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TÜRK EKONOMİ BANKASI A.Ş. 2010 ANNUAL REPORT

 

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CONTENTS Section I - Introduction Statement Concerning the 2010 Annual Report of Türk Ekonomi Bankası A.Ş. TEB From Past to Present Corporate Profile Main Indicators and Ratios Shareholding Structure of TEB Chairman’s Message CEO’s Message Economic and Sectoral Perspectives in 2010 TEB in 2010 Corporate Social Responsibility Awards TEB Financial Services Section II - Management and Corporate Governance Practices Members of the Board of Directors and the Audit Committee Executive Management Committees of Türk Ekonomi Bankası A.Ş. Human Resources Practices Information on Transactions Conducted with the Risk Group which TEB is Included Outsourced Services and Outsourcing Companies Agenda of the Ordinary General Assembly Meeting on March 30, 2010 Summary of the Board of Directors’ Report Presented to the General Assembly Our Proposal for Profit Distribution Corporate Governance Principles Compliance Report Section III - Assessment of Financial Position and Risk Management Auditors Report The Audit Committee’s Assessment of Internal Control, Internal Audit and Risk Management Systems and its Activities During the Reporting Period Assessment of Financial Position, Profitability and Debt-Servicing Capacity Risk Management Policies According to Various Types of Risks Credit Ratings Assigned by Rating Agencies and Information on their Contents Donations Five-Year Summary of Financial Information Including the Reporting Period Annual Activity Report Compliance Opinion Independent Audit Report for 31 December 2010 Non-Consolidated Financial Accounts and Footnotes for the Financial Accounts Section IV- Consolidated Financial Information Independent Audit Report for 31 December 2010, Consolidated Financial Accounts and Footnotes for the Financial Accounts Directory

 

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STATEMENT CONCERNING THE 2010 ANNUAL REPORT OF TÜRK EKONOMİ BANKASI A.Ş. The Annual Report of Türk Ekonomi Bankası A.Ş. has been prepared in accordance with the “Regulation on Principles and Standards for the Preparation and Publication of Annual Reports by Banks” published in the Official Journal numbered 26333, dated 1 November 2006.

Yavuz CANEVİ Chairman of the

Board of Directors

Jean Milan Board Member and

Chairman of the Audit Committee

Dr. Akın AKBAYGİL Vice Chairman of the

Board of Directors and Vice Chairman of the Audit Committee

Varol CİVİL General Manager

M. Aşkın DOLAŞTIR Assistant General Manager

in Charge of Financial Reporting

Gökhan KAZCILAR Director in Charge of Financial

Reporting

 

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TEB FROM PAST TO PRESENT TEB (the “Bank”) was initially founded under the title of Kocaeli Halk Bankası T.A.Ş. and in 1927. The Bank was acquired by Çolakoğlu Group in 1982 and renamed as “Türk Ekonomi Bankası A.Ş.” Celebrating its 84th year of service in 2010, TEB has played a key role in the development of private banking and the introduction of its standards in Turkey. TEB has pioneered operations in the field of private banking in Turkey since the early 1990s. The respected and distinguished position the Bank has enjoyed in the sector was further enhanced by subsidiaries active in investment, leasing, factoring and asset management as well as by an expanded branch network and diversified banking products and services. TEB’s first public offering took place in 2000 and the Bank’s shares began to be traded on the ISE. 15.63% of TEB’s shares are traded on the Istanbul Stock Exchange National Market as of December 31st, 2010 under the TEBNK ticker. TEB shares are also listed on the London Stock Exchange's depository receipt market. Up-to-date information concerning TEB’s shareholding structure and TEB shares can be found on the Bank’s web site at www.teb.com.tr. The BNP Paribas partnership - a milestone in TEB's corporate history On February 10th, 2005, control of a 50% stake in TEB Mali Yatırımlar A.Ş., TEB's principal shareholder, was transferred to BNP Paribas, a major international bank and one of the leading financial institutions in the European Union. As a result of this transaction, BNP Paribas acquired 42.125% indirect stake in TEB. Merger with Fortis Bank BNP Paribas and the Çolakoğlu Group, the indirect majority shareholders in TEB, entered a memorandum of understanding (the “MoU”) on June 3rd, 2010 according to which TEB and Fortis Bank. were to be merged under TEB upon approval of the regulatory authorities with TEB Mali Yatırımlar A.Ş (‘‘TEB Mali’’) remaining as the majority shareholder in TEB. As a result of share transfers between the main shareholders following the merger, the Çolakoğlu Group and the BNP Paribas Group each are to continue holding 50% of TEB Mali. Following the Extraordinary General Assembly Meetings of parties held on October 19th, 2010 regarding the merger, required filings were submitted to the Capital Markets Board (the “CMB”) on October 26th, 2010; and on November 25th, 2010 at the Board of Directors meetings of both parties, the merger ratio and the exchange ratio which were set forth in the reports prepared by legal experts commissioned by the court, and the competent independent institution were confirmed. The merger transaction was approved by the CMB with its decision no. 37/1145 dated December 21st, 2010. Following the publication of the Banking Regulation and Supervision Agency’s consent dated February 10th, 2011 in the Official Gazette no: 27844 and dated February 12, 2011, the merger between the two banks was legally completed upon the termination of the legal entity of Fortis Bank A.Ş. with a registration application submitted at the Istanbul Trade Registry on February 14th, 2011 and through the transfer of all its rights, receivables, debts and payables (assets and liabilities) to TEB, cumulatively.

 

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CORPORATE PROFILE Based in Istanbul, TEB is one of the leading private sector commercial banks in Turkey. According to end-of-year 2010 figures, TEB's total assets had reached TRY 19 billion, with a loan book of TRY 11.8 billion and TRY 12 billion in deposits. Active principally in corporate, commercial, retail and private banking as well as treasury and capital markets brokerage, TEB delivers its extensive array of products and services via 335 branches, 5,646 employees, 316 TEB Expresses, 288 TEB Express Plus, the Internet branch at www.teb.com.tr and the 444 0 666 Call Center to nearly 1.8 million customers with an innovative and technology-intensive approach. In addition to its expertise and strong reputation in international financial markets, TEB maintains its competitive edge with BNP's international banking network and its own Turkey Desks within this network. Innovation, quality and an activity-based business approach together form the foundation of TEB. TEB is the leader of a financial services group that operates in the fields of banking, leasing, investment and asset management in Turkey and abroad. This structure places TEB as an integrated financial services provider. TEB, • is a bank committed to service excellence and its customers; • is devoted to its business with true passion; • carefully monitors and manages risks; • has a disciplined, information- and analysis-based fair lending policy; • has a service-oriented workforce engaged in continuous professional development; • deploys a technological infrastructure that exceeds world standards; • focuses on sustainable and profitable growth.

 

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MAIN INDICATORS AND RATIOS TEB'S main business lines continued to pursue growth strategies with great care and discipline in 2010. The table below shows the progress of TEB’s development in different areas of banking in relation to its business performance. Non-consolidated Financial Indicators

31 December 2010 31 December 2009

Thousand USD (*)

Thousand TRY

Thousand USD (*)

Thousand TRY

Balance Sheet Total assets 12,377,149 19,031,105 9,796,800 15,063,560Securities 2,423,094 3,725,750 1,735,903 2,669,125Loans (Net) 7,643,896 11,753,255 5,847,239 8,990,715Deposits 7,803,818 11,999,150 6,127,494 9,421,635Equity 1,179,021 1,812,863 1,072,745 1,649,452Income statement Interest income 973,256 1,496,478 1,063,186 1,634,755Interest expense 473,835 728,569 542,322 833,875Net profit 195,305 300,301 136,685 210,167(*) conversion rate: USD$ 1 = TL 1.5376 (31.12.2010) Financial Ratios 31 December 2010 31 December 2009 CAR (%) 14.43 17.70Return on equity (%) 17.35 13.68Return on assets (%) 1.76 1.41 HR and Branch Indicators 31 December 2010 31 December 2009 Number of personnel 5,646 5,871Number of branches 335 334

 

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SHAREHOLDING STRUCTURE OF TEB

Shares of the Chairman and Members of the Bank’s Board of Directors, General Manager and Assistant General Managers Name, surname and title Share (TRY)Yavuz Canevi (Chairman) 28.83Dr. Akın Akbaygil (Deputy Chairman) 46.36Varol Civil (Board Member and CEO) 28.83Saniye Telci (Assistant General Manager) 4,759.08Nuri Tuncalı (Assistant General Manager) 8,889.61Levent Çelebioğlu (Assistant General Manager) 10,000.00Ayşe Aşardağ (Board Member) 38.05

Shareholder’s Name / Title Share in Capital (TRY)

Percentage (%)

TEB MALİ YATIRIMLAR A.Ş. 926,796,305.37 84.25 Publicly Traded 171,965,904.34 15.63 Total Shares of the Other Shareholders

1,237,790.29 0.12

TOTAL 1,100,000,000 100.00

 

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TEB SHARES Shares TEB's share certificates were offered to the public for the first time in February 2000. A total of 15.63% of the bank's shares were floated on the Istanbul Stock Exchange (ISE) and the London Stock Exchange. Simultaneously, a public offering was realized via the American and Global depository receipt program (144A and Reg-S) in international markets. TEB share certificates are traded under the symbol "TEBNK" on the IMKB in the national market. Depository Receipts, of which each is equivalent to one share, are traded in the International Order Book, the international share certificate market of the London Stock Exchange. Symbol on IMKB: <TEBNK.IS> Symbol on GDR: TKKKYP(144A) Reuters Code: < TURAq.L> Bloomberg Code: <TURA LI> Dividend distribution, as well as rights issues and free float issues since 2000, when TEB was offered to public, are summarized in the table below. Year 2000 2001 2002 2003 2004 2005 2006 Haz.07 Kas.07 Eyl.08 2009 2010Dividend Cash Dividend (Thousand TRY)(*)

- - - 15,953.33 14,018.77 9,414.94 18,742.63 - - - - 207,017.00

% - - 27.60 25.43 16.28 32.42 - - - - 18.82 Free Issue from Internal Sources (Thousand TRY)

30,650.00 - - - 2,675.00 - - 23,500.00 445,000.00 - - -

% 125.00 - - - 4.85 - - 30.71 445 - - - Cash Provision of Capital Share Issuance (Thousand TRY)

- - - - - - 18,700.00 - 210,000.00 345,000.00 - -

% - - - - - - 32.35 - 210 45.69 - - Previous Paid-In Capital (Thousand TRY)

24,500.00 55,125.00 55,125.00 55,125.00 55,125.00 57,800.00 57,800.00 76,500.00 100,000.00 755,000.00 1,100,000.00 1,100,000.00

Previous Paid-In Capital (Thousand TRY)

55,125.00 55,125.00 55,125.00 55,125.00 57,800.00 57,800.00 76,500.00 100,000.00 755,000.00 1,100,000.00 1,100,000.00 1,100,000.00

(*) Based on the year when the dividend payment was started.

 

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CHAIRMAN’S MESSAGE I respectfully greet our valued partners honoring our Bank’s Ordinary General Assembly Meeting for 2011. Before evaluating TEB's operations in 2010, I would like to share my findings regarding the developments in both the global and the Turkish economy. Exit strategies from the crisis and the results of the policies implemented were the most important matters on the agenda of the world economy in 2010. The recovery observed in the economic indicators, especially in the last two quarters of the year, paved the way for 2010 to be a year of emerging from the crisis. A variety of measures were taken by governments in a bid to ease the impacts of the global economic crisis, while central banks aimed to support these measures by means of expansionary monetary policies throughout the year. During this period, structural differences between developed and developing economies increased significantly, giving rise to wide margins between growth rates among different countries. Developing economies generally demonstrated a stronger economic performance, remaining to be the driving force of the global economy. Having contracted by 0.6% in 2009, the world economy is believed to have grown by 4.2% in 2010. A challenging year for US and Euro Zone economies Low levels of employment remained a fundamental problem for the US and Euro Zone economies in 2010. The unusual rise in the value of the Euro was another development to affect the Euro Zone. While the FED (US Federal Reserve) focused on loose financial policies, the ECB (European Central Bank) preferred tightening policies as a tool in reducing public deficits. Public debts increased rapidly in several EU member countries, particularly Greece, in 2010. As a result, CDS values of some EU countries rose as credit ratings narrowed. US and Euro Zone economies are estimated to have grown by 1% and 2.5%, respectively during 2010. On the other hand, developing economies are estimated to have recorded 5% growth, on average, led by China with a 9% growth rate. Growth rates are expected to rise to 3% in the USA and 2.5% in Europe in 2011. During this period, it will be one of the key factors behind sound growth if reflation is triggered and leads to increasing asset prices. On the other hand, it will be of great importance that inflation is kept under control via economic policies in developing countries, especially in China. With the ability to effectively manage global fluctuations, Turkey was one of the few countries to have been able to overcome the crisis rapidly. The first sign that the Turkish economy was emerging from the crisis came in the form of the 6% growth rate in the last quarter of 2009. This was followed by growth rates of 11.8% in the

 

