TAV Airports Employees whose Paintings are Featured in the 2011 Annual Report

Arzu Güzelaydın Ömür Begüm Ay Esen Sefer Fulya Pekcan M. Cengiz Yücel TAV Istanbul TGS BTA TAV Istanbul ATÜ TOC Officer Passenger Services Officer Accounting Officer Ramp Tower Officer ATU Bazaar Shop Supervisor

Merih Taraktaş Mesut Zerman Mustafa Çankaya Nursemin İşçimen Selda Adalı Tunçel TAV Istanbul BTA TAV Airport Hotel TAV Airport Hotel TAV Security Terminal Operations Officer Software Specialist Reservation Officer Reservation Officer Security Officer

Serdar Pektezol Sibel Tatlısu Songül Aydın Uğur Çolak Uğur Konyar TAV IT TAV Airports BTA TGS TAV Security Car Park System and Financial Reporting Senior Food Safety Chief VIP/CIP Passenger Services Security Officer Application Administrator Specialist Officer

Yeşim Çınar TAV Security Security Officer

* This project was carried out under the supervision of artist Köksal Çiftçi.

TABLE OF CONTENTS

TAV AT A GLANCE ASSESSMENTS OPERATIONS 02 Who We Are 24 Board of Directors’ Message 28 Airport Operations 10 What We Do 26 CEO’s Message 64 Service Companies 12 How 2011 Unfolded 78 Investor Relations and Stock Performance 14 Where We Operate 80 Glossary 16 Highlights of 2011 22 Outlook for 2012 2 TAV Airports 2011 Annual Report Who we are?

Shareholding Structure Strong, institutional shareholder base

Number of Shareholder Shares (1) Share ( %) Tepe İnşaat Sanayi A.Ş. 94,664,477 26.1 Akfen Holding A.Ş. 94,886,071 26.1 Sera Yapı Endüstrisi ve Ticaret A.Ş. 14,644,716 4.0 Non-floating (Other) 12,775,048 3.5 Free-float (Other) 146,310,939 40.3 Total 363,281,250 100.0

(1) As of December 31, 2011

Shareholders ( %)

Sera Yapı Endüstrisi ve Ticaret A.Ş. 4.0% Free-float (Other) 40.3%

Tepe İnşaat Akfen Holding A.Ş. Non-floating (Other) Sanayi A.Ş. 26.1% 26.1% 3.5%

Founding Shareholders Tepe İnşaat Sanayi A.Ş. Operating since Akfen Holding A.Ş. Akfen Holding is active Sera Yapı Endüstrisi ve Ticaret A.Ş. 1969, Tepe İnşaat is among the leading primarily in infrastructure investments Sera Yapı Endüstrisi ve Ticaret A.Ş. focuses companies in construction. as well as in maritime investments on infrastructure and superstructure (e.g. port operations), energy, real estate construction projects. and construction. 26.1% 26.1% 4.0%

Other Shareholders Free-float (other) 40.3% Non-floating (other) 3.5% TAV at a Glance Assessments Operations 3

Organizational Structure

Airport Operations Service Companies

Atatürk Airport ATÜ (50%) (100%) Unifree (Heinemann)

Esenboğa Airport BTA (67%) (100%) Bilintur (33%)

Havaş (65%) Adnan Menderes HSBC (28.3%) Havaş Airport (100%) İş Private Equity (6.7%) TGS (50%) Europe (67%)

TAV Operation Gazipaşa Airport Services TAV Airports served 451 (100%) (100%) thousand flights and 53 million passengers in 2011, bolstering its presence Madinah Airport TAV IT (33%) (99%) further in Europe and the Middle East. The Company

Monastir and undertook an ambitious Enfidha Hammamet TAV Security Airports (67%) (100%) investment program in 2011 whereby it took over the operation of the commercial Batumi and Tbilisi areas of the Riga Airport Airports (76%) in Latvia and won the tenders for Izmir and Medina Skopje and Ohrid Airports Airports. The Company (100%) enhanced its recognition, reputation and brand value on a global scale through Riga* Airport (100%) these investments.

* Only Commercial Areas 4 TAV Airports 2011 Annual Report Who we are?

Milestones A global brand in airport operations

1997 2005 2007 • TAV was founded and it was awarded • TAV Airports was awarded the tender to • TAV Airports Holding shares were the tender for the Istanbul Atatürk operate the Atatürk Airport International floated. Airport. and Domestic Terminal Buildings, Parking Garage and General Aviation • Tbilisi Airport’s new passenger terminal commenced service. 1999 Terminal for 15.5 years. • 60% of Havaş shares were acquired. • Batumi Airport commenced operation. • ATÜ, which was established as a TAV Airports venture to provide duty free • Construction and operation of the • TAV Airports was awarded the tender for shopping services, was incorporated Izmir Adnan Menderes International the Monastir and Enfidha Hammamet into the TAV corporate structure; BTA, Terminal was assumed by TAV. TAV Airports in Tunisia. which provides food and beverage Bilişim Hizmetleri A.Ş. (TAV IT) was • 40% minority shares of Havaş were services, was established. founded and the information technology acquired. Havaş became a wholly- services developed during the course owned subsidiary of TAV Airports. of construction and operation of airport 2000 terminals were consolidated under this • TAV Airports became 100% owner of TAV • TAV began operating the Istanbul company. Izmir and TAV Esenboğa. Atatürk Airport International Terminal. • TAV was awarded the tender for the • TAV Airports was awarded the tender for Tbilisi Airport in Georgia. the operation of the Antalya Gazipaşa 2001 Airport. • ”primeclass” CIP Service was launched. 2006 • The Hopa Terminal operated by Havaş commenced service. • Operation and construction services 2004 were restructured under “TAV • BTA began operating the Istanbul Havalimanları Holding A.Ş.” (TAV 2008 International Airport Hotel. Airports) and “TAV İnşaat” (TAV • TAV Airports assumed operation of Construction) as two separate holding Tunisia’s Monastir Airport. • Tepe - Akfen assumed construction companies. and operation of the Esenboğa Airport • TAV Gazipaşa Yatırım-Yapım ve İşletme Domestic and International Terminal. • Izmir Adnan Menderes Airport A.Ş. (TAV Gazipaşa) was founded to International terminals commenced operate the Antalya Gazipaşa Airport. • TAV İşletme Hizmetleri A.Ş. (TAV service. Operation Services) was founded. • TAV Airports was awarded the tender • Esenboğa Airport Domestic and for the operation of the airports in International Terminal commenced Macedonia’s capital Skopje and in Ohrid, operation. as well as the construction of the Shtip • TAV Özel Güvenlik Hizmetleri A.Ş. (TAV Cargo Airport, of which TAV Airports Security) was founded and the private also retains optional rights to operate. security services developed during The related concession contracts were the course of the construction and signed. operation of the airport terminals were • Havaş was awarded the tender for consolidated under this company. a 50%-shareholding partnership in TGS (Turkish Ground Services Co.), a subsidiary of Turkish Airlines. TAV at a Glance Assessments Operations 5

2009 • TAV Airports increased its issued capital • TAV Airports sold 18% of the shares • Skopje Airport’s new terminal by TL 121 million. of TAV Tunisie SA to the Pan African commenced operation after the Infrastructure Development Fund. completion of its construction. • TAV Gazipaşa commenced operation at the Antalya Gazipaşa Airport. • Havaş acquired a 50% equity stake • TAV Airports, jointly with its partners Al in North Hub Services (NHS, Havaş Rajhi and Saudi Oger, signed a contract • The Enfidha Hammamet Airport Europe), a provider of ground handling with Saudi Arabia’s Civil Aviation investment was completed. services at Latvia’s Riga Airport. Authority GACA for the build-operate- transfer project of the Madinah Airport, • Agreement was reached for the sale • TAV Airports was awarded the tender for of Havaş shares to HSBC (28%) and İş the first airport privatization in Saudi the operation of duty free, catering and Arabia. Private Equity (7%). other commercial areas at Latvia’s Riga • Havaş acquired a 50% equity stake in Airport. • TAV Mobile, the mobile phone app that TGS. provides access to real time information • TAV Airports Holding raised its at the airports operated by TAV Airports, • IFC (International Finance Corporation), ownership stake in TAV IT from 97% to was launched. a World Bank institution, acquired a 15% 99%. equity stake in TAV Tunisie. • TAV Airports Holding was awarded the tender for the leasing of the operation 2011 rights of Izmir Adnan Menderes 2010 • TAV commenced service at Latvia’s Riga Airport’s existing International Terminal, • TAV Airports assumed the operation of Airport after assuming the operation of CIP, Domestic Terminal and auxiliary Macedonia’s Skopje and Ohrid airports the commercial areas of this airport. structures as the highest bidder on November 17, 2011. for 20 years. • TAV Airports Holding raised its • The sale of the minority shares of Havaş ownership stake in TAV Security’s share • Havaş, a 65%-owned subsidiary to HSBC and İş Private Equity was capital from 66.67% to 100%. company of TAV Airports Holding, completed. increased its ownership stake in North • TAV Airports Holding’s ownership stake Hub Services (“NHS”), a company • TAV signed a “Global Training Center” in TAV Urban Georgia’s share capital providing ground handling services at agreement with Airports Council increased from 66% to 76%. Latvia’s Riga, Sweden’s Stockholm and International (ACI), whose membership • TAV Airports Holding raised its Finland’s Helsinki airports, from 50% to includes more than 1,600 airports from ownership stake in TAV Batumi 66.7% as of December 20, 2011. NHS around the world. Operations LLC’s share capital from 60% will continue to operate at these airports under the “Havaş Europe” commercial • TAV Operation Services launched the to 76%. brand. TAV Passport Card, which offers many • BTA Denizyolları (BTA Sea Lines) was services and privileges at airports founded as a 50%-50% joint venture operated by TAV. of BTA and TASS; BTA commenced • The operation of five service points service at İDO (Istanbul Fast Ferries Co.) (Kantin, Beerport, Kokpit Cafe, Kokpit locations. Brasserie and İç Hatlar Botanik Cafe) at the Istanbul Atatürk Airport Domestic Terminal was assumed by BTA as of July 1, 2010. 6 TAV Airports 2011 Annual Report Who we are? Business Model and Strategy High level of integration and customer satisfaction achieved through a unique business model

Service Companies

Duty Free

Airport Operations

Atatürk Airport Ground Handling

TAV Airports Esenboğa Airport Holding Adnan Menderes Airport Gazipaşa Airport Food & Beverage Madinah Airport

Monastir and Enfidha Hammamet Airports Batumi and Tbilisi Airports Information Technology Skopje and Ohrid Airports

Riga Airport

Security

Operation Services TAV at a Glance Assessments Operations 7

Organic Growth Inorganic Growth Soaring passenger traffic: New investments in new Organic growth is achieved regions: Inorganic growth, on through an increase in the the other hand, is accomplished passenger traffic of the with investments in airport and airports currently operated service companies. The Holding Generating Value by TAV. While the Holding’s continues to enrich its existing TAV Airports is increasing its revenues grow in parallel portfolio by adding new total value generation by with the soaring passenger airports and service companies strengthening the integration traffic, costs increase less than to it in the target region between its business lines. income since the majority of of Europe, Russia and the the Company’s expenditures Commonwealth of Independent consists of fixed costs. Thus States, Baltic Nations and the Holding takes advantage of Georgia, Middle East, Africa an operational leverage effect and India. and generates higher EBITDA. 8 TAV Airports 2011 Annual Report Who we are?

Investment Priorities At the center of the world’s attention

Turkey: TAV Airports: € 53 million net An alluring market A leading airport profit: with strong growth operator with a Steady financial potential balanced portfolio performance and cash structure generation capability

The fastest growing aviation Diversified portfolio Strong growth momentum market in Europe composition (2006-2011 period) 17% 1st 55% Compound Annual Growth Rate Turkey’s leading airport operator Compound Annual Growth Rate in passenger traffic between (CAGR) in EBITDA 2003 and 2011 12 Number of airports operated 17% 11% in Turkey, Georgia, Tunisia and Compound Annual Growth Rate Projected Compound Annual Macedonia* (CAGR) in Revenues Growth Rate* in passenger traffic from 2009 to 2023 * The commercial areas of Riga Airport are operated by TAV Airports. 18% * Compound Annual Growth Rate (CAGR) TAV plans to begin operating the airport in Compound Annual Growth Rate calculated based on the Turkish Ministry of Madinah, Saudi Arabia in the first half of 2012. Transport’s total airline passenger traffic (CAGR) in Passenger Traffic projection for Turkey of 350 million in 2023 Easy Access to the Rapidly 19% Developing Middle East and Compound Annual Growth Rate North Africa Regions (CAGR) in Employment TAV at a Glance Assessments Operations 9

Istanbul: The Region’s Most Efficient Transfer Hub

Transportation Hubs Lowest cost in transfer flight connections ( %)

Istanbul Atatürk 33

Frankfurt 23

Cairo 16

London 13

Dubai 13

3 Paris

1 Madrid

Source: Determining Hub Efficiency in Europe, Middle East and North Africa: A Comparative Study; E. Nur Günay, Şükrü Nenem

Istanbul stands out as the most efficient hub when compared with the other seven active and developing air transit hubs. 10 TAV Airports 2011 Annual Report What We Do?

Overview 12 airports on three continents

Airport Operations

Revenue Share of Total Revenues Share of EBITDA Number of Employees* € 498 million 47% 77% 5,937

Turkey Georgia Macedonia € 422 million € 25 million € 17 million

Istanbul Atatürk Izmir Adnan Menderes Batumi and Tbilisi Skopje and Ohrid Airport (100%) Airport (100%) Airports (76%) Airports (100%) Revenue: € 344 million Revenue: € 35 million Revenue: € 25 million Revenue: € 17 million

Share of Total Revenues Share of Total Revenues Share of Total Revenues Share of Total Revenues 33% 3% 2% 2%

Share of EBITDA Share of EBITDA Share of EBITDA Share of EBITDA 53% 9% 5% 1%

Number of Employees Number of Employees Number of Employees Number of Employees 2,413 559 747 664

Ankara Esenboğa Gazipaşa Airport Airport (100%) (100%) Tunisia Latvia Revenue: € 42 million Number of Employees Monastir and Enfidha Riga Airport (commercial Share of Total Revenues 19 Hammamet Airports activities) (100%) 4% (67%) Number of Employees Share of EBITDA Revenue: € 35 million 2 8% Share of Total Revenues Number of Employees 3% Saudi Arabia Saudi Arabia Madinah Share of EBITDA 840 Airport (33%) 2% Number of Employees 693

* As of December 31, 2011 TAV at a Glance Assessments Operations 11

Service Companies

Revenue Share of Total Revenues Share of EBITDA Number of Employees* € 552 million 53% 23% 14,332

Duty Free Food & Beverage Ground HandlIng Other

Operation Services, ATÜ (50%) BTA (67%) Havaş (65%) Information Technology (IT) and Security Revenue: € 208 million Revenue: € 81 million Revenue: € 197 million Revenue: € 66 million

Share of Total Share of Total Share of Total Share of Total Revenues Revenues Revenues Revenues 20% 8% 19% 6% Share of EBITDA Share of EBITDA Share of EBITDA 8% 2% 13% Number of Employees Number of Employees Number of Employees Number of Employees 1,420 2,323 9,928 661

Operates Turkey’s largest Has a total seating capacity Operates at 22 airports in TAV Operation Services (100%) duty free shops. of 12,500 at 146 points. Turkey including Istanbul, Provides commercial space Ankara, Izmir and Antalya allocation and tourism services. Established a partnership Supplies bakery products to with a market share of various chains in Turkey. with Unifree, a subsidiary of approximately 65%. TAV IT (99%) the leading German travel Provides airport IT services. retailer Heinemann. Operates the 131-room TGS (50%) operates in Istanbul Airport Hotel. Istanbul, Ankara, Izmir, TAV Security (100%) Operates in Turkey, Georgia, Antalya and Adana. Provides security services at Tunisia, Macedonia and Operates in Turkey, Georgia, Tunisia and Macedonia. the Istanbul, Ankara, Izmir and Latvia. Has a 67% ownership stake Gazipaşa airports. in Havaş Europe. Commenced service at İDO (Istanbul Fast Ferries Co.) locations via BTA Denizyolları (BTA Sea Lines).

* As of December 31, 2011 12 TAV Airports 2011 Annual Report How 2011 Unfolded?

TAV in Figures TAV’s rapid and steady ascent continues.

Consolidated Revenues* (€ million) 12%

2011 881 Consolidated revenues increased by 12% in 2011. Aviation income (including ground handling) constituted 46% of total income, 2010 785 while non-aviation income made up the remaining 54% of revenues. A large portion 2009 640 of the revenues is denominated in foreign 17% currency. compound annual growth rate 2008 627 (CAGR) between 2006 and 2011

2007 508

2006 402

Consolidated EBITDA* (€ million) 21%

2011 257 Revenues grew by 12% while EBITDA was up by 21% in 2011 thanks to operational leverage. 2010 212

2009 167 55% compound annual growth rate 2008 141 (CAGR) between 2006 and 2011

2007 77

2006 29

* Revenues and EBITDA were adjusted to include guaranteed passenger revenues but exclude construction revenues and expenditures. TAV at a Glance Assessments Operations 13

Passengers (million) 11%

Passenger traffic at the airports operated 2011 53 by TAV Airports increased by 11% compared to the previous year and reached 53 million in 2011. 2010 48

2009 42 18% compound annual growth rate 2008 41 (CAGR) between 2006 and 2011

2007 30

2006 23

Average Number of Employees 13%

TAV Airports provides services at 12 airports 2011 19,838 in five countries on three continents with nearly 20 thousand employees. 2010 17,535

2009 12,194 19% compound annual growth rate 2008 11,289 (CAGR) between 2006 and 2011

2007 9,473

2006 8,146 14 TAV Airports 2011 Annual Report Where We Operate?

Operations Map Expanding operations in Turkey and abroad

Passenger Fees

Ground Handling

Landing

Parking MACEDONIA Fueling

Duty Free TAV’s 2011 Commercial Flight Traffic Food and Beverage 11.9 thousand Car Park TAV’s 2011 Passenger Traffic 838 thousand

Revenue by Country 2%

Skopje

Ohrid

TUNISIA

TAV’s 2011 Commercial Flight Traffic 20.8 thousand

TAV’s 2011 Passenger Traffic 2.3 million

Revenue by Country 4%

Enfidha

Monastir TAV at a Glance Assessments Operations 15

LATVIA Riga Airport (Commercial Activities)

GEORGIA

TAV’s 2011 Commercial Flight Traffic 23.1 thousand

TAV’s 2011 Passenger Traffic 1.2 million

Revenue by Country 3%

Tbilisi

Batumi

TURKEY

TAV’s 2011 Commercial Flight Traffic 396 thousand

TAV’s 2011 Passenger Traffic 48 million

Revenue by Country 91% SaudI ArabIa Istanbul Atatürk Madinah Airport Operations are to be taken over in the first half of 2012. Ankara Esenboğa

Izmir Adnan Menderes

Antalya Gazipaşa 16 TAV Airports 2011 Annual Report Highlights of 2011

Operational Summary Rapid uninterrupted growth in every line of business

International Passengers (million) 9% International passenger traffic at 2011 31.9 the airports operated by TAV Airports increased by 9% to reach 31.9 million. 2010 29.3

Domestic Passengers (million) 14% Domestic passenger traffic at the 2011 20.8 airports operated by TAV Airports increased by 14% to reach 20.8 2010 18.3 million.

International Commercial Flights 5% International commercial flights at the 2011 281,123 airports operated by TAV Airports were up by 5% in 2011. 2010 266,991

Domestic Commercial Flights 14% Domestic commercial flights at the airports 2011 170,030 operated by TAV Airports were up by 14% in 2011. 2010 148,759

TAV Airports Average Number of Employees 13% In line with the expanding operations 2011 19,838 map, the Company’s average number of employees increased by 13% in 2011. 2010 17,535 TAV at a Glance Assessments Operations 17

Financial Summary Record-breaking financial success

Summary Income Statement* (€ million) 2010 2011

Operating Revenues 785 881

Operating Expenses 632 689

Net Operating Profit 153 192

Net Financial Expenses (57) (67)

Profit/(Loss) Before Tax 64 92

Income Tax Benefit/(Expense) (12) (40)

Net Profit/(Loss) 50 53

Profit/(Loss) Attributable to Minority Interests 2 (1)

EBITDA 212 257

EBITDAR 342 387

Operating Revenues* (€ million) 12% TAV Airports’ revenues increased 12% and 2011 881 reached € 881 million in 2011 as a result of organic and inorganic growth. 2010 785

EBITDA* (€ million) 21% EBITDA soared by 21% in 2011 thanks to 2011 257 the operational leverage effect.

2010 212

Net Profit (€ million) 6%

TAV Airports generated net profit of € 53 2011 53 million in 2011 thanks in part to the 11% growth in passenger traffic at the airports 2010 50 operated by the Company.

* Includes guaranteed passenger revenues but excludes construction revenues and expenditures. (Total guaranteed passenger income at Izmir and Ankara was € 33 million for 2011.) 18 TAV Airports 2011 Annual Report Highlights of 2011

Financial Summary

Summary Balance Sheet (€ million) 2010 2011 Cash, Cash Equivalents and Securities 32 76 Restricted Bank Balances 382 356 Total Assets 2,039 2,081 Financial Liabilities 1,236 1,224 Total Liabilities 1,499 1,519 Shareholders’ Equity 540 562 Net Debt 821 792

Total Assets (€ million) 2% 2011 2,081

2010 2,039

Shareholders’ Equity (€ million) 4%

2011 562

2010 540

Free Cash Flow

Free cash flow (net cash generated from operations - cash used in investments) in 2011 was € 250 million, up from € 217 million in 2010.

(€ million) 2010 2011 Net Cash Generated from Operations 336 355 Acquisition of Property and Equipment (80) (43) Addition to Airport Operation Rights (38) (61) Acquisition of Intangible Assets (1) (1) Free Cash Flow (FCF) 217 250 TAV at a Glance Assessments Operations 19

Capital Expenditures (€ million)

Property and Equipment Airport Operation Rights Intangible Assets

2011 106

2010 119

2009 312

2008 215

2007 120

Consolidated Net Debt (€ million) -4%

The consolidated net debt of TAV Airports 2011 792 Holding was down by 4% to € 792 million.

2010 821

Composition of Debt (€ million)

500

400

300

200

100

0

1 year 2 year 3 year 4 year 5 year 5+year

Other TAV Macedonia TAV Tunisie TAV Holding-standalone ATÜ TAV Istanbul Havaş TAV Georgia TGS TAV Izmir TAV Gazipaşa TAV Esenboğa 20 TAV Airports 2011 Annual Report Highlights of 2011

Highlights A productive and successful year when major investments were undertaken

TAV Airports Holding was awarded A wine store featuring mostly TAV Airports Holding raised its the tender held by the Turkish State Georgian wines was opened in the duty ownership stake in TAV Batumi Airports Authority (DHMİ) for the leasing free section of the Tbilisi Airport. Operations LLC’s share capital from 60% of the operation rights of Izmir Adnan to 76%. Menderes Airport’s existing International Izmir Adnan Menderes Airport was Terminal, CIP, Domestic Terminal and granted Level 1 Carbon Accreditation Havaş, a 65%-owned subsidiary auxiliary structures as the highest bidder Certification by the ACI in 2011. company of TAV Airports Holding, on November 17, 2011. increased its ownership stake in North The “open gate” policy was initiated at Hub Services (“NHS”), a company Skopje Airport, annual passenger the Ankara Esenboğa Airport. providing ground handling services at capacity of which was increased to Latvia’s Riga, Sweden’s Stockholm and 4 million by TAV Airports, commenced An MoU (Memorandum of Finland’s Helsinki International Airports, service. Understanding) was signed between the from 50% to 66.7% as of December 20, Turkish State Airports Authority (DHMİ), 2011. TAV Airports, through the consortium TAV and Turkish Airlines for the CDM it has formed jointly with its partners Al (Collaborative Decision Making) project in Skopje Airport’s new terminal Rajhi and Saudi Oger, was awarded the order to enhance passenger, airline and commenced operation after the tender for the operation of the Madinah sector satisfaction and optimize capacity completion of its construction. Airport for 25 years. at the Istanbul Atatürk Airport. TAV Macedonia was deemed worthy TAV Airports, jointly with its partners The trigen facility at the Istanbul of the best project award in the Public Al Rajhi and Saudi Oger, signed a Atatürk Airport resumed operation, Investment category at the International contract with Saudi Arabia’s Civil Aviation resulting in major energy cost savings. Real Estate and Investment Fair that was Authority GACA for the build-operate- organized for the first time in 2011. transfer project of the Madinah Airport, TAV assumed the operation of 1,300 the first airport privatization of Saudi square meters of commercial area at Istanbul Atatürk Airport International Arabia. Latvia’s Riga Airport at the beginning of and Domestic Terminal Food Court area 2011 and commenced operations. Total was renovated. Adding Istanbul Fast Ferries Co. (İDO) area taken over by TAV Airports reached to its service network, BTA acquired the 2,295 square meters during the year. TAV Operation Services and the operation right for 33 food and beverage Bank of Georgia inked the partnership sales points in terminals, fast ferries and TAV received the “Best Partner” award agreement allowing exclusive clients of ferryboats operated by İDO. from the Riga Airport management. the Bank of Georgia to use the “prime class” Lounge. TAV Mobile, the app developed for TAV Airports Holding raised its smart phones and tablet PCs that ownership stake in TAV Security’s share provides passengers access to real time capital from 66.67% to 100%. information, was launched. TAV Airports Holding’s ownership stake in TAV Urban Georgia’s share capital increased from 66% to 76%. TAV at a Glance Assessments Operations 21

Awards International awards won as a result of diligent and dedicated efforts

The 2010 Annual Report of TAV ISS Corporate Services (ICS), one TAV Airports was recognized with the Airports was deemed the “Best of Show” of the world’s most prestigious 2011 Corporate Governance Award 2011 (Best in the World) at the International independent corporate governance rating by the World Finance Magazine. Annual Report Competition held in New organizations, increased TAV Airports’ York City, USA. corporate governance rating score Moodie awarded Cakes & Bakes, a to 9.09. As a result of this score, TAV subsidiary company of BTA Catering, The 2010 Annual Report was Airports Holding became the holder of with the “Best Supplier” award. recognized with the Gold Award in the the second highest rating in the Istanbul “Airport Management” category at the Stock Exchange Corporate Governance Istanbul Atatürk Airport was named “Galaxy Awards” competition organized Index. “Best Airport Operator of the Year” at by MerComm in the United States. the Skalite 2011 Awards, known as the The Emerging Markets Airport “Tourism Oscars” in the industry and TAV Airports Holding’s 2010 Annual Awards recognized TAV Airports in three organized by Skal International Istanbul Report received the Gold Award in categories. At the award ceremony Club to raise the bar for quality in the “Transportation and Logistics” held in Dubai, United Arab Emirates, tourism. category from the League of American TAV Airports was chosen as the “Best Communications Professionals (LACP) Emerging Market Airport Management W3 Awards gave the “Silver Award” while ranking in the top 50 reports in the Company.” Izmir Adnan Menderes Airport to the Istanbul Atatürk Airport website Europe-Middle East-Africa (EMEA) region International Terminal captured the “Best in the “Transportation” and “Travel” and among top 10 reports in Turkey. Emerging Market Achievement Airport categories and to the TAV Investor for Eco Innovation” title while Georgia’s Relations website in the “Financial At the “Turkey Investor Relations Tbilisi Airport was deemed the “best” Services” category. Awards” organized for the third time in in its region (Russia/CIS); both of these 2011 by Thomson Reuters Extel Surveys airports are operated by TAV Airports. TAV Passport was deemed worthy of and Acclaro, TAV Airports won awards in the “Best Service” Award by gecce.com. six categories, “Best Investor Relations As a result of its leadership in internal CEO,” “Best Investor Relations CFO,” “Best audit, TAV Airports was deemed worthy ICT Summit Eurasia - Bilişim Zirvesi’11 Investor Relations Officer,” “Best Investor of the “Internal Audit Awareness” award designed as a platform to encourage Relations Website,” “Best Investor by the Internal Audit Institute of Turkey cooperation within the Eurasia region, Relations Unit” and “Best Disclosure of (TİDE) Board of Directors. recognized the communication Financial Results,” including a first-place technology projects undertaken finish in the “Best Investor Relations TAV Georgia won the “Golden Brand between the countries of the region. CEO” category. Award Best Brand” in the “Public Leaving many established information Transport and Service” category at the technology companies behind with its Golden Brand 2010 organized by Global Enfidha - Hammamet Airport information Idea, a leading market research firm technology infrastructure project, TAV IT in Georgia, and The Financial, a news was awarded the first place at the award portal. ceremony.

TAV Macedonia, won the best project award at the Real Estate and Investment Exhibition organized for the first time in Macedonia in 2011. 22 TAV Airports 2011 Annual Report Outlook for 2012

Outlook for 2012 New projects undertaken on the path to becoming a world renowned company

Passenger and Commercial Flight Turkey’s number 1 airport operator with strong regional growth Traffic in the World performance

Passenger Traffic Growth in Holding the concession rights to operate the airports of Turkey’s largest three metropolitan Selected Airports (%) (2011) areas (Istanbul Atatürk, Ankara Esenboğa, Izmir Adnan Menderes), TAV Airports expanded its TAV Airports 11 operations map overseas to include Tunisia, Georgia, Macedonia, Latvia and Saudi Arabia. TAV continues to grow by seizing on regional infrastructure development opportunities. Schiphol 10 Europe 7 Frankfurt 7 Aena 6 Aéroport de Paris 6 World 5 2011 Passenger Traffic (million) BAA 4 Istanbul Atatürk* 37.5 Istanbul SAW 12.7 Izmir* 8.5 TAV Airports surpassed the passenger traffic growth rates in the world and in Europe and continued its trend of Antalya 25.1 Ankara* 8.5 outperforming the industry in 2011. TAV Airports, the leading brand in the rapidly * Airports operated by TAV developing Turkish aviation industry, also continues to expand its business geographically by assuming operation of new foreign airports. TAV at a Glance Assessments Operations 23

Turkish Aviation Industry and TAV Airports

Turkish Market Total Passenger Traffic (million)

2011 117

2010 103

2009 86

2008 79

2007 70

2006 65 17% compound annual growth rate 2005 57 between 2003 and 2011

2004 45

2003 34

Source: DHMİ (State Airports Authority, excluding transit passengers)

TAV Airports Total Passenger Traffic (million)

2011 53

2010 48

2009 42

2008 41

2007 30 2006 23 25% compound annual growth rate 2005 17 between 2003 and 2011 2004 10

2003 9 24 TAV Airports 2011 Annual Report Board of Directors’ Message Board of Directors’ Message 2011 has been another stellar year when TAV Airports’ concrete accomplishments were recognized with a large number of awards. TAV Airports TAV Sibel Tatlısu, TAV at a Glance Assessments Operations 25

The gigantic turbulences experienced in This journey that began 15 years ago with governance standards in the most the world economy and in the financial a single airport in our own backyard led to comprehensive manner in Turkey. While markets that serve to price in the today’s regional powerhouse that serves conducting our business, we aimed to economic expectations have left a number at 12 airports on three continents. We attract billions of dollars of foreign capital of destructive and permanent marks on always stood out with our values and work into Turkey while maintaining the sensitive the global scale since 2007. As many ethic throughout this journey. Leveraging balance between professional discipline industries go through difficult times during the opportunities presented by the culture and creative freedom. We deployed the this period, undoubtedly the aviation sector we all grew up as part of, we worked in foreign capital that we have secured for that TAV operates in is also significantly utmost harmony with many partners from growth, but we also managed to maintain impacted by these adverse circumstances. many different faiths and speaking many the distinction of being an organization different languages on three continents. As that makes decisions expeditiously and TAV Airports has overcome many crises one of the most effective practitioners of shares information effectively while in its relatively short history, from the the matrix-style organizational structure growing. September 11 attacks and the avian flu that has been gaining prominence in the to the volcano eruption in Iceland and contemporary management literature, One of the most important elements of the Russia-Georgia war in Georgia, the TAV Airports steered its operations that TAV Airports Holding’s corporate culture is last such crisis being the popular uprising now span a vast geography in the most its focus on diversity and its understanding in Tunisia. From this perspective, we can efficient manner. that sees diversity as wealth. Approaching say that crises have become a part of the our employees in accordance with this natural flow of life for TAV Airports Holding. TAV Airports owes its current success to philosophy, we managed to add the its employees, each of whom is among personal knowledge and know-how of When we look back and analyze the the best professionals in his or her each employee to the Company’s shared operational and financial performance of field. We created a corporate culture intellectual capital pool. Consequently, TAV and the giant strides made by TAV Airports, at the Company, which makes the best Airports became an exemplary company in which operates in the aviation industry of the opportunities offered by our working in harmony with different cultures that is highly sensitive to the business unprecedented organizational structure, in a very diverse set of regions. cycle and economic developments, where the best is achieved in the shortest over the last five years that was a amount of time irrespective of external We anticipate the volatility to continue in period of major economic turbulence, circumstances. This comes about as a every segment of the economy for a little we see a bastion of stability operating result of engaging collective intelligence longer in the period ahead. TAV Airports in an unstable background. Growing its in decision-making processes as well as Holding will continue to represent Turkey passenger traffic, revenues and EBITDA each employee being equally responsible successfully on the global stage thanks to by an average of 18 %*, 17 %* and 55 %*, as all other employees with regard to the the impetus stemming from its values that respectively, over the last five years, the Company’s future. brought the Company to this day as well Company is realizing its policy of being a as its invaluable experience. We would like center of stability in Turkey’s region in its As affirmed by independent rating to express our deepest gratitude to our own economic sphere of influence thanks agencies, we continued to be a “best employees who made TAV Airports what to its strong and steady growth. Continuing practice” example of corporate governance it is today. to grow at an accelerating pace, TAV by thorough implementation of corporate Airports has become a leading company that steers its industry in all regions in which it operates.

Ali Haydar Kurtdarcan Dr. M. Sani Şener Hamdi Akın Vice Chairman of the Member of the Board of Chairman of the * CAGR: Compound Annual Growth Rate Board of Directors Directors, President & CEO Board of Directors 26 TAV Airports 2011 Annual Report CEO’s Message CEO’s Message TAV Airports continued to grow faster than the industry despite the global economic uncertainties and the instabilities created by the radical transformations taking place in the regions where the Company operates. TAV Airports TAV Sibel Tatlısu, TAV at a Glance Assessments Operations 27

Esteemed Shareholders, As a company that earns 54 % of its income cash flow during this period when it also from non-aviation businesses, TAV Airports recorded the strongest financial results in its Founded in 1997, TAV Airports has become takes special heed of the development of its history. Consequently, TAV Airports managed a respected regional brand in the Eurasia/ service companies. ATÜ, which has become to reduce its net debt to € 792 million as Africa axis in merely 15 years, which would an admired market leader in the region in the of December 2011 even after making be considered as short as the blink of an duty free retailing business line, commenced investments amounting to € 106 million eye as far as the history of corporations is operation at the Riga airport, an airport that is during the year. Increasing our headcount concerned. The most important factor we not operated by TAV; thereby demonstrating by 8 %, we ended 2011 as a larger and owe this accomplishment to is the diversity- the flexibility of the Company’s business stronger company with 20,269 employees oriented perspective that we have acquired model once again. In a similar vein, TAV’s and continued to be among the largest job from Turkey, which is among the few major food & beverage firm BTA established a creators in Turkey in 2011. centers of diversity on the planet. joint venture with TASS which took over the operation of Istanbul Fast Ferries Co (İDO), 2011 went in the books as a major milestone Thanks to this perspective that allows TAV under the name of BTA İDO, and began in the Company’s history as the year where Airports to act together in harmony with catering to 50 million customers of İDO with TAV’s “Smart Growth” strategy began to bear cultures that are very different from each the BTA quality. In addition, Havaş, Turkey’s fruit. TAV Airports Holding’s Board of Directors other, the Company is able to create value largest ground handling company, now also crowned the Company’s successful financial by finding a common denominator among serves airline passengers in Riga, Helsinki and results in 2011 by resolving to recommend to a diverse array of cultures spanning a vast Stockholm under the Havaş Europe brand. the General Assembly that a dividend of TL geography from northern European Union 0.25 per share be paid to the shareholders. countries such as Latvia, Finland and Sweden In 2011, a year marked by new investments, to Georgia, Macedonia, Tunisia and Saudi TAV Airports continued to operate its existing Our commitment to creating value for the Arabia. As the open and friendly foreign portfolio of airports most effectively. Istanbul society we belong to in every area during policies pursued by Turkey strengthen our ties Atatürk Airport, always one of the major the course of our operations reveals itself in with our neighbors with each passing day, focal points of the global aviation industry every activity we conduct. As one of the most they also help TAV Airports extend its journey that also holds the distinction of being TAV important indicators of this commitment, that began in its own homeland toward the Airports Holding’s crown jewel as well as the TAV Airports published its first sustainability greater region in leaps and bounds. number one entry point to Turkey, registered report in accordance with the GRI reporting an impressive growth rate of 17 % in 2011. standards in 2011. The Company will In this regard, we have recorded a major Corresponding to an additional 3 million continue to conduct its business along the landmark in the Company’s history in 2011. passengers, this increase alone is equivalent lines of sustainability in the coming years. TAV Airports Holding, as part of the TIBAH to the passenger traffic of a mid-size airport. consortium that it established jointly with Al What has transformed TAV Airports, whose Rajhi and Saudi Oger, two leading groups in Aside from Tunisia, all airports in our portfolio success in corporate governance and the Middle East was awarded the tender for achieved very strong, double-digit growth strategic communication is affirmed by the capacity expansion and operation until rates in 2011. The political turmoil in Tunisia independent sources each and every year, 2037 of the Madinah International airport, disrupted the Company’s growth in this into an exemplary and admired company which holds a very special place in our hearts country in 2011. However, as a company that in the region is our ability to keep polar for being one of the holy cities of Islam. We has invested in the next 35 years of Tunisia opposites in balance and turn our differences are all very excited and proud to have the alongside respected multilateral partners into strength, qualities that are embedded privilege of designing and operating the such as IFC and PIADF, we are aware that in the DNA of the Company and all of its gate of entry to the city of Madinah with the economic liberalization will increase this employees. These skills that helped TAV investment we will make there. country’s tourism potential and enhance the Airports get to where it is today are also the value of our assets; therefore, we are more principal assurance of the achievements During the year, TAV Airports was also optimistic than ever about Tunisia’s future. that the Company will continue chalk up in awarded the tender for the operation, the coming years. I would like to take this until year-end 2032, of the domestic and In a year when global airline passenger opportunity to express my sincere gratitude international terminals of the Izmir Adnan traffic grew by 4.9 % according to ACI data, to our employees, the most valuable assets Menderes Airport, which is the entrance TAV Airports increased its total passenger of TAV Airports, to our passengers, and to our gate to the Aegean coast, one of the major traffic by 11 % to 53 million. As a result, the esteemed shareholders whose support we tourism and culture hubs in Turkey. We are Company’s total revenue was up by 12 % always feel on our side. also glad to contribute to the faster growth to € 881 million and EBITDA increased by of the region through the € 250 million 21 % to € 257 million while EBITDA margin investment TAV will undertake in Izmir as a ticked up by 2.2 percentage points to reach result of this tender. 29.2 %. The Company increased its cash generation capability at an accelerating pace and generated € 250 million in free Dr. M. Sani Şener Member of the Board of Directors and President & CEO 28 TAV Airports 2011 Annual Report Airport Operations

Airport Operations Turkey: Fastest growing aviation market in Europe

Center of attention Turkey’s Growth Trend (US$ million) Thanks to its rich history, culture , beautiful nature, developing economy, Nominal GDP Real GDP Growth ( %) trade volume and strategic position,

Turkey is becoming a powerful center 10.0% 1,083

of attraction in Europe as well as in the 1,012 943

Middle East. 877 5.0% 798 742 730 647 615

531 0.0% Second largest population 483

With 75 million people, Turkey has the (5.0%) youngest, the most rapidly growing and the second largest population in (10.0%) Europe. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: IMF

Steady growth momentum GDP per Capita in 2011 (US$ thousand) Turkey is the sixth largest economy in Europe and the 16th largest in the Spain 33,297 world. Greece 27,875

Turkey’s steady growth momentum in Slovenia 25,939 recent years and the potential it offers attract investors. Czech Republic 20,925

Turkey ranks close to the bottom in Slovakia 17,888 Europe in terms of GDP per capita despite its high growth rates, Hungary 14,808 indicating ample room for growth. Croatia 14,529

Poland 13,966

Latvia 12,226

Turkey 10,576

Romania 8,665

Serbia 6,266

Bosnia and Herzegovina 4,714

Ukraine 3,574

Source: IMF, International Monetary Fund, World Economic Outlook Database, September 2011 TAV at a Glance Assessments Operations 29

Turkish Aviation Industry 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Domestic 9 9 14 21 31 32 36 41 51 58 International 25 25 31 36 34 38 44 44 53 59 Total 34 34 45 57 65 70 79 86 103 117 Tourist Arrivals 13 14 18 21 20 23 26 27 29 31

The global civil aviation industry continues to grow with a capacity of approximately 20 thousand commercial aircraft, nearly 5.4 billion passengers, 2,000 commercial airline companies and airports as of 2011. The forecasts call for the commercial aircraft capacity to rise to 40 thousand and the number of passengers to reach 9 billion by 2027.

Source: ICAO

Increasing Tourist Arrivals The number of tourists visiting Turkey increases with each passing year.

Countries 2011 Change 2010 2009 Germany 4.8 10 % 4.4 4.5 Russia 3.5 12 % 3.1 2.7 United Kingdom 2.6 -3 % 2.7 2.4 Iran 1.9 0 % 1.9 1.4 Bulgaria 1.5 4 % 1.4 1.4 Georgia 1.2 14 % 1.1 1.0 The Netherlands 1.2 4 % 1.1 1.1 France 1.1 23 % 0.9 0.9 Syria 1.0 8 % 0.9 0.5 USA 0.8 18 % 0.6 0.7 Other 12.0 14 % 10.5 10.5 Total 31.5 10% 28.6 27.1

Source: Ministry of Culture and Tourism of the Republic of Turkey

Growth in the Number of Total Number of Aircraft in Turkey* Aircraft 2011 349 The number of aircraft grew at a 2010 332 compound annual growth rate of 14% between 2002 and 2011. 2009 299

In 2011, the number of companies 2008 270 active in the Turkish civil aviation industry rose to 155 and the total 2007 250 turnover of the sector reached US$ 14% 12 billion. The Turkish aviation 2006 259 compound annual growth rate industry aims to continue with its between 2002 and 2011 2005 accomplishments and raise the number 240 of aircraft to 750 and passenger traffic 2004 202 to 350 million by 2023, when we will be celebrating the 100th anniversary of 2003 162 the Republic. 2002 110

Source: Directorate General of Civil Aviation (SHGM) Selda Adalı Tunçel, TAV Security / Istanbul Atatürk Airport

32 TAV Airports 2011 Annual Report Airport Operations

Istanbul Atatürk Airport One of world’s most preferred airports

In addition to being the largest and busiest airport in the region, Istanbul Atatürk Airport is also Europe’s fastest growing and the world’s 29th busiest airport according to 2011 statistics. Also an attractive hub for transit flights, Atatürk Airport receives an increasing number of passengers each day thanks to the large population and high tourism and commerce potential of Istanbul, one of world’s largest metropolitan areas.

Major Developments

• The trigeneration plant that has 10 • The “Rota” program that was • 34 new airline companies began MW electricity, 10,786 kW hot water developed by TAV IT to better scheduling flights from the Atatürk and 5,781 kW cold water production manage the aircraft parking space Airport including Asiana Airlines, capacity resumed operation, resulting need arising from increased air Ata Airlines (Iran), Air Bishkek, Iran in major energy cost savings. traffic began to be used by the Aseman Airlines, Kuwait Airways, Turkish State Airports Authority Carpat Air, China Southern Airlines, (DHMİ). Yakutia Airlines, Hainan Airlines and Tailwind Airlines. What is Open Gate? • Landings and takeoffs that were Initiated in 2011 and expected to be completed in 2012, the Open Gate system encompasses moving previously monitored only via • Istanbul Atatürk Airport was named the security control points at the entrances of the frequency using the data received the “Best Airport Operator of the waiting areas of gates to more central locations; from flight and ground radars Year” at the Skalite 2011 Awards, redrawing air-land boundaries through these points; began to be monitored over the known as the “Tourism Oscars” in and subjecting all passengers, transit passengers, personnel and materials that move to the airside internet. the industry. (isolated areas) to a security check in accordance with “pre-boarding control standards.” • Atatürk Airport hosted flights of 116 airline companies at the In addition, as part of the Open Gate policy: international terminal and eight • Passport control and pre-boarding security checks and scans of passengers will be performed at a airlines at the domestic terminal single checkpoint. in 2011. • Land-Air boundary will be drawn clearly as requested by ICAO and ECAC. • The liquid limitation policy will be fully implementable since the duty free and food & beverage areas will be inside the Isolated Lounge. • Passenger discomfort due to the existing gate lounges being small and insufficient to accommodate large aircraft will be eliminated. • Flight delays due to security concerns will be prevented. • The airside will be safe and secure at all times since entrance to all waiting lounges will be kept under surveillance. TAV at a Glance Assessments Operations 33

Indoor Car Park Area Catering Area Number of Bus Gates 180,000 m² 15,744 m² Domestic: 9 International: 16 Indoor Car Park Capacity Number of Check-in Counters 7,076 vehicles International: 224 Runways Domestic: 96 17R/35L 3,000x45 M Outdoor Car Park Area 05/23 2,600x60 M 28,300 m² Passport Counters 17/35R 3,000X45 M Departures Floor: 48 Outdoor Car Park Capacity Arrivals Floor: 42 Number of Destinations 1,034 vehicles International: 236 Number of Bridges Domestic: 33 Duty Free Area International: 26 6,100 m² Domestic: 12

Number of Duty Free Stores 25

Key Indicators

Passengers (million) Domestic International

2011 13.6 23.9 37.5

2010 11.8 20.3 32.1

2009 11.4 18.4 29.8

Commercial Flights (thousand) Domestic International

2011 106 200 306

2010 95 179 274

2009 96 170 266

Flight Traffic by Airline ( %) Lufthansa 2.3

International Turkish Airlines 68.4

Atlas Jet 2.3 Other 27

Atlas Jet 7.7

Domestic Turkish Airlines 75.4

Onur Air 14 Other 2.8 Selda Adalı Tunçel, TAV Security / Istanbul Atatürk Airport

36 TAV Airports 2011 Annual Report Airport Operations

Ankara Esenboğa Airport

Expiration of Operation Service quality worthy of May 2023

Car Park Area Turkey’s capital 108,000 m²

Car Park Capacity Reflecting Turkey’s modern face as the region’s newest airport 4,053 vehicles and shortening the distances covered by its passengers thanks Duty Free Area to its unprecedented design that combines the international and 2,387 m² domestic terminals under a single roof, Ankara Esenboğa Airport Number of Duty Free Stores offers a pleasant customer experience both before and after the 7 flight. Catering Area 5,200 m²

Major Developments Number of Check-in Counters International: 78 • Catering areas and shopping centers were expanded to best meet customer Domestic: 80 needs within the terminal. Passport Counters • The lounge located in the International Terminal began to be operated by Departures Floor: 18 “primeclass.” Arrivals Floor: 18 • Ankara Esenboğa Airport hosted scheduled and charter flights of 24 airline companies in 2011. Number of Bridges • International Terminal hosted flights to 29 destinations in 18 countries while 18 the Domestic Terminal served flights to 38 destinations. Number of Bus Gates • NAS Air launched flights from Ankara Esenboğa Airport in 2011. 10 • Beginning to generate its own electricity with a cogeneration plant in 2008, TAV Esenboğa met 70% of its energy consumption needs from this energy Runways production facility in 2011. 2 2RWY 03/21 runways 3,750x45, 3,750x60 m

Key Indicators

Passengers (million) Commercial Flights (thousand)

Domestic International Domestic International

2011 7.1 1.4 8.5 2011 60 12 72

2010 6.4 1.3 7.8 2010 51 12 63

2009 5.0 1.1 6.1 2009 41 10 51

Flight Traffic by Airline ( %)

International Turkish Airlines 41

Lufthansa 12 Pegasus 14 Other 33

Domestic Turkish Airlines 77

Pegasus 12 Other 11 Begüm Ay, TGS / Ankara Esenboğa Airport Serdar Pektezol, TAV ITE / İzmir Adnan Menderes Airport

40 TAV Airports 2011 Annual Report Airport Operations

Izmir Adnan Menderes Airport The airport growing with Izmir’s potential

Turkey’s third largest city, Izmir also boasts the second most important commercial port in the country. Serving 49 airline companies in 2011, the Izmir Adnan Menderes Airport International Terminal hosted flights to 87 destinations during the year. TAV Airports was awarded the tender that was held in 2011 for the operation rights of the domestic and international terminals until year-end 2032.

Major Developments

• The Domestic Terminal commenced • TAV Izmir hosted flights of 49 • TAV Izmir renewed its verification operation under the management airline companies in 2011. for the Level 1 of the Carbon of TAV Airports on January 2, 2012. Accreditation Program. • The number of international • The CIP and General Aviation destinations reached 87. • 11% reduction in electricity segmentation project was consumption and 1% reduction in completed and commenced service • Eight new airlines including Easy water consumption were achieved as of the end of the year for the Jet, Aer Lingus and Azerbaijan as part of the sustainability use of CIP and other privileged Airlines launched seasonal initiatives in 2011. passengers. scheduled flights.

• Number of passengers, flying particularly to Germany, France, Ireland, Poland and Austria, registered increases in 2011. TAV at a Glance Assessments Operations 41

Expiration of Operation Number of Duty Free Stores Number of Bridges December 2032 11 9

Car Park Area Catering Area Number of Bus Gates 69,168 m² 6,199 m² 8

Car Park Capacity Number of Check-in Counters Runways 2,237 vehicles 66 34R - 16L 3,240x45 m 34L - 16R 3,240x45 m Duty Free Area Passport Counters 2,403 m² Departures Floor: 18 Arrivals Floor: 16

Key Indicators

International Passengers (million)

2011 2.5

2010 2.1

2009 1.7

International Commercial Flights (thousand)

2011 17

2010 16

2009 13

Flight Traffic by Airline ( %) Sun Ekspres 31 Lufthansa 8 Atlas Jet 4

International

Pegasus 15 Onur Air 7 Other 36 42 TAV Airports 2011 Annual Report Airport Operations

Antalya Gazipaşa Airport New gateway to the Eastern Mediterranean

Serving as an international boutique airport in Antalya, one of the major destinations of Turkish tourism, Gazipaşa Airport stands out as the most convenient access point to Alanya. Gazipaşa Airport served three airlines and hosted 106 domestic and 90 international flights in 2011. TAV Istanbul / Antalya Gazipaşa Airport TAV Arzu Güzelaydın Ömür, TAV at a Glance Assessments Operations 43

Expiration of Operation Number of Duty Free Stores Passport Counters May 2034 2 Departures Terminal: 2 Arrivals Terminal: 3 Car Park Area Catering Area Departures Gate: 1 4,400 m² 57 m² Arrivals Gate: 1

Car Park Capacity Number of Check-in Counters Runway 150 vehicles 6 PCN 77/R/X/T 2,000x45 m Duty Free Area 94 m²

Major Developments

• After beginning to host scheduled • Runway extension and expansion • 30% conservation in electricity domestic flights in July 2010, investments were made. consumption was achieved in Antalya Gazipaşa Airport started 2011 by reducing the airport and hosting scheduled international • Transavia Airlines conducted immediate vicinity lighting levels by charter flights in 2011. Gazipaşa Airport’s first international one-third as part of the sustainability flight in 2011. initiatives.

