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Share Name | Share Symbol | Market | Type |
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Turbine Aviation Inc (CE) | USOTC:TURA | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.0001 | 0.00 | 01:00:00 |
RNS Number:6618O Turk Ekonomi Bankasi A.S. 14 August 2003 PART 1 Turk Ekonomi Bankasi Anonim Sirketi Unconsolidated Financial Statements As of June 30, 2003 Together With Review Report (CONVENIENCE TRANSLATION OF A REPORT AND FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH- SEE SECTION III, NOTE XXV) (Convenience Translation of A Report And Financial Statements Originally Issued In Turkish - See Section III, Note XXV) TURK EKONOMI BANKASI ANONIM SIRKETI REVIEW REPORT AS OF JUNE 30, 2003 We have reviewed the balance sheet of Turk Ekonomi Bankasi Anonim Sirketi as of June 30, 2003 and the related statements of income, shareholders' equity and cash flows for the interim period then ended. These financial statements are expressed in the equivalent purchasing power of Turkish lira as of June 30, 2003. These financial statements are the responsibility of the Bank's management. Our responsibility as independent auditors is to issue a review report on these financial statements based on our review. We conducted our review in accordance with the auditing standards which were determined under the provisions of Banking Law Number 4389. These standards require that the review should be planned and performed to obtain limited assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquires of bank personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly we do not express an opinion. The financial statements of Turk Ekonomi Bankasi Anonim Sirketi for the period ended June 30, 2002 were examined by other auditors who have ceased its operations and whose report dated July 26, 2002 expressed that nothing has come to their attention that causes them to believe that those interim financial statements were not presented fairly, in all material respects, in accordance with the accounting principles and standards that are based on the Article 13 of the Banking Law number 4389. Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial statements of Turk Ekonomi Bankasi Anonim Sirketi at June 30, 2003 are not presented fairly, in all material respects, in accordance with the accounting principles and standards that are based on the Article 13 of the Banking Law number 4389. Additional paragraph for convenience translation to English: The above mentioned accounting principles differ from International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board and so far as such differences apply to the financial statements of the Bank they mainly relate to the format of financial statements and disclosure requirements, accounting for deferred taxes and accounting for retirement pay liabilities. The effects of the differences between these accounting principles and accounting principles generally accepted in the countries in which the accompanying financial statements are to be used and IFRS have not been quantified in the accompanying financial statements. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in the countries of users of the financial statements and IFRS. The Bank's consolidated financial statements prepared in accordance with the accounting principles and standards that are based on the Article 13 of the Banking Law number 4389 will be issued separately. Guney Serbest Muhasebeci Mali Musavirlik Anonim Sirketi An Affiliated Firm of Ernst & Young International Esra Peri, SMMM August 12, 2003 Istanbul, Turkey INDEX SECTION ONE Page no. General Information I. Footnotes and Explanations on the Bank's Service Activities and Operating Areas 1 II. The Explanations and Footnotes Regarding the Including Group of the Bank 1 III. The Explanations Regarding the Interim Financial Statements of the Bank 1 SECTION TWO Unconsolidated Interim Financial Statements I. Balance Sheets - Assets 3 II. Balance Sheets - Liabilities 4 III. Statements of Income 5 IV. Statements of Off Balance Sheet Commitments 6 V. Statements of Changes in Shareholders' Equity 7 VI. Statements of Cash Flows 8 SECTION THREE Accounting Principles I. Basis of Presentation 9 II. Explanations on Forward, Option Contracts and Derivative Instruments 10 III. Netting of Financial Assets and Liabilities 10 IV. Interest Income and Expense 10 V. Fees and Commission Income and Expenses 10 VI. Securities Held for Trading 11 VII. Sales and Repurchase Agreements and Lending of Securities 11 VIII. Securities Held to Maturity, Securities Available for Sale and Bank Originated Loans and Receivables 11 IX. Participations 12 X. Subsidiaries 12 XI. Originated Loans and Receivables and Provisions for Loan Impairment 12 XII. Goodwill and Other Intangible Fixed Assets 13 XIII. Tangible Fixed Assets 13 XIV. Leasing Transactions 14 XV. Provisions and Contingent Liabilities 14 XVI. Liabilities Regarding Employee Benefits 15 XVII. Taxation 15 XVIII.Additional Explanations on Borrowings 16 XIX. Paid-in Capital and Share Certificates 16 XX. Acceptances 16 XXI. Government Incentives 16 XXII. Securities at Custody 16 XXIII. Impairment of Assets 16 XXIV. Segment Reporting 16 XXV. Other Matters 17 SECTION FOUR Information on Financial Structure I. Capital Adequacy Standard Ratio 18 II. Market Risk 21 III. Foreign Currency Risk 21 IV. Interest Rate Risk 23 V. Liquidity Risk 25 SECTION FIVE Footnotes and Explanations on Unconsolidated Financial Statements I. Footnotes and Explanations Related to the Assets 27 II. Footnotes and Explanations Related to the Liabilities 35 III. Footnotes and Explanations Related to the Income Statement 39 IV. Footnotes and Explanations Related to the Off-balance Sheet Commitments 41 V. Footnotes and Explanations Related to the Statements of Cash Flows 43 VI. Footnotes and Explanations on the Risk Group of the Bank 44 VII. Footnotes and Explanations on Inflation Accounting 46 VIII. Explanations Related to Subsequent Events 48 SECTION SIX Independent Limited Review Report I. The Explanations on the Independent Limited Review Report 48 SECTION ONE GENERAL INFORMATION I- Footnotes and Explanations on the Bank's Service Activities and Operating Areas a) Commercial name of the Bank : Turk Ekonomi Bankasi Anonim Sirketi (the Bank) Reporting period : 1 January - 30 June 2003 Address of the head office : Meclis-i Mebusan Caddesi No: 35 Findikli 34427 - ISTANBUL Telephone number : (0212) 251 21 21 Facsimile number : (0212) 249 65 68 Web page : www.teb.com.tr E-mail address : www.teb.com.tr b) The Bank's service activities and operating areas: The Bank's operating areas include, commercial financing and corporate banking, fund management operations, retail banking and credit card operations. c) Financial statements and relevant explanations together with the footnotes are stated in Billions of Turkish Lira. II. The Explanations and Footnotes Regarding the Group of the Bank The Group of the Bank: Turk Ekonomi Bankasi Anonim Sirketi ("the Bank") is included in the Colakoglu Group. 70.08% of the shares of the Bank belongs to TEB Mali Yatirimlar Anonim Sirketi (TEB Mali Yatirimlar) and 8.60% of the shares belongs to Colakoglu Metalurji Anonim Sirketi. III. Explanations on The Interim Financial Statements a) Accounting principles and basis of valuation used in the preparation of year-end financial statements are also used for the preparation of interim financial statements without any changes or exceptions, and are summarized in Section Three below. b) There are no transactions realized in the interim period that display a seasonal or a periodical nature. c) There are no non-recurring transactions or basic accounting misstatements. d) There are no extraordinary items in terms of nature or amount that effect the assets, liabilities, equity, net income or the cash flow of the Bank. e) Prior period interim financial statements, do not contain any changes with respect to the estimated values related with the current period. There are no items in the prior period financial statements that are recorded with their estimated value. f) There are no convertible bonds or any other debt securities issued during the current period. g) In accordance with the decision related with the distribution of profit, declared at the Annual General Meeting of the Bank dated March 27, 2003, the Bank distributed dividends to its shareholders in the current period starting at April 4, 2003. h) There are no subsequent events that occurred after the preparation date of the interim financial statements which have a material impact on the interim financial statements. i) There are no transactions that may cause a structural change for the Bank such as restructuring, mergers and acquisitions, or discontinue of any operations. j) There are no changes in the subsequent commitments and contingencies of the Bank that have arisen after the year-end balance sheet date. SECTION TWO UNCONSOLIDATED INTERIM FINANCIAL STATEMENTS I. Balance Sheets - Assets II. Balance Sheets - Liabilities III. Statements of Income IV. Statements of Off Balance Sheet Commitments V. Statements of Changes in Shareholders' Equity VI. Statements of Cash Flows I- BALANCE SHEETS - ASSETS Reviewed Audited Current Period Prior Period Note Ref. 30.06.2003 31.12.2002 ASSETS (Section TL FC Total TL FC Total five) I. CASH AND BALANCES WITH THE CENTRAL 24,040 412,972 437,012 23,252 455,508 478,760 BANK OF TURKEY 1.1 Cash 10,572 - 10,572 6,755 - 6,755 1.2 Foreign currency - 61,012 61,012 - 89,875 89,875 1.3 Balances with the Central Bank of I-1 13,468 351,960 365,428 16,497 365,633 382,130 Turkey II. TRADING SECURITIES (Net) 69,999 11,888 81,887 27,861 3,277 31,138 2.1 Public sector debt securities I-2 69,999 11,536 81,535 27,861 2,974 30,835 2.1.1 Government bonds I-2 54,168 655 54,823 21,461 2,974 24,435 2.1.2 Treasury bills I-2 15,830 - 15,830 6,399 - 6,399 2.1.3 Other I-2 1 10,881 10,882 1 - 1 2.2 Share certificates - - - - - - 2.3 Other marketable securities - 352 352 - 303 303 III. BANKS AND OTHER FINANCIAL 44,554 261,698 306,252 25,650 339,125 364,775 INSTITUTIONS 3.1 Due from banks 44,554 261,698 306,252 25,650 339,125 364,775 3.1.1 Domestic banks 39,514 91,519 131,033 25,650 117,920 143,570 3.1.2 Foreign banks 5,040 170,179 175,219 - 221,205 221,205 3.2 Other financial