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first quarter of 2010, 10.2% in Q2 and 5.5% in Q3, demonstrating a high economic performance that won acclaim from international rating institutions, which revised Turkey’s credit ratings upwards. Having climbed at the beginning of 2010, the rate of inflation fell to 6.4% by the end of the year, and is on course to continue its descent in 2011 as well. The rate of unemployment, which rose during the crisis, declined to 11.2% in November 2010 as the impacts of the crisis diminished. Despite rising domestic demand, weak foreign demand and rising energy-commodity prices drove up the foreign trade deficit. The foreign trade deficit reached US$ 71.563 billion in 2010, in turn driving up the current deficit, which reached 5.2% of Turkey’s GDP in September 2010. The CBT (Central Bank of Turkey) continued to cut interest rates throughout the year, while announcing a series of measures in Q4/2010 aimed at tackling the booming hot money inflow. The CBT raised the required reserve ratios but at the same time cut the overnight borrowing interest rate by 5 percentage points from 6.5% to 1.5%. A strong performance for the Turkish banking sector in 2010, thanks to its robust infrastructure Having been subject to a series of restructuring efforts in many areas since the economic crisis in 2001, the Turkish banking system successfully overcame the global economic crisis. The sector’s total assets rose by 20.8% in 2010 when compared to the end of 2009 and reached TRY 1,007.6 billion. Rising credit volumes and high repayment rates in non-performing loans supported the fall in the ratio of non-performing loans. The capital adequacy ratio of the banking sector stood at 19.0% at the end of the year, while its total shareholders’ equity reached TRY 134.5 billion. When the year is considered as a whole, 2010 was a successful year for the banking industry. In this period, the banking industry continued to support SMEs, which had been most affected by the economic crisis, thus playing a key role in the reinvigoration of the real sector and the Turkish economy as a whole. TEB continues to generate added value by putting its competitive advantages to the best use. Having concentrated on reading international and national market dynamics, TEB maintained its financial health and successfully reached its 2010 targets by managing its strong and widespread service structure thanks to the implementation of contemporary risk management practices. 2010 was a milestone year for TEB. Apart from the figurative growth in the balance sheet, qualitative developments in products and services reinforced customer satisfaction. By placing priority on efforts to enhance the quality of its operations, TEB succeeded in reaching its customers through a wider range of products in 2010. The Bank gave priority to marketing-oriented efforts aiming to raise product and service quality and diversity through its nationwide branch network and alternative delivery channels and satisfied its customers’ financial needs in corporate, commercial, retail and SME banking by means of an effective pricing policy as well as other banking instruments.

 

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TEB fulfilled its responsibilities to its customers as part of the most fundamental function of traditional banking, by canalizing its assets to efficient areas, and unstintingly meeting the demands of its credit customers as much as the demands of its depositors. Within this framework, TEB applied loan-granting policies which addressed its entire loan customer portfolio in 2010, significantly raising its credit volume. Moving forward with strong shareholder support, TEB met all the requirements of a project which is of great importance for our banking industry in 2010, and merged with Fortis on February 14th, 2011, completing all legal procedures. TEB is a service provider that has enjoyed a superior trend of success within the competitive Turkish banking industry. With the merger which has now been completed, both operationally and physically, I have full confidence that TEB will grow stronger and cement its strength to generate added value. Achieving ever greater scale, TEB will continue to expand its operations in the Turkish market, which offers tremendous growth potential while at the same time serving as a strategic lever of growth for BNP Paribas. Our post-merger goal is to be a leader among the second tier of banks in Turkey. Our business lines and staff will not waiver in their duties of successfully completing the TEB-Fortis integration, and will assume the most important tasks to realize our future targets, continuing to execute their jobs with passion. TEB completed 2010, a busy year for the Bank, with significant growth by demonstrating a strong financial performance without deviating from its primary mission. Our aim is to offer the best services to our customers and to continue to grow profitably and efficiently while offering an ever greater contribution to Turkey’s economic growth in the coming periods. In an organizational structure that supports sectoral competition, we are steadily progressing towards being a more productive and profitable bank. We would like to take this opportunity to express our gratitude to all of our employees who know no boundaries in providing service, and also our respects to our esteemed shareholders and investors. Yavuz Canevi Chairman of the Board of Directors

 

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CEO’S MESSAGE Dear investors, customers, business partners and colleagues, 2010 was a year in which we, as the TEB family, went through exciting developments, setting out the roadmap for our sustainable growth performance in the future. At the end of this period, we merged with Fortis, a milestone in the Turkish banking history, with our innovation-focused culture being adopted as the driving force behind our united bank and group. TEB, one of the building blocks of the Turkish banking industry, will continue to operate by the values that its brand stands for in the name of offering its customers the best services and to produce added value for all its stakeholders. Highlights of our performance in 2010 TEB recorded a strong operational and financial performance in 2010 and continued to play an active role to offer its customers the best services in different banking services under the most appropriate conditions. TEB’s total assets reached TRY 19 billion by the end of 2010. TEB’s total assets grew by 26% in 2010, largely thanks to expanding credit and securities portfolios. In 2010, the Bank maintained the trend of growth which had first been seen in the second half of 2009, and succeeded in expanding its credit portfolio on a yearly basis. According to figures for December 31st, 2010, the total volume of loans supplied by the Bank had reached TRY 11.8 billion. The loan policies that we diligently put in practice at TEB, which also guard the quality and health of our financial structure, allowed us to considerably curtail the volume of non-performing loans, helping reduce the share of non-performing loans in total credit volume to as low as 3%. Retail banking was one of the business lines where we recorded the highest growth rates in 2010. The rapid increase in the volume of consumer loans maintained the growth momentum in personal loans throughout the year. As a consequence of these developments, the share of personal loans in the total credit portfolio rose by 2 percentage points to 26% in 2010. Another business line in which TEB demonstrated strong growth was enterprise banking. TEB’s enterprise banking client portfolio expanded by 20% in 2010. This growth in our client portfolio emerged as a natural result of our efforts to use our delivery channels in the most effective manner possible. Having adopted the goal of being an exemplary practitioner of banking in a bid to build confidence, TEB held TRY 12 billion of deposits at the end of 2010. Deposits continued to be the primary source of our funding operations, while our loans/deposits ratio came in at 98%; in other words, for every TRY 100 of deposits, we supplied TRY 98 to our customers as loans. With this result, TEB has once again proven that it has successfully fulfilled the fundamental function of banking.

 

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Our Bank generated TRY 366.9 million in profit before taxes in 2010 and TRY 300.3 million in net profit. According to these results, TEB recorded an average return on capital of 17.35% (2009: 13.68%) and an average return on assets of 1.76% (2009: 1.41%). TEB’s capital adequacy ratio stood at 14.43% in 2010 preserving its high level. Besides its strong financial performance, TEB broke new ground in its banking products and services, and strengthened its presence in the market in 2010. Developments show the strength of our innovative business approach TEB’s innovative service approach and innovative spirit continued to a play key role in TEB’s sustainable performance. TEB was ranked the winner in the “Customer Satisfaction” category in the 2010 BNP Paribas Innovation Contest with its project entitled TEB Green Trumpet. Although TEB Green Trompet is a project directly linked to our retail and enterprise banking business lines, it is also an important means of expressing our Bank’s point of view towards innovation and its strength in the field. Launched on television in January 2010, TEB Green Trompet project comprises a number of campaigns, including Magnet Loan, Instant Money and TEB Personal Loan, which were widely acclaimed by our customers throughout the year, allowing us to expand our client base. In 2010 our Bank offered the market a product entitled Index Linked Deposit Account, which offers investors high returns based on potential changes in financial instruments like stock exchanges, exchange rates, interest rates, etc, as well as precious metals, thus covering the demands of its clients seeking alternative investment instruments. Another work that was awarded in 2010 was our Pensioner Service project. Having adopted the task of easing the lives of its customers and turning banking into an easy-to-reach and easy-to-use service as its mission, TEB launched the TEB Pensioner Service project, which aims to meet the needs of pensioners who are customers of TEB. In this project, which was put in practice in the second half of the year, we aimed to ensure that our pensioner customers enjoy easy access to TEB branches; initially, in our 6 branches where the project was first put in practice, more than 300 pensioners began to use the transportation network offered by our Bank in order to draw their retirement pensions and to carry out other transactions. As an example of our customer-oriented service philosophy, this service received the award under the Product and Service Category at the 2010 BNP Paribas Innovation Contest. The TEB Screen Card, which we offered to the market in September 2010, is a world first. It is the first digital bank card to produce internet banking passwords. The TEB Screen Card was given the Public-news Oscars award and was chosen as the product of the year by BNP Paribas.

 

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Dear investors, customers, business partners and colleagues, TEB – Fortis Merger I am delighted to inform you that TEB and Fortis merged under the roof of TEB on February 14th, 2011, a date when we were preparing our 2010 annual report for publication. This merger represents a milestone in our Bank’s history, and is also a momentous development for the Turkish banking sector. Recognizing the challenges and the demands of the work necessary to merge two banks, we are proud of the end result generated by our joint teams. With the new TEB, a new life began for us employees. Our teams have worked tirelessly since the beginning of the merger process. The strong synergy, shared targets and the rising corporate common knowledge, all generated during this period, played a major role in the timely completion of the merger process. I believe that the efforts and joint strength of our employees, who are so devoted to their jobs, will make us even stronger in the future. A rapid transformation process, which is aimed to be completed in March, was initiated to merge the two banks physically and operationally under the TEB brand. During this period, our priority has been our customers, as always. Our performance-oriented culture has been adopted as the driving force of the Bank and the Group. As part of this culture, TEB will continue its journey towards its targets without compromising service quality, while putting customer satisfaction at the heart of every matter. TEB now faces a new era full of opportunities. TEB is determined to turn these opportunities into high performance and reach its targets with the help of its shareholders’ support and the superior efforts of its employees. TEB became a bigger and stronger service provider following the merger, which has seen TEB’s assets nearly double, placing TEB as the sixth biggest private bank in Turkey with nearly 600 branches, more than 10,000 employees, more than 3 million individual customers and more than 500,000 corporate customers. TEB will continue to lay the foundations of its sustainable growth with a proactive business approach going forward, as it has in the past. Higher market shares, which we plan to reach in every business line steadily and through firm steps, will become the driving force of our growth. Our infrastructure, which is built from effective processes and instruments, will be the basic element in realizing this growth projection. Backed by BNP Paribas Group’s international financial strength and access facilities, TEB is a member of a global and strong family.TEB is also a respected, deeply rooted and strong bank with an extended knowledge of the Turkish banking industry, the real sector and the services sector. Having witnessed various phases of the Turkish economy, our Bank balanced these two valuable elements and successfully defined its competition threshold. With the ability to maintain this balance and its competition threshold, our Bank will be operational in a wider region in 2011 and reinforce its position in the market with the energy that its growing sale force would introduce.

 

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Aiming to be the leader among Turkey’s 2nd tier of banks TEB is one of the leading banks in Turkey. TEB is also a respected and a preferred solution and business partner in the international banking arena. Thanks to its human resources, technical infrastructure and customer-oriented business philosophy, TEB will continue to develop its creative business areas in 2011 and beyond, and to improve its service quality further with each passing day. While the merger with Fortis has placed TEB in a stronger position in the market, it has also allowed us to look at the future from a new perspective and to further raise the bar. The scale we have reached will positively affect TEB’s presence and prospects and its market share in various banking lines while also allowing us to stimulate our ability to generate added value. We completed the merger transaction, both operationally and physically, in early 2011 without compromising our sustainable growth strategies. TEB will continue to meet its responsibilities to its clients, employees, shareholders and other social stakeholders in 2011, while also further cementing its new organizational structure. As long as we shape TEB’s service quality with the point of I outlined above, our profitability, operating performance and presence in the market will grow stronger and our Bank will soon be the leader of Turkey’s 2nd tier of banks. Esteemed investors, customers, business partners and colleagues, With our doubled branch network and growing number of personnel, we are preparing to implement our strategy, which is focused on growth in the Turkish market. The period covering 2011 and beyond will witness exciting developments for each of us; our journey to new horizons in the sector will move us to new levels. We are proud of the performance demonstrated by TEB and Fortis teams under the exceptional conditions of 2010. As superior as their performance and teamwork was, each of our employees personally acknowledged and completely fulfilled the requirements of being a part of TEB. As long as our shareholders and Board of Directors provide us with the necessary support and guidance, TEB will continue to prepare annual reports for operating periods which promise to be brimming with achievements. I would like to take this opportunity to extend my thanks to our millions of customers, as well as our business partners and correspondent banks for their trust and for choosing us. Yours sincerely, Varol Civil CEO

 