Key Indicators

Passengers Domestic International

2011 3,988 9,924 13,912

2010 4,648

Commercial Flights Domestic International

2011 106 90 196

2010 212 44 TAV Airports 2011 Annual Report Airport Operations

Georgia Gateway of commerce to the Caucasus

Strategic position Georgia’s Growth Trend (US$ billion) The completed oil pipelines in the region such as the Baku- Nominal GDP Real GDP Growth ( %) Tbilisi-Ceyhan pipeline support the strategic position of Georgia, 20.0 15.0 % which is located at the crossroads 14.9 of Europe and Asia. 14.2 10.0 % 15.0 13.7 13.3 12.9 12.9 11.7 10.8 10.2 Trade routes 10.0 5.0 % Located on the eastern end of the Black Sea, Georgia controls the 5.0 0.0 % trade route that passes through the Caucasus Mountains. 0.0 ( 5.0 %) 2007 2008 2009 2010 2011 2012 2013 2014 2015 Growth potential Source: IMF With a population of 4.3 million, Georgia was among the fastest growing economies in the region Travel and Tourism Indicators until the tensions with Russia over Abkhazia and South Ossetia. Foreign Tourist Arrivals (thousand) Tourism Revenues (US$ billion)

1,600.0 1,600

1,400.0 1,400

1,200.0 1,200

1,000.0 1,000

800.0 800

600.0 600

400.0 400

200.0 200

0 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: World Economic Forum

Demographic Composition Ages 0 to 14 years

18.7 % 65.8 % 15.5 %

Ages 65 years and older Ages 15 to 64 years TAV at a Glance Assessments Operations 45

Tbilisi International Airport Modern flight base linking Georgia to the world

Tbilisi International Airport is the first international project of TAV Airports Holding. The airport serves nearly all air traffic of Tbilisi and Georgia which offer new business and trade opportunities. Tbilisi Airport registered 29% growth in passenger traffic and 19% increase in commercial flight traffic in 2011. BTA / Tbilisi International Airport Songül Aydın, BTA 46 TAV Airports 2011 Annual Report Airport Operations

Expiration of Operation Number of Duty Free Stores Number of Bridges February 2027 3 3

Car Park Area Catering Area Number of Bus Gates 750 m² 1,100 m² 4

Car Park Capacity Number of Check-in Counters CIP Area 370 vehicles 24 488 m²

Duty Free Area Passport Counters Runway 294 m² Departures Floor: 16 13R / 31L 3,000x45 m Arrivals Floor: 16

Major Developments

• Tbilisi Airport hosted flights of 24 • Tbilisi Airport hosted flights to 26 by Global Idea, a leading market airline companies in 2011. international and two domestic research firm in Georgia, and The destinations, serving a total of 28 Financial, a news portal. • Six new airlines launched flights in destinations. 2011: Ata Airline, Air Astana, China • Tbilisi Airport was honored by the Southern, Ural Airlines, Fly Dubai • TAV Georgia won the “Golden Brand EMAA with the Best Emerging and Air Cairo. Award Best Brand” in the “Public Airport Award in the region of the Transport and Service” category at Commonwealth of Independent the Golden Brand 2010 organized States and Russia.

Key Indicators

Passengers (thousand)

2011 1,058

2010 822

2009 703

Commercial Flights (thousand)

2011 19.6

2010 16.5

2009 13.8

Flight Traffic by Airline ( %) Georgian A/W 19 Azerbaijan Airlines 6 Lufthansa 5

International

Aerovit 9 Turkish Airlines 7 Pegasus 4 Other 49 TAV at a Glance Assessments Operations 47 TAV Airport Hotel / Batumi International Nursemin İşçimen, TAV 48 TAV Airports 2011 Annual Report Airport Operations

Batumi International Airport Symbol of exemplary international cooperation

As an airport used jointly by Georgia and Turkey, the Batumi Airport has become the symbol of a major regional cooperation. This crucial cooperation plays a significant role in the development of the region and reinforces strong ties between the two countries.

Expiration of Operation Number of Duty Free Stores Passport Counters August 2027 1 Departures Floor: 4 Arrivals Floor: 4 Car Park Capacity Catering Area 100 vehicles 64 m² Number of Bus Gates 4 Duty Free Area Number of Check-in Counters 64 m² 6 Runway 13 / 31 3,000x45 m

Major Developments

• Under the partnership of Anadolujet • 90% of the commercial areas Georgian Airlines, Belavia, Anadolu and Borajet, Ankara-Batumi flights inside the terminal were leased Jet and Kenn Borek. as well as Batumi-Moscow direct and new advertising areas were flights commenced. created. • The Batumi Airport hosted flights to two domestic and 12 international • The number of international flights • The Batumi Airport hosted destinations, serving a total of 14 soared by 54% while passenger scheduled flights of five airline destinations. traffic was up by 51%. companies in 2011: Turkish Airlines,

Key Indicators

Passengers (thousand) Commercial Flights (thousand)

2011 133.9 2011 3.5

2010 88.6 2010 2.3

2009 69.3 2009 1.8

Flight Traffic by Airline ( %)

International

Georgian A/W 41 Turkish Airlines 17 Belavia 7 Other 35 TAV at a Glance Assessments Operations 49

Tunisia On its way to becoming Africa’s flight hub…

Tourism-oriented growth Tunisia’s Growth Trend (US$ billion) Tunisia, one of the important countries of the Mediterranean, Tunisia North Africa Africa stands out with its sea trade routes and unparalleled tourism potential. 8.0 % Ninety percent of the visitors of Tunisia, a country whose popularity 6.0 % is rising by the day, prefer air transit to get there. 4.0 %

2.0 % Passenger traffic, which declined because of the “Arab Spring” - that began in December 2010, is

expected to rise again as stability 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 is restored in Tunisia. Source: IMF, African Economic Outlook.org

Effective privatization policies Tunisia, a country of 10 million, Travel and Tourism Indicators enjoyed strong economic growth momentum over the last decade Tourism Revenues (US$ million) Tourist Arrivals (thousand) thanks to the privatization policies pursued by its government. 6,000 8,000 Hosting approximately 10 million 5,000 6,000 passengers annually, Tunisia is 4,000 on its way to becoming a major 4,000 tourism hub. 3,000 2,000 2,000

Advanced infrastructure 1,000 - Standing out with its advanced air 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 and rail transport infrastructure in particular, Tunisia ranks 37th in Source: World Economic Forum Report the international infrastructure development survey conducted by the “World Economic Forum Demographic Composition Competitiveness.” Ages 0 to 14 years

26.0 % 67.5 % 6.5 %

Ages 65 years and older Ages 15 to 64 50 TAV Airports 2011 Annual Report Airport Operations

Monastir International Airport Where the world meets Tunisia

Located in Tunisia, one of the leading tourism destinations in North Africa, and positioned merely two hours away from many European capitals, the Monastir Airport has been operated by TAV since January 2008. Except for air traffic control, all operations at the Monastir Airport are administered by TAV Tunisie SA, a 67%-owned subsidiary of TAV Airports Holding. TAV Security / Monastir International Airport TAV Çınar, Yeşim TAV at a Glance Assessments Operations 51

Expiration of Operation Catering Area Number of Bus Gates May 2047 1,019 m² 12

Car Park Capacity Number of Check-in Counters Runway 13,077 vehicles 46 PCN: 45 2,950x45 m; asphalt

Duty Free Area Passport Counters 1,431 m² Departures Floor: 16 Arrivals Floor: 20 Number of Duty Free Stores 3

Key Indicators

Passengers (Monastir + Enfidha) (million)*

2011 2.3

2010 3.9

2009 3.8

* More than 90 % of the passengers are international flight passengers.

Commercial Flights (Monastir + Enfidha) (thousand)

2011 20.8

2010 31.8

2009 30.4 52 TAV Airports 2011 Annual Report Airport Operations

Enfidha Hammamet International Airport One of the fastest growing airports in North Africa

The Enfidha Hammamet International Airport, which has the potential to become one of the major air travel hubs in North Africa, is the second airport in Tunisia operated by TAV Tunisie SA after the Monastir International Airport, which is located 65 kilometers from the Enfidha Hammamet Airport.

Constructed by TAV with a € 500 Conducting intensive marketing efforts million investment and having in an attempt to increase the air traffic commenced operations at the end of of the Enfidha Hammamet Airport, TAV 2009, the Enfidha Hammamet Airport Tunisie SA reached agreements with plays a key role in Tunisian tourism numerous major airline companies because of its proximity to key tourist and tourism agencies in the region. attractions. Agreements were made with nearly 30 airline companies. BTA / Enfidha International Airport Mesut Zerman, BTA TAV at a Glance Assessments Operations 53

Expiration of Operation Catering Area Number of Bridges May 2047 950 m² 18

Car Park Area and Capacity Number of Check-in Counters Number of Bus Gates 130,000 62 3

Duty Free Area Passport Counters Runway 1,930 m² Departures Floor: 28 PCN: 104 3,330x60 m; asphalt Arrivals Floor: 28 Number of Duty Free Stores 6

Major Developments

• ICT Summit Eurasia - Bilişim undertaken between the countries of infrastructure project, TAV IT Zirvesi ’11, a platform to encourage the region. Leaving many established received the first place prize at the cooperation within the Eurasia information technology companies award ceremony. region, presented awards to the behind with its Enfidha - Hammamet communication technology projects Airport information technology

Flight Traffic by Airline ( %) Tunis Air 32 Transavia France 6 Air Berlin GMBH 2

International

Nouvelair Tunisia 22 Thomas Other 33 Cook UK 5 54 TAV Airports 2011 Annual Report Airport Operations

Macedonia Crossroads of commerce in the Balkans

Soaring passenger and air Macedonia’s Growth Trend (US$ billion) traffic Located at the heart of the Balkans Nominal GDP Real GDP Growth ( %) and attracting many tourists thanks 8.0 % 13.0 to its history as well as cultural 12.2 11.4

10.8 6.0 % 10.1 9.7 9.1 structure diversity, Macedonia 9.2 8.7 is also a major crossroads of 4.0 % commerce in the Balkan region 2.0 % due to its location. After the visa 0.0 % exception that took effect in (2.0 %) 2009, passenger traffic between

Macedonia and the 500-million 2007 2008 2009 2010 2011 2012 2013 2014 2015 strong European Union took off. Macedonia completed the negotiations to join the European common airspace and its air traffic is expected to rise rapidly after Travel and Tourism Indicators being admitted to the common Tourist Arrivals (thousand) Tourism Revenues (US$ million) airspace. 300 300

Growth expectation* 250 250 Macedonia, a country of 2.1 million 200 200 people, is expected to record an 150 150 annual average GDP growth rate of 7.4% between 2010 and 2015. The 100 100 constantly growing tourist arrivals 50 50 also support the country’s tourism - - potential. 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

* Source: IMF

Demographic Composition Ages 0 to 14 years

21.5 % 67.8 % 10.7 %

Ages 65 years and older Ages 15 to 64 years TAV at a Glance Assessments Operations 55 / Skopje Airport / Skopje BTA Esen Sefer, 56 TAV Airports 2011 Annual Report Airport Operations

Skopje Airport TAV’s pride in the Balkans

Making its first move into Europe, TAV Airports assumed the operation of the Alexander the Great Airport in Macedonia’s capital Skopje as of March 2010. In 2011 passenger traffic was up by 12% while flights of 18 airlines to 16 international destinations were served.

Major Developments

• The Skopje Airport began to be terminal building that commenced • Passenger traffic at the Skopje used exclusively as a civilian airport operations, achieving energy Airport was up by 11% in 2011. in 2011. efficiency and savings. • In 2011 the number of airline • As part of the approximately • TAV Macedonia became a sponsor companies served rose to 18 € 100 million investment, the new of the Macedonia Men’s Basketball after Wizz Air, the largest low-cost passenger terminal, car park and team. carrier in Eastern Europe, as well the cargo hangar were renovated as Pegasus, Air Berlin and Belle • TAV Macedonia received the and the runway was extended. Air Europe launched flights at the best project award in the Public Skopje Airport. • A BMS (Building Management Investment category at the System) was installed at the new International Real Estate and • The Skopje Airport hosted flights to Investment Fair. 16 destinations. TAV at a Glance Assessments Operations 57

Expiration of Operation Catering Area Number of Bridges March 2030 1,000 m² 6

Car Park Capacity Number of Check-in Counters Number of Bus Gates 1,206 vehicles 23 2

Duty Free Area Passport Counters Runway 450 m² Departures Floor: 12 Code E / ILS CAT I 2,980 m Arrivals Floor: 14 Number of Duty Free Stores 2

Key Indicators

Passengers (thousand)

2011 764

2010 685

2009 603

Commercial Flights (thousand)

2011 10.9

2010 11.1

2009 12.1 58 TAV Airports 2011 Annual Report Airport Operations

Ohrid Airport Macedonia’s tourism paradise

Declared a world heritage site by UNESCO and famous for its history and natural beauty as well as the lake it is named after, Ohrid is among Macedonia’s major tourism destinations. The Ohrid Airport served 25 different airlines and hosted flights to 24 destinations. TAV Istanbul / Ohrid Airport TAV Fulya Pekcan, TAV at a Glance Assessments Operations 59

Expiration of Operation Duty Free Area Passport Counters March 2030 20 m² Departures Floor: 4 Arrivals Floor: 4 Car Park Area Number of Duty Free Stores 11,000 m² 1 Number of Bus Gates 2 Car Park Capacity Catering Area 230 vehicles 90 m² Runway Code E / ILS CAT I 2,250 m Number of Check-in Counters 6

Major Developments

• As part of the investments • Corendon, Finn Air and Arke Fly • The Ohrid Airport recorded the undertaken, the VIP building, were airlines that launched flights highest passenger growth rate in aircraft hangar and new car park in 2011. the world with an increase of 169% was built and the terminal building in January 2011 and 189% in was renovated. September 2011.

Key Indicators

Passengers (thousand)

2011 74

2010 45

2009 37

Commercial Flights

2011 904

2010 627

2009 676 60 TAV Airports 2011 Annual Report Airport Operations

Latvia The rapidly growing country of Northern Europe

Located in Northern Europe on the shores of the Baltic Sea, Latvia stands out with its capital Riga. Forestry and forestry products, the machinery industry and textiles are the major sources of income and economic activity in Latvia, a country of 2.2 million people. The Latvian economy regained stability after the 2008 crisis and grew by 5.5% in 2011. TAV Security / Riga Airport TAV Uğur Konyar, TAV at a Glance Assessments Operations 61

Riga Airport Rapid transformation that began with TAV

The operation right of the 4,650 square-meter commercial space encompassing the duty free, food & beverage services and other commercial areas of the Riga International Airport, the second service link of TAV Airports in Europe after Macedonia, was awarded to TAV Latvia for a period of 10 years on January 1, 2011. Riga Airport’s passenger traffic in 2011 was 5.1 million, up by 9.5% compared to 2010.

Expiration of Operation Total Commercial Area* December 2021 2,295 m²

Major Developments

• TAV Latvia assumed the operation • The investments made increased • TAV Latvia received the “Best of the commercial spaces of the the brand recognition of TAV in Partner” award from the Riga Riga Airport totaling 2,295 square Latvia. Airport management thanks to its meters. excellent performance. • The Riga Airport’s passenger traffic • The duty free shops taken over by in 2011 was 5.1 million. ATÜ commenced service after being renovated.

Passengers (million)

2011 5.1

2010 4.7

2009 4.1

2008 3.7

2007 3.2 28% 2006 2.5 compound annual growth rate of passenger traffic between 2003 2005 1.9 and 2011

2004 1.1

2003 0.7

* Area in operation as of year-end 2011 M. Cengiz Yücel, ATÜ / Madinah Airport

64 TAV Airports 2011 Annual Report Service Companies TAV Security / Havaş TAV Selda Adalı Tunçel, TAV at a Glance Assessments Operations 65

Ground Handling Services: Havaş Complete ground handling services executed with precision

In 2011, Havaş handled 116,120 flights, both scheduled and charter, of 200 airlines in a total of 22 airports. Havaş continued to expand its client base by adding two more airlines, Air Transat and Hainan, to its portfolio in 2011. The consolidated revenues of Havaş reached € 197 million in 2011, up by 21% on the previous year.

Major Developments

• More than 200 airlines were served • Havaş Europe served 20 airline • Havaş was awarded a Certificate at 22 airports under the Havaş companies with an average of 415 of Appreciation by the Ministry of brand, six airports under the TGS employees. Labor and Social Security, General brand, one under the CAS brand Directorate of Public Employment • The apron traffic at the Istanbul and three under the Havaş Europe of Turkey. Atatürk and Antalya airports began brand. to be controlled and directed using • All charter stations were awarded • The Company commenced service the aircraft monitoring system a Certificate of Appreciation by SAS at the Sinop and Amasya - Merzifon developed by Proveo. Scandinavian Airlines. airports in Turkey. • The verification project in • The Company received the Turkish • 15 new airline companies, including accordance with the ISO 14064-1 State Airports Authority (DHMİ)’s Air Transat (Canada) and Hainan greenhouse gas standard continued Certificate of Appreciation as part Airlines (China) that have charter at Havaş stations. of the Libya humanitarian aid flights from the Istanbul Atatürk operation. • Warehouse cargo volume increased Airport, joined the client portfolio by 43% to 21,798 tons. • The Antalya Airport station of Havaş. of Havaş received Pegasus • The Company’s Esenboğa Airport • NHS, which served 30,591 flights Airlines’ AGCS Audit Certificate of station was recognized by Qatar in 2011, was renamed “Havaş Achievement. Airways with the Best Performance Europe” as part of its strategy to for 100% OTP Award. • The Company’s Antalya Airport grow with the Havaş brand. station was recognized with the 2011 winter season Letter of Achievement of the Aeroflot - Russian Airlines. 66 TAV Airports 2011 Annual Report Service Companies

Products and Services Subsidiaries Passenger Services Turkish Ground Services (TGS) Ramp Services Havaş Europe Cargo and Mail Services Cyprus Airport Services (CAS) Load Control, Communications and TAV Gözen Flight Operation Services Representation and Management Services Transportation Services Warehouse Services

Key Financial Results

Total Revenues (€ million)

2011 197.4

2010 163.5

2009 125.9

EBITDA (€ million)

2011 34.3

2010 25.5

2009 24.2

Number of Aircraft Served (thousand)*

2011 308

2010 269

2009 183

* Excluding CAS TAV at a Glance Assessments Operations 67 / TGS Uğur Çolak, TGS 68 TAV Airports 2011 Annual Report IT / ATÜ Serdar Pektezol, TAV TAV at a Glance Assessments Operations 69

Duty Free: ATÜ The world’s best brands in unrivalled duty free shops

Founded as a joint venture of TAV Airports Holding and Unifree Duty Free A.Ş., ATÜ is the unrivalled operator of Turkey’s duty free shops, offering more than 50 thousand products of the world’s best-known brands with attractive prices in 64 stores covering an area of 14,460 square meters.

Products and Services Major Developments Arrival duty free Product portfolio enhanced with local culture • Duty free operations commenced Increasing concept diversity at the Riga Airport in 2011. • Four new stores covering a total sales area of 420 square meters commenced service at the new terminal in Macedonia. Key Financial Results • The number of passengers served and the sales revenues recorded major increases due in part to Total Revenues (€ million) EBITDA (€ million) the “open gate” policy that was launched at the Ankara Esenboğa Airport. 2011 415.4 2011 42.4 • ATÜ Retail Institute was established in order to increase customer 2010 340.0 2010 30.8 satisfaction and employee productivity. 2009 290.3 2009 27.7 • Customer complaints were reduced to an extremely low ratio of 0.05%. • The accessory category product portfolio was expanded. Agreements were made with new EBITDA Margin ( %) brands such as Apple.

2011 10.2

2010 9.0

2009 9.5 Arzu Güzelaydın Ömür, TAV Istanbul / BTA

72 TAV Airports 2011 Annual Report Service Companies

Food & Beverage Services: BTA Unique world flavors that enhance the airport experience

BTA offers passengers a diverse selection of foods ranging from traditional Turkish cuisine to major international cuisines at world class standards with a service approach based on comfort and quality.

Major Developments

• Istanbul Airport’s domestic and • BTA established a partnership • Occupancy rate exceeded 100% at international terminal food court with TASS to manage the food the 131-room TAV Airport Hotel. areas were renovated and the & beverage operations of İDO • Cakes & Bakes raised its total restaurant selection was enriched (Istanbul Fast Ferries Co.) and production and storage area to with the addition of world- founded BTA Denizyolları ve 6,100 square meters. renowned chain brands. Limanları Yiyecek ve İçecek Hizmetleri Turizm Sanayi ve Ticaret • By offering a variety of price A.Ş. (BTA Sea Lines). alternatives to passengers, the number of guests served by BTA • BTA Sea Lines commenced service in its Turkish airport operations at 38 food & beverage sales increased by 15%. points on 17 ferryboats and at 12 terminals of İDO. TAV at a Glance Assessments Operations 73

Products and Services Subsidiaries and Affiliates Airports Food and Beverage Operations BTA Havalimanları (BTA Airports) Sea Lines Food and Beverage Operations BTA Georgia Hotel Management (TAV Airport Hotel) BTA Tunisie Bakery and Pastry Production (Cakes & Bakes) BTA Macedonia BTA Denizyolları (BTA Sea Lines) BTA Unlu Mamuller (BTA Bakery Products)

Key Financial Results

Total Revenues (€ million)

2011 81.1

2010 75.0

2009 59.1

EBITDA (€ million)

2011 6.0

2010 7.2

2009 6.5

EBITDA Margin (%)

2011 7.4

2010 9.6

2009 11.0 74 TAV Airports 2011 Annual Report Service Companies

Other Services Innovation in operations, security and information technology

Having adopted the ongoing goal of increasing service diversification and quality, TAV undertook new investments in these areas in 2011. Developing new applications for terminal operations, TAV also broke major new ground by launching the mobile platforms for these applications.

Major Developments

TAV IT TAV OPERATION SERVICES TAV SECURITY • TAV Mobile, the most • An agreement was entered into with Emirates • Aircraft Private Security comprehensive airport terminal Airlines for lounge operations and the Service and Supervision C related application in the world, construction of the lounge was completed as of certification was obtained from and the iPhone, iPad, Android the end of December. the Directorate General of Civil and Blackberry apps related to • Construction of the Turkish Airlines Domestic Aviation (SHGM). TAV Airports were developed. and International Flights CIP lounge at the • Contracts were signed with • As a result of the initiatives Izmir International Terminal was completed; the Turkmenistan Airlines and Algeria undertaken with the Turkish lounge commenced operation. Airlines. State Airports Authority • The number of TAV Passport card members • K-9 dogs began to be deployed (DHMİ) and Turkish Airlines, reached 6,816. for Delta Airlines. infrastructure work for the information sharing platform • As a result of the cooperation with Anadolu • The scope of service provided to was completed. Jet, the Anadolu Jet “primeclass” lounge LSG catering services as part of commenced service at the Ankara Domestic C License expanded. • The Macedonia Branch of TAV IT Terminal. was established. • EAGLE computerized training • Lounge agreements as well as collaborations certification was launched for • Thanks to the strategic for special passenger services, the equivalent of surveillance officers. partnership it has established in the services provided by “primeclass” CIP, were India, TAV IT took the first step executed with 43 airports acros the world. for the renovation of more than • Comfort Lounge commenced service at the 30 airports. Ankara International Terminal.

Products and Services Awards

TAV IT TAV Operation Services The CIO Turkey Magazine’s CIO 2011 Award was Commercial area allocation presendet to the TAV IT General Manager and TAV Security TAV Airports CIO. Leasing of advertisement and Civil aviation security promotion areas The Enfidha - Hammamet Airport Information Cargo security Technology Infrastructure Project was awarded Aircraft private security, service and “primeclass” CIP services the first-place prize at the ICT Summit Eurasia surveillance CIP Lounge operation Awards 2011. Loss prevention TAV Passport Card Membership Training services TAV Passport Card received the “Best Service” Program Physical security (store, facility, company) Award by gecce.com. Authorized arms transportation The Gate Magazine TAV at a Glance Assessments Operations 75 TAV Bilişim Airport Otel / TAV Mustafa Çankaya , TAV Merih Taraktaş, TAV Istanbul / TAV Security

78 TAV Airports 2011 Annual Report Investor Relations and Stock Performance

Investor Relations and Stock Performance A profitable company with high investment value

Embracing transparency and accountability as fundamental operating principles, TAV attended a number of road shows and conferences in 2011 in order to inform capital markets participants. The Holding’s operations, performance and other developments were discussed and detailed information was shared with attendees at these events.

TAV Airports increases shareholder value Stock Performance through its award winning investor The Company’s shares, listed on the Istanbul Stock Exchange under the ticker “TAVHL,” relations program. Since the public traded between a low of TL 6.08 and a high of TL 8.78 in 2011. offering in February 2007, the Investor 12 Relations Department of TAV Airports has TL assumed the function of a transparent, 10 two-way bridge between investors and 8 the Company while facilitating the public disclosure of all information about the 6 Holding in an accurate, impartial and timely manner. Within this framework, 4 the Department shares information about 2 TAV Airports in the most transparent and prompt manner on the Public Disclosure 0 Platform (PDP).

In 2011, TAV Investor Relations attended 23.02.2007 29.05.2007 29.08.2007 04.12.2007 10.03.2008 12.06.2008 12.09.2008 25.12.2008 30.03.2009 03.07.2009 07.10.2009 13.01.2010 15.04.2010 20.07.2010 25.10.2010 01.02.2011 04.05.2011 05.08.2011 15.11.2011 a total of 17 road shows and conferences and conducted face-to-face meetings with more than 600 investors, shareholders 1.50 Relative to ISE-100($) TAVHL ($) 9 8 and analysts in regards to the Holding’s 1.30 operations, performance and other 7 developments. In addition, pursuant to 1.10 6 5 the Capital Markets Law, 24 Material 0.90 Disclosures were issued in 2011 to the 4 Public Disclosure Platform (PDP) in order 0.70 3 to inform shareholders and the public; 2 0.50 these disclosures were also posted on the 1 Company’s website. 0.30 0 22.02.2007 18.05.2007 10.08.2007 07.11.2007 04.02.2008 29.04.2008 23.07.2008 20.10.2008 20.01.2009 14.04.2009 10.07.2009 06.10.2009 04.01.2010 30.03.2010 02.07.2010 29.09.2010 29.12.2010 23.03.2011 16.06.2011 13.09.2011 09.12.2011 TAV at a Glance Assessments Operations 79

Corporate Governance Rating The Company’s Corporate Governance Ratings by subcategory are presented below. According to the “Periodic Revision Corporate Governance Rating Report” Subcategories Weight Score issued by RiskMetrics Group (ISS), an international corporate governance Shareholders 0.25 90.63 rating agency that is also licensed to Public Disclosure and Transparency 0.35 93.41 conduct corporate governing rating Stakeholders 0.15 96.82 activities in Turkey in accordance with the Capital Markets Boards (CMB) Corporate Board of Directors 0.25 84.36 Governance Principles, the Company’s Total 1.00 90.96 Corporate Governance Rating Score was revised upwards from 90.35 (9.03 out of 10) as of August 31, 2010 to 90.96 (9.09 Profit Distribution Policy out of 10) on August 26, 2011 thanks to There are no privileges with respect to participation in the Company’s profit. our focus on corporate governance and commitment to its implementation. The Company takes its dividend distribution decisions in compliance with the Turkish Commercial Code, Capital Markets Law, Capital Markets Board Communiqués and Resolutions, the tax laws and the provisions of other related laws and regulations, as well as the Company’s Articles of Association.

It is among the Company’s primary goals to adhere to this profit distribution policy, except for special circumstances when investments and other funds are required for the long- term growth prospects of the Company or its subsidiaries and affiliates, as well as for extraordinarily unfavorable developments in the economy.

All information and data about TAV Airports Holding can be accessed through the Company’s Investor Relations website. In addition, information related to shares, financial reports, the General Assembly and other similar matters can be obtained from the Department through the contact information provided below.

Phone: +90 212 463 30 00 / 2120-2122-2123-2124 Fax: +90 212 465 31 00 Website: http://ir.tav.aero twitter.com/irTAV 80 TAV Airports 2011 Annual Report Glossary

Glossary

ACI Build-Operate-Transfer CIP Passenger Airports Council International Process in which a private company Commercially important person provides the financing for a public Aircraft Loading infrastructure investment or service, Civil Aviation Loading an airplane in accordance with its undertakes the project, operates it for a Civil Aviation in general refers to all technical specifications and operational period determined by the public authorities activities related to air transportation. More information and transfers the facility at the end of the specifically, it is also the generic term for all designated period to the related public air transport-related operational activities Airport authority in an intact, operating and well- performed by airports, airlines and handling A large area, on land or water, with maintained condition companies in accordance with national and buildings, facilities and equipment that is international rules and security principles. constructed for the purpose of featuring Carry-on Baggage Handcarts facilities that facilitate landing, takeoff and Mechanical, portable transporters used at Composite Cover ground movement of aircraft, serve the airports to carry passenger property A mixture of concrete and asphalt used for maintenance and other needs of aircraft, covering runways as well as boarding, loading and unloading Charter Flight aircraft Charter flight is a non-scheduled flight Conveyor service offered in certain periods, mostly in A mechanical apparatus with a moving belt Airside Area (Flight Line Facilities) summer months, in which departure time that carries the passengers’ baggage from Isolated areas beyond the passport control is determined based on airport traffic and check-in counters to the aircraft and back points (waiting lounges, duty free area, passenger demand. to the baggage-claim area boarding gates); the runways, apron areas and taxi routes of the airport as well as Charter Terminal Customs Enforcement zones adjacent to them; buildings and Terminal building reserved for passengers The organization that inspects or structures, or parts of these buildings and who travel with flights other than the confiscates the baggage or other freight, structures, that are directly used for flight scheduled or regular flights cargo or postal belongings of passengers operations under certain circumstances; as pursuant to customs regulations at airports well as areas that have controlled access Check-in that are open to international flights, to all of these sections Check-in is the process in which ticket and that enforces customs regulations and baggage transactions and passenger provisions in the process of sending or Apron controls are conducted at airport terminals receiving all kinds of commodities and Apron is a designated area at an airport by airline or ground handling company materials that will go-come abroad where aircraft are parked, refueled, loaded, representatives. unloaded, boarded and maintenance is Duty Free Shop performed. Check-in Counter Shops at airports where passengers can Equipped tables at terminals used for make purchases without paying customs Aviation Income passenger check-in procedures tax Income earned from services provided to passengers and aircraft at the airports Check-in Lounges Duty-Paid Lounge Sections at terminals hosting groups of Isolated lounges at airports that are open Baggage Handling System (BHS) check-in counters to international flights, where passengers A conveyor belt system that transports are taken for the declaration and checked baggage to areas where the bags control process pursuant to the customs are loaded onto airplanes regulations before making entry or exit TAV at a Glance Assessments Operations 81

Earnings per Share (EPS) Havaş Liquidity An indicator calculated by dividing a Havaş, or Havaalanları Yer Hizmetleri A.Ş. Liquidity is the degree of speed and ease to company’s net (after-tax) profit by its (Ground Handling Services Co.), is the which an asset can be exchanged for cash. number of outstanding shares company that performs ground handling services at the airports. Non-Aviation Income EBITDA Income derived from activities other than Acronym for “Earnings before Interest, HUB services provided to passengers and Taxes, Depreciation and Amortization” Main Center aircraft at the airports, such as duty free

EBITDAR Isolated Areas Organic Growth Acronym for “Earnings before Interest, Isolated lounges are zones at airports that Organic growth is the growth achieved Taxes, Depreciation, Amortization and Rent” are open to international flights, where via a company’s own activities. It includes passengers are taken before making production increase, as well as the increase EUROCONTROL entry or exit and after declaration and in revenue attained by selling this output. European Organization for the Safety of Air control process pursuant to the customs Navigation regulations, as well as lounges where Overflight passengers, who come from abroad An aircraft flight passing over the air space FIDS (Flight Information Display without entering into customs and will go of a foreign jurisdiction without landing System) to another airport of the same country or to FIDS is the system that displays the another country, are hosted. Passenger latest data via flight information screens, All individuals traveling on the aircraft who monitors, flight gate indicators, baggage ICAA are not part of the flight personnel or cabin claim indicators and employee monitors. International Civil Airports Association crew are referred to as passengers

Flight Limits ICAN Peak Day, Peak Hour Loading-related limits determined for each International Commission for Air Navigation Maximum amount of passenger, aircraft, type of aircraft cargo, et al. movement at an airport ICAO handled during one day or one hour within Guaranteed Passenger Income International Civil Aviation Organization a given period (generally a calendar year) Guaranteed passenger income is the passenger revenue guaranteed by the Inorganic Growth Prime Class Service related entity, based on the expected Inorganic growth is revenue growth As part of this exclusive service, passengers number of passengers per year, pursuant achieved by a company’s acquiring another are greeted at the Terminal Departures to the concession contract signed with the firm or making a new investment, and gate by a transportation representative and authorized entity. It can vary based on the consolidating the production and revenue their security check and scan, check-in and contract as well as the period covered by of the acquired firm. passport transactions are performed with the contract. the assistance of a service representative.

Hangar Mostly large structures at airports that are used for sheltering or conducting maintenance and repair activities on aircraft 82 TAV Airports 2011 Annual Report Glossary

Glossary

Project Finance Subsidiary Transfer Passenger Project finance is a method of securing A direct or indirect capital and management Transfer passengers are those who the financing needed for long-term relationship that creates a permanent continue their travel with a different aircraft infrastructure and industrial investments tie between a corporation and another in or in the same aircraft but with a different at the maximum possible level and with terms of participation in the management flight number after arriving at an airport on the minimum possible impact on the of the corporation and the formulation of an airplane. These passengers are allowed company’s balance sheets. Posting the the corporation’s policies to take advantage of duty free, catering project’s income stream or the asset itself and accommodation services at the airport. as collateral may be needed as a condition Taxi of financing. The movements of an aircraft on the Transit Passenger ground Transit passengers are those who continue Ramp their travel in the same aircraft or with the Ramp is the area at airports where aircraft Taxi Route (Taxiway) same flight number shortly after arriving at are parked and attended to. Standard-sized paths at airports along an airport on an airplane. These passengers which the aircraft taxi to or from a runway, are not allowed to take advantage of duty RAT Fields / Areas apron, and the like free, catering and accommodation services Runway, Apron and Taxiway areas as well at the airport. as other fields reserved on the airside of Terminal the airport for vehicles and equipment to Group of buildings featuring air transport VIP move and park service-related companies and facilities A very important person. VIPs are mostly where pre-flight and post-flight the senior managers of public entities Runway transactions of passengers are performed whose titles are listed by the Prime Ministry. Designated rectangular areas on a tract of land on which aircraft take off and land Terminal Operation VIP Lounge This term refers to the Airport General Places reserved at airports for VIP Scheduled Flight Directorate or Directorate that operates Passengers Scheduled flight is the flight service with a the terminal on behalf of the Turkish State pre-determined departure-arrival time and Airports Authority (DHMİ) at the airports route. operated by DHMİ, and/or state enterprises, public agencies, real and private legal Slot entities that engage in terminal operations It is a method of using airport capacity pursuant to the Build-Operate-Transfer optimally by spreading the air traffic at Model or as part of another arrangement. busy airports to each hour of the day and each hour of the week as equally as TOC possible. In other words, it is the right of Terminal Operations Center use of airport facilities at the landing- takeoff time slots allocated to the aircraft.

TAV AIRPORTS HOLDING Istanbul Atatürk Airport International Terminal (Gate A - Next to VIP) 34149 Yeşilköy, Istanbul, Turkey Phone: +90 212 463 30 00 Fax: +90 212 465 50 50 www.tavairports.com http://ir.tav.aero

CONTENTS

SUSTAINABILITY 02 Reporting Period and Purpose 02 Scope of the Report 03 Report Content 04 Sustainability Vision and Strategy 06 Our Economic Impacts 07 Our Environmental Impacts 10 Our Social Impacts 16 2011 Awards 17 2011 Certifications

CORPORATE GOVERNANCE 18 Risk Management 21 Internal Audit 22 Corporate Governance Principles Compliance Report 37 Board of Directors and Senior Management 47 Committees We are moving ahead while maintaining our values…

TAV Airports is a company that has been looked up to in the aviation industry since its establishment thanks to its business approach that respects the environment and society.

Always acting in light of these core values while accelerating growth and venturing into new investments, TAV Airports has demonstrated its responsible approach once again in 2011 by taking many concrete steps in the area of sustainability.

Publishing its first sustainability report in accordance with GRI standards in 2011, TAV Airports implemented a series of conservation measures in major areas and began using its resources much more efficiently.

Continuously improving its efficiency in resource utilization, TAV Airports aims to raise the bar much higher in the years ahead in this area. 2 TAV Airports 2011 Annual Report

Reporting Period and Purpose

By reporting on its sustainability Within this framework, this report serves performance, TAV aims to assess, monitor, to update, with data from January measure and manage its potential impacts 1, 2011 to December 31, 2011, the on its stakeholders as well as on the 2010 Sustainability Report that was environment in the course of conducting prepared in accordance with the globally- its daily operations. In addition, we see accepted Global Reporting Initiative (GRI) this report as a vehicle to raise awareness Sustainability Reporting Guideline (G3.1) regarding sustainability among our requirements and the GRI Airport Operators stakeholders. Sector Supplement (AOSS.)

Scope of the Report

Our 2011 Sustainability Report update TAV Airports’ Sustainability Report for the addresses TAV’s economic, environmental upcoming operating periods is intended and social performance and outlook, the to also include the international airports Company’s efforts for improvement as operated by the Company. well as the related objectives regarding airports operated by TAV in Turkey. TAV has set the scope of the report as the airports located in Turkey in which TAV has majority ownership; these airports represent 92 % of TAV’s operations in terms of passenger traffic. This definition encompasses the Istanbul Atatürk Airport, Ankara Esenboğa Airport, Izmir Adnan Menderes International Terminal and Antalya Gazipaşa Airport. Sustainability Corporate Governance 3

Report Content

The scope of this report comprises the The topics discussed and the information update, with 2011 data, of the 2010 presented in this report were determined sustainability report that was designed by way of a materiality analysis workshop and generated based on the materiality, held with the participation of managers stakeholder inclusiveness, completeness from various departments of TAV Airports and sustainability principles of the GRI; this Holding, as well as its subsidiaries, who report should be taken into consideration have knowledge of and experience in in conjunction with the 2010 report. sustainability issues. 4 TAV Airports 2011 Annual Report

Sustainability Vision and Strategy

Goals

2011-2014 2015-2017 2018-2020

• Assigning a permanent delegate to • Continuing Sustainability Orientation • Continuing Sustainability Orientation the ACI task force and environment Programs within TAV Airports and Programs within TAV Airports committee reaching an average of approximately 2,000 employees annually • Optimizing carbon emissions in • Organizing Sustainability Orientation operations in Turkey Trainings via TAV Academy and • Mapping carbon emissions and thereby cultivating greater awareness continuing optimization efforts • Further developing recyclable waste among employees to expand this into international management programs by leveraging operations the latest advances in technology • Launching waste management training • Making further progress in the water • Continuing to measure and manage and recyclable waste management noise levels at the terminals • Attending conferences related to the projects future of the aviation industry and • Encouraging business partners, environmental sustainability • Taking a more active part in social stakeholders and suppliers to adopt sustainability projects sustainability practices • Continuing to measure and manage noise levels at the terminals • Continuing to measure and manage noise levels at the terminals Sustainability Corporate Governance 5

The following activities were carried out Organizing Sustainability Orientation Attending conferences related to the in 2011 as part of the three-year road Trainings via TAV Academy and thereby future of the aviation industry and map stipulated in the 2010 Sustainability cultivating greater awareness among environmental sustainability Report: employees The following events were supported or Assigning a permanent delegate to ACI TAV Academy’s Environmental Training attended at the company level in 2011: task force and environment committee Program commenced as of 2011 at • Global Warming Conference organized all TAV terminals. Launched with 250 TAV Academy became a Global Training under the “Reclaim Your Life” slogan by employees in 2011, the Sustainability Center for ACI last year. Established in the Association of Economy Journalists Orientation Program is intended to be 1991 with the mission of organizing of Turkey on November 22, 2011 expanded to train 450 employees in programs and conferences worldwide 2012. This training covers all aspects of • “Sustainable Future” conference in accordance with the principles that sustainability including ethics, transparency organized by the Sustainability contribute to excellence in airport and employee relations in addition to the Academy on October 26, 2011 management and operation, the Airports environment and the economy. The need Council International (ACI) Global Training “Environment Summit” held on for integrating sustainability into daily • Center launched its 11th Global Training September 15-17, 2011 as part of the tasks and decision-making processes Center at the Istanbul Atatürk Airport. The Izmir International Fair is strongly emphasized throughout the cooperation between TAV Academy and training program. In addition, presentation Continuing to measure and manage the ACI began in March 2008 and TAV of the 2010 Sustainability Report will also noise levels at the terminals Academy became a Global Training Center be an area of focus. in 2011. In 2011 the TAV/ACI Training TAV continued to conduct noise Center focused on the strategically- Launching waste management training measurements at the Istanbul Atatürk designed Global Strategic Network (GSN) and Izmir Adnan Menderes airports under Waste management training sessions courses and the Airport Service Quality two categories: environmental noise and commenced at TAV Izmir in 2011 and 246 course in cooperation with the staff of the occupational health & safety (OHS.) people attended these training sessions. ACI World Global Training Center located The Company plans to continue conducting The measurements continued to in Montreal, Canada. TAV Academy hosted these trainings in Izmir and at other demonstrate that environmental noise 56 airport executives from 15 countries airports in 2012 at an accelerating pace. levels linger below the threshold values. at three courses conducted in Istanbul. As part of OHS measurements, potential As part of its strategic partnership with harmful impacts were prevented by the ACI, TAV Academy aims to be the equipping employees with personal information sharing center of the region in protective gear in cases where measures airport operations management. cannot be taken at the source. A subgroup of the members of the Sustainability Committee that was formed within TAV Airports Holding will attend the conference to be held in Milan for the ACI Environment Committee on April 12-13. 6 TAV Airports 2011 Annual Report

Our Economic Impacts

TAV Airports Holding’s investments from Saudi Oger Ltd. In addition, TAV Airports, to customized services and security and 2007 to date on three continents amounts which earns 54 % of its total consolidated information services. Total income and to € 872 million. The investments made income from non-aviation businesses, is EBITDA generated at the four airports for the airports operated in Georgia, Tunisia organized to meet every need that might covered by this report during the reporting and Macedonia are among the most be expected of an airport from ground period are as follows. important and largest foreign investments handling services and duty free shops in these countries.

Serving approximately 420 thousand Value Distributed to Shareholders 5.68 % Value Distributed to Suppliers 56.73 % flights of 300 airline companies and 53 million passengers via its subsidiary operating companies in 2011, TAV Airports Value Distributed to Employees 25.88 % Holding undertakes projects for and about the people in line with its uncompromising goals and principles with more than 20 thousand employees on three continents.

TAV Airports Holding generated € 912* Value Distributed to Suppliers million in net revenues during 2011, Value Distributed to the State Value Distributed to Creditors 7.34 % distributing 57 % of it to suppliers Value Distributed to Creditors in operating expenses and 26 % to Value Distributed to Employees Value Distributed to the State 4.36 % employees. The adjacent chart shows the Value Distributed to Shareholders proportions of direct spending that went to TAV’s major stakeholders in 2011.

TAV Airports is Turkey’s leading airport 2011 (€ million) Income EBITDA EBITDA Margin operator with a 46 % market share, Airports in Turkey 422 177 42 % according to 2011 passenger statistics from the Turkish State Airports Authority Istanbul 344 136 39 % (DHMİ.) TAV Airports, which serves millions Ankara 42 20 47 % of passengers annually in Istanbul, Izmir 35 22 62 % Ankara, Izmir and Gazipaşa in Turkey. Gazipaşa - (1) N/A Internationally manages airport operations in Georgia, Tunisia and Macedonia Note: Calculations in the table include guaranteed passenger revenue from the airports operated in Ankara and and holds the operating rights to the Izmir. Madinah International Airport jointly with its partners Al Rajhi Holding Group and

* Total IFRS revenues including construction revenue Sustainability Corporate Governance 7

Our Environmental Impacts

As part of its environmental vision, Carbon Disclosure Project for awareness Antalya Gazipaşa Airport TAV Airports Holding aims to identify purposes and identified the sources of the impacts of its operations on its carbon emissions and calculated and Antalya Gazipaşa Airport, a boutique the environment and eliminate or reported on them on an annual basis. airport, achieved 30 % conservation minimize such impacts. The Company’s in electricity consumption in 2011 by Environmental Policy encompasses Ankara Esenboğa Airport reducing the lighting levels by one- mindful and efficient use of scarce third during times when no flights are natural resources. Striving to improve Setting an example in energy scheduled at the Airport. In addition, quality of life in addition to preserving conservation with its architectural LED products are installed in the 378 nature and natural resources, the features, Esenboğa Airport generates projectors that are used for lighting the Company aims to leave a more its electricity from natural gas using Airport and the surrounding area. habitable world behind for future the cogeneration plant that it installed, generations. Prioritizing respect for a first in Turkey, while using the heat Airport Carbon the environment in accordance with captured by a waste heat recapture Accreditation its corporate principles, TAV Airports boiler for terminal air conditioning. These (1,000 tons of CO /year) conducts its activities in compliance with measures provide a 25 % reduction 2 international environmental standards. in energy costs. Managing to keep its 120 2011 2010 TAV Airports Holding acts with a shared carbon emission constant despite the 100 sense of responsibility together with increase in passenger traffic in 2011, 80 all of its employees in order to comply the Airport also reduced its water with the requirements of the national consumption per 1,000 passengers by 60 and international environmental laws 3 %. 18 % of the waste at the terminals 40 and regulations. All units within the was recycled. 20 Holding are liable for fulfilling their 0 responsibilities within their areas of Izmir Adnan Menderes International Istanbul Ankara Izmir activity. Terminal According to measurements performed Istanbul Atatürk Airport Participating in the Carbon Accreditation as part of the Airports Council Program administered by the Airports International’s (ACI) Airport Carbon Environmental investments continued at Council International (ACI,) the Airport Accreditation (ACA) Program, carbon the Istanbul Atatürk Airport, Turkey’s first attained Level 1 accreditation and emissions remained unchanged at the “Green Airport,” in 2011. TAV aimed for a received the Airport Accreditation Ankara and Izmir airports while they 45 % reduction in electricity consumption Certification. Completing the Level 1 increased by 20 % at the Istanbul Airport. by using LED lighting products renewal verification as part of the carbon The increase in TAV Istanbul’s carbon throughout the terminal and for 45,000 accreditation efforts, the Airport’s carbon emissions was due in large part to the cubic meters of water conservation dioxide emission was calculated to be 20 additional shuttle buses deployed by using rainwater to irrigate the 6,744 tons. In addition, the Airport’s for TAV employees. In addition, the landscaping and gardens. In addition, electricity and water consumption malfunction of the trigeneration system water conservation of more than 40,000 decreased by 11 % and 14 %, respectively, in January and February of 2011 also cubic meters was achieved through despite the increase in passenger traffic contributed to the uptick in carbon backwashing. Energy losses on the in 2011 while natural gas consumption emissions. transmission and distribution systems was up by just 13 % despite the were eliminated with the trigeneration colder than normal winter. 8.8 tons TAV has openly and publicly declared all system that generates the electric, of hazardous waste was disposed of of its activities in a transparent manner heating and air conditioning energy and 129 tons of waste was recycled and disclosed all actions completed in from a single unit within the terminal. in 2011. Additionally, training sessions 2010 in accordance with the Carbon Measuring its carbon footprint since were conducted for stakeholders at the Disclosure Project. Information on 2011 2010, the Airport participated in the Airport as part of the terminal’s waste activities will be announced to the public management efforts. in the first half of 2012. 8 TAV Airports 2011 Annual Report

Our Environmental Impacts

Electricity Purchases Primary Energy Resources (1,000 GJ/year) (1,000 GJ/year) 1.000 Natural Gas Diesel Fuel Oil 400 2011 2010 800

300 600

400 200 200 100 0 2011 2010 2011 2010 2011 2010 2011 2010 0 Istanbul Ankara Izmir Istanbul Ankara Izmir Gazipaşa

Information about the Carbon Disclosure The amount of natural gas used by the trigeneration plant at the Istanbul Atatürk Project is available at http://cgft. Airport increased as a result of the repair of the malfunction in February. In a similar sabanciuniv.edu. fashion, the amount of natural gas consumed by TAV Esenboğa ticked up as a result of the repair of the malfunction in the cogeneration plant. Natural gas consumption at The trigeneration plant at the Istanbul the Izmir Adnan Menderes Airport rose by 14 % as a result of the winter months being Airport resumed operation in February colder than those of 2010. 2011, which led to a decline in electricity purchased. In addition, the airport began supplying electricity to the Turkish State Water Consumption (1,000 cubic meters/year)

Airports Authority (DHMİ.) The table 1.000 above shows the electricity purchased for 2011 2010 the terminal. 800

600 Similarly, as a result of TAV Esenboğa’s utilization of its trigeneration plant at 400 full capacity, the amount of electricity 200 purchased declined significantly. 0 Istanbul Ankara Izmir Gazipaşa TAV Izmir’s electricity purchases in 2011 declined by 11 % compared to 2010 while The new system that collects rainwater from parking areas and service and electricity consumption per passenger accommodation roads to be used in irrigation commenced operation in early 2011. dropped 22 %. The adjacent chart shows annual total water consumption (1,000 cubic meters / year.)

The consumption per passenger Water consumption per 1,000 passengers went up by 4.2 % at the Istanbul Atatürk comparison was not performed for the Airport while declining by 2.7 % at the Ankara Esenboğa Airport and falling by 23.6 % Istanbul Atatürk and Ankara Esenboğa at the Izmir Adnan Menderes Airport. The reason for the increase in Istanbul is the airports due to the resumption of resumption of operation of the trigeneration plant. The cooling systems where water is operation of the trigeneration plant. lost as a result of evaporation, such as the cooling towers, were used at a higher rate at the Izmir Adnan Menderes Airport while the amount of water used for landscaping also increased. Sustainability Corporate Governance 9

Wastewater Management Waste Management (1,000 cubic meters/year) (1,000 tons/year) 800 8 2011 2010 2011 2010

600 6

400 4

200 2

0 0 Istanbul Ankara Izmir Istanbul Ankara Izmir Gazipaşa

Wastewater created at the terminals The treated wastewater discharged by TAV Esenboğa declined by 59.3 % in 2011 while is collected via a closed-loop sewage the decrease per passenger was 62.9 %. system and transferred to wastewater treatment facilities inside the airport The treated wastewater discharged by TAV Izmir ticked up by 4.7 % in 2011 while the premises. All terminals feature state- corresponding figure went down by 5 % on a per-passenger basis. of-the-art wastewater treatment facilities that use biological methods of As a result of the efforts to increase the share of recyclable wastes, the combined treatment. In accordance with related annual recycling volume at the three terminals increased by 3 % in 2011 compared environmental laws, wastewater to the previous year. While the amount of waste at the terminals registered a year- at TAV Airports is discharged to the over-year increase in 2011, the share of the waste recycled was 13 % at the Istanbul closest collecting system or receiving Atatürk Airport, 18 % at the Ankara Esenboğa Airport and 35 % at the Izmir Adnan environment. The amounts of Menderes Airport. wastewater generated in 2011 are shown in the chart above in 1,000 cubic meters / year.

