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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:0359L Turk Ekonomi Bankasi A.S. 13 May 2003 Turk Ekonomi Bankasi Anonim Sirketi Consolidated Financial Statements As of December 31, 2002 Together With Auditors' 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 REPORT OF INDEPENDENT AUDITORS' AS OF DECEMBER 31, 2002 We have audited the consolidated balance sheet of Turk Ekonomi Bankasi Anonim Sirketi and its subsidiraries as of December 31, 2002 and the related consolidated statements of income, changes in shareholders' equity and cash flows for the year then ended. These consolidated financial statements are expressed in the equivalent purchasing power of Turkish lira as of December 31, 2002. These financial statements are the responsibility of the Bank's management. Our responsibility as independent auditors is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards which were determined under the provisions of Banking Law Number 4389. These standards require that the audit should be planned and performed to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Turk Ekonomi Bankasi Anonim Sirketi and its subsidiaries at December 31, 2002 and the results of its consolidated operations and cash flows for the year then ended 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 and cash flows in accordance with the accounting principles generally accepted in the countries of users of the financial statements and IFRS. Guney Serbest Muhasebeci Mali Musavirlik Anonim Sirketi An Affiliated Firm of Ernst & Young International Esra Peri, SMMM March 27, 2003 Istanbul, Turkey INDEX SECTION ONE Page no. General Information I. Footnotes and Explanations on the Parent Bank's Service Activities and Operating Areas 1 II. The Explanations and Footnotes Regarding the Including Group of the Parent Bank 1 SECTION TWO Consolidated Financial Statements I. Consolidated Balance Sheets - Assets 3 II. Consolidated Balance Sheets - Liabilities 4 III. Consolidated Statements of Income 5 IV. Consolidated Statements of Off Balance Sheet Commitments 6 V. Consolidated Statements of Changes in Shareholders' Equity 7 VI. Consolidated Statements of Cash Flows 8 SECTION THREE Accounting Principles I. Basis of Presentation 9 II. Presentation of the Information Regarding the Parent Bank and the Group Companies Included in the Consolidation 9 III. Explanations on Forward, Option Contracts and Derivative Instruments 11 IV. Netting of Financial Assets and Liabilities 11 V. Interest Income and Expense 11 VI. Fees and Commission Income and Expense 11 VII. Securities Held for Trading 12 VIII. Sales and Repurchase Agreements and Lending of Securities 12 IX. Securities Held to Maturity, Securities Available for Sale and Bank Originated Loans and Receivables 12 X. Unconsolidated Participations and Subsidiaries 13 XI. Originated Loans and Receivables and Provisions for Loan Impairment 13 XII. Goodwill and Other Intangible Fixed Assets 14 XIII. Tangible Fixed Assets 15 XIV. Leasing Transactions 15 XV. Provisions and Contingent Liabilities 16 XVI. Liabilities Regarding Employee Benefits 16 XVII. Taxation 16 XVIII. Additional Explanations on Borrowings 17 XIX. Paid-in Capital and Share Certificates 17 XX. Acceptances 17 XXI. Government Incentives 17 XXII. Securities at Custody 17 XXIII. Impairment of Assets 17 XXIV. Segment Reporting 17 XXV. Other Matters 18 SECTION FOUR Information on Consolidated Financial Structure I. Strategy for the Use of Financial Instruments and Explanation Regarding the Foreign Currency Transactions 19 II. Consolidated Capital Adequacy Standard Ratio 19 III. Consolidated Credit Risk 22 IV. Consolidated Market Risk 24 V. Consolidated Foreign Currency Risk 24 VI. Consolidated Interest Rate Risk 26 VII. Consolidated Liquidity Risk 29 VIII. Presentation of Assets and Liabilities with Their Fair Values 30 IX. Transactions Made in the Name and Account of the Third Parties, Fiduciary Transactions 30 X. Operating Segments 30 SECTION FIVE Footnotes and Explanations on Consolidated Financial Statements I. Footnotes and Explanations Related to the Consolidated Assets 32 II. Footnotes and Explanations Related to the Consolidated Liabilities 47 III. Footnotes and Explanations Related to the Consolidated Income Statement 54 IV. Footnotes and Explanations Related to the Consolidated Off-balance Sheet Commitments 57 V. Footnotes and Explanations Related to the Consolidated Statement of Shareholders' Equity 61 VI. Footnotes and Explanations Related to the Consolidated Statement of Cash Flows 62 VII. Footnotes and Explanations Related to Mergers, Aquisitions of Banks, and the Recording Principles of Aquisitions of Subsidiaries 63 VIII. Footnotes and Explanations on the Risk Group of the Parent Bank 64 IX. Footnotes and Explanations on Inflation Accounting 66 X. The Information on the Parent Bank's Domestic, Foreign, Off-shore Branches and Foreign Representatives 68 XI. Explanations Related to Subsequent Events 68 SECTION SIX Other Footnotes and Explanations I. Other Explanations Regarding the Parent Bank 68 SECTION SEVEN Report of Independent Auditors I. Explanations on the Report of Independent Auditors 69 SECTION ONE GENERAL INFORMATION I- Footnotes and Explanations on the Parent Bank's Service Activities and Operating Areas a) Commercial name of the Bank : Turk Ekonomi Bankasi Anonim Sirketi (the Bank) Reporting period : 1 January - 31 December 2002 Address of the head office : Meclis-i Mebusan Cad. 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 : @teb.com.tr b) The Parent Bank's service activities and operating areas: The Parent 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 Including Group of the Parent Bank The Group of the Parent 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. SECTION TWO CONSOLIDATED FINANCIAL STATEMENTS I. Consolidated Balance Sheets - Assets II. Consolidated Balance Sheets - Liabilities III. Consolidated Statements of Income IV. Consolidated Statements of Off Balance Sheet Commitments V. Consolidated Statements of Changes in Shareholders' Equity VI. Consolidated Statements of Cash Flows I- CONSOLIDATED BALANCE SHEET Current Period Prior Period 31.12.2002 31.12.2001 ASSETS Note Ref. (Section TL FC Total TL FC Total Five) I. CASH AND 20,942 408,631 429,573 8,757 178,803 187,560 BALANCES WITH THE CENTRAL BANK OF TURKEY 1.1 Cash - 6,142 - 6,142 6,237 - 6,237 1.2 Foreign - - 80,634 80,634 - 177,001 177,001 currency 1.3 Balances with I-1 14,800 327,997 342,797 2,520 1,802 4,322 the Central Bank of Turkey II. TRADING 14,800 9,533 50,062 7,921 8,045 15,966 SECURITIES (Net) 2.1 Public sector I-2 40,529 9,261 49,790 7,921 8,045 15,966 debt securities 2.1.1 Government I-2 34,787 6,593 41,380 7,921 8,045 15,966 bonds 2.1.2 Treasury I-2 5,741 - 5,741 - - - bills 2.1.3 Other I-2 1 2,668 2,669 - - - 2.2 Share - - - - - - - certificates 2.3 Other - - 272 272 - - - marketable securities III. BANKS AND 39,070 996,376 1,035,446 6,502 527,365 533,867 OTHER FINANCIAL INSTITUTIONS 3.1 Due from - 39,070 996,376 1,035,446 6,502 527,355 533,857 banks 3.1.1 Domestic - 27,653 178,682 206,335 6,137 63,346 69,483 banks 3.1.2 Foreign banks I-3 11,417 817,694 829,111 365 464,009 464,374 3.2 Other - - - - - 10 10 financial institutions IV. MONEY MARKET 234,301 178,732 413,033 137,251 535,657 672,908 PLACEMENTS 4.1 Interbank - 227,250 178,732 405,982 137,251 535,657 672,908 money market placements 4.2 Istanbul - - - - - - - Stock Exchange money market placements 4.3 Receivables I-4 7,051 - 7,051 - - - from reverse repurchase agreements V. SECURITIES 9 16,856 16,865 - - - AVAILABLE FOR SALE (Net) 5.1 Share I-5 9 - 9 - - - certificates 5.2 Other I-5 - 16,856 16,856 - - - marketable securities VI. LOANS 360,424 953,050 1,313,474 272,264 922,241 1,194,505 6.1 Short term I-6 334,601 780,310 1,114,911 235,601 830,333 1,065,934 6.2 Medium and I-6 20,861 172,740 193,601 20,936 91,908 112,844 long term 6.3 Loans under I-6 20,212 40 20,252 22,641 - 22,641 follow-up 6.4 Specific I-6 (15,250) (40) (15,290) (6,914) - (6,914) provisions (-) VII. FACTORING I-7 41,900 24,654 66,554 26,047 23,361 49,408 RECEIVABLES VIII. SECURITIES 36,781 2,840 39,621 50,069 38,573 88,642 HELD TO MATURITY (Net) 8.1 Public sector I-8 36,781 2,840 39,621 50,062 38,573 88,635 debt securities 8.1.1 Government I-8 36,557 2,840 39,397 50,062 - 50,062 bonds 8.1.2 Treasury I-8 224 - 224 - - - bills 8.1.3 Other I-8 - - - - 38,573 38,573 8.2 Other I-8 - - - 7 - 7 marketable securities IX. INVESTMENTS 443 - 443 492 - 492 AND ASSOCIATES (Net) 9.1 Financial I-9 443 - 443 492 - 492 investments and associates 9.2 Non-Financial - - - - - - - investments and associates X. SUBSIDIARIES 338 - 338 347 466 813 (Net) 10.1 Financial I-10 338 - 338 347 466 813 subsidiaries 10.2 Non-Financial - - - - - - - subsidiaries XI. OTHER I-11 - - - - - - INVESTMENTS (Net) XII. FINANCE LEASE 4,683 80,364 85,047 7,683 54,377 62,060 RECEIVABLES (Net) 12.1 Gross finance I-12 6,559 90,374 96,933 9,194 63,266 72,460 lease receivables 12.2 Unearned I-12 (1,876) (10,010) (11,886) (1,511) (8,889) (10,400) income ( - ) XIII. RESERVE - 9,242 122,663 131,905 8,985 122,679 131,664 DEPOSITS XIV. MISCELLANEOUS I-13 311 41 352 309 44 353 RECEIVABLES XV. ACCRUED 24,073 12,050 36,123 28,106 28,444 56,550 INTEREST AND INCOME RECEIVABLES 15.1 Loans I-14 9,357 9,817 19,174 10,322 25,160 35,482 15.2 Marketable I-14 4,207 537 4,744 5,529 1,671 7,200 securities 15.3 Other I-14 10,509 1,696 12,205 12,255 1,613 13,868 XVI. PROPERTY AND 41,938 411 42,349 39,839 441 40,280 EQUIPMENT (Net) 16.1 Book value I-15 95,547 1,121 96,668 84,239 962 85,201 16.2 Accumulated I-15 (53,609) (710) (54,319) (44,400) (521) (44,921) depreciation ( - ) XVII. INTANGIBLE 3,765 125 3,890 3,303 297 3,600 ASSETS (Net) 17.1 Goodwill I-16 370 - 370 370 - 370 17.2 Other I-16 8,487 911 9,398 6,643 889 7,532 17.3 Accumulated (5,092) (786) (5,878) (3,710) (592) (4,302) amortization ( - ) XVIII. OTHER ASSETS I-17 36,974 2,507 39,481 33,106 6,415 39,521 TOTAL ASSETS 895,723 2,808,833 3,704,556 630,981 2,447,208 3,078,189 The accompanying notes are an integral part of these balance sheets. II- CONSOLIDATED BALANCE SHEET Current Period Prior Period 31.12.2002 31.12.2001 LIABILITIES Note Ref. TL FC Total TL FC Total (Section Five) I. DEPOSITS 390,122 2,415,641 2,805,763 289,834 1,897,358 2,187,192 1.1 Bank II-1 30,329 75,112 105,441 21,444 68,954 90,398 deposits 1.2 Saving II-1 163,563 - 163,563 130,909 - 130,909 deposits 1.3 Public II-1 35 - 35 122 - 122 sector deposits 1.4 Commercial II-1 162,985 - 162,985 136,310 - 136,310 deposits 1.5 Other II-1 33,210 - 33,210 1,049 - 1,049 institutions deposits 1.6 Foreign II-1 - 2,318,074 2,318,074 - 1,814,138 1,814,138 currency deposits 1.7 Precious II-1 - 22,455 22,455 - 14,266 14,266 metals deposit accounts II. MONEY MARKET 22,800 - 22,800 - - - BALANCES 2.1 Interbank - - - - - - - money market takings 2.2 Istanbul - - - - - - - Stock Exchange money market takings 2.3 Funds II-2 22,800 - 22,800 - - - provided under repurchase agreements III. FUNDS 35,331 357,549 392,880 50,464 395,679 446,143 BORROWED 3.1 Funds - - - - - - - borrowed from the Central Bank of Turkey 3.2 Other funds II-3 35,331 357,549 392,880 50,464 395,679 446,143 borrowed 3.2.1 Domestic II-3 16,849 12,144 28,993 20,946 15,546 36,492 banks and institutions 3.2.2 Foreign II-3 18,482 345,405 363,887 29,518 380,133 409,651 banks, institutions and funds IV. MARKETABLE - - - - - - SECURITIES ISSUED (Net) 4.1 Bills II-4 - - - - - - 4.2 Asset backed II-4 - - - - - - securities 4.3 Bonds II-4 - - - - - - V. FUNDS II-5 - - - - - - VI. MISCELLANEOUS II-6 22,196 37,618 59,814 21,472 44,549 66,021 PAYABLES VII. OTHER II-7 18,646 6,605 25,251 21,565 13,248 34,813 EXTERNAL RESOURCES VIII. TAXES AND II-8 6,758 - 6,758 7,923 - 7,923 OTHER DUTIES PAYABLE IX. FACTORING II-9 13,104 14,878 27,982 - 11,899 11,899 PAYABLES X. FINANCE - - - - - - LEASE PAYABLES (Net) 10.1 Finance II-10 - - - - - - Lease Payables 10.2 Deferred II-10 - - - - - - finance lease expenses (-) XI. ACCRUED 13,063 11,837 24,900 12,436 25,603 38,039 INTEREST AND EXPENSES PAYABLE 11.1 Deposits II-11 5,300 8,829 14,129 6,256 19,383 25,639 11.2 Borrowings II-11 2,061 2,185 4,246 2,851 5,172 8,023 11.3 Repurchase II-11 28 - 28 - 1,048 1,048 agreements 11.4 Other II-11 5,674 823 6,497 3,329 - 3,329 XII. PROVISIONS 36,649 1,685 38,334 34,366 4,286 38,652 12.1 General II-12 6,093 - 6,093 4,828 - 4,828 provisions 12.2 Reserve for II-12 1,751 - 1,751 1,513 - 1,513 employee termination benefits 12.3 Provisions II-12 21,245 1,685 22,930 21,845 4,286 26,131 for income taxes 12.4 Insurance - 7,017 - 7,017 6,101 - 6,101 technical reserves (Net) 12.5 Other II-12 543 - 543 79 - 79 provisions XIII. SUBORDINATED II-12 - 24,596 24,596 - - - LOANS XIV. MINORITY II-20 19,246 - 19,246 18,167 - 18,167 INTEREST XV. SHAREHOLDERS' 215,957 40,275 256,232 200,396 28,944 229,340 EQUITY 15.1 Paid-in II-13 55,125 - 55,125 55,125 - 55,125 capital 15.2 Supplementary II-13 182,146 - 182,146 406,123 - 406,123 capital 15.2.1 Share II-14 - - - - - - premium 15.2.2 Share - - - - - - - cancellation profits 15.2.3 Marketable II-15 201 - 201 - - - securities value increase fund 15.2.4 Revaluation II-16 - - - - - - fund 15.2.5 Value II-17 - - - - - - increase in revaluation fund 15.2.6 Other - - - - 569 - 569 capital reserves 15.2.7. Effect on - 181,945 - 181,945 405,554 - 405,554 inflation accounting on share capital 15.3 Profit - 4,410 5,851 10,261 54,602 4,587 59,189 reserves 15.3.1 Legal II-18 4,410 - 4,410 54,602 - 54,602 reserves 15.3.2 Status - - - - - - - reserves 15.3.3 Extraordinary - - - - - - reserves 15.3.4 Other profit - - 5,851 5,851 - 4,587 4,587 reserves 15.4 Profit or - (25,724) 34,424 8,700 (315,454) 24,357 (291,097) loss 15.4.1 Prior year - (40,346) 23,050 (17,296) (248,576) 16,863 (231,713) income/loss 15.4.1.1 Group's - (30,086) 23,050 (7,036) (246,222) 16,863 (229,359) share 15.4.1.2 Minority II-20 (10,260) - (10,260) (2,354) - (2,354) shares 15.4.2 Current year - 14,622 11,374 25,996 (66,878) 7,494 (59,384) income/loss 15.4.2.1 Group's - 13,604 11,374 24,978 (59,512) 7,494 (52,018) share 15.4.2.2 Minority - 1,018 - 1,018 (7,366) - (7,366) shares TOTAL 793,872 2,910,684 3,704,556 656,623 2,421,566 3,078,189 LIABILITIES The accompanying notes are an integral part of these balance sheets. III- CONSOLIDATED STATEMENTS OF INCOME Current Period Prior Period 31.12.2002 31.12.2001 INCOME AND EXPENSES Note Ref. (Section Five) Total Total I. INTEREST INCOME III-1 454,393 648,723 1.1 Interest on loans 205,985 245,208 1.1.1 Interest on TL loans 131,480 152,437 1.1.1.1 Short term loans 123,776 129,510 1.1.1.2 Medium and long term loans 7,704 22,927 1.1.2 Interest on foreign currency loans 73,864 92,666 1.1.2.1 Short term loans 58,391 81,589 1.1.2.2 Medium and long term loans 15,473 11,077 1.1.3 Interest on loans under follow-up 641 105 1.1.4 