüksel İnşaat A.Ş. on 6 October 1987. The coastal property operated by Netsel, has been leased from Ministry of Culture and Tourism for 49 years on 22 December 1988. Net Turizm sold its shares to Marmara Bank on 1992 and Yüksel İnşaat sold its shares to Çukurova Group in 1994. Following the liquidation process of Marmara Bank, 44.60% of Netsel was sold to Torunlar REIC in accordance with share transfer agreements on 31 May 2005 and 7 June 2005 respectively and 55% of Netsel was transferred to Tek-Art Kalamış and Fenerbahçe Marmara Turizm Tesisleri A.Ş. (a subsidiary of Koç Holding A.Ş.) in accordance with share transfer agreement on 22 August 2005 as a privatisation transaction. The remaining 0.40% belongs to Torun family. Torunlar REIT 2011 Annual Report P / 98

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

2.1 Basis of preparation

Financial reporting standards

The Company and its Turkish subsidiaries maintain their books of account and prepare their statutory financial statements in accordance with accounting principles in the Turkish Commercial Code (“TCC”) and tax legislation.

The Capital Markets Board (“CMB”) Communiqué Serial: XI, No: 29 “Financial Reporting Standards in Capital Markets” (“Communiqué Serial: XI, No: 29”) provides principles and standards on the preparation and presentation of financial statements. The Communiqué is applicable commencing from the first interim financial statements prepared subsequent to 1 January 2008, and Communiqué Serial: XI, No: 25 “The Capital Market Accounting Standards” (“Communiqué Serial: XI, No: 25”) is annulled by the application of this communiqué. As per this communiqué, the financial statements should be prepared in accordance with the International Financial Reporting Standards (“IAS/IFRS”) as endorsed by the European Union (“EU”). However, companies will apply IASs/IFRSs until the differences between the standards accepted by the European Union and the standards issued by International Accounting Standards Board (“IASB”) are announced by Turkish Accounting Standards Board (“TASB”). In this respect, Turkish Accounting / Financial Reporting Standards that are issued by TASB and are not controversial to the adopted standards shall be taken as a basis in the application.

As the differences between the International Financial Reporting Standards (“IAS/IFRS”) as endorsed by the European Union and the Turkish Accounting/Financial Reporting Standards (“TAS/TFRS”) have not been declared as of the date of this report, the accompanying financial statements and notes are prepared in accordance with IAS/IFRS as declared in the Communiqué Serial: XI, No: 29 with the required formats announced by the CMB.

The Group maintains their books of account and prepares their statutory financial statements (“Statutory Financial Statements”) in TL in accordance with the Turkish Commercial Code (“TCC”), tax legislation and the Uniform Chart of Accounts issued by the Ministry of Finance, accounting principles issued by the CMB for listed companies. These consolidated financial statements are based on the statutory records, which are maintained under historical cost conversion, with the required adjustments and reclassifications reflected for the purpose of fair presentation in accordance with the CMB Financial Reporting Standards

The application of inflation accounting to adjust financial statements at the period of high inflation

With the decision taken on 17 March 2005 numbered 11/367 , the CMB has announced that, effective from 1 January 2005, the application of inflation accounting is no longer required for companies operating in Turkey. However for IFRS reporting purposes Turkey has been considered a hyperinflationary economy until 31 December 2005 and IAS 29 “Financial Reporting in Hyperinflationary Economies” issued by IASB has not been applied starting from 1 January 2006.

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The Group’s functional and presentation currency is TL. Torunlar REIT 2011 Annual Report P / 99

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Consolidation principles

The consolidated financial statements include the accounts of the parent company, Torunlar REIC and its subsidiaries, joint ventures and associates on the basis set out in sections at the below. The financial statements of the companies included in the scope of consolidation are based on the statutory records which are maintained under historical cost conversion, with adjustments and reclassifications, for the purpose of fair presentations in accordance with CMB and application of uniform accounting policies and presentation.

Subsidiaries

Consolidated financial statements consist of financial statements of the Company, the Company’s subsidiaries and joint ventures. Control is provided with influence on financial and operational policy in order to obtain economic benefit from enterprise benefit.

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases. The Company has the power to govern the financial and operating policies of its Subsidiary for the benefit of the Company through the power to exercise more than 50% of the voting rights relating its shares in the Subsidiary.

The Company consolidates its Subsidiary from the date of establishment of the Subsidiary by the Group and subsidiaries are excluded from the consolidation at the date on which control is lost. Where necessary, accounting policies for the Subsidiary can been changed to ensure consistency with the policies adopted by the Company.

The balance sheet, statement of comprehensive income and the statement of cash flows of the Subsidiary are consolidated on a line-by- line basis. Intercompany transactions and balances between the Company and the Subsidiary are eliminated on consolidation. The cost of, and the dividends arising from, shares held by the Company in its Subsidiary are eliminated from equity and statement of comprehensive income for the year, respectively.

The non-controlling shareholders’ share in the net assets and results of Subsidiaries for the year are separately classified as non- controlling interest in the consolidated balance sheets and statements of income. When the losses applicable to the non-controlling shareholders exceed the non-controlling interest in the equity of the subsidiary, the excess loss and the further losses applicable to the non-controlling shareholders are charged against the non-controlling interest.

31 December 2011 31 December 2010 % %

Toray Danış - 99.99 TRN 99.99 99.99 Torunlar REIT 2011 Annual Report P / 100

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Joint Ventures

Joint Ventures are companies in respect of which there are contractual arrangements through which an economic activity is undertaken subject to joint control by the Company and one or more other parties. The Group exercises such joint control through the power to exercise voting rights relating to shares in the companies as a result of ownership interest directly and indirectly by itself.

The Group’s interest in Joint Ventures is accounted for by way of proportionate consolidation. According to this method, the Group includes its share of the assets, liabilities, income and expenses of each Joint Venture in the relevant components of the financial statements. Liabilities and expenses resulting from the assets controlled jointly are accounted according to their accrual basis. If the economic benefits related to the share of the Group from the revenue obtained from the usage or the sales of the assets of the enterprises subject to joint control are possible to flow to the Group and their amounts are reliably measurable, then the related share is recorded.

Unrealized profits and losses resulting from the transactions between the Group and the Group’s jointly controlled enterprises are eliminated in the share rate of the Group in the enterprises subject to joint management.

As of 31 December 2011 and 2010 Torunlar REIC’s share in the Joint Ventures is a follows:

31 December 2011 31 December 2010 % %

Torunlar Özyazıcı 60.00 60.00 TTA 40.00 40.00 Torunlar Aşçıoğlu Kapıcıoğlu 65.00 65.00

Torunlar Özyazıcı, TTA and Torunlar Aşçıoğlu Kapıcıoğlu joint ventures have been incorporated on 26 January 2009, 7 January 2010 and 18 October 2010, respectively. Transactions after this date have been consolidated by the Group.

Current assets, non-current assets, current liabilities and net income of the Joint Ventures have been proportionally consolidated in the consolidated financial statements on a line by line basis. The summary of these amounts are shown below: Torunlar REIT 2011 Annual Report P / 101

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Interest in Joint Ventures(*)

31 December 2011 31 December 2010

Current assets 84,955 65,339 Non-current assets 276,195 53,553

Total assets 361,150 118,892

Current liabilities 72,299 22,546 Non-current liabilities 154,525 - Equity 134,326 96,346

Total liabilities and equity 361,150 118,892

Net income for the period 62,754 56,428

(*) Interest in joint venture represents the balances of the joint venture’s stand-alone financial statements which is proportionately consolidated before the intercompany eliminations, reclassifications and adjustments.

Associates

Investments in Associates, over which the Group has significant influence, but which it does not control, are accounted for by the equity method of accounting. The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Carrying amount in the date of termination of significant influence, presented with fair value if fair value after this date can be measured securely, otherwise, presented with cost value. Torunlar REIT 2011 Annual Report P / 102

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Torunlar REIC’s effective ownership interests in its associates as at 31 December 2011 and 2010 are as follows (%):

31 December 2011 31 December 2010 % %

Yeni Gimat 14.83 14.83 Netsel 44.60 44.60

Interest in associates on combined basis(*) 31 December 2011 31 December 2010

Total assets 1,298,052 974,310 Total liabilities 236,961 171,416 Net income for the period 291,611 91,073

(*) These combined balances represent amounts presented in the separate financial statements of associates after adjustments for Group accounting policies but before the intercompany eliminations,

Interest in Yeni Gimat 31 December 2011 31 December 2010

Total assets 1,265,554 946,455 Total liabilities 227,405 165,026 Net income for the period 284,956 87,003

Interest in Netsel 31 December 2011 31 December 2010

Total assets 32,498 27,855 Total liabilities 9,556 6,390 Net income for the period 6,655 4,070

Offsetting

Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet when there is a legally enforceable right to set-off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

Going concern

The Group’s consolidated financial statements are prepared under the going concern assumption.

2.2. Changes in accounting policies

Material changes in accounting policies are corrected, retrospectively; by restating the prior periods’ consolidated financial statements. The Company has started to implement the bulletin of CMB serial XI, No.29 as of 1 January 2008 and has resubmitted the comparative financial information within this scope. The implementation of CMB Serial XI, No.29 bulletin has not caused important changes on the legal policies of the Company. Torunlar REIT 2011 Annual Report P / 103

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Comparative information and reclassifications in the previous period’s financial statements

In order to enable consistent presentation of the financial status and performance trends, the consolidated financial statements of the Group are being prepared in comparison to the previous period. With the aim of providing coherence with the consolidated financial statements of the current period, the classifications to the comparative financial information have been made where appropriate. In this context, advances given amounting to TL1,716 which were previously classified as inventories in the consolidated balance sheet as of 31 December 2010 is classified other current assets and work-in-progress amounting to TL2,337 related with Ali Sami Yen Project and uncompleted residences amounting to TL4,665 related with Korupark 3. Phase are classified under long term inventories.

Changes in standards and interpretations

Group applied the revised standards and interpretations that are relevant to its operations, published by International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC) and effective from 1 January 2011.

Application of new or amended standards and interpretations effective for annual periods beginning on or after 1 January 2011:

• IAS 32, (Amendment), “Presentation of Financial Statements” (effective for the annual reporting periods on or after 1 February 2010). • IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments” (effective for the annual reporting periods on or after 1 July 2010). • IFRIC 1, (Amendment) “First-time Adoption of IFRS”, (effective for the annual reporting periods on or after 1 July 2010). • IAS 24, (Revised), ‘Related Party Disclosures” (effective for the annual reporting periods on or after 1 January 2011. • IFRIC 14, (Amendment), “Prepayments of a Minimum Funding Requirement’” (effective for the annual reporting periods on or after 1 January 2011). • In the content of development project of IFRS, 6 standards and 1 interpretation were amended in 2010 which are IFRS 1, IFRS 3, IFRS 7, IFRIC 27, IFRS 34, IFRIC 13.

Amendments on standards and interpretations above are effective on 1 January 2011 and have no significant influence over consolidate financial statements.

Standards, amendments and interpretations to existing standards that is not yet effective as of 31 December 2011:

• IFRS 7 (Amendment), ‘Financial Instruments: Disclosures” (effective for the annual reporting periods on or after 1 July 2011). • IFRS 1 (Amendment), ‘First-time Adoption of IFRS” (effective for the annual reporting periods on or after 1 July 2011. • IAS 12 (Amendment), “Income Tax” (effective for the annual reporting periods on or after 1 January 2012. • IAS 1 (Amendment), “Presentation of Financial Statements” (effective for the annual reporting periods on or after 1 July 2012). • IAS 19 (Amendment), “Employee Benefits” (effective for the annual reporting periods on or after 1 January 2013). • IFRS 9, “Financial Instruments” (effective for the annual reporting periods on or after 1 January 2015). • IFRS 10, “Consolidated Financial Statements” (effective for the annual reporting periods on or after 1 January 2013).

The Group will evaluate the influence of the above changes over the operations and implement after 1 January 2012 where applicable. Torunlar REIT 2011 Annual Report P / 104

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

2.3. Restatement and errors in the Accounting Policies and Estimates

Material changes in accounting policies and accounting estimates are corrected, retrospectively; by restating the prior periods’ consolidated financial statements. The effect of changes in accounting estimates affecting the current period is recognized in the current period; the effect of changes in accounting estimates affecting current and future periods is recognized in the current and future periods. There has not been any significant change in accounting estimates of the Group for the current period.

2.4. Summary of significant accounting policies

The significant accounting policies followed in the preparation of the consolidated financial statements are summarised below:

Cash and cash equivalents

Cash and cash equivalents are carried at cost in the balance sheet. Cash and cash equivalents comprise cash in hand, bank deposits and highly liquid investments, whose maturity at the time of purchase is less than three months and conversion risk on value date is immaterial (Note 4).

Related parties

For the purpose of the consolidated financial statements, shareholders, key management personnel and Board members, in each case together with their families and companies controlled by or affiliated with them, Associates and Joint Ventures and companies controlled by the Torun Family are considered and referred to as related parties.

Foreign currency transactions

The foreign exchange transactions that take place during the period are translated into TL using the exchange rates on transaction dates of the operation dates. Foreign currency denominated monetary assets and liabilities are translated into TL with the exchange rates prevailing on the balance sheet dates. The foreign currency exchange gain and losses that were arisen by the exchange rate change based on monetary assets and liabilities were presented in the consolidated statement of income.