The treated wastewater discharged by TAV Istanbul increased by 36.7 % in 2011 while the increase per passenger was 17.1 %. Water leakages were reduced in 2011 as a result of the retrofits and renovations carried out in the wastewater treatment facility infrastructure. At the same time, the amount of wastewater reaching the facility increased due to the rise in total water consumption. 10 TAV Airports 2011 Annual Report

Our Social Impacts

TAV Airports embraces the principle the system. Managers are responsible for In an attempt to conduct these of managing its human capital, the tracking employee performance, assessing measurements even more effectively, an cornerstone of its success, in accordance competencies, identifying strong traits and employee satisfaction and engagement with an equal opportunity principle at areas for improvement, improving the staff survey was carried out by an international international standards; becoming a via training, applications, transfer of know- independent consulting company in 2011. company preferred by its employees; and how and on-the-job training, as well as The employee satisfaction score was 67.7 being a pioneer in its industry, in Turkey guiding and monitoring their development in 2011, 26 % above the industry average and in the world with its integrated human plans. In this respect, each department for the same survey. The same survey resources practices. At TAV Group, the of TAV functions as a training and revealed an employee loyalty score of 74.4, Human Resources Department plans development center. The managers, who 31 % higher than the industry average. its operations with a human resources are in a sense development and training The results were presented to senior management approach coherent with the officers, are expected to set an example management in the form of detailed and Holding’s business strategies so as to be for their staff with their personality and comparative reports and were also shared a strategic partner to all companies and knowledge, are supported via managerial with the employees via the corporate departments of the Holding to improve skills trainings. intranet. The “opinion-sharing meetings,” business results, nourish and promote a Following the performance evaluation which were rolled out in 2010 in order high performance culture and create value meetings, both the managers and the to conduct face-to-face conversations for all stakeholders. employees fill out a survey where they with employees and learn about their TAV’s human capital strategy is structured can share their views on the process. satisfaction levels, career and development in accordance with a corporate learning The developmental project that was plans, opinions about and expectations approach. As a pioneer and leader in launched to enhance the integration of from the Company and human resources airport operations in Turkey, TAV Airports the Performance Management process practices, and to get to know them better, institutionalizes the acquired information, with the Career and Talent Management were continued in 2011 with a wider scope. experience and know-how, and embeds processes was completed in 2011 to A Future Projection Meeting was organized this across all levels of the Company. commence service in 2012. in December 2011 that brought together TAV Airports shares its corporate vision, Focus on Employee Satisfaction all TAV Airports Human Resources and mission, values and ethical principles with Personnel Management staff, including employees through classroom trainings At TAV, in addition to quality of service, the TAV Airports companies abroad. More as part of the orientation process, as the relationship between the managers than 130 subject matter expert Human well as other development programs, and their staff, as well as the strong Resources and Personnel Management the corporate portal and other internal interaction between employee satisfaction employees from various countries and publications. and engagement have a crucial effect industries enjoyed the opportunity to on customer loyalty and sustained Performance Management discuss how to contribute to the goal of profitability. With the understanding that moving TAV Airports forward into the future In the performance management process, competitive edge and success stem largely with greater accomplishments and what annual strategic objectives and business from human resources, TAV Airports takes can be done to advance the Company’s plans of the Company and its departments heed of employees’ viewpoints. Employee vision of “Becoming the Best Company to are shared with employees. Employee satisfaction and engagement, one of Work for,” as well as getting acquainted views on the objectives and business plans the major factors that affect employee with each other and the human resources are considered as valuable feedback by motivation and performance, is measured practices and systems in various countries, the management and are integrated into and reported regularly on an annual basis. for two days. Sustainability Corporate Governance 11

Strategic Collaboration with Functional Category Universities Administrative 283 Operational 3,077 TAV Academy established strong Technical 471 strategic collaboration programs with such universities as Kocaeli University, Marital Status University of Turkish Aeronautical Single 2,166 Association (THK University,) and TOBB Married 1,665 (Union of Chambers and the Commodity Exchanges of Turkey) University of Disability Economics and Technology; industry- Yes 48 specific programs and R&D projects were No 3,783 carried out thanks to the knowledge and know-how transfer from TAV Academy. Sex In addition, as a result of the other Female 1,142 collaboration programs established with Male 2,689 universities and İŞKUR (Employment Agency of Turkey,) internship, part-time Male & Female Female and full-time employment opportunities Level 5 (Administrative Staff) 3,393 1,037 were created. Level 4 (Specialist/Engineer) 221 60 TAV Group places particular emphasis on Level 3 (Supervisory Level Employees) 149 31 the effective management of internships Level 2 (Middle Management) 65 13 for development of students as well as Level 1 (Senior Management) 3 1 the Company’s talent management and Total 3,831 1,136 recruiting strategies; the internship process is structured to yield the optimal benefits Age for both parties. Under 30 1,655 30-50 2,021 50+ 155

Type White Collar 651 Blue Collar 3,180 Total 3,831 12 TAV Airports 2011 Annual Report

Our Social Impacts

Occupational Health and Safety Communication with Customers

TAV Airports administered health and safety training programs for 983 employees in 2010 4,322 domestic and international and for 721 employees at the four airports in Turkey in 2011. passengers were surveyed via external customer satisfaction forms at the Atatürk, ISTANBUL ANKARA IZMIR ANTALYA Esenboğa and Izmir terminals in 2011. Health and Safety Trainings 2010 2011 2010 2011 2010 2011 2010 2011 H&S Training Hours Hours/ The survey consisted of questions in seven per Employee Year 3.3 1.4 15.1 1.3 5.1 0.6 24.0 54.3 distinct categories and participants were asked to assign a grade between one Accidents 2010 2011 2010 2011 2010 2011 2010 2011 and five for each category. The question All except first aid categories are as follows: level minor injuries Number 5.0 4.0 5.0 4.0 6.0 5.0 0.0 0.0 With fatality Number 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Reportable Number 3.0 0.0 3.0 0.0 0.0 3.0 0.0 0.0 • Assessment of entry into the airport Accident frequency % 2.49 2.99 3.50 3.00 15.00 14.80 0.0 0.0 • Assessment of check-in services Days of Absence 2010 2011 2010 2011 2010 2011 2010 2011 Lost Days Caused • Assessment of passport control by Work-Related % in Accidents absence 0.02 % 0.0 % 0.1 % 0.1 % 0.0 % 0.0 % 0.0 % 0.0 % • Assessment of security services % in Reportable*: absence 0.7 % 0.0 % 0.3 % 0.2 % 1.8 % 0.0 % 0.0 % 0.0 % • Assessment of ease of finding directions

• Assessment of common areas inside the airport

• Assessment of the airport in general

The results affirmed the importance TAV places on external customer satisfaction, as the rates of customer satisfaction were 97 % at TAV Istanbul, 99 % at TAV Esenboğa and 96 % at TAV Izmir.

* Work-related accidents where more than 3 days of absence is involved Sustainability Corporate Governance 13

The most frequently cited source of Contribution to Employment The number of interns at TAV Airports in dissatisfaction in Istanbul is the passport In 2011, TAV Group provided employment 2011 was as follows: control on the departures side. Aware of opportunities to a total of 20,269 people this situation, TAV Istanbul applied for (average number of employees in 2011: Holding 45 authorization to implement the Open 19,838) and offered 1,069 interns the TAV Istanbul 181 Gate Project that required a € 2 million chance to learn about work life and gain TAV Ankara 48 investment in 2010. professional experience. TAV also offers TAV Izmir 37 rich internship opportunities to ensure that OPEN GATE Project: In 2011, TAV Istanbul successful students, who are the workforce TAV Gazipaşa 2 started the investment for its Open Gate of the future, learn about professional life application that encompasses moving the and the aviation sector, assess themselves security control points at the entrances of and their skills. To support cooperation the waiting areas of gates to more central between academic and business circles locations; redrawing air-land boundaries and to increase employment in the sector, through these points; and subjecting all priority is given to students from civil passengers, transit passengers, personnel aviation departments of universities. The and materials that move to the air side performance of interns is evaluated by the (isolated lounge) to a security check in managers of the related departments and accordance with the “pre-boarding control Human Resources Department.The interms standard.” who are deemed successful are offered positions at the Company. To this end, the This will prevent flight delays stemming interns who successfully completed the from passenger security checks, allow “Professionals of the Future Internship more efficient utilization of gate Program” that was implemented in 2010 capacities, and help relaxed passengers to and who embraced the corporate culture have a higher quality experience. were recruited for appropriate positions in 2011. 14 TAV Airports 2011 Annual Report

Our Social Impacts

Corporate Social Responsibility put together from the works of the • TAV sponsored a series of events TAV Airports defines its corporate social TAV Workshop Photography Club in 2011 in order to support sector responsibility approach as its voluntary participants as the final activity of the development and progress in contribution to create a better and more year. international relations. The Turkish- developed society. Within this framework, Arab Economic Forum (TAF) that the Company aims to develop and Displaying great awareness toward brought together business people and support sustainable and transparent • projects that are open to diversity and multiculturalism and preservation of decision-makers from 22 countries development, that create value for society cultural values, TAV Airports conducted in the region; the International and encourage voluntary participation, and a number of activities for passengers Cooperation Platform (ICP) that that are carried out in accordance with in celebration of March 8 International brought together representatives from internationally-accepted standards. To that Working Women’s Day, April 23 the countries in the region to establish end, TAV conducted the following activities National Sovereignty and Children’s economic, political, scientific and in 2011. Holiday and the Month of Ramadan cultural collaboration; and the Leaders • Established to form a culture and in 2011. of Change Summit where global and art platform at the airports operated regional alliances were discussed by TAV, TAV Gallery was launched at • The magnitude 7.2 earthquake that were among the events supported by the Izmir Adnan Menderes Airport took place in Van, Turkey, on October TAV. Continuing to support culture and International Terminal in 2011 after 23, 2011 left many people dead, art, TAV established cooperation with Istanbul and Ankara. TAV Gallery Izmir injured and homeless. In an attempt Istanbul Modern, Turkey’s first modern presented the “SunExpress Izmir from to support the aid efforts and to art museum. the Sky,” “Blue,” “Caretta Caretta” meet the most urgent needs, such as and “Sultans of Poetry” exhibitions heating and food, of the earthquake • Taking part in the “Stars of Istanbul” to tens of thousands of passengers victims, TAV Airports launched an intra- campaign of UNICEF that works to throughout the year. Events at company aid campaign immediately advance children’s rights, TAV Airports TAV Gallery Ankara continued with after the earthquake. Using the funds also gave support to the launch of “Lösev (Foundation for Children collected in a very short period of Curioz, the new children’s club of with Leukemia),” Spirit of the Sea,” time by the campaign, TAV purchased Turkish Airlines. A joint photography “Lufthansa” and “News Photographers urgently needed supplies such as project was undertaken as part of Association of Turkey” exhibitions tents, blankets, baby formula and the collaboration with Darüşşafaka while events organized at TAV Gallery diapers and delivered these to Schools where talented but financially Istanbul include “Istanbul Maps,” the disaster zone immediately. In needy students are enrolled. “Firsts of Automobiles,” “Ladies and addition to the campaign organized Kaftans,” “Pamukkale,” “Tassa Cabin in conjunction with employees, the • The Corporate Communication Attendants” and “This City of Istanbul” Company also donated 10 homes as Certification Program, administered exhibitions. As one of Turkey’s largest part of the Mevlana Homes effort. in cooperation with Istanbul Bilgi employers, TAV chose the “Istanbul University, produced its first graduates is Photography” exhibition that was in 2011. Sustainability Corporate Governance 15

• Providing support for projects that Intra-Company Activities The Company diversified its internal benefit people with disabilities, TAV Additionally, two major projects that communication offerings for its employees Istanbul and BTA supported the bring TAV Group employees together and with the addition of TAV Workshop in “Collecting plastic bottle caps for contribute to their social life as well as 2011. Workshop activities that contribute a life without disabilities project” their personal development are TAV Cup to the personal development of TAV launched by the Spinal Cord Paralytics and TAV Workshop. Group employees were held in dance, Association of Turkey (TOFD) this year. photography, music and painting, reaching TAV Istanbul and BTA, which collected TAV Cup is comprised of sports more than 400 participants. Employees approximately 390 kilograms of caps tournaments organized simultaneously who participated in Workshop activities got for the “Collecting plastic bottle caps in Istanbul, Ankara and Izmir. Carried the opportunity to exhibit their hobbies. for a life without disabilities” campaign out for the third time this year, TAV Cup The Photography Workshop participants of TOFD, were acknowledged for tournaments are organized for soccer, were featured in TAV Gallery with the their support of the campaign with a basketball, volleyball, table tennis, chess, “Istanbul is Photography” exhibition while certificate by the Spinal Cord Paralytics bowling and backgammon. More than Painting Workshop participants produced Association of Turkey, the campaign 1,600 sports enthusiasts participated in the TAV Star as part of UNICEF’s “Stars of administrator. At the certificate all TAV Cup tournaments in its second Istanbul” project. TAV Airports Holding’s ceremony that was held with the year while more than 600 people joined “2010 Annual Report” that was prepared participation of all project sponsors, the soccer tournament alone in 2011. with the assistance of Dance Workshop power and manual wheelchairs were Every contest in the TAV Cup is overseen participants won the world’s best annual delivered to people in need of them. by scouts. The athletes chosen by these report award. TAV Istanbul and BTA also supported scouts compete on behalf of TAV in the “Ataşehir is collecting caps one Corporate Games, Turkey’s largest inter- Embracing corporate social responsibility by one, overcoming the barriers step company tournament. In 2011, the second as an internal piece of its management by step” campaign organized by year the Company participated in the processes, TAV Airports intends to focus the Ataşehir Municipality. Collecting Corporate Games with 120 players, TAV on environmental, education and arts & plastic soda bottle caps at designated won the title in chess, soccer and volleyball culture projects in 2012. Striving to be areas within the catering areas branches. the market leader in the sectors in which and airport personnel offices at the it operates, TAV also aims to contribute Istanbul Atatürk Airport operated by to the sector development processes, to the Company, TAV handed over nearly adopt and improve on the best practices, 250 kilograms of caps to the Ataşehir and to advance the industry by deploying Municipality, which resulted in delivery its know-how in this segment to its of wheelchairs to people in need in overseas operations. cooperation with the Association of Persons with Disabilities of Turkey. 16 TAV Airports 2011 Annual Report

2011 Awards International awards won as a result of diligent and dedicated efforts

The 2010 Annual Report of TAV ISS Corporate Services (ICS), one TAV Airports was recognized with the Airports was deemed the “Best of Show” of the world’s most prestigious 2011 Corporate Governance Award 2011 (Best in the World) at the International independent corporate governance rating by the World Finance Magazine. Annual Report Competition held in New organizations, increased TAV Airports’ York City, USA. corporate governance rating score Moodie awarded Cakes & Bakes, a to 9.09. As a result of this score, TAV subsidiary company of BTA Catering, The 2010 Annual Report was Airports Holding became the holder of with the “Best Supplier” award. recognized with the Gold Award in the the second highest rating in the Istanbul “Airport Management” category at the Stock Exchange Corporate Governance Istanbul Atatürk Airport was named “Galaxy Awards” competition organized Index. “Best Airport Operator of the Year” at by MerComm in the United States. the Skalite 2011 Awards, known as the The Emerging Markets Airport “Tourism Oscars” in the industry and TAV Airports Holding’s 2010 Annual Awards recognized TAV Airports in three organized by Skal International Istanbul Report received the Gold Award in categories. At the award ceremony Club to raise the bar for quality in the “Transportation and Logistics” held in Dubai, United Arab Emirates, tourism. category from the League of American TAV Airports was chosen as the “Best Communications Professionals (LACP) Emerging Market Airport Management W3 Awards gave the “Silver Award” while ranking in the top 50 reports in the Company.” Izmir Adnan Menderes Airport to the Istanbul Atatürk Airport website Europe-Middle East-Africa (EMEA) region International Terminal captured the “Best in the “Transportation” and “Travel” and among top 10 reports in Turkey. Emerging Market Achievement Airport categories and to the TAV Investor for Eco Innovation” title while Georgia’s Relations website in the “Financial At the “Turkey Investor Relations Tbilisi Airport was deemed the “best” Services” category. Awards” organized for the third time in in its region (Russia/CIS); both of these 2011 by Thomson Reuters Extel Surveys airports are operated by TAV Airports. TAV Passport was deemed worthy of and Acclaro, TAV Airports won awards in the “Best Service” Award by gecce.com. six categories, “Best Investor Relations As a result of its leadership in internal CEO,” “Best Investor Relations CFO,” “Best audit, TAV Airports was deemed worthy ICT Summit Eurasia - Bilişim Zirvesi’11 Investor Relations Officer,” “Best Investor of the “Internal Audit Awareness” award designed as a platform to encourage Relations Website,” “Best Investor by the Internal Audit Institute of Turkey cooperation within the Eurasia region, Relations Unit” and “Best Disclosure of (TİDE) Board of Directors. recognized the communication Financial Results,” including a first-place technology projects undertaken finish in the “Best Investor Relations TAV Georgia won the “Golden Brand between the countries of the region. CEO” category. Award Best Brand” in the “Public Leaving many established information Transport and Service” category at the technology companies behind with its Golden Brand 2010 organized by Global Enfidha - Hammamet Airport information Idea, a leading market research firm technology infrastructure project, TAV IT in Georgia, and The Financial, a news was awarded the first place at the award portal. ceremony.

TAV Macedonia, won the best project award at the Real Estate and Investment Exhibition organized for the first time in Macedonia in 2011. Sustainability Corporate Governance 17

2011 Certifications

In addition to the certifications and • TAV Istanbul initiated the BREEAM In accreditations listed in the 2010 report: Use certification process.

• TAV Istanbul initiated the ISO 14001 • The certification process for the certification process. barrier-free airport project is ongoing.

• TAV Istanbul initiated the ISO 10002 • TAV Izmir renewed its verification for certification process. the level 1 of ACI-Carbon Accreditation Program through an independent • TAV Istanbul initiated the OHSAS organization. 18001 certification process. 18 TAV Airports 2011 Annual Report

Risk Management An active risk assessment system that aims to anticipate and minimize risks

Enterprise Risk Management Risk Management Initiatives in Function 2011 In 2010, TAV Airports completed the TAV Airports Holding’s 2010 risk inventory initiative to form its Enterprise Risk was revised by the managers of the Management (ERM) structure, which was Holding’s main processes under the launched in December 2009. Under this coordination of the Risk Management and structure, ERM commenced operation Research Department and the impacts under the supervision of the Risk of the action plans determined in 2010 Management and Research Coordination were reflected in the risk levels. The 2011 Department, which in turn reports directly risk inventory formed in this manner was to the Finance Director, as of 2009. reported to the senior management.

Pursuant to the new Turkish Commercial As a result of the revision efforts, the Code that will take effect as of July 2012, number of risks that was determined to be publicly-traded companies whose shares 269 in 2010 rose only to 273 in 2011 with are listed on the Istanbul Stock Exchange new risks added to the list. The number of are required to report their major risks to risks that fall within the focus of the senior their senior managements regularly once management per the levels of the risks fell every two months via a “Risk Committee” from 61 to 46 while the number of risks that they will form. The new law gives deemed necessary for monitoring by the the duty of identification of existence and Internal Audit Department rose from 112 operation of this function to independent to 128. audit companies. TAV implemented this structure during its public offering based purely on its foresight well ahead of the enactment of this law, thereby demonstrating the importance of its shareholders and the share value for the Company.

Very High 7 There are 46 risks that fall within the focus of the Senior High 24 15 Management.

Medium 27 53 7 There are 128 risks that are deemed necessary

evel of Remaining Risk L evel of Remaining Risk for monitoring by Low 22 50 61 7 the Internal Audit Department. Low Medium High Very High Level of Natural Risk Sustainability Corporate Governance 19

TAV Airports Holding classifies risks under As a result of the ERM initiatives, TAV Enterprise Risk Management Approach the categories of strategic, financial, directed its focus on such matters as and Risk Assessment Method: operational and legal/compliance and reviewing contract management, data TAV Airports Holding’s risk management assesses the impact of the risk not and information ownership, collateral approach is structured along the lines only in financial terms, but also along tracking and insurance coverage and of “integrated risk management.” Under the dimensions of service continuity, defining operations and management the coordination of TAV Airports Holding’s reputation, loss of customers and legal/ principles between companies more Risk Management Department, all service regulatory effect. clearly; the Company commenced efforts companies and airport operations under for improvement in these areas. TAV Holding are encompassed by this risk The breakdown of the number of risks by management approach. In contrast to the category is presented below. Additionally, in keeping with the plans, conventional risk management method TAV launched ERM structuring efforts at which evaluates the risks in various Operational 124 45 % the group companies in 2011. A total of business units separately, the Holding 1,816 risks were identified at the five aims to operationalize a risk management Strategic 80 29 % service companies and three airport/ function that can oversee the general risks Legal/Regulatory 36 13 % terminal operators that participated in of the entire Company, puts the general these initiatives throughout the year and Financial 33 12 % interest of the Company before that of the company management began evaluating business unit the risk is stemming from, Total 273 100% these risks. The objective of this effort and that functions in a continuous manner. is to create a common ERM awareness throughout the entire group and to plant In addition, in accordance with its the seeds for increasing ERM maturity level sustainability principles, the Holding on a going forward basis. adopted an approach that encompasses adverse impacts stemming from social and environmental conditions, in addition to economic circumstances, in the regions in which TAV operates and that embraces the concept of managing risks proactively.

Identification & Measurement SUSTAINABILITY Identification & Measurement

Prioritization Prioritization

TERMINAL OPERATIONS HOLDING ERM & SERVICE COMPANIES

Action Action

Monitoring & Reporting Efficient Utilization of Resources Monitoring & Reporting 20 TAV Airports 2011 Annual Report

Risk Management

TAV Airports Holding defines risk manage the resulting crises should such • With respect to the management of management as the analysis of the risks materialize. In addition, since it is financial risks, accumulated knowledge opportunities and threats it encounters as impossible to entirely and accurately and experience of TAV’s finance, it works to achieve its corporate goals and measure some political, social and structured finance and project finance the correct pricing of the risks it takes in environmental risks (such as natural staff with extensive experience from relation to its risk appetite. disasters and wars,) risks that are included the volume and diversity of the within this scope are closely monitored on ventures they have managed At the same time, the Holding sees it an ongoing and continuous basis. as a prerequisite for the success of risk • The importance given to the budget Elements that Differentiate TAV management that the manager/business preparation, approval and controlling Airports Holding Enterprise Risk unit where the risk stems from takes principles within the Company since its the responsibility for the risk and such Management inception manager/business unit is assessed from The ERM structure of TAV Airports Holding, an impartial and objective perspective one of the first companies in Turkey to An agenda item for the Company in the in accordance with a predetermined adopt the ERM practice, has the backing coming years is to have reached the methodology. As part of this process, if the and support of its senior management. maturity level within TAV Airports Holding assessment reveals that the manager in This support undoubtedly hinges on to be measured by an independent question cannot mitigate the risks down to the importance the Company places on organization with respect to ERM, which the targeted levels despite the resources shareholder value. has completed its first year cycle in 2011 at his/her disposal and managerial after its establishment and the first-year skills and there are action plans that The characteristics of TAV Airports Holding assessments. can achieve this, then the manager that allow its risk management to be presents a recommendation to the senior conducted successfully are listed below: management of the Company accordingly. • Existence of an Internal Audit function The risks that are deemed highly important to monitor the activities determined according to the ranking generated to address the areas of improvement based on the assessment and that revealed by the ERM efforts fall within the authority of the senior • Existence of an information technology management are assigned a larger and company within the Group that can prioritized share of the resources. The generate “company-specific” systems- goal at this point, first and foremost, is based solutions to prevent the materialization of these risks and then to stand prepared to best Sustainability Corporate Governance 21

Internal Audit Meticulously conducted internal audits and team assesments

TAV Holding Internal Audit Directorate Activities in 2011 In addition to these activities, the conducts periodic internal audits to Along with the process audits conducted Directorate conducted efforts related monitor compliance with the Group Risk in Turkey, the Internal Audit Directorate to MIS (Management Information Policy at TAV Airports and its subsidiaries. conducted branch audits in 2011 for Systems) for generating the management The Internal Audit Directorate identifies locations outside of Turkey and for reports summarizing major financial and reports the deficiencies in risk companies with a low value of financial and operational information on TAV management and governance processes, scope/turnover. A total of 13 process audits Airports Holding and its subsidiaries to and the practices that are causing and three company audits were conducted be presented to the CEO and the senior inefficiencies and waste of resources while two special investigation reports management. As a result, the senior through independent audits and/or and three consulting service reports were management was provided with fast recommendations. Additionally, efforts drafted. accurate and up-to-date information on are carried out to enhance organizational the companies. functionality and service quality. No amendments were effected in 2011 concerning the internal regulations on As a result of the audits conducted, the TAV Holding Internal Audit Directorate has TAV Airports Holding’s areas of business. Directorate identified the following areas successfully completed the Internal Audit Audit activities that were conducted with of improvement: Quality Assurance Review carried out by three sub-units (Finance, Operations and PwC. The audit report, dated December 14, Information Technology) began to be • Increasing the effectiveness of the 2009, verified the Unit’s compliance with administered through two sub-units as of controls that are embedded in the the International Internal Audit Standards this year (Operations and Finance.) This processes and Ethical Principles. Thus, TAV Holding change is aimed at auditing the processes • Maintaining policies and procedures in Internal Audit Directorate became the with a more integrated methodology, written form and updated youngest unit to qualify for this title. improving effectiveness and expanding Improving system-security controls the know-how and knowledge base of • To enhance their knowledge, skills and the employees. The scope of the audit The Internal Audit Directorate worked with competences, members of the audit team activities expanded as the operation the related units within the scope of these hold various certifications such as CISA, rights were obtained for the Izmir areas of improvement and supported CIA, CFE, SMMM, CCSA, CFSA, CEH, ITIL V3 Adnan Menderes Airport Domestic and the enhancement of the effectiveness Foundation and initiatives in this area are International terminals and for the Madinah of controls. In addition to these efforts, carried out on an ongoing basis. International Airport. The expansion in the Directorate worked together with the scope in turn brought with it additional business units on conducting the content The Internal Audit Directorate identifies the legal and regulatory risks. controls of new policies and procedures business units to be audited and conducts and supported management for the structural risk analyses for the Holding and As part of its consulting services, the comprehension and implementation of its subsidiaries. Directorate made recommendations uniform rules by employees. regarding the configuration of newly installed systems and information As a result of its leadership in internal technology infrastructure in accordance audit, TAV Airports Holding was recognized with generally-accepted standards at the with the “Internal Audit Awareness” award airports TAV began to operate. In addition, by the Internal Audit Institute of Turkey process improvement activities were (TİDE) Board of Directors on May 24, 2011. conducted as part of the initiative for TAV IT to obtain the ISO 27001 Information Security Management System certification. 22 TAV Airports 2011 Annual Report

Corporate Governance Principles Compliance Report

TAV Airports Holding (“the Company”) Raising its corporate governance score As of the reporting period ending December makes every effort to comply with the from 9.03 to 9.09 out of 10 in its third 31, 2011, the Company complies with and Capital Markets Board’s (CMB) Corporate year of rating, TAV Airports had the second implements the Corporate Governance Governance Principles (“Corporate highest score this year after boasting Principles, with the exception of matters Governance Principles”.) To this end, the the top score in the index last year. The stipulated in sections 18.3.4 (“Using a Company continually strives to achieve the final rating score was calculated based cumulative voting system in the election highest corporate governance standards on the respective weight coefficients of of members of the Board of Directors”) and is working diligently to implement the four subcategories stipulated in the and 26.5.2 (“The number, structure and some of the stipulations specified as Capital Markets Board’s related principle independence of the Board committees” recommendations in the Corporate resolution: shareholders, public disclosure - “committee chairmen are elected from Governance Principles. TAV Airports and transparency, stakeholders and among independent members of the Holding considers ethics rules, as well as board of directors. Within this scope, the Board of Directors”) of the Report. These the principles of transparency, fairness, Company’s Corporate Governance Ratings aforementioned issues are not believed to responsibility and accountability, to be part by subcategory are presented in the table cause any significant conflict of interest as of the Company’s culture. below. of the present time. While the exercise of minority rights is made possible via the two The Company’s efforts with respect to Subcategories Weight Score independent members on the Company’s the Corporate Governance Principles Board of Directors, the Company is were evaluated in 2011 in the “Corporate Shareholders 0.25 90.63 currently assessing the advantages and Governance Rating Report,” prepared by Public Disclosure and disadvantages of using the cumulative RiskMetrics Group (ISS,) an international Transparency 0.35 93.41 voting system in the election of the corporate governance rating agency that members of the Board of Directors. The Stakeholders 0.15 96.82 is also licensed to conduct corporate two independent members of the Board governing rating activities in Turkey in Board of Directors 0.25 84.36 of Directors of the Company, Mehmet Cem accordance with the Capital Markets Boards Total 1.00 90.96 Kozlu and Pierre de Champfleury, also Corporate Governance Principles. As a result serve as Corporate Governance Committee of this report, the Company’s Corporate The Company’s information disclosure Chairman and Audit Committee Member, Governance Rating Score, which was 90.35 policy, which was created pursuant to respectively. (9.03) as of 2010 was revised upwards the Capital Markets Board’s Corporate to 90.96 (9.09) in 2011, taking into Governance Principles was documented in The Board of Directors, Senior Management consideration the continual development writing and announced through the ir.tav. and all employees of TAV Airports Holding and improvement of Company’s activities aero web site. support the adoption of the Corporate since the previous rating, as well as Governance Principles within the Company the Company’s great awareness of and An amendment was approved at the at every stage of the process. Following determination about corporate commitment General Assembly Meeting held on May the adoption of the Corporate Governance to its implementation. 24, 2010 changing the required number Principles, the Corporate Governance of members of the Board of Directors Principles Compliance Report was from 15 to “at least 9.” The requirement announced to the public, in which the of incorporating at least two independent Company declares that all activities shall members on the Board of Directors, which be undertaken in line with the principles of is stipulated by the Corporate Governance equality, transparency, accountability and Principles, has already been fulfilled by the responsibility. Company since the initial public offering. Sustainability Corporate Governance 23

SECTION I - SHAREHOLDERS Relations Website” categories, respectively. • Updating the Investor Relations website, At the 2010 awards TAV Airports’ Chief company presentations, annual reports 1. Shareholder Relations Unit Executive M. Sani Şener, Finance Director and other communication vehicles in The Company complies with the legislation, Murat Uluğ and Investor Relations order to provide accurate and complete Articles of Association and other Company Coordinator Nursel İlgen won the first- information to shareholders and regulations on the matter of exercise of place prizes in the “Best Investor Relations potential investors, and using electronic shareholder rights and takes necessary CEO,” “Best Investor Relations CFO” and communication means; measures to facilitate the exercise of these “Best Investor Relations Officer” categories, • Creating a database of domestic and rights. respectively, while the Company also won foreign institutional investors and equity awards in the “Best Investor Relations and industry analysts; In order to oversee all relations with Website” and “Best Investor Relations Unit” • Representing the Company in investor shareholders and establish channels of categories, bringing TAV Airports Holding’s IR relations meetings with existing and communication between the Company and award total to five in 2010. potential investors and analysts in Turkey its shareholders, the Investor Relations and abroad; Department was established within the Per the organization of the Company, the • Examining and monitoring analyst Company in September 2006, prior to the Investor Relations Department reports reports; initial public offering in February 2007. The directly to the Chief Executive Officer (CEO,) • Responding to the information requests Investors Relations Department operates who is also an executive member of the of the Corporate Governance Rating for the purpose of presenting accurate, Board of Directors. The Head of the Investor Agency; timely and coherent information to existing Relations Department attends the Board • Monitoring significant developments and and potential investors about TAV Airports of Directors meetings in order to establish statistics about the sector; Holding, increasing the recognition and two-way communication between the • Taking necessary measures to ensure credibility of the Company, positioning Board of Directors and shareholders. that the General Assembly meetings the Company among the publicly-traded are held in compliance with legislation airport operation companies in the world, Primary responsibilities of the Investor in force, the Company’s Articles of lowering the Company’s cost of capital by Relations Department, which serves as the Association and other Company implementing the Corporate Governance communication bridge between the Board of regulations; Principles and establishing communication Directors and the financial world, consist of: • Preparing the documents that will be between the Board of Directors and capital beneficial to shareholders for the General markets participants. In line with these • Ensuring that shareholder records are Assembly meetings; objectives, the Company strives to maintain kept accurately, reliably and up-to-date; • Providing shareholders access to meeting close communication with its shareholders • Furnishing the coordination within the minutes; and investors and conducts an active Company regarding shareholder-related • Monitoring and overseeing every aspect investor relations program. matters; of the public disclosure process for • Responding to written or verbal compliance with legislation. At the “Turkey Investor Relations Awards” information requests from shareholders, organized for the third time in 2011 by potential investors, equity analysts, The Investor Relations Department Thomson Reuters Extel Surveys and Acclaro, legal bodies (Capital Markets Board, makes every effort to use electronic TAV Airports won awards in six categories, Istanbul Stock Exchange, Central Registry communication means and the Company “Best Investor Relations CEO,” “Best Agency and the like) and financial website in all of its endeavors. Contact Investor Relations CFO,” “Best Investor publication houses about the Company, information for the Investor Relations Relations Officer,” “Best Investor Relations unless the requested information is Department is posted on the website Website,” “Best Investor Relations Unit” and publicly unavailable, confidential or a at ir.tav.aero and published in the “Best company in sharing financial results,” trade secret; ensuring that accurate annual reports. The Investor Relations including a first-place finish in the “Best information is made available to Department can be reached at ir@tav. Investor Relations CEO” category. everyone simultaneously in a consistent aero for all requests and questions. Further manner and updating existing enhancing its design and content in 2011, At the “Turkey Investor Relations Awards” information; the TAV Investor Relations website has that was organized for the first time in • Preparing and sending out material been renewed to provide an interactive 2009, TAV Airports Holding CEO M. Sani disclosures to the Public Disclosure experience, and many new features were Şener, TAV Airports Holding Head of Investor Platform (PDP) in both Turkish and adapted into the website facilitating easier Relations Nursel İlgen and TAV Airports English simultaneously; user access to information and data. In Investor Relations Website won awards in • Reviewing all Company announcements addition, major financial and operational the “Best Investor Relations CEO,” “Best and preparing and releasing the information about the Company is shared Investor Relations Officer” and “Best Investor announcements about financial results in on social media platforms such as both Turkish and English simultaneously; Facebook and Twitter. 24 TAV Airports 2011 Annual Report

Corporate Governance Principles Compliance Report

The operations of the Investor Relations Department are conducted by Nursel İlgen, CFA The activities of the Company are audited who also holds CMB Advanced Level and the Corporate Governance Rating Licenses; by regularly on a periodic basis by an Ali Özgü Caneri, who has passed the CMB Advanced Level, Derivatives and Corporate independent external auditor and auditors Governance Rating proficiency exams; and by Besim Meriç, who holds CMB Advanced Level, assigned by the General Assembly. In the Derivatives and Corporate Governance Rating Licenses. fiscal year 2011, the independent audit activities were conducted by KPMG under Within this scope, the persons in charge of the Investor Relations Department are listed below: the legal entity Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. TAV Investor Relations Department The Articles of Association currently do Name Surname Title Phone E-mail not recognize requests for assignment of Nursel İlgen Head of IR +90 212 463 3000 / 2122 [email protected] a special auditor as a shareholder right. The Company did not receive any requests Ali Özgü Caneri IR Assistant Manager +90 212 463 3000 / 2124 [email protected] for the appointment of special auditors. Besim Meriç IR Assistant Manager +90 212 463 3000 / 2123 [email protected] However, Article 20.1 of the Company’s Articles of Association authorizes As of April 2012, 44 % of the Company’s outstanding shares are publicly held (40 % of shareholders to direct the attention of shares are actually circulating,) approximately 85 % of which reside in the portfolios of auditors to doubtful matters and request foreign investors. In 2011, the Investor Relations Department attended 17 conferences necessary explanations. in Turkey and abroad that were organized to provide information to shareholders and investors. More than 600 face-to-face meetings were held with investors, shareholders and 3. Information on the General Assembly analysts about the Company’s operating results, performance and other developments. In The Ordinary General Assembly Meeting addition, pursuant to the Capital Markets Law, 24 material event disclosures were made of shareholders regarding the Company’s in 2011 and these material disclosures were also posted on the Company website. The 2010 activities was held on Friday May Department responded to inquiries from many investors and analysts via telephone and 13, 2011, at 10 a.m. at the TAV Academy e-mail during 2011, while detailed presentations were prepared about the Company’s (A) Hall, located at the Atatürk Airport financial results during financial reporting periods (quarterly.) International Terminal Gate A – Next to VIP, TAV Administration Center, Yeşilköy- 2. Exercise of Shareholders’ Right to Obtain Information Istanbul. The announcement for the Pursuant to its Information Disclosure Policy, it is the Company’s principle to treat all Ordinary General Assembly, including the shareholders, potential investors and analysts equally with respect to exercise of the necessary information about the meeting right to obtain and analyze information, as well as to make all information disclosures to date and time, meeting location, agenda everyone simultaneously and with identical content. All information sharing is undertaken items, procedures for the attendance within the scope of information that has previously been disclosed to the public. As part of shareholders at the meeting, proxy of the information sharing effort, all information of interest to shareholders and market forms and arrangement procedures were participants is announced via material disclosures; the English translations of these published on page 863 of the Turkish Trade disclosures are transmitted electronically to all people and entities who give their e-mail Registry Gazette, issue no. 7798, dated addresses to the Company and past material disclosures are posted on the Company’s April 20, 2011. The announcement was website in both Turkish and English. also published in the daily Radikal and Akşam Newspapers, dated April 16, 2011. Many written and verbal information requests from shareholders are responded to on Of the 363,281,250 shares representing an expedited basis under the supervision of the Investor Relations Department and the Company’s share capital as of the date in compliance with the provisions of the Capital Markets Law. In an effort to enhance of the meeting, 208,335,406 shares, or shareholders’ rights to obtain information, all necessary information that is stipulated 57.3 % of the total, were represented at in the Corporate Governance Principles and that can impact the exercise of shareholder the Ordinary General Assembly meeting. In rights is presented to shareholders in an up-to-date manner on the Company website. All addition to the procedures stipulated by the information on the Company website is presented in Turkish, as well as in English, in order legislation, the General Assembly meeting to treat all shareholders, domestic and foreign, equally. Sustainability Corporate Governance 25

announcement was also made available clear and comprehensible manner and the right is left to the discretion of Publicly at the Company Headquarters and on the language and expressions used did not Listed Joint Stock Companies pursuant to Company website (ir.tav.aero) 28 days prior allow for misinterpretations. Shareholders Communiqué Series: IV, No. 29 of the CMB; to the meeting in an attempt to reach the were given equal opportunity to voice their the Company’s Articles of Association do maximum number of shareholders possible. opinions and ask questions, thus creating not (yet) provide for cumulative voting. a healthy environment for discussion; However, within the scope of legal and The General Assembly Information however, shareholders did not exercise this regulatory developments, the Company will Document and the General Assembly right during the General Assembly meeting assess the advantages and disadvantages meeting announcements posted on the regarding 2010 activities. Minutes of the of this method. Company website included the meeting General Assembly meeting are available on date and time, meeting location, agenda, the Company website (http://ir.tav.aero.) Principle of Equal Treatment of the fact that the invitation was being Shareholders extended by the Board of Directors and 4. Voting Rights and Minority Rights As it is included in Company’s Disclosure the procedures for the shareholders to Policy, all shareholders, including minority attend the General Assembly. Since the Voting Rights and foreign shareholders, are treated Company does not have any registered The Company avoids practices that make equally. shares, no accommodations were made it difficult to exercise voting rights. All to facilitate the participation of this shareholders are given the opportunity 5. Dividend Policy and Timing of class of shareholders at the General to exercise their voting rights in the Distribution Assembly meetings. As of the date of the easiest and most convenient manner There are no privileges with respect to announcement inviting shareholders to possible. Each share is entitled to one participation in the Company’s profit. The the General Assembly meeting, financial vote in the Company. According to the Company makes its dividend distribution statements and reports and the General Company’s Articles of Association, there decisions taking into account the Turkish Assembly agenda items were made are no privileges associated with voting Commercial Code, Capital Markets Law, available for examination at locations rights. Therefore, there are no preferred Capital Markets Board Communiqués easily accessible by shareholders as well as stocks or different classes of shares in the and Resolutions, the Tax Laws and the on the Company website. Company. There is no Company regulation provisions of other related laws and that restricts the exercise of shareholders’ regulations, as well as the Company’s There have been no major changes in the voting rights for a certain time period Articles of Association. Accordingly, management or operational organization of following the acquisition date of the shares. pursuant to CMB’s resolution No. 02/51 the Company during the previous reporting The Company’s Articles of Association do dated January 27, 2010, publicly-listed period, nor are any such changes planned not contain any provision that prevents joint stock companies are not obligated for subsequent periods. If such a change non-shareholders from voting in proxy as a to pay any dividends from the profits they were to take place, it will be shared with representative of a shareholder. The share made from their activities in and after the public within the scope of legal and capital of the Company does not involve 2009 (there was a 20 % minimum threshold regulatory requirements. The Company did any cross-shareholdings. for 2008.) The corporations that resolve not receive any requests from shareholders to distribute profits may make dividend for adding items to the agenda of the Minority Rights payments based on the resolution of their General Assembly meetings held during the The Company’s Articles of Association general assemblies, either in cash or as year. The meeting procedure of the General contain a provision which stipulates gratis shares issued by adding that amount Assembly facilitates maximum participation that minority rights shall be exercised to the Company’s paid-in capital, or a by shareholders. General Assembly by shareholders collectively holding at combination of the two. meetings are carried out with the simplest least 5 % of the share capital. Exercise possible procedures, at the lowest possible of minority rights in the Company is This dividend policy adopted by the cost for the shareholders and in a manner subject to the Turkish Commercial Code, Company’s Board of Directors can also that does not create any inequality among the Capital Markets Law and related be found in the annual report and on the them. The TAV Academy (A) Hall, where the regulations, and the communiqués and Investor Relations website. It is among General Assembly meetings take place, is resolutions of the Capital Markets Board. the Company’s primary goals to adhere located at the Company’s Head Office and The Company’s Articles of Association do to this dividend policy, except for special it can accommodate all shareholders. The not contain any provisions in addition to the circumstances when investments and Company’s General Assembly meetings are provisions mentioned above. The Company other funds are required for the long-term open to the public and are held under the facilitates the exercise of minority rights growth prospects of the Company or its supervision of a Ministry of Industry and in accordance with the related laws subsidiaries and affiliates, as well as for Commerce Government Official. During the and regulations and, if necessary, by extraordinarily unfavorable developments General Assembly meeting, agenda items the independent members of the Board in the economy. were presented in an objective, detailed, of Directors. As the cumulative voting 26 TAV Airports 2011 Annual Report

Corporate Governance Principles Compliance Report

As stipulated in item 5 of the Agenda of overseeing and monitoring all matters • In addition to the channels stipulated by the Company’s Ordinary General Assembly regarding public disclosures. The Disclosure legislation, other public disclosure tools Meeting held on May 13, 2011, since the Policy aims to establish active and and methods such as press releases, Company had no distributable profit when transparent communication by sharing the electronic data distribution channels, the losses from previous years are netted past performance and future outlook of the e-mail messages, meetings with out with the profit that accrued at year- Company with shareholders, investors and shareholders and potential investors, end 2010 based on the Company’s legal capital markets experts (capital markets social media platforms, as well as records, the General Assembly unanimously participants) equally within the framework announcements posted on the Company resolved that no dividend should be of generally-accepted accounting principles website, are also used actively in the distributed to the shareholders for the 2010 and the provisions of the Capital Markets Company’s public disclosures. fiscal year and that the consolidated net Law, in a complete, fair, accurate, timely • The Code of Ethics stipulated within TAV profit shall be set aside as extraordinary and comprehensible manner. Airports spells out the principles and reserve pursuant to the Capital Markets rules that all managers and employees Board’s principle resolution regarding the Public Disclosure Principles and Tools are required to comply with. These rules issue and related regulations. The information to be disclosed to the of conduct are posted on the Company public is disseminated in a prompt, website as public information. The Board of Directors will present its accurate, complete, comprehensible and • Without prejudice to any of the resolution that the Company make a easy to interpret manner. Attention is provisions in the related regulations, dividend payment to shareholders in the also focused on easy and equal access to the Company informs the public when a amount of TL 0.25 (TL 0.2125 net) per information, with little cost, that will assist material change occurs, or is expected to share from the Company’s 2011 profit for persons and companies who will benefit occur in the near future, in the financial the approval of the General Assembly at its from the disclosure in their decision making. position and/or activities of the Company. meeting to be held in 2012. TAV Airports Holding complies with the • The Company continually updates and Capital Markets legislation and Istanbul publicly announces any changes or 6. Transfer of Shares Stock Exchange regulations in all of its developments that arise regarding public The Company’s Articles of Association public disclosure practices. Information announcements made by the Company. do not contain any provisions that make about the public disclosure principles • With the assistance of companies it difficult for the shareholders to freely and tools adopted by the Company are retained for monitoring the media, transfer their shares. presented below: TAV Airports Holding follows all the news reported by the prominent SECTION II - PUBLIC DISCLOSURE • The Investor Relations Department national media outlets. Within this AND TRANSPARENCY is responsible for overseeing and framework, TAV Airports Holding’s monitoring all matters related to public senior management team, Investor 1.The Disclosure Policy of the Company disclosures. Questions received from Relations Department and Corporate The Disclosure Policy of the Company, outside the Company are responded to Communications Department are prepared pursuant to the Capital Markets in the shortest amount of time possible informed each morning of the related Board Corporate Governance Principles, by the Chief Executive Officer (CEO,) news published or broadcast. If non- was produced as a written declaration and the Finance Director (CFO,) or within the factual news reports are identified, the is posted on the http://ir.tav.aero website. knowledge of and authorization limits set Investor Relations Department assesses TAV Airports Holding’s New Information by the CEO and the CFO, by the Investor the situation and makes the necessary Disclosure Policy will be presented for the Relations Department. The Company announcements in accordance with approval of the General Assembly at its keeps a record of all questions received the TAV Airports Information Disclosure meeting in 2012. in writing and the responses provided Policy, in response to an announcement by the Company. All correspondence request from the Istanbul Stock The Board of Directors is responsible for and meetings with capital markets Exchange or from the CMB, or in some overseeing, reviewing and improving the participants are carried out by the cases, without waiting for such a request Information Disclosure Policy. The Investor Investor Relations Department. for information. Relations Department is charged with Sustainability Corporate Governance 27

Periodic Financial Statements and All publicly disclosed information by the The website includes the contents below: Reports and Independent Audit in Public Company is also available on the Company Disclosures website. The Company letterhead clearly • Company history The Company’s financial statements and indicates the address of its website. The • Current management and shareholding accompanying notes are prepared on a Investor Relations section of the Company’s structure consolidated basis in accordance with CMB website can be reached directly at http:// • Summary balance sheet, income Communiqué Series: XI, No. 29, as well ir.tav.aero. Of the information stipulated statement and cash flow statement as the International Financial Reporting in the Capital Markets Board Corporate • Summary operational data Standards (IFRS); independently audited Governance Principles, all items applicable • Company’s Corporate Governance in accordance with the International Audit to the Company are posted and updated on Guidelines Standards (IAS); and are announced to the the website. With the activities conducted • Company’s Code of Ethics public. throughout 2010 and 2011, the content • Board of Directors and Board of the Investor Relations website has been Committees 2. Material Disclosures enhanced, the website was redesigned • Most recent version of the Articles of Developments that have the potential to to provide an interactive experience that Association and the dates and issue impact the value of the Company’s capital enables easy access to information and numbers of the Trade Registry Gazette in markets instruments are announced to data, the mobile site application was which the amendments were published the public on an expedited basis within launched and it was made compatible • Prospectuses and public offering circulars the timeframe stipulated in laws and with the iPad. Organized to address four • Trade registry information regulations. The Company made 24 different groups of users, General Users, • General Assembly meeting agenda, material event disclosures during 2011, Institutional Investors, Individual Investors, General Assembly information document, none of which were additional disclosures and Analysts, the content of the Company’s proxy voting form, meeting minutes requested by the CMB or the Istanbul Stock website differs depending on the choice • Corporate Governance Principles Exchange. The Company has no additional the user makes among the categories Compliance Report disclosure obligations since the Company appearing on the main page. • List of people who have access to insider does not have any capital markets information instruments listed on foreign exchanges. Thanks to the new features added to the • Information disclosure policy Company’s website, investors can submit • Annual reports 3. The Company Website and its all types of questions to the TAV Investor • Periodic financial statements and reports Contents Relations Department and establish • Financial calendar As stipulated by CMB Corporate Governance active communication with the Company’s • Material disclosures Principles, the Company website is management by sending messages to • Presentations actively used in public disclosures. All the Company’s Board of Directors. By • Data and charts on stock price and matters related to the Investors Relations joining the Company’s e-mail distribution performance Department are posted on the http://ir.tav. list, users can have regular access to • News updated by the data provider aero website. In addition to Turkish, all the reports and information related to company information on the Company website is the Company; institutional investors • Frequently asked questions also presented in English for the benefit of can send meeting requests through the • Analyst contact information foreign investors. The website won the first related section of the website. In addition, • Company contact information place in the “Best Website” category at the analysts issuing reports on the Company • Communication with the Board of Investor Relations Awards organized jointly can also access the website and post their Directors by Thomson Reuters and Acclaro for the reports, major financial and operational • Distribution list registration first time in 2009 and it won the second- forecasts regarding the Company, and their • Meeting requests place prize twice, in 2010 and 2011. expectations of the macroeconomic outlook • Report requests for the coming years by using the personal • Investor feedback form user IDs and passwords provided to them. 28 TAV Airports 2011 Annual Report

Corporate Governance Principles Compliance Report

4. Disclosure of Ultimate Controlling Shareholders Bilde Bilen There is no individual in the Company with ultimate controlling shares. Legal Counsel Binnur Onaran The shareholding structure of the Company as of December 31, 2011 is presented below. General Manager, TAV IT