Premiums received from Resource Utilization Support - - Fund 1.2 Interest received from reserve deposits 4,244 1,376 1.3 Interest received from banks 62,622 113,009 1.3.1 The Central Bank of Turkey 18 2,237 1.3.2 Domestic banks 16,034 57,279 1.3.3 Foreign banks 46,570 53,493 1.4 Interest received from money market transactions 86,031 127,363 1.5 Interest received from marketable securities 59,507 82,461 portfolio 1.5.1 Trading securities 26,430 79,215 1.5.2 Available-for-sale securities 770 2,636 1.5.3 Held to maturity securities 32,307 610 1.6 Other interest income 36,004 79,306 II. INTEREST EXPENSE III-2 260,997 473,155 2.1 Interest on deposits 188,380 329,843 2.1.1 Bank deposits 17,581 26,861 2.1.2 Saving deposits 70,977 83,095 2.1.3 Public sector deposits 4 - 2.1.4 Commercial deposits 10,804 71,894 2.1.5 Other institutions deposits 155 786 2.1.6 Foreign currency deposits 88,713 146,824 2.1.7 Precious metals vault accounts 146 383 2.2 Interest on money market transactions 33 1,730 2.3 Interest on funds borrowed 42,466 141,560 2.3.1 The Central Bank of Turkey - - 2.3.2 Domestic banks 8,581 18,048 2.3.3 Foreign banks 33,370 98,218 2.3.4 Other financial institutions 515 25,294 2.4 Interest on securities issued - - 2.5 Other interest expense 30,118 22 III. NET INTEREST INCOME (I - II) 193,396 175,568 IV. NET FEES AND COMMISSIONS INCOME 35,592 32,003 4.1 Fees and commissions received 49,879 50,253 4.1.1 Cash loans 2,604 4,633 4.1.2 Non-cash loans 7,146 7,788 4.1.3 Other 40,129 37,832 4.2 Fees and commissions paid 14,287 18,250 4.2.1 Cash loans 1,770 4,675 4.2.2 Non-cash loans 117 845 4.2.3 Other 12,400 12,730 V. DIVIDEND INCOME - - 5.1 Trading securities - - 5.2 Available-for-sale securities - - VI. NET TRADING INCOME 17,135 2,597 6.1 Profit/losses on trading account securities (Net) 21,711 23,734 6.2 Foreign exchange gains/losses (Net) (4,576) (21,137) VII PROFIT/LOSS FROM HELD TO MATURITY MARKETABLE III-3 - - SECURITIES VIII. OTHER OPERATING INCOME III-4 21,712 30,407 IX. TOTAL OPERATING INCOME (III+IV+V+VI+VII+VIII) 267,835 240,575 X. PROVISION FOR LOAN LOSSES OR OTHER RECEIVABLES (-) III-5 16,455 12,170 XI. OTHER OPERATING EXPENSES (-) III-6 143,880 157,509 XII. NET OPERATING INCOME (IX-X-XI) 107,500 70,896 XIII. PROFIT/LOSSES FROM ASSOCIATES AND SUBSIDIARIES III-7 - - XIV. GAIN / (LOSS) ON NET MONETARY POSITION (51,541) (112,261) XV. INCOME BEFORE TAXES (XII+XIII) 55,959 (41,365) XVI. PROVISION FOR TAXES ON INCOME (-) (29,963) (18,019) XVII. NET OPERATING INCOME/EXPENSE AFTER TAXES (XIV-XV) 25,996 (59,384) XVIII. EXTRAORDINARY INCOME/EXPENSE AFTER TAXES - - 18.1 Extraordinary net income/expense before taxes - - 18.1.1 Extraordinary income - - 18.1. 2 Extraordinary expense (-) - - 18.2 Provision for taxes on extraordinary income - - XIX. PROFIT/LOSSES ON UNCONSOLIDATED INVESTMENTS (-) III-8 - - XX. NET PROFIT/LOSSES (XVI+XVII+XVIII-XIX) 25,996 (59,384) 20.1 Group's profit/loss III-9 24,978 (52,018) 20.2 Minority shares 1,018 (7,366) XXI. Earnings/Losses per share 235,79 (538,63) The accompanying notes are an integral part of these statements. IV- CONSOLIDATED STATEMENTS OF OFF-BALANCE SHEET COMMITMENTS Current Period Prior Period 31.12.2002 31.12.2001 OFF- BALANCE Note SHEET COMMITMENTS Ref. TL FC TOTAL TL FC TOTAL (Section Five) A. OFF - BALANCE 528,700 1,497,860 2,026,560 416,727 1,024,297 1,441,024 SHEET COMMITMENTS (I+II+III) I. GUARANTEES IV-1 264,928 687,119 952,047 236,415 627,671 864,086 1.1. Letters of 264,814 315,819 580,633 236,415 365,377 601,792 guarantee 1.1.1. Guarantees 28,507 253 28,760 16,761 44,106 60,867 subject to State Tender Law 1.1.2. Guarantees given 69,747 46,968 116,715 - 29,382 29,382 for foreign trade operations 1.1.3. Other letters of 166,560 268,598 435,158 219,654 291,889 511,543 guarantee 1.2. Banks loans - 40,361 40,361 - 28,222 28,222 1.2.1. Import letter of - 40,361 40,361 - 27,211 27,211 acceptance 1.2.2. Other bank - - - - 1,011 1,011 acceptances 1.3. Letters of credit 72 321,915 321,987 - 219,376 219,376 1.3.1. Documentary 72 283,699 283,771 - 219,376 219,376 letters of credit 1.3.2. Other letters of - 38,216 38,216 - - - credit 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 42 1,395 1,437 - 1,420 1,420 1.8. Other collaterals - 7,629 7,629 - 13,276 13,276 II. COMMITMENTS 181,237 329,233 510,470 167,458 151,422 318,880 2.1. Irrevocable 181,237 329,233 510,470 167,458 - 167,458 commitments 2.1.1. Asset purchase 1,000 - 1,000 - - - commitments 2.1.2. Deposit purchase - 329,233 329,233 - - - and sales commitments 2.1.3. Share capital - - - - - - commitment to associates and subsidiaries 2.1.4. Loan granting 112,902 - 112,902 103,487 - 103,487 commitments 2.1.5. Securities issue - - - - - - brokerage commitments 2.1.6. Commitments for - - - - - - reserve deposit requirements 2.1.7. Commitments for 67,335 - 67,335 63,971 - 63,971 credit card limits 2.1.8. Other irrevocable - - - - - - commitments 2.2. Revocable - - - - 151,422 151,422 commitments 2.2.1. Revocable loan - - - - - - granting commitments 2.2.2. Other revocable - - - - 151,422 151,422 commitments III. DERIVATIVE IV-2 82,535 481,508 564,043 12,854 245,204 258,058 FINANCIAL INSTRUMENTS 3.1. Forward foreign 82,535 176,476 259,011 12,854 216,095 228,949 currency buy/sell transactions 3.1.1. Forward foreign 21,004 106,955 127,959 5,375 109,105 114,480 currency transactions-buy 3.1.2. Forward foreign 61,531 69,521 131,052 7,479 106,990 114,469 currency transactions-sell 3.2. Swap transactions - 305,032 305,032 - 29,109 29,109 related to f.c. and interest rates 3.2.1. Foreign currency - 151,844 151,844 - 14,467 14,467 swap-buy 3.2.2. Foreign currency - 153,188 153,188 - 14,642 14,642 swap-sell 3.2.3. Interest rate - - - - - - swaps-buy 3.2.4. Interest rate - - - - - - swaps-sell 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 3.4.1. Foreign currency - - - - - - futures-buy 3.4.2. Foreign currency - - - - - - futures-sell 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 1,160,196 384,239 1,544,435 985,573 200,101 1,185,674 PLEDGED ITEMS (IV+V) IV. ITEMS HELD IN 810,666 256,943 1,067,609 698,194 174,112 872,306 CUSTODY 4.1. Assets under - - - - - - management 4.2. Investment 281,669 144,849 426,518 349,432 70,678 420,110 securities held in custody 4.3. Checks received 515,188 44,196 559,384 342,246 24,186 366,432 for collection 4.4. Commercial notes 12,597 20,967 33,564 6,516 29,907 36,423 received for collection 4.5. Other assets 435 46,931 47,366 - 49,341 49,341 received for collection 4.6. Assets received - - - - - - for public offering 4.7. Other items under 777 - 777 - - - custody 4.8. Custodians - - - - - - V. PLEDGED ITEMS 349,530 127,296 476,826 287,379 25,989 313,368 5.1. Marketable 11,753 8,369 20,122 495 - 495 securities 5.2. Guarantee notes 6,208 1,319 7,527 9,342 1,309 10,651 5.3. Commodity 188,595 - 188,595 158,543 - 158,543 5.4. Warranty - - - - - - 5.5. Immovable 111,746 37,049 148,795 118,999 24,679 143,678 5.6. Other pledged 31,228 80,559 111,787 - 1 1 items 5.7. Pledged - - - - - - items-depository TOTAL COMMITMENTS 1,688,896 1,882,099 3,570,995 1,402,300 1,224,398 2,626,698 (A+B) The accompanying notes are an integral part of these statements. V- CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Note Ref. (Section Effect on Five) inflation Paid-in Accounting Share Legal Status Extraordinary Capital on premium Reserves Reserves Reserves Capital 1 Balances at the V-13 55,125 405,554 - 50,940 - - beginning of the