institutions - - - - - - IV. MONEY MARKET PLACEMENTS 153,850 90,089 243,939 253,325 199,241 452,566 4.1 Interbank money market placements 153,850 90,089 243,939 253,325 199,241 452,566 4.2 Istanbul Stock Exchange money market - - - - - - placements 4.3 Receivables from reverse repurchase - - - - - - agreements V. SECURITIES AVAILABLE FOR SALE (Net) 8 29,018 29,026 10 18,790 18,800 5.1 Share certificates I-3 8 - 8 10 - 10 5.2 Other marketable securities I-3 - 29,018 29,018 - 18,790 18,790 VI. LOANS 433,523 457,322 890,845 396,907 496,974 893,881 6.1 Short term I-4 395,410 436,402 831,812 368,121 478,649 846,770 6.2 Medium and long term I-4 32,913 20,920 53,833 23,254 18,325 41,579 6.3 Loans under follow-up I-4 20,231 - 20,231 22,532 - 22,532 6.4 Specific provisions (-) I-4 (15,031) - (15,031) (17,000) - (17,000) VII. FACTORING RECEIVABLES - - - - - - VIII. SECURITIES HELD TO MATURITY (Net) 38,367 - 38,367 40,752 - 40,752 8.1 Public sector debt securities I-5 38,367 - 38,367 40,752 - 40,752 8.1.1 Government bonds I-5 38,367 - 38,367 40,752 - 40,752 8.1.2 Treasury bills I-5 - - - - - - 8.1.3 Other I-5 - - - - - - 8.2 Other marketable securities I-5 - - - - - - IX. INVESTMENTS AND ASSOCIATES (Net) 6,180 - 6,180 6,291 - 6,291 9.1 Financial investments and associates I-6 6,180 - 6,180 6,291 - 6,291 9.2 Non-Financial investments and - - - - - - associates X. SUBSIDIARIES (Net) 66,194 49,009 115,203 64,014 48,767 112,781 10.1 Financial subsidiaries I-7 66,194 49,009 115,203 64,014 48,767 112,781 10.2 Non-Financial subsidiaries - - - - - - XI. OTHER INVESTMENTS (Net) - - - - - - XII. FINANCE LEASE RECEIVABLES (Net) - - - - - - 12.1 Gross finance lease receivables I-8 - - - - - - 12.2 Unearned income ( - ) I-8 - - - - - - XIII. RESERVE DEPOSITS - 9,624 113,193 122,817 10,302 136,738 147,040 XIV. MISCELLANEOUS RECEIVABLES 417 461 878 291 43 334 XV. ACCRUED INTEREST AND INCOME 28,755 3,724 32,479 26,821 3,756 30,577 RECEIVABLES 15.1 Loans I-9 7,916 2,952 10,868 10,403 2,924 13,327 15.2 Marketable securities I-9 6,571 531 7,102 4,466 416 4,882 15.3 Other I-9 14,268 241 14,509 11,952 416 12,368 XVI. PROPERTY AND EQUIPMENT (Net) 39,987 - 39,987 41,507 - 41,507 16.1 Book value 93,339 - 93,339 93,357 - 93,357 16.2 Accumulated depreciation ( - ) (53,352) - (53,352) (51,850) - (51,850) XVII. INTANGIBLE ASSETS (Net) 3,603 - 3,603 3,303 - 3,303 17.1 Goodwill - - - - - - 17.2 Other 8,211 - 8,211 7,347 - 7,347 17.3 Accumulated amortization ( - ) (4,608) - (4,608) (4,044) - (4,044) XVIII. OTHER ASSETS I-10 17,922 3,089 21,011 20,991 1,990 22,981 TOTAL ASSETS 937,023 1,432,463 2,369,486 941,277 1,704,209 2,645,486 The accompanying notes are an integral part of these balance sheets. II- BALANCE SHEETS - LIABILITIES Reviewed Audited Current Period Prior Period Note Ref. 30.06.2003 31.12.2002 LIABILITIES (Section TL FC Total TL FC Total five) I. DEPOSITS 391,990 1,172,148 1,564,138 397,767 1,487,807 1,885,574 1.1 Bank deposits II-1 30,411 43,688 74,099 20,410 46,412 66,822 1.2 Saving deposits II-1 186,748 - 186,748 182,331 - 182,331 1.3 Public sector deposits II-1 10,863 - 10,863 39 - 39 1.4 Commercial deposits II-1 119,253 - 119,253 157,966 - 157,966 1.5 Other institutions deposits II-1 44,715 - 44,715 37,021 - 37,021 1.6 Foreign currency deposits II-1 - 1,119,135 1,119,135 - 1,416,364 1,416,364 1.7 Precious metals deposit accounts II-1 - 9,325 9,325 - 25,031 25,031 II. MONEY MARKET BALANCES 21,930 - 21,930 25,416 - 25,416 2.1 Interbank money market takings - - - - - - 2.2 Istanbul Stock Exchange money market - - - - - - takings 2.3 Funds provided under repurchase II-2 21,930 - 21,930 25,416 - 25,416 agreements III. FUNDS BORROWED 21,138 278,378 299,516 17,775 275,445 293,220 3.1 Funds borrowed from the Central Bank - - - - - - of Turkey 3.2 Other funds borrowed II-3 21,138 278,378 299,516 17,775 275,445 293,220 3.2.1 Domestic banks and institutions II-3 21,138 22,389 43,527 17,775 13,538 31,313 3.2.2 Foreign banks, institutions and II-3 - 255,989 255,989 - 261,907 261,907 funds IV. MARKETABLE SECURITIES ISSUED (Net) - - - - - - 4.1 Bills II-4 - - - - - - 4.2 Asset backed securities II-4 - - - - - - 4.3 Bonds II-4 - - - - - - V. FUNDS II-5 - - - - - - VI. MISCELLANEOUS PAYABLES II-6 12,056 27,873 39,929 12,097 27,462 39,559 VII. OTHER EXTERNAL RESOURCES II-7 42,473 14,019 56,492 20,785 7,363 28,148 VIII. TAXES AND OTHER DUTIES PAYABLE 9,222 - 9,222 6,630 - 6,630 IX. FACTORING PAYABLES - - - - - - X. FINANCE LEASE PAYABLES (Net) - 6,022 6,022 - 7,520 7,520 10.1 Finance Lease Payables II-8 - 7,257 7,257 - 9,113 9,113 10.2 Deferred finance lease expenses ( - ) II-8 - 1,235 1,235 - 1,593 1,593 XI. ACCRUED INTEREST AND EXPENSES PAYABLE 33,523 2,328 35,851 13,884 2,716 16,600 11.1 Deposits II-9 7,427 1,364 8,791 5,845 1,128 6,973 11.2 Borrowings II-9 1,638 964 2,602 1,808 1,588 3,396 11.3 Repurchase agreements II-9 23 - 23 31 - 31 11.4 Other II-9 24,435 - 24,435 6,200 - 6,200 XII. PROVISIONS 26,148 - 26,148 30,267 - 30,267 12.1 General provisions II-10 6,753 - 6,753 6,792 - 6,792 12.2 Reserve for employee termination II-10 912 - 912 1,032 - 1,032 benefits 12.3 Provisions for income taxes II-10 17,947 - 17,947 21,840 - 21,840 12.4 Insurance technical reserves (Net) - - - - - - - 12.5 Other provisions II-10 536 - 536 603 - 603 XIII. SUBORDINATED LOANS II-10 - 21,115 21,115 - 27,418 27,418 XIV. SHAREHOLDERS' EQUITY 289,060 63 289,123 285,134 - 285,134 14.1 Paid-in capital II-11 55,125 - 55,125 55,125 - 55,125 14.2 Supplementary capital 209,152 63 209,215 209,371 - 209,371 14.2.1 Share premium II-12 - - - - - - 14.2.2 Share cancellation profits - - - - - - 14.2.3 Marketable securities value increase 5 63 68 224 - 224 fund 14.2.4 Revaluation fund - - - - - - 14.2.5 Value increase in revaluation fund - - - - - - 14.2.6 Other capital reserves - - - - - - Effect on inflation accounting on 209,147 - 209,147 209,147 - 209,147 14.2.7. share capital 14.3 Profit reserves 2,390 - 2,390 - - - 14.3.1 Legal reserves 2,390 - 2,390 - - - 14.3.2 Status reserves - - - - - - 14.3.3 Extraordinary reserves - - - - - - 14.3.4 Other profit reserves - - - - - - 14.4 Profit or loss 22,393 - 22,393 20,638 - 20,638 14.4.1 Prior year income/loss 2,275 - 2,275 - - - 14.4.2 Current year income/loss 20,118 - 20,118 20,638 - 20,638 TOTAL LIABILITIES 847,540 1,521,946 2,369,486 809,755 1,835,731 2,645,486 The accompanying notes are an integral part of these balance sheets. Reviewed Reviewed Reviewed Not Reviewed Current Prior 01.04.2003 01.04.2002 Period Period Note Ref. - - 30.06.2003 30.06.2002 30.06.2003 30.06.2002 INCOME AND EXPENSES (Section Total Total Total Total five) I. INTEREST INCOME III-1 159,764 197,619 74,266 100,915 1.1 Interest on loans 82,250 87,453 39,847 46,389 1.1.1 Interest on TL loans 69,320 72,255 33,829 38,029 1.1.1.1 Short term loans 65,803 67,847 32,682 35,381 1.1.1.2 Medium and long term loans 3,517 4,408 1,147 2,648 1.1.2 Interest on foreign currency loans 12,770 14,932 5,966 8,164 1.1.2.1 Short term loans 12,128 14,366 5,669 7,898 1.1.2.2 Medium and long term loans 642 566 297 266 1.1.3 Interest on loans under follow-up 160 266 52 196 1.1.4 Premiums received from Resource Utilisation - - - - Support Fund 1.2 Interest received from reserve deposits 2,815 1,924 1,308 928 1.3 Interest received from banks 13,730 5,973 6,811 3,136 1.3.1 The Central Bank of Turkey - - - - 1.3.2 Domestic banks 10,416 3,688 5,321 2,124 1.3.3 Foreign banks 3,314 2,285 1,490 1,012 1.4 Interest received from money market 48,196 56,467 19,945 22,339 transactions 1.5 Interest received from marketable securities 12,561 45,529 6,243 28,010 portfolio 1.5.1 Trading securities 2,217 45,529 1,220 28,010 1.5.2 Available-for-sale securities 791 - 49 - 1.5.3 Held to maturity securities 9,553 - 4,974 - 1.6 Other interest income 212 273 112 113 II. INTEREST EXPENSE III-2 92,857 103,452 52,953 47,832 2.1 Interest on deposits 62,879 62,908 31,668 26,557 2.1.1 Bank deposits 5,145 4,972 2,688 3,178 2.1.2 Saving deposits 33,734 30,501 17,061 11,912 2.1.3 Public sector deposits - 4 - 3 2.1.4 Commercial deposits 12,401 17,422 5,786 6,623 2.1.5 Other institutions deposits 195 41 100 (33) 2.1.6 Foreign currency deposits 11,323 9,895 6,015 4,837 2.1.7 Precious metals vault accounts 81 73 18 37 2.2 Interest on money market transactions - 36 - 1 2.3 Interest on funds borrowed 8,904 20,510 4,306 8,450 2.3.1 The Central Bank of Turkey - - - - 2.3.2 Domestic banks 4,267 3,782 2,189 1,778 2.3.3 Foreign banks 4,637 14,101 2,117 5,326 2.3.4 Other financial institutions - 2,627 - 1,346 2.4 Interest on securities issued - - - - 2.5 Other interest expense 21,074 19,998 16,979 12,824 III. NET INTEREST INCOME (I - II) 66,907 94,167 21,313 53,083 IV. NET FEES AND COMMISSIONS INCOME 9,232 10,666 4,387 4,417 4.1 Fees and commissions received 16,658 15,791 7,966 7,180 4.1.1 Cash loans 1,872 1,361 822 534 4.1.2 Non-cash loans 4,502 4,010 2,257 1,939 4.1.3 Other 10,284 10,420 4,887 4,707 4.2 Fees and commissions paid 7,426 5,125 3,579 2,764 4.2.1 Cash loans 1,327 743 671 (380) 4.2.2 Non-cash loans 17 23 12 17 4.2.3 Other 6,082 4,359 2,896 3,127 V. DIVIDEND INCOME - - - - 5.1 Trading securities - - - - 5.2 Available-for-sale securities - - - - VI. NET TRADING INCOME 20,856 (1,173) 25,768 (7,295) 6.1 Profit/losses on trading account securities 12,705 2,937 10,837 1,170 (Net) 6.2 Foreign exchange gains/losses (Net) 8,151 (4,110) 14,931 (8,465) VII PROFIT/LOSS FROM HELD TO MATURITY MARKETABLE III-3 SECURITIES - - - - VIII. OTHER OPERATING INCOME III-4 8,384 6,779 3,503 3,525 IX. TOTAL OPERATING INCOME (III+IV+V+VI+VII+VIII) 105,379 110,439 54,971 53,729 X. PROVISION FOR LOAN LOSSES OR OTHER RECEIVABLES III-5 2,361 9,555 939 644 (-) XI. OTHER OPERATING EXPENSES (-) III-6 58,751 58,549 29,024 32,459 XII. NET OPERATING INCOME (IX-X-XI) 44,267 42,335 25,008 20,626 XIII. PROFIT/LOSSES FROM ASSOCIATES AND SUBSIDIARIES III-7 11,668 3,825 121 438 XIV. NET POSITION INCOME/EXPENSE (20,160) (20,544) 824 (6,670) XV. INCOME BEFORE TAXES (XII+XIII+ XIV) 35,775 25,616 25,953 14,394 XVI. PROVISION FOR TAXES ON INCOME (-) 15,657 11,376 10,183 3,132 XVII. NET OPERATING INCOME/EXPENSE AFTER TAXES 20,118 14,240 15,770 11,262 (XV-XVI) XVIII. EXTRAORDINARY INCOME/EXPENSE AFTER TAXES - (1,259) - (1,259) 18.1 Extraordinary net income/expense before taxes - - - (1,259) 18.1.1 Extraordinary income - - - - 18.1. 