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ECONOMIC AND SECTORAL PERSPECTIVES IN 2010 Global economic recovery was strongly felt in 2010, both in Turkey and in the world Strong economic activity was primarily driven by extremely loose monetary policies implemented by the central banks of developed countries, especially the FED (Federal Reserve), through bond purchase programs. The global growth rate, which was 4.8% in 2010, is expected to slow down slightly to just under 4% in 2011. Despite the prospect of slow growth in the USA and European countries, Germany has been demonstrating strong economic growth, along with Asian countries, excluding Japan, and emerging market economies such as Turkey. During this period, liquidity provided by the central banks of developed countries has headed to developing countries, lured by high returns and the growth potential in these countries. Turkey’s GDP is estimated to have grown by more than 8% in 2010 Turkey’s economy steamed ahead with a double-digit GDP growth rate in the first half of 2010 with the support of the base effect, while the growth rate fell to 6% in the second half of the year as the base effect was gradually eliminated. For 2010 as a whole, Turkey’s GDP growth rate is forecasted to come in at 8.2%. Turkey is expected to maintain its strong growth in the first half of 2011, with GDP on course to grow by 5% in 2011. With the correction observed in food prices in the last quarter, the year-end annual inflation rate was 6.4%, a figure compatible with CBT’s target The annual inflation rate may fall to below 5% in the first quarter of 2011, thanks to a fall in prices on a yearly basis in 2011 as the lower monthly inflation rates will be taken into account, instead of the monthly inflation rate which rose in the first two months of 2010 due to tax increases applied in the beginning of the year, as well as high food prices. From April onwards, however, inflation expectations are more negative, in parallel with the removal of the base effect, and with inflation creeping back up again due to loose monetary and financial policies. As such, the annual rate of inflation is expected to reach 7% once again towards the end of the year. The CBT maintained its overnight borrowing interest rate, which is also its policy interest rate, steady at 6.5% until May 2010. The CBT then began to determine its policy interest rate depending on liquidity conditions and based on the Repurchase Tender interest rate with a 1 week maturity, which was 7% at that time. In order to curtail the increase in capital inflows, in November the CBT cut the overnight borrowing interest rate to 1.75% while keeping the policy interest rate on hold. This paved the way for a downward volatility in short term interest rates, while the TL became less attracted to foreign investors with a short-term investment horizon. In December, the CBT initiated a series of new cuts in policy interest rates. In addition to interest rate cuts, the CBT began raising banks’ required reserve ratios in a bid to limit the expansion of credit volume.

 

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Exchange rates moved in line with global risk appetite, while borrowing costs moved in parallel with the monetary policies being applied Capital inflows were strong in 2010 thanks to the liquidity provided by the central banks of developed countries and a total of US$ 10.7 billion of foreign liquidity flowed into the bond market throughout the year. Furthermore, the CBT’s loose monetary policies ensured bond yields remained low. Within this framework, the benchmark bond yield, which had been nearly 9% in early 2010, fell to as low as 7.1% in December 2010. In the FX market, the $/TL exchange rate, which stood at 1.45 at the beginning of 2010 rose to as high as 1.60 during the year as global risk appetite weakened amid concerns over Euro Zone economies struggling under a burden of heavy debts. However, the Lira then began to recover against the dollar again as Greece and Ireland were included in the IMF-EU rescue fund. As a result of this development, the $/TL exchange rate fell back to below 1.40 in November before rising back to 1.55 towards the end of the year as the CBT loosened its monetary policy. Liquidity provided by developed countries’ central banks also drove prices higher in the global commodity market. Within this framework, the average price per barrel of crude oil rose from $62 in 2009 to $80 in 2010. In addition, as strong economic growth fuelled demand for imports, the current deficit/GDP ratio rose from 2.3% in 2009 to 6.4% in 2010. The current deficit is expected to rise further in 2011 and approach 7%. The Turkish banking sector maintains its robust structure The average capital adequacy ratio, which was 20.6% at the end of 2009, fell to 19.0% by the end of 2010, although this can still be considered as a high figure. Banking sector data as of end-December 2010 (TRY billion) Total assets 1,007.6 Credit volume 529.1Marketable securities portfolio 287.9Deposit volume 617.0 According to these brief figures, the banking sector succeeded in raising its total assets by 21% in 2010, with a 34% increase in its credit volume, a 9.5% increase in its securities portfolio and 20.0% growth in its deposit volume.

 

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TÜRK EKONOMİ BANKASI IN 2010 General Evaluation TEB wrote a pretax profit of TRY 366.9 million and an after-tax profit of TRY 300.3 million in 2010. Due to the growth in loans and securities in particular, TEB raised its total assets by nearly 26% year-on-year in 2010. The bank’s securities portfolio staged especially impressive growth as inflation-indexed products with the purpose of investment were included. These products also had a significant positive impact on TEB’s shareholders’ equity. Still maintaining the momentum it gained in the second half of 2009, TEB sustained its performance in 2010 and achieved a 31% year-on-year expansion in its credit portfolio by the end of the year. Supported by the economic recovery as well as TEB’s asset quality-oriented credit policies, non-performing loans began to decline in 2010, with their share on total loans diminishing as credits were repaid. The rate of growth in personal loans was maintained as a result of the rapid increase in consumer loans; the share of personal loans in the total credit portfolio climbed from 24% at the end of 2009 to 26% by the end of 2010. Corporate and commercial banking, one of TEB’s key fields of operation, also continued to grow in 2010, underpinned by special products designed in line with customers’ needs. Deposits remained the primary source of our funding operations in 2010, while products such as Index Linked Deposit Account offered to customers during the year allowed us to extend the maturity of this resource. TEB’s Position in the Sector TEB's market shares in the sector, and the indicators related to this movement in market share during 2010, are shown below.

(TRY million)

31 December 2010 31 December 2009

TEB Sector TEB’s

Share (%) TEB Sector TEB’s

Share (%)Total Assets * 19,031 1,007,556 1.89 15,064 834,014 1.81Total Loans * 11,753 529,012 2.22 8,991 396,207 2.27Total Deposits * 11,999 617,037 1.94 9,422 514,620 1.83Number of Branches **

335 9,465 3.54 334 9,027 3.70

Number of Personnel **

5,646 178,504 3.16 5,871 172,402 3.41

* Source (sectoral figures): February 2011 Monthly Bulletin, Banking Regulation and Supervision Agency ** Source (sectoral figures): Banks Association of Turkey

 

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Comparisons between TEB's own balance sheet composition and the sector’s composition as a whole are shown below:

% of Balance Sheet Total 31 December 2010 31 December 2009

TEB Sector* TEB Sector*Liquid Assets 14 12 17 13Marketable Securities 20 29 18 32Loans 62 53 60 48Fixed Assets 1 1 1 1Other 3 5 4 6Total Assets 100 100 100 100 Deposits 63 61 63 62Money Markets 1 6 7 7Borrowings 19 12 11 10Subordinated Debt 2 1 3 1Other 5 7 5 7Shareholders’ Equity 10 13 11 13Total Liabilities 100 100 100 100* Source: February 2011 Monthly Bulletin, Banking Regulation and Supervision Agency In 2010, TEB's

total assets increased by 19% when compared to the first half of the year; shareholder's equity reached TRY 1,813 million; share of total deposits in the balance sheet came in at 63%; credit portfolio increased by 12% when compared to the first half of the year in

parallel with the expansion in personal loans and operating capital loans, to compose 62% of the assets.

NPL ratio was below the sector average, with a rate of 3.00%. Strong lending policies and a cautious approach to risk played a significant role in these positive results.

Loans to deposits ratio was 98%, showing that TRY 98 of each TRY 100 deposit was used as a loan.

Capital adequacy ratio was 14.43% and return on equity was 17.35%. The ratios summarized above are strong indicators of TEB's capacity for rapid growth. TEB is focused on improving its effectiveness in the market in 2011 and beyond in line with its vision, by acquiring new customers and deepening its relations with current clients. After the merger transaction with Fortis Bank is completed, TEB will be in a better position to grow strongly, both in terms of scale and extent, and continue to produce ever more added value for all if its stakeholders.

 

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FINANCIAL INSTITUTIONS GROUP TEB International Banking 2010 was a successful year for TEB International Banking. The Bank increased its market shares in a range of fields and strengthened its relations with international institutions. TEB International Banking,

Increased its market share in international payments by nearly 24% year-on-year. Its market share rose from 6.87% in 2009 to 7.38% by the end of 2010 thanks to the qualified and rapid services offered to its customers.

Increased its market share in foreign trade related guarantee transactions by 12% year-on-year thanks to the high quality of its products. TEB raised its market share from 9.11% in 2009 to 9.73% by the end of 2010.

Increased collaboration with the subsidiaries of the World Bank. In addition to the foreign trade finance contracts signed with the IFC and EBRD, TEB signed a contract with the Asian Development Bank (ADB).

TEB has successfully renewed the syndication loan within the framework of its need for foreign finance and carried out negotiations with supranational institutions on long-term funding facilities.

The Bank provided € 50 million in funds with a 12-year maturity and a low interest rate from the French Development Agency, in order to finance its customers’ projects in the fields of energy efficiency and renewable energy.

Tremendous demand in syndication loan The significant demand shown in the Bank’s syndication loan in 2010 was the most concrete sign of the international markets’ confidence in TEB. TEB received a syndication loan worth US$ 345 million in total with two separate tranches in Euro and US$ terms for use in export financing. The total cost of the syndication loan, which had a 1-year maturity and was provided in two separate tranches (€ 190 million and US$ 100 million), was Libor+1.3%. Although it demand exceeded 100% in 2010 in contrast with the syndication loan issued in 2009, TEB preferred to maintain the previous year’s loan amount, in parallel with its needs. Competitive advantages of International Banking with TEB Deemed as one of the leading banks with respect to providing resources with long maturity and low interest rates - which is what the Turkish economy actually needs - the sustainable business relations it has entered into with supranational financial institutions has enabled TEB to;

produce rapid customer-specific solutions in money transfers through its extensive network of correspondent banks;

offer qualified services to its customers even in locations where it is difficult to carry out transactions, thanks to BNP Paribas’ extensive network of correspondents in Middle East and Africa; and

finance its customers’ long-term investments with cost-efficient terms.

 

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Highlights from international banking practices in 2010 With permits for livestock exports given to individuals and corporations with

investments in stockbreeding, TEB signed a cooperation agreement with a pioneer correspondent bank in this field, offering rapid funding facilities to its clients with respect to livestock exports.

Following the signing of the contract with the ICIEC (The Islamic Corporation for Insurance of Investments and Export Credits), the Bank will be able to serve its customers in risky transactions in the Far East, without actually undertaking those risks . Based on the agreement that entered force in December 2010, TEB will offer advantages to its customers with respect to the ability to work in more countries and with more banks.

Currently able to perform money transfers in 125 currencies, TEB is also undertaking efforts to enable its customers to accept money transfers in various currencies.

TEB conducted efforts to enter into a risk-sharing and risk sales agreement with Inter-American Development Bank, a supranational institution. This agreement, which would offer advantages to TEB customers who export goods to Latin America and Caribbean countries, is planned to be completed in 2011.

Following the agreement reached by senior official executives with respect to the execution of commercial relations between China and Turkey directly over the Turkish Lira and the Yuan (Renminbi), TEB signed an agreement with the Bank of China Ltd. (Hong Kong) and became one of the first Turkish banks to facilitate transactions using the Chinese Yuan. This agreement allowed TEB customers to send money to and to receive money from China over their Yuan accounts and to carry out foreign trade transactions through Yuan.

Joint work conducted between TEB and other institutions in international banking In 2010 TEB undertook joint efforts with the BNP Paribas Fixed Income Securities team to enable Turkish companies to obtain long-term resources from international bond-bill markets. TEB maintained its pioneering position in the field of tobacco and nut financing in 2010, supported by the synergy it created by combining BNP Paribas’ experience in the field of commodity finance with its long years of experience. Within the framework of tobacco and nut financing, the Bank provided more than € 200 million of resources to its clients in 2010. TEB sh.A, founded in the Republic of Kosovo, received its first foreign resource from the IFC in 2010. This was the first project that the IFC invested in following the World Bank’s decision to include Kosovo on the list of investible countries. Progress in operations addressing the Africa and Middle East

In 2010, TEB signed an agreement entitled “Foreign Trade Finance Program” with the Asian Development Bank (ADB). Within the framework of this agreement, TEB was able to serve its customers in the banks’ transactions where TEB was formerly unwilling to take the risk.

The number of export transactions related to Africa grew by 5% in 2010, compared to 2009. Likewise, the number of export transactions related to the Middle East increased by 7.5% year-on-year.

 

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TEB entered agreements with Taiwan Exim and South Korea Exim to support the finance of imports of TEB clients who import investment goods and/or services from South Korea or Taiwan. Through these agreements, TEB provides those clients purchasing machinery, equipment or services, as well as clients importing investment and consumption goods with financial facilities offering maturities of up to 5 years under reasonable conditions.

TEB continued to strengthen its relations with supranational institutions through long-term loans in 2010. Thanks to the long maturity of the € 50 million resource provided from the AFD, the Bank decided to use the loan to support energy efficiency and renewable energy projects.