Financial assets

Classification

The financial assets of the Group consist of receivables and cash and cash equivalents. Management determines the classification of its financial assets at initial recognition. a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables comprise “trade and other receivables”.

Trade receivables generally consist of receivables from sales on credit terms based on preliminary sale agreements and rent receivables from shopping malls. Torunlar REIT 2011 Annual Report P / 105

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) b) Derivative financial instruments

The Group has an interest rate swap transaction as of 31 December 2011. This derivative instrument provides an economic hedge of the Group’s cash flow risks arising from its borrowings, however; instruments have been accounted under the “Other financial liabilities” account balance in the consolidated financial statements due to not including necessary documentation requirements in terms of risk accounting according to ISA 39 “ Recognition of financial instruments” as of 31.12.2011.

Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets except for these that are carried at fair value through profit or loss. Financial assets carried at fair value through profit or losses are initially recognised at fair value, and transaction costs are expensed in the consolidated statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Derivative financial instruments are initially recognized at cost and subsequently re-measured at fair value. Unrealized gains and losses arising from the changes in the fair values of these instruments are accounted in the consolidated statement of comprehensive income.

Derivatives which have positive fair value are recognised in assets, derivatives which have negative fair value are recognised in liabilities in the consolidated financial statements.

Impairments related to trade receivables are explained in the accounting policies related to trade receivables.

Trade receivables and payables

Trade receivables which arise from providing with a product or service to a purchaser by the company, are recognized net of unaccrued financing income. Trade receivables of the Group are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. Short term receivables with no stated interest rate are measured at original invoice amount unless the effect of imputing interest is significant (Note 7).

An impairment provision for trade receivables is established if there is objective evidence that the Group will not be able to collect all amounts due in accordance with the original agreement terms. 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.

If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is reversed through other operating income.

Trade payables consist of payables to suppliers for purchases of goods and services. Trade payables and other financial liabilities are accounted for at amortized cost. Payable amounts in the subsequent period of recorded payables from original invoice values of trade payables and other liabilities after unaccrued financial liabilities are calculated with discounted based on the original effective interest rate. Torunlar REIT 2011 Annual Report P / 106

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Advances received

Advances received comprise amounts received from customers who entered into preliminary sales contracts with the Group for its housing projects. Therefore, these amounts have been classified as short and long term based on the estimated delivery date of the underlying housing units. The advances received for other operational activities are classified as short-term and long-term according to nature and duration of advances.

Financial liabilities and borrowing costs

Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method in consolidated financial statements. Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method in consolidated financial statements. IAS 23, (Revised) “Borrowing Costs” IAS 23 (revised) requires an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset, removing the option of immediately expensing borrowing costs. The Group has applied “allowed alternative treatment” in accordance with the previous IAS 23 and IFRS 1 for periods before 1 January 2009 and started to apply IAS 23 revised for periods starting 1 January 2009.

Financial leases

The Group as the lessee

Finance leases

Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the consolidated statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Equipment acquired via finance leases are installed in investment properties (elevators, escalators etc) and therefore considered an integral part of these investment properties. These investment properties are carried at fair value in the financial statements and therefore the cost of this equipment is not accounted for separately. Obligations under finance leases are accounted for under the “Financial liabilities” account balance on the balance sheet (Note 5).

Operational leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.

The Group as the lessor

Revenue includes rental income, and service charges and management charges from properties. Rental income from operating leases is recognised on a straight-line basis over the lease term. When the Group provides incentives to its tenants, the cost of incentives is recognised over the lease term, on a straight-line basis, as a reduction of rental income only when such incentives are for the acquisition of new tenants. Rent discounts in various forms granted to existing tenants are deducted from revenue in the period in which such discounts are given. Service and management charges are recognised in the accounting period in which the services are rendered (Note 16). Torunlar REIT 2011 Annual Report P / 107

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Current and deferred income taxes

The Company is exempt from corporate income taxes in accordance with paragraph d-4 of Article 5 of the Corporate Income Tax Law. In accordance with paragraph 6-a of Article 94 of the Income Tax Law, the earnings of the real estate investment trusts are subject to withholding taxes, with Council of Ministers decision No, 93/5148, the withholding rate is determined as “0”, Therefore, the Company has no tax obligation over its earnings for the related period (Note 22).

Both the subsidiary Toray Danış and the joint ventures; Torunlar Özyazıcı and Torunlar Aşçıoğlu Kapıcıoğlu are ordinary joint stock companies in legal form. Ordinary partnerships do not have a corporate income tax liability as separate legal entities. Tax is included to comprehensive income statement on the condition of not to be related with any transaction such as recognition of tax under equities. Otherwise, recognition of tax is made under equities together with related transaction. TRN which is subsidiary of the Group was founded consequent to a carve-out due to the inconvenience of Antalya Deepo to be in portfolio and; therefore the related real estates had been transferred to TRN. TRN, a joint stock company is subject to corporate income tax over its profit.

Deferred income taxes are provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. Currently enacted tax rates are used to determine deferred income tax at the balance sheet date (Note 22). As the Company is exempt from corporate income taxes based on the current tax legislation, no deferred income tax asset or liability has been calculated on temporary taxable and deductible differences in these consolidated financial statements. In order to clear inconvenience related to Antalya Deepo Shopping Mall which is owned by subsidiary TRN, TRN’s merger is planned with Torunlar REIC, therefore deferred tax is not calculated over the temporary timing difference between carried value and fair values of related investment properties.

Employment termination benefits

Provision for the employee termination benefits shows the present value of total liabilities resulting from retirement of personnel in the future for the company in accordance with Turkish Labor Law. Under the Turkish Labor Law, the Company is required to pay termination benefits to each employee who has completed at least one year of service and whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men). Since the legislation was changed on 23 May 2002, there are certain transitional provisions relating to length of service prior to retirement.

The amount payable consists of one month’s salary limited to a maximum of 2,731.85 in full TL amount as of 31 December 2011 (31 December 2010: TL2,517).

Provision is related to fair value of defined benefit plan calculated with the method of estimated liability. All actuarial profit and losses are accounted under consolidate comprehensive income statement.

IFRS, requires actuarial valuation methods to be developed to estimate the enterprise’s obligation for such benefits. The liability for this unfunded plan recognized in the balance sheet is the full present value of the defined benefit obligation at the end of the reporting period, calculated using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows from the retirement of its employees using the long term TL interest rates.

The principal actuarial assumption is that the maximum liability will increase in line with inflation. Thus the effective discount rate applied represents the expected real interest rate after adjusting for the effects of future inflation. As the maximum liability amount is revised semi-annually by the authorities, the maximum amount of 2,805.04 in full TL which is effective from 1 January 2012 has been taken into consideration when calculating the liability (1 January 2011: TL 2,623.23). Torunlar REIT 2011 Annual Report P / 108

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Provisions, contingent assets and liabilities

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are not recognized for future operating losses.

Contingent assets or contingent obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group are not included in financial statements and are treated as contingent assets or liabilities (Note 14).

Inventories

Inventories are valued at the lower of cost or net realisable value. Inventories comprise of construction costs of housing units (completed and in-progress) and the cost of land used for to these housing projects. Land held for future development of housing projects are also classified as inventory. Cost elements included in inventory are purchase costs, conversion costs and other costs necessary to prepare the asset for its intended use. Unit costs of the inventories are valued at the lower of cost or net realisable value. Housing units which are completed and ready for delivery to customers together with work-in progress costs for housing units which will be completed within a year, are classified as short term inventories in the consolidated financial statements. Borrowing costs attributable to qualifying projects are capitalized, where construction of the project has started before 1 January 2009 or such project is already financed with up-front advances from customers, the Group does not capitalize borrowing costs (Note 9).

Property, plant and equipment and related depreciation

Property and equipment are carried at cost less accumulated depreciation and provision for impairment, if any. Any directly attributable costs of setting the asset in working order for its intended use are included in the initial measurement.

Depreciation is calculated over of the cost of property and equipment using the straight-line method based on expected useful lives (Note 10).

The expected useful lives are stated below: Years

Motor vehicles 5 Furniture and fixtures 4-5

Subsequent costs incurred for tangible assets are included in the asset’s carrying amount or recognized as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the consolidated statement of comprehensive income during the financial period in which they were incurred.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount and the provision for impairment is charged to consolidated statement of comprehensive income.

Gains and losses on the disposal of property and equipment are determined by deducting the net book value of the property and equipment from its sales and are included in the related income and expense accounts, as appropriate. Torunlar REIT 2011 Annual Report P / 109

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Intangible fixed assets

Intangible assets acquired separately are carried at cost, less accumulated amortization and any accumulated impairment losses. Amortization is charged on a straight-line basis over their estimated useful lives. Estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.

Construction contracts

The Group does not have any activities where IAS 11 “Construction Contracts” is applicable. The Group’s activities in housing development projects are accounted for under IAS 18 “Revenue”, as confirmed on the comment IFRIC 15 “Agreements for the construction of real estate”

Non-current assets held for sale

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell and no depreciation is calculated, if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use. The Group does not have any non-current assets that meet the criteria for asset held for sale as of 31 December 2011 (31 December 2010: None).

Investment properties

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property. Investment properties are carried at fair value. Gains and losses resulting from changes in fair values of investment property are recognized in the consolidated statement of comprehensive income (Note 8).

As from 1 January 2009, in line with the amendment in IAS 40 investment property shall also include properties that are being constructed or developed for future use as investment property. Since the Group applied IFRS 1, the amendment in IAS 40 has been applied for all periods presented, that is fair value model is also applied to investment properties under construction before 1 January 2009 provided that the fair values of such investment properties under construction were determined at those dates.

Goodwill

Goodwill is not amortised, instead it is tested for impairment annually (as of 31 December), or more frequently if events or changes in circumstances indicate that it might be impaired, (Note 13). Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. For the purpose of impairment testing goodwill is allocated to the cash-generating units. Torunlar REIT 2011 Annual Report P / 110

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Impairment of assets

The Company reviews all assets including tangible assets at each balance sheet date in order to see if there is a sign of impairment on the stated asset. If there is such a sign, carrying amount of the stated asset is projected. Impairment exists if the carrying value of an asset or a cash generating unit including the asset is greater than its net realizable value. Net recoverable value is the higher of the net sales value or value in use. Value in use is the present value of cash flows generated from the use of the asset and the disposal of the asset after its useful life. Impairment losses are recorded in the consolidated statement of comprehensive income. Impairment loss for an asset is reversed, if an increase in recoverable amount is related to a subsequent event following the booking of impairment by not exceeding the amount reserved for impairment.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors (Note 3).

Revenue recognition

Revenue is recognised when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to the Group. Revenue is presented net of value added and sales taxes. The following criteria are necessary for the recognition of revenue:

Rent income obtained from investment properties

Rent income from investment properties is recognised on an accrual basis. Revenue is realized when economic benefits arising from the transaction have passed, and when the amount of such income can be reliably measured. Rent discounts and similar promotions granted to existing tenants from time to time are netted off from rent revenues as they are not rent incentives for acquisition of new contracts.

Revenues from common area charges

Common area expenses of Torunlar REIC related to owned shopping malls charged to tenants in accordance with the individual provisions of rental contracts entered into with tenants. Torunlar REIT 2011 Annual Report P / 111

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Sale of real estate

Income obtained from the sales of the real estate (residential and office units classified as inventories) is accounted as soon as the below conditions are met:

• The Group has transferred all significant risks and rewards associated property to the buyer. (Transfer of title generally coincides with the final acceptance by the customers of the residential or office units sold and that is when the risk and rewards of ownership is considered to have passed to the customer). • The Group is not having any control on the continued administrative participation associated with property and on the sold properties, • Measuring the amount of income reliably, • Possibility of a flow of the economic benefits related to the transaction to the Group and • Reliable measurement of the inflows resulting from the transaction reliably.

Interest income

When the arrangement effectively constitutes a financing transaction, the fair value of the consideration is determined by discounting all future receipts using an imputed rate of interest.

Dividend income

Dividend income is recognized by the Group at the date the right to collect the dividend is realized.

Paid-in capital

Ordinary shares are classified as equity. Proceeds from issuing new equity instruments are recorded net of transaction costs.

Share premium

Share premium represents the positive difference between the nominal value of issued shares and proceeds for such shares issued.

Treasury shares

The Company’s own shares which are bought by the Company itself from ISE are named as treasury shares and recorded on nominal value in equities. Purchase/sale of treasury stocks is not associated with comprehensive income statement, and recognition is made directly on equities. Torunlar REIT 2011 Annual Report P / 112

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Earnings per share

Earnings per share are determined by dividing net comprehensive income by the weighted average number of shares that have been outstanding during the period concerned.

In Turkey, companies can increase their share capital by making a pro-rata distribution of their shares (“bonus shares”) to existing shareholders funded from retained earnings or other reserves. For the purpose of earnings per share computations, such bonus share issuances are regarded as issued shares for all periods presented and accordingly the weighted average number of shares used in earnings per share computations in prior periods is adjusted retroactively for the effects of these shares, issued without receiving cash or another consideration from shareholders.

Reporting of cash flows

Consolidated statement of cash flows includes cash and cash equivalents, cash with original maturity periods of less than three months and bank deposits (Note 4).