2 Extraordinary expense (-) - (1,259) - (1,259) 18.2 Provision for taxes on extraordinary income - - - - XIX. NET PROFIT/LOSSES (XVII+XVIII) III-8 20,118 12,981 15,770 10,003 XX. Earnings/Losses per share 182.47 117.74 143.03 90.71 The accompanying notes are an integral part of these statements. IV- STATEMENTS OF OFF-BALANCE SHEET COMMITMENTS Reviewed Audited Current Period Prior Period Note Ref. 30.06.2003 31.12.2002 OFF BALANCE SHEET COMMITMENTS (Section TL FC TOTAL TL FC TOTAL five) A. OFF BALANCE SHEET COMMITMENTS 655,501 1,369,975 2,025,476 586,006 1,545,250 2,131,256 (I+II+III) I. GUARANTEES IV-2,3 325,610 613,928 939,538 291,967 608,644 900,611 1.1. Letters of guarantee 325,538 246,775 572,313 291,887 283,275 575,162 1.1.1. Guarantees subject to State 34,889 69 34,958 31,778 282 32,060 Tender Law 1.1.2. Guarantees given for foreign 77,313 15,510 92,823 77,750 10,587 88,337 trade operations 1.1.3. Other letters of guarantee 213,336 231,196 444,532 182,359 272,406 454,765 1.2. Banks loans - 43,754 43,754 - 44,992 44,992 1.2.1. Import letter of acceptance - 43,754 43,754 - 44,992 44,992 1.2.2. Other bank acceptances - - - - - - 1.3. Letters of credit 72 318,511 318,583 80 271,873 271,953 1.3.1. Documentary letters of credit 72 278,931 279,003 80 229,272 229,352 1.3.2. Other letters of credit - 39,580 39,580 - 42,601 42,601 1.4. Prefinancing given as guarantee - - - - - - 1.5. Endorsements - - - - - - 1.5.1. Endorsements to the Central - - - - - - Bank of Turkey 1.5.2. Other endorsements - - - - - - 1.6. Securities issue purchase - - - - - - guarantees 1.7. Other guarantees - - - - - - 1.8. Other collaterals - 4,888 4,888 - 8,504 8,504 II. COMMITMENTS 194,460 126,688 321,148 202,034 367,010 569,044 2.1. Irrevocable commitments 194,460 126,688 321,148 202,034 367,010 569,044 2.1.1. Asset purchase commitments - - - 1,115 - 1,115 2.1.2. Deposit purchase and sales 6,000 126,688 132,688 - 367,010 367,010 commitments 2.1.3. Share capital commitment to - - - - - - associates and subsidiaries 2.1.4. Loan granting commitments 94,821 - 94,821 125,857 - 125,857 2.1.5. Securities issue brokerage - - - - - - commitments 2.1.6. Commitments for reserve deposit 400 - 400 - - - requirements 2.1.7. Commitments for credit card IV-2 93,239 - 93,239 75,062 - 75,062 limits 2.1.8. Other irrevocable commitments - - - - - - 2.2. Revocable commitments - - - - - - 2.2.1. Revocable loan granting - - - - - - commitments 2.2.2. Other revocable commitments - - - - - - III. DERIVATIVE FINANCIAL 135,431 629,359 764,790 92,005 569,596 661,601 INSTRUMENTS 3.1. Forward foreign currency buy/ 135,431 434,162 569,593 92,005 237,153 329,158 sell transactions 3.1.1. Forward foreign currency 50,620 226,459 277,078 23,414 139,825 163,240 transactions-buy 3.1.2. Forward foreign currency 84,811 207,703 292,515 68,591 97,328 165,918 transactions-sell 3.2. Swap transactions related to - 185,095 185,095 - 332,443 332,443 f.c. and interest rates 3.2.1. Foreign currency swap-buy - 92,794 92,794 - - - 3.2.2. Foreign currency swap-sell - 92,301 92,301 - 165,432 165,432 3.2.3. Interest rate swaps-buy - - - - - - 3.2.4. Interest rate swaps-sell - - - - 167,011 167,011 3.3. Foreign currency and interest - - - - - - rate options 3.3.1. Foreign currency options-buy - - - - - - 3.3.2. Foreign currency options-sell - - - - - - 3.3.3. Interest rate options-buy - - - - - - 3.3.4. Interest rate options-sell - - - - - - 3.4. Foreign currency futures - 10,102 10,102 - - - 3.4.1. Foreign currency futures-buy - 5,051 5,051 - - - 3.4.2. Foreign currency futures-sell - 5,051 5,051 - - - 3.5. Interest rate futures - - - - - - 3.5.1. Interest rate futures-buy - - - - - - 3.5.2. Interest rate futures-sell - - - - - - 3.6. Other - - - - - - B. CUSTODY AND PLEDGED ITEMS 1,680,255 420,643 2,100,898 1,288,226 428,327 1,716,553 (IV+V) IV. ITEMS HELD IN CUSTODY 1,225,118 276,248 1,501,366 901,397 286,425 1,187,822 4.1. Assets under management - - - - - - 4.2. Investment securities held in 508,675 163,666 672,341 313,989 161,469 475,458 custody 4.3. Checks received for collection 687,753 50,011 737,764 573,379 49,267 622,646 4.4. Commercial notes received for 27,604 15,990 43,594 14,029 23,373 37,402 collection 4.5. Other assets received for 1,086 46,581 47,667 - 52,316 52,316 collection 4.6. Assets received for public - - - - - - offering 4.7. Other items under custody - - - - - - 4.8. Custodians - - - - - - V. PLEDGED ITEMS 455,137 144,395 599,532 386,829 141,902 528,731 5.1. Marketable securities 16,983 9,445 26,428 10,295 9,329 19,624 5.2. Guarantee notes 7,467 1,156 8,623 6,920 1,470 8,390 5.3. Commodity 206,295 12,745 219,040 210,235 - 210,235 5.4. Warranty - - - - - - 5.5. Immovables 120,265 50,420 170,685 124,568 41,300 165,868 5.6. Other pledged items 104,127 70,629 174,756 34,811 89,803 124,614 5.7. Pledged items-depository - - - - - - TOTAL COMMITMENTS (A+B) 2,335,756 1,790,618 4,126,374 1,874,232 1,973,577 3,847,809 The accompanying notes are an integral part of these statements. V- STATEMENTS OF SHAREHOLDERS' EQUITY Effect of Note Paid-in inflation Share Legal Status Extraordinary Other Current Period Ref. Capital Accounting premium Reserves Reserves Reserves Reserves on Capital 1 Balances at the 55,125 209,147 - - - - - beginning of the period - January 1, 2003 Increases in the - - - - - - - period : 2 Available for sale - - - - - - - investment 2.1 Net fair value - - - - - - - gain/losses 3 Cash flow hedge: - - - - - - - 3.1 Net fair value - - - - - - - gain/losses 4 Foreign exchange - - - - - - - difference Transferred Amount : 5 Available for sale - - - - - - - investment 5.1 Transferred to net - - - - - - - income 6 Cash flow hedge: - - - - - - - 6.1 Transferred to net - - - - - - - income 6.2 Transferred to assets - - - - - - - 7 Net Income - - - - - - - 8 Dividend - - - - - - - 9 Transferred to legal - - - 2,390 - - - reserves 10 Issuance of share - - - - - - - certificate Closing Balance - June 55,125 209,147 - 2,390 - - - 30 2003 (1+2+3+4+5+6+7+8+9+10) Value Marketable Current Increase Securities Note Period Prior Period Revaluation Fund Value Current Period Ref. Net Net Fund Revaluation Increase Total Income/(Loss) Income/(Loss) Fund Fund 1 Balances at the 20,638 - - - 224 285,134 beginning of the period - January 1, 2003 Increases in the - - period : 2 Available for sale - - - - - - investment 2.1 Net fair value - - - - - - gain/losses 3 Cash flow hedge: - - - - - - 3.1 Net fair value - - - - - - gain/losses 4 Foreign exchange - - - - - - difference Transferred Amount : 5 Available for sale - - - - - - investment 5.1 Transferred to net - - - - - - income 6 Cash flow hedge: - - - - (156) (156) 6.1 Transferred to net - - - - - - income 6.2 Transferred to assets - - - - (156) (156) 7 Net Income 20,118 - - - - 20,118 8 Dividend - (15,973) - - - (15,973) 9 Transferred to legal (20,638) 18,248 - - - - reserves 10 Issuance of share - - - - - - certificate Closing Balance - 20,118 2,275 - - 68 289,123 June 30 2003 (1+2+3+4+5+6+7+8+9+10) Effect of Prior Period Note Paid-in inflation Share Legal Status Extraordinary Other Ref. Capital Accounting premium Reserves Reserves Reserves Reserves on Capital 1 Balances at the 55,125 458,414 - 56,297 - - - beginning of the period - January 1, 2002 Increases in the period : 2 Available for sale - - - - - - - investment 2.1 Net fair value - - - - - - - gain/losses 3 Cash flow hedge: - - - - - - - 3.1 Net fair value - - - - - - - gain/losses 4 Foreign exchange - - - - - - - difference Transferred Amount : 5 Available for sale - - - - - - - investment 5.1 Transferred to net - - - - - - - income 6 Cash flow hedge: - - - - - - - 6.1 Transferred to net - - - - - - - income 6.2 Transferred to assets - - - - - - - 7 Net Income - - - - - - - 8 Dividend - - - - - - - 9 Transferred to legal - - - - - - - reserves 10 Issuance of share - - - - - - - certificate Closing Balance - June 55,125 458,414 - 56,297 - - - 30 2002 (1+2+3+4+5+6+7+8+9+10) Value Marketable Current Increase Prior Period Note Period Prior Period Revaluation Fund Securities Ref. Net Net Fund Revaluation Value Total Income/(Loss) Income/(Loss) Fund Increase Fund 1 Balances at the (19,374) (286,189) - - - 264,273 beginning of the period - January 1, 2002 Increases in the period : 2 Available for sale - - - - - - investment 2.1 Net fair value - - - - - - gain/losses 3 Cash flow hedge: - - - - - - 3.1 Net fair value - - - - - - gain/losses 4 Foreign exchange - - - - - - difference Transferred Amount : 5 Available for sale - - - - - - investment 5.1 Transferred to net - - - - - - income 6 Cash flow hedge: - - - - - - 6.1 Transferred to net - - - - - - income 6.2 Transferred to assets - - - - - - 7 Net Income 12,981 - - - - 12,981 8 Dividend - - - - - - 9 Transferred to legal 19,374 (19,374) - - - - reserves 10 Issuance of share - - - - - - certificate Closing Balance - 12,981 (305,563) - - - 277,254 June 30 2002 (1+2+3+4+5+6+7+8+9+10) VI- STATEMENTS OF CASH FLOWS Current Prior Period Period 01.01.2003 01.01.2002 Note Ref - 30.06.2003 - 30.06.2002 A. CASH FLOWS FROM BANKING OPERATIONS 1.1 Operating profit before changes in operating assets and 29,142 27,582 liabilities(+) 1.1.1 Interest received(+) 160,003 188,923 1.1.2 Interest paid(-) (91,841) (97,971) 1.1.3 Dividend received(+) - 3,825 1.1.4 Fees and commissions received(+) 16,658 15,791 1.1.5 Other income(+) 18,841 8,457 1.1.6 Collections from previously written off loans and other 2,248 1,918 receivables(+) 1.1.7 Payments to personnel and service suppliers(-) (27,055) (23,966) 1.1.8 Taxes paid(-) (40,769) (32,234) 1.1.9 Other (8,943) (37,161) 1.2 Changes in operating assets and liabilities (88,495) (40,261) 1.2.1 Net (increase) decrease in trading securities(+/-) 50,749 (10,454) 1.2.2 Net (increase) decrease in due from banks and other financial 129,350 (2,581) institutions(+/-) 1.2.3 Net (increase) decrease in loans 2,704 (173,952) 1.2.4 Net (increase) decrease in other assets(+/-) (715) (978) 1.2.5 Net increase (decrease) in bank deposits(+/-) 7,277 19,921 1.2.6 Net increase (decrease) in other deposits(+/-) (332,199) 36,653 1.2.7 Net increase (decrease) in funds borrowed(+/-) 6,296 120,639 1.2.8 Net increase (decrease) in matured payables(+/-) - - 1.2.9 Net increase (decrease) in other liabilities(+/-) 48,043 (29,509) I. Net cash provided from banking operations(+/-) (59,353) (12,679) B. CASH FLOWS FROM INVESTING ACTIVITIES II. Net cash provided