New solution packages As a result of the ‘Intraturkey’ contracts which TEB entered into with its Euro and Dollar correspondents, preferential rates were obtained for domestic FX transfers. Thus, TEB began to carry out transactions for clients seeking to perform domestic Euro or Dollar transfers more rapidly and cost-efficiently. Following the signing of new contracts with its correspondents, the Bank offered its clients the option to send money in 125 different currencies. Developments in 2010 in EFIL IV Loan and in the field of commodity finance TEB financed its clients’ investment and operating capital needs for the medium and long-term through the EFIL 4 loan to provide support to increase their FX revenues; the Bank continued to support those of its clients who were exporting through the fund, which was provided by the World Bank. TEB Foreign Trade Centers Helping increase the security of its clients’ sales to risky markets from a macroeconomic standpoint, TEB undertook efforts in 2010 to assume the risks of banks operating in various African countries and signed an agreement with the ICIEC, a subsidiary of the Islamic Development Bank, to insure risks related to export letters of credit. Within the scope of the campaign entitled ‘The African Initiative’, the Bank offered solution packages that fit the needs of its clients who export to the continent, while a similar process was performed for countries in the Middle East. TEB’s market share in foreign trade remained steady in 2010 with a 4.5% share in imports and a 6.7% share in exports. Within the organization of TEB, four Foreign Trade Centers were operating (Istanbul, Izmir, Adana and Ankara), while another Foreign Trade Center was opened in Bursa, one of Turkey’s major industrial cities in 2010 in response to significant demand from clients. Specialists working at TEB Foreign Trade Centers target not only existing clients, but also prospective companies, by conducting regular visits to firms heavily involved in foreign trade. This strategy also contributes to the addition of new clients. TEB also pays careful attention to developing the best foreign trade financing solutions which best meet customer needs in cooperation with other centers in related countries and TEB's wide correspondent network.

 

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A worldwide network of BNP Paribas Foreign Trade Centers... TEB is in close communication and cooperation with the Foreign Trade Centers of BNP Paribas at 90 locations in 55 countries. It also has strong relations with BNP Paribas subsidiaries, especially in North Africa. TEB offers effective and rapid solutions to companies and exporters in the Turkish construction sector through the BNP Paribas network. Turkey Desks service continued to develop in 2010... Turkey Desks is another positive result of the multi-faceted BNP Paribas-TEB synergy. The first Turkey Desk was set up in Algeria at BNP Paribas El Djazair in 2005, followed by Ukraine, Egypt and Russia within the next four years. Commanding the highest share of Turkey’s exports, EU countries were hit hard by the global economic crisis in 2009, which was one of the most fundamental reasons behind the contraction in Turkey’s exports. Turkish exporters, who adopted a proactive approach to deal with the contraction in demand throughout the EU, sought out new markets, especially Northern Africa, where BNP Paribas enjoys a strong presence. BNP Paribas’ Trade Centers served exporters as if they are Undersecretaries of Trade. TEB will continue to monitor Turkish exporters all around the world throughout 2011, developing solution packages that meet the requirements of its clients in different parts of the world and providing exporters with information on buyers with the support of insurance corporations. TEB Corporate Banking The TEB Corporate Banking Group gained further prestige and raised its market share by achieving growth in its credit and deposit volumes in 2010. Mediating medium and long-term investment loans, TEB Corporate Banking acquired new foreign-capital clients on the back of the synergy it created with BNP Paribas. The Group achieved 25% growth in its cash FX loans, with non-cash loans growing by 20% and deposits by 35%. Aiming to strengthen its position as a major bank by establishing long-term cooperation with its clients, TEB Corporate Banking set itself apart from the sector in 2011, thanks to

Its client-centered “business partnership” approach performed through long-term relationship management,

Its competitive edge, particularly in countries in Northern Africa and the Middle East, based on the synergy created with the global network of BNP Paribas,

Its effective customer contact in foreign-capital companies on the back of the synergy created with BNP Paribas, and

Its cash Management Services supported by a strong technical infrastructure, which offers customizable solutions.

The synergy between TEB and BNP Paribas increased the number of banking transactions through TEB performed by BNP customers who have investments in Turkey. Within this framework, accounts were opened for international companies and solution packages were offered to cover their financial and cash management needs.

 

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The relations with BNP Paribas Corporate and Investment Banking (CIB) product groups continued to evolve in 2010. We aimed to create new business lines in agricultural products as well as precious metals and oil mediated preparation of a number of finance offers in the field of country loans. In other CIB products, we cemented our communication with respective BNP Paribas departments on a transaction basis. Efforts to create synergy with business lines within the Bank and the subsidiaries continued as a strategy during 2010. TEB Commercial Banking In 2010, TEB Commercial Banking

pursued a strategy of extending and building its relations with current customers and expanded its client base;

increased the volume of revolving enterprise loans issued, predominantly in parallel with growing TL and FX loans in 2010 (28% growth in TL loans and 40% growth in FX loans);

raised short and medium-term credit volume; raised its share in the foreign trade volume as a business line; increased both exports and imports when compared to the previous year; and developed derivatives and cash management products; supported cash management

products with various campaigns. Strategy of building stronger relations with clients TEB Commercial Banking aimed to strengthen its relations with customers in 2010. While focusing on identifying client needs, TEB also focused on directing its clients to qualified products such as derivatives and cash management products. At the same time, TEB continued to create solutions addressing the Bank’s customers who require expertise in cooperation with Trade Centers and with the support of BNP Paribas. The synergy created with BNP Paribas raised the prospect of benefiting from the facilities and experience of the Trade Centers, and supported TEB in its target of being the preferred consulting bank of clients. Joint efforts were conducted between TEB Arval, TEB Cetelem, TEB Leasing and TEB Factoring to address customer needs, and the cooperation was continued in offering joint solutions to Bank customers. TEB Commercial Banking is determined to maintain its growth strategy and customer-oriented service approach in 2011. TEB Gold Banking Sector leader in gold loans The volume of gold loans, one of TEB’s Gold Banking products, rose by 8.6% as of December 20th, 2010 on a kg basis, when compared to the beginning of the year. TEB became the sector leader in gold loans in 2010 with a 35% market share.

 

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Gold prices reached US$1,385/oz in 2010, an increase of 27.1% compared to the beginning of the year. While this situation enhanced gold demand for investment purposes, it led to a decline in demand for gold loans in the market, as it brought about a decline in the demand for gold for ornamental purposes. TEB worked closely with sector-related chambers and associations throughout the year and organized meetings to provide information about the Bank and gold banking to potential firms operating in the sector. TEB supported the jewelry sector by participating at local fairs that address the sector. By reaching a wider customer mass with lower savings capacity, TEB paved the way for generalizing gold deposits to the base in 2010. TEB SME Banking Having embraced the task of being “the first bank to be remembered when SME banking comes to mind”, TEB SME Banking aims to be the “consulting bank” for SMEs, and also in a pioneering practice, by developing solutions for the non-financial needs of SMEs. Working to realize firsts in the sector in an innovative and creative approach, TEB SME Banking was deemed worthy of significant awards both at national and international platforms, thanks to this approach, as well as its diverse products and services. TEB SME Banking offers unique services to SMEs through qualified human resources which it trains through various programs. At the same time, the Bank undertakes projects like TEB SME Academy and Future Strategy Conferences and provides a significant contribution to Turkey’s social life by taking important steps on behalf of social responsibility. Steadfast support for SMEs in all fields In 2010, TEB pressed ahead with its training and informing activities addressing SMEs and assisting them in developing their competitive strength at national and international platforms and helping them to acquire effective management models. Besides offering services with high added value, TEB has been in close cooperation with KOSGEB (SME Development Organization of Turkey) and taken part in all interest support programs since 2008 to assist SMEs in accessing public resources. Having mediated in four support packages during 2008 and four packages during 2009, in 2010, TEB continued to grant the loans within the framework of three of the four projects which were launched in 2009. The volume of loans extended to SMEs totaled TRY 31.6 million during the year. SMEs submitted a total of TRY 213.8 million in applications for the Scale Indexed Growth Support Loan and Export Finance Support Loan, which were launched in 2010. The cooperation between TEB and KOSGEB not only covers interest support programs; the Bank undertook a new joint project with KOSGEB in 2010. The “Train 100,000 SMEs” project, launched by KOSGEB as part of its 20th anniversary events and which aims to provide detailed information regarding the subsidies offered to SMEs by KOSGEB, was conducted jointly by KOSGEB and TEB; more than 1,500 SMEs in

 

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10 cities were provided with the necessary training by TEB and KOSGEB over a 5-month period. In addition to KOSGEB’s support programs, SMEs were given the opportunity to receive training from specialists on strategy and marketing/growth. TEB plans to organize similar training programs in 2011. TEB aims to strengthen its cooperation with KOSGEB. The cooperation TEB entered into with the Credit Guarantee Fund (CGF) in 2005 allows SMEs to make greater use of loans, allowing them to benefit from long-term and cost-efficient loans. As part of its cooperation with the CGF, the Bank encourages entrepreneurism and contributes to economic growth and development by creating an additional credit facility opportunity. TEB is included in the scope of CGF support programs and granted loans to its 95 customers in 2010 against a total of TRY25.1 million worth of CGF guarantees. A financial market structure addressing SMEs Within the framework of the synergy generated with its subsidiaries and group companies, including TEB Leasing, TEB Factoring, TEB Arval and TEB Cetelem, TEB set up a financial market structure in which all financial needs can be covered. Within the scope of this synergy, the Bank offers holistic services including the finance of SMEs’ investments, management of their receivables and satisfaction of their vehicle renting needs. The number of SMEs for which TEB mediates salary payments, rose by 74% in 2010, while the number of people served rose by 73%. With the AFD Energy Credit received in 2010, TEB has taken its environmentally friendly approach one step forward. This approach aims to support SMEs by raising their awareness of energy efficiency and renewable energy. Having supported and financed economic and social projects in more than 80 countries via various financial instruments, the French Development Agency (Agence Française de Developpement - AFD) selected TEB as its business partner in Turkey and provided € 40 million in resources as the first stage in the project aimed at raising SMEs’ awareness on corporate social responsibility. A new loan was received from the AFD in 2010: a new financing facility worth € 50 million was provided, which will be utilized to draw people’s attention to energy efficiency, renewable energy and carbon emissions and to encourage companies to invest in these fields. With the AFD Energy Credit, SMEs are able to finance their energy saving related investment projects with credits of up to 8 years in maturity, while also benefiting from energy studies that calculate the amount of energy to be saved with these projects. Moreover, within the scope of the study, the carbon footprints of the related projects of those SMEs receiving loans are measured in order to support sustainable development by reducing carbon emissions.

 

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Towards 2011… In 2011 TEB SME Banking aims to

keep growing profitably by building its relations with existing clients and by acquiring new clients,

contribute to Turkey’s social life and support forward looking investments through projects aimed at encouraging social responsibility and energy efficiency, and

diversify the finance facilities offered to SMEs by entering cooperation with global institutions such as the AFD and local organizations like KOSGEB.

Synergy between BNP Paribas and TEB SME Banking Having been awarded the brass ring at the BNP Paribas Innovation Spirit Contest in 2007, the TEB SME Academy Project was conceptualized by BNP Paribas to be put in practice in developed countries. The concept introduced in the project will soon be introduced to SMEs from the USA, Italy, France, Belgium and Ukraine. During the preparation of the project, BNP Paribas teams worked together with TEB SME Banking teams and performed effective sharing of know-how. TEB SME Academy Corporate Development Training TEB SME Academy Corporate Development Training sessions continued to offered to SMEs in 2010. Within the scope of these meetings, SMEs in Malatya, İzmit, Konya and Izmir were able to obtain information first-hand from specialists in areas such as like strategy, foreign trade, marketing and institutionalization. The TEB SME Academy received a new award in 2010; it was deemed worthy of the “Award of Perfection in SME Customer Services” at Financial World Innovation Awards. Future Strategy Conferences (FSC) The Future Strategy Conferences (FSC) played an effective role in shaping the futures of cities in 2010; the Future Strategy Conferences (FSC), organized in Malatya and Sivas, involved identifying development areas of these two cities. Within the framework of the FSC, TEB also held a General Strategy Conference in the Turkish Republic of Northern Cyprus (TRNC). A first in the TRNC, this event received a very positive welcome from senior state representatives; the results achieved through the FSC were shared with nearly 200 business men and women, senior executives of public institutions and representatives of non-governmental organizations. All these efforts contributed to TEB’s recognition in the region, allowing the Bank to expand its client base and strengthen its relations with existing customers. Sectoral Future Strategy Conferences Sectoral Future Strategy Conferences which aim to identify the strategic targets of sectors, continued with the “Jewelry Sector” in 2010. In the study carried out with the participation of leading representatives from the sector, the 2-year and 5-year targets of the jewelry sector were identified and a wide information sharing platform was set up. TEB plans to carry out further such organizations in 2011.