period -31.12.2000 2 Foreign exchange - - - - - - difference 3 Net Income - - - - - - 4 Dividend - - - - - 5 Transferred to legal V-18 - - - 3,662 - - reserves 6 Bond Convertible to - - - - - shares 7 Issuance of share - - - - - - certificate Closing Balance of the 55,125 405,554 - 54,602 - - period (1+2+3+4+5+6+7+8+9+10) 1 Balances at the 55,125 405,554 - 54,602 - - beginning of the period -31.12.2001 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 I-16 - - - - - - investment 5.1 Transferred to net I-16 - - - - - - income 6 Cash flow hedge: V-15 - - - - - - 6.1 Transferred to net - - - - - - income 6.2 Transferred to assets V-15 - - - - - - 7 Net Income - - - - - - 8 Dividend - - - - - - 9 Transferred to legal V-18 - (223,609) - (50,192) - - reserves 10 Issuance of share - - - - - - certificate Closing Balance 55,125 181,945 - 4,410 - - (1+2+3+4+5+6+7+8+9+10) (*) The negative goodwill was included in other reserves balance at the beginning of the year, amounting to TL569, is reflected in the income statement for the current year. Value Marketable Current Increase Securities Other Period Net Prior Period Fund Value Note Ref Reserves Income/ Net Income/ Revaluation Revaluation Increase (Section Five) (*) (Loss) (Loss) Fund Fund Fund Total 1 Balances at the V-13 2,135 30,089 (255,119) - - - 288,724 beginning of the period -31.12.2000 2 Foreign exchange 3,021 - (3,021) - - - - difference 3 Net Income - (59,384) - - - - (59,384) 4 Dividend - - - - - - - 5 Transferred to legal V-18 - (30,089) 26,427 - - - - reserves 6 Bond Convertible to - - - - - - - shares 7 Issuance of share - - - - - - - certificate Closing Balance of 5,156 (59,384) (231,713) - - - 229,340 the period (1+2+3+4+5+6+7+8+9+10) 1 Balances at the 5,156 (59,384) (231,713) - - - 229,340 beginning of the period -31.12.2001 Increases in the - - - period : 2 Available for sale - - - - - - - investment 2. Net fair value - - - - - - - 1 gain/losses 3 Cash flow hedge: - - - - - - - 3. Net fair value - - - - - - - 1 gain/losses 4 Foreign exchange 1,264 - - - - - 1,264 difference Transferred Amount : 5 Available for sale I-16 (569) - - - - - (569) investment 5. Transferred to net I-16 (569) - - - - - (569) 1 income 6 Cash flow hedge: V-15 - - - - - 201 201 6. Transferred to net - - - - - - - 1 income 6. Transferred to V-15 - - - - - 201 201 2 assets 7 Net Income - 25,966 - - - - 25,966 8 Dividend - - - - - - - 9 Transferred to legal V-18 - 59,384 214,417 - - - - reserves 10 Issuance of share - - - - - - - certificate Closing Balance 5,851 25,996 (17,296) - - 201 256,232 (1+2+3+4+5+6+7+8+9+10) (*) The negative goodwill was included in other reserves balance at the beginning of the year, amounting to TL569, is reflected in the income statement for the current year. The accompanying notes are an integral part of these statements. VI- CONSOLIDATED STATEMENTS OF CASH FLOWS Note Ref. Current Period Prior Period (Section Five) 31.12.2002 31.12.2001 A. CASH FLOWS FROM BANKING OPERATIONS 1.1 Operating profit before changes in operating assets 49,469 (15,856) and liabilities(+) 1.1.1 Interest received(+) 470,780 797,535 1.1.2 Interest paid(-) (275,761) (595,640) 1.1.3 Dividend received(+) - - 1.1.4 Fees and commissions received(+) 49,879 50,251 1.1.5 Other income(+) 43,423 54,141 1.1.6 Collections from previously written off loans and 1,004 2,008 other receivables(+) 1.1.7 Payments to personnel and service suppliers(-) (58,469) (61,703) 1.1.8 Taxes paid(-) (40,185) (32,631) 1.1.9 Other VI-1 (141,202) (229,817) 1.2 Changes in operating assets and liabilities 429,318 689,748 (37,829) 17,712 1.2.1 Net (increase) decrease in trading securities(+/-) (13,752) 87,579 1.2.2 Net (increase) decrease in due from banks and other (118,970) (55,822) financial institutions(+/-) 1.2.3 Net (increase) decrease decrease in loans VI-1 (40,335) 68,655 1.2.4 Net (increase) decrease in other assets(+/-) 15,043 (21,991) 1.2.5 Net increase (decrease) in bank deposits(+/-) 603,528 572,880 1.2.6 Net increase (decrease) in other deposits(+/-) - - 1.2.7 Net increase (decrease) in funds borrowed(+/-) 16,083 8,879 1.2.8 Net increase (decrease) in matured payables(+/-) VI-1 5,550 11,856 1.2.9 Net increase (decrease) in other liabilities(+/-) 478,787 673,892 I. Net cash provided from banking operations(+/-) B. CASH FLOWS FROM INVESTING ACTIVITIES 20,876 371,350 II. Net cash provided from investing activities(+/-) VI-2 - - 2.1 Cash paid for purchase of investments, associates and VI-3 483 - subsidiaries(-) 2.2 Cash obtained from sale of investments, associates and (17,119) (12,074) subsidiaries(+) 2.3 Fixed assets purchases(-) 1,623 799 2.4 Fixed assets sales(+) (16,865) (3,733) 2.5 Cash paid for purchase of securities available for 3,733 - sale (-) 2.6 Cash obtained from sale of securities available for (39,621) (88,642) sale (+) 2.7 Cash paid for purchase of investment securities(-) 88,642 475,000 2.8 Cash obtained from sale of investment securities(+) - - 2.9 Extraordinary items(+/-) - - 2.10 Other (+/-) C. CASH FLOWS FROM FINANCING ACTIVITIES (28,666) (977,213) III. Net cash provided from financing activities(+/-) 417,477 446,143 3.1 Cash obtained from funds borrowed and securities (446,143) (1,423,356) issued(+) 3.2 Cash used for repayment of funds borrowed and - - securities issued(-) 3.3 Capital increase(+) - - 3.4 Dividends paid(-) - - 3.5 Payments for finance leases(-) - - 3.6 Extraordinary items(+/-) - - 3.7 Other(+/-) IV. Effect of change in foreign exchange rate on cash and (1,034) (14,886) cash equivalents V. Net increase / (decrease) in cash and cash 469,963 53,143 equivalents(I+II+III) VI. Cash and cash equivalents at beginning of the year(+) VI-4 1,394,335 1,341,192 VII. Cash and cash equivalents at end of the year VI-4 1,864,298 1,394,335 The accompanying notes are an integral part of these statements. SECTION THREE ACCOUNTING PRINCIPLES I. Basis of Presentation The Parent 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. Changes in Accounting Policies and Valuation Methods in the Current Period Changes in Accounting Policies Until September 30, 2002, the Parent 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 "Accounting Application Regulations" (AAR) 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 to the current year income statement. Certain reclassifications were made on the December 31, 2001 financial statements for comparative presentation with to the current period consolidated financial statements. II- Presentation of the Information Regarding the Parent Bank and the Group Companies Included in the Consolidation: Turk Ekonomi Bankasi Anonim Sirketi and its financial institutions, The Economy Bank N.V. (Economy Bank), Petek International Holdings B.V. (Petek International), TEB Yatirim Menkul Degerler A.S. (TEB Yatirim), TEB Portfoy Yonetimi A.S. (TEB Portfoy), TEB Finansal Kiralama A.S. (TEB Leasing), TEB Factoring A.S. (TEB Factoring) and TEB Sigorta A.S. (TEB Sigorta) are included in the accompanying consolidated financial statements by full consolidation method. The provisions of the Communique 15 "The Standard of Preparation of Consolidated Financial Statements and Accounting for the Subsidiaries, Participations and the Entities and Participations Jointly Controlled" of the AAR were considered while determining the institutions to be consolidated. The Parent Bank and the institutions included in the consolidation will be named as "the Group". Certain changes were made on the financial