from investing activities(+/-) (12,861) (95,741) 2.1 Cash paid for purchase of investments, associates and - (17,895) subsidiaries(-) 2.2 Cash obtained from sale of investments, associates and - - subsidiaries(+) 2.3 Fixed assets purchases(-) (2,659) (1,690) 2.4 Fixed assets sales(+) 1,813 3,189 2.5 Cash paid for purchase of securities available for sale (-) (29,026) - 2.6 Cash obtained from sale of securities available for sale (+) 18,800 - 2.7 Cash paid for purchase of investment securities(-) (2,008) (175,970) 2.8 Cash obtained from sale of investment securities(+) 219 96,625 2.9 Extraordinary items(+/-) - - 2.10 Other (+/-) - - C. CASH FLOWS FROM FINANCING ACTIVITIES III. Net cash provided from financing activities(+/-) (16,088) (1,918) 3.1 Cash obtained from funds borrowed and securities issued(+) - - 3.2 Cash used for repayment of funds borrowed and securities - - issued(-) 3.3 Capital increase(+) - - 3.4 Dividends paid(-) (15,973) - 3.5 Payments for finance leases(-) (115) (1,918) 3.6 Extraordinary items(+/-) - - 3.7 Other(+/-) - - IV. Effect of change in foreign exchange rate on cash and cash (91,246) 18,092 equivalents V. Net increase / (decrease) in cash and cash equivalents (179,548) (92,246) (I+II+III) VI. Cash and cash equivalents at beginning of the year(+) VI-1 1,148,258 1,217,176 VII. Cash and cash equivalents at end of the year VI-1 968,710 1,124,930 SECTION THREE ACCOUNTING PRINCIPLES I- Basis of Presentation The Bank prepares its financial statements in accordance with the "Accounting Application Regulations" (AAR) based on Article 13 named as "Accounting and Recording System" of the Banking Law 4389 and related communiques and related explanations and further communiques that add or cause a change on the content of the relevant communiques. Restatement of Financial Statements in Accordance with The Current Period Purchasing Power The "Accounting Standard on Financial Statements at Hyperinflation Periods", Communique No:14 of "Accounting Application Regulations" (AAR) became effective from July 1, 2002. In accordance with the communique No:14, the Bank's financial statements should be restated, taking the current period equivalent purchasing power of Turkish lira into account. In other words, Communique No:14 states that, financial statements prepared in terms of the domestic currency of a country with high inflation rate should be restated in accordance with the equivalent purchasing power of the domestic currency at the balance sheet date. Prior period financial statements should also be restated in their entirety to the measuring unit current at the balance sheet date. One characteristic that necessitates the application of inflation accounting under the provisions of Communique No : 14 is a cumulative three-year inflation rate approaching or exceeding 100%. Restatement of financial statements is based on both the principles described in Communique No.14 and the wholesale price indices published in its appendix and the wholesale price indices announced by the State Institute of Statistics. Detailed information on the application of inflation accounting is given in the section V, footnote VII, "Footnotes and Explanations on Inflation Accounting" of the following footnotes. Other Basis of Valuation Other basis of valuation used for assets and liabilities in the preparation of financial statements are explained among the accounting principles for the related assets and liabilities. Changes in Accounting Policies and Valuation Methods in the Current Period Changes in Accounting Policies Until September 30, 2002, the Bank's financial statements were being prepared in accordance with the Uniform Chart of Accounts, standard balance sheet, income statement, supplementary financial statements and footnotes to these financial statements and the explanations related to the applications of such financial statements and the accounting and valuation principles thereto that are based on the article 13 of the Banking Law 4389 as revised by Law Number 4672 and 4491 and the "Accounting Standard on Financial Statements at Hyperinflation Periods", Communique No:14, published at Official Gazette dated June 22, 2002 and numbered 24793 and which is related to the "Regulation of Accounting Applications" and became effective from July 1, 2002. After October 1, 2002, the Bank's financial statements are prepared in accordance with the accounting policies explained below and included in both Communique No:14 and the other communiques related to the Regulation of Accounting Applications effective from October 1, 2002. Accordingly, assets and liabilities were classified as of October 1, 2002 in accordance with the provisions of the related communiques and the required changes for the other accounts were made and the effects of such changes were reflected in the income statement for 2002. II- Explanations on Forward, Option Contracts and Derivative Instruments The Bank makes forward currency agreements and swap transactions to reduce the foreign currency risk. In accordance with Communique No:1, "Accounting Standards of Financial Instruments" of AAR, derivative financial instruments that are not designated as hedging instruments are classified as held-for-trading and carried at fair value. Foreign currency forward and swap transactions are evaluated by comparing the period end Bank foreign exchange rates with the forward rate amortized to the balance sheet date since the book values approximate their fair values. The resulting gain or loss is reflected to the income statement. There are no embedded derivatives separated from the host contract or that are designated as hedging instruments. Before the effective date of AAR, above-mentioned transactions had been recorded by means of arbitrage accounting, the changes at the foreign currencies had been recorded through evaluation under accounts and the liabilities at the maturity had been followed under off balance sheet commitments. In order to avoid the effects of the changes at the rates on the income statement, the amounts followed under off balance sheet commitments had been evaluated and the generated differences had been recorded under the income and expense accrual accounts. Foreign Currency Assets and Liabilities Gains or losses arising from foreign currency transactions are reflected in the statement of income as they are realized during the year. Foreign currency assets and liabilities at each year-end are translated into Turkish lira at the year-end foreign exchange buying rates announced by the Bank and the resulting foreign exchange gains or losses are recorded in the statement of income as foreign exchange loss, net. The net investment in foreign entities as of the related year-ends were translated into Turkish lira by applying the exchange rates prevailing at respective dates. The resulting foreign exchange gains or losses are recorded in the statement of income. The differences resulting from the translation of the securities issued and monetary financial assets into Turkish lira are reflected to the statement of income. III- Netting of Financial Assets and Liabilities Financial assets and liabilities are netted off when the Parent Bank has a legal right and sanction regarding netting off, and when the Bank has the intention of collecting or paying the net amount of related assets and liabilities or when the Bank has the right to off set the assets and liabilities simultaneously. There is no netting of financial assets and liabilities at the accompanying financial statements as of June 30, 2003. IV- Interest Income and Expense Interest income and expense are recognized in the income statement for all interest bearing instruments on an accrual basis using the effective interest method. In accordance with the related regulation, the due and not due interest accruals of the non-performing loans are cancelled and interest income related to these loans are recorded as interest income only when collected. V- Fees and Commission Income and Expense Commission income and fees for various banking services in the period of collection. Fees and commissions for funds borrowed paid to other financial institutions, which is a part of the transaction costs, are recorded as prepaid expenses and considered as a part of interest of the related funds borrowed and accordingly, recorded as expense monthly. The dividend income is reflected to the financial statements on cash basis when the profit distribution is realized by the participations and the subsidiaries. VI- Securities Held for Trading Trading securities are securities which were either acquired for generating a profit from short-term fluctuations in price or dealer's margin, or are securities included in a portfolio in which a pattern of short-term profit taking exists. Trading securities are initially recognized at cost. Transaction costs of the related securities are included in the initial cost. The positive difference occurred between the cost and fair value of the marketable security is accounted as interest and income accrual. The negative difference occurred is accounted under marketable security diminution in value account. Since the foreign currency financial assets held at the same portfolio (Eurobond) do not hold a price formed in an active market and since the fair values of these securities could not be determined reliably, they are valued at amortized cost by using relevant interest rates as stated in the articles 8 and 9 of the AAR's Communique No:1, "Accounting Standards of Financial Instruments." VII- Sales and Repurchase Agreements and Lending of Securities The Bank has been following the repurchase agreements made with the clients as a balance sheet item since February 1, 2002 in accordance with the Uniform Chart of Accounts. Accordingly, the government bonds and treasury bills sold to clients under repurchase agreements are recorded under the related securities account in the financial statements and are valued according to the valuation principles of the related account. Funds obtained by repurchase agreements are classified as a separate sub account under money markets account in the liabilities. The interest expense accruals calculated by means of effective interest method for the funds obtained by means of repurchase agreements are reflected to the interest and other expense accruals