Shareholder Paid-in Capital (TL) Share (%) Burak Birhekimoğlu Management Systems Coordinator Tepe İnşaat Sanayi A.Ş. 94,664,477 26.1 Burcu Geriş Akfen Holding A.Ş. 94,886,071 26.1 Project and Structured Finance Coordinator Sera Yapı Endüstrisi ve Ticaret A.Ş. 14,644,716 4.0 Burcu Sarıoğlu Other Non-Floating 12,775,048 3.5 Media Relations Manager Other Free-Floating 146,310,939 40.3 Burcu Yar Gürhan TOTAL 363,281,250 100.0 Internal Audit Manager (Financial and Operational) 5. Public Disclosure of People who have Access to Insider Information Bülent Özütürk Investments Coordinator Pursuant to the provisions of relevant laws Aslıhan Manas and regulations, as well as the employment Executive Assistant of the Board of Ceyda Akbal contracts entered into with Company Directors Legal Counsel employees, persons who hold key positions Ayşe Kefli Defne Bahar and fall within this category are listed Project and Structured Finance Specialist Project and Structured Finance Assistant below: Specialist Aytekin Bektaş Abdullah Atalar Accounting Manager, TAV Istanbul Defne Sertel Member of the Board of Directors Translator Aziz Murat Uluğ Ali Haydar Kurtdarcan Finance Director, Member of the Corporate Demet Sözmen Vice Chairman of the Board of Directors, Management Committee Tax Manager Chairman of the Audit Committee Banu Pektaş* Deniz Aydın Ali Özgü Caneri General Counsel Financial Affairs Director Investor Relations Assistant Manager Barışcan İl Doruk Karabulut Alkan Özyayla Marketing Specialist Project and Structured Finance Assistant Strategy Senior Specialist Manager Begüm Özbey Bayol Alper Topçu Legal Counsel Eda Bildiricioğlu Corporate Communications Design Manager General Manager, TAV Operations Services Bengi Vargül Altuğ Koraltan Corporate Communications Coordinator Ensar Yürükçü Internal Audit Director Budget and Planning Senior Specialist Berk Kayserli Asaf Kirazoğlu Corporate Communications Specialist Ersagun Yücel Budget and Planning Assistant Manager Member of the Board of Directors, General Besim Meriç Secretary Aslıhan Çörtük Investor Relations Assistant Manager Marketing Coordinator

*Ms. Banu Pektaş resigned from her position as the General Counsel in TAV Airports Holding’s Legal Coordination Department as of April 1, 2012; she was replaced by Ms. Ceyda Akbal. Sustainability Corporate Governance 29

Ersan Arcan Kemal Ünlü Nursel İlgen General Manager, ATÜ General Manager, TAV Istanbul Investor Relations Coordinator Esin Rodoplu Levent Tunakan Onur Aygüneş Risk Management and Research Assistant Project and Structured Finance Specialist Marketing Senior Specialist Manager Mahmut Miraç Pekmezci Önder Sezgi Esin Gözpınar Financial Reporting Manager Member of the Board of Directors, Member Risk Management and Research Senior of the Audit Committee Mehmet Cem Kozlu Specialist Member of the Board of Directors, Pierre de Champfleury Fatih Ömür Chairman of the Corporate Governance Member of the Board of Directors, Member Business Development Senior Specialist Committee of the Audit Committee Fırat Erkan Balcı Mehmet Erdoğan Sadettin Cesur General Manager, TAV Izmir External Relations Coordinator General Manager, BTA Fırat Ocak Mehmet Sina Avşar Serkan Karahatay Strategy Specialist Research and Development Coordinator Marketing Senior Specialist Gamze Şen Melek Tan Sıla Usta Financial Reporting Senior Specialist Executive Board Office Manager Corporate Event Management Manager Giray Çolpan Melis Erkun Sibel Arı Business Development Senior Specialist Legal Counsel Financial Reporting Senior Specialist (Country Representative – Latvia) Meryem Kuduzoğlu Şafak Özbay Gökçe Atasoy Cost Control Senior Specialist, TAV Istanbul Financial Reporting Senior Specialist Project and Structured Finance Specialist Mete Erkal Şaziye Çevik Göker Köse General Manager, TAV Georgia Administrative Bureau Manager Project and Structured Finance Manager Muharrem Selçuk Çöğen Turgay Şahan Gökhan Aygör Legal Counsel, Strategy Directorate General Manager, TAV Security Budget and Planning Manager Müjdat Yücel Umut Ercevahir Gökhan Doğan General Manager, Havaş Financial Reporting Coordinator Research and Development Coordinator Murat Cevher Vehbi Serkan Kaptan Güçlü Batkın Tax Manager Business Development and Strategy Business Development Coordinator Director Murat Örnekol Gülçin Bulan Operations Director Waleed Ahmed Youssef Tax Senior Specialist GCC Director & ACI Representative Mustafa Sani Şener Hakan Erbek Member of the Board of Directors and Yaşar Kerem Gökyer Financial Reporting Assistant Specialist President & CEO Tax Assistant Manager Haluk Bilgi Nazım Yaprak Yiğit Oğuz Duman North Africa Director Finance Coordinator Human Resources Director, Member of the Corporate Governance Committee Hamdi Akın Nazmi Hügül Chairman of the Board of Directors Strategy Coordinator Zoran Krstevski General Manager, TAV Macedonia Hasan Yeşilyurt Nihat Akkaya Corporate Event Management Senior Administrative Bureau Chief Specialist Noyan Alp Ozdemir Hilal Doğru Budget and Planning Specialist Administrative Bureau Staff Nuray Demirer İbrahim Süha Güçsav General Manager, TAV Esenboğa Member of the Board of Directors 30 TAV Airports 2011 Annual Report

Corporate Governance Principles Compliance Report

All employment contracts contain SECTION III - STAKEHOLDERS 2. Participation of Stakeholders in the following clause: “The employee Management understands that ‘insider trading’ 1. Informing Stakeholders The Company does not have a formal transactions are prohibited. (“Insider The Company’s corporate governance model or mechanism for the participation trading” means stock trading in violation of practices and code of ethics safeguard of stakeholders in management. However, competition and honesty, using information the rights of stakeholders as stipulated in the independent members of the Board of on the financial position of a publicly laws and regulations as well as in mutual Directors allow the representation of all traded company or any other information agreements. Stakeholders are continually stakeholders, as well as the Company and that can affect the share price of the kept informed within the framework of the the shareholders, in management. company before other investors can learn Company’s Information Disclosure Policy, of it.) Therefore, the employee accepts established with respect to governing 3. Human Resources Policy and commits to not using any information legislation and the Company’s code of • Organizational structures are developed, or documents on the Company’s financial ethics. In addition, the Company strives human resources requirements are position, or any other information that can to provide information to all stakeholders identified and workforce plans are affect the value of the Company’s publicly via press releases, annual reports, the formed in accordance with the strategic traded shares, acquired as a result of Company website and other practices plans, areas of business and needs of managerial position, or any other position within the framework of the Company’s TAV Holding. in the Company, or through other means in transparency-oriented Information • All operations within TAV Airports are or outside of stock market trading for the Disclosure Policy. For the Company’s conducted on the basis of achieving purpose of making a profit on his/her own employees, the intranet, which is the intra- personal and professional development behalf or on behalf of another person.” Company information sharing platform, through customer-oriented and is used actively and the “NEWSPORT” innovative approaches. All managers and Pursuant to the Corporate Governance magazine is published quarterly and employees are expected to create and Principles, whenever the list of people “Gate” magazine is published monthly. support an environment that is conducive who have access to insider information The Company’s employees are expected to making a difference and creating is revised, the latest version of the list is to fulfill their responsibilities and hold value. disclosed on the Company website. the Company’s interests above their own • Producing high quality products and interests and the interests of their families services, managing the processes on the or acquaintances while performing their basis of data, ensuring the satisfaction jobs. Employees shall avoid any conduct of internal and external customers, and that may be construed as pursuing establishing interactions to enhance their own or acquaintances’ interests. the productivity of the processes are Foreseeable conflict of interest situations adopted as the main principles in all as well as situations defined by the activities. Company management in such manner are • It is necessary to implement the systems shared with the employees and Company and processes that relate the Company’s management takes necessary measures objectives to business results by when required. means of measurable and observable parameters. Achieving business excellence and sustained success is only possible by conducting effective efforts toward attaining the Company’s objectives. Sustainability Corporate Governance 31

• It is essential to manage and evaluate Holding determines the general policies TAV Airports Holding’s 2010 Sustainability corporate and individual performance. for arrangements and practices to Report that was issued in 2011 assesses Employees are evaluated on the basis achieve the satisfaction of customers the Company’s economic, environmental of their responsibilities, qualifications, of its subsidiaries. It provides maximum and social performance and outlook. The work development and contribution to support to its subsidiaries and, in some report includes TAV’s improvement efforts the Company’s objectives. Outstanding circumstances, enters into contracts with and the objectives set for the airports performance is differentiated from all third parties in these matters, continually operated by TAV in Turkey. By reporting on others and rewarded by various benefits. striving to enhance customer satisfaction. its sustainability performance, TAV aims • The Company does not discriminate In this respect, surveys are conducted for to assess, monitor, measure and manage on any basis in the recruitment and quality control and enhanced customer its potential impacts on its stakeholders placement processes and employees satisfaction. Customers are provided with as well as on the environment in the suitable for the requirements of the job opportunities to easily communicate their course of conducting its daily operations. are recruited from local and international needs and complaints are responded to Furthermore, the Company’s subsidiaries sources. and resolved as quickly as possible. have international quality control plans for • Employees are expected to improve their operation areas and quality control themselves and their jobs. The Call Center audits are conducted in compliance with Company’s objective in this regard is to TAV Airports has established a call center to international standards. provide the basic means needed in the handle passenger demands and complaints development process. All employees efficiently. The common call center that SECTION IV – BOARD OF DIRECTORS are provided with equal opportunities in serves all airports inside Turkey can be terms of personal development. easily accessed by dialing 444 9 TAV. 1. The Structure and Formation of the • The salary for a given position is Board of Directors and Independent determined by evaluating the description 5. Corporate Social Responsibility Members and responsibilities of and the necessary The Company expends maximum effort The formation and election of the Board qualifications required for the job as well to be sensitive to its social responsibilities of Directors conform to the Corporate as the prevailing market wages. in its operations. It complies with all Governance Principles and the principles • Corporate Governance Principles are regulations regarding the environment, governing this issue are set forth in embraced by all employees. Respect consumers and public health, as well as the Company’s Articles of Association. for the people and the job, open and ethics rules, and directs and supports Accordingly: honest communication, and business its subsidiaries to behave in the same ethics principles constitute the basic manner. The Company’s terminal operating Following the resolution of the General management principles. subsidiaries conduct their operations in Assembly Meeting dated May 24, 2010, • As of December 31, 2011, TAV Airports, compliance with environmental regulations the article stipulating that the Company including all of its subsidiaries, has and the directives and guidelines of is governed by a Board of Directors a total of 20,269 employees. No international aviation organizations such as comprised of at least 15 members elected complaints related to discrimination were the ICAO, ECAC, EUROCONTROL and IATA, by the General Assembly from among received from employees. as well as the Equator Principles of the shareholders has been amended to state World Bank. that the Company is governed by a Board 4. Information about Relations with of Directors comprised of at least nine Customers and Suppliers Due to the nature of their operations, members. As stipulated in the Company’s Since the Company is a holding company, the Company and its subsidiaries are Articles of Association, two of the members it is not directly involved in any operation. not legally required, within the scope of the Board of Directors are required to Therefore, it does not have any direct of Environment Law and its related be independent members as defined by relationships with customers or suppliers. regulations, to produce environmental the Capital Markets Board’s Corporate As a holding company, TAV Airports impact assessment reports. Nevertheless, Governance Principles. the Company’s related subsidiaries have prepared environmental reports and environmental management plans during both the construction and operation phases of terminals and they comply with updated environmental management plans. 32 TAV Airports 2011 Annual Report

Corporate Governance Principles Compliance Report

The names of the members of the Board of Directors who were appointed in accordance governing the Company’s transactions and with the Company’s Articles of Association are presented below: business, are qualified and experienced in corporate management, possess Board of Directors the capability of examining financial statements and reports, and preferably Hamdi Akın Chairman of the Board of Directors (Non-executive) have a postgraduate degree. Background Ali Haydar Kurtdarcan Vice Chairman of the Board of Directors (Non-executive) information for the members of the Company’s Board of Directors is presented Mustafa Sani Şener Member of the Board of Directors and President & CEO in the annual report and on the Company Mehmet Cem Kozlu Member of the Board of Directors, Independent website. Pierre de Champfleury Member of the Board of Directors, Independent 3. Mission, Vision and Strategic Goals Ahmet Ersagun Yücel Member of the Board of Directors, General Secretary of the Company Abdullah Atalar Member of the Board of Directors (Non-executive) İbrahim Süha Güçsav Member of the Board of Directors (Non-executive) Our Mission To create the highest value for all Önder Sezgi Member of the Board of Directors (Non-executive) stakeholders in airport operations with a customer-oriented management approach. Non-executive members comprise seven of Board of Directors cannot be appointed as the nine members of the Board of Directors an independent member of the Board of Our Vision (more than half of the Board of Directors,) Directors. To become the leader and the pioneer while the remaining two are executive airport operating company in our members. The Chairman of the Board of The Company does not impose any rules target regions (Europe, Russia and the Directors is not the same person as the or restrictions on the members of its Board Commonwealth of Independent States, the President and CEO. Six Board members of Directors for assuming additional duties Middle East, Africa and India.) are empowered to represent and bind the outside of the Company. However, pursuant Company. to the new Corporate Governance Principles Our Strategic Goals published by the Capital Markets Board, The Company’s general strategic goals are Of the members of the Board of Directors, this clause will be revised as “restricted or specified below: Mr. Mehmet Cem Kozlu and Mr. Pierre subject to certain rules or limitations.” de Champfleury qualify as independent • To achieve long-term, sustainable and members according to the independence 2. Qualifications of Board Members profitable growth criteria stipulated in the CMB Corporate All of the nominated and appointed • To maintain and solidify our leadership Governance Principles. No situation arose members of the Company’s Board of in the domestic market and to become in the reporting period that would cease Directors possess the qualifications the leader, or one of the leaders, at the the independent status of the independent stipulated in the CMB’s Corporate international level in the near future members of the Company’s Board of Governance Principles. Directors. The Board of Directors sets strategic goals The Board of Directors is structured for relevant periods through discussions Independent members of the Board of to ensure maximum influence and with the executive member (CEO) and the Directors are required to submit a written effectiveness. Article 13 of the Company’s Group Directors. statement of independence to the Board Articles of Association stipulates the of Directors and immediately inform the principles regarding this matter. It is the Board of Directors when their independent Company’s principal aim to appoint Board status ceases. An individual who serves members who possess the fundamental a total of seven years on the Company’s knowledge regarding the legal principles Sustainability Corporate Governance 33

4. Risk Management and Internal Audit The Holding’s risk management approach Directors. A Board of Directors Secretariat, Mechanism can be defined as “integrated risk which serves all Board members and management.” Under the coordination of reports to the Chairman, has been formed Internal Audit TAV Airports Enterprise Risk Management to properly maintain documents related to TAV Airports Internal Audit Directorate (ERM) Department, all Group companies Board of Directors meetings. that is audited by the Institute of Internal and operations are included in this risk Auditors (IIA) provides assistance to the management approach. In contrast to the • The Board of Directors meetings are Audit Committee in the Committee’s conventional risk management method planned and held in an effective and supervision role. The mission of the Internal that evaluates the risks in various business efficient manner. As stipulated in the Audit Directorate is to assist the Board units separately, the Holding aims to Company’s Articles of Association. of Directors and the senior management operationalize a risk management function • The Board of Directors shall meet as in their oversight, management and that can oversee the general risks of the the business and transactions of the operational responsibilities by identifying entire Company, puts the general interest Company require. However, the Board and reporting deficiencies in internal of the Company before that of the business of Directors makes every effort to meet audit, risk management and governance unit the risk is stemming from, and at least once every three months. Four processes, as well as practices that functions in a continuous manner. Board of Directors meetings were held are causing inefficiencies and waste of during 2011. resources. 5. The powers and Responsibilities of • The Chairman, Vice Chairman or any the Members of the Board of Directors member of the Board of Directors has Per the Company’s organizational chart, the and Executives the right to call the Board of Directors Internal Audit Director reports directly to the The powers and responsibilities of the for a meeting and/or include any item on CEO. Internal audit plans are formulated Board of Directors are defined in the the agenda that he/she wants discussed by taking into account risk analyses, as Company’s Articles of Association in a by inviting all members of the Board of well as the matters highlighted by the manner that is consistent with the Board’s Directors at least seven days in advance. Audit Committee and the management. functions that does not leave room for any • Such meeting invitations shall be made Risk analyses are conducted regularly to doubt and that is clearly distinguishable via e-mail or facsimile. However, Board identify both existing and newly emerging and identifiable from the authorities and members may waive these meeting risks. Officially, risk analyses are performed responsibilities of the General Assembly. formalities in writing. annually; however, they may be performed • All meetings of the Board of Directors in more frequently if deemed necessary. All shareholders are obliged to keep 2011 were held at the Company’s Head confidential Company secrets forever, Office, as it was not decided otherwise Studies have been conducted in the critical regardless of how they learned those by the Board of Directors. processes at locations in Turkey and secrets, even after losing their shareholding • Alternative opinions expressed, opposing abroad and the results have been reported rights. Shareholders who fail to meet this votes cast (with their reasons) and to the senior management. The Internal obligation are liable to the Company for deliberate questions posed by members Audit Directorate continuously reviews its the damages this may cause. However, the of the Board of Directors at the Board systems and methods of operation in order provisions of this article are not applicable meetings are also recorded in the to identify all risks in a precise and timely for information that needs to be disclosed resolution book. However, since no such fashion, and implements new approaches pursuant to the Capital Markets Law. opposition or alternative opinion has and methodologies to conduct more been expressed in any meeting of the effective and efficient audits. In this regard, 6. Operating Principles of the Board of Board of Directors, no announcement to the Directorate implemented two new Directors this effect has been made to the public. methods, “Control Self-Assessment and Board members are provided with timely • Every member of the Board of Directors Continuous Audit,” in 2010. access to any information they need to is entitled to one vote. Board members fully execute their duties. The Board of do not have weighted voting rights or Risk Management Directors issues a separate resolution for affirmative/negative veto rights. Along with Internal Audit, the Risk the approval of financial statements and Management and Research Coordination accompanying notes, the independent audit The Board of Directors executes the duties Department is also a part of the Finance report, the “Corporate Governance Principles that the Articles of Association and the Directorate and it is responsible for Compliance Report” and the annual report. related legislation assign to it. identifying the risk factors that may According to the Company’s Articles of have an impact on the processes carried Association, a quorum for the meetings out to attain TAV’s corporate objectives, is a simple majority (half the number determining the risk-taking appetite of directors plus one) of the Board of compatible with this goal, and assessing these risks. 34 TAV Airports 2011 Annual Report

Corporate Governance Principles Compliance Report

7. Prohibited Transactions and Non- jobs. Employees shall avoid any conduct and to obtain the information required by Competition with the Company that may be construed as pursuing their their jobs. Employees are responsible for At the General Assembly meeting that took own or acquaintances’ interests. the damages they inflict on the Company place on May 24, 2010, the proposal that as result of misconduct, recklessness or was presented for shareholder approval to Conflict of interest situations negligence. Employees are responsible for authorize the Chairman and the members It is essential that employees prioritize completing their jobs in a timely manner of the Board of Directors to perform the the interests of the Company in all of the by delegating work to subordinates when transactions stipulated in articles 334 business activities. necessary and for making every effort to and 335 of the Turkish Commercial Code comply with the instructions of their seniors regarding the prohibition on doing business The situations described below are and supervisors. As representatives of the and competing with the Company was regarded as situations that constitute a Company, all employees are responsible approved by the General Assembly. conflict of interest: for protecting the Company’s reputation against third parties. Employees are obliged 8. Code of Ethics • A family member or a relative within to avoid all conduct and actions that may TAV Airports Holding’s Code of Ethics third degree of consanguinity has a put the Company in a difficult position. All sets out the rules and principles that all business relationship with the Company; employees are obligated to conduct their executives and employees are required • A family member or a relative within professional relationships with colleagues, to comply with in order to add financial third degree of consanguinity has an business partners and stakeholders value to shareholders and to enhance the ownership in or relationship of interest within the framework of business ethics Company’s corporate value. The Company with the competitors of the Company; and codes of conduct. Employees are has publicly announced the Code of • An employee contracts work to a strictly prohibited from receiving benefits Ethics on the Company website within the company where a family member from third parties regarding their jobs, framework of its information disclosure or a relative within third degree of establishing private business relationships policy, published it on the Company’s consanguinity is employed; with them, and demanding or making intranet and shared it with its employees • An employee borrows money from or payments. through workplace programs and establishes private business relationship performance evaluation forms. The Code with firms working with the Company. Responsibility for compliance with of Ethics is designed to ensure that the workplace principles and rules conduct of TAV executives and employees Prevention of conflicts of interest Employees are obliged to comply with the is of the highest standard and that they are Foreseeable potential conflict of interest Company’s rules regarding management, aware of the impact of their conduct and situations and others defined by the harmony, discipline, occupational health attitudes on the Company. Furthermore, Company management are communicated and safety, as well as the instructions, the Code ensures that ethics of the highest to the employees and necessary measures regulations and procedures that are standards are upheld and the best methods are taken by the Company’s management. published to implement these rules. are employed regarding Company activities The Company’s executives and employees and shareholders. are obliged to report the conflict of Responsibility of being mindful in interest situations they come across to the conduct and relationships Conflict of interest management. Once a conflict of interest Employees are obligated to work in A conflict of interest arises when there is comes about, the Corporate Governance harmony with their colleagues and an existing or potential conflict between Committee takes the necessary actions managers, to form good personal the personal interests of an employee after evaluating the matter. relationships with private or official persons and those of the Company. TAV Airports or entities associated with the workplace, Holding’s employees are expected to Responsibility of diligence on duty and to perform their duties quickly and fulfill their responsibilities and hold the Employees are obliged to perform the honestly. Employees have the responsibility Company’s interests above their own jobs they assume by the employment of reporting the persons acting in breach interests and the interests of their families contract diligently and to make efforts to of the principles of business ethics to the or acquaintances while performing their acquire and develop the competencies management together with the supporting documentation.

Sustainability Corporate Governance 35

Obligation of confidentiality and Corporate Governance Committee keeping secrets Reporting directly to the Board of Directors, the Corporate Governance Committee’s function Employees are obligated to keep the is to assist the Board of Directors in creating and improving the structure and practices information and secrets regarding their jobs necessary for the governance of the Company in accordance with the internationally- or the Company confidential, whether they accepted Corporate Governance Principles, as well as remuneration, professional are related to the position of the employee development and career planning of the senior management team. The duties and or not. Employees cannot disclose the responsibilities of the Corporate Governance Committee are stipulated in the Company’s secrets, information and related documents Articles of Association. to unauthorized persons or entities. This obligation continues even after the job The Corporate Governance Committee is responsible for overseeing the Company’s agreement between the employee and the compliance with corporate governance principles, and its primary duties include: Company is terminated. • Overseeing the implementation of corporate governance principles by the Company, Responsibility of protecting the identifying the reasons if they are not being fully implemented and the consequences of interests of the Company inadequate implementation, and recommending measures for improvement, Employees are obliged to protect the • Determining methods that ensure transparency in the process of identifying candidates Company’s interests related to the business for the Board of Directors membership, and the workplace run by the Company • Conducting studies on the number of the members of the Board of Directors and the and to avoid all conduct that may harm senior management team and developing recommendations, these interests. Employees cannot use the • Developing recommendations for the principles and practices for the performance Company’s resources for their personal evaluation and remuneration of the members of the Board of Directors and the senior interests. management team; and overseeing the implementations.

Prohibition of working in another job Mehmet Cem Kozlu is the Chairman of the Corporate Governance Committee and was Employees cannot accept another job elected from among the independent members of the Board of Directors. -public or private, permanent or temporary, paid or unpaid- or engage in commerce, Members of the Corporate Governance Committee are listed below: without the consent of the Company. Corporate Governance Committee Responsibility of reporting the changes Chairman in personal information Employees are obligated to provide Mehmet Cem Kozlu Member of the Board of Directors, TAV Airports Holding (Independent) the Personnel Department with prompt Members information and supporting documents Murat Uluğ Chief Financial Officer, TAV Airports Holding regarding all changes in their family status, marital status and address; as well as all Yiğit Oğuz Duman Human Resources Director, TAV Airports Holding changes in the information regarding the employee, his/her family or relatives that Audit Committee form the basis for the rights and obligations Reporting directly to the Board of Directors, the Audit Committee assists the Board stipulated in the agreements and/or of Directors in coordinating the efforts that are undertaken to ensure that Company regulations. practices comply with domestic and international laws and regulations, contribute to the improvement of business processes through their audits, and ensure information 9. The Number, Structure and transparency. Independence of Board Committees In keeping with the Capital Markets • The Audit Committee is responsible for taking all measures to ensure the adequacy and Board Corporate Governance Principles, transparency of all internal and independent external audit activities and executing the a Corporate Governance Committee and duties stipulated in the Capital Markets Law. Its primary duties include: an Audit Committee, which report to the • Auditing and approving the compliance of financial statements and accompanying notes Board of Directors, were formed within to be publicly reported with relevant laws and regulations and international accounting the Company. General principles regarding standards, the Corporate Governance Committee • Overseeing the operation and effectiveness of the Company’s accounting system, public and the Audit Committee were stipulated disclosure of financial information, independent audit, and the internal control and risk in Article 34.A of the Company’s Articles management system, of Association that was published in the • Investigating and resolving complaints about the Company’s accounting, internal control Turkish Trade Registry Gazette, dated system and independent audit, December 17, 2008. • Preventing conflicts of interest that may arise among the members of the Board of Directors, managers and other employees, and identifying regulations that may prevent the abuse of the Company’s trade secrets. 36 TAV Airports 2011 Annual Report

Corporate Governance Principles Compliance Report

The Company’s Articles of Association stipulate that the Audit Committee shall meet at least once every three months upon the invitation of the Committee Chairman. Senior executives responsible for financial affairs are not allowed to be Audit Committee members. Pierre de Champfleury, one of the members of the Audit Committee, is also an independent member of the Board of Directors.

Members of the Audit Committee are listed below:

Audit Committee Chairman A. Haydar Kurtdarcan Vice Chairman of the Board of Directors, TAV Airports Holding Members Önder Sezgi Member of the Board of Directors, TAV Airports Holding H. Kadri Samsunlu Executive Vice President of Financial Affairs, Akfen Holding A.Ş. Pierre de Champfleury Member of the Board of Directors, TAV Airports Holding (Independent)

10. Remuneration of the Board of Directors Within the framework of the Capital Markets Board’s Corporate Governance Principles, the Company pays a salary of USD 50,000 per year to each independent member of the Board of Directors commensurate with the time investment and efforts necessary for executing the duties of serving on the Board of Directors. However, it was resolved by the General Assembly that the Company shall not pay any salary or attendance fee to the other members of the Board of Directors or the statutory auditors. Sustainability Corporate Governance 37

Board of Directors and Senior Management

Hamdi Akın, Chairman of the Board of Ali Haydar Kurtdarcan, Vice Chairman Akfen Holding in March 2010. Mr. Güçsav Directors (57) of the Board of Directors (60) graduated from Istanbul University, Hamdi Akın assumed his current position Ali Haydar Kurtdarcan assumed his current Department of Economics in 1992 and as the Chairman of the Board of Directors position as Vice Chairman of the Board earned his Master’s degree from Gazi of TAV Airports Holding in 2005. One of of Directors of TAV Airports Holding in University, Institute of Social Sciences, the founders and shareholders of TAV 2000 and he is also the Chairman of the Department of Business Administration. Airports, Mr. Akın is also the founder and Audit Committee. Mr. Kurtdarcan, who is Beginning his career at Alexander & the Chairman of the Board of Directors the Chairman of the Board of Directors Alexander Insurance Brokerage Co. in 1992, of Akfen Holding. After graduating of Tepe İnşaat (Tepe Construction,) which Mr. Güçsav joined Akfen Group in 1994. from Gazi University, Department of is a shareholder of TAV Airports Holding, Serving at Akfen Holding as Finance Group Mechanical Engineering, he founded graduated from Middle East Technical President and then as President of the Akfen Holding in 1975, a company that University, Department of Civil Engineering Executive Board, he was the Vice Chairman operates in construction, port operation, in 1973. He has served in various of the Board of Directors of Akfen Holding energy, tourism and service industries. managerial positions, including Assistant between 2003 and March 2010. Mr. Güçsav Undertaking infrastructure, energy and General Manager and General Manager, at also serves as a member of the Board of port operation projects within the scope Tepe İnşaat for the last 24 years. Directors at various subsidiaries including of privatization efforts, in addition to TAV Airports Holding, as executive member private entrepreneurial activities, Mr. Akın Mustafa Sani Şener, Member of the of the Board of Directors at Akfen GYO served as a founder and executive in Board of Directors and President & CEO (Akfen Real Estate Investment Partnership) many associations, foundations and non- (57) and the CEO of IBS Insurance Brokerage governmental organizations. He served as Mustafa Sani Şener was appointed Services. the Vice President of Fenerbahçe Sports member of the Board of Directors, President Club from 2000 to 2002, the President and CEO of TAV Airports Holding in 1997. Abdullah Atalar, Member of the Board of Ankara Region Representative Council After graduating from Black Sea Technical of Directors (57) of the Turkish Metal Industrialists’ Union University (KTÜ,) Department of Mechanical Abdullah Atalar was appointed member (MESS) from 1992 to 2004, the Chairman Engineering in 1977, Mr. Şener earned his of the Board of Directors of TAV Airports of the Board of Directors of Turkish Young Master’s degree in fluid mechanics in 1979 Holding in 2009. After graduating Businessmen’s Association (TÜGİAD) from from University of Sussex, Department of from Middle East Technical University, 1998 to 2000, member of the Board Applied Sciences in the UK. He has been Department of Electrical Engineering in of Directors of Turkish Confederation awarded an Honorary Doctorate from 1974, Mr. Atalar received his Master’s and of Employer Associations (TİSK) from KTÜ for his invaluable contributions to the PhD degrees from Stanford University, 1995 to 2001, member of the Board of development of Turkish engineering at the Department of Electrical Engineering in the Directors of the Turkish Industrialists’ and international level. Prior to his career at United States, respectively in 1976 and Businessmen’s Association (TÜSİAD) and TAV Airports Holding, Mr. Şener served in 1978. Beginning his career at the Hewlett the President of the Information Society various positions, from project manager Packard Research Labs in 1979, Mr. Atalar and New Technologies Committee from to general manager, in many national and returned to Turkey as an Assistant Professor 2008 to 2009. He is one of the founders of international projects. Mr. Şener attended at Middle East Technical University in 1980. the Chair in Contemporary Turkish Studies training on management of complex In 1982 he led the project to develop the at the London School of Economics and he systems at the Massachusetts Institute of first commercial acoustic microscope at currently serves as the founding member Technology (MIT.) He is currently the chief Ernst Leitz Wetzlar in Germany. In 1986, and the Honorary Chairman of the Human executive of the TAV Group, a conglomerate he served as the Chair of the Department Resources Foundation of Turkey (TİKAV,) with 24 subsidiary companies and 40 of Electrical and Electronics Engineering which has been active since 1999 in order thousand employees. Mr. Şener is also a and as Associate Professor at the newly to provide well-educated human resources member of the Board of Directors of the established Bilkent University and he was for Turkey. Mr. Akın was appointed Vice Airports Council International (ACI) Europe. promoted to Full Professorship in 1990. Chairman of the Board of Trustees of Mr. Atalar worked as Visiting Professor at Abdullah Gül University Support Foundation İbrahim Süha Güçsav, Member of the Stanford University in 1996. He received in 2011. Board of Directors (43) the Scientific Encouragement and Science İbrahim Süha Güçsav was appointed Awards of TÜBİTAK in 1982 and 1994, a member of the Board of Directors of respectively. He was also elected as a TAV Airports Holding in 2000 and CEO of full-member of the Turkish Academy of 38 TAV Airports 2011 Annual Report

Board of Directors and Senior Management

Sciences in 1997 and has been awarded Mehmet Cem Kozlu, Member of the Ersagun Yücel, Member of the Board of a Fellow Degree by the IEEE in 2007. Board of Directors (65) Directors and General Secretary (39) Mr. Atalar led research projects for such Mehmet Cem Kozlu was appointed Ersagun Yücel was appointed General companies as ASELSAN, Teletaş and an independent member of the Board Secretary of TAV Airports Holding in 2002 Hitachi. Mr. Atalar has 17 international of Directors of TAV Airports Holding in and as member of the Board of Directors patents, 78 academic articles and 114 2006 and is also the Chairman of the of TAV Airports Holding in 2009. Mr. conference proceedings and there are more Corporate Governance Committee. Mr. Yücel graduated from California Newport than 1,600 citations referring to his papers. Kozlu graduated from Denison University, University, Department of Business He is currently the President of Bilkent Department of Economics in 1969 and Administration in 1999 and is currently University, member of the Science Board of received his MBA from Stanford University pursuing his MBA degree at the same TÜBİTAK, and Vice Chairman and Executive and PhD from Boğaziçi University in university. He also graduated from Yıldız Director of Bilkent Holding. Administrative Sciences. He has also been Technical University, Department of awarded an Honorary Doctorate Degree by Serigraphy in 1994 and attended the New Önder Sezgi, Member of the Board of Denison University. Mr. Kozlu held various York University Advertising and Marketing Directors (44) positions at National Cash Register Co. in Program in 1997. Beginning his career Önder Sezgi was appointed a member Ohio, Procter&Gamble in Switzerland and as a graphic artist in MR Com Graphics of the Board of Directors of TAV Airports Komili, and served as a member of the in 1993, Mr. Yücel worked as manager Holding in 2009. After graduating Parliament between 1991 and 1995. Mr. in Rifle Jeans and Calvin Klein Jeans from Ankara University, Faculty of Kozlu served as the CEO and Chairman of between 1995 and 1998. Mr. Yücel joined Political Sciences, Department of Public the Board of Directors of Turkish Airlines, TAV Airports in 1999 as the Assistant to Administration in 1988, Mr. Sezgi served and President of Central Europe, Eurasia the President & CEO. In addition to his as a Tax Inspector on the Board of Tax and Middle East Group in The Coca-Cola responsibilities as the General Secretary of Inspectors at the Ministry of Finance until Company. He currently serves as Consultant TAV Holding, he also oversees the activities 1998. Joining Tepe Group the same year, to Coca-Cola Eurasia and Africa Group of the Corporate Communications, External Mr. Sezgi currently serves as the Financial as well as the Chairman of the Board of Relations, Management Systems, and Affairs Coordinator (CFO) at Bilkent Holding Directors of Noktacom Medya İnternet Board of Directors Administrative Affairs as well as Vice Chairman and executive Hizmetleri A.Ş. (Noktacom Media Internet Departments. member of the Board of Directors at Services) and a member of the Board İstanbul Deniz Otobüsleri A.Ş. (Istanbul of Directors of CCBCSA (The Coca-Cola Pierre de Champfleury, Member of the Fast Ferries Inc..) Having more than 35 Bottling Company of Saudi Arabia.) Board of Directors (66) articles about economics, tax, law and Mr. Kozlu is a member of the Board of Pierre de Champfleury was appointed finance published in various newspapers Directors at Istanbul-based Coca-Cola an independent member of the Board and journals, Mr. Sezgi participated as a İçecek A.Ş. (Coca-Cola Bottling); Evyap of Directors of TAV Airports Holding in speaker in more than 20 conferences and Sabun, Yağ ve Gliserin Sanayii ve Ticaret 2007 and is also a member of the Audit panels on these topics. Holding the title of A.Ş. (Evyap Soap, Oil and Glycerine); Committee. After graduating from Paris Sworn-in Certified Public Accountant, he Anadolu Endüstri Holding (Anadolu Industry École des Hautes Études Commerciales served in various positions and operations Holding); Efes Biracılık ve Malt Sanayii in Paris in 1967, Mr. Champfleury earned in the Tax Council, Turkish Industrialists’ A.Ş. (Efes Brewery and Malt); Kamil Yazıcı his MBA degree from Stanford University and Businessmen’s Association (TÜSİAD,) Yönetim ve Danışmanlık A.Ş. (Kamil Yazıcı in 1971. Beginning his 30-year career International Investors Association (YASED,) Management and Consulting); The Marmara in luxury goods at Elizabeth Arden and Foundation of Tax Inspectors, and Union of Hotels & Residences; and the Council of Parfums Lagerfeld, an Eli Lilly company, Chambers of Certified Public Accountants Foreign Economic Relations. Mr. Kozlu is he served as the chief executive of and Sworn-in Certified Public Accountants also a member of the Board of Trustees of the operations in France and the UK. of Turkey (TÜRMOB.) Anadolu-Johns Hopkins Health Center and Subsequently moving to New York, Pierre Istanbul Modern Arts Foundation. de Champfleury took over as the CEO of Austin Nichols and Co., the producer of the exclusive bourbon whiskey brand Wild Turkey. Returning to Paris after his term there, Mr. Champfleury served as the CEO of Yves Saint Laurent Parfums and then as the CEO of Manuel Canovas SA, a manufacturer of luxury upholstery fabrics. Sustainability Corporate Governance 39

Senior Management

Mustafa Sani Şener, Member of the Murat Uluğ, Finance Director (CFO) (41) Serkan Kaptan, Business Development Board of Directors and President & CEO Murat Uluğ was appointed the Finance & Strategy Director (41) (57) Director (CFO) of TAV Airports Holding in Serkan Kaptan was appointed Business Mustafa Sani Şener was appointed member 2006 and he is also a member of the Development & Investments Director of TAV of the Board of Directors, President and Corporate Governance Committee. Mr. Airports Holding in 2003, managing TAV CEO of TAV Airports Holding in 1997. Uluğ has been serving as a member of the Airports’ business development, aviation After graduating from Black Sea Technical Board of Directors at Havaş Yer Hizmetleri marketing, research & development and University (KTÜ,) Department of Mechanical A.Ş. (Havaş Ground Handling) since 2007, investments activities. Mr. Kaptan is also Engineering in 1977, Mr. Şener earned his at CAS Cyprus Airport Services since 2009, Chairman of the Board of Directors of Master’s degree in fluid mechanics in 1979 and at BTA Denizyolları Yiyecek ve İçecek Havaş Europe (formerly known as North Hub from University of Sussex, Department of Hizmetleri A.Ş. (BTA Sea Lines Food and Services) as well as an Executive Committee Applied Sciences in the UK. He has been Beverage Services) since its inception in Member for TAV Georgia and TAV Latvia. awarded an Honorary Doctorate from 2011, all of which are TAV Airports Holding He graduated from Istanbul University, KTÜ for his invaluable contributions to the subsidiaries. He graduated from Istanbul Department of Business Administration in development of Turkish engineering at the Technical University, Faculty of Electrical 1995 and received his MBA degree from international level. Prior to his career at TAV and Electronic Engineering, Department of Marmara University in 2002. Before joining Airports Holding, Mr. Şener served in various Electronic and Communication Engineering TAV Airports in 1998, Mr. Kaptan worked at positions, from project manager to general in 1992. Mr. Uluğ received his Executive Birgenair Charter Group as dispatcher and manager, in many national and international MBA degree from the joint program of operations supervisor. Mr. Kaptan served as projects. Mr. Şener attended training on Istanbul Bilgi University and Manchester an airport operations consultant at Airport management of complex systems at the Business School in 2003. After 11 years Consulting Vienna from 1998 to 2001. Massachusetts Institute of Technology (MIT.) of banking experience at Garanti Bank, Having 19 years of experience in airport He is currently the chief executive of the TAV HSBC and ABN Amro, Mr. Uluğ served as and airline operations and public-private Group, a conglomerate with 24 subsidiary the Finance Coordinator at Akfen Holding partnership projects, he served as the companies and 40 thousand employees. before joining TAV Airports. He is a member country director in managing TAV Airports’ Mr. Şener is also a member of the Board of of the Turkish Institutional Investment operations in Iran and Georgia. Mr. Kaptan Directors of the Airports Council International Managers’ Association (TKYD) and Finance formerly served as a member of the Board (ACI) Europe. and IT Executives Association of Turkey of Directors at TAV Airports Holding, Havaş, (TÜBİYAD) as well as a member of the and TGS; as Vice Chairman of the Board of Board of Directors of the Investor Relations Directors at Cyprus Airport Services; and as Association of Turkey (TÜYİD.) an Executive Committee Member for TAV Macedonia. Mr. Kaptan has also been the Chairman of the Turkish-Latvian Business Council and a member of the Board of Directors of the Turkish-Czech Business Council in the Foreign Economic Relations Board of Turkey (DEİK) since 2010. 40 TAV Airports 2011 Annual Report

Senior Management

Altuğ Koraltan, Internal Audit Director Murat Örnekol, Operations Director (53) Yiğit Oğuz Duman, Human Resources (48) Murat Örnekol graduated from Middle Director (38) Altuğ Koraltan was appointed Internal East Technical University, Department of Yiğit Oğuz Duman was appointed TAV Audit Director of TAV Airports in 2007. Industrial Engineering in 1980. From 1990 Airports Holding’s Human Resources After graduating from Istanbul University, until 2000, Mr. Örnekol served as Logistics Director as of October 2011. Mr. Duman Department of Business Administration in & Business Development Coordinator, graduated from Boğaziçi University, 1986, Mr. Koraltan began his career as an Head of the Healthcare Group, Telecom Department of Industrial Engineering in External Auditor at Peat Marwick&Mitchell Project Director and Vice Chairman of 1996 and received his MBA from Koç between 1986 and 1988. He served as a the Holding’s Executive Board at Bayındır University in 2001. Mr. Duman began Sales Representative at the Baghdad office Group companies. In his early career, he his career in 1995 at Kibar Holding A.Ş., of ENKA Marketing. Working at Effemex- worked as General Manager at Bordata, a conglomerate active in foreign trade, Mars as a Finance Manager in 1990, an IT company, and as Planning Engineer, automotive, metals and food industries, Mr. Koraltan served as Internal Auditor, IT Manager and Commerce Manager and assumed active responsibilities in Securities Department Assistant Manager at Kutlutaş Holding. Before joining TAV such major areas as change management, and Dealer at the foreign exchange desk of Airports, Mr. Örnekol served as Beretta human resources management, industrial the Treasury Department at Ottoman Bank Holding’s General Manager between 2000 relations, quality assurance applications during the following five years. Serving as and 2006. Mr. Örnekol served as the and corporate law. He served as Human the Chairman of the Internal Audit Board of General Manager of TAV Esenboğa between Resources Manager at Assan Aluminum and OYAK Bank for a one-year term in 1997, Mr. 2006 and 2008. He was appointed as Human Resources and Administrative Koraltan was the head of Internal Audit in Operations Director of TAV Airports Holding Affairs Director at Kibar Holding. In 2008 charge of Turkey and Greece at ABN Amro in 2008. Mr. Duman joined Turkcell Superonline, Bank for ten years, from 1997 to 2007, where he continues to serve. Assuming before joining TAV Airports. responsibilities in Human Resources, Purchasing Administrative Affairs and Customer Experience Management areas at Turkcell Superonline, Yiğit Oğuz Duman also held the positions of Executive Vice President of Business Support and Executive Vice President of Customer Experience Management in this company. Since 2001 Mr. Duman has been assuming various managerial positions on the Board of Directors of Personnel Management Association of Turkey (PERYÖN,) Turkey’s largest NGO in the Human Resources Management field that he has been a member of since 1995. Yiğit Oğuz Duman served as the President of PERYÖN from 2005 until 2010. Mr. Duman currently is the Vice President of this association. Sustainability Corporate Governance 41

Dr. Waleed Youssef, Gulf Arab Countries Deniz Aydın, Financial Affairs Director Haluk Bilgi, North Africa Director (42) Director & ACI Representative (46) (46) Haluk Bilgi was appointed TAV Airports Dr. Waleed Youssef joined TAV Airports Appointed TAV Airports Holding’s Financial Holding’s Business Development Director Holding as the Strategy Director in 2008. A Affairs Director in July 2010, Deniz Aydın responsible for Subsidiaries in 2008 and graduate of the University of California at had joined TAV Airports Holding in 2006 also serves as TAV Tunisie Country Director. Berkeley, Department of Civil Engineering, as Financial Affairs Coordinator. Ms. Aydın Mr. Bilgi graduated from Istanbul University, he subsequently earned his Master’s degree graduated from Middle East Technical Department of Economics in 1992. He in transportation economics and PhD in air University, Department of Economics in received his MBA degree from Middle transport finance from the same university. 1988. Prior to joining TAV Airports, she East Technical University in 1999, and Prior to joining TAV Airports, Dr. Youssef served in the financial affairs departments attended the Structuring Effective Private served as Director at Abu Dhabi Airports of such companies as Ernst & Young, Akfen Equity Partnership Program of Harvard Company, and as Aviation Specialist at Holding, Bobcock & Wilcox Gama Kazan Business School. Haluk Bilgi began his the International Finance Corporation (IFC,) and FMC Nurol Savunma San. A.Ş. in areas career as Foreign Relations Specialist at the private sector arm of the World Bank encompassing cost systems, management BBBAG in 1991. Assuming his first position Group. Having vast experience in airport and international reporting and the abroad in 1993 with Sibkon Siberia, Mr. privatizations, Dr. Waleed Youssef executed establishment of other similar systems. Bilgi joined Tepe Group in 1995, and successful operations at the JFK Terminal 4 Obtaining her CPA certification in 2004, served in senior management posts in (the US,) Brisbane (Australia) and Bangalore Deniz Aydın is also a member of TÜRMOB the Russian Federation, the UK, United International Airport (India.) He served as (Union of Chambers of Certified Public States and Iraq at Tepe Group and its privatization advisor to the governments Accountants and Sworn-in Certified Public subsidiaries for 10 years. Before joining of Jordan (Amman,) Saudi Arabia (Hajj Accountants of Turkey) Istanbul SMMM TAV Airports as Business Development Terminal,) Madagascar (Antananarivo,) (Chamber of Independent Accountants and Group Manager in 2005, he served as Nigeria (Abuja) and Panama (Howard Financial Advisors.) the Business Development Coordinator at Air Force Base) during his tenure at the Tepe İnşaat (Tepe Construction) and has IFC. Dr. Youssef led the incorporation also served as a member of the American and certification process of two airport Management Association, Foreign Economic companies in Abu Dhabi (Abu Dhabi Relations Board (DEİK)’s Turkish American and Al Ain.) Dr. Waleed Youssef is also a Business Council International Contracting member of the World Economics Standing Committee, Central Anatolia Exporters Committee at Airports Council International Union’s Board of Directors, Global Ethics, (ACI) and a member of the Committee on Tunisia Businessmen’s Association, and Airfield and Airspace Capacity and Delay Tunisian American Chamber of Commerce. at the US National Academy of Sciences’ Transportation Research Board. 42 TAV Airports 2011 Annual Report

Senior Management

Ersagun Yücel, Member of the Board of Banu Pektaş*, General Counsel (69) Kemal Ünlü, General Manager, TAV Directors and General Secretary (39) Banu Pektaş was appointed General Istanbul (52) Ersagun Yücel was appointed General Counsel of TAV Airports in 2007. Ms. Pektaş Kemal Ünlü was appointed General Secretary of TAV Airports Holding in graduated from Istanbul University, Faculty Manager of TAV Istanbul in 2005. Mr. 2002 and as a member of the Board of Law in 1964. She worked as a freelance Ünlü graduated from Gazi University, of Directors of TAV Airports Holding in attorney between 1965 and 1987 while Department of Electrical Engineering in 2009. Mr. Yücel graduated from California serving as a lecturer at Istanbul University, 1983. Mr. Ünlü joined TAV Airports in 2004 Newport University, Department of School of Foreign Languages during the after leaving his post as the Principal in Business Administration in 1999 and is same period. Ms. Pektaş was the General Charge of Atatürk Airport at the Turkish currently pursuing his MBA degree at the Counsel of Coca-Cola Turkey between State Airports Authority (DHMİ.) He held same university. He also graduated from 1987 and 2006 with her responsibilities various positions at the Turkish State Yıldız Technical University, Department of increasing to cover 36 countries in the Airports Authority’s Esenboğa, Antalya and Serigraphy in 1994 and attended the New Eurasia and the Middle East Group of the Atatürk Airports between 1978 and 2004. York University Advertising and Marketing company over these years. Program in 1997. Beginning his career as a graphic artist in MR Com Graphics *Ms. Banu Pektaş resigned from her in 1993, Mr. Yücel worked as manager position as the General Counsel in TAV in Rifle Jeans and Calvin Klein Jeans Airports Holding’s Legal Coordination between 1995 and 1998. Mr. Yücel joined Department as of April 1, 2012; she was TAV Airports in 1999 as the Assistant to replaced by Ms. Ceyda Akbal. the President & CEO. In addition to his responsibilities as the General Secretary of TAV Holding, he also oversees the activities of the Corporate Communication, External Relations, Management Systems, and Board of Directors Administrative Affairs Departments.