statements of the subsidiaries, which were prepared in accordance with the principles and rules regarding financial statement and report presentation stated in the Turkish Commercial Code and/or Financial Leasing Law and/or XI/1 and XI/11 numbered communiqies of the Capital Board Market and any other communiques which adds and changes statements at the formal communiqies, in order to present their financial statements in accordance with to AAR. Explanations on Consolidation Method and Scope The commercial names of the institutions included in consolidation and the locations of the head offices of these institutions: Commercial Name: Head Office ------------------- --------------- Economy Bank The Netherlands Petek International The Netherlands TEB Yatirim Istanbul TEB Portfoy Istanbul TEB Leasing Istanbul TEB Factoring Istanbul TEB Sigorta Istanbul Full consolidation method is used for all the financial institutions included in the consolidation. The unconsolidated subsidiary TEB Kiymetli Madenler Anonim Sirketi is valued at cost. The financial statements of TEB Kiymetli Madenler Anonim Sirketi is not included in the consolidation as of December 31, 2002 in accordance with the AAR's materiality principle. When there are differences between the accounting policies of the subsidiaries and the Parent Bank, the financial statements are adjusted in accordance with the ARR principles considering the materiality. The financial statements of the subsidiaries are prepared as of December 31, 2002 and 2001 and restated in accordance with the inflation accounting principles. The transactions and balances between the Parent Bank and the subsidiaries are netted off. No subsidiaries were acquired during the current period. The Group does not have any goodwill related to the subsidiaries. No difference occured while applying the fair values at the foreign entities' assets and liabilities. There are no subsidiaries disposed in at the current or previous periods. Explanations on Foreign Currency Transactions 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 Parent Bank and the resulting foreign exchange gains or losses are recorded in the statement of income as foreign exchange gain or loss. The USD exchange rate used for translating foreign currency transactions into Turkish Lira and reflecting these to consolidated financial statements as of December 31, 2002 is TL 1,639,745 (2001 - TL 1,446,638 (in full TL)). The Group's total net foreign exchange loss included in the net income of the period is TL 4,576 (2001 - TL 21,137). The amount results from recording of the foreign exchange gain amounting to TL 12,724 related to the foreign currency indexed loans under the "Interest Income" in accordance with the Uniform Chart of Accounts. There are no capitalized foreign exchange losses. The information regarding the principles of foreign currency risk management are stated in Section Four, Note V. The net investment in foreign entities of the Group as of the related year-ends were translated into Turkish lira by applying the Parent Bank's exchange rates prevailing at respective dates. The resulting foreign exchange gains or losses are recorded in the statement of income. There are no debt securities issued. Foreign exchange gains and losses arising from translating monetary financial assets are reflected to foreign exchange gains / (losses) in the statement of income. III- Explanations on Forward, Option Contracts and Derivative Instruments The Parent Company 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. As of December 31, 2002, foreign currency forward and swap transactions were evaluated by comparing year- end foreign exchange rates of the Parent Bank 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. IV- 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 December 31, 2002. V- 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. VI- 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. VII- 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 in 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." VIII- 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 December 31, 2002, the Parent Bank does not have any reverse repo transactions (2001 - None). As of December 31, 2002, the Parent Bank does not have any lent marketable securities (2001 - None). IX- 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) are 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 profit shares. There are no financial assets that cannot be classified as securities held to maturity for two years because of tainting rules. 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. X- Unconsolidated Participations and Subsidiaries 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 in included under shareholders' equity 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. The difference between the fair value and cost value of the participations valued at fair value is recorded to " Marketable Security Increase in Value Fund " under the Shareholders' Equity. 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. There are no foreign currency unconsolidated participations or 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 for group III, group IV, group V loans 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 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. Foreign currency denominated loans are recoreded at the Turkish Lira equivalent values at the recording dates and the foreign currency exchange gains generated from these loans are recorded under the interest income accounts. XII- Goodwill and Other Intangible Fixed Assets The negative difference which totals to TL 569 ( 2001 - TL 569 ), between the cost of TEB Leasing and the Parent Bank's share in its equity as of December 31, 2002, generating from the changes at the Parent Bank's participation structure in the year 2000 is reflected in the current period's income statement. The positive difference which totals to TL 370 ( 2001 - TL 370 ), between the cost of TEB Factoring and the Parent Bank's share in its equity is reflected under the intangible fixed assets as goodwill in the accompanying consolidated financial statements after deducting the accumulated amortization amounting to TL 222 ( 2001 - TL 148 ). 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 Parent 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. Soft wares mainly used are developed within the Parent 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 December 31, 2002. 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 prorata 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 Parent Bank records depreciation expense in each period for the leased assets. The depreciation rate is determined in accordance with the Communique No:2 "Accounting Standard of Tangible Fixed Assets" and the depreciation rate is 20%. The gross lease receivables including interest and principal amounts regarding the Group's financial leasing activities conducted by TEB Leasing as "Lessor" are stated under the receivables from the financial leasing activities. The difference between the total of rent payments and the cost of the related fixed assets are reflected to the" unearned income" account. The interest income is calculated and recorded as prevailing a stable periodic income ratio over the lessor's investment on the leased item. The Group expenses the rent payments made regarding the rent agreements made under operational activities throughout the rent period in equal amounts. 