account in the balance sheet. The above-mentioned transactions are short term and consists of domestic public sector debt securities. The income and expenses generated from above mentioned operations are reflected to the "Interest Income on Marketable Securities" and "Interest Expense on Marketable Securities subject to Repurchase Agreement" accounts in the statement of income. As of June 30, 2003, the Bank does not have any reverse repo transactions (December 31, 2002 - None). As of June 30, 2003, the Bank does not have any lent marketable securities (December 31, 2002 - None). VIII- Securities Held to Maturity, Securities Available for Sale and Bank Originated Loans and Receivables Securities held to maturity are obtained with the intention of holding till the maturity of the security, and accordingly, including the funding abilities, the relevant conditions for this exist. This portfolio includes securities with fixed or determinable payments and with a fixed maturity, excluding bank originated loans and receivables. Securities available for sale include all securities other than bank originated loans and receivables, securities held to maturity and securities held for trading. The marketable securities are initially recognized at cost including the transaction costs. Foreign currency denominated financial assets included in the available for sale securities portfolio (Eurobonds) is stated by translating the cost value to Turkish lira at The Bank's exchange rates. The differences generated from the translation is reflected to foreign currency gains and losses account at the relevant period. Since these securities do not hold a price formed in an active market and since the fair values of these securities could not be determined reliably, they are valued at amortized cost by using relevant interest rates as stated in the articles 8 and 9 of the AAR's Communique No:1, "Accounting Standards of Financial Instruments." The differences between the cost and the valued amounts are reflected to the income accrual accounts. Loans and receivables originated by the Bank are those generated by lending money and exclude those that are held with the intention of trading or selling in near future. Held to maturity securities are remeasured at amortized cost by using original effective interest rate and reserve for impairment in value is provided, if any. The interests received from securities held to maturity are recorded as interest income. There are no dividends related with any marketable securities that are held to maturity. There are no financial assets that were previously classified as securities held to maturity but cannot be currently classified as held to maturity for the next two years due to the breaching of "tainting" rules by the Bank. The Bank classifies securities according to above-mentioned portfolios at the acquisition date of the related security. The sale and purchase transactions of the securities held to maturity are recorded at the delivery dates. Prior to the effective date of AAR, the Bank had initially recorded marketable securities held with the intention of not selling till maturity (investment portfolio), which were given as collateral at cost, and the income accruals of these securities were calculated by straight line method and reflected to the financial statements. IX- Participations Turkish lira participations which are quoted at the stock exchange are valued at fair value and any positive difference between fair value price and cost is included under shareholders' equity at "Marketable Securities Value Increase Fund" account in the financial statements. The others are valued by means of restating their costs and the capital increases after deducting the ones generated by means of adding the values accumulated at the revaluation like funds to the capital of the participations, with the rates applicable for the relevant dates. A provision is provided when there is a permanent diminution in value. X- Subsidiaries Turkish lira subsidiaries are valued by means of restating their costs and the capital increases after deducting the ones generated by means of adding the values accumulated at the revaluation like funds to the capital of the subsidiaries, with the rates applicable for the relevant dates. Foreign currency denominated subsidiaries are valued with year-end foreign exchange rates. A provision is provided when there is a permanent diminution in value of the subsidiaries. XI- Originated Loans and Receivables and Provisions for Loan Impairment The Bank initially records originated loans and receivables at cost, and at the following periods, in accordance with the AAR, Communique No:1, these loans are remeasured at amortized cost by means of effective interest rate method. The taxes, transaction expenses and other expenses paid for the guarantees taken for the originated loans are taken into consideration while calculating the banks financing cost and these are reflected to the interest rates of the loans. Cash loans are recorded in accordance with the regulations stated at the Communique on the Uniform Chart of Accounts and Its Explanations. Provision is set for the loans that may be doubtful and the amount is expensed at the current period. The provisioning criteria for the non-performing loans are determined by the Bank's management for compensating the probable losses of the current loan portfolio, by means of evaluating the portfolio for its quality and risk factors and by means of considering the economical conditions, other facts and related regulations. Allowances are computed and reflected in accordance with the Banking Law No.4389 as revised by Law Number 4672 and 4491, Article 3, Sub Article 11 and Article 11, Sub Article 12 published on the Official Gazette No. 24448 dated 30.06.2001 on "Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves" amended by Communiques dated 31.01.02 in the current period financial statements. Furthermore, a general reserve of 0.5% is being provided for the cash loans and other receivables and 0.1 % is provided for non-cash loans. These provisions are reflected to the statement of income under "Provision and Diminishing in Value Expenses - Special Provision Expense". The collection made regarding these loans are first deducted from the principal amount of the loan and the remaining collections are deducted from interest receivables. The collections made regarding the current year provision of the above mentioned loans are deducted from the "Provision for Loans and Other Receivables" account in the income statement. The collections made related to the previous years' written-off loans or allowances are recorded under "Other Operating Income" account and interest incomes are recorded under the "Interest Received from Non-performing Loans" account. Release of provision are removed by means of reversing the amount to the " Provision and Diminishing in Value Expense - Provision Expense" account. Allowances recorded in the previous periods and lost its necessity in the current period are credited to "Collections Regarding Previous Year's Expenses" account. XII- Goodwill and Other Intangible Fixed Assets There is no goodwill regarding the participations and subsidiaries. The intangible fixed assets are reflected with their restated costs in accordance with inflation accounting and depreciated with straight-line method. The depreciation rate is 20%. The cost of assets subject to depreciation is restated after deducting the exchange differences, capitalized financial expenses and revaluation increases, if any, from the cost of the assets. Major group classified as other intangible fixed assets by the Bank is softwares. While determining the depreciation periods of these, the essentials of General Tax Regulations are taken in to consideration and no special criteria are used. The useful lives of these assets are determined as 5 years. Softwares mainly used are developed within the Bank by the Bank's personnel, and the expenses regarding these are not capitalized. Software is purchased only in emergency cases and for special projects. There are no expected changes in the accounting estimates about the depreciation rate and method and residual values for the current and future periods. XIII- Tangible Fixed Assets Buildings are reflected to the financial statements at their restated costs and reserve for impairment is provided, if any. In accordance with the Communique No:14, buildings are valued by real estate expertise companies and the expertise value is higher than the restated costs at June 30, 2003. The straight-line method for depreciation is used and economical life is accepted to be 50 years. Other tangible fixed assets are reflected with their restated cost in accordance with inflation accounting, and depreciated by straight-line depreciation method. The depreciation rate is 20%. A prorate basis is used for depreciating assets held less than one year as of the balance sheet date. The leasehold improvements are depreciated in accordance with the lease period by means of straight-line method. The annual rates used, which approximate rates based on the estimated economic lives of the related assets, are as follow: % Buildings 2 Motor vehicles 20 Furniture, fixtures and office equipment 20 Leasehold improvements Lease period-not less than 5 years Gain profit or loss resulting from disposals of the tangible fixed assets are reflected to the statement of income as the difference between the net proceeds and net book value. The repairment costs of the tangible fixed assets are capitalized if the operation lengthens the economic life of the asset. Otherwise the repairment costs are expensed. There are no pledge, mortgage or other restrictions on the tangible fixed assets. There are no purchase commitments related to the tangible fixed assets. There are no expected changes in the accounting estimates, which could have a significant impact on the current and future periods. XIV- Leasing Transactions Leasing of fixed assets are recorded in accordance with AAR, Article 7 of the Communique No:4, "Accounting Standard for Leasing Transactions." In accordance with the above-mentioned article, the leasing transactions, which consist only foreign currency liabilities, are translated to Turkish lira with the exchange rates effective at the transaction dates