Offsetting

Each material class of similar items according to their nature or function is presented separately in the financial statements. If a line item is not individually material, it is aggregated with other similar items according to their nature or function. If the essence of the transaction and events requires offsetting, presentation of these transactions and events at their net values or following up of the assets at their amounts after the deduction of impairment, is not evaluated as a breach of the non-deductibility rule.

Dividends

Dividend income is recognized by the Group at the date the right to collect the dividend is realized. Dividend payables are recognized as a result of profit distribution in the period they are declared.

Subsequent events

Subsequent events cover any events which arise between the reporting date and the balance sheet date, even if they occurred after any declaration of the net profit for the period or specific financial information publicly disclosed. The Company adjusts its financial statements if such subsequent events arise which require an adjustment to the financial statements (Note 26).

2.5 Critical accounting estimates, assumptions and judgements

The preparation of consolidated financial statements requires the use of assumptions and estimates that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues expenses which are reported throughout the period. Even though, these assumptions and estimates rely on the best estimates of the Company management; the actual results might differ from them. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are outlined below: Torunlar REIT 2011 Annual Report P / 113

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Fair valuation of investment properties:

In the consolidated financial statement, basic assumptions used in valuation reports during the finding fair values of real estates classified as investment property is defined below;

In the consolidated financial statement, investment properties are carried at fair values. Fair values of the investment properties are determined by independent valuation experts; Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş. and Standart Gayrimenkul Değerleme Uygulamaları A.Ş. who were the experts in 2010 and 2011, respectively. The Group assumes that expenditure amount on investment property has an equivalent effect on fair value of related real estate.

In the consolidated financial statements, the following assumptions used by valuation experts, that is the selection of the valuation method, the discount rate, the rent increase per annum, the capitalisation rate (which is the discount rate used to determine the terminal value) and determination of the market comparable m2 values are considered critical and thus disclosed below in tabular format.

Valuation Valuation Rent market m2 report Valuation Discount increase Capitalisation value 31 December 2011 date method rate(*) rate p.a rate in full TL

Mall of İstanbul 27/02/2012 Discounted cash flow 10.50% 3.00% 7.50% - Bursa Korupark Shopping Mall 27/02/2012 Discounted cash flow 10.10% 2.00% 8.10% - Torium Shopping Mall 27/02/2012 Discounted cash flow 10.50% 3.00% 7.50% - Torun Tower 27/02/2012 Sale comparison - - - 26,698 Bursa Zafer Plaza Shopping Mall 27/02/2012 Discounted cash flow 10.50% 3.00% 7.50% - Antalya Deepo Shopping Mall 27/02/2012 Discounted cash flow 10.10% 3.00% 7.10% - Antalya Deepo additional lands 27/02/2012 Sale comparison - - - 150-500 İstanbul İkitelli Kayabaşı land 27/02/2012 Sale comparison - - - 350 İstanbul Beyoğlu Kemankeş building 27/02/2012 Sale comparison - - - 4,389 Bursa Korupark separate retail units 27/02/2012 Discounted cash flow - - - 500-1,750 Bulvar Samsun Shopping Mall 27/02/2012 Discounted cash flow 10.50% 3.00% 7.50% -

Valuation Valuation Rent market m2 report Valuation Discount increase Capitalisation value 31 December 2010 date method rate(*) rate p.a rate in full TL

Mall of İstanbul 31/12/2010 Discounted cash flow 10.00%-10.50% 3.00% 6.50%-7.00% - (“Mall of İstanbul land”) Sale comparison - - - 1,000 Bursa Korupark Shopping Mall 31/12/2010 Discounted cash flow 8.50% 2.00% 6.50% - Torium Shopping Mall 31/12/2010 Discounted cash flow 9.00% 3.50% 6.50% - Torun Tower 31/12/2010 Discounted cash flow 11.50% 3.00% 7.00% - Bursa Zafer Plaza Shopping Mall 31/12/2010 Discounted cash flow 9.50% 3.00% 6.50% - Antalya Deepo Shopping Mall 31/12/2010 Discounted cash flow 9.50% 3.00% 6.50% - Antalya Deepo additional lands 31/12/2010 Sale comparison - - - 60-400 İstanbul İkitelli Kayabaşı land 31/12/2010 Sale comparison - - - 261 İstanbul Beyoğlu Kemankeş building 31/12/2010 Sale comparison - - - 3,096 Bursa Korupark separate retail units 31/12/2010 Discounted cash flow 9.50-10.00% 2.50-3.00% 6.50-7.00% - Nishistanbul retail units 31/12/2010 Discounted cash flow 10.00% 3.00% 7.00% -

(*) Discount rates are based on the currency in which the majority of cash flows are denominated for each investment property. In Turkey Euro and USD are commonly used in rent agreements. Torunlar REIT 2011 Annual Report P / 114

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) i. As at 31 December 2011, 140,926 m2 of land located in İstanbul - Başakşehir İkitelli - 2 district is classified under investment properties. The Group is planning to build a multipurpose project called Mall of Istanbul Project on this land.

Construction licence of Mall of Istanbul project was taken in 18 March 2011 and construction started at the same time. Project will be located on the 656,529 m2 closed area including 129,186 m2 closed area for shopping mall, 8,433 m2 closed area for offices and totally 97,700 m2 closed area for 4 residence blocks with 421,209 m2 common areas. In 4 residence blocks there will be 1,114 flats and in the 1 office block there will be 116 offices. Shopping Mall’s rentable area has been determined as 150,000 m2. Completion ratio of project is 27% as of 31 December 2011. Project’s completion date is expected as last quarter of 2013.

The Group has classified cost of residences and offices that are planned to be sold in the ordinary course of business in inventories, and has classified investment costs related to shopping mall in investment property.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş.’s valuation report in accordance with Capital Markets Board’s Serie: IV No:1 Communiqué, as at 27 February 2012 with the report number SvP_11_TRGYO_08 the aforementioned property’s fair value is determined as TL839,056 as at 31 December 2011 (Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL645,787).

As at its current stage of completion, costs could not be apportioned between the investment property and the inventory portions of the Project, no capital appreciations on the investment property portion was recognized. At 31 December 2011, investment property portion of the Project amounted to TL531,084 and the inventory portion amounted to TL258,264 which in the aggregate amounted to TL789,348 compared to the fair value of the project amounted to TL839,056 as appraised by the independent valuation expert. ii. As at 31 December 2011, Bursa Korupark Shopping Mall located in Bursa - Osmangazi Emek district on 53,185.61 m2 is classified under investment properties and on May 2007 the shopping mall was opened. Management of the Mall is conducted by Torun Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. (“Torun AVM”) - a related party of the Group.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş.’s valuation report in accordance with Capital Markets Board’s Serie: IV No:1 Communiqué, as at 27 February 2012 with the report number SvP_11_TRGYO_10 the aforementioned property’s fair value is TL600,229 as at 31 December 2011 (Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL540,510). iii. On the 44,571 m2 land located in İstanbul - Büyükçekmece Esenyurt district - which is classified under investment property as of 31 December 2011 in the consolidated financial statements, the Group completed the Torium Project and the shopping mall has been opened on 30 October 2010.

Based on Standart Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report with the number SvP_11_TRGYO_04, Capital Markets Board’s Serie: IV No:1 Communiqué, dated 27 February 2012, at 31 December 2011, the aforementioned property’s fair value is TL567,276. Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL549,876. These amounts represent the share of the Company on the mentioned property. As a part of the Torium Project, Torium Residence is constructed independently from Torium Shopping Mall which was classified under inventories (Note 9). Torunlar REIT 2011 Annual Report P / 115

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) iv. On the 14,992 m2 land located in İstanbul - Şişli 2nd District - which is classified under investment property as of 31 December 2011 in the consolidated financial statements, the Company develops Torun Tower Project. The construction licence of Torun Tower Project was received on 30 September 2011, construction works started in November 2011. Project consists of 106,929 m2 gross area and with 152 separate retail units in one block.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş’s valuation report in accordance with Capital Markets Board’s Serie: IV No:1 Communiqué, dated 27 February 2012 with the report number SvP_11_TRGYO_02, the aforementioned property’s fair value is TL253,266 as at 31 December 2011 (Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report 2010/TGYO/09, as at 31 December 2010, the aforementioned property’s fair value is TL237,736). v. Antalya Deepo Shopping Mall located on 67,319.78 m2 land in Antalya - City Centre Koyunlar District - which is classified under investment property as of 31 December 2011 in the consolidated financial statements has been opened in October 2004. Management of the Mall is conducted by Torun Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. a related party of the Group.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş’s valuation report in accordance with Capital Markets Board’s Serie: IV No:1 Communiqué, dated 27 February 2012 with the report number 2012 / SvP_11_TRGYO_14 the aforementioned property’s fair value is TL197,763 as at 31 December 2011. Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report 2010/TGYO/01, as at 31 December 2010, the aforementioned property’s fair value is TL180,492.

According to the appraisal report obtained from Standart Gayrimenkul Değerleme Uygulamaları A.Ş., for the related property to be included in the REIC portfolio, 1/1000 scale implementation zoning plan shall be approved by the Kepez Municipality Zoning Directorate and Antalya Metropolitan Municipality Zoning Directorate and subsequently all related legal permits for the shopping mall shall be obtained. In accordance with the Extraordinary General Assembly Meeting held on 9 March 2010, the Company has transferred Antalya Deepo Mall located in Antalya - City Centre Koyunlar to a newly incorporated subsidiary of the Company, TRN Alışveriş Merkezleri Yatırım ve Yönetim A.Ş. (“TRN”) by “spin-off”. The related transfer has been performed as of 31 March 2010. vi. Bursa Zafer Plaza located on the 9,622 m2 land in Bursa - Osmangazi Şehreküstü District - which is classified under investment property as of 31 December 2011 in the consolidated financial statements has been opened in October 1999. Management of the Mall is conducted by Zafer Plaza İşletmecilik A.Ş. a related party of the Group.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş’s valuation report, dated 27 February 2012 with the report number SvP_11_ TRGYO_09 the aforementioned property’s fair value is TL176,777 as at 31 December 2011 (Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010, the aforementioned property’s fair value is TL143,156) . These amounts represent the share of the Company on the mentioned property. vii. TTA Gayrimenkul Yatırım Geliştirme ve Yönetim A.Ş. (TTA) started project of Bulvar Samsun Shopping Mall on land located in Samsun- City owned by Samsun Metropolitan Municipality and 30 year easement right granted to the Group which is classified under investment property as of 31 December 2011. The Company has completed the construction and the shopping mall is planned to be opened in June 2012.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş’s valuation report in accordance with Capital Markets Board’s Serie: IV No:1 Communiqué, dated 27 February 2012 with the report number 2012/SvP_11_TRGYO_16 the aforementioned shopping mall’s fair value is TL103,583 as at 31 December 2011 and TL41,433 is owned by the Group over its 40% share. Shopping mall’s fair value is calculated using the discounted cash flows considering the future payments of the easement right attached to the revenues of the shopping mall. Torunlar REIT 2011 Annual Report P / 116

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) viii. The Group owns 79,334 m2 land located in Antalya - City Centre Koyunlar District - which is classified under investment property as of 31 December 2011 in the consolidated financial statements. Enlargement of Deepo Shopping Mall is planned with the new construction over the land adjacent to the shopping mall.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş.’s valuation report in accordance with Capital Markets Board’s Serie: IV No:1 Communiqué, dated 27 February 2012 with the report number 2012 / SvP_11_TRGYO_15 the aforementioned property’s fair value is TL34,606 as at 31 December 2011 (Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL28,334). ix. The Group owns 60,833 m2 land located in İstanbul - Küçükçekmece Kayabaşı District - which is classified under investment property as of 31 December 2011 in the consolidated financial statements. The usage of this land has not been determined by the management as of balance sheet date and the land is retained for capital appreciation.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş’s valuation report in accordance with Capital Markets Board’s Serie: IV No:1 Communiqué, dated 27 February 2012 with the report number 2012/SvP_11_TRGYO_03 the aforementioned property’s fair value is TL21,292 as at 31 December 2011 (Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL15,904). x. The Group owns a building located on 1,501 m2 land in İstanbul - Beyoğlu Kemankeş District - which is classified under investment property as of 31 December 2011 in the consolidated financial statements. The building is planned to be renovated as a hotel.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş’s valuation report in accordance with Capital Markets Board’s Serie: IV No:1 Communiqué, dated 27 February 2012 with the report number 2012/SvP_11_TRGYO_06 the aforementioned property’s fair value is TL17,119 as at 31 December 2011 (Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report, as at 31 December 2010 the aforementioned property’s fair value is TL12,703). xi. As at 31 December 2011 separate unit of Bursa Korupark Shopping Mall located in Bursa - Osmangazi Emek district which is classified under investment properties includes a dolphin pool, social recreation areas, office and depots.

Based on Standart Gayrimenkul Değerleme Uygulamaları A.Ş’s valuation report in accordance with Capital Markets Board’s Serie: IV No:1 Communiqué, dated 27 February 2012 with the report number 2012/SvP_11_TRGYO_11 the aforementioned property’s fair value is TL16,645 as at 31 December 2011 (Based on Prime Gayrimenkul Değerleme ve Danışmanlık A.Ş.’s valuation report 210/TGYO/07, as at 31 December 2010 the aforementioned property’s fair value is TL9,324).