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 Group immediately at the estimated amounts. The Parent Bank did not provide an additional provision for contingent liabilities as of December 31, 2002 apart from the doubtful receivable provision and general provision set in accordance with the relased regulations. XVI- Liabilities Regarding Employee Benefits In accordance with the existing social legislation, the Group 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 Group 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 Group. In accordance with AAR, Communique No:10, the Group sets provision for retirement and notice pay liabilities by taking the actual payment rates for the previous 5 years into consideration. The Group has no employees contracted for determined periods. As of December 31, 2002 the arithmetical average of the actual payments realized for the previous five years is 8.44%. The Bank's consolidated participations and subsidiaries provided full reserve for retirement pay for the eligible personnel as of December 31, 2002. The Bank employees are members of TEB'LILER 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 The corporate tax rate is 30 %, and by means of adding 10% fund share, the effective tax rate is calculated as 33%. Over the income excluded from the corporate tax base (excluding participation income) 11% or 19.8% tax is calculated including the fund share. Additionally, when there is cash profit distribution, the dividends are subject to 33% corporate tax, is also subject to income tax at rates of 5% and 15%, respectively, (additionally 10% fund share is applied) depending on to the fact that the Bank is a public company or not. This amount is paid by the Bank in the name of the shareholders. In accordance with the Tax Procedural Code, in every three-month period the tax assessment is made and the temporary corporate tax is calculated over the income generated in the three-month period at a rate of 25% and paid in cash. 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 yeras. 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 Group does not compute deferred tax on the effects of inflation accounting. 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 Group has not issued any debt securities. The Group has not issued convertible bonds during the current period or the previous period. XIX- Paid-in Capital and Share Certificates The Parent Bank does not have any costs regarding share issuance. Subsequent to the balance sheet date, in the General Assembly meeting of the Parent Bank, dated March 27, 2002, it was decided that the profit for the year 2002, amounting TL 18,514 (in equivalent purchasing power as of December 31, 2002 ) to be distributed to the shareholders after providing the legal reserves. XX- Acceptances Acceptances are realized simultaneously with the payment dates of the clients and they are presented as likely commitments of the Group in off-balance sheet accounts. There are no acceptances of the Group presented as liabilities against any assets. XXI- Government Incentives There are no government incentives utilized by the Group. XXII- Securities at Custody Securities at custody held by the Parent Bank on behalf of clients are not reflected to the financial statements since they are not the 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 consolidated financial statements differ from International Financial Reporting Standards (IFRS) and so far as such differences apply to the consolidated financial statements of the Bank they relate mainly, but not limited, to the format of consolidated 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 consolidated financial statements are not intended to present the consolidated financial position and results of its consolidated operations in accordance with accounting principles generally accepted in the countries of users of the financial statements and IFRS. There are no other issues required need to be disclosed. SECTION FOUR INFORMATION ON FINANCIAL STRUCTURE I- Strategy for the Use of Financial Instruments and Explanation Regarding the Foreign Currency Transactions The Group aims to develop and market products concerning the needs of its all kind of client like small sized companies, big sized companies or private investors, in accordance with Banking Regulations. While fulfilling the clients' needs, the Group's first priority is to maintain liquidity. Therefore, approximately 50% of the financial sources created are invested in liquid products. These investments are made with ultimate care at maturity management and aiming the maximum income possible under these conditions. While conducting asset and liability management, the Group aims to generate a positive margin between the financing cost and product income and to prevent maturity mismatch. As a part of the Parent Bank's risk management strategy, any kind of risk creating position exceeding the limits given by board of directors generated from short-term exchange rate, interest and price movements are tried to be kept minimal at the Bank's treasury transactions. The Parent Bank's asset and liability management committee, principally adopts prevention of maturity mismatch and as a pricing policy, to work with positive balance sheet margin while determining the short-term, middle and long-term price strategies. Among the operation areas of the Parent Bank, the main activities generating profit over expectations are marketable securities transactions. Board of Directors permits the risks taken at the money, capital and commodity markets as treasury transactions, and the risk taken is controlled by the product-based limits. The strategies for hedging exchange rate risk generated from the Parent Bank's foreign currency available for sale capital instruments are explained in Exchange Rate Risk section and the applications regarding the hedging of interest rate risk generated from deposits with fixed or floating interest rates are explained at Interest Rate Risk section in detail. When the asset and liability committee of the Parent Bank decides on investing on, available for sale capital instruments denominated in foreign currency, which are suitable for the structure of the balance sheet, the committee also approves making swaps, foreign currency futures and similar derivative instruments in order to be able to hedge the changes in interest and exchange rates. No exchange rate risk generating banking operations are permitted except for treasury transactions and the risk is hedged by making forward transactions. The hedging of foreign currency investment in foreign entities are established by spots and foreign currency forward transactions similar to other foreign currency transactions, in accordance with the Parent Bank's general strategy to hedge foreign currency positions within legal limitations. II- Consolidaded 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. The consolidated capital adequacy ratio of the Parent Company Bank, calculated in accordance with the Communique on "Measurement and Assessment of Banks Capital Adequacies " is 16.75% ( 2001 - 16.22% ). 