 

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As in 2009, TEB SME TV was chosen as “People’s Favorite” in 2010 with the votes of users at the Altın Örümcek (Golden Spider) Contest, which is one of the most prestigious web contests in Turkey. Helping SMEs reach information in a single “click” since 2006, TEB SME TV continued to serve its users in 2010 with its new homepage and its more functional interface. With its content enriched in 2010, TEB SME TV offers a platform where experts answer questions on such matters as taxation, social security, business law, state incentives and business management. In 2010, foreign trade was also included to the topics, allowing TEB SME TV to reach a broader user mass. A total of 3,955 questions were forwarded to TEB SME TV experts in 2010, with the service receiving 3.5 million visitors. SME Consultants Project The TEB SME Consultants Project allows SMEs to identify their weaknesses with respect to organization restructuring, strategy, sales-marketing, human resources, foreign trade and finance management through comprehensive analyses. SMEs are also able to take concrete and professional advice from SME Consultants before taking any steps towards growth and development. The SME Consultant Project, an important project aimed at improving TEB staff’s competency, trains customer representatives at TEB providing services to SMEs to become specialized in fields including international domestic sales and marketing, product management, finance management, and are thus able to offer clients more comprehensive and outstanding services. The success of TEB SME Consultants Project extended beyond Turkey’s borders in 2010, bringing TEB two international awards The TEB SME Consultants Project reached the final under the SME Customer Services category in the Financial World Innovation Awards, received the brass ring under the Best Service category at the International Business Awards – Stevie’s Contest, and the winning award under the Corporate Social Responsibility category at the 8th Active Academy Finance Summit. KOBİLİNGO TEB SME Banking, which aims to stand by SMEs whenever help is needed, began to offer a new unique service in the sector in 2010, in order to generate solutions when it comes to foreign languages, which is one of the most fundamental obstacles to SMEs in finding new markets and customers. KOBİLİNGO is a platform which allows company executives to establish instant and easy communication with their foreign correspondents without any knowledge of foreign language. It is designed to offer solutions for the foreign language problem for firm executives who need help communicating in foreign languages to communicate with the rest of the world. The platform will support executives seeking to penetrate new markets and allow them to save time and resources, as well as helping cut communication/human resources costs.

 

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KOBİLİNGO ensures that texts written by the user in their chosen language are submitted to the counterparty in any desired language and that the counterparty’s message is received in any language chosen by the user. Any client seeking to establish communication invites their correspondent to join KOBİLİNGO in a standard invitation letter, which may be written in any of 6 languages, while members may, when online, write to each other in any of 57 languages. Anyone who is a member of TEB SME TV may make use of KOBİLİNGO. TEB Retail Banking A year of innovative projects Having received the winning award under the “Customer Satisfaction” branch at the BNP Paribas Innovation contest in 2010, the TEB Green Trumpet project was a multi-channel marketing communication platform through which the most competitive campaigns of Retail and Enterprise Banking were announced throughout the year. One innovative idea put forward by TEB employees, “TEB Outlet”, which was created with inspiration on the outlet concept in banking, was put in practice in January 2010 as “TEB Green Trompet”. Launched on TV in January, the first campaign of Green Trompet entitled “there is nothing more economic” offered customers personal loans with the market’s lowest interest rate throughout the campaign. The TEB Green Trompet project paved the way for prominent services to be offered in the banking sector throughout the year, such as the following:

Magnet Loan, which allows clients of the bank to transfer all their debts to TEB, Instant Money, an installment cash advance product from TEB Bonus Card, TEB Personal Loan campaigns.

Innovations in alternative investment products In 2010 a product entitled “Index Linked Deposit Account“, which offers investors high returns based on potential changes in financial instruments like stock exchanges, FX and interest rates, as well as precious metals, was offered to TEB customers. Clients seeking to invest in gold are allowed to make gold transactions with a minimum amount of 0.01 grams through Gold Drawing and Deposit Accounts, thus allowing investors to buy and sell gold safely. TEB Pensioner Service Project was awarded under the Product and Service Category at the BNP Paribas Innovation Contest in 2010. The project which was put in practice in August 2010 aims to ensure that pensioner customers have easy access to TEB branches. Initially, at 6 TEB branches where the project was first put in practice, more than 300 pensioner customers began to use the transportation service offered by our Bank in order to draw their retirement pensions and to carry out other transactions.

 

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Planned to be organized on a regular basis in the coming period, TEB Pensioner Service was awarded under the Product and Service Category at the 2010 BNP Paribas Innovation Contest, as an example of TEB’s customer-oriented service philosophy. In 2010 pensioner TEB customers also continued to benefit from S.O.S. and Emergency Medical Packages, a present from TEB to pensioners. Synergy with group companies A big portion of customers who received automobile loans from TEB Cetelem, a group company of TEB, pay their loan installments predominantly through TEB branches. Efforts are shown to make it a satisfactory banking experience for these people who visit TEB branches and thus acquire them as new customers. In 2010, various banking products/services were sold to these new customers. Western Union Services is at 316 TEB Branches Based on the contract signed by TEB in 2009, Western Union services began to be offered at a total of 316 TEB branches nationwide as of July 5th, 2010. Effective and rapid service offering capability of TEB branches also allows Western Union services to be rendered swiftly. During 2010, the Bank designed promotional products for Western Union transactions, which are advantageous for its clients, and distributed many promotional products by marketing them at 43 branches in 9 cities. TEB plans to design more promotional products in 2011. Having rapidly expanded its client base in retail banking in the recent years, TEB has once again proven the strength of its service approach that fits its client profile and its ambition in retail banking, and raised its market share in 2010. Carrying out efforts to increase customer activity and cross-sales, TEB reliably grew in the field of retail banking, continuing its success in banking addressing its client base. In 2010, TEB organized retail banking campaigns in line with its targets of achieving a well spread deposit base, maintaining healthy growth in loans and further penetration of existing customers. The Bank recorded an increase of

29% in salary customers, 26% in internet banking customers, 27% in automatic payment customers, 25% in current accounts, 75% in personal loans, 20% in housing loans, and 17% in the number of credit cards.

Growth in loans exceeds the sector average TEB continued to support its customers in 2010 through comprehensive individual loan products aiming to cover the diverse needs of its customers. Having expanded the number of its customers on credit by 41%, the number of TEB’s individual loan customers reached 152,000 by the end of the year.

 

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In installment loans, TEB grew by 26% demonstrating a higher performance than the sector which grew by 22%;

In personal loans, TEB grew by 60% while the sector grew by 31%; and In vehicle loans, TEB grew by 38% while the sector grew by 7%.

TEB Star Banking The TEB Star Banking segment continued to offer privileged services to TEB customers in 2010 through every channel by means of experienced and specialized asset representatives who give priority to personal recommendations and management of relationships, as well as by means of a diversified website and call center service. Addressing the top income group, TEB Star Banking served through 56 branches in 2010 with 58 representatives. The strategy of TEB Star Banking is founded on the continuous development of customer loyalty and efficiency per customer, as well as acquisition of new customers by identifying the desires and needs of its customers with regard to banking services and lifestyles. TEB Star Banking, while informing Bank customers in the field of banking through conferences on economy, has deepened its relations with its clients through events addressing customers’ private fields of interest. While product diversity was provided to customers through 8 Index Linked Time Deposit and 9 Capital Protected Fund issues in 2010, mortgages were the prominent product. International mortgage practices, launched in October 2008 in cooperation with BNP Paribas International Buyers, were applied under TEB Star Banking, which has been serving the top income group since July 2010. The amount of loans made available to customers in 2010 within this program reached € 1.9 million. In 2011, TEB Star Banking plans to market sophisticated products in addition to traditional instruments, pursue a privileged service approach through competitive pricing support and expand its service field by raising the number of its branches and customer representatives. TEB Small Business Banking TEB Small Business Banking aims to be the first bank remembered by traders and craftsmen, producing high added value for the national economy. In line with the needs of its customers and the market and paralleling this target, TEB Small Business Banking continued to develop new products and service models that fit the needs of the market and to strengthen its position in the small business banking line by providing any kind of financial support. TEB possesses a specific scale, a delivery network and a high technological infrastructure, which allow the Bank to offer its products and services to customers at the right time and the right manner. Accurate, planned and effective use of TEB Small Business Banking capabilities in 2010 strengthened TEB’s ambition and market share in the field of small business banking.

 

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TEB Small Business Banking offers clients rapid and result-oriented services through an approach which prioritizes customer satisfaction and which ensures that customers feel that the Bank is always standing by them. Thanks to the campaigns jointly conducted with group companies in 2010, the Bank offered a higher number of products with more advantages to customers, while recording a significant development in leasing and insurance business lines. Having achieved significant breakthroughs in 2010, TEB Small Business Banking, within the framework of its cooperation with SGK (Social Security Institutions) which was launched in 2009, continued to mediate the SGK payments of its customers operating in the health sector in 2010 as well; within this framework, a Health Package was created, with which advantageous products and services are offered to Bank customers in the health sector, especially pharmacists. A world of special advantages for traders and craftsmen In 2010, in order to support traders and craftsmen, TEB

supplied a total of TRY 79 million in KOSGEB-supported loan packages to more than 3,000 customers in KOSGEB projects in 2009 and 2010;

offered chamber members advantageous products in a variety of fields from loan products to insurance services within the framework of cooperation with traders and craftsmen associations;

in cooperation with a large national newspaper, regularly informed customers of the Bank regarding the developments in the sector and the Bank’s practices and produced customized solutions for traders, craftsmen and the sector;

reached 11,000 new customers in 2010 through its Solution Package for Traders and Craftsmen; and

continued to support tradeswomen and craftswomen who own their businesses in their efforts to expand their business or through services like filling the missing link in their cash cycle, as part of activities to commemorate March 8th, International Women’s Day.

TEB Small Business Banking plans to raise product penetration in its existing customers and to expand its client base with the support of its experienced sales personnel in 2011. Contribution by Small Business Banking to POS Market Share The POS product, which is one of the major means of canalizing customers’ cash flow through TEB, remained one of the prioritized products of TEB Small Business Banking in 2010. Restaurant POS Package The Restaurant POS Package, which is implemented with sector-specific solution packages, was one of the most effective service packages in 2010. In this context, restaurants, cafés, kiosks and pastry shops which opted for TEB’s POS gained sector-specific advantages. The Restaurant POS Package, while providing all kinds of financial support through TEB to restaurant and café owners who contribute significantly to the Turkish economy, offered

 

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solutions that address the needs of enterprise owners, thanks to the Bank’s collaboration with a number of organizations. İşim Nette (My Job on the Net) With the free website installation package titled “İşim Nette”, TEB Small Business Banking expanded the boundaries of the qualified service approach that it offers to its customers, and experienced the excitement of breaking new ground in the sector with this free service. The Draft Turkish Trade Code, which restructures trade practices in Turkey, brings every capital-holding company the liability to have a website, so TEB Small Business Banking has gifted website installation packages to its customers. TEB Agricultural Banking The private bank offering the highest number of agricultural loan products Founded in November 2008, TEB Agricultural Banking achieved to be one of the most recognized brands in the sector. Offering the highest number of agricultural loan products among private banks, TEB supplied TRY 385 million in cash loans to the agricultural sector, corresponding to a 68% growth compared to 2009. This growth is generally a result of TEB’s organizational structuring and a well set-up strategy. In line with the strategy it defined in 2009, TEB Agricultural Banking continued to acquire qualified and sustainable agricultural enterprises as customers in 2010, too. The share of investment loans (excluding tractors and equipments) in total agricultural loans rose from 9% in 2008 to 25% in 2010. Meanwhile, the number of Harman Kart cards in issue rose to 8,000. The cards were first offered to the market in October 2009, providing enterprises with the facility to conduct shopping on a periodic basis, interest-free, and the ability to be indebted in a controlled manner. Capabilities of TEB Agricultural Banking TEB Agricultural Banking differentiates itself with its

service approach which takes account of the circumstances in the sector, ability to offer the right products, the right pricing and the right schemes, ability to offer various financing schemes to fit any sub-production category, and experienced agricultural banking employees, a significant portion of which are

agricultural engineers. TEB Agricultural Banking is currently in a position to establish a long-term and ever increasing competitive edge in the sector with its organizational structure, staff of specialized personnel and information-based strategic approach. Maintaining its strategic importance for Turkey, the agricultural sector has become more and more important and has been an increasing priority for TEB. The agricultural sector is

 

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currently in a process of rapid restructuring, consolidation and modernization. In accordance with this process, TEB continuously updates its agricultural business models and expands its organizational structure. In August 2010, TEB began to offer Letter of Intent and Agricultural Project Loan services to enterprises seeking to apply at the Instrument for Pre-Accession Assistance for Rural Development (EU) (IPARD) Grant Program. Also, in 2011, TEB plans to carry out efforts in sectors with high unit added value that provide significant contribution to the national economy, such as greenhouse cultivation, production of fruit and vegetables, good agricultural practices and organic agriculture, bovine and ovine breeding, poultry production, etc. With its specialized personnel and information-based strategic approach targeting in the agricultural sector, TEB Agricultural Banking strives to achieve permanent and steady growth in the sector. Credit Cards and Bank Cards Highlights from developments in 2010

TEB’s market share of credit card turnover was realized at 1.31%. The number of cards in circulation rose by 11% to 795,000. The Bank’s credit card turnover from abroad rose by 6%, achieving a market share of