2.6 Control of Compliance with the Portfolio Limitations

Presented informations in Note 22: ‘Additional Note: control of compliance with the portfolio limitations’, in accordance with Capital Markets Board’s Communiqué Serial: XI, No: 29 “Financial Reporting in Capital Markets” Amendment No: 17 are condensed information and prepared in accordance with Capital Markets Board’s Communiqué Serial: VI, No: 11“Real Estate Investment Company”. The information given in Note 22 is based on stand-alone amounts of the Company (Torunlar REIC) excluding the figures of the subsidiaries, joint ventures and associates. The aforementioned information may not be reconcile with the amounts in the consolidated financial statements. Torunlar REIT 2011 Annual Report P / 117

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 3 - SEGMENT REPORTING

The reportable segments of Torunlar REIC have been organised by management as a portfolio on a project-by-project basis and makes decisions about resources to be allocated to the properties on the same basis. Major items classified under other items are those projects which are related to other major projects but not a part of them, such as Bursa Korupark separate units, İstanbul İkitelli Küçükçekmece land.

Accounting policies applied by each operational segment of Torunlar REIC are the same as those are applied in Torunlar REIC’s consolidated financial statements prepared in accordance with the accounting policies explained in Note 2. The information about each segment is below. Gross profit has been considered as the performance of segments. a) The segment information for the reportable segments as of and for the period ended 31 December 2011 is as follows;

Total Income segment Gross Capital from revenue profit Depreciation expenditure(*) associates(**)

Korupark Shopping Mall 51,525 37,830 - 281 - Torium Shopping Mall 48,094 26,602 - 7,957 - Korupark Residences 25,379 12,573 - 27,631 - Antalya Deepo Shopping Mall 14,968 11,214 - 339 - Nishistanbul Project 11,809 5,131 - 316 - Zafer Plaza Shopping Mall 8,900 6,491 - - - Torium Residences 569 (177) - 5,358 - Ankamall and Crowne Plaza Hotel - - - - 42,259 Mall of Istanbul Project - - - 145,722 - Torun Tower Project - - - 5,214 - Ali Sami Yen Project - - - 1,807 - Maltepe Land - - - 16,421 - Samsun Bulvar Shopping Mall - - - 10,140 - Other 1,665 491 291 2,066 2,968

Total 162,909 100,155 291 223,252 45,227

(*) Capital expenditures include expenditures made for residence and shopping mall constructions which are classified as inventories and investment properties in the consolidated financial statements. (**) Income from the associate: Yeni Gimat consists of rent income from Ankaramall Shopping Mall and Crowne Plaza Hotel amounting to TL42,259 .The income from the associate: Netsel amounting to TL2,968 is classified in other. Torunlar REIT 2011 Annual Report P / 118

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) b) The segment information for the reportable segments as of and for the period ended 31 December 2010 is as follows:

Total Income segment Gross Capital from revenue profit Depreciation expenditure(*) associates(**)

Nishistanbul Project 119,444 9,342 - 85,554 - Korupark Residences 41,909 21,691 - 1,983 - Korupark Shopping Mall 39,822 29,672 - 250 - Antalya Deepo Shopping Mall 13,656 9,380 - 1,637 - Torium Shopping Mall(***) 9,377 3,572 - 98,599 - Zafer Plaza Shopping Mall 8,400 6,126 - - - Torium Residences - - - 6,741 - Ankamall and Crowne Plaza Hotel - - - - 12,910 Mall of Istanbul Project - - - 18,277 - Torun Tower Project - - - 239 - Other 320 235 183 - 1,815

Total 232,928 80,018 183 213,280 14,725

(*) Capital expenditures include expenditures made for residence and shopping mall constructions which are classified as inventories and investment properties in the consolidated financial statements. (**) Income from the associate: Yeni Gimat consists of rent income from Ankamall Shopping Mall and Crowne Plaza Hotel amounting to TL12,910. The income from the associate: Netsel amounting to TL1,815 is classified in other. (***) The Company’s shopping center in Istanbul called “Torium Mall”, is launched on 30 October 2010. The amount includes segment revenue, gross profit and capital expenditures after the launch of the shopping mall.

NOTE 4 - CASH AND CASH EQUIVALENTS 31 December 2011 31 December 2010

Cash in hand 2 3 Cash at banks - demand deposits 191 32 - time deposits 596,934 438,591 Other 261 38

597,388 438,664 Torunlar REIT 2011 Annual Report P / 119

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

As of 31 December 2011 and 2010 cash and cash equivalents at the consolidated statement of cash flows are as follows:

31 December 2011 31 December 2010

Cash and cash equivalents 597,388 438,664 Less: Blocked deposits(*) - (121,447)

Cash and cash equivalents at statement of cash flow 597,388 317,217

(*) As of 31 December 2010 time deposits amounting to USD75,000 as well as its accrued interest in the fiscal period are blocked against USD 100,000 loan raised according to the borrowing agreement made with the bank, the interest rate of this blocked time deposit is 5.60% per annum with 25 February 2011 maturity date.

Maturities of cash and cash equivalents are as follows:

31 December 2011 31 December 2010

Up to 30 days 438,619 266,508 30 - 90 days 158,769 172,156

597,388 438,664

The breakdown of foreign currency denominated cash and cash equivalents in terms of TL is as follows:

31 December 2011 31 December 2010

USD 166,915 166,316 EUR 43,542 22,501

210,457 188,817

Average effective interest rates of time deposits are as follows (%):

31 December 2011 31 December 2010 (%) (%)

USD 5.52 5.52 EUR 4.17 4.09 TL 11.44 8.84 Torunlar REIT 2011 Annual Report P / 120

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 5 - FINANCIAL LIABILITIES

Financial Investments

The time deposits that have more than three months maturity:

Interest rate Currency p.a.(%) Maturity 31 December 2011

31 December 2011 - TL 12.50% December 2012 58,197 31 December 2010 - EUR 4.00% January 2012 29,459

Financial Liabilities 31 December 2011 31 December 2010

Short-term bank borrowings 160,604 155,539 Short-term portion of Long-term bank borrowings 128,539 75,602 Long-term bank borrowings 811,373 552,122

1,100,516 783,263

Weighted average effective interest Original TL 31 December 2011 rate p.a. (%) Currency balance equivalent

Short-term bank borrowings 5.03% USD 45,344 85,650 14.50% TL 38,027 38,027 4.93% EUR 15,110 36,927

Short-term portion of long term bank borrowings 5.88% USD 49,783 94,034 4.94% EUR 14,118 34,505

Long-term bank borrowings 5.02% USD 290,408 548,556 4.94% EUR 107,545 262,817

Total bank borrowings 1,100,516 Torunlar REIT 2011 Annual Report P / 121

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Weighted average effective interest Original TL 31 December 2010 rate p.a. (%) Currency balance equivalent

Short-term bank borrowings 3.61 USD 86,900 134,347 8.64 TL 19,141 19,141 3.00 EUR 1,001 2,051

Short-term portion of long term bank borrowings 6.36 USD 32,630 50,447 4.88 EUR 12,276 25,155

Long-term bank borrowings 5.82 USD 198,250 306,495 4.91 EUR 119,871 245,627

Total bank borrowings 783,263

The redemption schedules of long-term borrowings at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010

2012 - 142,442 2013 148,125 95,665 2014 170,750 91,443 2015 140,588 66,851 2016 and over 351,910 155,721

811,373 552,122

The analysis of borrowings in terms of periods remaining to contractual repricing dates is as follows:

31 December 2011 31 December 2010

Up to 3 months(*) 685,170 584,633 3-12 months 415,346 196,500 1-5 years - 2,130

1,100,516 783,263

(*) As of 31 December 2011, interest of borrowings amounting to TL288,239 is fixed until 2012 with an interest rate swap contract (31 December 2010: TL264,489) (Note 6). Torunlar REIT 2011 Annual Report P / 122

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 6 - OTHER FINANCIAL LIABILITIES

Derivative financial instruments 31 December 2011 Notional Fair value Amount liability

Interest rate swap contracts 288,239 (1,313)

288,239 (1,313)

31 December 2010 Notional Fair value amount liability

Interest rate swap contracts 264,489 (3,877)

264,489 (3,877)

At 9 June 2009, the Group has signed an interest rate swap contract to fix the Euribor floating interest of its long term borrowing for the period from 24 January 2010 to 24 January 2012. According to the contract signed, Euribor and the total interest of the borrowing are fixed at 2.74% and 4.94% accordingly between 2009 and 2012.

NOTE 7 - TRADE RECEIVABLES AND PAYABLES

Short-term trade receivables 31 December 2011 31 December 2010

Notes receivable 56,734 6,389 Trade receivable 9,372 10,000 Trade receivables from related parties (Note 23)(*) 3,307 35,312 Receivables from the joint venture partner 2,332 - Cheques receivable 1,632 - Notes receivables from related parties (Note 23) - 105

73,377 51,806

Less: Provision for doubtful receivables (2,296) (1,874) Less: Unearned credit finance income - (226)

71,081 49,706

(*) Group, provided funds to Torunlar Aşçıoğlu Kapıcıoğlu Project partnership in the amount of TL95,000 which was used by the Partnership to make the advance payment to The Republic of Turkey Prime Ministry Housing Development Administration (“TOKİ”) which amount to TL97,165 within the scope of Ali Sami Yen Project as of 31 December 2010. TL34,008 which is the exceeding amount of the Group’s 65% share in the partnership, has been presented as receivables from Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership within the receivables from related parties. In 2011, Torunlar Aşçıoğlu Kapıcıoğlu Project partnership paid the debt related to advance payment to the Group after drawing credit from the bank in 2011. Torunlar REIT 2011 Annual Report P / 123

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Long-term trade receivables 31 December 2011 31 December 2010

Notes receivable 60,079 5,377 Less: Unearned credit finance income - (648)

60,079 4,729

Movement of the provision for the doubtful receivables is as follows:

31 December 2011 31 December 2010

At the beginning of the period (1,874) (1,789)

Current year additions (422) (85)

At the end of the period (2,296) (1,874)

The aging schedule of impaired doubtful receivables is as follows:

31 December 2011 31 December 2010

3-6 months (293) (85) 6 months and over (2,003) (1,789)

(2,296) (1,874) Torunlar REIT 2011 Annual Report P / 124

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Short-term trade payables 31 December 2011 31 December 2010

Trade payables 30,217 28,221 Due to related parties (Note 23) 6,803 3,501 Due to the joint venture partner 1,033 952 Notes payable 811 1,862

38,864 34,536

As of 31 December 2011 and 2010, majority of trade payables consist of payables to subcontractors relating to projects in progress.

NOTE 8 - INVESTMENT PROPERTIES

Movement schedule of investment property as of 31 December 2011 and 2010:

1 January Change in 31 December 2011 Additions Disposals Transfers fair value 2011

Bursa Korupark Shopping Mall 540,510 281 - - 59,438 600,229 Torium Shopping Mall 549,876 7,954 - - 9,446 567,276 Mall of İstanbul(*) 645,787 88,530 - (203,233) - 531,084 Torun Tower(**) 237,736 5,214 - - 10,316 253,266 Antalya Deepo Shopping Mall 180,492 339 - - 16,932 197,763 Bursa Zafer Shopping Mall 143,156 - - - 33,621 176,777 Samsun Bulvar Shopping Mall - 10,140 - 473 30,820 41,433 Antalya Deepo additional land 28,334 1,927 - - 4,345 34,606 Nishistanbul retail units 25,673 316 - (25,989) - - Kayabaşı land 15,904 - - - 5,388 21,292 Kemankeş building 12,073 - - - 5,046 17,119 Korupark separate units 9,324 139 - - 7,182 16,645

2,388,865 114,840 - (228,749) 182,534 2,457,490

(*) Construction licence of Mall of İstanbul Project was taken on 18 March 2011.