*Ms. Banu Pektaş resigned from her position as the General Counsel in TAV Airports Holding’s Legal Coordination Department as of April 1, 2012; she was replaced by Ms. Ceyda Akbal. Sustainability Corporate Governance 43

Nuray Demirer, General Manager, TAV Fırat Erkan Balcı, General Manager, TAV K. Mete ERKAL, General Manager, TAV Esenboğa (45) Izmir (38) Georgia (46) Nuray Demirer was appointed General Fırat Erkan Balcı was appointed General K. Mete Erkal was appointed General Manager of TAV Esenboğa in 2008. Manager of TAV Izmir in 2009. Mr. Balcı Manager of TAV Georgia in June 2010. Ms. Demirer graduated from Istanbul was appointed as Assistant General Mr. Erkal graduated from Southern Illinois Technical University, Department of Manager of TAV Izmir in 2006 and served University, Department of Finance in 1993. Architecture in 1988. She joined TAV as the Acting General Manager from March He served as the Operations Coordination Airports for the construction of the 2008 until January 2009. He graduated Manager of TAV Airports Holding from Atatürk Airport International Terminal in from Middle East Technical University, 2008 to 2009, and as Assistant General 1999. Ms. Demirer served as the Project Department of Civil Engineering in 1996. Manager (Acting Manager) of TAV Georgia Manager of TAV Esenboğa Domestic Mr. Balcı served as the Assistant General between September 2009 and June 2010. and International Terminal. Ms. Demirer Manager of TAV Izmir between 2006 and Mr. Erkal was a Management Trainee at the served as the Assistant General Manager 2008. Before joining TAV Airports, Mr. Balcı Blinder&Robinson Co., in St. Louis, United of TAV Esenboğa between 2006 and worked as the Operations Manager at the States and served as the New York and 2008. Beginning her career at Atölye T Antalya Airport International Terminal I, Paris Lines Manager at Turkish Airlines prior Architecture in 1988, she served in both Information Technology Project Manager at to 1995. Mr. Erkal served as the Assistant the construction and the operation of Fraport, and Information Technology Chief General Manager of Sales and Services in Eczacıbaşı Pharmaceuticals Factory, as well at the Bayındır Antalya Airport. the privatization of Havaş Yer Hizmetleri as site manager, construction manager A.Ş. (Havaş Ground Handling) and in its and project manager at Tepe İnşaat (Tepe partnership with Swissport from 1995 until Construction.) 1999, and as the Commerce Director at Çelebi Hava Servisi A.Ş. (Çelebi Air Services) between 1999 and 2002. Working as the Marketing Director of ATA Holding for three years prior to joining TAV Airports, he is also a member of the American Marketing Association. 44 TAV Airports 2011 Annual Report

Senior Management

Zoran Krstevski, General Manager, TAV Eda Bildiricioğlu, General Manager, TAV Binnur Güleryüz Onaran, General Macedonia (50) Operations Services (42) Manager, TAV IT (42) Zoran Krstevski was appointed General Eda Bildiricioğlu was appointed General Binnur Güleryüz Onaran was appointed Manager of TAV Macedonia in January Manager of TAV Operations Services in General Manager of TAV IT in July 2010. 2011. Mr. Krstevski graduated from the 2006. Ms. Bildiricioğlu graduated from After she was appointed as the Assistant University St. “Cyril & Methodius,” Faculty the Eastern Mediterranean University, General Manager of System Support and of Law in 1985. He served as the General Department of Business Administration Application at TAV IT in 2006, Ms. Onaran Director of the Civil Aviation Agency of and Economics in 1991. She served as served as the Acting General Manager the Republic of Macedonia from 2008 to marketing manager in various companies from October 2009 until July 2010. After 2010 before joining TAV Airports. During his before joining TAV Airports in 1997 as the completing the Computer Programmer/ tenure he was a member of the Provisional Commercial Affairs Manager. Analyst Program at Conestoga College from Council of the Eurocontrol Management 1990 to 1993, she administered trainings Board, member of the Enlarged Committee, on computer programming and network member of ECAC, and EASA Management administration as the Training Manager at Board Observer. Zoran Krstevski worked Vancouver, CDI College between 1993 and as the General Director of JSC Airports 1995. Binnur Güleryüz Onaran worked as Macedonia between 2006 and 2008, manager in the Information Technology where he was also a member of the ACI and Organization Department of Mercedes Policy Committee. Mr. Krstevski was a Benz Turkey from 1995 to 2002. After member of Parliament of the Republic of completing the Executive Training program Macedonia from 2002 to 2006 and served at Daimler Chrysler University, Ms. as the Deputy Prime Minister for European Onaran was appointed the Manager of Affairs from 2000 until 2002. Working as Organization & Information Technology the Vice President and Assistant General Administration of Mercedes Benz Turkey in Director of JSC Makpetrol earlier in his 2002. Working as Information Technology career, he was the General Director of Director of TÜVTURK before joining TAV PEAS Airport Services for three years, and Airports, she managed various network, an Aviation Law Senior Specialist between telecommunication, software, ERP and 1986 and 1990. infrastructure system projects, and served in organizational structuring, process optimization and system development initiatives. Sustainability Corporate Governance 45

Turgay Şahan, General Manager, TAV Müjdat Yücel, General Manager, Havaş Ersan Arcan, General Manager, ATÜ (44) Security (43) (60) Ersan Arcan was appointed General Turgay Şahan was appointed General Müjdat Yücel was appointed General Manager of ATÜ in August 2007. Mr. Arcan Manager of TAV Security in April 2011. Manager of Havaş in 2005 after joining assumed the responsibility of the financial Joining TAV Security in 2006 as the Havaş as Assistant General Manager and operational management of ATÜ’s Esenboğa Airport Security Manager, Mr. in 2004. Mr. Yücel worked for Turkish Duty Free operations. He has more than 19 Şahan served as the Assistant General Airlines from 1972 to 2003. During his years of experience in the retail sector as Manager from January 2010 to April 2011 tenure at Turkish Airlines, Yücel served in an entrepreneur and a professional. Ersan and the Esenboğa Airport Private Security Singapore, Iran, United States, and the UK Arcan graduated from Warnborough College Coordinator between 2007 and 2010. He internationally, as well as serving as the Oxford in the UK (BBA) in 1989 and from graduated from the Police Academy in Head of Ground Operations for two years Schiller University in Heidelberg, Germany, 1989. Turgay Şahan attended the Scotland and as Assistant General Manager of Department of Business Administration Yard Police Department Occupational Ground Operations for four years in Turkey. in 1991. Before joining ATÜ, Mr. Arcan Collaboration Program between 1989 and worked as Northern Europe brand and sales 1990 and the Ankara University European representative at A.T.A s.a.r.l in Switzerland. Union Basic Training program between He served as Operations Manager between 1999 and 2000. Mr. Şahan served in 1999 and 2005, and as Assistant General various capacities in different units of Manager responsible for financial and Izmir, Tunceli, Ankara Police Departments. operational management of Istanbul, He executed ECAC duties in Haiti, Bosnia, Ankara and Izmir operations from 2005 Kosovo, United Nations Peacekeeping until 2007 at ATÜ. Force and Belgium. Turgay Şahan also served as the Airports Security Branch Manager at Security General Directorate of National Police Protection Department and the Chairman of Training, Inspection and Investigation Experts Committee (EADUK.) 46 TAV Airports 2011 Annual Report

Senior Management

Sadettin Cesur, General Manager, BTA (39) Sadettin Cesur was appointed General Manager of BTA in 2000. Mr. Cesur graduated from Sheffield Hallam University in London, Department of Tourism, Hospitality & Events Management. He attended the Managing Successfully program in the US. Before joining TAV Airports, Sadettin Cesur also worked for five-star hotels including Çınar Hotel, Parksa Hilton, Conrad Istanbul and the Four Seasons Hotel as well as at Bilintur Catering Center. In addition to his current duty, Mr. Cesur was also appointed Chief Executive of BTA Airports Operations, Cakes & Bakes Operation, and BTA Denizyolları Yiyecek ve İçecek Hizmetleri A.Ş. (BTA Sea Lines Food and Beverage Services) as of July 2011. Sustainability Corporate Governance 47

Committees

Audit Committee Corporate Governance Committee Chairman of the Audit Committee Chairman of the Corporate Governance Committee Ali Haydar Kurtdarcan Vice Chairman of the Board of Directors Mehmet Cem Kozlu TAV Airports Holding Member of the Board of Directors (Independent) Members of the Audit Committee TAV Airports Holding Önder Sezgi Member of the Board of Directors Members of the Corporate Governance TAV Airports Holding Committee Murat Uluğ Hüseyin Kadri Samsunlu Finance Director (CFO) Executive Vice President of Financial Affairs TAV Airports Holding Akfen Holding Yiğit Oğuz Duman Pierre de Champfleury Human Resources Director Member of the Board of Directors TAV Airports Holding (Independent) TAV Airports Holding

TAV AIRPORTS HOLDING Istanbul Atatürk Airport International Terminal (Gate A - Next to VIP) 34149 Yeşilköy, Istanbul, Turkey Phone: +90 212 463 30 00 Fax: +90 212 465 50 50 www.tavairports.com http://ir.tav.aero

CONTENTS

01 The Agenda of 2011 Ordinary General Shareholders’ Meeting 02 Auditors’ Report 03 Statement Of Responsibility 04 Consolidated Financial Statements

Financial Information 1

The Agenda of 2011 Ordinary General Shareholders’ Meeting of TAV HAVALİMANLARI HOLDİNG ANONİM ŞİRKETİ to be held on 11th May 2012 Friday

1. Opening and forming of the Presiding Board 2. Granting authorization to the Presiding Board on signing of the Ordinary General Shareholders’ Meeting Minutes. 3. Review, discussion, and approval of the Annual Report of the Board of Directors and the Auditors’ Report of the fiscal year 2011. 4. Review, discussion, and approval of the Balance Sheet and the Profit and Loss Statements for the fiscal year 2011. 5. Accepting, accepting by amendment or declining the proposition of distribution of the consolidated net profit of 2011 and the date of profit distribution. 6. Releasing the Members of the Board and the Auditors for their activities for the fiscal year 2011. 7. Submitting the election of Board Members, appointment of Independent Board Members for the approval of the General Assembly. 8. Nomination of the Independent Audit Company for the approval of the General Assembly. 9. Amendment of the clauses no. 4., 13.1., 13.2., 13.4., 21.2., 22., 23., 27.2., 28., 29., 30.2., 34A, 34A.1., 34A.2., 34B of the Articles of Association (AoA) as per Attachment/1 to comply with the Corporate Governance Principles of the Capital Markets Board (CMB) and resolutions of the Capital Market Legislation regarding guarantees, securities, and pledges and enable the Company buy back its shares as approved by the CMB Presidency and permitted by Ministry of Customs and Trade. 10. Submitting the Remuneration Policy drafted as per the Capital Markets Board regulations for the information of the General Assembly. 11. Submitting the Disclosure Policy drafted as per the Capital Markets Board regulations for the information of the General Assembly. 12. Submitting the Share Buy Back Program of the Company for the approval of the General Assembly. 13. Giving information to the General Assembly regarding the transactions of the “Related Parties” within the framework of the provision of Article 5 of the Communique of the Capital Markets Board Series: IV No. 41. 14. Giving information to the shareholders about the donations made by the Company during 2011. 15. Giving information regarding pledges, collaterals, and mortgages to the shareholders as per the decision no. 28/780 of the Capital Markets Board dated 09/09/2009. 16. Granting authorization to the Chairman and the Members of the Board pursuant to Article 334 and 335 of the Turkish Commercial Code. 17. Wishes and requests. 18. Closing. 2 TAV Airports 2011 Annual Report

AUDITORS’ REPORT

To the Ordinary General Assembly of TAV Airports Holding Co.:

Title : TAV Airports Holding Co. Headquarters : İstanbul Capital : TL 363,281,250 (as of December 31, 2011) : Airports, Investment and Operation Activities regarding Airport Terminal Area of Operation Construction and Operation, participation in companies engaged in such activities and provision of management and financing services.

Name and Duration of Duty of the Auditors, : Murat AŞKAR, Meral ALTINOK and Belgin BERKER. Our duration of duty is two Partnership or Duties in the Company years. We are not partners of the Company. We have no duties in the Company.

Number of Board of Directors Meetings : The Auditors held six Audit Board Meetings. Attended and Audit Board Meetings held

:Dates of such Examinations, and Conclusion Reached : We performed The Scope of the Examination Performed on examinations and audits during the first weeks of the 3rd, 6th, 9th and 12th the Company Accounts, Books and Documents, months, in accordance with the Tax Laws and the Turkish Commercial Code; we have not encountered any issue to critique.

Number and Conclusions of the Counts Performed in the Company’s : Inventory counts were performed and count reports were created during the audit; Treasury Pursuant to Article 353, Section 1.3 of the Turkish as a result of the counts, we determined that actual inventories agree with the Commercial Code records.

Number and Dates of the Audits Pursuant to Article 353, Section 1.4 : As a result of the examinations we performed on the first day of each month, we of the Turkish Commercial Code determined that securities present agree with the records.

Complaints and Frauds Submitted and : No complaint was submitted to the auditors Transactions Performed in Response

We have audited the transactions and accounts of TAV Airports Holding Co. for the fiscal year from January 1, 2011, to December 31, 2011, in accordance with the Turkish Commercial Code, the Company’s Articles of Association, other laws and applicable legislation and generally accepted Accounting Principles and Standards.

In our opinion, the balance-sheet prepared as of December 31, 2011 factually and accurately reflects the Company’s true financial position as of this date; and the income statement prepared for the period from January 1, 2011, to December 31, 2011 factually and accurately reflects the Company’s operations results for this period; the profit allocation proposal is in accord with the laws and the Company’s Articles of Association.

We recommend the approval of the balance-sheet and the income statement and discharge of the Board of Directors.

BOARD OF STATUTORY AUDITORS

Murat AŞKAR Meral ALTINOK Belgin BERKER Financial Information 3

STATEMENT OF RESPONSIBILITY

STATEMENT OF RESPONSIBILITY PURSUANT TO ARTICLE 9 OF SECTION THREE OF THE COMMUNIQUÉ SERIAL: XI NO: 29 OF THE CAPITAL MARKETS BOARD

Approved by the Board of Directors and the Audit Committee, the consolidated financial statements of the Company regarding the period of January-December 2011, which were prepared in accordance with the mandatory format stipulated by the Capital Markets Board (CMB) on December 20, 2004, to comply with the CMB resolution 11/367, dated March 17, 2005 and the International Financial Reporting Standards stipulated by the Communiqué Serial: XI No: 29 of the CMB on “Principles of Financial Reporting in Capital Markets” are enclosed herewith.

We hereby declare that; a) We have reviewed the consolidated financial statements dated December 31, 2011, b) To the best of our knowledge, the consolidated financial statements do not contain any untrue statement or any omission of material facts that may result in misleading conclusion as of the date of issuance, c) Prepared in accordance with the financial reporting standards in effect, the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and the annual report includes a fair review of the development and performance of the business and the financial position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties faced.

With Kind Regards,

Sani ŞENER Deniz AYDIN CEO Financial Affairs Director TAV Havalimanları Holding A.Ş. and its Subsidiaries

Consolidated Financial Statements As at and for the Year Ended 31 December 2011

24 February 2012 This report contains the “Independent Auditors’ Report” comprising 1 page and “Consolidated Financial Statements and their explanatory notes” comprising 103 pages

Independent Auditors’ Report

To the Board of Directors of TAV Havalimanları Holding Anonim Şirketi

We have audited the accompanying consolidated financial statements of TAV Havalimanları Holding Anonim Şirketi and its subsidiaries (“the Group”), which comprise the consolidated statement of financial position as at 31 December 2011, the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2011, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

İstanbul, Turkey 24 February 2012

İsmail Önder Ünal, SMMM Sorumlu Ortak, Başdenetçi 6 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Consolidated Statement of Financial Position As at 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

31 December 31 December Notes 2011 2010 ASSETS Property and equipment 17 178,963,452 169,534,780 Intangible assets 18 35,918,255 37,877,865 Airport operation right 19 766,392,280 734,271,656 Other investments 20 24,238 24,238 Goodwill 18 152,128,602 154,019,707 Prepaid rent expenses 21 65,472,265 82,283,714 Trade receivables 25 94,299,205 113,810,957 Other non-current assets 24 556,510 601,680 Deferred tax assets 22 81,718,487 79,492,563 Total non-current assets 1,375,473,294 1,371,917,160

Inventories 23 18,676,471 13,966,730 Prepaid rent expenses 21 123,449,770 122,592,025 Trade receivables 25 73,823,017 77,681,614 Due from related parties 40 7,944,503 5,124,375 Derivative financial instruments 36 4,206,768 - Other receivables and current assets 24 45,582,640 33,305,357 Cash and cash equivalents 26 76,346,757 32,442,373 Restricted bank balances 27 355,745,501 382,444,797 Total current assets 705,775,427 667,557,271

TOTAL ASSETS 2,081,248,721 2,039,474,431

The accompanying notes form an integral part of these consolidated financial statements. Financial Information 7

TAV Havalimanları Holding A.Ş. and its Subsidiaries Consolidated Statement of Financial Position As at 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

31 December 31 December Notes 2011 2010 EQUITY Share capital 28 162,383,978 162,383,978 Share premium 220,286,470 220,286,470 Legal reserves 36,349,627 21,655,917 Other reserves 8,282,721 14,622,932 Revaluation surplus 1,641,111 1,982,718 Purchase of shares of entities under common control 40,063,860 40,063,860 Cash flow hedge reserve (67,855,317) (61,729,366) Translation reserves (1,481,436) 849,301 Retained earnings 75,542,281 37,209,526 Total equity attributable to equity holders of the Company 475,213,295 437,325,336

Non-controlling interests 87,210,276 103,060,117

Total Equity 562,423,571 540,385,453

LIABILITIES Loans and borrowings 30 1,021,043,251 1,008,094,394 Reserve for employee severance indemnity 31 10,258,618 7,451,972 Due to related parties 40 7,718,535 14,130,564 Deferred income 33 19,926,008 21,688,366 Other payables 32 15,943,257 - Deferred tax liabilities 22 6,077,185 6,281,310 Total non-current liabilities 1,080,966,854 1,057,646,606

Bank overdraft 26 - 2,865,313 Loans and borrowings 30 203,251,209 225,363,062 Trade payables 35 40,404,338 34,158,389 Due to related parties 40 10,422,167 14,021,181 Derivative financial instruments 36 126,736,082 104,968,109 Current tax liabilities 16 11,782,208 9,920,571 Other payables 32 28,535,999 38,074,621 Provisions 34 5,613,238 4,832,799 Deferred income 33 11,113,055 7,238,327 Total current liabilities 437,858,296 441,442,372

Total Liabilities 1,518,825,150 1,499,088,978

TOTAL EQUITY AND LIABILITIES 2,081,248,721 2,039,474,431

The accompanying notes form an integral part of these consolidated financial statements. 8 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Consolidated Statement of Comprehensive Income For the Year Ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Notes 2011 2010 Construction revenue 8 64,737,429 41,627,967 Operating revenue 9 811,863,601 713,278,533 Other operating income 10 35,849,793 39,627,856 Construction expenditure 8 (64,737,429) (41,410,646) Cost of catering inventory sold (17,697,061) (16,466,156) Cost of duty free inventory sold (77,331,969) (64,892,061) Cost of services rendered (59,707,623) (42,097,025) Personnel expenses 11 (236,147,580) (219,294,927) Concession and rent expenses 12 (129,439,623) (129,638,846) Depreciation and amortisation expenses 14 (65,141,068) (59,544,585) Other operating expenses 13 (103,633,872) (100,439,595) Operating profit 158,614,598 120,750,515

Finance income 29,103,554 31,885,484 Finance costs (96,113,454) (89,169,954) Net finance costs 15 (67,009,900) (57,284,470)

Profit before tax 91,604,698 63,466,045

Tax expense 16 (39,762,744) (11,826,115) Profit for the year 51,841,954 51,639,930

Other comprehensive income Revaluation of property and equipment 68,320 68,320 Effective portion of changes in fair value of cash flow hedges (16,117,193) (13,594,103) Foreign currency translation differences for foreign operations (3,267,058) 3,237,686 Tax on cash flow hedge reserves 6,276,998 4,868,363 Other comprehensive income for the year, net of tax (13,038,933) (5,419,734)

Total comprehensive income for the year 38,803,021 46,220,196

Profit attributable to: Owners of the Company 52,761,556 49,780,525 Non-controlling interest (919,602) 1,859,405 Profit for the year 51,841,954 51,639,930

Total comprehensive income attributable to: Owners of the Company 44,373,188 50,801,954 Non-controlling interest (5,570,167) (4,581,758) Total comprehensive income for the year 38,803,021 46,220,196

Weighted average number of shares outstanding 363,281,250 363,281,250

Basic earnings per share 29 0.15 0.14

The accompanying notes form an integral part of these consolidated financial statements. Financial Information 9 - - Total Total

Equity v 68,320 68,320 202,808 881,149 (640,545) 3,237,686 51,639,930 81,603,979 (8,725,740) (5,419,734) 51,841,954 (9,840,195) (3,267,058) (6,448,860) (2,015,295) (9,181,897) 46,220,196 81,166,242 38,803,021 (13,038,933) 412,999,015 540,385,453 540,385,453 562,423,571 (16,764,903) - - Non- 331,868 202,808 542,788 881,149 145,018 Interests (640,545) (919,602) (936,321) 1,859,405 Controlling 66,981,047 (6,773,031) (6,441,163) (3,714,244) (4,650,565) (6,448,860) (2,015,295) (2,841,686) 40,555,777 66,543,310 (4,581,758) 87,210,276 (5,570,167) 103,060,117 103,060,117 (10,424,692) - - - - - Total 68,320 68,320 (542,788) (145,018) 2,905,818 1,021,429 49,780,525 14,622,932 (1,952,709) 52,761,556 (6,125,951) (2,330,737) (8,388,368) (6,340,211) 50,801,954 14,622,932 44,373,188 (6,340,211) 372,443,238 437,325,336 437,325,336 475,213,295 ------409,927 409,927 409,927 409,927 Earnings Retained 49,780,525 52,761,556 (3,812,910) 50,190,452 37,209,526 37,209,526 (9,168,016) 53,171,483 75,542,281 (14,838,728) ------849,301 849,301 Reserves 2,905,818 2,905,818 2,905,818 (2,330,737) (2,330,737) Translation Translation (2,056,517) (2,330,737) (1,481,436) ------Cash Flow Cash Flow (1,952,709) (1,952,709) (6,125,951) (6,125,951) (1,952,709) (6,125,951) (59,776,657) (61,729,366) (61,729,366) (67,855,317) Hedge Reserve ------Control Common Shares of 40,063,860 40,063,860 40,063,860 Purchase of 40,063,860 Entities Under ------Attributable to owners of the Company Attributable to owners Surplus (341,607) (341,607) (341,607) (341,607) (341,607) (341,607) 2,324,325 1,982,718 1,982,718 1,641,111 Revaluation ------Other Reserves 8,282,721 14,622,932 (6,340,211) 14,622,932 14,622,932 14,622,932 (6,340,211) ------Legal Reserves 3,270,122 14,693,710 18,385,795 21,655,917 21,655,917 36,349,627 ------Share Premium 220,286,470 220,286,470 220,286,470 220,286,470 ------Share Capital 162,383,978 162,383,978 162,383,978 162,383,978 The accompanying notes form an integral part of these consolidated financial statements. The accompanying notes form 16 15 15 16 15 15 Note Revaluation of property and equipment portion of changes in fair value cash hedges, net tax Effective operations foreign for Foreign currency translation differences Revaluation of intangible assets portion of changes in fair value cash hedges, net tax Effective operations foreign for Foreign currency translation differences Total other comprehensive income Total Transfers Profit for the year Profit for Other comprehensive income Total other comprehensive income Total Transactions with owners of the Company, recognized directly in equity of the Company, with owners Transactions of the Company and distributions to owners Contributions by Issue of share capital Dividend distributions Changes in ownership interests in subsidiaries Changes in ownership Sale of non-controlling interest Profit for the year Profit for Other comprehensive income Transactions with owners of the Company, recognized directly in equity of the Company, with owners Transactions of the Company and distributions to owners Contributions by Decrease in capital of subsidiary Dividend distributions Changes in ownership interests in subsidiaries Changes in ownership Purchase of non-controlling interest, net of change in group structure Effect TAV Havalimanları Holding A.Ş. and its Subsidiaries TAV Consolidated Statement of Changes in Equity Ended 31 December 2011 For the Year (Amounts expressed in Euro unless otherwise stated) Balance at 1 January 2010 Total comprehensive income for the year comprehensive income for Total Total comprehensive income for the year comprehensive income for Total Total transactions with owners of the Company transactions with owners Total Transfers Balance at 31 December 2010 Balance at 1 January 2011 Total comprehensive income for the year comprehensive income for Total Total comprehensive income for the year comprehensive income for Total Total transactions with owners of the Company transactions with owners Total Balance at 31 December 2011 10 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Consolidated Statement of Cash Flows For the Year Ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Notes 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES Profit for the year 51,841,954 51,639,930 Adjustments for: Amortisation of airport operation right 14-19 36,729,520 32,765,582 Depreciation of property and equipment 14-17 23,034,317 21,218,211 Amortisation of intangible assets 14-18 5,377,231 5,560,792 Concession and rent expenses 12 129,439,623 129,638,846 Provision for employment termination benefits 11 5,950,613 4,393,388 Provision for doubtful receivables 38 7,327,641 1,336,568 Other provisions (released) / set (102,926) 204,048 Discount on receivables and payables, net (30,542) (22,078) Impairment of property and equipment 17 - 6,638,910 Gain on sale of property and equipment 10 (1,844,005) (386,413) Provision for unused vacation 34 1,314,910 1,802,934 Provision for slow moving inventory (5,361) 53,749 Reversal of / (accrued) insurance income 752,350 (6,924,254) Interest income 15 (16,300,766) (14,619,447) Interest expense on financial liabilities 15 83,452,333 81,804,039 Tax expense 16 39,762,744 11,826,115 Unwinding of discount on concession receivable 15 (12,722,651) (10,242,300) Unrealised foreign exchange differences on statement of financial position items (6,499,680) 23,649,535 Cash flows from operating activities 347,477,305 340,338,155 Change in trade receivables (3,474,069) (16,948,645) Change in non-current trade receivables 32,234,227 30,888,845 Change in inventories (4,704,375) (2,617,149) Change in due from related parties (2,820,129) 5,358,004 Change in restricted bank balances 213,415,123 159,245,338 Change in other receivables and current assets 3,271,133 17,525,665 Change in trade payables (565,906) (7,513,802) Change in due to related parties (10,011,043) (3,216,358) Change in other payables and provisions 8,517,005 7,691,195 Change in other long term assets 45,170 8,328,918 Additions to prepaid rent expenses 21 (106,638,321) (97,461,768) Cash provided from operations 476,746,120 441,618,398 Income taxes paid (34,234,346) (24,797,818) Interest paid (85,025,198) (78,695,629) Retirement benefits paid 31 (1,989,595) (1,834,364) Net cash provided from operating activities 355,496,981 336,290,587

The accompanying notes form an integral part of these consolidated financial statements. Financial Information 11

TAV Havalimanları Holding A.Ş. and its Subsidiaries Consolidated Statement of Cash Flows For the Year Ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Notes 2011 2010 CASH FLOWS FROM INVESTING ACTIVITIES Interest received 15,424,151 14,509,566 Proceeds from sale of property, equipment and intangible assets 5,895,650 1,863,704 Proceeds from sales of non-controlling interest in subsidiaries - 141,668,682 Acquisition of property and equipment 17 (43,469,631) (79,841,910) Additions to airport operation right 19 (61,067,735) (38,015,639) Acquisition of non-controlling interest (9,181,897) - Acquisition of joint venture net of cash acquired - (3,241,766) Acquisition of intangible assets 18 (1,185,637) (1,046,598) Net cash (used in) / provided from investing activities (93,585,099) 35,896,039

CASH FLOWS FROM FINANCING ACTIVITIES New borrowings raised 179,456,890 140,991,003 Repayment of borrowings (191,350,629) (215,050,661) Change in restricted bank balances (202,139,978) (242,350,100) Non-controlling interest change (3,758,568) (59,633,892) Change in finance lease liabilities 2,650,100 1,803,095 Net cash used in financing activities (215,142,185) (374,240,555)

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 46,769,697 (2,053,929) CASH AND CASH EQUIVALENTS AT 1 JANUARY 26 29,577,060 31,630,989 CASH AND CASH EQUIVALENTS AT 31 DECEMBER 26 76,346,757 29,577,060

The accompanying notes form an integral part of these consolidated financial statements. 12 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

1. REPORTING ENTITY

TAV Havalimanları Holding A.Ş. (“TAV”, “TAV Holding” or “the Company”) was established in 1997 under the name of Tepe Akfen Vie Yatırım Yapım ve İşletme A.Ş. in Turkey for the purpose of reconstructing the İstanbul Atatürk Airport (International Lines Building) and operating it for a limited period of 66 months. On 7 August 2006, the Company’s name has been changed to TAV Havalimanları Holding A.Ş.. The address of the Company’s registered office is İstanbul Atatürk Havalimanı Dış Hatlar Terminali 34149 Yeşilköy, İstanbul, Turkey.

The Company is listed in İstanbul Stock Exchange since 23 February 2007 and the Company’s shares are traded as “TAVHL”.

The immediate parents and ultimate controlling parties of TAV and its subsidiaries are Tepe Group and Akfen Group. As explained in Note 3, Significant accounting policies, in years 2005, 2006 and 2007, the ultimate shareholders of the Company transferred their shares in certain companies and joint ventures to the Company. As a result of these share transfers, the Company became the parent company of these subsidiaries.

TAV, its subsidiaries and its joint ventures are collectively referred to as “the Group” in this report. The Company’s subsidiaries as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010

Place of Ownership Voting power Ownership Voting power Name of Subsidiary Principal Activity operation interest % held % interest % held %

TAV İstanbul Terminal İşletmeciliği A.Ş. (“TAV İstanbul”) İstanbul Airport Terminal Services Turkey 100.00 100.00 100.00 100.00

TAV Esenboğa Yatırım Yapımve İşletme A.Ş. (“TAV Esenboğa”) Ankara Airport Terminal Services Turkey 100.00 100.00 100.00 100.00

TAV İzmir Terminal İşletmeciliği A.Ş. (“TAV İzmir”) İzmir Airport Terminal Services Turkey 100.00 100.00 100.00 100.00

TAV Ege Terminal Yatırım Yapım ve İşletme A.Ş.(“TAV Ege”) İzmir Airport Terminal Services Turkey 100.00 100.00 - -

TAV Tunisie SA (“ TAV Tunisia”) Airport Operator Tunisia 67.00 67.00 67.00 67.00

TAV Urban Georgia LLC (“TAV Tbilisi”) Airport Operator Georgia 76.00 76.00 66.00 66.00

Airport Management Service TAV Batumi Operations LLC (“TAV Batumi”) Provider Georgia 76.00 100.00 60.00 100.00

Batumi Airport LLC Airport Operator Georgia - 100.00 - 100.00

TAV Macedonia Dooel Petrovec (“TAV Macedonia”) Airport Operator Macedonia 100.00 100.00 100.00 100.00

TAV Gazipaşa Yapım, Yatırım ve İşletme A.Ş. (“TAV Gazipaşa”) Airport Operator Turkey 100.00 100.00 100.00 100.00

SIA TAV Latvia (“TAV Latvia”) Commercial Area Operator Latvia 100.00 100.00 100.00 100.00

HAVAŞ Havaalanları Yer Hizmetleri A.Ş. (“HAVAŞ”) Ground Handling Services Turkey 65.00 65.00 65.00 65.00

BTA Havalimanları Yiyecek ve

İçecek Hizmetleri A.Ş. (“BTA”) Food and Beverage Services Turkey 66.66 66.66 66.66 66.66

BTA Georgia LLC (“BTA Georgia”) Food and Beverage Services Georgia 66.66 66.66 66.66 66.66

BTA Tunisie SARL (“BTA Tunisia”) Food and Beverage Services Tunisia 66.66 66.66 66.66 66.66

BTA Macedonia Dooel Petrovec

(“BTA Macedonia”) Food and Beverage Services Macedonia 66.66 66.66 66.66 66.66

BTA Unlu Mamülleri Pasta Üretim Turizm Gıda Yiyecek İçecek Hizmetleri San. ve Tic. A.Ş. (“Cakes & Bakes”) Food and Beverage Services Turkey 66.66 66.66 66.66 66.66

Financial Information 13

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

31 December 2011 31 December 2010 Place of Ownership Voting power Ownership Voting power Name of Subsidiary Principal Activity operation interest % held % interest % held % Operations & Maintenance (“O&M”), TAV İşletme Hizmetleri A.Ş. (“TAV İşletme”) Lounge Services Turkey 100.00 100.00 100.00 100.00 TAV Georgia Operation Services LLC (“TAV İşletme Georgia”) Lounge Services Georgia 99.99 99.99 99.99 99.99 TAV Tunisie Operation Services SARL(“TAV İşletme Tunisia”) Lounge Services Tunisia 99.99 99.99 99.99 99.99 TAV Tunisie Operation Services Plus SARL (“TAV İşletme Tunisia Plus”) Lounge Services Tunisia 99.99 99.99 99.99 99.99 TAV Macedonia Operation Services Dooel (“TAV İşletme Macedonia”) Lounge Services Macedonia 99.99 99.99 - - TAV Bilişim Hizmetleri A.Ş. (“TAV Bilişim”) Software and System Services Turkey 98.53 98.53 98.53 98.53 TAV Özel Güvenlik Hizmetleri A.Ş. (“TAV Güvenlik”) Security Services Turkey 100.00 100.00 66.67 66.67 North Hub Services SIA (“HAVAŞ Europe”) (*) Ground Handling Latvia 66.67 66.67 50.00 50.00 North Hub Services Finland OY (“HAVAŞ Europe Helsinki”) Ground Handling Finland 66.67 66.67 - - North Hub Services Stockholm Ab (“HAVAŞ Europe Stockholm”) Ground Handling Sweden 66.67 66.67 - -

(*) Proportionately consolidated as joint venture as at 31 December 2010. See Note 3(a). 14 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

The entities that are jointly controlled by the Company as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010 Voting Voting Place of Ownership power Ownership power Name of joint venture Principal activity operation interest % held % interest % held % ATÜ Turizm İşletmeciliği A.Ş. (“ATÜ”) Duty Free Services Turkey 49.98 50.00 49.98 50.00 ATÜ Georgia Operation Services LLC (“ATÜ Georgia”) Duty Free Services Georgia 49.98 50.00 49.98 50.00 ATÜ Tunisie SARL (“ATÜ Tunisia”) Duty Free Services Tunisia 49.98 50.00 49.98 50.00 ATÜ Macedonia Dooel (“ATÜ Macedonia“) Duty Free Services Macedonia 49.98 50.00 49.98 50.00 AS Riga Airport Commercial Development (“ATÜ Latvia”) Duty Free Services Latvia 49.98 50.00 49.98 50.00 TAV Gözen Havacılık İşletme ve Ticaret A.Ş. Operating Special (“TAV Gözen”) Hangar Turkey 32.40 32.40 32.40 32.40 Cyprus Airport Services Ltd. (“CAS”) Ground Handling KKTC 50.00 50.00 50.00 50.00 TGS Yer Hizmetleri A.Ş. (“TGS”) Ground Handling Turkey 50.00 50.00 50.00 50.00 BTA Denizyolları ve Limanları Yiyecek ve İçecek Food and Beverage Hizmetleri Tic. A.Ş. (“BTA Denizyolları”) Services Turkey 50.00 50.00 - -

On 12 April 2010, HAVAŞ signed the agreement regarding the purchase of 50 % shares of HAVAŞ Europe. For the acquisition of HAVAŞ Europe, see note 7. On 21 December 2011, an additional 16.6 7 % shares of HAVAŞ Europe was purchased by HAVAŞ and HAVAŞ Europe is consolidated with the non-controlling interest’s ownership reflected as a non-controlling interest as at 31 December 2011.

BTA and TASS Denizcilik ve Ulaş. Hizm. Tur. San. ve Tic. A.Ş. formed a joint venture under the name of BTA Denizyolları on 8 August 2011. BTA has 50.00 % ownership in BTA Denizyolları as at 31 December 2011. BTA Denizyolları is engaged in sales of food and beverage in ferries and ferry piers.

TAV İşletme formed a subsidiary under the name of TAV İşletme Macedonia on 10 August 2011. TAV İşletme has 99.99 % ownership in TAV İşletme Macedonia as at 31 December 2011. TAV İşletme Macedonia is engaged in lounge services in terminals.

TAV Holding formed a subsidiary under the name of TAV Ege on 8 December 2011. TAV Holding has 100.00 % ownership in TAV Ege as at 31 December 2011. TAV Ege is engaged in construction and operation of İzmir Adnan Menderes International Airport’s domestic terminal starting from 2012 and operation of İzmir Adnan Menderes International Airport’s international terminal starting from 2015. Financial Information 15

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Description of Operations

The Group’s core businesses are related to the construction of terminal buildings, management and operation of terminals or airports. TAV Esenboğa, TAV İzmir and TAV Gazipaşa enter into Build – Operate – Transfer (“BOT”) Agreements with Devlet Hava Meydanları İşletmesi Genel Müdürlüğü (General Directorate of State Airports Authority) (“DHMİ”), TAV Tbilisi with JSC Tbilisi International Airport (“JSC”), TAV Batumi with Georgian Ministry of Economic Development (“GMED”), TAV Tunisia with Tunisian Airport Authority (Office De L’Aviation Civil Et Des Aeroports) (“OACA”) and TAV Macedonia with Macedonian Ministry of Transportation and Communication (“MOTC”). Under these agreements, the Group agrees to build or renovate or manage an airport or terminal within a specified period of time and in exchange receives the right to operate the airport and terminal for a preestablished period of time. At the end of the contracts, the Group will transfer the ownership of the terminal buildings or airports back to the related public authority, DHMİ, JSC, GMED, OACA or MOTC accordingly. Group also signs separate contracts related with the airport operations.

BOT Agreements

The airport terminals operated by the Group are as follows:

İstanbul Atatürk International Airport

A BOT agreement was executed between TAV and DHMİ regulating the reconstruction, investment and operations of Atatürk International Airport International Lines Building (referred to as “Atatürk International Airport Terminal” or “AIAT”) in year 1998. TAV was required to complete the construction by August 2000 and then had the right to operate the facilities of the International Lines Building for 3 years, 8 months and 20 days. TAV completed the reconstruction of the International Lines Building in January 2000 and started the operation seven months earlier, after completion of a significant portion of the construction. Construction of the remaining parts of the project was finalized in August 2000. DHMİ and the Undersecretariat of Treasury gave their acceptance of the project in August 2000 when the investment period was formally completed.

An addendum to the agreement was made in June 2000. Under the terms of the addendum, TAV committed to enlarge the International Lines Building by 30 % by year 2004. In return for extending the International Lines Building, the operation period of TAV was extended by 13 months 12 days (approximately 66 months in total) through June 2005. The contract expired in June 2005 and TAV transferred ADAT to DHMİ. On 3 June 2005, TAV İstanbul signed a rent agreement to operate AIAT and Atatürk Domestic Airport Terminal (referred to as “ADAT”) for 15.5 years until year 2021. The rent agreement requires TAV İstanbul to make annual rent payments totaling US Dollar (“USD”) 2,543,000,000 plus Value Added Tax (“VAT”) (18 %) over the life of the rent agreement, of which USD 584,890,000 plus VAT has been prepaid at the beginning of the rent period under the terms of the rent agreement. In addition, TAV İstanbul is required to maintain the facilities throughout the rent period.

An addendum has been signed on 4 November 2008, namely Atatürk Airport Development Project, covering installation of new passenger boarding bridges and construction of new commercial areas. Through this addendum TAV has undertaken EUR 36 million of investment in exchange of the operation right of newly created commercial areas.

Ankara Esenboğa International Airport

A BOT agreement was executed between TAV Esenboğa and DHMİ on 18 August 2004 regulating the reconstruction, investment and operations of the Ankara Esenboğa International Airport (international and domestic terminals) for the period until May 2023. According to the Agreement, TAV Esenboğa was required to complete the construction within 36 months after the agreement date and would then have the right to operate the facilities of the Ankara Esenboğa International Airport Terminal for a period of 15 years and 8 months. TAV Esenboğa is providing terminal, car park and passenger boarding services since the beginning of operations on 16 October 2006. 16 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

İzmir Adnan Menderes International Airport

A BOT agreement was executed between TAV İzmir and DHMİ on 20 May 2005 regulating the reconstruction, investment and operations of İzmir Adnan Menderes Airport International Terminal. According to the Agreement, TAV İzmir was required to complete the construction within 24 months after the agreement date and would then have the right to operate the facilities of İzmir Adnan Menderes Airport International Terminal for a period of 6 years, 7 months and 29 days. An addendum to the Agreement was signed on 21 August 2006. Under the terms of the addendum, in return for additional works, the operation period of TAV İzmir was extended by 11 months 17 days through January 2015. TAV İzmir has been providing terminal, car park and passenger boarding services since the beginning of operations on 13 September 2006.

A lease agreement was executed between TAV Ege and DHMİ with an effective date of 16 December 2011 regulating the operation of the domestic terminal of İzmir Adnan Menderes Airport until 31 December 2032 and taking-over the international terminal on January 2015 and operating it until 31 December 2032. TAV Ege is obliged to construct a new domestic terminal with its ancillary buildings and to pay EUR 610,000,000 plus VAT to DHMI in yearly equal installments.

Tbilisi International Airport

A BOT agreement was executed between TAV Tbilisi and JSC on 6 September 2005 for the operations of Tblisi International Airport (both international, domestic terminals and parking-apron-taxi ways). The BOT agreement undertakes the design, engineering, financing, construction, testing, commissioning and maintenance of the new terminal for Tbilisi International Airport, for an initially agreed term of 10 years and 6 months from the commencement date of the new terminal operations. Subsequently, this period was extended by another 9.5 years until August 2027, in exchange for an obligation by TAV Tbilisi to invest an additional amount for the construction of the terminal (including construction of additional runways, extension of apron etc.) for Batumi airport. TAV Tbilisi is providing a wide range of airport activities such as terminal, car-park, cargo, ground handling, aircraft parking, apron and runway services – excluding air traffic control – in New Tbilisi International Airport since the beginning of operations on 8 February 2007.

Batumi International Airport

On 9 August 2007, TAV Batumi Operations signed an agreement with the Georgian Ministry of Economic Development to transfer the management rights of all shares of the Batumi Airport LLC to TAV Batumi for 20 years. According to such share management agreement, all airport operations (excluding only the air traffic control and aviation security services) of the Batumi International Airport will be carried out by TAV Batumi until August 2027. Georgian Government is responsible for providing air traffic control and security services.

Tunisia Monastir and Enfidha International Airports

A BOT agreement was executed between TAV Tunisia and OACA on 18 May 2007, for the operation of existing Monastir Habib Bourguiba Airport and new Enfidha Airport (International, domestic terminals and parking-apron-taxi-ways). Through the BOT agreement TAV Tunisia undertakes the operation of the existing Monastir Habib Bourguiba Airport and design, engineering, financing, construction, testing, commissioning and maintenance of the new Enfidha Airport. The operations of Monastir Habib Bourguiba Airport and Enfidha Airport were undertaken in January 2008 and December 2009, respectively. The concession periods of both airports will end in May 2047. The operations of the Monastir and Enfidha Airports cover a wide range of airport activities such as terminal, car-park, cargo, ground handling, aircraft parking, apron and runway services excluding air traffic control services.

Gazipaşa Airport

Relating to the transfer of the operational rights of Antalya-Gazipaşa Airport via a lease, the concession agreement between TAV Gazipaşa and DHMİ was signed on 4 January 2008. The operation period of Antalya-Gazipaşa Airport, which currently has 500,000 annual passenger capacity, is 25 years until May 2034, and the operation of the airport covers activities within airside and landside facilities and area of runway, apron and taxiway. TAV Gazipaşa shall make an annual rent payment of USD 50,000 plus VAT as a fixed amount, until the end of the operation period; as well as a share of 65 % of the net profit to DHMİ. Financial Information 17

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Macedonia Skopje, Ohrid and Shtip Airports

On 24 September 2008, the 20-year BOT for the construction and operation of Alexander the Great Airport in Skopje, renovation and operation of the St. Paul the Apostle Airport in Ohrid, and the construction and optional operation of the New Cargo Airport in Shtip airports was signed between TAV Macedonia and MOTC. The operation of the airports shall cover all airport activities with the exception of air traffic control, and modernisation activities are contemplated to include the technical infrastructure. The effective date of the concession contract for Alexander the Great Airport and St. Paul the Apostle Airport is 1 March 2010 and final date of Concession Agreement is 1 March 2030. The effective date for initiating construction of New Cargo Airport in Shtip will be decided after meteorological and technical measurements which will last for at least 10 years after the effective date. The renovation of the St. Paul the Apostle Airport in Ohrid and the construction of Alexander the Great Airport in Skopje were completed and the airports started their operations in March 2011 and September 2011, respectively.

Operations Contracts

BOT operations and management contracts include the following:

Terminal and airport services – The Group has the right to operate the terminals and airports as mentioned in the preceding paragraphs. This includes passenger, ramp and check-in counter services and services for parking-apron-taxi ways (for airport operations). A fee is charged to each airline based on the number of passengers that utilise the airport, based on the number of aircrafts that utilize ramps and runways and based on the number of check-in counters utilised by the airlines.

Duty free goods – The Group has the right to manage duty free operations within the terminals which the Group operates. Duty free shopping is available to both arriving and departing passengers. The duty free shops are either operated by the Group or, in certain circumstances, subcontracted to other companies in exchange for a commission based on sales.

Catering and airport hotel services – The Group has the right to manage all food and beverage operations within the terminals both for the passengers and the terminal personnel. The Group subcontracts certain food and beverage operations in exchange for a commission based on sales.

Area allocation services – As a lessor, the Group leases office space in the airport terminal including the offices leased to the airlines for ticket office and banks.

Ground handling – The Group has the right to provide all ground handling operations. Ground handling involves providing traffic, ramp, flight operation, cargo and all other ground handling services for domestic and international flights under the Civil Aviation Legislation License (“SHY 22”). Additional activities include shuttle bus and car parking.

Lounge services – The Group has the right to operate or rent the lounges to provide CIP services to the passengers who have the membership.

Bus and car parking services – The Group has the right to operate the car park and render valet parking services. Revenues from bus operations include shuttle services running from airports to city centers.

Software and system services – The Group develops software and systems on operational and financial optimization in aviation, particularly terminal, flight management system and software programs and to meet the information systems requirements of group companies and certain third parties.

Security services – The Group operates the security services within the domestic terminals.

The Group employs approximately 20,269 (average: 19,838) people as at 31 December 2011 (31 December 2010: 18,768 (average: 17,535) people). 18 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

2. BASIS OF PREPARATION a) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”).

The Group’s consolidated financial statements were authorized for issue by the Board of Directors on 24 February 2012. The power to change the consolidated financial statements after the issuing of the consolidated financial statements is held by the General Assembly. b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments which are measured at fair value.

The methods used to measure fair values are discussed further in note 4. c) Functional and presentation currency

TAV Holding and its subsidiaries operating in Turkey maintain their books of account and prepare their statutory financial statements in Turkish Lira (“TRL”) in accordance with the accounting principles as promulgated by the Turkish Commercial Code and tax legislation. The foreign subsidiaries and jointly controlled entities maintain their books of account in accordance with the laws and regulations in force in the countries in which they are registered. The accompanying consolidated financial statements are presented in EUR, which is the functional currency of TAV Group.

Although the currency of the country in which the majority of the Group entities are domiciled is TRL, most of the Group entities’ functional currencies are EUR. Financial Information 19

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

The table below summarizes the functional currencies of the Group entities:

Company Functional Currency TAV Holding EUR TAV İstanbul EUR TAV Esenboğa EUR TAV İzmir EUR TAV Ege EUR TAV Tunisia EUR TAV Tbilisi Georgian Lari (“GEL”) TAV Batumi GEL Batumi Airport LLC GEL TAV Macedonia EUR TAV Gazipaşa EUR TAV Latvia EUR HAVAŞ EUR HAVAŞ Europe EUR HAVAŞ Europe Helsinki EUR HAVAŞ Europe Stockholm Swedish Krona (“SEK”) BTA TRL BTA Georgia GEL BTA Tunisia Tunisian Dinar (“TND”) BTA Macedonia Macedonian Denar (“MKD”) Cakes & Bakes TRL TAV İşletme TRL TAV İşletme Georgia GEL TAV İşletme Tunisia TND TAV İşletme Tunisia Plus TND TAV İşletme Macedonia MKD TAV Bilişim EUR TAV Güvenlik TRL ATÜ EUR ATÜ Georgia GEL ATÜ Tunisia EUR ATÜ Macedonia EUR ATÜ Latvia EUR TAV Gözen USD CAS USD TGS TRL BTA Denizyolları TRL 20 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

d) Use of estimates and judgements

The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:

Note 3(e) – mark-up applied to construction cost incurred under IFRIC 12 “Service Concession Arrangements”.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

Note 17 and 18 – useful lives of property and equipment and intangible assets Note 18 – key assumptions used in discounted cash flow projections Note 22 – utilisation of tax losses and tax incentives Note 31 – measurement of reserve for employee severance indemnity Notes 34 and 39 – provisions and contingencies Note 36 and 38 – valuation of financial instruments

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities. a) Basis of consolidation

The consolidated financial statements include the financial statements of the Company and entities controlled or jointly controlled by the Company (its subsidiaries and jointly controlled entities). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Each entity is consolidated based on the following methods:

•TAV İstanbul, TAV Esenboğa, TAV İzmir, TAV Ege, TAV Macedonia, TAV Gazipaşa, TAV Latvia, TAV İşletme and TAV Güvenlik are fully consolidated without non-controlling interest’s ownership.

•TAV Tunisia, TAV Tbilisi, TAV Batumi, Batumi Airport LLC, HAVAŞ, BTA, BTA Georgia, BTA Tunisia, BTA Macedonia, Cakes & Bakes, TAV İşletme Georgia, TAV İşletme Tunisia, TAV İşletme Tunisia Plus, TAV İşletme Macedonia, HAVAŞ Europe, HAVAŞ Europe Helsinki, HAVAŞ Europe Stockholm and TAV Bilişim are fully consolidated with the non-controlling interest’s ownership reflected as a non-controlling interest. The share capital of Batumi Airport LLC is fully reflected as non-controlling interest due to the transfer of right on shares to JSC at the end of share management agreement period.

•ATÜ, ATÜ Georgia, ATÜ Tunisia, ATÜ Macedonia, ATÜ Latvia, TAV Gözen, CAS, TGS and BTA Denizyolları are proportionately consolidated. Financial Information 21

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

i) Business combinations:

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as: • the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus • if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss.

Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. ii) Subsidiaries:

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. iii) Acquisitions of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary.

In 2011, TAV Holding acquired 16 % of TAV Batumi’s shares from Akfen İnşaat Turizm ve Ticaret A.Ş. (“Akfen İnşaat”) in return for USD 667,200 (EUR 467,061). As a result, TAV Holding’s share in TAV Batumi increased to 76 % and TAV Batumi is consolidated with non-controlling interest’s ownership reflected as a non-controlling interest. The effect of this transaction is recognised as an equity transaction as other reserves in the consolidated financial statements.

In 2011, TAV Holding acquired 33.33 % of TAV Güvenlik’s shares from Tepe Savunma ve Güvenlik Sistemleri Sanayi A.Ş. in return for TRL 6,000,000 (EUR 2,760,779). As a result, TAV Holding’s share in TAV Güvenlik increased to 100 % and TAV Güvenlik is fully consolidated without any non- controlling interest ownership. The effect of this transaction is recognised as an equity transaction as other reserves in the consolidated financial statements.

In 2011, TAV Holding acquired 10 % of TAV Tbilisi’s shares from Sera Yapı Endüstrisi ve Tic. A.Ş. (“Sera Yapı”) and Akfen İnşaat in return for USD 8,583,000 (EUR 5,954,057). As a result, TAV Holding’s share in TAV Tbilisi increased to 76 % and TAV Tbilisi is consolidated with non-controlling interest’s ownership reflected as a non-controlling interest. The effect of this transaction is recognised as an equity transaction as other reserves in the consolidated financial statements.