and they are recorded both as an asset and a liability. The foreign currency liabilities are translated to Turkish lira with the Bank's period end exchange rate. The increases resulting from the differences in the foreign exchange rates are recorded as expense in the relevant period. Rent payments consist of financing costs generated due to leasing, and the amount of the leased asset corresponding to the relevant period. The financing cost resulting from leasing is distributed through the agreement period to form a fixed interest rate. In addition to interest expense, the Bank records depreciation expense in each period for the leased assets. The depreciation rate is determined in accordance with "Accounting Standard of Tangible Fixed Assets" and the depreciation rate is 20%. Operating lease expenses are recognized as expense in the income statements in the periods in which they are incurred. The Bank has no leasing transactions as lessor. XV- Provisions and Contingent Liabilities The provisions and contingent liabilities are determined in accordance with the Communique No:8 of AAR, except for the general and specific provisions set for the loans and other receivables. Liabilities generated from previous events are recorded by the Bank immediately at the estimated amounts. XVI- Liabilities Regarding Employee Benefits In accordance with the existing social legislation, the Bank is required to make lump-sum termination indemnities including retirement and notice payments to each employee whose employment is terminated due to resignment or for reasons other than misconduct. The retirement pay is calculated for every working year within the Bank over the wage for 30 days and the notice pay is determined by the relevant notice period time calculated over the years worked within the Bank. In accordance with AAR, Communique No:10, the Bank sets provision for retirement and notice pay liabilities by taking the actual payment rates for the previous 5 years into consideration. The Bank has no employees contracted for determined periods. As of June 30, 2003 and December 31, 2002, the arithmetical averages of the actual payments realized for the previous five years are 8.35% and 8.44% respectively and this forms the base of the provision amount that will be set for the retirement and notice pay liabilities. The Bank employees are members of Tebliler foundation. The Bank does not have any liability to this foundation. There are no liabilities that require additional provisions related to other employee rights. XVII- Taxation Corporate tax In accordance with the incumbent tax Law, Corporate Tax is computed over statutory net income that is subject to tax, without taking into account the effects of inflation accounting. In line with the new tax Law number 4842, published in the Official Gazette dated April 24, 2003, starting with the current year income, the corporate tax rate to be applied is 30 % (December 31, 2002 - 33%, including fund share). Corporate tax is to be paid in a lump sum payment within the specified period allowed by the law for the declaration of tax. As long as the Bank does not distribute the yearly income for 2003, there will not be any withholding taxes with regards to this income. The addition of current year profit to the share capital will not be regarded as a profit distribution and thus, will be exempt from any withholding taxes. The Bank's distribution of profit to "Fully-liable" institutions will also be exempt from any withholding taxes. The Bank's distribution of profit to real persons, "semi-liable" institutions, and those institutions that are not liable and or exempt from both corporation tax and income tax, will be subject to withholding taxes. In accordance with the Tax Procedural Code explained above, in every three-month period the Bank's tax assessment is made and the temporary corporate tax is calculated over the income generated in the three-month period at a rate of 30% and paid in cash up to the fifth day of the second month following the period. The corporate tax provision is recorded under "Provisions and Diminishing in Value Expenses-Tax Provision" account and expensed at every three month period end. At the corporate tax payment periods, the cash payments made are deducted from the tax liability calculated over the yearly income and the remaining liability is paid in cash. In accordance with the Tax Procedural Code, the losses presented in the tax declarations can be deducted from the tax assessments at the current period within five years. In Turkey, tax returns are filed during the fourth month following the year-end. According to existing tax regulations, the tax authorities may examine such returns and the underlying accounting records within five years. Deferred tax Certain income and expense items are taxable in periods different from those in which they are recognized in the financial statements. Deferred taxes on such timing differences are calculated and reflected in full in the accompanying financial statements. The Bank does not compute deferred tax on the effects of inflation accounting. As of June 30, 2003 and December 31, 2002, the deferred tax asset is included in other assets in the accompanying balance sheet and the deferred tax provision is stated under the tax provision in the accompanying income statement. XVIII- Additional Explanations on Borrowings The Bank has not issued any debt securities. The Bank has not issued convertible bonds. There are no debt securities issued by the Bank. XIX- Paid-in Capital and Share Certificates The Bank does not have any costs related to share issue as of June 30, 2003. In the General Assembly meeting of the Bank, dated March 27, 2002, it was decided that the profit for the year 2002 will be distributed to the shareholders after providing the legal reserves, which will amount to 276 (Nominal full TL) of dividend for every 1,000 TL nominal shares owned by each shareholder. The payment of dividends to the shareholders were started at April 4, 2003 and completed as of June 30, 2003. XX- Acceptances Acceptances are realized simultaneously with the payment dates of the clients and they are presented as commitments in off-balance sheet accounts. There are no acceptances presented as liabilities against any assets. XXI- Government Incentives There are no government incentives utilized by the Bank. XXII- Securities at Custody Securities at custody held by the Bank on behalf of clients are not reflected to the financial statements since they are not Bank's assets. XXIII- Impairment of Assets At every balance sheet date, the evidence on impairment in value of assets is evaluated objectively for existence. When an evidence regarding impairment in value exists, the market value of the asset is determined. The difference between book and net realizable values of the asset is recorded as provision for impairment in the balance sheet and as an expense in the income statement. XXIV- Segment Reporting Segment reporting will be made effective January 1, 2004. XXV- Other Matters Explanation for convenience translation to English The accounting principles used in the preparation of the accompanying financial statements differ from International Financial Reporting Standards (IFRS) and so far as such differences apply to the financial statements of the Bank they relate mainly, but not limited, to the format of financial statements and disclosure requirements, accounting for deferred taxes and reserve for retirement pay liabilities. The effects of the differences between these accounting principles and the accounting principles generally accepted in the countries in which the accompanying financial statements are to be used and IFRS have not been quantified in the accompanying financial statements. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with accounting principles generally accepted in the countries of users of the financial statements and IFRS. The Bank's consolidated financial statements prepared in accordance with the accounting principles and standards that are based on the Article 13 of the Banking Law number 4389 will be issued separately. There are no other matters required to be disclosed. SECTION FOUR INFORMATION ON FINANCIAL STRUCTURE I- Capital Adequacy Standard Ratio The method used for risk measurement for capital adequacy standard ratio is performed in accordance with the Communique on "Measurement and Assessment of Banks Capital Adequacies ", which was published on January 31, 2002 in the Official Gazette numbered 24657. As of June 30, 2003, the Bank's capital adequacy ratio is % 14.96 (December 31, 2002 - %15.40). In the computation of capital adequacy standard ratio, information prepared in accordance with statutory accounting requirements are used. Additionally, the market risk amount is calculated in accordance with the communique on the "Internal Control and Risk Management Systems of the Banks" and is taken in to consideration in the capital adequacy standard ratio calculation The values deducted from the capital in the shareholders' equity computation are not considered while calculating risk-weighted assets, non-cash loans and contingent liabilities. Assets subject to depreciation and depletion among risk-weighted assets are included in the calculations over their net book values after the relative depreciations and provisions are deducted. When calculating the basic amounts subject to credit risk regarding the transactions on the non-cash loans, the net receivable amount from the counter parties found by means of deducting the provision amount set in accordance with the "Communique on Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves" is multiplied by the rates presented at the Clause 1, Article 21 of the "Communique on Regulations on the Establishment and Operations of Banks", and included in the related risk group and weighted by the related group's risk. Receivables from counter parties generated from foreign currency and interest rate transactions are included in the related risk group at the loan conversion rates stated in Clause 2, Article 21 of the "Communique on Regulations on the Establishment and Operations of Banks" and weighted for a second time by the weight of the related risk group. Information related to the capital adequacy ratio: Risk Weight 0% 20% 50% 100% Risk Weighted