The Project with 656,528 m2 construction area comprising 129,186 m2 shopping mall, 97,700 m2 residence, 8,433 m2 office and 421,209 m2 is mixed-use project. Project construction has started in March 2011 and is planned to be completed in the last quarter of 2013. Based on the valuation report numbered 2011/TGYO/10 and dated 31 March 2011, which was prepared by Prime Gayrimenkul A.Ş., the value of land belonging to 146,039 m2 sellable residences and offices was determined as TL 203,233 and the value of land belonging to residences and offices to be sold after Project completion has been transferred to inventories. In the content of Project, TL 210,785 advances have been received for the pre-sale contracts of 580 units consisting of 540 residences and 40 offices as of 31 December 2011 (Note 11). Land of 8,506.82 m2, adjacent to the Mall of Istanbul Project, which is kept for project development is owned to the share 112.123/240.000 by the Group (land block 858, Lot 1 Ikitelli-2 Neighborhood, Başakşehir District, Istanbul Province). Against real estate of 9,261,58 m2 area (which corresponds to the 122,071/240,000 share of Block 858 owned by S.S. Masko Istanbul Manufacturers of Wooden Furniture Society Collective Housing), the partnership signed a floor construction in exchange for land agreement with the S.S. Masko Istanbul Manufacturers of Wooden Furniture Society Collective Housing. Land of 52.73 m2 owned by one shareholder on the 18,209.90 metersquare (Block 858, Lot 1 Ikitelli-2 Neighborhood, Başakşehir District, Istanbul Province), adjacent to the Mall of Istanbul Project land (block 858, lot 2 İkitelli Neighbourhood, Başakşehir District) has been acquired by the Group for the amount of 158 TL. After acquisition, total land size of Torunlar REIC became 17,821.13 m2. (**) The Group commenced “Torun Tower Office Project” construction in the on the land Plate 306, Block 2011 and Lot 5 Şişli, Mecidiyeköy District, Istanbul Province. The construction licence was taken on 30 September 2011 and construction started on 30 November 2011. Project completion date is expected as 2013. Torunlar REIT 2011 Annual Report P / 125

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

1 January Change 31 December 2010 Additions Disposals Transfers in fair value 2010

Mall of İstanbul 619,419 18,277 - - 8,091 645,787 Torium Shopping Mall(*) 399,617 98,599 - (1,728) 53,388 549,876 Bursa Korupark Shopping Mall 590,042 250 - - (49,782) 540,510 Torun Tower 167,656 239 - - 69,841 237,736 Antalya Deepo Shopping Mall 124,981 334 - - 55,177 180,492 Bursa Zafer Plaza Shopping Mall 149,201 - - - (6,045) 143,156 Antalya Deepo additional land 14,772 1,303 - - 12,259 28,334 Nishistanbul retail units - 12,617 (4,179) - 17,235 25,673 Kayabaşı land 13,646 - - - 2,258 15,904 Kemankeş building 11,045 - - - 1,028 12,073 Korupark separate units 6,051 63 - - 3,210 9,324

2,096,430 131,682 (4,179) (1,728) 166,660 2,388,865

(*) Current year transfers relate to the cost of land transferred to inventories for the purpose of residential building.

Liens on investment properties regarding bank borrowings at 31 December 2011 and 2010 are as follows:

Original 31 December 31 December Balance Currency 2011 2010

Mall of İstanbul(*) 300,000 USD 566,670 - Bursa Korupark Shopping Mall 225,000 EUR 549,855 461,048 Torium 120,000 USD 226,668 185,520 Torun Tower 100,000 USD 188,890 154,600

1,532,083 801,168

(*) Liens of investment property established by Türkiye İş Bankası A.Ş. on 31 May 2011.

Total capitalized borrowing cost amounts in 2011 in investment property of Mall of İstanbul, Torun Tower and Bulvar Samsun Shopping mall projects in the development process are respectively TL 7,555, TL 1,121 and TL 1,354. Torunlar REIT 2011 Annual Report P / 126

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 9 - INVENTORIES

Short-term inventories 31 December 2011 31 December 2010

Lands(*) 16,421 1,728

Completed residential units 50,930 40,030 - Nishistanbul(**) 30,683 9,091 - Korupark 2. Phase(***) 10,432 20,271 - Torium 7,552 6,818 - Korupark 1. Phase(***) 2,263 3,850

Non-completed residential units 31,294 - - Korupark 3. Phase(***) 31,294 -

Other 2,160 1,303

100,805 43,061

Borrowing cost amounting to TL 4,028 have been capitalized in Mall of Istanbul residences which are in the development process. No borrowing cost has been capitalized for Korupark 3rd Phase since no external resource was used for the development of the Project.

(*) As of 31 December 2011, the land amounting to TL 16,421 consists of the land which is located in İstanbul, Maltepe, lot 251 and was purchased for the development of residence project. (**) There are 8 offices (gross 2,150 m2), 3 residences (gross 291 m2) and 20 retail units (gross 3,425,17 m2) registered in Nishistanbul project in İstanbul, Yenibosna, plate 243DS3A, Block 338, Lot 1. Additionally, Torunlar REIC has 60% shares over 5 offices (gross 1,289 m2) which have not been shared among the partners yet. (***) The Group commenced Bursa Korupark Evleri Project in May 2006 on the land located in Bursa Mudanya, Bursa, Osmangazi, 3. Phase and totaling 83,207.30 m2. 329 residences were sold with 54,873.10 m2 of 1. Phase of the Project which consists of 343 residences until 31 December 2011 (31 December 2010: 53,295.67 m2 321 residences). The construction of 1. Phase was completed in 2008. 356 residences were sold with 56,479.42 m2 of 2. Phase of the Project which consists of 403 residences until 31 December 2011 (31 December 2010: 46,078.13 m2’ 300 residences). Construction of 2. Phase was completed in 2009. In 1. and 2. Phase, there were respectively 14 residences with 2,245.90 m2 and 47 residences with 10,241.58 m2 as of 31 December 2011 (31 December 2010: 1. Phase 3,823.33 m2, 22 residences and 2nd Phase 20,642.87 m2 103 residences). In the context of 3. Phase of the Project, there are 17 blocks, 678 residences and 2 offices where on 20 March 2011 construction and on 30 April 2011 pre sales started. As of 31 December 2011, for 218 residences, preliminary sales contracts were signed and TL 51,489 advances were received (Note 11). Torunlar REIT 2011 Annual Report P / 127

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Long-term inventories

31 December 2011 31 December 2010

Non-completed residential units under construction - Mall of Istanbul project 258,264 - - Ali Sami Yen project 4,142 2,337 - Korupark 3. Phase - 4,655

262,406 6,992

NOTE 10 - PROPERTY, PLANT AND EQUIPMENT

1 January 31 December 2011 Additions Transfers Disposals 2011

Cost

Furniture and fixtures 456 366 - - 822 Motor vehicles 842 195 - (120) 917 Construction in progress 473 - (473) - -

1,771 561 (473) (120) 1,739

Accumulated depreciation

Furniture and fixtures (142) (139) - - (281) Motor vehicles (514) (118) - 48 (584)

(656) (257) - 48 (865)

Net book value 1,115 874 Torunlar REIT 2011 Annual Report P / 128

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

1 January 31 December 2010 Additions Disposals 2010

Cost

Furniture and fixtures 160 296 - 456 Motor vehicles 737 105 - 842 Construction in progress - 473 - 473

897 874 - 1,771

Accumulated depreciation

Furniture and fixtures (97) (45) - (142) Motor vehicles (393) (121) - (514)

(490) (166) - (656)

Net book value 407 1,115

Current year amortisation charge for intangible fixed assets amounts to TL34 (31 December 2010: TL17). Total depreciation charged to income statement is TL291 (31 December 2010: TL183).

NOTE 11 - OTHER ASSETS AND LIABILITIES

31 December 2011 31 December 2010

Other current assets

Advances given 9,742 1,759 Value added tax (“VAT”) receivables 2,129 37,862 Prepaid expenses 1,457 1,526 Prepaid taxes and funds 49 17 Other 423 194

13,800 41,358

Other non-current assets

Advances given(*) 108,063 61,750 VAT receivables 47,678 11,192 Prepaid expenses 1,415 1,408

157,156 74,350

(*) Torunlar Aşçıoğlu Kapıcıoğlu Project Partnership paid TL165,250 to TOKİ within the content of Ali Sami Yen Project and 65% of the advances paid is attributable the Group (31 December 2010: 95,000 TL). Torunlar REIT 2011 Annual Report P / 129

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

31 December 2011 31 December 2010 Other short-term liabilities

Advances received 52,383 3,110 Deposits and warranties received 2,368 4,846 Deferred income 1,785 1,395 Taxes and funds payable 1,110 1,743 Provisions 545 990 Due to personnel 372 321 Other 102 565

58,665 12,970

As of 31 December 2011 advances received amounting to TL51.489 were related to Korupark 3. Phase residence sale commitments. The Group plans to deliver the residences before 31 December 2012.

31 December 2011 31 December 2010 Other long term liabilities

Advances received(*) 210,785 - Others 8 -

210,793 -

(*) All advances received from residence sales consist of sale commitments related to Mall of İstanbul Project as of 31 December 2011. Torunlar REIT 2011 Annual Report P / 130

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 12 - INVESTMENTS IN ASSOCIATES

31 December 2011 31 December 2010 % TL % TL

Yeni Gimat 14.83 153,957 14.83 115,886 Netsel 44.60 10,232 44.60 9,572

164,189 125,458

31 December 2011 31 December 2010

At the beginning of the period 125,458 115,478

Income from associates (net) 45,227 14,725 Dividends received from associates (6,496) (4,745)

At the end of the period 164,189 125,458

Income/expense from investments in associates

31 December 2011 31 December 2010

Yeni Gimat 42,259 12,910 Netsel 2,968 1,815

Total 45,227 14,725

NOTE 13 - GOODWILL

31 December 2011 31 December 2010

At the beginning of the period - 8,250

Goodwill transferred to income statement - (8,250)

At the end of the period - - Torunlar REIT 2011 Annual Report P / 131

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 14 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES

Contingent assets and liabilities are as follows:

31 December 2011 31 December 2010

Liens received - 36,000 Guarantees received 47,831 16,521

The totals of expected minimum operational lease revenues as of 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010

Operational lease revenues between 0-1 years 108,908 81,029 Operational lease revenues between 1-5 years 438,104 215,328 Operational lease revenues between 5-10 years 481,623 765,334

The minimum operational lease revenue represents lease revenue from Korupark shopping mall, Torium shopping mall, Zafer shopping mall and Deepo shopping mall. The lease revenues from Ankamall and Crowne Plaza Hotel that are owned by Yeni Gimat-associate of the group are not included in minimum operational lease revenue.

Below are the amounts of guarantees, pledges and mortgages of the Group as of 31 December 2011 and 2010:

31 December 2011 31 December 2010 CPM’s given by the company (Collaterals, Pledges, Mortgages)

A. CPM’s given for its own legal personality 1,587,677 801,168 B. CPM’s given on behalf of fully consolidated companies 8,148 2,428 C. CPM’s given for continuation of its economic activities on behalf of third parties - - D. Total amount of other CPM’s i) Total amount of CPM’s given on behalf of the majority shareholder - - ii) Total amount of CPM’s given to on behalf of other Group companies which are not in scope of B and C - - iii) Total amount of CPM’s given on behalf of third parties which are not in scope of C - -

1,595,825 803,596

As of 31 December 2011 liens on investment properties of the Group is TL 1,532,083 (31 December 2010: TL801,168) (Note 8). Torunlar REIT 2011 Annual Report P / 132

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

31 December 2011 31 December 2010 Foreign TL Foreign TL currency Amount currency Amount

EUR 225,000 549,855 225,000 461,048 USD 520,000 982,228 220,000 340,120 TL 63,742 63,742 2,428 2,428

1,595,825 803,596

The lease revenues from Korupark shopping mall and Torium Shopping mall are pledged against borrowings.

The Group also stands as the guarantor of the borrowings that will be used by the buyers of the residences until the completion of residences and transfer of deeds to the contracting parties in relation to sale of residences through loans in Mall of İstanbul and Korupark 3. Phase. These guarantees were determined with the total limit of TL182,500 in three different banks and determined without limit with two banks as of 31 December 2011 (31 December 2010: None).

NOTE 15 - EQUITY

The Company, increased its issued capital from TL176,100,000 to TL224,000,000 through public offering. A total TL56,352,942 nominal value of shares were offered to the public, consisting of TL47,900,000 to be issued from the capital increase and additional shares 8,452,942 TL owned by current shareholders. The compulsory prospectus of the public offering was registered by the İstanbul Trade Registry Office on 7 October 2010 and announced in the Trade Registry no: 7669 on 14 October 2010 pages between 641-735 totally 95 pages. The Company’s quoted shares are traded in the İstanbul Stock Exchange as from 21 October 2010.

Company’s shareholders and capital structure as of 31 December 2011 and 2010 as below;

A Group B Group C Group 31 December Shareholders % (quantity) (quantity) (quantity) 2011

Aziz Torun 37.41 44,870 - 38,918 83,788 Mehmet Torun 37.37 - 44,835 38,882 83,717 Y. Emre Torun 0.03 - 35 35 70 Torun Pazarlama A.Ş. 0.02 32 32 - 64 Ali Coşkun less than 0.01 4 - - 4 Mahmut Karabıyık less than 0.01 - 4 - 4 Other (Public quotation) 25.16 - - 56,353 56,353

Total paid-in capital 44,906 44,906 134,188 224,000 Torunlar REIT 2011 Annual Report P / 133

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

The A and B group shares have nomination privilege to the Board of Directors according to articles of association.

In accordance with decision of the Board of Directors numbered 63 and dated 27 August 2010, and based on the Article 8 of the Articles of Association, the Company decided to increased its issued capital through public offering, within the limits of the registered capital of TL1,000,000,000 to TL224,000,000 from TL176,100,000. In the context of the capital increase, it was decided that, TL47,900,000 of the increased capital would be contributed by the public offering through the sale C group shares (current shareholders were restricted to acquire those shares). Additionally, a total of 4,191,251 C group shares that are held by the shareholders namely Aziz Torun and Mehmet Torun and 70,440 C group shares that are held by the corporate shareholder namely Torun Pazarlama A.Ş. would be offered to public. In case that sufficient excess demand is achieved in the public offering, additional 4,226,471 C group shares that are held by Aziz Torun and Mehmet Torun would be additionally subjected to public offering in accordance with the Serial I, No: 40 decree of the CMB: ‘Registration of Shares to CMB Registry and Guidelines for Public Offering’. According to the decision of the Board of Directors of Istanbul Stock Exchange on 7 October 2010, the Company’s C Group shares with total nominal value of TL47,900,000 is traded in the İstanbul Stock Exchange starting from 21 October 2010. As a result of the public offering, the Company earned TL349,670,000 against its shares with TL47,900,000 nominal value and the difference of TL301,770,000 has been accounted for as share premiums in the consolidated financial statements.