1.43%. TEB was ranked 9th in the sector in terms of average expenditure per credit card and

in 6th place in business cards, with a 3.5% market share. New products with plentiful advantages In the top segment, 26,000 credit cards and bank cards were issued by TEB in 2010; the Bank also began to offer its private customers World Signia, deemed to be one of the world’s most prestigious cards. Izmirim (My Izmir) Bonus Card The TEB Bonus Izmirim Card, offered since 2007 upon cooperation with Izmir Trade Chamber’s Education and Health Foundation, was the first credit card in Turkey available exclusively to people from one city. Izmir’s football clubs received financial support from the funds generated with this card. TEB She Card First issued in June 2010, TEB She Card was specially designed to meet women’s needs. The total number of users of this card had reached 12,000 by the end of year. TEB She Card

Offers a 5% bonus in women’s spending of clothes and cosmetics worth 100 TRY or more;

offers an installment option for medical, coiffure, skincare and massage spending, a first in the sector;

 

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offers a 25% discount under the slogan “treating yourself is in your hands” in many areas ranging from personal care to magazine subscription, dry cleaning to childcare; and

includes a free-of-charge insurance against stealing/snatching. The first credit card in Turkey to offer discount in fuel oil: TEB Total Card Launched on TV, newspapers and other platforms at the end of June, TEB Total Card attracted 70,000 members by the end of 2010. The TEB Total Card offers the following advantages to its customers:

a continuous 5% discount in fuel oil and motor-LPG with no minimum purchase amount,

discount of up to 40% in necessary vehicle parts (such as navigation, vehicle maintenance, etc),

a voucher worth TRY 49 from Ziebart for each Bank customer, which can be used until the end of the year,

a personal accident insurance policy from Zurich Insurance. TEB Screen Card: the world’s first bank card with a screen Offered to the market in September 2010, the total number of TEB Screen Cards in the market had reached 26,000 by the end of the year. It is the first bank card to generate internet banking passwords, thanks to its digital touch screen. The TEB Screen Card won the Publi-news Oscars award and was selected by BNP Paribas as product of the year. TEB plans to offer its customers the new version of its Screen Card in 2011. Blackberry application practice Loan application by Blackberry began in June 2009. With this practice, TEB received the BNP Paribas Innovation Award in 2010. Developments in POS TEB continued to carry out eye-catching campaigns in the POS sector in 2010, too. Within this framework, TEB

handed out 100 netbooks in a new year campaign, bringing smiles to 100 small business owners;

began to use tebpos.com.tr as an effective means of POS sales; handed out USB memory sticks to businesses whose POS application over internet had been approved; and

carried out local and regional campaigns aimed at POS sales. Alternative Delivery Channels In parallel with the differentiated, varied and rapidly growing customer needs, a fundamental shift is occurring in the banking sector; alternative delivery channels are no longer alternative, but now complementary.

 

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Aiming to be a bank which offers its customers the most comfortable and most practical solutions in non-branch channels, TEB employs the latest technological solutions. Within this framework, shifting the operational workload from the Bank’s physical service network to alternative delivery channels was a priority. The TEB Express, Call Center, mobile banking and Internet applications comprise TEB’s primary alternative delivery channels, with which TEB provides services to different customer segments with its extensive options. The shares of the Bank’s client transactions which were completed through alternative delivery channels in 2010 are as follows:

TEB Expresses; 20%, Retail and corporate/commercial Internet branches; 72%, Mobile banking; 1%, and The Call Center; 7%.

Nearly TRY 1 billion of transactions were completed through the internet, mobile banking, Call Center and TEB Express channels in 2010. Awards TEB won an array of prestigious awards in 2010, thanks to its delivery channels, including;

The “Advergame Award” with its TEB Internet Branch and the TEB Handy Internet Branch in the 14th Web Award organization in 2010 held by the Web Marketing Association,

The “Selective Website Award” at the Az Tuşlu Piyano website, www.aztuslupiyano.com,

The “Financial Services Excellence Standard Award” at the TEB Bonus Card’s website, www.tebbonus.com, and

The “Excellence in Financial Services Award” at the TEB Private Banking website, www.tebozel.com.

TEB Internet Branch The number of Internet Branch users reached 400,000 in 2010, a 40% increase compared to the previous year. The number of active users totaled 140,000, a 27% year-on-year increase. The branch’s active customer penetration rate increased from 16% to 17.3%. TEB Handy Internet Branch TEB Handy Internet Branch continued to enhance its offerings with new functionality added in 2010. Designed for customers looking for a unique internet banking experience, the TEB Handy Internet Branch was chosen as the “Second Best Internet Branch” in 2009 in the Golden Spider Web Awards. The internet branch proved its claim of “excellence” in its sector with “Financial Services Excellence Standard” and “Banking Excellence Standard” awards it received at the 2010 Web Awards.

 

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CEPTETEB Users can access information on domestic and global markets (exchange rates, ISE, gold and repo, foreign exchange market indices), the closest TEB Branch and TEB Express and the Bank’s loan and investment products at wap.teb.com.tr. TEB customers can conduct money transfers and payments and withdraw cash as well as review their account details, account summary and TEB Bonus Card information on CEPTETEB WAP Branch. TEB Private Banking TEB Private Banking supports a service quality at international standards with new and proper products in parallel with the development of Turkish and global markets. Having increased its number of clients by 7% in 2010, TEB Private Banking has cemented its competitive strength by offering commercial real estate consultancy services, and issued the TEB Private World Signia Card for a specific number of Bank clients. Providing private banking services since 1989, TEB has differentiated itself in the sector, thanks to its

experienced and specialized workforce who monitor global markets throughout the day,

more than 20 years of experience and knowledge, and effective business model that enables the follow-up of portfolios throughout the day.

Within the framework of Asset Management Consultancy, TEB Private Banking continues to offer alternative products to its customers, such as Index Linked Time Deposit Accounts launched by the end of 2009 and Capital Guarantee Funds, which had been offered three years ago. Maintaining the volume of its assets under management in 2010 in the face of fierce price competition, TEB Private Banking widened its product diversity, gained independence from deposits and thus reached a very high percentage in Capital Guarantee and Index Linked Accounts. TEB Private World Signia Card The painting entitled Anatolian Money by the artist, İsmail Acar, was used in the design of the TEB Private World Signia Card, a special card in every aspect. The painting, which includes coins from various civilizations which existed in Anatolia over 2,600 years, gave TEB the idea of creating the TEB Private World Signia Card, the most recent and most private version of money at present. The product is currently used by TEB Private Banking clients. Commercial Real Estate Consultancy in Cooperation with Jones Lang LaSalle TEB offered its clients, free of charge, the information and experience of Jones Lang LaSalle, the world’s leading commercial real estate consultancy, which is an important area of investment. TEB Private Banking also offers a solution package entitled the “Commercial Real Estate Loan Package” in case its clients need loans during their investment. TEB Private Banking organized Economy and Commercial Real Estate Seminars for its customers throughout the year, thus allowing them to obtain information on the matter and ask interactive questions.

 

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Further strengthened by BNP Paribas’ international experience and knowledge Working in cooperation with the BNP Paribas Wealth Management team in implementing the practices of BNP Paribas in the field of financial and non-financial consultancy services, TEB Private Banking, within the framework of this synergy, plans joint production in legal, tax, inheritance, art, commercial real estate consultancies, especially investment consultancy. TEB also offers its customers with up-to-date reports on the global economy and information on markets, again with the benefit of BNP Paribas’ global experience. A wider array of products for customers through TEB Asset Management The offering of Capital Guarantee Funds, founded and managed by TEB Asset Management, to TEB Private Banking customers was an important step, both in terms of enhancing product diversity offered to clients and also in cooperation with subsidiaries. In addition to funds, TEB Private Banking, which has been providing asset management services in conjunction with TEB Asset Management since 2004, plans to focus on this practice, a first in the field of Asset Management, through a brand new work model in 2011. Another area, where TEB Private Banking and TEB Asset Management worked in cooperation, was the Capital Guarantee Fund, an instrument used in the sector primarily for investment instruments with a 1-year maturity. This instrument enabled Turkish investors to spread risk via commodities traded globally, as well as various investment instruments and maximize revenue in accordance with their own investment profiles. TEB Private Banking plans to apply a unique approach in introducing the products and services BNP Paribas created in the field of private banking through its global know-how and experience. Most of these products will be carried out for the first time in Turkey. TEB Treasury Group Gaining an ever more dominant position in derivatives transactions TEB Treasury Group pursued a policy of generalizing derivatives among its client base in 2010 and inclined towards commercial clients with lower transaction volumes compared to the corporate business line. TEB is one of the few banks that are able to hedge three primary risks (FX, interest, and commodity) which Turkish companies hold in their balance sheets. Derivatives currently have less recognition than other banking products. Various flexibilities were provided to each business line so derivatives could be marketed efficiently and rapidly. This situation played a key role in raising the number of clients using derivatives. TEB benefits from BNP Paribas’ expertise in derivatives-related pricing systems. These systems allow rapid and effective pricing in multi-leg products. The flexibility of these systems raises the speed of product development and allows the right products to be offered to clients at the right time. A new and pioneering product: index linked deposits In 2010 TEB introduced a brand new deposit product to the market, which is indexed to asset-liability management.

 

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The product is a type of deposit with a 6-month maturity and can be indexed to any market indicator in the market. As long as the related index is within the specified interval, customers are offered interest rates exceeding even the highest interest rates on deposits in the market. With this strategy, the Bank succeeded in moving a proportion of its deposits to maturities longer than 6 months. The developed product pioneered the sector and began to be applied by some other banks. Cooperation with BNP Paribas in treasury management Relations established between BNP Paribas ALM and TEB ALM paved the way for development in the technical capacity of assets-liabilities management. TEB plans to offer new products to the market in 2011 by employing BNP Paribas’ expertise in alternative funding products. The joint goal of these efforts, as in index linked deposits, is to minimize high costs introduced by competition in the market and to create resources with longer maturities. Relations with Group companies in treasury management TEB remained in close communication with Group companies in Turkey and abroad with respect to assets-liabilities management in 2010. TEB shares its own market projections and assets-liabilities management techniques with Group companies at regular meetings and whenever necessary at the right time and in accordance with its business structure. This situation allows the benefits introduced by accurate market projections, particularly when it comes the use of gap management by other Group companies. TEB Securities Services In 2010, TEB Securities Services served its customers as the Turkey branch of BNP Paribas Securities Services, Europe’s biggest custody bank and the fifth largest custody bank in the world. TEB Securities Services recorded growth in its transaction volume, custody balances and profitability (a 95% increase in revenues) during 2010 on the back of new customer acquisitions and supportive market conditions, and also because TEB customers began to operate in different areas. In addition to typical settlement and custody services, TEB Securities Services began to provide products to its customers in various matters related to the capital markets. Some of these services cover issue and payment transactions for warrants, short selling transactions and stock option management provided for foreign capital companies. The joint efforts of branches and related units for Group companies and the Bank maintained their importance in 2010. Thanks to joint products designed by TEB Investment and TEB Securities Services with regard to derivatives, the market share of TEB Securities Services in this field increased to 30% with new customer acquisitions, thus taking a significant step towards becoming the market leader.

 

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Within the scope of the merger between Fortis and TEB, TEB Securities Services were able to share BNP Paribas Securities Services’ expertise in the field of securities and pension funds related services with Group companies like TEB Investment, TEB Asset Management, etc. and the Bank’s fund services units. TEB Securities Services proved the quality of its services by receiving Top Rated qualification in the field of non-Group and foreign settled customers at the “Global Custodian Magazine Agent Banks in Emerging Markets Survey”; and began to offer new services with high added value to corporate customers and their shareholders through the joint efforts conducted with corporate branches. TEB Information Technologies TEB Information Technologies adds value to TEB by working in accordance with ITIL processes and COBIT and CMMI standards. It rapidly improves innovative banking services thanks to its banking knowledge and expertise, robust technological infrastructure, and rapid software development environment and processes and without compromising quality. In 2010, TEB Information Technologies maintained its efforts to keep customer satisfaction at the highest level by offering the necessary services 24/7, rapid, qualified and practical banking transactions and processes for Bank customers and to provide maximum support to the Bank’s cost management by raising efficiency in processes. In 2010, the foundations of the TEB Information Technologies Group were made by efforts carried out in line with the “Practical Banking” vision. TEB Information Technologies concentrated on the following:

renewal of banking, branch and headquarters faceplates with more friendly and “Practical” ones (“Pusula” - Compass),

switching of the management systems linked to credit cards, POS and ATM devices to a new software infrastructure and

Fortis - TEB merger. Highlights of the applications conducted by TEB Information Technologies in 2010

“OPTIMUS”, the Card Systems Management Package, which was reprogrammed under a new design and new technology, was put in practice, while a number of arrangements were applied to card systems in 2010 through the new package.

TEB Information Technologies ensured that the credit card collections of a wide array of products were made available through Virtual POS in all of the channels (branch, website, call center) that they had defined.

In addition to the new arrangements applied to the joint POS system, a new POS infrastructure was developed and efforts with respect to the messaging protocol between POS and the Main Center were completed.

The integration between Cash register and POS was put in practice. Access to personal internet banking and CEPTETEB through the Cep PratikŞifre

practice, a program installed to mobile phones which can generate instant passwords, was made possible.