On 12 April 2010, 50 % of HAVAŞ Europe was acquired by HAVAŞ. HAVAŞ Europe was jointly controlled by HAVAŞ and Baltic Aviation Services and was proportionately consolidated until December 2011 (Note 7). Effect of this transaction is presented as “acquisitions through business combinations” in the consolidated financial statements. On 21 December 2011, an additional 16.67 % of HAVAŞ Europe shares was acquired in return for EUR 1,001,418 by HAVAŞ. After this acquisition HAVAŞ obtained the control of HAVAŞ Europe and HAVAŞ Europe is consolidated with the non-controlling interest’s ownership reflected as a non-controlling interest as at 31 December 2011. Effect of this change is presented as “effect of change in group structure” in the consolidated financial statements. 22 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

iv) Acquisitions from entities under common control:

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or, if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder’s consolidated financial statements. The components of equity of the acquired entities are added to the same components within the Group equity and any gain/loss arising is recognised directly in equity. v) Loss of control:

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained. vi) Jointly controlled entities:

Jointly controlled entities are those entities over whose activities the Group has joint control established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. The Group reports its interests in jointly controlled entities using proportionate consolidation. The Group’s share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line-by-line basis. vii) Transactions eliminated on consolidation:

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with jointly controlled entities are eliminated to the extent of the Group’s interest in the jointly controlled entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. b) Foreign currency i) Foreign currency transactions:

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on qualifying cash flow hedges to the extent the hedge is effective, which are recognised in other comprehensive income. Financial Information 23

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

ii) Foreign operations:

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Euro at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Euro at monthly average exchange rates.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the foreign operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

The Group entities use either EUR, TRL, USD, TND, MKD, SEK or GEL as functional currencies since these currencies are used to a significant extent in, or have a significant impact on, the operations of the related Group entities and reflect the economic substance of the underlying events and circumstances relevant to these entities. All currencies other than the currency selected for measuring items in the financial statements are treated as foreign currencies. Accordingly, transactions and balances not already measured in the functional currency have been re-measured to the related functional currencies in accordance with the relevant provisions of IAS 21 (“The Effects of Changes in Foreign Exchange Rates”). The Group uses EUR as the reporting currency.

The financial statements of subsidiaries that report in the currency of a hyperinflationary economy (Turkey) are restated in terms of the measuring unit current at the reporting dates until 31 December 2005 before they are translated into EUR as the reporting currency. Turkey came off highly inflationary status for the period beginning after 15 December 2005, therefore restatement for IAS 29 (“Financial Reporting in Hyperinflationary Economies”) has not been applied since 1 January 2006.

The financial statements of subsidiaries, namely BTA, TAV İşletme and TAV Güvenlik, which have the TRL as their functional currency, were restated to compensate for the effect of changes in the general purchasing power of the TRL until 31 December 2005, in accordance with IAS 29 as TRL was the currency of a hyperinflationary economy. Financial statements of such subsidiaries are then translated into Euro, the main reporting currency of the Group, by the exchange rate ruling at reporting date.

The EUR / TRL, EUR / GEL, EUR / TND, EUR / MKD, EUR / SEK and EUR / USD exchange rates as of the related periods are as follows:

31 December 2011 31 December 2010 EUR / TRL 2.4438 2.0491 EUR / GEL 2.1614 2.3500 EUR / TND 1.9383 1.9221 EUR / MKD 61.5050 61.5050 EUR / SEK 8.9447 9.0020 EUR / USD 1.2938 1.3254 24 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

c) Financial instruments i) Non-derivative financial assets:

The Group initially recognises loans, receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Non-derivative financial assets of the Group comprise loans and receivables.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise cash and cash equivalents, restricted bank balances, trade receivables, due from related parties, guaranteed passenger fee receivable from DHMİ (Concession receivables) (see Note 25).

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less.

The Group’s use of Project Accounts Reserve Accounts or Funding Accounts is based on certain conditions as defined in respective loan agreements. Therefore, bank balances included in these accounts are presented as restricted bank balances in the consolidated statement of financial position.

Service concession arrangements

The Group recognises a financial asset arising from a service concession arrangement when it has an unconditional contractual right to receive cash or another financial asset from or at the direction of the grantor for the construction or upgrade services provided. Such financial assets are measured at fair value upon initial recognition. Subsequent to initial recognition, the financial assets are measured at amortised cost.

If the Group is paid for the construction services partly by a financial asset and partly by an intangible asset, then each component of the consideration is accounted for separately and is recognised initially at the fair value of the consideration (see also accounting policy note on intangible assets below). Financial Information 25

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

ii) Non-derivative financial liabilities:

The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

The Group has the following other financial liabilities: loans and borrowings, bank overdrafts, trade payables and due to related parties.

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. iii) Share capital:

Ordinary shares are classified as equity. iv) Derivative financial instruments, including hedge accounting:

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.

On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Cash flow hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. The amount recognised in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the statement of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.

In other cases, when the hedged item is not a non-financial asset, the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified in profit or loss. 26 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

d) Property and equipment i) Recognition and measurement:

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

Gains and losses on disposal of an item of property and equipment are calculated as the difference between the net proceeds from disposal and the carrying amount of the item and are recognised net within “other operating income / (expense)” in profit or loss. ii) Subsequent costs:

Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred. iii) Depreciation:

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

The estimated useful lives for the current and comparative periods are as follows:

Buildings 50 years Machinery and equipment 4-19 years Vehicles 5-18 years Furniture and fixtures 2-19 years Leasehold improvements 1-15 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. The useful lives of certain machinery, equipments, vehicles, furniture and fixtures of HAVAŞ are revised as of 31 December 2011. Financial Information 27

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

e) Intangible assets i) Goodwill:

Goodwill that arises upon the acquisition of subsidiaries and joint ventures is included in intangible assets. For the measurement of goodwill at initial recognition, see Note 3(a)(i).

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses. ii) Intangible assets recognised in a business combination:

Customer relationships are the intangible assets recognised during the purchase of HAVAŞ shares in years 2005 and 2007, purchase of TGS shares in 2009 and purchase of HAVAŞ Europe shares in 2010 and 2011. DHMİ license is the intangible asset recognised during the purchase of HAVAŞ shares in years 2005 and 2007 and purchase of TGS shares in 2009. In a business combination or acquisition, the acquirer recognises separately an intangible asset of the acquiree at the acquisition date only if it meets the definition of an intangible asset in IAS 38 Intangible Assets and its fair value can be measured reliably.

The fair values of DHMİ licence and customer relationship are determined by an independent external third party expert.

The Group applied proportionate consolidation method to account for its 60 % ownership interest in HAVAŞ until 30 September 2007. Therefore, intangible assets arising from the initial acquisition of HAVAŞ were reflected by 60 %, being the shareholding of the Group, in the consolidated financial statements. In accordance with IFRS 3 Business Combinations, the Group applied step acquisition during the purchase of the remaining 40 % shareholding in HAVAŞ. Customer relationship and DHMİ licence were remeasured to their fair values. The fair value change attributable to 60 % portion was recorded to the revaluation reserve under equity. This figure reflected the change in fair value of intangible assets which were already carried in the consolidated financial statements prior to the acquisition of the additional 40 % shareholding.

50 % share purchase of TGS, 50 % and 16.67 % share purchases of HAVAŞ Europe are accounted by applying IFRS 3 in 2009, 2010, and 2011, respectively. DHMİ license and customer relations arising from the share purchase are revalued at their fair values which are determined by the independent valuation experts. iii) Internally generated software:

Internally generated software consists of airport software developed by TAV Bilişim. Internally generated software with finite useful lives is measured at cost less accumulated amortisation and impairment losses. iv) Other intangible assets:

Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses. v) Subsequent expenditure:

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. 28 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

vi) Amortisation:

Except for goodwill, intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are available for use.

Purchased software is amortised over estimated useful lives, which is between 3-5 years. Intangible assets recognized during acquisitions of HAVAŞ, TGS and HAVAŞ Europe are customer relationships and DHMİ licence. Customer relationships have 5-10 years useful life and DHMİ licence has indefinite useful life since the duration of net cash inflow arising from DHMİ licence to the Company does not have any foreseeable limit. DHMİ licence is tested for impairment annually.

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Amortisation of the airport operation right is calculated on a straight line basis over the BOT periods of each project from the date of commencement of physical construction of the terminal. vii) Service concession arrangements

TAV Esenboğa and TAV İzmir are bound by the terms of the BOT Agreements made with DHMİ. According to the BOT agreements, TAV Esenboğa and TAV İzmir have guaranteed passenger fee to be received from DHMİ. The agreements cover a period up to January 2015 for TAV İzmir and May 2023 for TAV Esenboğa.

A BOT agreement was executed between TAV Tbilisi and JSC on 6 September 2005 for the operations of airport (both international, domestic terminals and parking-apron-taxi ways). The agreement covers a period up to August 2027.

A BOT agreement was executed between TAV Tunisia and OACA on 18 May 2007, for the operation of existing Monastir Habib Bourguiba Airport and new Enfidha Airport (International, domestic terminals and parking-apron-taxi-ways). The concession periods of both airports will end in May 2047.

A concession agreement was executed between TAV Gazipaşa and DHMİ on 4 January 2008 for the operation of Antalya Gazipaşa Airport (air side, land side, parking-apron-taxi ways). The agreement covers a period up to May 2034.

On 24 September 2008, the 20-year BOT for the construction and operation of Alexander the Great Airport in Skopje, renovation and operation of the St. Paul the Apostle Airport in Ohrid, and the construction and optional operation of the New Cargo Airport in Shtip airports was signed between TAV Macedonia and the Ministry of Transport and Communication of Macedonia. The agreement covers a period up to March 2030. i) Intangible assets:

The Group recognizes an intangible asset arising from a service concession agreement when it has a right to charge for usage of concession infrastructure. Intangible assets received as consideration for providing construction or upgrade services in a service concession agreement are measured at fair value upon initial recognition. Subsequent to initial recognition the intangible asset is measured at cost less accumulated amortisation and accumulated impairment losses.

The Group recognises an intangible asset arising from a service concession arrangement when it has a right to charge for usage of the concession infrastructure. An intangible asset received as consideration for providing construction or upgrade services in a service concession arrangement is measured at fair value on initial recognition. Subsequent to initial recognition, the intangible asset is measured at cost, which includes capitalised borrowing costs, less accumulated amortisation and accumulated impairment losses. Financial Information 29

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

The fair value of the consideration received or receivable for the construction services delivered includes a mark-up on the actual costs incurred to reflect a margin consistent with other similar construction work. Mark-up rates for TAV İzmir, TAV Esenboğa, TAV Tbilisi, TAV Tunisia, TAV Gazipaşa and TAV Macedonia are 0 %, 0 %, 15 %, 5 %, 0 % and 0 %, respectively.

The estimated useful life of an intangible asset in a service concession arrangement is the period from when the Group is able to charge the public for the use of the infrastructure to the end of the concession period. ii) Financial assets:

The Group recognizes the guaranteed passenger fee amount due from DHMİ as financial asset which is determined by the agreements with TAV Esenboğa and TAV İzmir. Financial assets are initially recognised at fair value. Fair value of financial assets is estimated as the present value of all future cash receipts discounted using the prevailing market rate of instrument. (see Note c)i)). iii) Accounting for operations contract (TAV İstanbul):

The costs associated with the operations contract primarily include rental payments and payments made to enhance and improve ADAT. TAV İstanbul prepaid certain rental amounts and the prepayment is deferred as prepaid rent and is recognised over the life of the prepayment period. The expenditures TAV İstanbul incurs to enhance and improve the domestic terminal are recorded as prepaid development expenditures and are being amortised over the life of the associated contract. Any other costs associated with regular maintenance are expensed in the period in which they are incurred.

Under IFRIC 12 an operator recognizes an intangible asset or financial asset received as consideration for providing construction or upgrade services or other items. In TAV İstanbul there is neither construction nor significant upgrade service provided and the contract is in operating phase. Therefore, no intangible asset or financial asset is recognised in TAV İstanbul’s financial statements and the revenue and costs relating to the operation services are recognised in accordance with IAS 18. f) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and the leased assets are not recognised on the Group’s consolidated statement of financial position. g) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out (FIFO) principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. 30 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

h) Impairment i) Non-derivative financial assets:

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, the disappearance of an active market for a security.

Financial assets measured at amortised cost

The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. ii) Non-financial assets:

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that one not yet available for use, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (“CGU”) exceeds its estimated recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets (the “CGU”). Goodwill acquired in a business combinations allocated to groups of CGU’s that are expected to benefit from the synergies of the combination.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Financial Information 31

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

i) Reserve for employee severance indemnity

In accordance with the existing labour law in Turkey, the Group entities operating in Turkey are required to make lump-sum payments to employees who have completed one year of service and whose employment is terminated without cause or who retire, are called up for military service or die. Such payments are calculated on the basis of 30 days’ pay maximum TRL 2,732 as at 31 December 2011 (equivalent to EUR 1,118 as at 31 December 2011) (31 December 2010: TRL 2,517 (equivalent to EUR 1,228 as at 31 December 2010)) per year of employment at the rate of pay applicable at the date of retirement or termination. Reserve for retirement pay is computed and reflected in the accompanying consolidated financial statements on a current basis. The management of the Group used some assumptions (detailed in Note 31) in the calculation of the retirement pay provision. The calculation was based upon the retirement pay ceiling announced by the Government.

All actuarial differences are recognized immediately in profit or loss. j) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money where appropriate and the risks specific to the liability. k) Revenue

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

Construction revenue and expenditure: Construction revenue and expenditure are recognised by reference to the stage of completion of the contract activity at the reporting date, as measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Service concession agreements: Revenue relating to construction services under a service concession arrangement is recognised based on the stage of completion of the work performed, consistent with the Group’s accounting policy on recognising revenue on construction contracts. Operation or service revenue is recognised in the period in which the services are provided by the Group. When the Group provides more than one service in a service concession arrangement the consideration received is allocated by reference to the relative fair values of the services delivered.

Aviation income: Aviation income is recognised based on the daily reports obtained from related airline companies for terminal service income charged to passengers, as well as for ramps utilised by aircraft and check-in counters utilised by the airlines. 32 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Area allocation income: Area allocation income is recognised by the issuance of monthly invoices based on the contracts made for allocated areas in the terminal.

Sales of duty free goods: Sales of goods are recognised when goods are delivered and title passes.

Catering services income: Catering services income is recognised when services are provided. The Group defers revenue for collections from long-term contracts until the services are provided. There are no deferred costs related to these revenues since these are related with the selling rights given to food and beverage companies to sell their products at domestic and international lines terminals as well as third parties out of the terminals where the subsidiaries operate.

Ground handling income: Ground handling income is recognised when the services are provided.

Commission: The Group subcontracts the right to operate certain duty free operations and the catering services to third parties. The third parties pay the Group a specified percentage of their sales for the right to operate these concessions. The commission revenue is recognised based on the sales reports provided from the subcontractor entities in every 2 to 3 days.

Software and system sales: Software and system sales are recognised when goods are delivered and title has passed or when services are provided.

Income from lounge services: Income from lounge services is recognised when services are provided.

Bus and car parking operations: Income from bus and car parking operations is recognised when services are provided. l) Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. m) Finance income and finance costs

Finance income comprises interest income on funds invested and unwinding of discount on guaranteed passenger fee receivable from DHMİ arising from the application of IFRIC 12 and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established.

Finance costs comprise interest expense on borrowings, impairment losses recognised on financial assets, (other than trade receivables) and ineffective portion of hedging instruments. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses are reported on a net basis as either finance income or finance cost. Financial Information 33

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

n) Tax

Tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

In determining the amount of current and deferred tax the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a deter¬mination is made.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

The Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the accompanying consolidated financial statements, have been calculated on a separate-entity basis. o) Earnings per share

The Group presents basic EPS data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. There are no dilutive potential shares. 34 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

p) Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the Group Management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Group management include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill. q) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective as at 31 December 2011, and have not been applied in preparing these consolidated financial statements. Among those new standards, the following are expected to have effect on the consolidated financial statements of the Group:

•Amendments to IAS 1 Presentation of Items of Other Comprehensive Income require that an entity present separately the items of other comprehensive income that would be reclassified to profit or loss in the future if certain conditions are met from those that would never be reclassified to profit or loss. The amendments are effective for annual periods beginning on or after 1 July 2012.

• IFRS 10 Consolidated Financial Statements supersedes IAS 27 (2008) and SIC-12 Consolidation—Special Purpose Entities and becomes effective for annual periods beginning on or after 1 January 2013.

• IFRS 11 Joint Arrangements supersedes IAS 31 and SIC-13 Jointly Controlled Entities—Non-Monetary Contributions by Venturers and becomes effective for annual periods beginning on or after 1 January 2013.

• IFRS 12 Disclosure of Interests in Other Entities contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities and becomes effective for annual periods beginning on or after 1 January 2013.

• IFRS 13 Fair Value Measurement replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance and becomes effective for annual periods beginning on or after 1 January 2013.

• IAS 27 Separate Financial Statements (2011) supersedes IAS 27 Consolidated and Separate Financial Statements (2008) and becomes effective for annual periods beginning on or after 1 January 2013.

• IAS 28 Investments in Associates and Joint Ventures (2011) supersedes IAS 28 Investments in Associates (2008) and becomes effective for annual periods beginning on or after 1 January 2013.

• IFRS 9 Financial Instruments could change the classification and measurement of financial assets and becomes effective for annual periods beginning on or after 1 January 2015.

The Group does not plan to adopt these standards early and the extent of the impact has not been determined yet. Financial Information 35

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

4. DETERMINATION OF FAIR VALUES

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. i) Property and equipment:

The fair value of property and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. The fair value of items of equipment, fixtures and fittings is based on the market approach and cost approaches using quoted market prices for similar items when available and replacement cost when appropriate. ii) Intangible assets:

The fair value of intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

The fair values of customer relationship and DHMİ licence acquired in a business combination are determined according to the excess earnings method and replacement cost approach, respectively.

The airport operation right as an intangible asset is initially recognised at cost, being the fair value of consideration transferred to acquire the asset, which is the fair value of the consideration received or receivable for the construction services delivered less any financial asset recognised. The fair value of the consideration received or receivable for the construction services delivered includes a mark-up on the actual costs incurred to reflect a margin consistent with other similar construction work. Mark-up rates for TAV İzmir, TAV Esenboğa, TAV Tbilisi, TAV Tunisia, TAV Gazipaşa and TAV Macedonia are 0 %, 0 %, 15 %, 5 %, 0 % and 0 %, respectively. iii) Trade and other receivables:

The fair value of trade and other receivables is estimated as the present value of future cash flows discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes or when acquired in a business combination. iv) Derivatives:

The fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds) or option pricing models.

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.

Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate. 36 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

v) Other non-derivative financial liabilities:

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements.

5. FINANCIAL RISK MANAGEMENT

Overview

The Group has exposure to the following risks from its use of financial instruments:

• credit risk • liquidity risk • market risk • operational risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group has established a Risk Management Department who is responsible for the Enterprise Risk Management function within the Group, and aims to develop a disciplined and constructive risk management and control environment in which all employees know and understand their roles and responsibilities.

All directors act to ensure an effective risk management and internal control process, providing assurance in relation to continuous identification and evaluation of the risks that exist in all main process areas.

The Group Audit Committee is assisted in its oversight role by Internal Audit. The mission of the Internal Audit Directorate of the Group is to assist TAV Holding Board of Directors and Management (including subsidiaries) in their oversight, management and operating responsibilities by identifying; ineffectivenesses of internal control, risk management and governance processes inefficiencies that cause waste of its resources and making professional recommendations through independent audits (reports) and / or advisory services.

Internal audit plans are based on risk assessments as well as the issues highlighted by the Audit Committee and the management. Risk assessment is conducted and coordinated by Risk Management Department on continuous basis so as to identify and evaluate not only existing risks but also emerging risks. Formally, risk assessment is made annually but more often if required. Financial Information 37

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and bank balances.

The Group’s principal financial assets are cash and cash equivalents and trade and other receivables.

Credit risk on liquid funds is limited because the counterparties are banks with high credit ratings.

The Group has procedures in place to ensure that services are provided to customers with an appropriate credit history. The carrying amount of trade and other receivables, net of provision for impairment of receivables, and the total of cash and cash equivalents, represents the maximum amount exposed to credit risk. The main customer is THY. Based on past history with this customer, the Group management believes there is no significant credit risk for this customer. Although collection of receivables could be influenced by economic factors, management believes that there is no significant risk of loss to the Group beyond the provisions already recorded due to reputation and type of customers for the airlines (well-known reputable, international and flag carrier companies), method of sales which is cash or credit card basis for duty free sales.

In addition, the Group receives letters of guarantee, and notes from some customers whose credibility is low.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimizing its cash return on investments. Typically the Group ensures that it has sufficient cash on demand to meet expected operational and financial expenses, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by lenders and executives of the Group as mentioned in Note 36.

The Group applies hedge accounting in order to manage volatility in profit or loss. 38 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

i) Currency risk:

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Group has exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. As at 31 December 2011, the Group had balances that are denominated in a currency other than the respective functional currencies of Group entities, primarily EUR, but also USD, GEL, TND, MKD, SEK and TRL which are disclosed within the relevant notes to these consolidated financial statements. The currencies in which these transactions primariliy denominated are USD and TRL. The Group manages this currency risk by maintaining foreign currency cash balances and using some financial instruments as mentioned in Note 38. ii) Interest rate risk:

The Group adopts a policy of ensuring that between 50 and 100 percent of its exposure to changes in interest rates on borrowings is on a fixed rate basis. This is achieved by entering into interest rate swaps as mentioned in Note 38.

Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group’s operations.

The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This responsibility is supported by the development of overall Group standards for the management of operational risk in the following areas:

• requirements for appropriate segregation of duties, including the independent authorisation of transactions • requirements for the reconciliation and monitoring of transactions • compliance with regulatory and other legal requirements • documentation of controls and procedures • requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified • requirements for the reporting of operational losses and proposed remedial action • development of contingency plans • training and professional development • ethical and business standards • risk mitigation, including insurance where this is effective.

Compliance with Group standards is supported by a programme of periodic reviews undertaken by Internal Audit. The results of Internal Audit reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit Committee and senior management of the Group.

Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence; to sustain future development of the business and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Financial Information 39

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

6. SEGMENT REPORTING

Operating Segments:

For management purposes, the Group is currently organised into four reportable segment; Terminal Operations, Catering Operations, Duty Free Operations, Ground Handling and Bus Operations. These reportable segments are the basis on which the Group reports its primary segment information, the principal activities of each are as follows:

• Terminal operations: Operating terminal buildings, the car park and the general aviation terminal, the Group companies included in this segment are TAV İstanbul, TAV Esenboğa, TAV İzmir, TAV Ege, TAV Gazipaşa, TAV Tunisia, TAV Batumi, TAV Tbilisi, Batumi Airport LLC and TAV Macedonia. TAV Tbilisi, TAV Batumi, TAV Tunisia, TAV Gazipaşa and TAV Macedonia also include the ground handling operations, and parking-apron-taxi ways as they are not outsourced and are run by the airport.

• Catering operations: Managing all food and beverage operations of the terminal, both for the passengers and the terminal personnel, which is run by BTA, BTA Georgia, BTA Tunisia, BTA Macedonia, Cakes & Bakes and BTA Denizyolları.

• Duty free operations: Sales of duty free goods for the international arriving and departing passengers. The Group operates its duty free services through ATÜ, ATÜ Georgia, ATÜ Tunisia, ATÜ Macedonia and ATÜ Latvia.

• Ground handling and bus operations: Providing traffic, ramp, flight operation, cargo and all other ground handling services for domestic and international flights under the Civil Aviation Legislation License. The Group operates the ground handling services through HAVAŞ, CAS, TAV Gözen, TGS, HAVAŞ Europe, HAVAŞ Europe Helsinki and HAVAŞ Europe Stockholm. HAVAŞ also provides bus operations.

• Other: Providing lounge services, IT and Security services, the Group companies included in this segment are TAV Holding, TAV İşletme, TAV İşletme Georgia, TAV İşletme Tunisia, TAV İşletme Tunisia Plus, TAV İşletme Macedonia, TAV Bilişim, TAV Güvenlik and TAV Latvia.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment operating profit, as included in the internal management reports that are reviewed by the Group’s Management. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on arm’s length basis. 40 TAV Airports 2011 Annual Report 2010 2010 24,238 41,627,967 20,057,507 713,278,533 134,315,347 122,286,627 123,661,155 (41,410,646) (59,544,585) (87,264,948) 31 December 2,039,474,431 1,499,088,978 Total Total 2011 2011 24,238 64,737,429 20,781,586 811,863,601 148,283,260 159,145,764 108,571,189 (65,141,068) (87,972,663) 31 December -(64,737,429) 2,081,248,721 1,518,825,150 - - 2010 2010 24,238 1,538,257 2,959,624 27,535,702 19,051,288 77,024,073 (1,330,713) (5,968,298) (8,762,614) 182,738,137 31 December - - Other Operations 2011 2011 Other Operations 24,238 4,878,340 5,922,879 23,065,386 18,342,311 (1,252,402) (2,172,291) (5,831,351) 212,540,279 137,479,827 31 December - - - 2010 2010 255,266 593,162 12,573,364 30,788,076 (6,454,905) 161,894,686 147,782,385 133,053,540 (12,964,912) 31 December - - - Bus Operations Operations 2011 2011 Ground Handling and 211,797 656,469 22,524,329 13,403,322 (7,073,864) Ground Handling and Bus 195,848,653 144,205,207 120,793,524 (11,787,362) 31 December - - - - 2010 2010 867,561 927,064 (936,237) 24,174,029 37,727,069 14,434,623 (1,330,650) 165,835,658 31 December - - - - Duty Free Operations Duty Free 2011 2011 916,930 Duty Free Operations Duty Free 2,398,984 31,852,488 38,377,316 20,159,947 (1,455,415) (1,014,443) 202,669,820 31 December - - - 2010 2010 431,672 (257,860) 4,847,132 2,817,956 53,218,141 13,377,867 21,120,961 13,153,062 (2,367,477) 31 December - - - Catering Operations 2011 2011 416,102 Catering Operations (203,089) 4,093,505 4,976,894 59,542,799 11,293,619 22,377,936 15,836,332 (1,931,938) 31 December - 2010 2010 41,627,967 15,205,488 96,399,806 87,589,802 304,794,346 101,630,926 (41,410,646) (70,458,919) (41,945,246) 31 December 1,663,658,919 1,238,131,234 - Terminal Operations Terminal 2011 2011 Terminal Operations Terminal 64,737,429 12,869,206 82,913,649 330,736,943 118,435,533 114,540,274 (64,737,429) (73,408,944) (49,154,923) 31 December 1,670,272,811 1,206,338,151 Total external Total revenues Inter-segment revenue Construction revenue Construction expenditure Interest income Interest expense Depreciation and amortisation Reportable segment operating profit / (loss) Capital expenditure Reportable segment assets Other investments Reportable segment liabilities Operating Segments

TAV Havalimanları Holding A.Ş. and its Subsidiaries TAV Statements Notes to the Consolidated Financial the year ended 31 December 2011 As at and for (Amounts expressed in Euro unless otherwise stated) Financial Information 41

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Reconciliations of reportable segment revenues, profit before tax, assets and liabilities and other material items

Revenues 2011 2010 Total revenue for reportable segments 983,476,593 842,634,857 Other revenue 41,407,697 46,586,990 Elimination of inter-segment revenue (148,283,260) (134,315,347) Consolidated revenue 876,601,030 754,906,500

Operating profit 2011 2010 Segment operating profit 161,318,055 128,254,925 Other operating loss (2,172,291) (5,968,298) Elimination of inter-segment operating profit (531,166) (1,536,112) Consolidated operating profit 158,614,598 120,750,515 Finance income 29,103,554 31,885,484 Finance expense (96,113,454) (89,169,954) Consolidated profit before tax 91,604,698 63,466,045

Assets 31 December 2011 31 December 2010 Total assets for reportable segments 1,868,708,442 1,856,736,294 Other assets 212,540,279 182,738,137 Consolidated total assets 2,081,248,721 2,039,474,431

Liabilities 31 December 2011 31 December 2010 Total liabilities for reportable segments 1,381,345,323 1,422,064,905 Other liabilities 137,479,827 77,024,073 Consolidated total liabilities 1,518,825,150 1,499,088,978

Interest income 2011 2010 Total interest income for reportable segments 14,858,707 17,097,883 Other interest income 5,922,879 2,959,624 Elimination of inter-segment interest income (4,480,820) (5,438,060) Consolidated interest income 16,300,766 14,619,447

Interest expense 2011 2010 Total interest expense for reportable segments (82,141,312) (78,502,334) Other interest expense (5,831,351) (8,762,614) Elimination of inter-segment interest expense 4,520,330 5,460,909 Consolidated interest expense (83,452,333) (81,804,039) 42 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Geographical information

The main geographical segments of the Group are comprised of Turkey, Tunisia, Georgia and Macedonia.

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of revenue. Segment assets are based on the geographical location of the assets.

Revenue 2011 2010 Turkey 735,306,026 644,092,838 Macedonia 74,318,587 41,291,630 Tunisia 37,548,985 47,998,041 Georgia 23,309,383 19,945,184 Other 6,118,049 1,578,807 Consolidated revenue 876,601,030 754,906,500

Non-current assets 31 December 2011 31 December 2010 Turkey 696,374,548 749,020,034 Tunisia 514,239,122 511,310,316 Macedonia 85,759,252 28,301,813 Georgia 78,411,367 82,944,828 Other 689,005 340,169 Consolidated non-current assets 1,375,473,294 1,371,917,160 Financial Information 43

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

7. ACQUISITIONS OF JOINTLY CONTROLLED ENTITIES AND ADDITIONAL INTERESTS

Acquisitions of jointly controlled entities

Acquisition of 50 % shares of HAVAŞ Europe:

On 12 April 2010, HAVAŞ acquired 50 % shareholding of HAVAŞ Europe for a consideration of EUR 3,250,000 from Baltic Aviation. After the transfer of 50 % of shares, HAVAŞ Europe, which provides ground services at Latvia Riga International Airport and Helsinki International Airport is proportionately consolidated in the Group’s consolidated financial statements.

Pre-acquisition carrying amounts were determined based on the applicable IFRSs immediately before the acquisition. The values of assets, liabilities and contingent liabilities recognized on acquisition are their estimated fair values.

The fair value of the customer relationship acquired is based on the excess earnings method.

Under IFRS 3, customer relationships at the amount of EUR 637,000 have been recognized as intangible assets arising from the acquisition of 50 % share of HAVAŞ Europe.

Recognized values on Identifiable assets acquired and liabilities assumed acquisition

Property and equipment 89,068 Intangible assets 637,483 Other investments 713 Other non-current assets 131,434 Deferred tax liabilities (95,550) Inventories 22,177 Trade receivables 83,662 Cash and cash equivalents 8,234 Other assets 64,622 Loans and borrowings (53,223) Trade payables (141,341) Other liabilities and tax payables (114,151) Total identifiable net assets 633,128 Goodwill 2,616,872 Total consideration, satisfied by cash 3,250,000

Cash consideration paid 3,250,000 Cash and cash equivalents acquired (8,234) Net cash outflow arising on acquisition 3,241,766

44 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Acquisitions of additional interest

Acquisition of 16.67% shares of HAVAŞ Europe:

On 21 December 2011, HAVAŞ acquired 16.67 % shareholding of HAVAŞ Europe in return for EUR 1,001,418, increasing its total share from 50 % to 66.67 %. After the transfer of 16.67 % shares, HAVAŞ Europe is fully consolidated with the non-controlling interest’s ownership reflected as a non-controlling interest.

Recognized values on Identifiable assets acquired and liabilities assumed acquisition Property and equipment 5,590,821 Intangible assets 2,444,556 Other non-current assets 64,714 Deferred tax assets 48,822 Inventories 89,735 Trade receivables 883,864 Due from related parties 1,004 Cash and cash equivalents 67,640 Other assets 389,350 Loans and borrowings (3,909,331) Trade payables (1,450,381) Due to related parties (34,419) Other liabilities (1,666,605) Provisions (536,162) Deferred tax liabilities (329,700) Total identifiable net assets 1,653,907

Cash consideration paid 1,001,418 Total net identifiable assets (1,653,907) Fair value of non-controlling interest 551,302 Fair value of previously held interest 826,954 Goodwill 725,767

Cash consideration paid 1,001,418 Cash and cash equivalents acquired (33,820) Net cash outflow arising on acquisition 967,598

Financial Information 45

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

8. CONSTRUCTION REVENUE AND EXPENDITURE

An analysis of the Group’s construction revenue and expenditure for the years ended 31 December is as follows:

2011 2010 Construction expenditure 64,737,429 41,410,646 Mark-up on construction expenditure - 217,321 Construction revenue 64,737,429 41,627,967

Construction revenue and expenditure for the years ended 31 December 2011 and 2010 relate to the construction of Skopje International Airport, Ohrid International Airport, Enfidha International Airport and Gazipaşa Airport.

9. OPERATING REVENUE

An analysis of the Group’s operating revenue for the years ended 31 December is as follows:

2011 2010 Sales of duty free goods 202,669,820 165,835,658 Ground handling income 191,868,004 152,044,794 Aviation income 177,511,683 169,691,514 Commission from sales of duty free goods 87,217,851 77,824,570 Catering services income 51,622,007 47,753,898 Area allocation income 26,463,109 21,308,147 Income from car parking operations and valet service income 23,656,57 25,028,222 Bus services income 20,330,105 21,373,448 Income from lounge services 16,609,929 21,649,152 Other operating revenue 13,914,522 10,769,130 Total operating revenue 811,863,601 713,278,533 46 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

10. OTHER OPERATING INCOME

An analysis of the Group’s other operating income for the years ended 31 December is as follows:

2011 2010 Advertising income 13,671,974 13,045,190 Rent income from sublease 11,539,567 9,678,898 Insurance income (*) - 9,672,529 Gain on sale of property and equipment 1,844,005 386,413 Other income 8,794,247 6,844,826 Total other operating income 35,849,793 39,627,856

(*) For the damage occurred on the generators of the Trigeneration Project of TAV İstanbul in 2010, insurance income was accrued for the receivables from insurance companies (see note 17).

11. PERSONNEL EXPENSES

An analysis of the Group’s personnel expenses for the years ended 31 December is as follows:

2011 2010 Wages and salaries 182,393,865 173,096,264 Compulsory social security contributions 27,838,508 25,642,117 Employment termination benefit expenses 5,950,613 4,393,388 Other personnel expenses 19,964,594 16,163,158 Total personnel expenses 236,147,580 219,294,927

12. CONCESSION AND RENT EXPENSES

An analysis of the Group’s concession and rent expenses for the years ended 31 December is as follows:

2011 2010 TAV İstanbul 122,592,025 117,275,560 TAV Tunisia (*) 4,331,798 10,250,799 TAV Macedonia (**) 2,515,800 2,112,487 Total concession rent expenses 129,439,623 129,638,846

Rent expense is related with TAV İstanbul, concession rent expense is related with TAV Tunisia and TAV Macedonia.

(*) TAV Tunisia has a concession period of 40 years and annual concession fee is paid based on the annual revenue of Monastir and Enfidha Airports. The concession fee is computed at an increasing rate between 11 % and 26 % of the annual revenues. Based on the negotiations with OACA, the concession fee payable for 2011 is reduced by EUR 4.6 million and concession fee payables for 2011, 2012, and 2013 are deferred by 3 years to 2014, 2015 and 2016. (**) The concession fee of TAV Macedonia is 15 % of the gross annual turnover until the number of passengers using the two airports reaches to 1 million, and when the number of passengers exceeds 1 million, this percentage shall change between 4 % and 2 % depending on the number of passengers.

Financial Information 47

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

13. OTHER OPERATING EXPENSES

An analysis of the Group’s other operating expenses for the years ended 31 December is as follows:

2011 2010 VAT non-recoverable 12,333,155 12,349,059 Utility cost 11,126,319 13,366,931 Maintenance expenditures 10,907,002 9,785,423 Insurance expense 10,187,116 11,105,294 Cleaning expense 8,761,161 8,982,899 Consultancy expense 7,383,364 10,707,134 Provision expenses 7,327,641 1,336,568 Advertisement and marketing expenses 5,762,392 2,984,281 Rent expense 4,907,863 3,168,748 Taxes 4,819,371 3,431,711 Traveling and transportation expenses 3,929,676 3,674,701 Communication and stationary expenses 3,547,963 3,893,859 Representation expenses 2,065,056 1,612,240 Security cost 1,475,636 937,438 Impairment loss on property and equipment (*) - 6,638,910 Other operating expenses 9,100,157 6,464,399 Total other operating expenses 103,633,872 100,439,595

(*) Impairment loss recognised is related with the fire in the Trigeneration Project of TAV İstanbul (see Note 17). 48 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

14. DEPRECIATION AND AMORTISATION

An analysis of the Group’s accumulated depreciation and amortisation for the year ended 31 December is as follows:

Property and Other intangible Airport operation right equipment assets Total Balance at 1 January 2010 68,808,174 78,156,329 14,522,282 161,486,785 Effect of movements in exchange rates 481,595 474,441 43,156 999,192 Charge for the period 32,765,582 21,218,211 5,560,792 59,544,585 Disposals - (2,354,352) (75,063) (2,429,415) Balance at 31 December 2010 102,055,351 97,494,629 20,051,167 219,601,147

Balance at 1 January 2011 102,055,351 97,494,629 20,051,167 219,601,147 Effect of movements in exchange rates 2,077,414 (1,377,386) (201,754) 498,274 Charge for the period 36,729,520 23,034,317 5,377,231 65,141,068 Disposals - (1,898,409) (186,075) (2,084,484) Effect of change in group structure (*) - 519,711 32,687 552,398 Balance at 31 December 2011 140,862,285 117,772,862 25,073,256 283,708,403

(*) Effect of acquisition of 16.67 % shares of HAVAŞ Europe in 2011.

Financial Information 49

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

15. FINANCE INCOME AND FINANCE COSTS

Recognised in profit or loss

An analysis of the Group’s finance income and finance costs for the years ended 31 December is as follows:

2011 2010 Interest income on bank deposits and intercompany loans 16,300,766 14,619,447 Discount income (*) 12,753,193 10,264,378 Foreign exchange gain, net - 6,179,665 Other finance income 49,595 821,994 Finance income 29,103,554 31,885,484

Interest expense on financial liabilities and intercompany loans (83,452,333) (81,804,039) Foreign exchange loss, net (4,960,181) - Commission expense (1,829,309) (1,979,851) Other finance costs (**) (5,871,631) (5,386,064) Finance costs (96,113,454) (89,169,954)

Net finance costs (67,009,900) (57,284,470)

(*)Discount income of EUR 12,722,651 includes unwinding of discount on guaranteed passenger fee receivables from DHMİ (concession receivables). (2010: EUR 10,242,300) (**)Other finance costs include bank charges and consultancy expenses charged in accordance with the requirements of project financing facilities.

Recognised in other comprehensive income

2011 2010 Effective portion of changes in fair value of cash flow hedges (16,117,193) (13,594,103) Foreign currency translation differences for foreign operations (3,267,058) 3,237,686 Tax on cash flow hedge reserves 6,276,998 4,868,363 Finance costs recognised in other comprehensive income, net of tax (13,107,253) (5,488,054)

50 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

16. TAX EXPENSE

An analysis of the Group’s tax expense for the years ended 31 December is as follows:

Tax recognised in profit or loss

2011 2010 Current tax expense Current period tax expense 33,147,025 33,632,939 Adjustments for prior years (*) 2,948,958 (306,225) 36,095,983 33,326,714 Deferred tax expense / (income) Origination and reversal of temporary differences 4,503,072 (18,047,173) Change in previously recognised investment incentives (**) (13,345,563) 6,383,194 Change in previously recognised tax losses 12,509,252 (9,836,620) 3,666,761 11,826,115 Total tax expense 39,762,744 (21,500,599)

(*) Adjustments for prior periods amounting to EUR 2,930,708 consist of tax expenses that Group has incurred from tax amnesty within the context of The Law Concerning the Restructuring of Certain Receivables, and the Amendment of the Social Security Law and the General Health Law and Certain Other Laws and Decrees with the Force of Law (The Law numbered 6111). (**) See Note 22.

Tax recognised in other comprehensive income

2011 2010 Before tax Tax benefit Net of tax Before tax Tax benefit Net of tax Revaluation of property and equipment 68,320 - 68,320 68,320 - 68,320 Effective portion of changes in fair value of cash flow hedges (16,117,193) 6,276,998 (9,840,195) (13,594,103) 4,868,363 (8,725,740) Foreign currency translation differences for foreign operations (3,267,058) - (3,267,058) - 3,237,686 (19,315,931) 6,276,998 (13,038,933) (10,288,097) 4,868,363 (5,419,734)

Financial Information 51

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Reconciliation of effective tax rate

The reported tax expenses for the years ended 31 December 2011 and 2010 are different than the amounts computed by applying the statutory tax rate to profit before tax of the Group, as shown in the following reconciliation:

% 2011 % 2010 Profit for the year 51,841,954 51,639,930 Total tax expense 39,762,744 11,826,115 Profit before tax 91,604,698 63,466,045

Tax using the Company’s domestic tax rate 20 18,320,940 20 12,693,209 Tax effects of: - not deductible expenses 4 3,447,212 2 1,298,371 - translation of non-monetary items according to IAS 21 5 4,995,011 14 8,510,047 - change in previously recognised investment incentives (15) (13,345,563) 10 6,383,194 - change in previously recognised tax losses 19 17,065,507 - - - tax exempt income (1) (892,943) (1) (405,953) - translation effect on tax losses 2 2,196,850 (2) (1,117,220) - recognition of previously unrecognised tax losses - - (16) (9,836,620) - current year losses for which no deferred tax asset is recognized 7 6,166,148 3 2,062,178 - effect of different tax rates for foreign jurisdictions (4) (3,461,044) (4) (2,284,108) - adjustments for prior periods 3 2,948,958 - (306,225) - change in unrecognized temporary differences - 365,134 1 411,902 - utilization of previously not recognised carry forward losses - - (5) (3,047,108) - tax effect of sale of investments recognised in equity - - (7) (4,416,944) - other consolidation adjustments 2 1,956,534 2 1,881,392 Tax expense 43 39,762,744 19 11,826,115 52 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Corporate tax: 2011 2010 Corporate tax provision 33,147,025 33,632,939 Adjustments for prior periods 2,948,958 (306,225) Add: taxes payable from previous period 9,920,571 1,391,675 Less: corporation taxes paid during the period (34,234,346) (24,797,818) Current tax liabilities 11,782,208 9,920,571

The Turkish entities within the Group are subject to Turkish corporate taxes. Provision is made in the accompanying consolidated financial statements for the estimated charge based on the each of the Group entities’ results for the year.

Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back non- deductible expenses, and by deducting dividends received from resident companies, other exempt income and investment incentives utilised.

In Turkey, advance tax returns are filed on a quarterly basis. The advance corporate income tax rate at 31 December 2011 is 20 % (31 December 2010: 20 %).

Losses can be carried forward for offsetting against future taxable income for up to 5 years. Losses cannot be carried back.

Georgian corporate income tax is levied at a rate of 15 % on income less deductible expenses.

Tunisian corporate income tax is levied at a rate of 30 % on income less deductible expenses. According to concession agreement, TAV Tunisia is exempt from corporate tax for a period of 5 years starting from the concession agreement date.

Macedonian corporate income tax is levied at a rate of 10 % on income less deductible expenses. Unless there is a dividend distribution, no corporate tax is levied. Losses cannot be carried forward in determining corporate tax base. Corporate taxpayers should pay tax on their non-deductible expenses at a rate of %10. However, in determining the base of the tax over non-deductible expenses, losses can be carried forward for five years according to the amendment on tax legislation.

Latvian corporate income is levied at a rate of 15 % on income less deductible expenses.

In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns between 1-25 April following the close of the accounting year to which they relate. Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five years.

Investment allowance:

The Temporary Article 69 added to the Income Tax Law no.193 with the Law no.5479, which became effective starting from 1 January 2006, upon being promulgated in the Official Gazette no. 26133 dated 8 April 2006, stating that taxpayers can deduct the amount of the investment allowance exemption which they are entitled to according to legislative provisions effective at 31 December 2005 (including rulings on the tax rate) only from the taxable income of 2006, 2007 and 2008. Accordingly, the investment incentive allowance practice was ended as of 1 January 2006. At this perspective, an investment allowance which cannot be deducted partially or fully in three years time was not allowed to be carried forward to the following years and became unavailable as of 31 December 2008. On the other hand, the Article 19 of the Income Tax Law was annulled and the investment allowance practice was ended as of 1 January 2006 with effectiveness of the Article 2 and the Article 15 of the Law no. 5479 and the investment allowance rights on the investment expenditures incurred during the period of 1 January 2006 and 8 April 2006 became unavailable. Financial Information 53

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

However, at 15 October 2009, the Turkish Constitutional Court decided to cancel the clause no. 2 of the Article 15 of the Law no. 5479 and the expressions of “2006, 2007, 2008” in the Temporary Article 69 related to investment allowance mentioned above that enables effectiveness of the Law as of 1 January 2006 rather than 8 April 2006, since it is against the Constitution. Accordingly, the time limitations for the carried forward investment allowances that were entitled to in the previous period of mentioned date and the limitations related with the investments expenditures incurred between the issuance date of the Law promulgated and 1 January 2006 were eliminated. According to the decision of Turkish Constitutional Court, cancellation related with the investment allowance became effective with promulgation of the decision on the Official Gazette and the decision of the Turkish Constitutional Court was promulgated in the Official Gazette no. 27456 dated 8 January 2010.

According to the decision mentioned above, the investment allowances carried forward to the year 2006 due to the lack of taxable income and the investment allowances earned through the investments started before 1 January 2006 and continued after that date constituting economic and technical integrity will be used not only in 2006, 2007 and 2008, but also in the following years. In addition, 40 % of investment expenditures that are realized between 1 January 2006 and 8 April 2006, within the context of the Article 19 of the Income Tax Law will have the right for investment allowance exemption.

The Article 5 of the Law no. 6009 “Law on the Amendment of the Income Tax Law and Certain Laws and Decree Laws” which was promulgated in the Official Gazette on 1 August 2010 regulated the amount of investment incentive to be benefited in computing the corporate tax base after the cancellation of the Article no.2 of the Law no. 5479. According to the Law no. 6009, the taxpayers were allowed to benefit from the investment incentive stemming from the periods before the promulgation of the Law no. 5479, up to 25 % of the taxable income of the respective tax period. Such change is effective including the fiscal year ending on 31 December 2011.

However, on 17 February 2012, the Turkish Constitutional Court decided to cancel the Article 5 of the Law no. 6009 and the cancelation of the article was promulgated in the Official Gazette no. 28208 dated 18 February 2012. Accordingly, taxpayers are allowed to benefit from the investment incentive without any limitation

Income withholding tax:

According to Corporate Tax Law code numbered 5520 article 15, companies who are resident in Turkey, should calculate 15 % income withholding tax on dividends distributed to non-resident companies, individuals and resident individuals. Undistributed dividends incorporated in share capital are not subject to income withholding taxes.

Transfer pricing regulations:

In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 2007 sets details about implementation.

If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes.

The Law numbered 6111

The Law numbered 6111 has been put into effect following its promulgation in the Official Gazette on 25 February 2011. According to the law, apart from the VAT refundable or/and already refunded in cash, no tax investigation or tax assessment regarding corporate and value added taxes will be made for the tax-payers who increase their tax bases for the years between 2006 and 2009.

Some of the subsidiaries of the Group have benefited from the aforementioned law for the fiscal years 2006-2009 for corporate and value added taxes by increasing their tax bases, which resulted in additional and corporate taxes amounting to EUR 2,930,708 and VAT amounting to EUR 1,269,232. The related corporate tax expense is included in the current tax expense for the period as an adjustment for prior periods in the accompanying consolidated financial statements. 54 TAV Airports 2011 Annual Report Total 89,068 (408,500) (406,541) 3,317,088 1,584,609 43,767,770 (3,956,509) 80,543,073 (6,638,910) (3,825,785) (13,012,944) 296,736,314 267,029,409 267,029,409 195,683,895 - - - (3,417) (20,951) progress 8,751,623 22,411,554 (2,601,766) 42,503,008 (6,638,910) 32,720,935 32,720,935 51,390,219 (43,758,149) (54,529,965) Construction in - 1,514 102,518 488,235 (754,637) 4,257,508 3,932,187 Leaseholds 43,310,095 (1,472,455) 54,091,069 (2,588,475) 91,270,230 91,270,230 35,345,700 136,713,259 improvements - - 6,195 75,871 39,554 fixtures 398,892 (508,417) (620,019) 4,893,096 5,170,049 (1,181,303) loss amounting to EUR 6,638,910 has been recognised in 27,127,196 23,808,395 23,808,395 18,853,278 Furniture and - - 25,157 Vehicles 135,256 303,868 (52,687) 153,924 (678,583) (438,239) 4,725,843 3,479,288 27,027,498 22,593,801 22,593,801 19,373,671 - 1,003 52,687 87,554 143,410 (725,217) (179,052) 3,003,443 7,479,769 equipment (2,811,890) 25,458,541 88,824,626 81,825,834 81,825,834 56,314,378 Machinery and ------6,076 18,761 (80,509) 324,955 386,703 386,703 Buildings 380,627 ------Land 397,489 1,207,461 7,967,157 (7,663,815) 14,423,511 14,423,511 14,026,022 Balance at 31 December 2011 of change in group structure (*****) Effect (****) Transfers Disposals Additions (*) in exchange rates of movements Effect Balance at 1 January 2011 Balance at 31 December 2010 (****) Transfers Impairment losses (***) Acquisitions through business combinations (**) Disposals Cost Additions (*) Balance at 1 January 2010 in exchange rates of movements Effect costs costs amounting to EUR 298,139 are capitalised on property and equipment in 2011 (2010: 701,163). The capitalisation rate used determine the amount of borrowing (*) Borrowing capitalisation is 100 % (2010: %). eligible for Europe in 2010 (see Note 3(a)). of acquisition 50 % shares HAVAŞ (**) Effect Impairment an insurance policy. by İstanbul in March 2010 which is covered Project of TAV (***) There was a fire in the Trigeneration 17. PROPERTY AND EQUIPMENT the consolidated financial statements for the damage occurred on the generators. Additionally, an income accrual is booked for the amount that will be compensated by the insurance the amount that will be compensated by for an income accrual is booked the damage occurred on generators. Additionally, the consolidated financial statements for the damage and loss of operations. company for to intangible assets. amounting to EUR 408,500 (2010: 406,541) comprises transfer (****) The remaining portion of transfer Europe in 2011 (see Note 3(a)). of acquisition additional 16.67 % shares HAVAŞ (*****) Effect TAV Havalimanları Holding A.Ş. and its Subsidiaries TAV Statements Notes to the Consolidated Financial the year ended 31 December 2011 As at and for (Amounts expressed in Euro unless otherwise stated) Financial Information 55 Total 519,711 474,441 21,218,211 23,034,317 (2,354,352) (1,377,385) (1,898,410) 78,156,329 97,494,629 97,494,629 178,963,452 169,534,780 117,772,862 ------progress 8,751,623 32,720,935 Construction in 21,607 128,042 (580,580) (620,915) 9,759,131 11,916,644 (1,654,969) Leaseholds 70,062,851 12,975,175 21,207,379 21,207,379 31,944,135 104,769,124 improvements 17,089 fixtures 251,295 (296,201) (439,194) (781,562) 3,200,982 3,071,715 9,922,545 8,471,792 12,180,527 15,336,603 15,336,603 17,204,651 Furniture and 35,413 50,611 223,557 Vehicles (340,270) (494,042) 3,518,019 2,941,396 9,072,382 10,799,755 10,293,059 13,521,419 13,521,419 16,227,743 42,456 445,602 (62,912) (210,128) (373,658) 4,702,936 5,068,866 equipment 36,585,477 34,517,367 42,625,987 47,308,467 47,308,467 52,239,149 Machinery and - 2,037 37,143 11,663 35,696 81,581 (10,936) 167,771 265,942 120,761 120,761 157,184 Buildings ------Land 7,967,157 14,423,511 At 31 December 2011 in exchange rates of movements Effect in exchange rates of movements Effect Carrying amounts At 31 December 2010 Balance at 1 January 2010 Balance at 1 January 2011 Accumulated depreciation the period Depreciation for Disposals Balance at 31 December 2010 the period Depreciation for Disposals of change in group structure (*) Effect Balance at 31 December 2011 Europe in 2011 (see Note 3(a)). of acquisition additional 16.67 % shares HAVAŞ (*) Effect the outstanding notes payable amounting to EUR 1,049,400 (31 December amounting to EUR 3,148,200 (31 December 2010: 2,037,126) for There is a pledge on vehicles of HAVAŞ 2010: EUR 633,560). amounting to EUR 2,999,037 as at 31 December 2011 (31 2010: 3,389,113) with respect the borrowings Tunisia There is a pledge on property and equipment of TAV obtained from financial institutions. TAV Havalimanları Holding A.Ş. and its Subsidiaries TAV Statements Notes to the Consolidated Financial the year ended 31 December 2011 As at and for (Amounts expressed in Euro unless otherwise stated) 56 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

18. INTANGIBLE ASSETS

Purchased Internally software and generated Customer brandmarks software relationships DHMİ license Total

Cost Balance at 1 January 2010 11,636,075 3,754,038 32,708,550 7,743,771 55,842,434 Effect of movements in exchange rates 76,896 - - - 76,896 Additions 1,046,598 - - - 1,046,598 Disposals (80,921) - - - (80,921) Acquisitions through business combinations (*) 483 - 637,00 - 637,484 Transfers from construction in progress (**) 69,090 337,451 - - 406,541 Balance at 31 December 2010 12,748,221 4,091,489 33,345,551 7,743,771 57,929,032

Balance at 1 January 2011 12,748,221 4,091,489 33,345,551 7,743,771 57,929,032 Effect of movements in exchange rates (270,298) - - - (270,298) Additions 1,185,637 - - - 1,185,637 Disposals (201,277) - - - (201,277) Transfers from construction in progress (**) 408,500 - - - 408,500 Effect of change in group structure (***) 155,967 - 1,783,950 - 1,939,917 Balance at 31 December 2011 14,026,750 4,091,489 35,129,501 7,743,771 60,991,511

Amortisation

Balance at 1 January 2010 6,125,859 809,035 7,587,388 - 14,522,282 Effect of movements in exchange rates 43,156 - - - 43,156 Amortisation for the period 2,226,294 272,766 3,061,732 - 5,560,792 Disposals (75,063) - - - (75,063) Balance at 31 December 2010 8,320,246 1,081,801 10,649,120 - 20,051,167

Balance at 1 January 2011 8,320,246 1,081,801 10,649,120 - 20,051,167 Effect of movements in exchange rates (201,754) - - - (201,754) Amortisation for the period 2,010,883 272,766 3,093,582 - 5,377,231 Disposals (186,075) - - - (186,075) Effect of change in group structure (***) 32,687 - - - 32,687 Balance at 31 December 2011 9,975,987 1,354,567 13,742,702 - 25,073,256

Carrying amounts

At 31 December 2010 4,427,975 3,009,688 22,696,431 7,743,771 37,877,865

At 31 December 2011 4,050,763 2,736,922 21,386,799 7,743,771 35,918,255

(*)Effect of acquisition of 50 % shares of HAVAŞ Europe in 2010 (see Note 3(a)). (**) Transfers amounting to EUR 408,500 (31 December 2010: EUR 406,541) are related with the internally generated software in progress. (***) Effect of acquisition of additional 16.67 % shares of HAVAŞ Europe in 2011 (See Note 3(a)).