Assets, Liabilities and Non-Cash Loans Balance Sheet items (Net) 844,543 300,652 38,434 873,726 Cash 71,584 - - - Due from banks 365,428 300,652 - 5,600 Interbank money market placements 243,939 - - - Receivables from reverse repo transactions - - - - Reserve deposits 122,817 - - - Special finance houses - - - - Loans 32,982 - 38,434 814,229 Loans under follow-up (Net) - - - 5,200 Subsidiaries, associates and investments held to maturity - - - - Miscellaneous receivables - - - 878 Marketable securities held to maturity (Net) - - - - Advances for assets acquired by financial leasing - - - - Financial lease receivables - - - - Leased assets (Net) - - - - Fixed assets (Net) - - - 33,964 Other assets 7,793 - - 13,855 Off balance sheet items 146,584 393,615 262,602 39,281 Guarantees and pledges 16,527 387,889 68,142 24,321 Commitments 126,688 - 194,460 - Other off balance sheet items - - - - Transactions related with derivative financial - - - 4,085 instruments Interest and income accruals 3,369 5,726 - 10,875 Non risk weighted accounts - - - - 991,127 694,267 301,036 913,007 Total Risk Weighted Assets - 138,853 150,518 913,007 Summary information related to the capital adequacy ratio: Current Prior Period Period Total Risk Weighted Assets (*) 1,247,112 1,229,328 Shareholders' Equity 186,619 189,301 Shareholders' Equity / Total risk weighted assets (CAR (%)) 14.96 15.40 (*) As of June 30, 2003, the amount includes TL 44,734 (2002 - TL 21,933) of market risk amount. Information related to the shareholders' equity components : Current Prior Period Period MAIN CAPITAL Paid-in Capital 55,125 55,125 Nominal capital 55,125 55,125 Capital commitments (-) - - Effect on Inflation Accounting on Share Capital 209,147 209,147 Share Premium - - Legal Reserves 2,390 - First legal reserve (Turkish Commercial Code 466/1) 2,390 - Second legal reserve (Turkish Commercial Code 466/2) - - Other legal reserve per special legislation - - Statute Reserves - - Extraordinary reserves - - Reserves allocated by the General Assembly - - Retained earnings - - Accumulated loss - - Foreign currency share capital exchange difference - - Profit 22,393 20,638 Current period profit 20,118 20,638 Prior period profit 2,275 - Loss (-) - - Current period loss - - Prior period loss - - Total Main Capital 289,055 284,910 SUPPLEMENTARY CAPITAL Revaluation Fund - - Furniture, fixture and vehicles - - Buildings - - Profit on sale of associates, subsidiaries and buildings to be transferred to share - - capital Revaluation fund of leasehold improvement - - Increase in the Value of Revaluation Fund - - Foreign Exchange Differences - - General Reserves 6,753 6,792 Provisions for Possible Losses - - Subordinated Loans 21,115 27,418 Marketable Securities and Investment Securities Value Increase Fund 68 224 Associates and subsidiaries 68 224 Available for sale securities - - Structured positions - - Total Supplementary Capital 27,936 34,434 TIER III CAPITAL - - CAPITAL 316,991 319,344 DEDUCTIONS FROM THE CAPITAL 130,372 130,043 Investments in unconsolidated financial companies whose main activities are money and capital markets, insurance and that operate with licenses provided in accordance with special laws 121,383 119,072 Leasehold improvements 6,023 7,113 Start-up costs - - Prepaid expenses 2,966 3,858 The negative difference between the market values and the carrying amounts for unconsolidated investments, subsidiaries, other investments and fixed assets - - Subordinated loans given to other banks which operate in Turkey - - Goodwill (Net) - - Capitalized expenses - - - - Total Shareholder's Equity 186,619 189,301 II- Market Risk The Bank has determined market risk management operations and has taken the necessary precautions in order to hedge market risk within its financial risk management purposes, in accordance with the Communique on "Internal Control and Risk Management Systems of Banks" announced in the Official Gazette dated February 8, 2001. The interest rate and exchange rate risks of the financial positions taken by the Bank related to balance sheet and off-balance sheet accounts are measured and while calculating the capital adequacy, the amount subject to VAR is taken into consideration by the standard method. Scenario analysis and stress tests are used additionally in market risk computations. In order to measure the market risk of the Bank, the Board of Directors has determined risk management strategies in accordance with the proposals of the Top Management Risk Committee and these strategies are forced to be followed up periodically. The Board of Directors evaluates the basic risks faced and determines limitations accordingly. The limits are revised periodically. Additionally the Board of Directors has urged the risk management group and the top management to take necessary precautions to consider, evaluate, control and to control the variety of risks the Bank faces. Amount Capital to be employed for interest rate risk - standard method 2,431 Capital to be employed for general market risk 2,431 Capital to be employed for specific risk - Capital to be employed for options subject to interest rate risk - Capital to be employed for common stock position risk - Standard method - Capital to be employed for general market risk - Capital to be employed for specific risk - Capital to be employed for options subject to common stock position risk - Capital to be employed for currency risk - Standard method 1,148 Capital liability 1,148 Capital to be employed for options subject to currency risk - Total Value-at-risk (VAR)-Internal Model - Total capital to be employed for market risk 3,579 Amount subject to market risk 44,734 III- Foreign Currency Risk Foreign currency risk indicates the possibilities of the potential losses that banks are subject to due to the exchange rate movements in the market. While calculating the share capital requirement, all foreign currency assets, liabilities and forward transactions of the Bank are taken into account. Net short and long position of Turkish Lira equivalent of each foreign currency is calculated. The value, which will be a base for calculating the share capital requirement, is computed by taking the higher absolute value of the position by adding to absolute net gold position. Share capital requirement is computed over of this amount. The Board of Directors sets limits for the positions, which are followed up daily. Additionally, possible value changes in the existing or possible foreign currency positions are observed together with the follow-up of the foreign currency risk in accordance with the provisions of the "Communique on Internal Control and Risk Management Systems of Banks". As an element of the Bank's risk management strategies, foreign currency liabilities are hedged against exchange rate risk by derivative instruments. The Board of Directors of the Bank determines the short position limits that the Bank can hold in accordance with the present legal limitations. The Treasury Department of the Bank is responsible for the management of Turkish Lira or foreign currency price, liquidity and affordability risks that could occur in the domestic and international markets. The Risk Control Department continuously controls risk and risk related transactions occurring in the money markets and prepares weekly reports for the Bank's Asset-Liability Committee. The related principles and limitations of the counterparties are determined by the Loan Committee. The limits concerning the maturity structure of the foreign currency transactions and interest rates are examined by the Asset-Liability Committee. As of June 30, 2003, the Bank's net short position is TL 11,156 (December 31, 2002 - TL 726) resulting from short position amounting to TL 30,405 (December 31, 2002 - TL 41,647) on the balance sheet and long position amounting to TL 19,249 (December 31, 2002 - TL 40,921) on the off-balance sheet. The announced current foreign exchange buying rates of the Bank at the balance sheet date and the previous five working days are as follows: 23/6/03 24/6/03 25/6/03 26/6/03 27/6/03 30/6/03 USD 1,425,412 1,430,099 1,431,814 1,426,927 1,421,717 1,407,647 CHF 1,070,660 1,077,748 1,076,602 1,062,049 1,048,790 1,035,502 GBP 2,364,948 2,384,162 2,385,588 2,375,020 2,352,848 2,322,246 JPY 12,052 12,118 12,160 12,006 11,849 11,712 EUR 1,646,066 1,653,338 1,650,882 1,637,255 1,623,601 1,609,503 The simple arithmetical average of the major current foreign exchange buying rates of the Bank for the thirty days before the balance sheet date is as follows: Monthly Average Foreign Exchange Rate USD 1,418,523 CHF 1,072,841 GBP 2,354,887 JPY 11,958 EUR 1,655,554 Information on the foreign currency risk of the Bank: Current Period EUR USD YEN OTHER FC TOTAL Assets Cash (cash in vault, foreign currency cash, money in transit, cheques purchased) and balances with the Central Bank of Turkey 21,824 388,543 - 2,605 412,972 Due from other banks and financial institutions 17,819 184,294 403 59,182 261,698 Trading securities (***) 1,298 10,457 - 352 12,107 Investment securities available-for-sale - 29,018 - - 29,018 Loans (**) 210,768 297,007 - 8,343 516,118 Investments in subsidiaries and participations 49,009 - - - 49,009 Investment securities held-to-maturity - - - - - Property and equipment - - - - - Goodwill - - - - - Other assets 20,530 187,042 - 2,984 210,556 Total Assets 321,248 1,096,361 403 73,466 1,491,478 Liabilities Bank deposits 3,905 7,948 119 31,716 43,688 Foreign currency deposits (*) 246,361 843,536 574 37,989 1,128,460 Funds provided from other financial institutions 6,819 292,208 - 466 299,493 Marketable securities issued - - - - - Miscellaneous payables 10,494 16,172 - 1,207 27,873 Other liabilities 3,634 18,008 - 727 22,369 Total liabilities 271,213 1,177,872 693 72,105 1,521,883 Net Balance Sheet Position 50,035 (81,511) (290) 1,361 (30,405) Net Off-Balance Sheet Position (47,769) 67,758 - (740) 19,249 Financial derivative assets 123,723 189,432 - 11,149 324,304 Financial derivative liabilities 171,492 121,674 - 11,889 305,055 Non-cash loans (****) 180,617 402,468 6,287 24,556 613,928 Prior Period Total Assets 396,433 1,281,968 20,663 95,020 1,794,084 Total Liabilities 296,363 1,454,169 226 84,973 1,835,731 Net Balance Sheet Position 100,070 (172,201) 20,437 10,047 (41,647) Net Off-Balance Sheet Position (98,996) 168,691 (20,158) (8,616) 40,921 Non-cash loans 184,397 391,877 7,456 24,914 608,644 (*) Gold account deposits amounting to TL 9,325 (December 31, 2002 - TL 25,031) are included in the foreign currency deposits. (**) foreign currency indexed loans amounting to TL 58,796 (December 31, 2002 - TL 89,632) are included in the loan portfolio. (***) Foreign currency indexed government bonds and treasury bills amounting to TL 219 (December 31, 2002 - TL 243) are included in the trading portfolio. (****) There are no effects on the net off-balance sheet position. IV- Interest Rate Risk Interest rate risk shows the loss probability related to the changes in the interest rates depending on the Bank's position, and it is managed by the Treasury Department. The interest rate sensitivity of assets, liabilities and off-balance sheet items related to this risk are measured by using the standard method. The first step at calculation of interest rate risk, is to place the instruments subject to interest rate risk in the appropriate one of the 13 maturity sections according to the remaining time to maturity or to the repricing. At the second step, the instruments with variety of maturities are weighted according to their risks for reflecting the interest rate risk volatilities that match their maturities. The first priority of the Bank's risk management is to protect from interest rate volatility. All types of sensitivity analysis performed within the context is calculated by the risk management and reported to the Asset-Liability Committee. Work is performed regarding interest income according to the macro economical indicators in the Bank's budget estimations and the effects of the market interest fluctuations on the financial position and cash flow are purified at the maximum level possible by means of target revisions. The Bank management follows the market interest rates daily and determines the interest rates of the Bank when necessary. Since the Bank does not permit or imposes limits, on maturity mismatches it is not expected that the Bank will face a significant interest rate risk. Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items based on repricing dates): Up to 1 1-3 3-6 6-12 1 Year and Months Months Months Months Over Demand Total Current Period Assets Cash (cash in vault, foreign currency cash, money in transit, cheques purchased) and balances with the Central Bank of Turkey 488,245 - - - - 71,584 559,829 Due from banks and other financial institutions 423,267 17,500 14,493 4,000 - 90,931 550,191 Trading securities 1,472 3,032 9,591 21,494 46,298 - 81,887 Securities available-for-sale 8 - - 6,572 22,446 - 29,026 Loans 360,003 236,310 156,105 78,345 54,882 - 885,645 Securities held-to-maturity 1,743 36,350 - 274 - - 38,367 Other assets 9,936 8,402 3,518 7,008 889 194,788 224,541 Total Assets 1,284,674 301,594 183,707 117,693 124,515 357,303 2,369,486 Liabilities Bank deposits 60,801 12,098 1,200 - - - 74,099 Other deposits 1,350,553 108,186 29,064 2,236 - - 1,490,039 Miscellaneous payables - - - - - 39,929 39,929 Marketable securities issued - - - - - - - Funds provided from other 41,031 12,715 257,039 5,906 3,940 - 320,631 financial institutions Other liabilities 40,656 8,834 7,051 2,356 4,906 380,985 444,788 Total Liabilities 1,493,041 141,833 294,354 10,498 8,846 420,914 2,369,486 Balance Sheet Interest (208,367) 159,761 (110,647) 107,195 115,669 (63,611) - Sensitivity Gap Off Balance Sheet Interest - - - - - - - Sensitivity Gap Total Interest Sensitivity Gap (208,367) 159,761 (110,647) 107,195 115,669 (63,611) - The other assets line at the without interest column consists of tangible fixed assets amounting to TL 39,987, intangible fixed assets amounting to TL 3,603, participations amounting to TL 6,180 and subsidiaries amounting to TL 115,203 and the other liabilities line consists of shareholders' equity with a total amount of TL 289,123. Up to 1 1-3 3-6 6-12 1 Year and Over Month Month Months Months Demand Total Prior Period Assets Cash (cash in vault, foreign 529,171 - - - - 96,888 626,059 currency cash, money in transit, cheques purchased) and balances with the Central Bank of Turkey Due from banks and other financial 721,694 12,263 8,917 2,856 - 71,611 817,341 institutions Trading securities 2,818 14,108 6,922 6,560 428 302 31,138 Investment securities - 18,790 - - - 10 18,800 available-for-sale Loans 364,679 179,348 238,332 60,072 45,918 - 888,349 Investment securities 231 40,521 - - - - 40,752 held-to-maturity Other assets - - - - - 223,047 223,047 Total Assets 1,618,593 265,030 254,171 69,488 46,346 391,858 2,645,486 Liabilities Banks deposits 65,525 182 1,115 - - - 66,822 Other deposits 1,658,400 132,980 11,489 15,443 440 - 1,818,752 Miscellaneous payables - - - - - 39,559 39,559 Marketable securities issued - - - - - - - Funds provided from other financial 4,548 204,684 19,770 91,636 - - 320,638 institutions Other liabilities 122 388 627 1,051 5,334 392,193 399,715 Total Liabilities 1,728,595 338,234 33,001 108,130 5,774 431,752 2,645,486 On Balance Sheet Interest (110,002) (73,204) 221,170 (38,642) 40,572 (39,896) - Sensitivity Gap Off Balance Sheet Interest - - - - - - - Sensitivity Gap Total Interest Sensitivity Gap (110,002) (73,204) 221,170 (38,642) 40,572 (39,896) - The other assets line at the without interest column consists of tangible fixed assets amounting to TL 41,507, intangible fixed assets amounting to TL 3,303, participations amounting to TL 6,291 and subsidiaries amounting to TL 112,781 and the other liabilities line consists of shareholders' equity with a total amount of TL 285,134. Average interest rates applied to monetary financial instruments: EURO USD Yen TL % % % % Current Period Assets Cash (cash in vault, foreign currency cash, money in - transit, cheques purchased) and balances with the Central 1.00 0.39 25.00 Bank of Turkey Due from banks and other financial institutions - 1.37 - 40.91 Trading securities 10.58 10.68 - 54.30 Securities available-for-sale - 10.23 - - Loans 5.96 6.20 6.36 48.63 Securities held-to-maturity - - - 58.18 Liabilities Bank deposits 3.37 2.10 4.33 39.64 Other deposits 3.05 3.03 3.04 33.20 Miscellaneous payables - - - - Marketable securities issued - - - - Funds provided from other financial institutions 4.51 2.98 5.93 39.23 V- Liquidity Risk Liquidity risk occurs when there is not sufficient amount of cash or cash flows to fulfill the cash outflows completely and on time, resulting from the unstable cash inflows. Liquidity risk may occur when the market penetration is not enough, when the open positions cannot be closed urgently with a suitable price and sufficient amount due to barriers and break-ups at the markets. The Bank's policy is to establish a liquid asset structure that can afford all kinds of liabilities by liquid sources. In this scope liquidity problem does not happen at any period. The Board of Directors of the Bank continuously determines the liquidity ratios and related standards, and controls them, in order to keep this structure. There is a system worked on to apply international measurement methods. However, according to the general policies of the Bank, the adaptation of the assets, liabilities, the interest rates to the payments are always established within the asset liability management strategies. A positive difference is tried to be established between the yields of TL and foreign currency assets and liabilities at the balance sheet and their costs. According to this strategy, the Bank pays special attention not to take maturity risk, and no banking service is marketed when the price is lower than the financing cost. When the funding and liquidity sources are considered, the Bank covers majority of its liquidity need by deposits, and in addition to this source, it makes use of prefinancing and syndication products to generate additional sources. Generally, the Bank does not prefer to utilize liquidity from interbank money markets and is in a net lender position in interbank money markets. Presentation of assets and liabilities according to their remaining maturities : 1-3 3-6 6-12 1 Year and Months Months Months Over Current Period Demand (*) Total (**) Assets Cash (cash in vault, foreign currency cash, money in transit, cheques purchased) and Balances with the Central 559,829 - - - - 559,829 Bank of Turkey Due from banks and other financial 514,198 17,500 14,493 4,000 - 550,191 institutions Trading securities 809 1,981 9,591 22,051 47,455 81,887 Securities available-for-sale 9 - - 6,571 22,446 29,026 Loans 360,003 236,310 156,105 78,345 54,882 885,645 Securities held-to-maturity - - - 38,367 - 38,367 Other assets 35,939 7,837 3,518 7,729 940 224,541 Total Assets 1,470,787 263,628 183,707 157,063 125,723 2,369,486 Liabilities Bank deposits 60,801 12,098 1,200 - - 74,099 Other deposits 1,350,553 108,186 29,064 2,236 - 1,490,039 Funds provided from other financial 41,031 12,715 198,387 5,906 62,592 320,631 institutions Marketable securities issued - - - - - - Miscellaneous payables 39,929 - - - - 39,929 Other liabilities 113,940 8,834 7,051 20,935 294,028 444,788 Total Liabilities 1,606,254 141,833 235,702 29,077 356,620 2,369,486 Net Liquidity Gap (135,466) 121,795 (51,995) 127,986 (230,897) - Prior Period Total Assets 1,797,604 218,712 271,052 78,169 106,066 2,645,486 Total Liabilities 1,867,199 160,751 57,192 200,269 360,075 2,645,486 Net Liquidity Gap (69,595) 57,961 213,860 (122,100) (254,009) - (*) The maturity of up to 1 month of Interbank funds sold amounting to TL 243,939, loans amounting to TL360,003, and domestic and foreign banks placements amounting to TL 270,259 are shown in the demand column. Furthermore, demand deposits amounting to TL 1,349,097 is included in the other deposits and shown at the demand column. (**) Total column includes other assets amounting to TL 168,578 consists of TL 121,383 of subsidiaries and participations, TL 39,987 of tangible assets, TL 3,603 of intangible fixed assets, TL 2,966 of prepaid expenses and TL 639 of office supply inventory that are not taken in to consideration at the maturity distribution. Other liabilities which matures up to 1 year and over includes shareholders' equity amounting to TL 289,123. This information is provided by RNS The company news service from the London Stock Exchange MORE TO FOLLOW IR KGGMRVDLGFZG
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