The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (“TCC”). The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve balance reaches 20% of the Company’s paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. Under the TCC, the legal reserves can only be used to offset losses and are not available for any other usage unless they exceed 50% of paid-in share capital.

In accordance with the Communiqué No:XI-29 and related announcements of CMB, effective from 1 January 2008, “Share capital”, “Legal Reserves” and “Share Premiums” shall be carried at their statutory amounts. The valuation differences (such as inflation adjustment differences) shall be disclosed as follows:

• If the difference is arising due to the inflation adjustment of “Paid-in Capital” and not yet been transferred to capital should be classified under the “Inflation Adjustment to Share Capital”; • If the difference is due to the inflation adjustment of “Legal Reserves” and “Share Premium” and the amount has not been utilized in dividend distribution or capital increase yet, it shall be classified under “Retained Earnings”. Other equity items shall be shown with the amount of valuation in accordance with CMB financial reporting standards.

Companies whose shares are quoted in ISE are subject to profit distribution rules of CMB as follows:

Dividend is distributed according to Communiqué Serial: IV, No: 27 on “Principles Regarding Distribution of Dividends for the quoted entities subjected to Capital Market Board Law”, principles determined in the Articles of Association and dividend distribution policy which is declared by the Companies to the market.

In addition, the decision also allows companies to compute their distributable profit amounts by considering the net profit for the period presented in the publicly disclosed financial statements prepared in accordance with the Communiqué Serial: XI, No: 29, if such distributable profits could be fully recovered from resources subject to profit distribution in the statutory records. Torunlar REIT 2011 Annual Report P / 134

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

The composition of the Company’s equity based on the Serial:XI, No:29 decree of the CMB is as follows:

31 December 2011 31 December 2010

Share capital 224,000 224,000 Share premium 301,770 301,770 Restricted reserves 3,947 3,127 Treasury shares (836) - Retained earnings 1,826,713 1,625,941 Net profit of the year 177,312 214,245

2,532,906 2,369,083

The Company bought back its 205,000 shares traded in ISE within the price range TL3.90 - TL4.34 with a total transaction value TL836 in the period of 21 November to 15 December 2011. Average buying price of repurchased shares was TL4.08 and ratio of number of bought shares to total shares is 0.45%.

As of 31 December 2011 and 2010 the net distributable profits according to the statutory accounts and the reserves that can be subjected to the dividend distribution are as follows:

31 December 2011 31 December 2010

Distributable current year profit 24,560 12,799 Extraordinary reserves 4,152 4,152 Share premium 301,770 301,770

330,482 318,721 Torunlar REIT 2011 Annual Report P / 135

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

As of 31 December 2011 and 2010, the details of restricted reserves are as follows:

31 December 2011 31 December 2010

First legal reserves 1,441 767 Second legal reserves 2,506 2,360

3,947 3,127

NOTE 16 - REVENUE AND COST OF REVENUE

2011 2010

Revenues

Rent income 91,969 53,899 Residence sales 37,758 161,064 Common area income 31,518 14,012 Commercial goods sales 1,513 3,785 Other 151 168

162,909 232,928

Cost of Revenue

Common area expenses (36,560) (16,113) Cost of residence sales (20,231) (122,099) Rent expenses and management fees of shopping malls (4,790) (3,383) Cost of commercial goods sold (1,156) (2,637) Goodwill of Nishistanbul Project - (8,250) Other (17) (428)

(62,754) (152,910)

Gross profit 100,155 80,018 Torunlar REIT 2011 Annual Report P / 136

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Operational lease revenues mainly consist of rent income from shopping malls. Shopping malls in operation are Ankara Ankamall, Bursa Korupark, Bursa Zafer Plaza, Antalya Deepo and Torium. Additionally, Bulvar Samsun Shopping Mall is currently under construction as of 31 December 2011 and is expected to be opened in 2012. Ankamall is owned by Yeni Gimat - associate of the Company. According to the management agreement, management of the Bursa Korupark, Istanbul Torium and Antalya Deepo is conducted by Torun AVM and the management of Bursa Zafer Plaza is conducted by Zafer Plaza İşletmeciliği A.Ş. (Note 23).

Common area expenses consist of electricity, water, security, cleaning, advertising and other common area expenses of the shopping malls. Common area income consists of expenses of the common area expenses charged to tenants.

The commercial goods sales and cost of commercial goods sold are related to sales of machinery, equipment to lessees of Torium Shopping Mall and goods sales to the owner of residences in Nishistanbul Project.

NOTE 17 - MARKETING, SELLING AND DISTRIBUTION, GENERAL ADMINISTRATIVE EXPENSES

31 December 2011 31 December 2010 General administrative expenses

Taxes, duties and fees (6,047) (5,056) Personnel expenses (2,956) (1,487) Consultancy expenses (1,661) (943) Donations (1,062) (4,161) CMB quotation and public offering expenses (494) (10,818) Depreciation expenses (291) (183) Transportation and travel expenses (265) (165) Other (1,001) (685)

(13,777) (23,498)

CMB quotation and public offering expenses are composed of ISE quotation, CMB registry and consultancy expenses which are related to public offering.

The major part of taxes, duties and fees are related to property taxes. The property taxes are amounting to TL 3,726 in 2011 and TL 3,047 in 2010. Torunlar REIT 2011 Annual Report P / 137

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

The Group made TL501 donation to Akdeniz University in the form of building materials on behalf of Antalya Deepo Shopping mall and TL495 donation was made in clothing donation to school children through Erzincan governorship social aid and solidarity foundation. In 2010, TL4,000 donations was made to the Bursa metropolitan municipality in order to provide mass transportation to Korupark Shopping mall with light railway system and to name the metro station as “Korupark”.

2011 2010 Marketing, selling and distribution expenses

Marketing expenses for residence sales (6,860) (1,626) Advertising expenses (2,987) (2,462) Marketing and organization expenses for shopping malls - (973) Other (891) (481)

(10,738) (5,542)

NOTE 18 - EXPENSES BY NATURE

2011 2010

Common area expenses (36,560) (16,113) Cost of residence sales (20,231) (122,099) Marketing expenses of residence sales (6,860) (1,626) Taxes, duties and fees (6,047) (5,056) Rent expenses and management fees of shopping malls (4,790) (3,383) Advertising expenses (2,987) (2,462) Personnel expenses (2,956) (1,487) Consultancy expenses (1,661) (943) Cost of commercial goods sold & services charges (1,156) (2,637) Donations (1,062) (4,161) Public offering and CMB quotation expenses (494) (10,818) Depreciation expenses (291) (183) Transportation and travel expenses (265) (165) Goodwill expenses - (8,250) Marketing expenses for shopping malls - (973) Other (1,909) (1,594)

(87,269) (181,950) Torunlar REIT 2011 Annual Report P / 138

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 19 - OTHER INCOME/EXPENSES

2011 2010

Other income

Net gain from fair value adjustment on investment property (Note 8) 182,534 166,660 Other 1,747 540

184,281 167,200

Other expenses

Allowance for the decline in the value of inventories (5,377) - Other (1,956) (1,269)

(7,333) (1,269)

NOTE 20 - FINANCIAL INCOME/EXPENSES

31 December 2011 31 December 2010

Financial income:

Interest income on time deposits 49,639 18,233 Gains on derivative financial instruments, net 2,564 - Foreign exchange gains, net(*) - 3,562 Other - 1,282

52,203 23,077

Financial expenses:

Foreign exchange losses, net(*) (122,414) - Interest expenses (48,305) (39,208) Other (186) (184)

(170,905) (39,392)

(*) The Group has shows same period’s foreign exhange losses and gains have in net. Torunlar REIT 2011 Annual Report P / 139

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 21 - EARNINGS PER SHARE

In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“Bonus Shares”) to existing shareholders from retained earnings and revaluation surplus. The issue of such shares is treated as the issuance of ordinary shares in the calculation of earnings per share.

Earnings per share disclosed in the consolidated income statement is determined by dividing net income attributable to ordinary shareholders by the weighted average number of shares existing during the period concerned.

31 December 2011 31 December 2010

Net income attributable to equityholders of the parent in full TL 177,312 214,245 Weighted average number of ordinary shares 224,000,000 185,468,871

0,79 1,16

NOTE 22 - TAX ASSETS AND LIABILITIES

The Company is exempt from corporate income tax in accordance with paragraph d-4 of Article 5 of the Corporate Income Tax Law and in accordance with paragraph 6-a of Article 94 of the Income Tax Law, the earnings of the real estate investment trusts are subject to withholding taxes, According to the Council of Ministers decision, No: 93/5148, the withholding tax rate is determined as “0”. Therefore, the Company has no corporate tax obligation.

Tax charges for the period ended at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010

Current period Corporate tax provision (1,801) (1,274) Deferred tax charge - -

(1,801) (1,274)

Deferred taxes

The Company does not recognise any deferred tax assets and liabilities based on temporary differences arising between the balance sheet items as reported for IFRS purposes and the statutory financial statements since the Company is exempt from corporate income tax after the REIC conversion on 25 January 2008. Torunlar REIT 2011 Annual Report P / 140

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

NOTE 23 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES a) Balances with related parties at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010

Trade payables to related parties: Torun Yorum 607 - Torun Yapı 171 701 Other 24 4

802 705

Other liabilities to related parties: Torun AVM 4,941 2,776 Torunlar Gıda 1,060 20

6,001 2,796

Trade receivables from related parties: Torun AVM 3,137 1,304 Torunlar Aşçıoğlu Kapıcıoğlu Proje Ortaklığı 155 34,008 Torun Yorum 13 - Other 2 -

3,307 35,312

Torun AVM, is providing management and administration services to Istanbul Torium, Antalya Deepo and Bursa Korupark Shopping Malls which are owned by the Company. In accordance with the management agreement signed for Bursa Korupark Shopping Mall, management fee is paid to Torun AVM which is 2% (VAT excluding) of the sum of monthly TL rent bills charged to tenants. In accordance with the management agreement signed for Antalya Deepo Shopping Mall, management fee is paid to Torun AVM which is 2% (excluding VAT) of the sum of the monthly TL rents charged to the tenants. a) Notes receivable from related parties at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010

Notes receivable from related parties:

Torunlar Gıda - 105

- 105 b) For the years ended 31 December 2011 and 2010 rent and interest income from related parties are as follows:

2011 2010

Sales to related parties: Torun AVM 26,245 21,000 Zafer Plaza İşletmeciliği A.Ş. 8,912 8,553 Torunlar Gıda 9 6 Torun Yapı - 6

35,166 29,565 Torunlar REIT 2011 Annual Report P / 141

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Zafer Plaza İşletmeciliği A.Ş. is providing management and administration services to Zafer Plaza Shopping Mall which is owned by the Company. In accordance with the management agreement signed for Zafer Plaza Shopping Mall, Torunlar REIC has a fixed rent income amounting to TL8,900 for the years 2011 and TL 8,400 for the year 2010. c) For the years ended 31 December 2011 and 2010 commission paid, service and interest expenses to related parties are as follows:

2011 2010 Purchases from related parties:

Torun AVM 22,579 7,860 Torun Yorum 7,943 - Torun Yapı 2,242 8,936 Torunlar Gıda 782 86 Torun Pazarlama A.Ş. 103 55 Other 7 -

33,656 16,937

Trade payables to Torun Yapı as of 31 December 2011 are related to the subcontractor activities of Torun Yapı for the ongoing real estate projects.

2011 2010 Interest expenses:

Torunlar Gıda 1,171 - Torun AVM 349 265

1,520 265

Advances given to related parties 2011 2010

Torun Yorum 1,109 - d) Remuneration of top management

2011 2010

Salaries and premiums 1,553 862

The remuneration of top management consists of short-term wages and other short-term benefits and free from long-term benefits.

NOTE 24 - FINANCIAL RISK MANAGEMENT

The Company’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Company’s management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. Torunlar REIT 2011 Annual Report P / 142

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Liquidity Risk

Liquidity risk is the inability of the Group to match the net funding requirements with sufficient liquidity. The Group management tries to avoid liquidity risk from daily operations by trying to keep sufficient levels of cash and to have open credit lines with creditors. Management also tries to align the repayment of borrowings obtained for the construction and acquisition of investment properties with the rental revenue streams from such properties to the extent possible. For the construction of residential units the Group obtains cash advances from customers by engaging in pre-sales agreements to minimize the funding requirement in such projects.