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 Bank" 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 Groups", 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: Consolidated Parent Bank Risk Weight Risk Weight 0% 20% 50% 100% 0% 20% 50% 100% Risk Weighted Assets, Liabilities, Non-Cash Loans Balance Sheet 1,327,967 1,034,980 93,755 1,092,307 1,024,774 326,762 8,708 787,494 items (Net) Cash 86,776 - - - 86,683 - - - Due from Groups 342,797 1,034,748 698 342,797 326,530 - 698 InterGroup 405,982 - - - 405,982 - - - money market placements Receivables 7,051 - - - - - - - from reverse repo transactions Reserve 131,905 - - - 131,905 - - - deposits Special finance - - - - - - - - houses Loans 341,733 - 8,708 1,024,625 47,365 - 8,708 740,837 Loans under - - - 4,962 - - - 4,962 follow-up (Net) Subsidiaries, - - - - - - - - associates and investments held to maturity Miscellaneous - - - 352 - - - 299 receivables Marketable - - - - - - - - securities held to maturity (Net) Advances for - - - - - - - - assets acquired by financial Leasing Financial lease - - 85,047 - - - - - receivables Leased assets - - - - - - - - (Net) Fixed assets - - - 38,322 - - - 33,817 (Net) Other assets 11,723 232 - 23,348 10,042 232 - 6,881 Off balance 62,602 398,318 240,647 40,695 44,763 332,122 240,647 39,110 sheet items Guarantees and 52,837 393,873 59,410 24,713 42,489 327,696 59,410 23,995 pledges Commitments - - 181,237 - - - 181,237 - Other off - - - - - - - - balance sheet items Transactions - - - 2,871 - - - 3,160 related with derivative financial Instruments Interest and 9,765 4,445 - 13,111 2,274 4,426 - 11,955 income accruals Non risk - - - - - - - - weighted accounts Total Assets 1,390,569 1,433,298 334,402 1,133,002 1,069,537 658,884 249,355 826,604 Subject to Risk Total Risk 286,660 167,201 1,133,002 - 131,777 124,678 826,604 Weighted Assets Summary information related to the capital adequacy ratio: Consolidated Parent Bank Current Prior Current Prior Period Period Period Period Total Risk Weighted Assets (*) 1,637,112 1,345,399 1,102,734 1,044,259 Shareholders' Equity 274,268 218,279 169,817 138,426 Shareholders' Equity / Total risk weighted assets (CAR 16.75 16.22 15.40 13.26 (%)) (*) The above mentioned amounts consist of base amounts of the market risk which are TL 50,249 and TL 19,675 as consolidated and as for the Parent Bank basis, respectively, for the current period and TL 81,923 and TL 77,828 TL for the previous period. Information related to the shareholders' equity components : Consolidated Parent Bank Current Period Prior Period Current Period Prior Period MAIN CAPITAL Paid-in Capital 55,125 55,125 55,125 55,125 Nominal capital 55,125 55,125 55,125 55,125 Capital commitments (-) - - - - Effect on Inflation Accounting on Share Capital 181,945 405,554 181,945 405,554 Share Premium - - - - Legal Reserves 10,261 59,189 - 50,502 First legal reserve (Turkish Commercial Code 4,410 54,602 - 49,383 466/1) Second legal reserve (Turkish Commercial Code - - - - 466/2) Other legal reserve per special legislation 5,851 4,587 - 1,119 Statute Reserves - - - - Extraordinary reserves - - - - Reserves allocated by the General Assembly - - - - Retained earnings - - - - Accumulated loss - - - - Foreign currency share capital exchange - - - - difference Profit 25,996 - 18,514 - Current period profit 25,996 - 18,514 - Prior period profit - - - - Loss (-) (17,296) (291,097) - (274,111) Current period loss - (59,384) - (17,380) Prior period loss (17,296) (231,713) - (256,731) Total Main Capital 256,031 228,771 255,584 237,070 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 6,093 4,828 6,093 4,828 Provisions for Possible Losses - - - - Subordinated Loans 24,596 24,596 - Marketable Securities and Investment Securities 201 272 201 - Value Increase Fund Associates and subsidiaries 201 272 201 - Available for sale securities - - - - Structured positions - - - - Total Supplementary Capital 30,890 5,100 30,890 4,828 TIER III CAPITAL - - - CAPITAL 286,921 233,871 286,474 241,898 DEDUCTIONS FROM THE CAPITAL 12,653 15,592 116,657 103,472 Investments in unconsolidated financial 781 1,315 106,815 94,715 companies whose main activities are money and capital markets, insurance and that operate with licenses provided in accordance with special laws Leasehold improvements 7,547 11,812 6,381 7,090 Start-up costs - - - - Prepaid expenses 4,177 2,266 3,461 1,667 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 Groups which - - - - operate in Turkey Goodwill (Net) 148 199 - - Capitalized expenses - - - - Total Shareholder's Equity 274,268 218,279 169,817 138,426 III- Consolidated Credit Risk Credit risk represents the risk generating from the Bank's counter party's not fulfilling its responsibilities stated in the agreement either partially or totally. Sectoral risk limitations are imposed on debtors individually or as a group in accordance with the credit risk, but risk limitations are not imposed according to geographical regions. The rating of the firms, credit limit and guarantee acceptance processes are taken into consideration all together in accordance with conservative lending policies applied by the Loan Lending and Risk Follow up Group, and, accordingly the follow up of credit risk is established. The risks and limits generated from treasury and client based commercial transactions are followed up daily. Additionally, the control of the limits of the correspondent Groups is determined by their ratings and the control of the accept risk level according to the Group's equity are performed daily. Risk limits are determined for the transactions taking place daily and the risk concentration of the off-balance sheet transactions are followed up by the system. The credibility of the debtors of the Group is assessed periodically 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." Majority of the accepted statements presenting the financial position of the borrowers are audited statements. The reason for accepting unaudited financials, is the timing differences between the lending of the money and the audit period of the borrowers. The accepted unaudited financials are replaced with the audited ones when they become available. The loan limits are determined based on the audited financials and the guarantees are determined by the loan committee according to the borrowers' financial structure and the quality of the transactions. Transaction limits for the forward and other similar agreement positions held by the Parent Bank is determined by the Board of Directors and transactions take place within these limits. The fulfillment of liabilities in the forward agreements are only possible at the maturity of the agreement. However, in order to be able to minimize the risk, reverse positions of the present positions are taken from the market and by means of that the risk is closed. Indemnified non-cash loans are weighted in the same risk group with the non-performing loans. Since the volume of the restructured loans is not material to the financial statements, no additional follow up methodology is developed, except as stated in the regulations. Foreign country and institution risks of the Parent Bank are generally determined for foreign countries and institutions, which are considered at the investment level, in other words, which are stated as carrying minimum level of default risk by the international rating companies. Accordingly, the likely risks that may occur are minor risks when the financial structure of the Parent Bank is considered. The Parent Bank does not hold a major credit risk when compared to other financial institutions together with their financial activities as an active participant at the international