 

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For Factoring and Leasing, software was designed and implemented with internal resources.

The Cetelem practice was improved; in addition to consumer finance practices, motor vehicle loan supply functions were maximized.

A portal that enables branches to collectively monitor the performances and development of all funds managed by the TEB Asset Management, as well as all information required for fund management was developed.

Some practices already used by the Bank were made available to other Group companies, thus creating synergies.

TEB Information Technologies allowed those customers of the Bank who use Master Cards abroad to directly access TEB to carry out their transactions.

The new customer efficiency system, which includes profitability evaluations on a product basis, was made available, while screens allowing easy evaluation of customers were opened to TEB branches.

Within the scope of the NCAP 5 project, corporate loan allocation processes were reconsidered thoroughly and improved in accordance with present conditions.

In 2010, with “Practical Banking” vision, 50 projects were completed and many efforts were conducted by TEB Information Technologies to ensure that Bank customers carry out their transaction more rapidly and in a more qualified way. Improvements in TEB Information Technologies’ Processes and Infrastructure TEB Information Technologies undertook improvements to its infrastructure aimed at allowing the Bank to offer its services without interruption and reliably, and at a superior level of quality. Within the framework of this infrastructure work,

“PLANIT”, a demand and project management practice which thoroughly supports software changes, demand management processes and project management processes was put in practice at TEB with customized processes and generalized;

BTStudio, a project aimed at ensuring easy access to all information practices required for software development processes was introduced;

Processes bringing suppliers’ and personnel’s access to IT systems under control, were integrated into the system;

The training environment system, which is used to ensure more rapid and efficient realization of system training, was restructured together with its infrastructure;

efforts continued to integrate with other systems aimed at raising the effectiveness of the TEBKeys identity management practice;

existing duties and authorizations were evaluated according to SoD rules and improvements were made in authorization processes in line with the results of the evaluation; and

internet access infrastructure was amended within the scope of harmonization with BNP Paribas standards.

Within the framework of cooperation with BNP Paribas The ACE program, which has been conducted in line with BNP Paribas’ customer orientation and operational perfection targets, was put in practice at TEB together with the BNP Paribas team within the framework of the “practical banking” vision.

 

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Moreover, in 2010, joint efforts were conducted via “Multichannel International Banking” infrastructure and program, one of the strongest areas for BNP Paribas Retail Banking. TEB Banking Operations In 2010, the Banking Operations Group focused on two important areas:

to effectively execute its daily activities with an approach which focuses on operational perfection, minimum risk and maximum customer satisfaction and

to thoroughly review all operational processes and procedures within the scope of the merger and to determine the most ideal business flows for the new bank.

New regulations with respect to customer acquisition and new cheque laws which were imposed by regulatory institutions also impacted the Bank’s daily business flows. In 2010, the Banking Operations Group developed strong business models in accordance with legal regulations that took effect in these fields. Outsourcing, which began with the purpose of increasing the effectiveness of operations, was one of the most important areas of activity in 2010. Within the framework of these efforts, outsourcing, particularly in cash custody services, branches, ATMs and cash services for corporate customers, contributed to the Group’s effectiveness. The Banking Operations Group continued to participate in customer inquiry efforts within the scope of the government’s inter-organizational electronic data exchange project. The Group also carried out work to ensure the standardization of centralized operational units and arrangement of processes. Among the topics dealt with within this framework were branch operations, customers, loans, foreign trade, payment systems and treasury operations. Central operational units in Istanbul continued to operate with their own business lines and in conjunction with the regional directorates they are linked to. The branch operation model was solidified to maximize its support to marketing and sales activities. Another project carried out by the Group in 2010 was the establishment of new teams to coordinate insurance operations. The risk control methodology, which aimed to ensure close monitoring of any type of risks that may arise from the fluctuations in the market became one of the Group’s most fundamental tasks. Working on TEB-Fortis merger was one of the key activities carried out by the Banking Operations Group in 2010. It was the Group’s prioritized target to design a new business process in the new bank. Projects which had been operationally defined following extensive cooperation and initiatives were completed successfully. Training sessions, regional and branch visits and e-education efforts were among the Group’s other contributions in 2010. The Banking Operations Group realized all of its primary targets in service fields in 2010.

 

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HUMAN RESOURCES GROUP Human resources policy The underlying objectives in TEB’s human resources activities are to be one of the best examples of excellence in human resources practices in the financial services sector, to manage all human resources related processes actively so as to give itself a competitive edge and to support the Bank’s human resources performance through coordination of the overall effort. TEB Human Resources strives to

ensure that the TEB Group is always prepared for change, and keep its organizational structure dynamic in line with the Group’s strategic plans and targets,

ensure that the TEB Group, within the framework of TEB’s Talent Pool, recruits individuals of the highest level of education with entrepreneurial talent and potential to develop themselves and their jobs, and who are well trained, innovative and likes changes, who are energetic, dynamic, adaptable to teamwork and able to adopt and lay claim to TEB’s corporate values,

support the personal and professional development of TEB employees through development programs determined in accordance with their career roadmaps in order to ensure the use of the Bank’s human resources in the most effective and efficient manner, in line with TEB’s targets and strategies,

create a professional working environment and career development opportunities through BNP Paribas’ advanced training programs,

contribute to the development of Bank employees in line with TEB Group’s targets and strategies within the framework of the approach entitled “continuous learning and development with the TEB Formation Academy”, which considers training and development as an investment made in human resources,

raise Bank executives from within TEB and evaluate in-house requests preferably for new positions,

focus on various systems of awarding with the Performance Evaluation System by improving individual and team performance through processes and systems that increase quality at all times, and

offer equal opportunities and facilities to everyone in line with their career roadmaps. With these practices, TEB Human Resources provides swift and effective support to all employees in all human resources related matters, while playing a key role in further raising the efficiency and performance of TEB branches. In striving to achieve its strategic targets, TEB’s most important asset is its human resources. At the end of 2010, the Bank had 5,646 employees on its payroll and a total of 335 branches. Of TEB’s employees, 66.1% are university graduates, 6.3% hold a master’s degree and 0.1% have a doctorate. The average training period per employee was 32 hours in 2010.

 

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Competence Management and TEB Competency Model in 2010 In 2010, follow-on development of employees who had demonstrated high potential and performance within the framework of Competence Management processes was specially conducted through Competence Management, in conjunction with the employee’s manager and TEB’s Training & Development unit. Individual training plans contributed significantly to the development of TEB employees, which were prepared in accordance with employees’ needs. These plans were complimented by mentoring work and other development instruments. TEB Competency Model With the purpose of sustaining a high level of performance, TEB continued to apply its TEB Competency Model in 2010, which plays a key role in the development of employees in the light of TEB’s vision, mission and corporate values. The TEB Competency model has four main headings and 12 Competencies, which can be measured on a staff position basis. Leadership Vision & Change Leadership

Influencing & Leading Innovation & Creativity

Think the Business Entrepreneurship and Business Acumen Generating Strategic Business Relations / Create Synergy Performing with Excellence / Customer Orientation Commitment

Drive Results Problem Solving & Decision Making Planning & Organizing

Maximize Yourself Continuous Learning Self Confidence/Flexibility/Strength Professional Expertise

So as to help employees easily understand competencies and apply them in daily business life, supporting documents, which are accessible over the Human Resources Portal, were prepared and various informative meetings were held.. Competency evaluation is performed annually at TEB through “Competence and Development Report Cards”. The impact of employees’ individual and professional development on their performances was objectively measured by ensuring system integration between “Competency and Development Report Cards” and “Performance Report Cards”. Projects undertaken by the Human Resources Group in 2010 Innovation in TEB Winning the admiration of the US-based international consultancy, Gartner Group, in 2009 thanks to its innovation efforts, TEB continues to foster a culture of innovation by encouraging its employees to generate innovative and creative ideas through internal initiatives, and offering innovative and creative products to its customers.

 

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In 2010, TEB’s approach towards innovation and its management models were found to be exemplary in a study addressing 145 banks from 50 countries conducted by the European Financial Management Association (EFMA). “TEB Smart Ideas Competition” – Make an Invention The 4th TEB Smart Ideas Competition, a reflection of TEB’s innovation efforts, was held in 2010. Facilitating its customers’ lives with innovative and creative services offered to them, TEB deems innovation as one of the most important instruments in its strategy of making a difference. The competition also includes social targets such as

cooperation with universities, increasing innovation-related information and competencies of university students

and young people, the recruitment of talented young people by TEB and ensuring that products and services offered to customers are shaped by them

personally. Ideas entered into the competition in 2010 were, as in previous years, presented to customers as products and services; five of the finalists were recruited by TEB. The TEB Screen Card, which was ranked 1st in the competition, was introduced in 2010 and shown by Master Card as a new generation card in the world, which can produce internet banking passwords. Kıvılcım Portal and TEB In-House Innovation Competition Since 2007, 36,500 recommendations have been submitted to the Kıvılcım Portal, an internet portal to which TEB employees forward their new ideas throughout the year, and the most innovative of those were implemented. Among the projects in 2010 were the “TEB Green Trompet” and “İki Bayram Arası Ödemezi Kredi” (Loan with No Repayment between two Holidays). The in-house innovation competition, which was organized for the first time this year, aimed to encourage employees of the Bank to produce ideas as a team with employees from different departments, creating an entertaining environment of competition by racing innovative projects. TEB senior executives were commissioned as jury members for the competition, which attracted a great deal of interest from TEB employees, and identified the three winning projects. The second in-house innovation competition, which is planned to be continued in coming years, will be organized in 2011. “TEB Smart Ideas Conferences” – Innovation Summit “TEB Smart Ideas Conferences”, which are organized every year with the participation of 1,500 employees and 500 customers, brought international lecturers, TEB customers and employees together in 2010 as well. In the first part of the TEB Smart Ideas Conference, international lecturers expanded participants’ vision with their presentations on innovation; awards were handed to the most creative employees who submitted their ideas to the Kıvılcım Portal, as well as customers,

 

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university students and new graduates who had ranked highly in the “Smart Ideas Competition”. The TEB Directors’ Meeting took place in the second part. 2010 BNP Paribas Innovation Competition Award Ceremony The “BNP Paribas Innovation Competition” award ceremony was held in Turkey in 2010, as in 2009. In the competition, which involved a total of 32 projects, 11 projects qualified for the final, eight of which were from TEB and three from Fortis. TEB was deemed worthy of an award with its “Green Trompet” project under the “Customer Satisfaction” category and its “TEB Pensioner Banking” project under the “Products and Services” category. Moreover, TEB and Fortis were given awards under the “Process Optimization” category with their joint project, which enables loans and credit card applications to be submitted from Blackberry devices. University Activities – Smart Ideas Campus In 2010, the TEB Human Resources Group continued to organize university campus activities to identify young, budding talents and introduce them to TEB. A total of 2,100 applications from 82 universities were submitted to the Smart Ideas Campus, which was launched in 2008 for students, while 290 people from 30 universities took part in a total of 20 campus activities. 61 of these students were given the opportunity for internship at TEB, while one was recruited at TEB. Training at TEB As an institution that attaches importance to continuous learning and development and prioritizes investment in its employees, TEB continued its training activities in 2010 paralleling its principle of offering everyone equal opportunities and facilities. TEB Performance Evaluation System was a kind of guidance for training and development activities, thanks to its structure aiming to measure and improve individual and team performance. Within the framework of the system, evaluation results coming from the competency evaluation process were analyzed; competency development programs were prepared paralleling employees’ needs and participation of employees at these programs was ensured. TEB continued Talent Management program in 2010. “Individual development plans” were prepared for Bank employees who recorded high potential and superior performance; also, special training programs were designed in line with their needs. In accordance with the Bank’s developing and changing needs, the Corporate Culture and Values project led by TEB Human Resources Group was completed. Upon the completion of the project, efforts for generalizing corporate values among all employees were initiated to make sure that employees adopt these values. In the first quarter of 2010, all employees participated at regionally organized group works and got the chance to anticipate and adopt the values of the TEB Group in an interactive learning environment. Efforts related to the target of raising bank executives from inside the organization were continued in 2010, as well. Works related to the Evaluation Center were performed to

 

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measure the executive competencies of TEB employees and to identify their areas of development. Mentorship activities at TEB The TEB Mentor program contributes to self-development of employees by benefiting from the professional knowledge and experience of mentors, who are more advanced in their careers at TEB. A first in the Bank, the TEB Mentor program evaluated requests of 160 employees and assigned mentors for 147 of them in accordance with their needs. Requests of Bank employees, who would like to benefit from the TEB Mentor program but whose needs can be met by means of any channels other than mentorship, were covered through different methods (training, rotation, career interview, etc). TEB Club The Bank’s contests, social events, and athletic and cultural activities are conducted within the framework of TEB Club, which serves as a motivational tool for the staff. TEB Club’s wide range of activities attracted much interest from employees across the Bank in 2010, as well. In this context,

An exciting competition environment was created with painting contests on “April 23rd National Sovereignty and Children’s Day” and “environment”. While picnics and paintball tournaments were organized in regions, expeditions performed by the members of the Photography Club were good opportunities for TEB employees who enjoy photography.