The analysis of the Group’s financial liabilities with respect to their maturities as of 31 December 2011 is as follows:

Carrying Contractual Up to 3 months 1 year - Over value cash flows 3 months to 1 year to 5 years 5 years

Short-term financial liabilities (Non-derivative): Financial liabilities 290,456 321,201 67,718 253,483 - - Advances received 52,383 52,383 - 52,383 - - Trade payables 32,061 32,061 32,061 - - - Due to related parties 6,803 6,803 6,803 - - - Other short-term liabilities 6,691 6,991 6,991 - - -

388,394 419,439 113,573 305,866 - -

Long-term financial liabilities (Non-derivative): Financial liabilities 811,373 927,652 - - 709,094 218,558 Provisions 85 85 - - 85 - Other long-term liabilities 210,793 210,793 - - 210,793 -

1,022,251 1,138,530 - - 919,972 218,558

1,410,645 1,557,969 113,573 305,866 919,972 218,558

Carrying Contractual Up to 3 months 1 year - Over Derivative financial liabilities value cash flows 3 months to 1 year to 5 years 5 years

Derivative cash inflows 288,239 288,239 288,239 - - - Derivative cash outflows (288,239) (288,239) (288,239) - - -

Derivative instruments, net cash inflows ------Torunlar REIT 2011 Annual Report P / 143

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

The analysis of the Group’s financial liabilities with respect to their maturities as of 31 December 2010 is as follows:

Carrying Contractual Up to 3 months 1 year - Over value cash flows 3 months to 1 year to 5 years 5 years

Short-term financial liabilities (Non-derivative): Financial liabilities 235,038 254,567 27,491 227,076 - - Trade payables 31,035 31,035 31,035 - - - Due to related parties 3,501 3,501 3,501 - - - Provisions ------Other short-term liabilities 12,970 12,970 12,970 - - -

282,544 302,073 74,997 227,076 - -

Long-term financial liabilities (Non-derivative): Financial liabilities 552,122 642,101 - - 475,080 167,021 Provisions 90 90 - 90 - -

552,212 642,191 - 90 475,080 167,021

834,756 944,264 74,997 227,166 475,080 167,021

Carrying Contractual Up to 3 months 1 year - Over Derivative financial liabilities value cash flows 3 months to 1 year to 5 years 5 years

Derivative cash inflows 264,489 264,489 - - 264,489 - Derivative cash outflows (264,489) (264,489) - - (264,489) -

Derivative instruments, net cash inflows ------

Interest rate risk

The Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. These exposures are managed by offsetting interest rate sensitive assets and liabilities and using derivative instruments when considered necessary.

In this context, matching of not only maturities of receivables and payables but also contractual repricing dates are crucial. In order to keep the exposure of financial liabilities to interest rate changes at a minimum, “fixed interest/floating interest”, “short-term/long-term”, “TL/foreign currency” balance should be structured consistent within and with assets in the balance sheet.

Financial instruments which have been classified as other financial liabilities in the Company’s balance sheet have been exposed to the interest risk as a result of change in prices. At 31 December 2011, if interest rates at contractual repricing dates of TL denominated financial assets and liabilities with variable interest rates have strengthened/weakened by 1% with all other variables held constant, income would have been TL17 lower/higher as a result of interest expenses. (31 December 2010: TL41). Torunlar REIT 2011 Annual Report P / 144

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Borrowings with floating interest rate which have been classified as financial liabilities in the Company’s balance sheet have been exposed to the interest risk as a result of change in interest rates. At 31 December 2011, if interest rates at contractual repricing dates of EUR and USD denominated financial assets and liabilities with variable interest rates have strengthened/weakened by 1% with all other variables held constant, income would have been TL3,273 lower/higher as a result of interest expenses. (31 December 2010: TL1,040).

Average effective annual interest rates of balance sheet items as of 31 December 2011 and 2010 are as follows:

31 December 2011 (%) TL EUR USD

Current assets Cash and cash equivalents 11.44% 4.17% 5.52%

Current liabilities Financial liabilities 14.50% 4.94% 5.07%

Non-current liabilities Financial liabilities 4. 94% 5.02%

31 December 2010 (%) TL EUR USD

Current assets Cash and cash equivalents 8.84% 4.09% 5.52% Trade receivables 7.16% - -

Current liabilities Financial liabilities 8.64% 4.74% 4.36%

Non-current liabilities Financial liabilities - 4.91% 5.82%

The Company’s financial instruments that are sensitive to interest rates are as follows:

31 December 2011 31 December 2010

Financial instruments with fixed interest rate Time deposits 596,934 438,591 Financial assets - 29,459 Financial liabilities 493,609 518,736

Financial instruments with floating interest rate Financial liabilities 606,907 264,527 Torunlar REIT 2011 Annual Report P / 145

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Group’s financial assets and liabilities in carrying amounts classified in terms of periods remaining to contractual repricing dates as of 31 December 2011 are as follows:

31 December 2011 Up to 3 months More than Non-interest 3 months to 1 year 1 year bearing Total

Cash and cash equivalents 596,934 - - 454 597,388 Financial assets 58,197 - - 58,197 Trade receivables 28,292 39,482 60,079 - 127,853 Due from related parties 3,307 - - - 3,307 Inventories - - 100,805 100,805 Advances given - 9,742 - - 9,742 Other current assets 4,058 - - - 4,058 Investment property - - 2,457,490 2,457,490 Tangible fixed assets - - - 874 874 Intangible fixed assets - - - 86 86 Investment in associates - - - 164,189 164,189 Long term advances given - - 108,063 - 108,063 Other non-current assets - - 49,093 - 49,093 Long term inventories - - - 262,406 262,406

Total assets 632,591 107,421 217,235 2,986,304 3,943,551

Bank borrowings (685,170) (415,346) - - (1,100,516) Other financial Liabilities (1,313) - - - (1,313) Trade payables (32,061) - - - (32,061) Advances received - (52,383) (210,785) - (263,168) Due to related parties (6,803) - - - (6,803) Provisions for employment termination benefits - - - (85) (85) Other liabilities (6,691) - (8) - (6,699)

Total liabilities (732,038) (467,729) (210,793) (85) (1,410,645)

Net repricing position (99,447) (360,308) 6,442 2,986,219 2,532,906 Torunlar REIT 2011 Annual Report P / 146

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

31 December 2010 Up to 3 months More than Non-interest 3 months to 1 year 1 year bearing Total

Cash and cash equivalents 266,439 172,156 - 69 438,664 Financial assets - - 29,459 - 29,459 Trade receivables 13,584 705 4,729 - 19,018 Due from related parties 35,417 - - - 35,417 Other current assets 39,642 - - - 39,642 Inventories - - - 51,769 51,769 Investment property - - - 2,388,865 2,388,865 Tangible fixed assets - - - 1,115 1,115 Intangible fixed assets - - - 82 82 Investment in associates - - - 125,458 125,458 Other non-current assets - - 74,350 - 74,350

Total assets 355,082 172,861 108,538 2,567,358 3,203,839

Borrowings (444,920) (342,220) - - (787,140) Finance lease liabilities (20) - - - (20) Trade payables (31,035) - - - (31,035) Due to related parties (3,501) - - - (3,501) Provisions for employment termination benefits - - - (90) (90) Other liabilities (12,970) - - - (12,970)

Total liabilities (492,446) (342,220) - (90) (834,756)

Net repricing position (137,364) (169,359) 108,538 2,567,268 2,369,083

Credit risk

The Group is subject to credit risk arising from trade receivables related to credit sales and deposits at banks.

The Group keeps majority of its deposits with top 10 retail banks established in Turkey, with which the Group had standing relations.

Credit risk mainly consists of receivables from related parties. Credit risk of receivables from third parties is managed by securing receivables with collaterals covering receivables at the highest possible proportion. Methods used are as follows:

• Bank guarantees (letter of guarantee, letter of credit, etc.), • Mortgage on real estate, • Cheques and notes,

In credit risk control, the credit quality of each customer is assessed; taking into account its financial position, past experience and other factors, individual risk limits are set in accordance and the utilisation of credit limits is regularly monitored. Torunlar REIT 2011 Annual Report P / 147

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Credit and receivable risk of financial instruments as of 31 December 2011 is as follows:

Trade receivables Deposits 31 December 2011 Related party Other party in Banks

Maximum exposed credit risk as of reporting date 3,307 127,853 597,125 Secured portion of the maximum credit risk by guarantees, etc, - 9,931 - A. Net book value of financial assets that are either not due or not impaired 3,307 127,853 597,125 - Secured portion by guarantees, etc, - 9,931 - B. Financial assets with renegotiated conditions - - - - Secured portion by guarantees, etc - - - C. Net book value of the expired but not impaired financial assets - - - - Secured portion by guarantees, etc, - - - D. Net book value of impaired assets - Overdue (Gross book value) - 2,296 - - Not overdue (Gross book value) - - - Impairment (-) - (2,296) - - Secured portion of the net value by guarantees, etc, - - -

Credit and receivable risk of financial instruments as of 31 December 2010 is as follows:

Trade receivables Deposits 31 December 2010 Related party Other party in Banks

Maximum exposed credit risk as of reporting date 35,417 19,018 438,591 Secured portion of the maximum credit risk by guarantees, etc, - 3,970 - A. Net book value of financial assets that are either not due or not impaired 35,417 15,048 438,591 - Secured portion by guarantees, etc, - - - B. Financial assets with renegotiated conditions - - - - Secured portion by guarantees, etc, - - - C. Net book value of the expired but not impaired financial assets - 2,096 - - Secured portion by guarantees, etc, - 2,096 - D. Net book value of the impaired assets - Overdue (Gross book value) - 1,874 - - Not overdue (Gross book value) - - - - Impairment (-) (1,874) - Secured portion of the net value by guarantees, etc, - - -

While determining the above-mentioned amounts, the factors that increase the credibility such as guarantees received are not considered. In the financial assets of the Company which are subject to credit risk, no impairment risk has been identified. Additionally, Company’s off balance sheet items which are subject to credit risk include overdued but not impaired assets. Torunlar REIT 2011 Annual Report P / 148

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) a) Credit quality of not yet due, not impaired receivables whose conditions are re-negotiated

31 December 2011 31 December 2010

Group 1 - - Group 2 127,853 14,515 Group 3 - -

127,853 14,515

Group 1 - New customers (less than three months) Group 2 - Existing customers with no defaults in the past (more than three months) Group 3 - Existing customers with some defaults in the past which were however fully recovered with some delay, b) The aging table of the receivables that are past due but not impaired

31 December 2011 31 December 2010

Past due 0-1 month - 2,096

- 2,096

Foreign exchange risk

The Group is exposed to foreign exchange rate risk through operations done using multiple currencies. The main principle in the management of this foreign currency risk is maintaining foreign exchange position in a way to be affected least by the fluctuations in foreign exchange rates, in other words, maintaining foreign exchange position close to zero.

For this reason, the proportion of the positions of these currencies among each other or against new Turkish lira to shareholders’ equity is aimed to be controlled under certain limits.

The Group is exposed to foreign exchange rate risk mainly for EUR and USD.

Foreign currency position

Foreign currency denominated assets, liabilities and off-balance sheet accounts give rise to foreign exchange exposure.

Company’s assets and liabilities in foreign exchange are not balanced through any off balance sheet instruments as of 31 December 2011.

The company does not have any export or import activity in 2011 and 2010. Torunlar REIT 2011 Annual Report P / 149

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Foreign currency denominated assets and liabilities held by the Group are as follows:

31 December 2011 31 December 2010

Assets 223,130 219,902 Liabilities (1,067,927) (771,110)

Net on-balance sheet position (844,797) (551,208)

Net off-balance sheet derivatives positions (15,111) -

Net foreign currency position (859,908) (551,208)

The table below summaries foreign currency position risk of the Company as of 31 December 2011. The original currency amounts of assets and liabilities denominated in foreign currencies and the total TL equivalent at 31 December 2011 are as follows:

TL EUR USD Equivalent

Current assets 19,433 92,985 223,130 Monetary financial assets 17,817 88,366 210,457 Other assets 1,616 4,619 12,673

Total assets 19,433 92,985 223,130

Current liabilities (30,810) (95,963) (256,554) Trade payables (1,579) (836) (5,435) Financial liabilities (29,228) (95,127) (251,112) Other current liabilities (3) - (7)

Non-current liabilities (107,545) (290,408) (811,373) Financial liabilities (107,545) (290,408) (811,373)

Total liabilities (138,355) (386,371) (1,067,927)

Net balance sheet position (118,922) (293,386) (844,797)

Derivative financial assets 116,850 - 285,558 Derivative financial assets (116,850) (8,000) (300,669) Net position of off-balance sheet items - (8,000) (15,111)

Net foreign currency asset / (liability) position (118,922) (301,386) (859,908)

Net foreign currency position against currencies is as follows:

Against EUR (290,621) Against USD (569,287)

Net foreign currency position (859,908) Torunlar REIT 2011 Annual Report P / 150

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

The table below summaries foreign currency position risk of the Company as of 31 December 2010. The original currency amounts of assets and liabilities denominated in foreign currencies and the total TL equivalent at 31 December 2010 are as follows:

TL EUR USD equivalent

Current assets 25,358 108,630 219,902 Trade receivables - 1,052 1,626 Monetary financial assets 25,358 107,578 218,276

Total assets 25,358 108,630 219,902

Current liabilities (14,429) (122,524) (218,988) Trade payables (1,142) (2,994) (6,968) Financial liabilities (13,287) (119,530) (212,020)

Non-current liabilities (119,871) (198,250) (552,122) Financial liabilities (119,871) (198,250) (552,122)

Total liabilities (134,300) (320,774) (771,110)

Net balance sheet position (108,942) (212,144) (551,208)

Derivative financial assets 127,900 - - Derivative financial assets (127,900) - - Net position of off-balance sheet items - - -

Net foreign currency asset / (liability) position (108,942) (212,144) (551,208)

Net foreign currency position against currencies is as follows:

Against EUR - - (223,233) Against USD - - (327,975)

Net foreign currency position - - (551,208)

The table below shows the Company’s sensitivity for 10% fluctuation of USD and EUR. These amounts represent the effect on the consolidated statement of comprehensive income of 10% fluctuation of USD and EUR against TL. During this analysis all other variables especially interest rate are assumed to remain constant. Torunlar REIT 2011 Annual Report P / 151

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Foreign currency sensitivity analysis as of 31 December 2011 and 2010 are as follows:

Gain/Loss Equity 31 December 2011 Appreciation Depreciation Appreciation Depreciation

+/- 10% fluctuation in USD rate USD net asset/liability (30,139) 30,139 - - Secured portion from USD risk USD net effect (30,139) 30,139 - -

+/- 10% fluctuation in EUR rate EUR net asset/liability (11,892) 11,892 - - Secured portion from EUR risk EUR net effect (11,892) 11,892 - -

Gain/Loss Equity 31 December 2010 Appreciation Depreciation Appreciation Depreciation

+/- 10% fluctuation in USD rate USD net asset/liability (21,214) 21,214 - - Secured portion from USD risk USD net effect (21,214) 21,214 - -

+/- 10% fluctuation in EUR rate EUR net asset/liability (10,894) 10,894 - - Secured portion from EUR risk EUR net effect (10,894) 10,894 - -

Capital risk management

The Company attempts to manage its capital by minimising the investment risk with portfolio diversification. The Company’s objectives are to safeguard the Group’s sustainability as a going concern to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital and to keep a gearing ratio that is in-line with industry averages.