Financial Information 57

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

There is a pledge on intangible assets of TAV Tunisia amounting to EUR 1,709 (31 December 2010: EUR 27,663) with respect to the borrowings from financial institutions.

DHMİ licenses through the purchase of HAVAŞ shares in years 2005 and 2007 and purchase of TGS shares in the year 2009 were recognised with indefinite useful lives since there is no foreseeable limit to the period over which they are expected to generate net cash inflows. The DHMİ license associated with the acquisitions of HAVAŞ and TGS were deemed indefinite lived intangible assets since;

• without these licenses ground handling companies could not operate, • it’s difficult to obtain the licence, which requires high pre-operational costs and procurement of workforce and equipment required to deliver ground handling services • the continuity of the license requires low annual payments compared to initial license cost.

The replacement cost method was used in order to determine the fair value of the DHMI licences for impairment testing. As a result of the impairment testing no impairment was recognized.

Goodwill

An analysis of goodwill as at 31 December 2011 and 2010 is as follows: 2011 2010

Balance at 1 January 154,019,707 151,402,835 Effect of change in group structure (*) (1,891,105) - Addition during the period (**) - 2,616,872 Balance at the end of the year 152,128,602 154,019,707

Goodwill is related with the CGU’s HAVAŞ, TGS, HAVAŞ Europe and TAV Tbilisi as at 31 December 2011 and 2010.

(*) After the step acquisition of additional 16.67 % shares of HAVAŞ Europe in December 2011, HAVAŞ has obtained control of HAVAŞ Europe. As a result of obtaining control over HAVAŞ Europe, identifiable assets acquired and the liabilities assumed are reassessed and previous goodwill amounting to EUR 2,616,872 arising from the acquisition of 50 % shares of HAVAŞ Europe in 2010 was recomputed as EUR 725,767 in the consolidated financial statements as at 31 December 2011 (see Note 7). (**) Addition amount in 2010 consists of the goodwill amount arising on acquisition of 50 % shares of HAVAŞ Europe (see Note 7). 58 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Impairment testing for CGU’s

For the purpose of impairment testing, goodwill is allocated to CGU’s. The aggregate carrying amounts of goodwill allocated to each CGU are as follows: 2011 2010 HAVAŞ 131,564,539 131,564,539 TGS 15,979,972 15,979,972 TAV Tbilisi 3,858,324 3,858,324 HAVAŞ Europe 725,767 2,616,872 152,128,602 154,019,707

A valuation for the fair values of HAVAŞ, TGS and TAV Tbilisi as three seperate CGU’s was performed by an independent valuation expert. The income and market approaches were used to determine the fair values of HAVAŞ and TAV Tbilisi. In the analysis, income approach (discounted cash flow method) was mostly used, with lower weightings were applied to the value of HAVAŞ and TAV Tbilisi resulting from the Guideline Transaction and Company methods. For the valuation of TGS, solely income approach method was used since TGS became fully operational during 2010.

5-year business plan prepared by the management for HAVAŞ, and 10-year business plans prepared by the management for TGS and TAV Tbilisi were used in the valuation of companies. The growth in business plan of HAVAŞ and TGS is driven by the opportunities in companies’ businesses and addition of new customers. Furthermore, since TAV Tbilisi has a limited life, the forecast of TAV Tbilisi was extended until the end of the BOT period assuming a lower growth rate and maintaining the margins estimated by the management.

As a result of the impairment testing performed on CGU basis, no impairment loss was recognised as at 31 December 2011.

Key assumptions used in discounted cash flow projections

Key assumptions used in calculation of recoverable amounts are discount rates and terminal growth rates. These assumptions are as follows: Discount rate Terminal growth rate HAVAŞ 14 % 2 % TGS 13 % 2 % TAV Tbilisi 16 % n.a

Discount rate

The discount rates used in discounted cash flows are the weighted average cost of capitals (“WACC”) of the companies.

Terminal growth rates for HAVAŞ and TGS are determined as 2 %. Since TAV Tbilisi has a limited life, terminal growth rate is not used in the valuation.

Market Approach

The Guideline Transaction Method utilises valuation multiples based on actual transactions that have occurred in the subject company’s industry. These derived multiples are then applied to the appropriate operating data of the subject company to arrive at an indication of fair market value. Guideline Company Method focuses on comparing the subject company to guideline publicly-traded companies.

Financial Information 59 907,254,565 63,617,782 7,309,776 836,327,007 836,327,007 42,071,484 2,406,338 791,849,185 Total 86,711,395 58,587,773 - 28,123,622 28,123,622 28,123,622 - - Skopje Skopje International Airport 21,525,045 720,659 - 20,804,386 20,804,386 8,974,248 - 11,830,138 Antalya Gazipaşa Airport 515,971,435 4,309,350 - 511,662,085 511,662,085 4,973,614 - 506,688,471 Enfidha International Airport 91,077,208 - 7,309,776 83,767,432 83,767,432 - 2,406,338 81,361,094 Tbilisi International Airport 80,469,270 - - 80,469,270 80,469,270 - - 80,469,270 İzmir Adnan Menderes International Airport 111,500,212 - - 111,500,212 111,500,212 - - 111,500,212 Ankara Esenboğa International Airport Balance at 31 December 2011 Additions (*) in exchange rates of movements Effect Balance at 1 January 2011 Balance at 31 December 2010 Additions (*) in exchange rates of movements Effect Cost Balance at 1 January 2010 costs amounting to EUR 2,550,047 was capitalised on airport operation right during 2011 (2010: 4,055,845). The capitalisation rate used determine the amount of (*) Borrowing capitalisation is 100 % (31 December 2010: %). costs eligible for borrowing TAV Havalimanları Holding A.Ş. and its Subsidiaries TAV Statements Notes to the Consolidated Financial the year ended 31 December 2011 As at and for (Amounts expressed in Euro unless otherwise stated) RIGHT 19. AIRPORT OPERATION 60 TAV Airports 2011 Annual Report Total 481,595 2,077,414 36,729,520 32,765,582 68,808,174 734,271,656 140,862,285 102,055,351 102,055,351 766,392,280 - - - - - Airport 1,615,051 1,615,051 28,123,622 85,096,344 Skopje International Skopje - - - Airport 918,192 366,629 366,629 366,629 1,284,821 20,437,757 20,240,224 Antalya Gazipaşa - - - Airport 13,722,893 11,955,832 25,678,725 11,955,832 11,955,832 499,706,253 490,292,710 EnfidhaInternational Airport 481,595 3,998,688 2,077,414 3,968,425 63,901,910 25,941,624 19,865,522 19,865,522 15,415,502 65,135,584 Tbilisi International - - Menderes 9,759,313 9,759,313 38,849,758 51,378,825 41,619,512 41,619,512 31,860,199 29,090,445 İzmir Adnan International Airport - -

6,715,383 6,715,383 83,252,356 34,963,239 28,247,856 28,247,856 21,532,473 76,536,973 Ankara Esenboğa International Airport At 31 December 2011 Carrying amounts At 31 December 2010 Balance at 31 December 2011 Amortisation for the period Amortisation for in of movements Effect exchange rates Balance at 1 January 2011 Balance at 31 December 2010 Amortisation for the period Amortisation for in of movements Effect exchange rates Accumulated amortization Balance at 1 January 2010

TAV Havalimanları Holding A.Ş. and its Subsidiaries TAV Statements Notes to the Consolidated Financial the year ended 31 December 2011 As at and for (Amounts expressed in Euro unless otherwise stated) Financial Information 61

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

20.OTHER INVESTMENTS

Non-current investments

At 31 December 2011 and 2010, non-current investments comprised the following:

Ownership 31 December 31 December % 2011 2010 Unlisted entities TAV Havacılık A.Ş. (“TAV Havacılık”) 1.00 24,238 24,238 24,238 24,238

21. PREPAID RENT EXPENSES

An analysis of the Group’s prepaid rent expenses as at 31 December 2011 and 2010 is as follows:

Prepaiddevelopment 31 December 2011 Rent expenditures Total Balance at 31 December 2010 174,042,177 30,833,562 204,875,739 Rent payments 106,638,321 - 106,638,321 Current period rent expense – TAV İstanbul (119,513,730) (3,078,295) (122,592,025) Balance at 31 December 2011 161,166,768 27,755,267 188,922,035 Represented as current prepaid rent expense 120,363,039 3,086,731 123,449,770 Represented as non-current prepaid rent expense 40,803,729 24,668,536 65,472,265

Prepaiddevelopment 31 December 2010 Rent expenditures Total Balance at 31 December 2009 190,777,674 33,911,857 224,689,531 Rent payments 97,461,768 - 97,461,768 Current period rent expense – TAV İstanbul (114,197,265) (3,078,295) (117,275,560) Balance at 31 December 2010 174,042,177 30,833,562 204,875,739 Represented as current prepaid rent expense 119,513,728 3,078,297 122,592,025 Represented as non-current prepaid rent expense 54,528,449 27,755,265 82,283,714 62 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Rent:

The total rent associated with the rent agreement is USD 2,543,000,000 plus VAT (equivalent to EUR 1,965,575,211 as at 31 December 2011). TAV İstanbul paid in advance 23 % of the total amount plus VAT as required by the Rent Agreement. A payment representing 5.5 % of the total rent amount will be made within the first five workdays of each rental year following the first rental year. Below is the payment schedule per the Rent Agreement, excluding VAT, as at 31 December 2011:

Year Amount (US Dollar) Amount (Euro) 2012 139,865,000 108,106,637 2013 139,865,000 108,106,637 2014 139,865,000 108,106,637 2015 139,865,000 108,106,637 After 2016 to 2020 699,325,000 540,533,183 1,258,785,000 972,959,731

Prepaid development expenditures:

Prepaid development expenditures represent costs incurred by TAV İstanbul related to the installation of EDS Security Systems (“EDS”) for the International and Domestic Lines Terminals, and various re-design at the exterior of the Domestic Lines Terminal as required by the Rent Agreement.

22. DEFERRED TAX ASSETS AND LIABILITIES

The Group recognizes deferred tax assets and liabilities in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. These differences usually result in the recognition of revenue and expenses in different reporting periods for IFRS and tax purposes and they are given below.

For calculation of deferred tax asset and liabilities, the rate of 20 % for subsidiaries and joint ventures in Turkey (31 December 2010: 20 %), the rate of 15 % for subsidiaries and joint ventures in Georgia and Latvia (31 December 2010: 15 %), the rate of 30 % for subsidiaries in Tunisia (31 December 2010: 30 %) and the rate of 10 % for subsidiaries in Macedonia (31 December 2010: 10 %) are used.

In Turkey, companies cannot declare a consolidated tax return, therefore subsidiaries and joint ventures that have deferred tax assets position were not netted off against subsidiaries and joint ventures that have deferred tax liabilities position and disclosed separately. Financial Information 63

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Recognised deferred tax assets and liabilities

As at 31 December 2011 and 2010, deferred tax assets and liabilities are attributable to the following:

Assets Liabilities Net 31 December 31 December 31 December 31 December 31 December 31 December 2011 2010 2011 2010 2011 2010 Property and equipment, airport operation right, and other intangible assets 7,420,630 13,613,639 (15,334,340) (14,484,033) (7,913,710) (870,394) Prepaid rent expenses - - (4,029,880) (4,383,534) (4,029,880) (4,383,534) Trade and other receivables and payables 41,716 38,280 (441,078) (1,465,460) (399,362) (1,427,180) Derivatives 26,314,909 19,749,109 - - 26,314,909 19,749,109 Loans and borrowings 3,638,583 3,437,327 (985,658) (924,698) 2,652,925 2,512,629 Reserve for employee severance indemnity 1,968,446 1,400,546 - - 1,968,446 1,400,546 Provisions 915,929 833,383 - - 915,929 833,383 Tax loss carry-forwards 24,605,830 37,115,082 - - 24,605,830 37,115,082 Investment incentives 29,790,448 16,444,885 - - 29,790,448 16,444,885 Other items 2,699,904 2,896,494 (964,137) (1,059,767) 1,735,767 1,836,727 Deferred tax assets / (liabilities) 97,396,395 95,528,745 (21,755,093) (22,317,492) 75,641,302 73,211,253 Set-off of tax (15,677,908) (16,036,182) 15,677,908 16,036,182 - - Net deferred tax assets / (liabilities) 81,718,487 79,492,563 (6,077,185) (6,281,310) 75,641,302 73,211,253

64 TAV Airports 2011 Annual Report - 2011 915,929 (399,362) 2,652,925 1,968,446 1,735,767 Balance at 26,314,909 24,605,830 (7,913,710) 29,790,448 (4,029,880) 31 December ------change in group Effect of Effect structure (243,181) 75,641,302 ------rate 62,993 changes Effect of Effect exchange in foreign in foreign (243,181) ------other income 62,993 6,276,998 Recognisedin comprehensive - loss 82,546 353,654 288,802 140,296 567,900 (100,960) 1,027,818 6,276,998 in profit or Recognised 13,345,563 6(6,863,128) (12,509,252) - 2010 833,383 (870,394) 2,512,629 1,400,546 1,836,727 Balance at 19,749,109 37,115,082 16,444,885 (4,383,534) (1,427,180) (3,666,761) 31 December ------through (95,550) business Acquisition 73,211,253 combinations ------rate 19,764 changes Effect of Effect (95,550) exchange in foreign in foreign ------income in other 4,868,363 Recognised comprehensive 4,868,36319,764 loss 535,563 507,451 349,077 952,912 8,227,704 3,385,482 3,061,313 2,472,796 9,836,620 in profit or Recognised (1,445,125) (6,383,194) 21,500,599 2010 17,945 893,095 484,306 883,815 1 January 1,977,066 Balance at 12,407,950 27,278,462 (9,022,312) 22,828,079 (7,769,016) (3,061,313) 46,918,077 Property and equipment, airport operation right and other intangible assets Prepaid rent expenses Other investments Trade and other receivables payables Trade Derivatives Loans and borrowings Reserve for employee severance indemnity employee Reserve for Provisions Tax loss carry-forwards Tax Investment incentives Other items Tax assets / (liabilities) Tax TAV Havalimanları Holding A.Ş. and its Subsidiaries TAV Statements Notes to the Consolidated Financial the year ended 31 December 2011 As at and for (Amounts expressed in Euro unless otherwise stated) during the period in temporary differences Movements Financial Information 65

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

At the reporting date, the Group has unused tax losses of EUR 148,034,971 (31 December 2010: EUR 165,002,376) available for offset against future profits. Tax losses can be carried forward for five years under the current tax legislation. Deferred tax asset amounting to EUR 24,605,830 (31 December 2010: EUR 37,115,082) which the Group can utilize for offsetting the against tax losses in the following years, is recognised as at 31 December 2011. Unutilised tax losses will expire as follows:

31 December 2011 31 December 2010 Expire in year 2012 9,073,254 5,331,234 Expire in year 2013 92,529,090 122,995,706 Expire in year 2014 21,863,785 25,998,230 Expire in year 2015 52,163 10,677,206 Expire in year 2016 and after 24,516,679 - Total 148,034,971 165,002,376

Tax loss carry forwards amounting to EUR 28,937,927 arise from TAV Tunisia’s losses, and can be carried forward without any time restriction.

The Group recognised deferred tax assets related with the unused tax losses, since it is assessed as probable that sufficient future taxable profits will be available, through increase in passenger numbers and improved operational performance in the following years, against which the unused tax losses can be utilised before they expire.

As per the annulment decision of the Turkish Constitutional Court (see Note 16), TAV Esenboğa and TAV İzmir, consolidated subsidiaries of the Company, are subject to investment allowance ruling and can use their available allowances to reduce their taxable corporate income without any time limitations. Accordingly, deferred tax asset amounting to EUR 29,790,448 (31 December 2010: EUR 16,444,885) on such investment allowance of TAV Esenboğa and TAV İzmir is recorded in the accompanying consolidated financial statements as at 31 December 2011 since it is assessed as probable that TAV Esenboğa and TAV İzmir will use their right of deducting investment allowances from their corporate income after deducting carry forward tax losses to the extent that sufficient future taxable profits will be available till the end of their concession periods.

Unrecognised deferred tax assets and liabilities

Unrecognised deferred tax assets as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December2010 Tax loss carry-forwards 13,917,690 789,228 Investment incentives 7,531,688 22,830,830 21,449,378 23,620,058

The tax incentives do not expire under current tax legislation. Deferred tax assets have not been recognized in respect of the investment incentives because it is not probable that future taxable profit will be available against which the Group can utilize the benefits therefrom till the end of concession periods.

In accordance with IAS 12 “Income Taxes”, at 31 December 2011, a deferred tax liability of EUR 35,584,026 (31 December 2010: EUR 20,925,379) related to investments in subsidiaries and joint ventures was not recognized since it is not assessed as probable that the temporary difference will reverse in the foreseeable future. 66 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Movements of net deferred tax assets are as follows:

2011 2010 Balance at 1 January 73,211,253 46,918,077 Recognised in profit or loss for the period (3,666,761) 21,500,599 Recognised in other comprehensive income 6,276,998 4,868,363 Effect of movements in exchange rates 62,993 19,764 Acquired in business combinations (243,181) (95,550) Balance at 31 December 75,641,302 73,211,253

23. INVENTORIES

At 31 December 2011 and 2010, inventories comprised the following:

31 December2011 31 December 2010 Duty free inventories 10,819,492 6,792,669 Spare parts and other inventories 6,190,364 5,802,862 Catering inventories 1,666,615 1,371,199 18,676,471 13,966,730

At 31 December 2011, the write-down of inventories to net realizable value amounted to EUR 216,141 (31 December 2010: EUR 221,502).

24.OTHER RECEIVABLES, CURRENT AND NON-CURRENT ASSETS

At 31 December 2011 and 2010, other receivables and current assets comprised the following:

Other receivables and current assets 31 December2011 31 December 2010 Advances to suppliers (*) 13,600,612 698,478 Income accruals (**) 9,576,061 9,910,349 VAT deductible (***) 8,221,743 6,026,244 Business advances given 4,419,326 2,178,747 Prepaid insurance 3,503,852 6,156,491 Other prepaid expense 2,473,249 4,123,586 Prepaid taxes and funds 1,231,448 1,918,552 Other receivables 2,556,349 2,292,910 45,582,640 33,305,357

(*) Advances to suppliers mainly comprises advance given to DHMİ by TAV Ege. (**) Income accruals include the accrued insurance income from insurance companies amounting to EUR 6,171,904 related with the fire in Trigeneration Project of TAV İstanbul (31 December 2010: EUR 6,924,254). (***) VAT deductible is mainly attributable to the VAT of TAV Macedonia according to local legislations. Financial Information 67

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

At 31 December 2011 and 2010, non-current assets comprised the following:

Other non-current assets: 31 December2011 31 December 2010 Advances to suppliers 137,333 239,385 Non-current prepaid insurance expenses 22,686 34,616 Other non-current receivables 396,491 327,679 556,510 601,680

25. TRADE RECEIVABLES

At 31 December 2011 and 2010, trade receivables comprised the following:

Trade receivables: 31 December 2011 31 December 2010 Trade receivables (*) 52,851,752 54,812,599 Guaranteed passenger fee receivable from DHMİ (**) 19,511,750 20,646,543 Doubtful receivables 10,251,271 3,111,507 Allowance for doubtful receivables (-) (10,251,271) (3,111,507) Notes receivable 1,398,469 2,212,288 Other 61,046 10,184 73,823,017 77,681,614

Non-current trade receivables:

Guaranteed passenger fee receivable from DHMİ (**) 94,299,205 113,810,957 94,299,205 113,810,957

Allowance for doubtful receivables has been determined by reference to past default experience.

The Group’s exposure to credit and market risks and impairment losses on trade receivables are disclosed in Note 38.

(*) Pledges on trade receivables are disclosed in Note 39. (**) Guaranteed passenger fee receivable represents the remaining discounted guaranteed passenger fee to be received from DHMİ according to the agreements made for the operations of Ankara Esenboğa Airport and İzmir Adnan Menderes Airport as a result of IFRIC 12 application. 68 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

26. CASH AND CASH EQUIVALENTS

At 31 December 2011 and 2010, cash and cash equivalents comprised the following:

31 December 2011 31 December2010 Cash on hand 912,768 591,338 Cash at banks - Demand deposit 14,812,615 7,431,550 - Time deposits 59,732,453 23,830,600 Other liquid assets 888,921 588,885 Cash and cash equivalents 76,346,757 32,442,373 Bank overdrafts used for cash management purposes - (2,865,313) Cash and cash equivalents in the statement of cash flows 76,346,757 29,577,060

The details of the Group’s time deposits, maturities and interest rates as at 31 December 2011 and 2010 are as follows:

31 December 2011Original Currency Maturity Interest rate % Balance TRL January 2012 8.00 - 12.05 30,514,432 EUR January 2012 1.00 - 5.67 24,563,532 USD January 2012 0.50 - 5.74 4,654,489 59,732,453

31 December 2010 Original Currency Maturity Interest rate % Balance TRL January 2011 6.00 - 9.00 17,899,934 EUR January 2011 0.15 - 0.50 5,261,075 USD January 2011 0.50 603,219 MKD January 2011 0.50 66,372 23,830,600

The Group’s exposure interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 38.

There is no blockage or restriction on the use of cash and cash equivalents as at 31 December 2011 and 2010.

Financial Information 69

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

27. RESTRICTED BANK BALANCES

At 31 December 2011 and 2010, restricted bank balances comprised the following:

31 December 2011 31 December 2010 Project reserve and funding accounts (*) 341,582,638 369,914,807 Cash collaterals (**) 14,162,863 12,529,990 355,745,501 382,444,797

(*) Certain subsidiaries, namely TAV İstanbul, TAV Esenboğa, TAV İzmir, TAV Tunisia, TAV Tbilisi, TAV Macedonia and ATÜ (“the Borrowers”) opened Project Accounts designated mainly in order to reserve required amount of debt services, lease payment to DHMİ based on agreements with their lenders. As a result of pledges regarding the project bank loans as explained in Note 30, all cash except for cash on hand are classified in these accounts for TAV İstanbul, TAV Esenboğa, TAV İzmir, TAV Tunisia, TAV Tbilisi and TAV Macedonia. Based on these agreements, the Group can access and use such restricted cash as per the conditions and cascade defined in respective loan agreements. The project accounts should be used for predetermined purposes, such as, operational expenses, loan repayments or rent payments to airport administrations, tax payments, debt service, etc.

(**) Cash collaterals include the time deposit provided by HAVAŞ as guarantee for its bank loan.

Interest rates are in the range of 0.08 % - 4.50 % (31 December 2010: 0.10 % - 3.70 %) for EUR reserves, in the range of 0.10 % - 9.00 % (31 December 2010: 0.24 % - 3.00 %) for USD reserves, and in the range of 3.50 % - 12.10 % (31 December 2010: 1.50 % - 9.00 %) for TRL reserves.

28. CAPITAL AND RESERVES

At 31 December 2011 and 2010, the shareholding structure of the Company was as follows:

Shareholders (%) 31 December 2011 Akfen Holding A.Ş. (“Akfen Holding”) 26.12 94,886,071 Tepe İnşaat Sanayi A.Ş. (“Tepe İnşaat”) 26.06 94,664,477 Sera Yapı 4.03 14,644,716 Other non-floated 3.52 12,775,047 Other free float 40.27 146,310,939 Paid in capital in TRL (nominal) 100.00 363,281,250

Paid in capital in EUR (nominal) as at 31 December 2011 148,654,247 Effect of non-cash increases and exchange rates 13,729,731 Paid in capital EUR 162,383,978

70 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Shareholders (%) 31 December 2010 Akfen Holding 26.12 94,886,071 Tepe İnşaat 26.06 94,664,477 Sera Yapı 4.17 15,139,046 Other non-floated 3.52 12,775,048 Other free float 40.13 145,816,608 Paid in capital in TRL (nominal) 100.00 363,281,250

Paid in capital in EUR (nominal) as at 31 December 2010 177,288,200 Effect of non-cash increases and exchange rates (14,904,222) Paid in capital EUR 162,383,978

The Company’s share capital consists of 363,281,250 shares amounting to TRL 363,281,250 as at 31 December 2011 (31 December 2010: 363,281,250 shares amounting to TRL 363,281,250).

Legal reserves

According to the Turkish Commercial Code (“TCC”), legal reserves are comprised of first and legal reserves. The first legal reserves are generated by annual appropriations amounting to 5 percent of income disclosed in the Company’s statutory accounts until it reaches 20 percent of paid-in share capital. If the dividend distribution is made in accordance with Communiqué XI-29, a further 1/10 of dividend distributions, in excess of 5 percent of paid-in capital is to be appropriated to increase second legal reserves. If the dividend distribution is made in accordance with statutory records, a further 1/11 of dividend distributions, in excess of 5 percent of paid-in capitals are to be appropriated to increase second legal reserves. Under the TCC, the legal reserves can be used only to offset losses and are not available for any other usage unless they exceed 50 percent of paid-in capital. At 31 December 2011, legal reserves of the Group amount to EUR 36,349,627 (31 December 2010: EUR 21,655,917).

Non-controlling interests

Equity in a subsidiary that is not attributable, directly or indirectly, to a parent is classified under the “Non-controlling interests” in the consolidated financial statements.

As at 31 December 2011 and 2010 the related amounts in the “Non-controlling interests” in the consolidated statement of financial position are respectively EUR 87,210,276 and EUR 103,060,117. In addion, net profit or loss in a subsidiary that is not attributable, directly or indirectly, to a parent is also classified under the “Non-controlling interests” in the consolidated financial statements. As at 31 December 2011 and 2010 loss amounts attributable to non-controlling interests in the consolidated statement of comprehensive income are respectively EUR 5,570,167 and EUR 4,581,758. Financial Information 71

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Dividend distribution

Publicly held companies distribute dividends based on the Capital Market Board (“CMB”) regulations explained below:

According to CMB’s decision on 27 January 2010 numbered 02/51, corporations traded on the stock exchange market are not obliged to distribute a specified amount of dividends. For corporations that will distribute dividends, in relation to the resolutions in their general meeting the dividends may be in cash, may be free by adding the profit into equity, or may be partially from both, it is also permitted not to distribute determined first party dividends falling below 5 percent of the paid-in capital of the company but, corporations that increased capital before distributing the previous year’s dividends and as a result their shares are separated as “old” and “new” are obliged to distribute 1st party dividends in cash.

In the Ordinary General Shareholders’ Meeting for the year 2010, it was resolved that there would not be distribution of profit for 2010 fiscal year, mainly due to accumulated losses.

Share premium

Excess amount of selling price and nominal value for each share was recorded as share premium in equity.

Revaluation surplus

The revaluation surplus comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognised or impaired.

Purchase of shares of entities under common control

The purchase of the shares of entities that are under common control are accounted for at book values. The net amount of consideration paid over the book value of the net assets acquired is recognized directly in equity.

Cash flow hedge reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. 72 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Other reserves

Other reserve comprises all gain or loss realized on sale or purchase of non-controlling interest in a subsidiary.

In 2011, TAV Holding acquired 16 % of TAV Batumi’s shares from Akfen İnşaat in return for USD 667,200 (EUR 467,061). As a result, TAV Holding’s share in TAV Batumi increased to 76 % and the effect of this transaction is recognised as an equity transaction as other reserves in the consolidated financial statements.

In 2011, TAV Holding acquired 33.33 % of TAV Güvenlik’s shares from Tepe Savunma ve Güvenlik Sistemleri Sanayi A.Ş. in return for TRL 6,000,000 (EUR 2,760,779). As a result, TAV Holding’s share in TAV Güvenlik increased to 100 % and TAV Güvenlik is fully consolidated without any non- controlling interest ownership and the effect of this transaction is recognised as an equity transaction as other reserves in the consolidated financial statements.

In 2011, TAV Holding acquired 10 % of TAV Tbilisi’s shares from Sera Yapı and Akfen İnşaat in return for USD 8,583,000 (EUR 5,954,057). As a result, TAV Holding’s share in TAV Tbilisi increased to 76 % and the effect of this transaction is recognised as an equity transaction as other reserves in the consolidated financial statements.

In 2010, HAVAŞ Holding has been established as per the laws of the Republic of Turkey in which TAV has 65 %, HSBC Investment Bank Holdings Plc (“HSBC”) has 28.33 % and İş Girişim Sermayesi Yatırım Ortaklığı A.Ş. (“İş Girişim”) has 6.67 % ownership interest. HAVAŞ Holding has taken over whole shares of HAVAŞ by paying EUR 180 million and in accordance with its ownership in HAVAŞ Holding, TAV had transferred capital of EUR 78 million to HAVAŞ Holding, as HSBC and İş Girişim injected EUR 34 million and EUR 8 million, respectively into HAVAŞ Holding, totaling to a capital of EUR 120 million. On 28 December 2010, share capital of HAVAŞ increased from TRL 45,000,000 to TRL 182,632,711 as a result of the acquisition of HAVAŞ Holding by HAVAŞ as a whole with all assets and liabilities. As a result, the Group’s share in HAVAŞ decreased to 65 % and HAVAŞ is fully consolidated with the non-controlling interest’s ownership reflected as a non-controlling interest and the effect of this transaction is recognised as an equity transaction as other reserves in the consolidated financial statements.

In 2010, an agreement regarding the sale of 18 % of shares of TAV Tunisia to Pan African Infrastructure Development Fund (“PAIDF”) was signed by the parties. Fore-mentioned shares have been transferred to PAIDF in June 2010 and PAIDF has gained the control of these shares afterwards. As a result of this transfer, TAV Holding’s share in TAV Tunisia has decreased to 67 % and the effect of this transaction was recognised as an equity transaction as other reserves in the consolidated financial statements as at 31 December 2010.

29. EARNINGS PER SHARE

The calculation of basic EPS at 31 December 2011 was based on the profit attributable to ordinary shareholders of EUR 52,761,556 (31 December 2010: EUR 49,780,525) and a weighted average number of ordinary shares outstanding of 363,281,250 (31 December 2010: 363,281,250), as follows:

2011 2010 Numerator: Profit for the period 52,761,556 49,780,525

Denominator: Weighted average number of shares 363,281,250 363,281,250

Basic profit per share 0.15 0.14

2011 2010

Issued ordinary shares at 1 January 363,281,250 363,281,250 Effect of shares issued during the period - - Weighted average number of ordinary shares 363,281,250 363,281,250

Financial Information 73

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

30. LOANS AND BORROWINGS

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity risk, see Note 38.

31 December 2011 31 December 2010 Non-current liabilities Secured bank loans (*) 964,511,878 1,005,945,828 Unsecured bank loans 55,896,379 592,092 Finance lease liabilities 634,994 1,556,474 1,021,043,251 1,008,094,394 Current liabilities Current portion of long term secured bank loans (*) 135,891,850 133,213,503 Short term unsecured bank loans 29,210,740 47,986,157 Short term secured bank loans 16,997,625 42,813,809 Current portion of long term unsecured bank loans 16,858,498 628,677 Current portion of finance lease liabilities 4,292,496 720,916 203,251,209 225,363,062

(*) Secured bank loans mainly consist of project finance loans that have been secured by pledges.

The Group’s total bank loans and finance lease liabilities as at 31 December 2011 and 2010 are as follows:

31 December2011 31 December 2010 Bank loans 1,219,366,970 1,231,180,066 Finance lease liabilities 4,927,490 2,277,390 Total 1,224,294,460 1,233,457,456

The Group’s bank loans as at 31 December 2011 are as follows:

Presented as Current liabilities Non-current liabilities Total TAV İstanbul 48,828,649 328,157,620 376,986,269 TAV Tunisia 21,666,051 346,252,111 367,918,162 TAV Esenboğa 11,154,039 112,107,460 123,261,499 TAV Holding 44,948,159 55,038,998 99,987,157 HAVAŞ 15,090,234 62,405,914 77,496,148 TAV Macedonia 6,099,932 60,458,341 66,558,273 TAV İzmir 20,169,182 21,605,422 41,774,604 ATÜ 6,776,132 17,369,537 24,145,669 TAV Tbilisi 6,006,027 16,155,476 22,161,503 TAV Gazipaşa 16,997,624 - 16,997,624 Others 1,222,684 857,378 2,080,062 198,958,713 1,020,408,257 1,219,366,970

74 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

The Group’s bank loans as at 31 December 2010 are as follows:

Presented as Current liabilities Non-current liabilities Total TAV İstanbul 66,454,425 363,819,937 430,274,362 TAV Tunisia 17,751,562 354,455,367 372,206,929 TAV Esenboğa 10,220,401 130,334,402 140,554,803 HAVAŞ 7,432,837 72,588,717 80,021,554 TAV İzmir 19,236,918 40,437,681 59,674,599 TAV Holding 42,223,876 - 42,223,876 ATÜ 6,194,360 22,074,317 28,268,677 TAV Tbilisi 5,909,002 22,216,129 28,125,131 TAV Macedonia 19,834,878 - 19,834,878 TAV Gazipaşa 16,958,210 - 16,958,210 TGS 11,783,002 - 11,783,002 Others 642,675 611,370 1,254,045 224,642,146 1,006,537,920 1,231,180,066

Redemption schedules of the Group’s bank loans according to original maturities as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010 On demand or within one year 198,958,714 224,642,146 In the second year 181,404,952 125,322,194 In the third year 126,408,005 129,332,278 In the fourth year 126,878,492 116,588,371 In the fifth year 123,417,435 120,675,484 After five years 462,299,373 514,619,593 1,219,366,971 1,231,180,066

The majority of the borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. Spread for EUR and USD denominated loans as at 31 December 2011 is between 1.26 % – 5.75 % and 4.50 %, respectively (31 December 2010: 1.50 % – 5.75 % and 4.50 %, respectively).

100 %, 49 %, 100 %, 50 %, 100 % and 85 % of floating bank loans for TAV İstanbul, TAV İzmir, TAV Esenboğa, HAVAŞ, TAV Macedonia and TAV Tunisia respectively are fixed with interest rate swaps as explained in Note 36.

The Group has obtained project loans to finance construction of its BOT concession projects, namely TAV Esenboğa, TAV İzmir, TAV Tbilisi, TAV Macedonia and TAV Tunisia; and to be able to finance advance payments to DHMİ related to concession leasing project, TAV İstanbul.

Financial Information 75

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Details of the loans are summarised for each project below:

TAV İstanbul

The breakdown of bank loans as at 31 December 2011 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loans (*) EUR 2018 Euribor + 2.50 % 378,080,000 376,986,269 378,080,000 376,986,269

TAV İstanbul has bank loan in the amount of EUR 376,986,269 under the facility agreement. The terms of the loan require semi-annual principal and interest payments on 4 July and 4 January of each year according to the loan agreements.

(*) Interest rate is Euribor + 2.50 % until 4 January 2013, Euribor + 2.65 % between the period of 4 January 2013 and 4 January 2016 and Euribor + 2.75 % between the period of 4 January 2016 and 4 July 2018.

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loans (*) EUR 2018 Euribor + 2.50 % 431,220,000 430,274,362 431,220,000 430,274,362

(*) Interest rate is Euribor + 2.50 % until 4 January 2013, Euribor + 2.65 % between the period of 4 January 2013 and 4 January 2016 and Euribor + 2.75 % between the period of 4 January 2016 and 4 July 2018.

Redemption schedules of bank loans of TAV İstanbul according to the original maturities as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December2010 On demand or within one year 48,828,649 66,454,425 In the second year 52,551,550 45,968,671 In the third year 57,366,957 51,273,849 In the fourth year 61,620,168 56,232,498 In the fifth year 62,640,026 60,155,520 After five years 93,978,919 150,189,399 376,986,269 430,274,362

76 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

TAV Tunisia

The breakdown of bank loans as at 31 December 2011 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2028 Euribor + 2.28 % 165,804,190 163,873,100 Secured bank loan EUR 2022 Euribor + 1.90 % 107,479,325 106,296,506 Secured bank loan EUR 2028 Euribor + 1.54 % 68,950,000 68,146,954 Secured bank loan EUR 2028 Euribor + 4.75 % 29,950,429 29,601,602 372,183,944 367,918,162

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2028 Euribor + 2.28 % 167,487,481 165,443,763 Secured bank loan EUR 2022 Euribor + 2.00 % 109,684,026 108,378,082 Secured bank loan EUR 2028 Euribor + 1.54 % 69,650,000 68,800,117 Secured bank loan EUR 2028 Euribor + 4.75 % 29,950,427 29,584,967 376,771,934 372,206,929

Redemption schedules of bank loans of TAV Tunisia as at 31 December 2011 and 2010 are as follows:

31 December2011 31 December 2010 On demand or within one year 21,666,051 17,751,562 In the second year 18,663,001 21,000,989 In the third year 21,755,730 21,125,801 In the fourth year 25,758,248 24,485,906 In the fifth year 28,337,761 27,721,040 After five years 251,737,371 260,121,631 367,918,162 372,206,929 Financial Information 77

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

TAV Esenboğa

The breakdown of bank loans as at 31 December 2011 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loans EUR 2021 Euribor + 2.35 % 125,700,113 123,261,499 125,700,113 123,261,499

TAV Esenboğa has a bank loan in the amount of EUR 123,261,499 under loan agreement. The terms of the loan require semi-annual principal and interest payments on 30 June and 31 December according to the loan agreement starting from 31 December 2007 for interest and 30 June 2008 for principal.

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loans EUR 2021 Euribor + 2.35 % 143,250,000 140,554,803 143,250,000 140,554,803

Redemption schedules of TAV Esenboğa borrowings according to original maturities as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010 On demand or within one year 11,154,039 10,220,401 In the second year 11,769,320 11,628,863 In the third year 12,889,659 12,886,545 In the fourth year 13,921,878 14,165,252 In the fifth year 13,944,362 15,134,935 After five years 59,582,241 76,518,807 123,261,499 140,554,803

TAV Holding

The breakdown of bank loans as at 31 December 2011 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Unsecured bank loan EUR 2012 - 2014 4.25 % - 6.95 % 85,000,000 85,800,320 Unsecured bank loan USD 2012 3.75 % - 4.25 % 13,912,841 14,186,837 98,912,841 99,987,157

78 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Unsecured bank loan USD 2011 5.50 % 18,861,939 19,189,843 Unsecured bank loan EUR 2011 4.10 % - 8.00 % 17,000,000 17,013,312 Secured bank loan EUR 2011 6.00 % 6,000,000 6,020,721 41,861,939 42,223,876

Redemption schedules of TAV Holding bank loans as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010 On demand or within one year 44,948,15 42,223,876 In the second year 49,447,989 - In the third year 5,591,009 - 99,987,157 42,223,876

HAVAŞ

The breakdown of bank loans as at 31 December 2011 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2018 Euribor + 4.75 % 60,000,000 60,313,583 Secured bank loan EUR 2017 Euribor + 5.75 % 17,340,000 17,182,565 77,340,000 77,496,148

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2018 Euribor + 4.75 % 60,000,000 60,203,252 Secured bank loan EUR 2017 Euribor + 5.75 % 20,000,000 19,818,302 80,000,000 80,021,554

Financial Information 79

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Redemption schedules of the HAVAŞ bank loans as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010 On demand or within one year 15,090,234 7,432,837 In the second year 13,285,694 14,017,548 In the third year 11,825,764 12,605,833 In the fourth year 10,529,470 11,250,238 In the fifth year 9,365,496 9,959,514 After five years 17,399,490 24,755,584 77,496,148 80,021,554

On 24 March 2010, HAVAŞ utilized a bank loan amounting to EUR 60,000,000 with an interest rate of Euribor + 4.75 % and a maturity of March 2018 from Türkiye İş Bankası A.Ş.. Following securities are provided in favor of the lender:

• TAV Holding has provided surety of EUR 10,000,000. • Second ranking pledge was established on 50 % of the shares in TGS. • Dividend receivables arising from subsidiaries and joint ventures of HAVAŞ are assigned to repayment of the outstanding loan. • Second ranking pledge was established on the shares of HAVAŞ.

In accordance with the loan agreement, HAVAŞ will have the right for the distribution of dividends only if there is a net cash balance in the related bank’s accounts at least EUR 5 million, the first three repayment instalments have been fully paid, all other payments related to financial liabilities are made till the maturity date and no event of default has occurred.

The loan agreement includes covenants, including restrictions on the ability of HAVAŞ to incur additional indebtedness; to make certain other restricted payments, loans; to create liens; to give guarantees; to dispose of assets, and to acquire a business or an undertaking.

On 9 December 2009, HAVAŞ utilized a bank loan amounting to EUR 20,000,000 with an interest rate of Euribor + 5.75 % and maturity of December 2017 from Türkiye İş Bankası A.Ş.. Following securities are provided in favor of the lender:

• First degree and first ranking pledge was established on 50 % of the shares in TGS. • Time and demand deposit amounting to EUR 14,162,863 is provided as guarantee. • TAV Holding was provided surety for the total outstanding loan amount. • Dividend receivables arising from subsidiaries and joint ventures are assigned to repayment of the outstanding loan. • Pledge has been registered with first priority against but not limited to business entity and entity name registered in trade register, machinery and equipment, furnitures and fixtures and vehicles of HAVAŞ. • First ranking pledge was established on the shares of HAVAŞ.

The loan agreement includes covenants, including restrictions on the ability of HAVAŞ to incur additional indebtedness; to make certain other restricted payments, loans; to create liens; to give guarantees; to dispose of assets, and to acquire a business or an undertaking.

Related with the bank loans amounting to EUR 60,000,000 with an interest rate of Euribor + 4.75 % and a maturity of March 2018 and the bank loan amounting to EUR 20,000,000 with an interest rate of Euribor + 5.75 % and a maturity of December 2017 from Türkiye İş Bankası A.Ş., 65 % shares of HAVAŞ with a nominal amount of TRL 118,711,263 have been pledged in favour of Türkiye İş Bankası A.Ş. by TAV Holding. However, the voting right for these shares remains at TAV Holding.

80 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

TAV Macedonia

The breakdown of bank loans as at 31 December 2011 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2020 Euribor + 5.50 % 70,000,000 66,558,273 70,000,000 66,558,273

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2011 Euribor + 1.50 % 20,000,000 19,834,878 20,000,000 19,834,878

Redemption schedules of TAV Macedonia bank loans as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010 On demand or within one year 6,099,932 19,834,878 In the second year 2,432,668 - In the third year 6,052,439 - In the fourth year 6,672,941 - In the fifth year 7,772,915 - After five years 37,527,378 - 66,558,273 19,834,878

Pledges regarding the project bank loan of TAV Macedonia:

TAV Macedonia has granted share pledge in favor of the lenders. In addition, receivables of TAV Macedonia amounting to 1,486,234 EUR (31 December 2010: 1,889,427 EUR) have been pledged and all the commercial contracts and insurance policies have been assigned to the lenders.

TAV İzmir

The breakdown of bank loans as at 31 December 2011 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2013 Euribor + 3.00 % 41,350,600 41,774,604 41,350,600 41,774,604

TAV İzmir has bank loans in the amount of EUR 41,774,604 under loan agreements. The terms of the loan require semi-annual principal and interest payments at each 23 January and 23 July according to the loan agreements. TAV İzmir has fully repaid the bank loan subsequently on 23 January 2012.

Financial Information 81

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2013 Euribor + 3.00 % 58,522,448 59,674,599 58,522,448 59,674,599

Redemption schedules of TAV İzmir bank loans according to original maturities as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010 On demand or within one year 20,169,182 19,236,918 In the second year 21,605,422 19,833,326 In the third year - 20,604,355 41,774,604 59,674,599

Pledges regarding the project bank loans of TAV İstanbul, TAV İzmir and TAV Esenboğa: a) Share pledge: TAV İstanbul, TAV İzmir and TAV Esenboğa have pledges over shares amounting to TRL 180,000,000, TRL 150,000,000, and TRL 241,650,000, respectively. In case of an event of default, the banks have the right to take control of the shares. Upon the occurrence of any event of default, the banks can demand the sale of shares by way of public auction in accordance with the applicable provisions of the Bankruptcy and Execution Law of the Republic of Turkey or by way of private auction among the nominees. Share pledges will expire after bank loans are paid or on the dates of maturity. b) Receivable pledge: In case of an event of default, the banks have the right to take control of the receivables of project companies (disclosed as the Borrowers in Note 27) in order to perform its obligations under the loan documents. Immediately upon the occurrence of default, and all payments relating to assigned receivables shall be made to the banks which shall be entitled to collect the assigned receivables and exercise all rights with respect to assigned receivables.

TAV İstanbul, TAV İzmir and TAV Esenboğa have pledged their receivables amounting to EUR 26,600,239, EUR 1,125,448, and EUR 3,208,140, respectively as at 31 December 2011 (31 December 2010: EUR 19,543,667, EUR 1,376,218, and EUR 3,077,029, respectively). c) Pledge over bank accounts: In case of an event of default, the banks have the right to control the bank accounts of project companies in order to perform its obligations under the loan documents. Upon the occurrence of event of default project companies shall be entitled to set-off and apply the whole or any part of the cash standing to the credit of the accounts and any interests, proceeds and other income that may accrue or arise from the accounts.

TAV İstanbul, TAV İzmir and TAV Esenboğa have pledges over bank accounts amounting to EUR 262,507,724, EUR 38,547,273, and EUR 19,755,667, respectively as at 31 December 2011 (31 December 2010: EUR 271,216,672, EUR 33,426,426, and EUR 30,759,515, respectively). 82 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

With the consent of the facility agent, TAV İstanbul, TAV İzmir and TAV Esenboğa have a right to have an additional;

• subordinated debt approved in advance by the Facility Agent, • indebtedness up to USD 0.5 million for the acquisition cost of any assets or leases of assets, • indebtedness up to USD 3 million for the payment of tax and social security liabilities.

Distribution lock-up tests for TAV İstanbul, TAV Esenboğa, TAV İzmir, TAV Tunisia, TAV Tbilisi and TAV Macedonia must satisfy following conditions before making any distribution:

• no default has occurred and is continuing, • no default would result from such declaration, making or payment, • the reserve accounts are each fully funded, • all mandatory prepayments required to have been made, • debt service cover ratio is not less than 1.30 for TAV İstanbul, 1.25 for TAV Esenboğa, 1.30 for TAV İzmir, 1.20 for Tunisia, 1.30 for TAV Tbilisi and 1.20 for TAV Macedonia, • the first repayment has been made, • all financing costs have been paid in full, • any tax payable in connection with the proposed distribution has been paid from amounts available for paying such distribution.

Pledges regarding the project bank loan of TAV Tunisia:

Similar to above, TAV Tunisia has granted share pledge, account pledge and pledge of rights from the Concession Agreement to the lenders. TAV Tunisia has pledge over shares amounting to TND 245,000,000. Share pledge will expire after bank loan is paid or on the date of maturity. TAV Tunisia has a right to have additional indebtedness;

• with a maturity of less than one year for an aggregate amount not exceeding EUR 3,000,000 (up to 1 January 2020) and not exceeding EUR 5,000,000 (thereafter), • under finance or capital leases of equipment if the aggregate capital value of the equipment leased does not exceed EUR 5,000,000, • incurred by, or committed in favour of, TAV Tunisia under an Equity Subordinated Loan Agreement, • disclosed in writing by TAV Tunisia to the Intercreditor Agent and in respect of which it has given its prior written consent.