Grouping market. The total loan balance of the top 100 cash loan clients of the Group is TL 682,344 (2001- TL 411,252) and the percentage to the total loan portfolio is 52.14% (2001- 31.43%). As of December 31, 2002, the total balance of the top 100 non-cash loan clients of the Group is TL 461,244 (2001- TL 488,773) and the percentage to the total non-cash loan portfolio is 49.22% (2001- 52.16 %). As of December 31, 2002, the percentage of the total cash and non-cash loans balances of the top 100 clients to the total of assets and off-balance sheet items is 26.69% (2001- 30.31%). As of December 31,2002, general provision for loans set by the Parent Bank amounted to TL 6,093 (2001 - TL 4,828). Information according to geographical concentration: Assets Liabilities Non-Cash Loans Capital Investments Net Profit/Loss Domestic European Union Countries 2,785,635 1,867,369 823,709 781 14,622 OECD Countries * 308,190 1,363,724 127,182 - 11,374 Off-shore Banking Regions 75,974 14,294 - - - USA, Canada 94,134 39,403 - - - Other Countries 380,188 114,332 - - - Unallocated 59,654 29,956 1,156 - - Assets/liabilities** Domestic - - - - - Total 3,703,775 3,429,078 952,047 781 25,996 Prior Period Domestic 2,523,893 1,530,878 779,727 839 (66,878) European Union Countries 344,246 1,076,778 66,916 466 7,494 OECD Countries * 3,066 26,626 328 - - Off-shore Grouping Regions 1,265 30,195 - - - USA, Canada 201,823 166,205 17,115 - - Other Countries 2,591 - - - - Unallocated - - - - - Assets/liabilities** Total 3,076,884 2,830,682 864,086 1,305 (59,384) * OECD Countries other than EU countries, USA and Canada ** Unallocated assets / liabilities which could not be distributed according to a consistent criteria. Sectoral Breakdown of Cash Loans : Current Period Prior Period TL (%) FC (%) TL (%) FC (%) Agricultural 7,095 2.00 67,062 7.04 6,880 2.68 93,485 10.14 Farming and raising 2,586 0.73 4,174 0.44 5,020 1.96 15,733 1.71 livestock Forestry 4,462 1.26 62,888 6.60 1,841 0.72 77,752 8.43 Fishing 47 0.01 - 0.00 19 0.01 - 0.00 Manufacturing 189,051 53.18 393,850 41.33 163,822 63.86 384,302 41.66 Mining 19,768 5.56 149,052 15.64 506 0.20 25,671 2.78 Production 169,008 47.55 236,305 24.79 150,105 58.51 227,005 24.61 Electric, gas and water 275 0.08 8,493 0.89 13,211 5.15 131,626 14.27 Construction 9,135 2.57 16,527 1.73 2,859 1.11 19,590 2.12 Services 115,687 32.55 415,895 43.64 58,996 23.00 340,912 36.97 Wholesale and retail 39,572 11.13 151,004 15.84 13,635 5.32 78,092 8.47 trade Hotel, food and 1,494 0.42 994 0.10 844 0.33 4,927 0.53 beverage services Transportation and 9,444 2.66 37,190 3.90 4,187 1.63 27,807 3.02 telecommunication Financial institutions 57,577 16.20 225,368 23.65 15,002 5.85 215,393 23.36 Real estate and renting 69 0.02 - 0.00 1,552 0.60 204 0.02 services Self-employment 3,365 0.95 517 0.05 - 0.00 14,015 1.52 services Education services 622 0.17 - 0.00 232 0.09 - 0.00 Health and social 3,544 1.00 822 0.09 23,544 9.18 474 0.05 services Other 34,494 9.70 59,716 6.27 23,980 9.35 83,952 9.10 Total 355,462 100.00 953,050 100.00 256,537 100.00 922,241 100.00 IV- Consolidated Market Risk The Group 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 Groups" announced in the Official Gazette dated February 8, 2001. The interest rate and exchange rate risks of the financial positions taken by the Group 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 Parent 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. Consolidated Parent Bank Capital to be employed for interest rate risk - standard method 1,460 1,286 Capital to be employed for general market risk 1,460 1,286 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 2,560 288 Capital liability 2,560 288 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 4,020 1,574 Amount subject to market risk 50,249 19,675 V- Consolidated 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 Parent 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 Groups". As an element of the Group's risk management strategies, foreign currency liabilities are hedged against exchange rate risk by derivative instruments. The Board of Directors of the Parent 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 December 31, 2002, the Group's net long position is TL 57,698 (2001- TL 4,454) resulting from long position amounting to TL 36,090 (2001- TL 1,942) on the balance sheet and long position amounting to TL 21,608 (2001- TL 6,396) from off-balance sheet position. The announced current foreign exchange buying rates of the Parent Bank at the balance sheet date and the previous five working days are as follows: 24/12/02 25/12/02 26/12/02 27/12/02 30/12/02 31/12/02 USD 1,669,897 1,649,711 1,633,732 1,651,207 1,634,501 1,639,745 CHF 1,179,075 1,171,950 1,163,081 1,176,781 1,169,633 1,180,579 GBP 2,657,574 2,631,386 2,608,675 2,643,345 2,618,888 2,640,240 JPY 13,866 13,682 13,580 13,741 13,678 13,792 EUR 1,717,823 1,701,512 1,691,403 1,714,448 1,703,477 1,718,945 The simple arithmetical average of the major current foreign exchange buying rates of the Group for the thirty days before the balance sheet date is as follows: Monthly Average FX rates USD 1,580,651 CHF 1,095,840 GBP 2,504,824 JPY 12,951 EUR 1,610,082 Information on the foreign currency risk of the Group: 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 29,327 374,450 65 4,789 408,631 Central Bank of Turkey Due from other Banks and financial institutions 125,853 808,102 1,834 60,587 996,376 Trading securities (**) 5,037 2,668 - 2,046 9,751 Investment securities available-for-sale - - 16,856 - 16,856 Loans (**) 224,820 785,414 - 23,222 1,033,456 Investments in subsidiaries and participations - - - - - Investment securities held-to-maturity - 1,542 - 1,298 2,840 Property and equipment 411 - - - 411 Goodwill - - - - - Other assets 82,706 328,397 363 9,670 421,136 Total Assets 468,154 2,300,573 19,118 101,612 2,889,457 Liabilities Bank deposits 4,433 46,321 3 24,355 75,112 Foreign currency deposits (*) 267,531 2,020,275 804 51,919 2,340,529 Funds provided from other financial institutions 13,859 354,403 - 13,883 382,145 Marketable securities issued - - - - - Miscellaneous payables 34,058 2,138 - 1,422 37,618 Other liabilities 93,125 9,443 - 9,183 111,751 Total liabilities 413,006 2,432,580 807 100,762 2,947,155 Net Balance Sheet Position 55,148 (132,007) 18,311 850 (57,698) Net Off-Balance Sheet Position (103,839) 169,107 (18,082) (11,096) 36,090 Financial derivative assets 48,721 210,078 - - 258,799 Financial derivative liabilities 152,560 40,971 18,082 11,096 222,709 Non-cash loans (***) 177,079 480,386 4,240 25,414 687,119 Prior Period Total Assets 397,746 1,984,968 382 74,420 2,457,516 Total Liabilities 323,832 2,052,379 363 76,488 2,453,062 Net Balance Sheet Position 73,914 (67,411) 19 (2,068) 4,454 Net Off-Balance Sheet Position (8,990) 10,805 72 55 1,942 Non-cash loans (***) 145,943 457,614 2,824 21,290 627,671 (*) Gold account deposits amounting to TL 22,455 are included in the foreign currency deposits. (**) Foreign currency indexed government bonds and treasury bills amounting to TL 218 are included in the trading portfolio and foreign currency indexed loans amounting to TL 80,406 are included in the loan portfolio. (***)The amount does not have any impact on the net off-balance sheet position. This information is provided by RNS The company news service from the London Stock Exchange END FR EALSDFLDDEFE
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