When the company manages the capital, the Group aims to provide returns to shareholders and to reduce cost of capital, to maintain optimal capital structure by protecting group’s operation ability.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Torunlar REIT 2011 Annual Report P / 152

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Gearing ratios as of 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010

Total liabilities 1,410,645 834,756 Cash and cash equivalents (597,388) (438,664)

Net debt 813,257 396,092 Total shareholders’ equity 2,532,906 2,369,083

Invested capital 224,000 224,000

Gearing ratio 32% 17%

NOTE 25 - FINANCIAL INSTRUMENTS

Fair value of financial instruments

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 or liquidation, and is best evidenced by a quoted market price, if one exists.

The fair values of financial instruments that are not traded in an active market have been determined by the Company using available market information and appropriate valuation methodologies. However, judgement is necessarily required to interpret market data to estimate the fair value. Accordingly, the estimates presented herein may differ from the amounts the Company could realise in a current market exchange.

The following methods and assumptions were used to estimate the fair value of the financial instruments for which it is practicable to estimate fair value:

Financial assets:

The fair values of cash and due from banks are considered to approximate their respective carrying values due to their short-term nature.

Expertise values are used on the determination of the fair values of investment property (Note 8).

The carrying values of trade receivables, which are measured at amortised cost, along with the related allowances for uncollectability are assumed to approximate their fair values.

The fair values of balances denominated in foreign currencies, which are translated at period-end official exchange rates announced by the Central Bank of Turkey, are considered to approximate their carrying value. Torunlar REIT 2011 Annual Report P / 153

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Financial liabilities:

The fair value of liabilities arising from financial leasing are considered to approximate their respective carrying values due to their short- term nature.

Derivative financial instruments are carried at their fair values.

Carrying values and fair values of TL and foreign currency denominated borrowings fixed and floating rates are as follows:

Carrying values Fair values 31 December 31 December 31 December 31 December 2011 2010 2011 2010

Financial liabilities 1,100,516 783,263 1,161,559 783,016

NOTE 26 - SUBSEQUENT EVENTS

Share repurchases

The Group has implemented share repurchase programme by using TL30 million in order to protect investors and support share performance. In this context, totally 205,000 shares with the transaction value of TL836 within a price range of TL3.90 and TL4.34 has been repurchased between 21 November and 15 December 2011 and after balance sheet date, 68,299 shares have been repurchased in March 2012 in a price range of TL5.16 to TL5.30. Total purchased shares ratio to the capital in the subsequent period is 0.03% and total repurchased stocks ratio to the issued capital is 0.12%.

Real estate purchases

The Group purchased 105,46 squaremeter land for TL455 on 2 March 2012 which was owned by 6 shareholders on 18,208.90 squaremeters real estate located in İstanbul, Başakşehir, İkitelli-2, Block 858, lot 1 where Mall of Istanbul Project is planned and valued with TL3,750 as unit price per m2 in the valuation report of Standart Gayrimenkul Değerleme Uygulamaları A.Ş. SvP_TRGYO_08 as of 31 December 2011.

The Group purchased 180.12 squaremeters land for TL779 on 18 January 2012 which was owned by 1 real person on 18,209.90 squaremeters real estate located in İstanbul, Başakşehir, İkitelli-2, Block 858, lot 1 next to the Block 858, lot 2 which is the place of Mall of Istanbul Project.

The Group gave the highest bid of TL355,000 to the tender held by Republic of Turkey Prime Ministry Privatization Administration related to the real estate (old distillery) and docks located in İstanbul, Beykoz, Paşabahçe on 29 March 2012. Torunlar REIT 2011 Annual Report P / 154

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Possible share sale of the subsidiary

For the transfer to ECE European Prime Shopping Centre Fund A/B/C Invest Co. S.a.r.l (hereinafter referred to as ECE Group) of 100% of Turkish company Yeni Gimat Isyerleri Işletmesi A.Ş. which owns Ankamall shopping center and Crowne Plaza Hotel located in Ankara where Torunlar REIC Turkey holds 14.83% stake, a confidentiality agreement was signed on 15 March 2012 between ECE Group and Yeni Gimat (hereinafter referred to as the Parties) in order for a legal, technical and financial due diligence to start and if ECE Group finds the outcome of the due diligence satisfactory, the Parties will commence to negotiate the draft agreements where substantial and procedural issues will be drawn out for the transfer of shares.

Dividend income from subsidiaries

The Group received dividend income amounting TL3.453 on 21 February 2012, regarding 2011’s dividend distribution from Netsel Turizm Yatırımları A.Ş with 44.60% share.

NOTE 27 - OTHER ISSUES THAT SIGNIFICANTLY AFFECT THE FINANCIAL STATEMENTS OR OTHER ISSUES REQUIRED FOR THE CLEAR UNDERSTANDING OF FINANCIAL STATEMENTS

Approval of Financial Statements:

The Group’s consolidated financial statements as at 31 December 2011, as audited by independent auditors and reviewed in accordance with the Capital Markets Board’s Communiqué Serial: XI, No: 29, present fairly the consolidated financial position of the Group and the results of its operations in accordance with the regulations issued by the Capital Markets Board and Group accounting policies. With the Board of Directors’ decision dated 5 April 2012, Assistant General Manager İsmail Kazanç and Accounting Manager Lütfü Vardı are authorized to sign electronically the consolidated financial statements for public disclosure.

NOTE 28 - ADDITIONAL NOTES: CONTROL OF COMPLIANCE WITH THE PORTFOLIO LIMITATIONS

In accordance with the Principles Regarding Real Estate Investment Companies Communiqué with Series VI, No: 11, information on control of compliance with the portfolio limitations is given in a way defined by the CMB and by using non-consolidated financial statement items. The related information may not be consistent with the informations given in consolidated financial statements. Torunlar REIT 2011 Annual Report P / 155

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

In this context, informations related to control of compliance with the portfolio limitations is as follows as of 31 December 2011 and 2010:

Non-consolidated (stand-alone) Related 31 December 31 December financial statements main account items regulations 2011 2010

A Money and capital market instruments Series: VI, No: 11, Art.27/(b) 655,483 464,472 B Properties, projects based on properties and rights based on properties Series: VI, No: 11, Art,27/(a) 2,545,012 2,198,696 C Subsidiaries Series: VI, No: 11, Art,27/(b) 446,290 377,727 Due from related parties (Non commercial) Series: VI, No: 11, Art,24/(g) - - Other assets 204,415 170,769

D Total assets Series: VI, No: 11, Art,4/(i) 3,851,200 3,211,664

E Financial liabilities Series: VI, No: 11, Art,35 963,218 779,348 F Other financial liabilities Series: VI, No: 11, Art,35 1,313 3,877 G Due from financial leases Series: VI, No: 11, Art,35 - 20 H Due to related parties (Non commercial) Series: VI, No: 11, Art,24/(g) - - I Shareholder’s equity Series: VI, No: 11, Art,35 2,563,236 2,384,233 Other liabilities 323,433 44,186

D Total liabilities Series: VI, No: 11, Art,4/(i) 3,851,200 3,211,664

Non-consolidated (stand-alone) Related 31 December 31 December financial statements main account items Regulations 2011 2010

A1 The portion of money and capital market instruments held for payables of properties for the following 3 years Series: VI, No: 11, Art.27/(b) 389,684 307,960 A2 TL and foreign currency time and demand deposits Series: VI, No: 11, Art,27/(b) 655,483 464,472 A3 Foreign capital market instruments Series: VI, No: 11, Art,27/(c) - - B1 Foreign properties, projects based on properties and rights based on properties Series: VI, No: 11, Art,27/(c) - - B2 Idle lands Series: VI, No: 11, Art,27/(d) - - C1 Foreign affiliates Series: VI, No: 11, Art,27/(c) - - C2 Investments in affiliated operating companies Series: VI, No: 11, Art,32/A - - J Non-cash loans Series: VI, No: 11, Art,35 52,378 52,533 K Mortgage amount on non-owned land to be developed Series: VI, No: 11, Art,25/(n) - - Torunlar REIT 2011 Annual Report P / 156

Torunlar Gayrimenkul Yatırım Ortaklığı A.Ş. Notes to the Consolidated Financial Statements at 31 December 2011 (Convenience Translation into English of Financial Statements Originally Issued in Turkish) (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)

Minimum / Related 31 December 31 December maximum Portfolio limitations regulations 2011 2010 rate

1 Mortgage amount on non-owned land to be developed (K/D) Series: VI, No: 11, Art.25/(n) 0% 0% <10% 2 Properties, projects based on properties and rights based on properties (B+A1)/D) Series: VI,No:11, Art.27/(a),(b) 76% 78% >50% 3 Money and capital market instruments and affiliates (A+C-A1)/D) Series: VI, No: 11, Art.27/(b) 18% 17% <50% 4 Foreign properties, projects based on properties rights based on properties, affiliates, capital market instruments (A3+B1+C1/D) Series:VI,No:11, Art.27/(c) 0% 0% <49% 5 Idle lands (B2/D) Series:VI,No:11, Art.27/(d) 0% 0% <20% 6 Investment in affiliated operating companies (C2/D) Series:VI,No:11, Art.32/A 0% 0% <10% 7 Borrowing limit (E+F+G+H+J)/I Series:VI,No:11, Art.35 40% 35% <500% 8 TL and foreign currency time and demand Series:VI,No:11, Art.27/(b) 7% 5% <10% deposits (A2-A1)/D

Shareholding rate 31 December 2011 31 December 2010 Associate (%) TL TL

TRN 99.99% 236,938 212,630 Yeni Gimat 14.83% 153,957 115,886 TTA 40.00% 32,570 338 Torunlar Özyazıcı 60.00% 11,943 39,300 Netsel 44.60% 10,232 9,573 Torunlar-Aşçıoğlu-Kapıcıoğlu 65.00% 650 -

446,290 377,727

Yeni Gimat, Netsel, TTA, TRN, Torunlar Özyazıcı and Torunlar-Aşçıoğlu-Kapıcıoğlu which are associates, subsidiaries and joint ventures of the Group (all together “Subsidiaries”) do not have valuation reports as of 31 December 2011. For the purposes of the control of compliance with the portfolio limitations, net asset values of subsidiaries are used. In this respect, TRN, Yeni Gimat and TTA’s stand- alone financial statements which are prepared in accordance with financial reporting standards of the Group, are multiplied with the Group’s ownership rate in the related subsidiary. Thus, it is assumed that net values which are determined by adding and deducting net receivables/ liabilities as of balance sheet date from the investment properties that are owned by subsidiaries and followed in stand- alone financial statements with fair values, approximate to the fair value of the subsidiaries. Investment properties which are owned by subsidiaries are explained in Note 1 in detail. Since, there are no valuation reports of Torunlar Özyazıcı and Netsel, net asset values of the subsidiaries based on their stand-alone financial statements are taken into account and they are multiplied with Group’s share in these subsidiaries.

As it is explained in Note 1 in detail, Torunlar, Aşçıoğlu Kapıcıoğlu partnership was founded with the title of Torunlar Aşçıoğlu Kapıcıoğlu partnership at 18 October 2010 for the tourism trade and recreation area on the condition that all expenses would be covered by contractor company, on the location İstanbul, Şişli, Dikilitaş, place of Ali Sami Yen Stadium, Plate 58, Block 1199, Lot 384 which is owned by The Republic of Turkey Prime Ministry Housing Development Administration of Turkey. As of 31 December 2011 and 2010, licence related to the project has not been obtained and construction has not started yet. In this context, subsidiary value has been included in the control of compliance with the portfolio limitations table with the historical cost value. Contact

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