ATÜ

The breakdown of bank loans as at 31 December 2011 is as follows:

NominalInterest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2012 - 2018 4.80 % - 6.00 % 15,201,528 15,458,338 Secured bank loan EUR 2015 Euribor + 2.70 % 8,417,896 8,388,436 Secured bank loan TND 2013 5.93 % 297,117 298,895 23,916,541 24,145,669 Financial Information 83

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2012 - 2018 5.00 % - 6.00 % 16,887,264 17,184,633 Secured bank loan EUR 2015 Euribor + 2.70 % 10,522,368 10,476,144 Secured bank loan TND 2013 5.93 % 630,601 607,900 28,040,233 28,268,677

Redemption schedules of the ATÜ bank loans as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December2010 On demand or within one year 6,776,132 6,194,360 In the second year 5,077,735 6,258,254 In the third year 4,542,525 4,694,988 In the fourth year 4,442,248 4,238,714 In the fifth year 1,284,586 3,848,187 After five years 2,022,443 3,034,174 24,145,669 28,268,677

TAV Tbilisi

The breakdown of bank loan as at 31 December 2011 is as follows:

NominalInterest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan USD 2015 Libor + 4.50 % 21,920,000 22,161,503 21,920,000 22,161,503

The breakdown of bank loan as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount

Secured bank loan USD 2015 Libor + 4.50 % 27,813,520 28,125,131 27,813,520 28,125,131 84 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Redemption schedules of the TAV Tbilisi bank loans as at 31 December 2011 and 2010 are as follows:

31 December 2011 31 December 2010 On demand or within one year 6,006,027 5,909,002 In the second year 6,103,570 6,017,633 In the third year 6,186,550 6,136,087 In the fourth year 3,865,356 6,210,943 In the fifth year - 3,851,466 22,161,503 28,125,131

Pledges regarding the bank loans: a) Share pledge - to take control of 75 percent plus one share of the charter capital of TAV Tbilisi; b) Revenue pledge - to take control of the revenues derived from Tbilisi International Airport operations as stipulated in the BOT Agreement; c) Pledge over bank accounts – to take control of TAV Tbilisi’s bank accounts in JSC Bank of Georgia, JSC Bank Republic and JSC TBC Bank and be entitled to set-off and apply the whole or any part of the cash standing to the credit of the accounts and any interests, proceeds and other income that may accrue or arise from the accounts; d) Pledge over insurance proceeds – to receive all insurance compensation and any other amounts payable under the insurance policies of TAV Tbilisi; e) Pledge over BOT rights – to control all interests and benefits of TAV Tbilisi pursuant to the BOT Agreement; f) Pledge over rights under the construction guarantees – to control all right, title and interest under each construction guarantee; g) Pledge over project reserve account – to control the project reserve account.

The shareholders of TAV Tbilisi, TAV Holding, Urban İnşaat Sanayi ve Ticaret A.Ş., and Aeroser International Holding (UK) Limited concluded Guarantee, Share Retention, Support and Subordination Deed with EBRD and IFC in respect of the loans extended to TAV Tbilisi. Accordingly, all shareholders irrevocably and unconditionally guarantee, on joint and several basis: • to pay to EBRD and IFC on demand, and in the currency in which the same falls due for payment by TAV Tbilisi, all monies and liabilities which shall have been advanced to, become due, owing or incurred by TAV Tbilisi to or in favour of EBRD and IFC; • to indemnify EBRD and IFC in full on demand against all losses, costs and expenses suffered or incurred by EBRD and IFC arising from or in connection with any one or more of the purported liabilities or obligations of TAV Tbilisi to EBRD and IFC under the loan and related agreements.

Financial Information 85

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

TAV Gazipaşa

The breakdown of bank loans as at 31 December 2011 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2012 5.40 % - 6.75 % 10,450,000 10,748,799 Secured bank loan TRL 2012 11.00 % 6,137,982 6,248,825 16,587,982 16,997,624

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Secured bank loan EUR 2011 4.00 % - 7.00 % 10,450,000 10,755,767 Secured bank loan TRL 2011 8.50 % 6,100,239 6,202,443 16,550,239 16,958,210

Redemption schedules of TAV Gazipaşa bank loans as at 31 December 2011 and 2010 are as follows:

31 December2011 31 December 2010 On demand or within one year 16,997,624 16,958,210 16,997,624 16,958,210

TGS

The breakdown of bank loans as at 31 December 2010 is as follows:

Nominal Interest Original Currency Year of Maturity Rate Face Value Carrying Amount Unsecured bank loan TRL 2011 6.95 % - 7.95 % 11,712,460 11,783,002 11,712,460 11,783,002

Redemption schedules of TGS bank loans as at 31 December 2011 and 31 December 2010 are as follows:

31 December 2011 31 December2010 On demand or within one year - 11,783,002 - 11,783,002

86 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Finance lease liabilities

31 December 2011 31 December 2010 Present Present Future value of Future value of minimum minimum minimum minimum lease lease lease lease payments Interest payments payments Interest payments 1 year 4,354,998 62,502 4,292,496 1 year 748,758 27,842 720,916 1-5 year 678,195 43,201 634,994 1-5 year 1,572,058 15,584 1,556,474 Total 5,033,193 105,703 4,927,490 Total 2,320,816 43,426 2,277,390

It is the Group’s policy to lease certain of its fixtures and equipment under finance leases. The average remaining lease term is five years as at 31 December 2011. For the year ended 31 December 2011, the average effective borrowing rate was 6.32 % (31 December 2010: 6.60 %). Interest rates are fixed at the contract date, and thus expose the Group to fair value interest rate risk. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

31. RESERVE FOR EMPLOYEE SEVERANCE INDEMNITY

Under the Turkish Labour Law, the Company and its Turkish subsidiaries and joint ventures are required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service (20 years for women) and reaches the retirement age (58 for women and 60 for men). Since the legislation was changed on 8 September 1999, there are certain transitional provisions relating to length of service prior to retirement.

Such payments are calculated on the basis of 30 days’ pay maximum full TRL 2,732 as at 31 December 2011 (equivalent to EUR 1,118 as at 31 December 2011) (31 December 2010: TRL 2,517 (equivalent to EUR 1,228 as at 31 December 2010)) per year of employment at the rate of pay applicable at the date of retirement or termination. Reserve for retirement pay is computed and reflected in the financial statements on a current basis. The reserve has been calculated by estimating the present value of future probable obligation of the Company and its Turkish subsidiaries and joint ventures arising from the retirement of the employees. The calculation was based upon the retirement pay ceiling announced by the government.

The provision has been calculated by estimating the present value of the future probable obligation of the Company and its subsidiaries and joint venture registered in Turkey arising from the retirement of employees. IFRSs require actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:

The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying consolidated financial statements as at 31 December 2011, the provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees. The provision at 31 December 2011 has been calculated assuming an annual inflation rate of 5.00 % and a discount rate of 9.08 % resulting in a real discount rate of approximately 3.89 % (31 December 2010: annual inflation rate of 5.10 % and a discount rate of 10.00 % resulting in a real discount rate of approximately 4.66 %). It is planned that retirement rights will be paid to employees at the end of concession periods. Accordingly, present value of the future probable obligation has been calculated based on the concession periods. Financial Information 87

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

2011 2010 Balance at 1 January 7,451,972 4,645,483 Interest cost 1,601,449 699,279 Service cost 1,600,502 2,106,677 Payments made during the period (1,989,595) (1,834,364) Effects of changes in foreign exchange rate (1,154,372) 247,465 Actuarial difference 2,748,662 1,587,432 Balance at 31 December 10,258,618 7,451,972

32. OTHER PAYABLES

At 31 December 2011 and 2010, other payables comprised the following:

Other short term payables 31 December 2011 31 December 2010 Social security premiums payable 8,494,770 4,516,272 Due to personnel 6,711,429 6,626,054 Taxes and duties payable (*) 6,294,375 4,574,775 Expense accruals 2,721,949 2,137,509 Concession payable (**) 1,991,016 18,706,708 Advances received 1,190,971 678,847 Other accruals and liabilities 1,131,489 834,456 28,535,999 38,074,621

Other long term payables 31 December 2011 31 December 2010 Concession payable (**) 14,487,214 - Taxes and duties payable (*) 1,272,811 - Other accruals and liabilities 183,232 - 15,943,257 -

(*) The Group has obtained benefits from tax amnesty within the context of Law no.6111. In this context, the Group has payables amounting to EUR 2,128,065 in other short term payables and EUR 1,272,811 in other long term payables as of 31 December 2011. (**) TAV Tunisia has a concession period of 40 years and annual concession fee is paid based on the annual revenue of Monastir and Enfidha Airports. The concession fee is computed at an increasing rate between 11 % and 26 % of the annual revenues. Based on the negotiations with OACA, the concession fee payable for 2011 is reduced by EUR 4.6 million and concession fee payables for 2011, 2012, and 2013 are deferred by 3 years to 2014, 2015 and 2016. The concession fee of TAV Macedonia is 15 % of the gross annual turnover until the number of passengers using the two airports reaches to 1 million, and when the number of passengers exceeds 1 million, this percentage shall change between 4 % and 2 % depending on the number of passengers.

The Group’s exposure to currency and liquidity risk is related to other payables is disclosed in Note 38. 88 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

33. DEFERRED INCOME

The breakdown of deferred income as at 31 December 2011 and 2010 is as follows:

31 December 2011 31 December 2010 Deferred income Short-term deferred income 11,113,055 7,238,327 Long-term deferred income 19,926,008 21,688,366 31,039,063 28,926,693

EUR 17,283,411 (31 December 2010: EUR 19,275,195) of deferred income is related with the unearned portion of concession rent income from ATÜ.

34. PROVISIONS

At 31 December 2011 and 2010, provisions comprised the following:

31 December 2011 31 December 2010 Unused vacation provision 5,286,392 4,401,279 Other provisions 326,846 431,520 5,613,238 4,832,799

Unused vacation 2011 2010 Balance at 1 January 4,401,279 2,468,446 Provision set during the period, net 1,314,910 1,802,934 Effects of change in foreign exchange rate (537,765) 129,899 Effect of change in group structure (*) 107,968 - Balance at 31 December 5,286,392 4,401,279

(*) Effect of acquisition of additional 16.67 % shares of HAVAŞ Europe in 2011 (see Note 3(a)).

35. TRADE PAYABLES

At 31 December 2011 and 2010, trade payables comprised the following:

31 December 2011 31 December 2010 Trade payables 39,311,950 33,260,277 Deposits and guarantees received 1,028,426 818,738 Other 63,962 79,374 40,404,338 34,158,389

Trade payables mainly comprise payables outstanding for trade purchases and ongoing costs. The Group’s exposure to currency and liquidity risk related to trade payables is disclosed in Note 38.

Financial Information 89

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

36. DERIVATIVE FINANCIAL INSTRUMENTS

At 31 December 2011 and 2010, derivative financial instruments comprised the following:

31 December 2011 Assets Liabilities Net Amount Interest rate swap - (126,736,082) (126,736,082) Cross currency swap 4,206,768 - 4,206,768 4,206,768 (126,736,082) (122,529,314)

31 December 2010 Assets Liabilities Net Amount Interest rate swap - (99,485,643) (99,485,643) Cross currency swap - (5,482,466) (5,482,466) - (104,968,109) (104,968,109)

Interest rate swap:

TAV Esenboğa uses interest rate swap to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2011, 100 % of project finance loan is hedged through Interest Rate Swap (“IRS”) contract during the life of the loan with an amortising schedule depending on repayment of the loan (31 December 2010: 100 %).

TAV Tunisia uses interest rate swaps to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2011, 85 % of floating senior bank loan is hedged through IRS contract during the life of the loan with an amortising schedule depending on repayment of the loan (31 December 2010: 85 %).

TAV İstanbul uses interest rate swaps to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2011, 100 % of project finance loan is hedged through IRS contract during the life of the loan with an amortising schedule depending on repayment of the loan (31 December 2010: 100 %).

TAV İzmir uses interest rate swap to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2011, 49 % of total project finance loan is hedged through IRS contract (31 December 2010: 65 %).

HAVAŞ uses interest rate swap to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2011, 50 % of total loan is hedged through IRS contract (31 December 2010: 50 %).

TAV Macedonia uses interest rate swap to manage its exposure to interest rate fluctuations on its bank borrowings. As at 31 December 2011, 100 % of total loan is hedged through IRS contract (31 December 2010: None). 90 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Cross currency swap:

TAV İstanbul uses cross currency swaps to manage its exposure to foreign currency exchange rate fluctuations on its rent installments that will be paid to DHMİ in terms of USD.

TAV İstanbul had signed a derivative contract with Dexia Credit Local (“DCL”) on 12 March 2008 to manage and fix its exposure on foreign currency exchange rate fluctuations between USD and EUR on the rent installments that will be paid to DHMİ till 2018. TAV İstanbul terminated the hedge relationship in 2010 and two new cross currency swap contracts were signed by and between TAV İstanbul, DCL, and ING Bank N.V. on 16 December 2010. The total notional amount of the contract is EUR 275,309,357 (in exchange of USD 362,857,733) as at 31 December 2011 (31 December 2010: EUR 316,004,183 (in exchange of USD 416,493,513)).

The fair value of derivatives at 31 December 2011 is estimated at EUR 122,529,314 (31 December 2010: EUR 104,968,109). This amount is based on market values of equivalent instruments at the reporting date. Since the Group applied hedge accounting as at 31 December 2011, changes in the fair value of these interest rate swaps and cross currency swaps are reflected to other comprehensive income resulting to a loss of EUR 9,840,195 (31 December 2010: EUR 8,725,740), net of tax.

Fair value disclosures:

The Group has determined the estimated fair values of the financial instruments by using current market information and appropriate valuation methods.

Since the book values of the foreign exchange denominated monetary items are estimated to approximate their fair values, these monetary items are translated to EUR by using the foreign exchange rates as at the reporting date. Since the financial assets and liabilities are short term in nature, it is accepted that their fair values approximate to their carrying amounts.

37. OPERATING LEASES

The Group entered into various operating lease agreements (excluding rent agreement for TAV İstanbul, and concession agreement for TAV Macedonia and TAV Tunisia). For the year ended 31 December 2011, total rent expenses for operating leases amounted to EUR 4,907,863 recognised in profit or loss (31 December 2010: EUR 3,168,748). Financial Information 91

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

38. FINANCIAL INSTRUMENTS

Exposure to credit, interest rate and currency risks arises in the normal course of the Group’s business. However, most of the Group’s revenues are denominated in hard currency. The gap between hard currency assets and liabilities are hedged by derivative financial instruments such as cross currency swaps. In addition to hedging of the currency risk, TAV İstanbul, TAV İzmir, TAV Esenboğa, TAV Tunisia, HAVAŞ and TAV Macedonia use interest rate swaps to hedge the fluctuations in Euribor and Libor rates (i.e. 100 %, 49 %, 100 %, 85 %, 50 % and 100 % of floating loans of TAV İstanbul, TAV İzmir, TAV Esenboğa, TAV Tunisia, HAVAŞ and TAV Macedonia, respectively are fixed).

Credit risk

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is:

Note 31 December 2011 31 December 2010 Trade receivables - non-current 25 94,299,205 113,810,957 Trade receivables - current 25 73,823,017 77,681,614 Due from related parties 40 7,944,503 5,124,375 Other receivables and current assets (*) 24 7,303,771 7,112,588 Restricted bank balances 27 355,745,501 382,444,797 Cash and cash equivalents (**) 26 75,433,989 31,851,035 Derivative financial instruments 36 4,206,768 - 618,756,754 618,025,366

(*) Non-financial instruments such as VAT deductible and carried forward, prepaid expenses and advances given are excluded from other current assets and other non-current assets. (**) Cash on hand is excluded from cash and cash equivalents.

Impairment losses

The movements in the allowance for impairment in respect of trade receivables during the years ended 31 December were as follows:

2011 2010 Balance at 1 January (3,111,507) (2,046,447) Collections during the period 57,295 414,944 Impairment loss recognized (7,327,641) (1,336,568) Effect of changes in foreign exchange rates 130,582 (143,436) Balance at 31 December (10,251,271) (3,111,507)

Allowance for doubtful receivables is determined by reference to past default experience. The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amount considered irrecoverable is written off against the trade receivable directly. 92 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

31 December 2011 Carrying Contractual 3 months 3 -12 1-5 More than Amount cash flows or less months years five years Non-derivative financial liabilities Secured bank loans 1,117,401,353 (1,447,538,794) (58,098,910) (99,030,745) (568,336,499) (722,072,640) Unsecured bank loans 101,965,617 (110,274,282) (6,943,096) (40,803,231) (62,527,955) - Financial lease liabilities 4,927,490 (4,936,432) (294,887) (4,004,255) (637,290) - Trade payables (*) 39,375,912 (39,482,652) (39,482,652) - - - Due to related parties 18,140,702 (20,207,701) (7,563,093) (3,057,792) (6,715,962) (2,870,854) Other payables (*) 43,288,285 (43,288,285) (26,511,067) (833,961) (15,943,257) -

Derivative financial liabilities Interest rate swaps used for hedging 126,736,082 (140,577,272) (5,271,410) (20,002,710) (83,202,554) (32,100,598)

Currency swaps Outflow - (275,349,357) - (40,165,436) (166,373,904) (68,810,017) Inflow (4,206,768) 280,506,405 - 40,917,699 169,489,939 70,098,767 1,447,628,673 (1,801,148,370) (144,165,115) (166,980,431) (734,247,482) (755,755,342)

(*) Non-financial instruments such as deposits on guarantees and advances received are excluded from trade payables and other payables.

31 December 2010 Carrying Contractual 3 months 3 -12 1-5 More than Amount cash flows or less months years five years Non-derivative financial liabilities Secured bank loans 1,181,973,140 (1,568,760,956) (81,465,237) (86,820,043) (575,295,078) (825,180,598) Unsecured bank loans 49,206,926 (50,821,104) (12,577,209) (37,592,813) (651,082) - Financial lease liabilities 2,277,390 (2,277,390) (180,036) (540,882) (1,556,472) - Bank overdraft 2,865,313 (2,865,313) (2,865,313) - - - Trade payables (*) 33,339,651 (33,410,648) (33,410,648) - - - Due to related parties 28,151,745 (28,602,597) (9,007,087) (3,001,342) (12,165,619) (4,428,549) Other payables (*) 37,395,774 (37,395,774) (20,801,555) (16,594,219) - -

Derivative financial liabilities Interest rate swaps used for hedging 99,485,643 (128,396,091) (7,771,973) (22,535,602) (74,547,906) (23,540,610)

Currency swaps Outflow 5,482,466 (316,044,183) - (40,694,826) (163,343,650) (112,005,707) Inflow - 309,982,153 - 40,633,167 161,594,590 107,754,396 1,440,178,048 (1,858,591,903) (168,079,058) (167,146,560) (665,965,217) (857,401,068)

(*) Non-financial instruments such as deposits on guarantees and advances received are excluded from trade payables and other payables.

Financial Information 93

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

The following table indicates the periods in which the cash flows associated with the derivatives that are cash flow hedges expected to occur.

31 December 2011 Carrying Contractual 3 months 3 -12 1-5 More than Amount cash flows or less months years five years Interest rate swaps Assets ------Liabilities (126,736,082) (140,577,272) (5,271,410) (20,002,710) (83,202,554) (32,100,598)

Cross currency swaps Assets 4,206,768 5,157,048 - 752,263 3,116,035 1,288,750 Liabilities ------

31 December 2010 Carrying Contractual 3 months 3 -12 1-5 More than Amount cash flows or less months years five years Interest rate swaps Assets ------Liabilities (99,485,643) (128,396,091) (7,771,973) (22,535,602) (74,547,906) (23,540,610)

Cross currency swaps Assets ------Liabilities (5,482,466) (6,062,030) - (61,659) (1,749,060) (4,251,311)

Currency risk

Exposure to currency risk:

The Group’s exposure to foreign currency risk in Euro equivalent of their original currencies was as follows:

31 December 2011

Foreign currencydenominated financial assets USD EUR (*) TRL Other Total Other non-current assets 6,647 - 11,717 31,950 50,314 Trade receivables 11,703,621 721,517 3,504,540 7,753,044 23,682,722 Due from related parties 1,270,876 120,217 1,173,949 88,055 2,653,097 Derivative financial instruments 4,206,768 - - - 4,206,768 Other receivables and current assets 64,898 - 15,492,694 7,788,292 23,345,884 Restricted bank balances 11,484,284 7,254 88,121,114 2,507,185 102,119,837 Cash and cash equivalents 5,046,933 532,859 17,533,796 4,050,763 27,164,351 33,784,027 1,381,847 125,837,810 22,219,289 183,222,973 Foreign currencydenominated financial liabilities Loans and borrowings (36,992,989) (300,000) (6,248,828) (1,373,427) (44,915,244) Trade payables (2,029,390) (122,346) (7,090,307) (6,021,287) (15,263,330) Due to related parties (680,925) (48,325) (3,796,935) (3,949) (4,530,134) Other payables (1,109,190) (30,142) (13,318,486) (3,939,809) (18,397,627) (40,812,494) (500,813) (30,454,556) (11,338,472) (83,106,335) Net exposure (7,028,467) 881,034 95,383,254 10,880,817 100,116,638

(*) The figures in this column reflect the Euro position of subsidiaries and joint ventures that have functional currencies other than Euro. 94 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

31 December 2010 Foreign currencydenominated financial assets USD EUR (*) TRL Other Total Other non-current assets 6,262 - 46,073 11,411 63,746 Trade receivables 13,540,569 575,824 3,350,067 5,806,226 23,272,686 Due from related parties 924,730 - 1,510,813 - 2,435,543 Other receivables and current assets 48,008 1,797 8,095,835 5,083,236 13,228,876 Restricted bank balances 11,857,494 44,739 101,838,200 2,081,289 115,821,722 Cash and cash equivalents 1,547,022 81,651 7,515,141 1,857,146 11,000,960 27,924,085 704,011 122,356,129 14,839,308 165,823,533

Foreign currency denominated financial liabilities Loans and borrowings (48,652,286) - (6,143,968) (913,676) (55,709,930) Bank overdraft - - (1,738,590) (4,870) (1,743,460) Trade payables (2,684,766) (22,344) (6,768,971) (7,461,918) (16,937,999) Due to related parties (4,609,180) (52,928) (10,193,770) - (14,855,878) Derivative financial instruments (5,482,466) - - - (5,482,466) Other payables (1,049,707) (30,478) (10,118,087) (2,784,677) (13,982,949) (62,478,405) (105,750) (34,963,386) (11,165,141) (108,712,682) Net exposure (34,554,320) 598,261 87,392,743 3,674,167 57,110,851

(*) The figures in this column reflect the Euro position of subsidiaries and joint ventures that have functional currencies other than Euro.

The following significant exchange rates against Euro applied during the year:

Average Rate Reporting Date Closing Rate 31 December2011 31 December 2010 31 December 2011 31 December 2010 USD 0.7188 0.7538 0.7729 0.7545 TRL 0.4302 0.5029 0.4092 0.4880 GEL 0.4260 0.4228 0.4627 0.4255 MKD 0.0163 0.0163 0.0163 0.0163 TND 0.5107 0.5285 0.5159 0.5203 SEK 0.1107 0.1047 0.1118 0.1111

Sensitivity analysis:

The Group’s principal currency rate risk relates to changes in the value of the Euro relative to TRL and the USD. The Group manages its exposure to foreign currency risk by entering into derivative contracts and, where possible, seeks to incur expenses with respect to each contract in the currency in which the contract is denominated and attempt to maintain its cash and cash equivalents in currencies consistent with its obligations. Financial Information 95

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

The basis for the sensitivity analysis to measure foreign exchange risk is an aggregate corporate-level currency exposure. The aggregate foreign exchange exposure is composed of all assets and liabilities denominated in foreign currencies, both short-term and long-term purchase contracts. The analysis excludes net foreign currency investments.

A 10 percent strengthening / (weakening) of EUR against the following currencies at 31 December 2011 and 2010 would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Equity Profit or loss Strengthening of EUR Weakeningof EUR Strengthening of EUR Weakeningof EUR 31 December 2011 USD (24,408,884) 29,836,997 1,123,524 (1,123,524) TRL - - (9,538,325) 9,538,325 Other - - (1,088,082) 1,088,082 Total (24,408,884) 29,836,997 (9,502,883) 9,502,883

31 December 2010 USD (25,972,195) 31,744,226 2,907,185 (2,907,185) TRL - - (8,739,274) 8,739,274 Other - - (367,417) 367,417 Total (25,972,195) 31,744,226 (6,199,506) 6,199,506

Interest rate risk

The Group has used material amounts of bank borrowings from foreign financial institutions and banks. Although most of these borrowings have floating interest rates, the Group management and banks fixed interest rates by using derivative financial instruments. TAV İstanbul, TAV İzmir, TAV Esenboğa, TAV Tunisia, HAVAŞ and TAV Macedonia use interest rate swaps to hedge the fluctuations in Euribor and Libor rates (i.e. 100 %, 49 %, 100 %, 85 %, 50 % and 100 % of floating loans of TAV İstanbul, TAV İzmir, TAV Esenboğa, TAV Tunisia, HAVAŞ, and TAV Macedonia, respectively are fixed). 96 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Profile:

At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was:

Carrying amount 31 December 2011 31 December 2010 Fixed rate instruments Financial assets 371,757,008 345,054,870 Financial liabilities (281,655,629) (209,071,088) 90,101,379 135,983,782

Carrying amount 31 December2011 31 December2010 Variable rate instruments Financial assets 15,196,517 14,380,772 Financial liabilities (1,084,646,501) (1,130,956,789) (1,069,449,984) (1,116,576,017)

Fair value sensitivity analysis for fixed rate instruments:

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments:

Based on the Group’s current borrowing profile, a 50 basis points increase in Euribor or Libor would have resulted in additional interest expense of approximately EUR 1.0 million on the Group’s variable rate debt when ignoring effect of derivative financial instruments. EUR 0.9 million of the exposure is hedged through interest rate swap contracts. Therefore, the net exposure on statement of comprehensive income would be EUR 0.1 million. A 50 basis points increase in Euribor or Libor would have resulted an increase in cash flow hedge reserve in equity approximately by EUR 27.9 million and a 50 basis points decrease in Euribor or Libor would have resulted a decrease in cash flow hedge reserve in equity approximately by EUR 24.4 million.

Financial Information 97

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Fair values

Fair values versus carrying amounts:

The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated statement of financial position, are as follows:

31 December 31 December 2011 2010 Carrying Fair Carrying Fair Note Amount Value Amount Value Financial assets Trade receivables - non current 25 94,299,205 159,501,551 113,810,957 194,669,072 Trade receivables - current 25 73,823,017 83,446,071 77,681,614 84,000,402 Due from related parties 40 7,944,503 7,944,503 5,124,375 5,124,375 Derivative financial instruments 36 4,206,768 4,206,768 - - Other receivables and current assets (*) 24 7,303,771 7,303,771 7,112,588 7,112,588 Restricted bank balances 27 355,745,501 355,745,501 382,444,797 382,444,797 Cash and cash equivalents 26 76,346,757 76,346,757 32,442,373 32,442,373

Financial liabilities Bank overdraft 26 - - (2,865,313) (2,865,313) Loans and borrowings 30 (1,224,294,460) (1,224,294,460) (1,233,457,456) (1,233,457,456) Trade payables (**) 35 (39,375,912) (39,375,912) (33,339,651) (33,339,651) Due to related parties 40 (18,140,702) (18,140,702) (28,151,745) (28,151,745) Derivative financial instruments 36 (126,736,082) (126,736,082) (104,968,109) (104,968,109) Other payables (**) 32 (43,288,285) (43,288,285) (37,395,774) (37,395,774) (832,165,919) (757,340,519) (821,561,344) (734,384,441)

(*) Non-financial instruments such as prepaid expenses, prepaid taxes and dues and advances given are excluded from other non-current assets and other receivables and current assets. (**) Non-financial instruments such as advances received are excluded from trade payables and other payables.

The methods used in determining the fair values of financial instruments are discussed in Note 4.

98 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Fair value hierarchy:

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). • Level 3: input for the asset or liability that are not based on observable market data (unobservable inputs).

31 December 2011 Level 1 Level 2 Level 3 Interest rate swap - (126,736,082) - Cross currency swap - 4,206,768 - - (122,529,314) -

31 December 2010 Level 1 Level 2 Level 3

Interest rate swap - (99,485,643) - Cross currency swap - (5,482,466) - - (104,968,109) -

39. COMMITMENTS, CONTINGENCIES AND CONTRACTUAL OBLIGATIONS

Commitments and contingencies

31 December 2011 31 December 2010 Letters of guarantee given to DHMİ 161,435,188 122,819,761 Letters of guarantee given to third parties 88,230,962 54,776,983 Letters of guarantee given to Macedonian Government 20,250,000 20,250,000 Letters of guarantee given to Tunisian Government 11,941,338 8,421,230 281,857,488 206,267,974

The Group is obliged to give 6 % of the total rent amount of USD 152,580,000 of TAV İstanbul as a letter of guarantee according to the rent agreement made with DHMİ. The total obligation has been provided by the Group.

The Group is obliged to give a letter of guarantee at an amount equivalent of EUR 7,520,469 (31 December 2010: EUR 7,971,230) to the Ministry of Transport and EUR 4,420,869 (31 December 2010: EUR 450,000) to OACA according to the BOT agreement signed with OACA in Tunisia. The total obligation has been provided by the Group.

Majority of letters of guarantee given to third parties includes the guarantees given to customs, lenders and some customers.

Financial Information 99

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Contractual obligations

TAV İstanbul

TAV İstanbul is bound by the terms of the Rent Agreement made with DHMİ. If TAV İstanbul does not comply with the rules and regulations set forth in the Rent Agreement, this might lead to the forced cessation of TAV İstanbul’s operation.

At the end of the contract period, TAV İstanbul will be responsible for one year for the maintenance and repair of the devices, system and equipment supplied for the contractual facilities. In case the necessary maintenance and repairs are not made, DHMİ will have this maintenance and repair made, and the cost will be charged to TAV İstanbul.

Pursuant to the provisions of this agreement, the contractual obligations of TAV İstanbul include the rental of the above mentioned facilities for a period of fifteen and a half years beginning on 3 July 2005; the operation of the facilities in compliance with international norms and standards within the rental (operation) period; the performance of periodic repair and maintenance activities on the facilities and the transfer of the facilities in question including the supporting systems, equipment, furniture and fixtures in a proper and usable condition to DHMİ upon the expiry of the rental period.

In the case where TAV İstanbul as the lessee performs a delayed and/or incomplete rent payment to DHMİ, TAV İstanbul is charged a penalty of 10 % of the rent amount to be paid. TAV İstanbul is then obliged to perform the payment latest within five days. Otherwise, DHMİ shall be entitled to terminate the rent agreement. TAV İstanbul is not entitled to claim the rent payments performed to DHMİ prior to the termination of the contract.

TAV Esenboğa and TAV İzmir

TAV Esenboğa and TAV İzmir are bound by the terms of the BOT Agreements made with DHMİ. If these companies do not follow the rules and regulations set forth in the concession agreement, this might lead to the forced cessation of these companies’ operations according to the BOT Agreements. According to the BOT agreements:

• The share capital of the companies cannot be less than 20 % of fixed investment amount.

• The companies have a commitment to make additional investment up to 20 % of the initial BOT investment upon request of DHMİ.

DHMİ has requested an extension of EUR 13,900,000 (13 % of the initial investment) from TAV İzmir on 21 August 2006 which extended the construction period by 2 months and 20 days, and operation period by 8 months and 27 days. TAV İzmir completed the construction for such extension on 10 May 2007. After granting of temporary acceptance by DHMİ in year 2007, final acceptance was granted by DHMİ on 21 March 2008.

After granting of temporary acceptance by DHMİ in year 2007, final acceptance for BOT investments of TAV Esenboğa was granted by DHMİ on 5 June 2008.

At the end of the contract period, the companies will be responsible for one year for the maintenance and repair of the devices, system and equipment supplied for the contractual facilities. In case the necessary maintenance and repairs are not made, DHMİ will have this maintenance and repair made and the cost will be charged to TAV İzmir and TAV Esenboğa.

100 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

All equipment used by TAV Esenboğa and TAV İzmir must be in a good condition and under warranty and need to meet the international standards and Turkish Standards as well.

If the need shall arise to replace fixed assets subject to depreciation, which become unusable within the rent period and the depreciation rates of which are not delineated in the Tax Application Law, the operator is obliged to perform the replacement.

All fixed assets covered by the implementation contract will be transferred to DHMİ free of charge. Transferred items must be in working conditions and should not be damaged. TAV Esenboğa and TAV İzmir have the responsibility of repair and maintenance of all fixed assets under the investment period.

HAVAŞ and TGS

In accordance with the general ground handling agreement (an integral part of the ground handling operation A Group license) signed with DHMİ, HAVAŞ and TGS undertake the liability of all losses incurred by their personnel to DHMİ or to third parties. In this framework, Havaş and TGS cover those losses by an insurance policy amounting to USD 50 million. They also take the responsibility of the training facilities given to the personnel and the quality of the service provided by its personnel together with the repair and maintenance of the ground handling vehicles and equipment. HAVAŞ and TGS are required to provide DHMİ with letters of guarantee each amounting to USD 1,000,000. Fines received from losses incurred by the ground handling personnel or fines arising from the violation of the related agreement will be charged to HAVAŞ and TGS. Fines which are overdue in accordance with the appointed agreement / period declared by DHMİ will be settled by the liquidation of the letter of guarantee. If DHMİ liquidates the collateral, HAVAŞ and TGS are obliged to complete the collateral at its original amount which is USD 1,000,000 within 15 days.

In accordance with the rental agreements signed with DHMİ regarding several parking areas, land, buildings, offices at the Atatürk, Esenboğa, Adnan Menderes, Dalaman, Adana, Trabzon, Milas, Nevşehir, Antalya, Gaziantep, Kayseri, Urfa, Batman, Adıyaman, Elazığ, Muş, Sivas and Konya airports; when the rent period ends, DHMİ will have the right to retain the immovable in the area free of charge.

TAV Tbilisi

TAV Tbilisi is bound by the terms of the BOT Agreement. In case TAV Tbilisi fails to comply with the rules and regulations set forth in the agreement, it may be forced to cease its operations.

With regards to the BOT Agreement, TAV Tbilisi is required to;

• comply with all applicable safety standards and ensure that the airport and all other ancillary equipment are operated in a manner safe to passengers, workers and general public, as well as to comply with the technical and operational requirements of Tbilisi International Airport and environmental standards of Georgia;

• maintain and operate the new terminal and infrastructure at Tbilisi International Airport in accordance with the applicable requirements of the BOT Agreement and International Air Transportation Association, International Civil Aviation Organization or European Civil Aviation Conference;

• ensure that its subcontractors and TAV Tbilisi itself obtain and maintain relevant insurance policies from financially strong and internationally reputable insurance companies;

• remedy accidents that might occur upon mechanical damage inflicted by TAV Tbilisi to existing communication networks or inappropriate use or operation thereof.

The Final Acceptance Protocol was concluded in May 2011.

Financial Information 101

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Tax legislation and contingencies

Georgian commercial legislation and tax legislation in particular may give rise to varying interpretations and amendments. In addition, as management’s interpretation of tax legislation may differ from that of the tax authorities, transactions may be challenged by the tax authorities, and as a result TAV Tbilisi may be assessed additional taxes, penalties and interest. Tax periods remain open to review by the tax authorities for five years. Management believes that their interpretation of the relevant legislation is appropriate and TAV Tbilisi’s profit, currency and customs positions will be sustained.

TAV Batumi

TAV Batumi is obliged to perform the terms agreed under the Agreement for Management of 100 percent of Shares in “Batumi Airport LLC” (the “Agreement”) together with its Schedules annexed to the Agreement. In the event that TAV Batumi fails to fulfill its material obligations under the Agreement and its Schedules, it may be forced to cease the management of the Batumi International Airport and all operation rights generated at the Airport.

With regards to the Agreement, TAV Batumi is required to;

• comply with all requirements of the relevant statutes and the Applicable Laws of Georgia;

• prevent repatriation and transfer of the dividends distributable by Batumi Airport LLC from Georgia;

• comply with the terms of Permits that materially adversely affect the performance of TAV Batumi’s obligations under the Agreement or achievement of the Revenues by Batumi Airport LLC and/or achievement of dividends by the TAV Batumi from Batumi Airport LLC;

• protect, promote, develop and extend the business interests and reputation of Batumi Airport in connection with the Services (reasonable effort basis);

• maintain and operate Batumi Airport in accordance with the international standards applicable to similar international airports, and any other local standards that will be applicable to the operations of an international airport;

• recruit and train sufficient number of staff for the operation of Batumi Airport in accordance with standard, accepted operational standards;

• perform regular, periodic and emergency maintenance and repair works of all the fixed assets, as well as the annexations and accessories related thereto located on the territory of Batumi Airport; and

• procure and maintain insurance policies listed under the Agreement during the term of the operation.

TAV Tunisia

TAV Tunisia is bound by the terms of the Concession Agreements related to the building and operation of Enfidha Airport and to the operation of Monastir Airport. In case TAV Tunisia fails to comply with the provisions of these Concession Agreements as well as the Terms and Specifications annexed thereto, it may be forced to cease the operation of the said airports.

According to Enfidha Concession Agreement, TAV Tunisia is required to:

• design, construct, maintain, repair, renew, operate and improve at its own costs and risks and under its liabilities, the land made available to it, infrastructures, buildings, facilities, equipments, networks and services necessary for the operation of Enfidha Airport; 102 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

• complete the construction of the Airport and start operating it at the latest on 1 October 2009 which is then extended to 1 December 2009 through a notice from the Authority, unless the requirements by the Terms and Specifications of the Agreement fails. The operation of the Airport was started in the specified date in 2009.

• finance up to 30 % of the Project by Equity.

According to Monastir Concession Agreement, TAV Tunisia is required to maintain, repair, renew, operate and improve at its own costs and risks and under its liabilities, the land made available to it, infrastructures, buildings, facilities, equipments, networks and services necessary for the operation of Monastir Airport.

Pursuant to both Concession Agreements, TAV Tunisia is required to:

•market and promote the activities operated in the Airports and perform the public service related with these activities;

• provide with and maintain the bank guarantees in accordance with the Agreements;

• pay the Concession Royalties to the Conceding Authorities (Tunisian State and OACA);

• comply particularly with provisions of Appendix 2 to the Terms and Specifications annexed to the Agreements related to the ownership of the shares by TAV Tunisia’s shareholders;

• require the approval of the Conceding Authority prior to the transfer of its rights under the Concession Agreements to any third party or to the conclusion of any sub-contract during the operation phase of the Airports;

• comply with its obligations under the Agreements and with all applicable Tunisian Laws and International rules related particularly but not limited to safety, security, technical, operational and environmental requirements;

• comply with its obligations related to insurance as provided for by the Agreements.

TAV Tunisia may also be obliged to cease the operation of the said airports if (i) it is declared insolvent or is subject to judicial liquidation proceedings or (ii) it is forced to cease the operation of one of the Airports.

The Conceding Authority and TAV Tunisia shall, seven years prior to the expiry of the Concession Agreement, negotiate and agree on a repair, maintenance and renewal program, with the assistance of specialists if applicable, which program includes the detailed pricing of the works for the final five years of the concession which are necessary in order to ensure that the movable and immovable concession property is transferred in good condition to the Conceding Authority, as well as the schedule of the tasks to be completed prior to the transfer. In this context, TAV Tunisia annually performs repair and maintenance procedures for the operation of the concession property according to the requirements set in the Concession Agreement.

Financial Information 103

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

TAV Gazipaşa

TAV Gazipaşa is bound by the terms of the Concession Agreement made with DHMİ for Antalya Gazipaşa Airport.

If TAV Gazipaşa violates the agreement and does not remedy the violation within the period granted by DHMİ, DHMİ may terminate the Agreement.

The share transfers of the shareholders of TAV Gazipaşa are subject to the approval of DHMİ.

The Agreement is made for a period of twenty-five years effective from the date TAV Gazipaşa obtains the operation authorisation from the Ministry of Transportation. The contractual obligations of TAV Gazipaşa include the operation of the facilities in compliance with the international norms and standards subject to the supervision of the Ministry of Transportation Civil Aviation General Directorate and DHMİ; obtaining maintenance and periodic maintenance and repairs of all systems and equipment requisite for the operation and the transfer of the facilities together with the systems, equipment, furniture and fixtures in a proper and usable condition to DHMİ, without any debt or liabilities, upon the expiry of the Agreement (if the economic lives of the systems, equipment, furniture and fixtures have come to an end, they should be renewed before the transfer to DHMİ). Upon the expiry of the Agreement, TAV Gazipaşa will be responsible for one year for the maintenance and repair of the systems and equipment in the facilities. In case the necessary maintenance and repairs are not made, DHMİ will have this maintenance and repairs made and the cost will be charged to TAV Gazipaşa.

If expropriation of land is required for construction of additional facilities or systems during the term of the Agreement, TAV Gazipaşa will be responsible for the compensation for expropriation and will not demand any compensation and/or additional rent period from DHMİ and the owner of the subject land will be DHMİ.

In the event that TAV Gazipaşa is delayed in paying the rent and/or the rent is not fully paid to DHMİ, TAV Gazipaşa will be charged a monthly penalty in the amount of 10 % of the outstanding amount.

Facility usage amount represents the 50,000 USD fixed payment that is paid as a usage amount of the airport facility, subsequent to rent period starting, within the last month of each rent payment year.

TAV Macedonia

TAV Macedonia is bound by the terms of the Concession Agreement made with Macedonian Ministry of Transport and Communication (“MOTC”).

If TAV Macedonia violates the agreement and does not remedy the violation within the period granted by MOTC, MOTC may terminate the Agreement.

All equipment used by TAV Macedonia must need to meet the Concession Agreement’s standards.

All fixed assets covered by the implementation contract will be transferred to MOTC free of charge. Transferred items must be in working conditions and should not be damaged. TAV Macedonia has the responsibility of repair and maintenance of all fixed assets under the investment period.

Management believes that as at 31 December 2011, the Group has complied with the terms of the contingencies mentioned above.

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TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

40. RELATED PARTIES

The major immediate parents and ultimate controlling parties of the Group are Tepe and Akfen Groups.

All other transactions not described in this footnote between the Company and its subsidiaries and joint ventures, which are related parties of the Company, have been eliminated on consolidation. Details of balances between the Group and other related parties are disclosed below.

Key management personnel compensation:

The remuneration of directors and other members of key management during the year comprised the following:

2011 2010 Short-term benefits (salaries, bonuses etc.) 12,746,578 7,786,951 12,746,578 7,786,951

As at 31 December 2011 and 2010, none of the Group’s directors and executive officers has outstanding personnel loans from the Group.

The details of the transactions between the Group and any other related parties are disclosed below:

Other related party transactions:

31 December2011 31 December 2010 Due from related parties 7,418,090 4,628,730 Current loan to related parties 526,413 495,645 7,944,503 5,124,375

Due from related parties 31 December 2011 31 December 2010 TAV Tepe Akfen Yat. İnş ve İşl. A.Ş. (“TAV İnşaat”) 4,275,584 1,111,065 ATÜ (*) 2,324,337 1,603,588 TAV G Otopark Yapım Yatırım ve İşletme A.Ş. (“TAV G”) 266,579 1,139,341 Other related parties 551,590 774,736 7,418,090 4,628,730

(*) Receivables from ATÜ comprise non-eliminated portion of concession fee duty-free receivables per proportionate consolidation.

Financial Information 105

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Loan to related parties 31 December 2011 31 December 2010 CAS 521,366 487,088 Other related parties 5,047 8,557 526,413 495,645

31 December 2011 31 December 2010 Due to related parties 2,869,114 6,059,656 Current loan from related parties 7,553,053 7,961,525 10,422,167 14,021,181

Non-current loan from related parties 7,718,535 14,130,564 7,718,535 14,130,564

Due to related parties 31 December 2011 31 December2010 IBS Brokerlik ve Sigorta Hizmetleri A.Ş. (IBS Sigorta) (*) 2,628,202 5,480,173 Other related parties 240,912 579,483 2,869,114 6,059,656 106 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

(*) IBS Sigorta provides insurance intermediatory services to the Group.

Current loan from related parties 31 December 2011 31 December 2010 TGS (*) 4,363,017 5,120,686 ATÜ (**) 1,843,929 1,242,469 TAV İnşaat 933,295 1,185,494 Other related parties 412,812 412,876 7,553,053 7,961,525

Non-current loan from related parties 31 December 2011 31 December 2010 ATÜ (**) 7,718,535 9,006,363 TGS (*) - 5,124,201 7,718,535 14,130,564

(*) Loan from TGS is related with HAVAŞ’s share of unpaid portion of the capital increase of TGS. (**) Loan received from ATÜ for financing purposes.

31 December 2011 31 December 2010 Short term deferred income from related parties ATÜ (*) 2,002,689 2,001,602 Other related parties 2,817 1,326 2,005,506 2,002,928

31 December2011 31 December 2010 Long term deferred income from related parties ATÜ (*) 15,280,722 17,273,593 Other related parties 487 487 15,281,209 17,274,080 Financial Information 107

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

(*) Deferred income from related parties is related with the unearned portion of concession rent income from ATÜ.

Services rendered to related parties 2011 2010 ATÜ (*) 91,939,885 75,328,545 Other related parties 8,898,002 4,540,943 100,837,887 79,869,488

(*) Services rendered to ATÜ comprise non-eliminated portion of concession fee duty-free per proportionate consolidation.

Services rendered by related parties 2011 2010 IBS Sigorta (*) 3,703,401 7,849,041 TAV İnşaat (**) 2,867,540 448,327 Tepe Servis 1,783,932 609,758 TAV Havacılık A.Ş. 507,015 516,136 Other related parties 554,609 436,363 9,416,497 9,859,625

(*) IBS Sigorta provides insurance brokerage services to the Group. (**) TAV İnşaat provides construction services to the Group. 108 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

Interest (expense) / income from related parties (net) 2011 2010 TGS (700,878) (1,488,049) ATÜ (579,002) (657,496) TAV İnşaat 42,960 (150,324) Other related parties 41,674 22,199 (1,195,246) (2,273,670)

The average interest rate used within the Group is 4.43 % per annum (31 December 2010: 3.82 %). The Group converts related party TRL loan receivable and payable balances to USD at month end using the Central Bank’s announced exchange rates and then charges interest on the USD balances.

Construction work rendered by related parties 2011 2010 TAV İnşaat (*) 71,456,236 59,201,400 TAV G 5,428,997 - 76,885,233 59,201,400

(*) TAV İnşaat mainly provided services relating to the construction of Skopje and Ohrid Airports in 2011. In 2010, TAV İnşaat provided services to renovation of Monastir, Gazipaşa and İstanbul Atatürk Airports and construction of Skopje, Ohrid and Enfidha Airports. Financial Information 109

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

41. JOINT VENTURES

The Group has the following significant interests in joint ventures:

• 49.98 % equity shareholding with 50 % voting power in ATÜ, a jointly controlled entity established in Turkey. Summary of financial information of ATÜ and its subsidiaries, not adjusted for the percentage ownership held by the Group is as follows:

Statement of Financial Position 31 December2011 31 December 2010 Current assets 56,084,664 42,713,446 Non-current assets 61,456,087 64,682,272 Current liabilities (42,964,046) (33,372,318) Non-current liabilities (38,589,337) (45,315,704)

Statement of Comprehensive Income 2011 2010 Total revenues 415,412,600 340,167,492 Total expenses (389,569,378) (319,368,809) Profit for the year 25,843,222 20,798,683

• 50 % equity shareholding with 50 % voting power, in CAS, a joint venture established in KKTC. Summary of financial information of CAS, not adjusted for the percentage ownership held by the Group is as follows:

Statement of Financial Position 31 December2011 31 December2010 Current assets 362,007 760,987 Non-current assets 624,608 674,211 Current liabilities (3,351,990) (3,491,808)

Statement of Comprehensive Income 2011 2010 Total revenues 2,381,269 3,199,746 Total expenses (2,621,702)(4,268,521) Loss for the year (240,433) (1,068,775) 110 TAV Airports 2011 Annual Report

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

• 32.40 % equity shareholding with 32.40 % voting power, in TAV Gözen, a joint venture established in Turkey. Summary of financial information of TAV Gözen, not adjusted for the percentage ownership held by the Group is as follows:

Statement of Financial Position 31 December2011 31 December 2010 Current assets 408,336 259,138 Non-current assets 471,469 893,197 Current liabilities (23,155) (27,216)

Statement of Comprehensive Income 2011 2010 Total revenues 557,896 1,370,675 Total expenses (833,126) (1,014,870) (Loss) / profit for the year (275,230) 355,805

• 50 % equity shareholding with 50 % voting power, in TGS, a joint venture established in Turkey. Summary of financial information of TGS, not adjusted for the percentage ownership held by the Group is as follows:

Statement of Financial Position 31 December 2011 31 December 2010 Current assets 41,763,182 46,524,398 Non-current assets 39,363,878 47,707,553 Current liabilities (14,366,112) (38,172,947) Non-current liabilities (3,020,100) (947,188)

Statement of Comprehensive Income 2011 2010 Total revenues 139,292,606 79,575,316 Total expenses (125,147,352) (86,583,575) Profit / (loss) for the year 14,145,254 (7,008,259) Financial Information 111

TAV Havalimanları Holding A.Ş. and its Subsidiaries Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in Euro unless otherwise stated)

• 50 % equity shareholding with 50 % voting power in HAVAŞ Europe, a joint venture established in Latvia. HAVAŞ acquired 50 % of shares of HAVAŞ Europe in 2010. In 2011, the Group obtained 16.67 % of HAVAŞ Europe’s shares and consequently acquired 66.67 % equity shareholding with 66.67 % voting power. HAVAŞ Europe was fully consolidated with the minority’s ownership reflected as a minority interest. Summary of financial information of HAVAŞ Europe, not adjusted for the percentage ownership held by the Group is as follows:

Statement of Financial Position 31 December 2011 31 December 2010 Current assets - 1,264,056 Non-current assets - 5,981,050 Current liabilities - (4,300,495) Non-current liabilities - (2,543,048)

Statement of Comprehensive Income 2011 2010

Total revenues - 5,666,644 Total expenses - (6,265,338) Loss for the year - (598,694)

• 49.98 % equity shareholding with 49.98 % voting power in BTA Denizyolları, a joint venture established in Turkey. Summary of financial information of BTA Denizyolları, not adjusted for the percentage ownership held by the Group is as follows:

Statement of Financial Position 31 December 2011 31 December 2010 Current assets 4,857,456 - Non-current assets 1,624,814 - Current liabilities (2,461,976) - Non-current liabilities (3,199,218) -

Statement of Comprehensive Income 2011 2010

Total revenues 4,261,239 - Total expenses (4,258,424 - Profit for the year 2,815 -

42. SUBSEQUENT EVENTS

HAVAŞ’s bus operations in İstanbul and Antalya are temporarily suspended by the decisions of İstanbul and Antalya Municipalities in January 2012 and February 2012, respectively. HAVAŞ has opened lawsuits against İstanbul and Antalya Municipalities in order to resume the operations. Group management believes that these lawsuits will be finalised in favor of HAVAŞ.

TAV AIRPORTS HOLDING Istanbul Atatürk Airport International Terminal (Gate A - Next to VIP) 34149 Yeşilköy, Istanbul, Turkey Phone: +90 212 463 30 00 Fax: +90 212 465 50 50 www.tavairports.com http://ir.tav.aero