The Bank was well represented by TEB Stars in the Corporate League and TEB Rowing Team in the TEB Rowing-Full Unity Dragon Festival. TEB football teams in the regions represented the Bank in banking soccer tournaments. TEB runners raced on behalf of the Bank in the Eurasia Marathon and Atatürk Running.

Entertaining bowling tournaments were held in the regions and Istanbul. Within the scope of the Bank’s support to the handicapped, donations were made to

the Turkish Spinal Cord Injury Association with support provided to TEB’s voluntary runners.

In cooperation with the Divers’ Club, diving sessions were organized at the TEB Formation Academy, offering employees of the Bank the chance to receive a diving certificate. In expeditions performed by the club in spring and summer, TEB employees had the chance to practice diving.

A link was established between art and TEB employees, by organizing the Marc Chagall exhibition, Mozart’s opera named “The Marriage of Figaro” and Emmanual Bex’s Trio concert at the Pera Museum.

A special preview of the film entitled The Revenge of Arthur Maltazar, sponsored by BNP Paribas, was shown at the Feriye Cinema for Bank employees; employees were given surprise gifts and had the chance to enjoy time with their children.

The launch of Starbank, The Game and 2010 Starbank World Cup organized by BNP Paribas was introduced to TEB employees through in-house announcements.

A Historical Istanbul Culture tour was organized to bring TEB and Fortis employees together.

 

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“HR is with you” Meetings The “HR is with you” program was implemented with the belief that the way to increase employee satisfaction and loyalty is to be closer to employees and to listen to their concerns. Priority in the program was given to field teams. In “HR is with you” meetings, in addition to interactively organized general informing sessions, one-to-one interviews were held with all employees who wished to take part. These meetings were held first in the regions, then at the Bank Headquarters in Ümraniye, İstanbul. A total of 1,370 people participated in the meetings and personal interviews were made with 520 of them.

 

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CORPORATE SOCIAL RESPONSIBILITY As a good corporate citizen that is fully aware of its social responsibilities, TEB strives to be a Bank that upholds the core values and heritage of the society in which it operates. To achieve this goal, TEB implements corporate social responsibility projects that contribute to the protection of the environment, the development of SMEs that are the dynamo of the Turkish economy and provide for a large proportion of the country’s employment, and the education of young population that will build the future of Turkey. Planning its corporate social responsibility program in parallel with its business activities, TEB continues to encourage the active, voluntary participation of its employees in its projects. Contributing to the Environment As a pioneer aware of its responsibility to contribute to a sustainable environment, TEB developed and deployed an effective and systematic management approach to minimize the environmental impacts of its operations. The Bank aims and undertakes to:

Preserve and effectively use natural resources, Reduce and recycle waste at source, Offer environmentally-friendly products, Increase resource savings and energy efficiency, Follow up scientific and technological developments to minimize environmental

pollution and continuously improve its environmental performance, Raise the environmental awareness of its employees, suppliers and customers.

As the first deposit bank entitled to receive the ISO 14001 Environmental Management Standard Certification, TEB designed a new environment-friendly product in 2010. TEB signed a € 50 million loan agreement with the French Development Agency (Agence Française de Developpement - AFD) to support companies’ environmentally related investments. The resource began to be offered to those companies that will invest in energy efficiency and renewable energy. The French Development Agency (AFD), a global institution supporting sustainable development projects, chose TEB as the first private bank to provide financial resources to SMEs in Turkey and granted a € 50 million loan in 2010. This resource enables companies to finance their operating and investment loan requirements in energy efficiency and renewable energy projects in a cost-efficient manner. Having covered the "TEB Mobil ATM" and its Ataköy branch with solar panels, the Bank achieved an exemplary breakthrough in the field of energy. The solar-powered branch and mobile ATM are firsts in the Turkish banking sector. Contribution to SMEs Keeping a watchful eye on the development of SMEs, which are among the fundamental pillars of the Turkish economy, TEB supports many activities in this area. Since 2005, after forging a strategic partnership with BNP Paribas, the largest bank in the Euro zone, TEB further contributed to the development of SMEs. The Bank provided SMEs with knowledge

 

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that would help them gain a competitive edge through its own TEB SME Academy-Corporate Development Program and Future Strategy for Provinces Conferences. The TEB SME Academy – Corporate Development Program The Corporate Development Program is a hands-on initiative designed to help guide SMEs towards increasing their domestic and international profitability and assist them in gaining a competitive edge in the marketplace. The program also offers SMEs significant tips on how they can strategically manage their companies in the most appropriate manner. The Corporate Development Program started in 2005 and has reached nearly 7,000 SMEs in 31 cities around Turkey. TEB SME Academy – Future Strategy Conferences Future Strategy Conferences are held in different cities on a monthly basis. With the participation of members from the local business community, academics, bureaucrats and administrative officials, the conferences aim to help SMEs determine their future objectives and strategies. In addition, the Future Strategy Conferences reveal potential investment areas in the regions based on the economic, commercial and social histories of each location. In conferences which TEB held in 13 different cities under the title “Provinces Are Looking for their Future”, the Bank sought to help cities plan their future. These efforts were published in a Province Report which was submitted to related people and institutions, and the project was rolled out on a nationwide basis in 2010. Furthermore, a Future Strategy conference was held in the TRNC (Turkish Republic of Northern Cyprus). TEB SME TV The first internet TV channel in the banking sector, TEB SME TV is a free internet TV channel with more than 65,000 members, reaching 3,000,000 viewers in the last year. The www.tebkobitv.com channel broadcasts on a 24x7 basis, covering new business opportunities, marketing and sales information, export targets, information on international markets, news about sectors, legislative amendments that affect the trade and industrial sectors, comments from the business world, politicians, sector representatives and experts with respect to all matters concerning SMEs. Moreover, with SME TV, companies may ask questions and receive answers to their questions easily by reaching people who are well-known in their areas. In addition to these features, the KOBİLİNGO project was implemented in order to ensure that SMEs do not face any foreign language problems while communicating with new markets and customers. Thanks to this project, SMEs are now able to establish contact with potential customers and suppliers in 57 different languages. TEB SME CONSULTANTS The Bank has implemented another first in the industry: TEB SME CONSULTANTS. These consultants work at TEB branches and help SME clients identify problematic issues in their businesses, offer them solutions and guide them toward opportunities ahead. TEB SME Consultants enabled many companies to perform successfully in 2010. KOBİ CLUB Conducted by TEB, the KOBİ Club is the first and only bank-supported club, which brings all SMEs under a single unity and combines their strengths. With the KOBİ Club, TEB’s

 

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corporate clients are able to solve an array of problems such as accessing the right product or seller which they experience during purchase or product supply; TEB clients may also benefit from advantages including a decline of up to 50% in their purchase costs. Contributions to Youth Turkey’s Youth are “Inventing” with TEB Considering that a large proportion of the Turkish population is composed of young people, TEB has organized an annual innovation competition, “Make an Invention”, in a bid to encourage the young population generate creative and innovative ideas. Serving as a good example of private sector-university cooperation, this TEB-sponsored competition contributes to various goals such as raising awareness of “innovation-creativity” among the university students and young professionals, developing competencies and introducing the finance sector to university students. Through this competition, TEB gives awards young participants who demonstrate high potential for generating innovative and creative ideas. TEB also organizes an innovation contest among its customers in order to encourage them in this area and grants awards to winning customers. In addition, TEB provides university students with special education programs in the fields of innovation, communication and creativity, such as “Smart Ideas Campus” designed for undergraduate and master students and the “No Barriers Campus” designed for disabled students. TEB helps students discover their innovation-creativity abilities and contributes to their education through these initiatives. Students from different universities who participated at the “TEB Smart Ideas Campus” and the “TEB No Barriers Campus” also have the opportunity to work at TEB, based on their education, knowledge and experience. AWARDS TEB's activities attracted wide-reaching acclaim and the Bank won many awards in Turkey and abroad in 2010.

The “Parvest Turkey” mutual fund, which TEB Asset Management provides investment consultancy services to, was granted the “Best Stock Fund in Turkey” award among European funds in 2010 by Lipper, a mutual fund rating institute.

With the product titled “Mobil-ink” which was designed in cooperation with Adidas Spor Malzemeleri, TEB received the winning award under the “One to Watch” category at the “Adam Smith Awards” competition held by “Treasury Today”.

At the Stevie Awards, one of the most prestigious award ceremonies of the business world, TEB received the “Winning Award” and the “Honorable Mention Award” under the “Best New Services of the Year” category, thanks to its projects “TEB SME Consultants” and “TEB SME Club”.

With the practical banking solution that it offers pensioners, TEB was deemed worthy of an award by BNP Paribas under the “Product and Service” category within the framework of 2010 Group Innovation Awards.

With its Blackberry practice, a banking solution offered in the field of technology, BNP Paribas granted TEB the “Process Optimization Award”.

 

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TEB Factoring was chosen as “The Best Export Factoring Company in 2010” by Factors Chain International (FCI), the world’s largest factoring organization.

At the Golden Spider Web Awards, TEB’s corporate website at teb.com.tr was chosen as “People’s Favorite” under the “Financial Services (Banking and Finance)” category; TEB SME TV’s website at tebkobitv.com was selected as “People’s Favorite” under the “NGOs/Social Responsibility” category; and Az Tuşlu Piyano’s (which is prepared as a continuation of the commercial related to the TEB Handy Internet Branch) website at aztuslupiyano.com was pointed out as “People’s Favorite” under the “Advergame” category.

Launched in December 2009, “Green Trumpet”, which is TEB’s cedit promotion platform, was handed “The Best Customer Satisfaction Award” by BNP Paribas.

Within the scope of Financial World Innovation Awards, TEB SME Academy was deemed worthy of award of excellence under the SME Customer Services category.

In a world first, TEB’s “Screen Bank Card” received the “Innovative Card Award” at 2010 Publi-News Innovative Card Awards.

The TEB SME Consultants project won an award under the social responsibility category at the Active Academy 8th International Finance Summit”, an organization which the finance and the banking sectors keep close view of.

 

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TEB FINANCIAL SERVICES GROUP TEB Asset Management Established in 1999, TEB Asset Management’s fundamental objective is to determine the investment vehicle compositions of investment portfolios based on the risk profiles of their individual and corporate clients and to manage those portfolios accordingly with optimum benefit. Through its wide product range, the Company comes up with recommendations which create added value in line with its clients’ risk profile and return-related expectations. TEB Asset Management has been providing asset management services since June 2004. The goal of asset management services is to determine an investment model which provides perfect balance between risks and returns. The Company also began to offer corporate asset management services in 2005. Having entered a synergetic collaboration with its partner, BNP Paribas Asset Management, a leading name in the asset management business in the Eurozone, TEB Asset Management is determined to press forward quickly towards its goal of becoming a global player. Attaching great importance to strategic partnerships, TEB Asset Management also offers management services for the mutual funds of Millennium Bank, one of Europe’s leading banks, which is owned by the Portuguese BCP International Bank. In addition, TEB Asset Management, which is a part of an innovative culture, is one of the leading asset management companies which established various versions of Capital Guarantee funds, hedge funds and foreign securities funds like the BRIC fund, which includes various stocks traded on the stock exchanges of Brazil, Russia, India and China. Moreover, by ensuring distribution of funds under its management through other channels, the Company has broken new ground in Turkey. TEB Asset Management’s Stock Division enjoyed a successful year in 2010, as in 2009, and exceeded the projected returns on all funds under its management and the expected return ratios. In 2010, the Division pioneered the formation of hybrid funds, which minimize the stock market risk through future contracts, and significantly increased the value of assets under the management of TEB Asset Management, as these funds yielded returns in excess of their benchmark levels. By adopting a similar strategy, the Division began to manage a Hedge Fund, which is planned to be offered to investors in 2011. Through the end of 2010, the Company funds performed broadly in line with their benchmarks, and as a result of successful investment strategies applied throughout the year, TEB’s Bond / Bill funds were among the highest-return yielding funds in the sector in 2010. Founded by BNP Paribas Investment Partners in 2006, Parvest, which receives consultancy services from TEB Asset Management, was granted the “Best Turkish Stock Fund” award in 2010 among European funds, by Lipper, a fund rating agency that evaluates Turkish funds. As of September 30, 2010, the mutual fund industry’s assets under management had increased by 1.94% in value to reach TRY 30.4 billion (US$ 20.9 billion). “Type B” (bond & bill / money-market) funds totaled TRY 29.2 billion in value, while “Type A” (equity) funds had

 

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combined resources amounting to around TRY 1.2 billion. During the same period, the total value of the mutual funds under the management of TEB Asset Management had declined by 1% to TRY 1.162 billion (December 31st, 2009: TRY 1.176 billion), while the Company’s market share slipped slightly from 3.94% at the end of 2009 to 3.85% at the end of September 2010. At the end of September 2010, TEB Asset Management was managing a total of 31 portfolios consisting of 23 TEB, 5 TEB Investment and 3 Millennium Bank mutual funds. At the same time the Company was managing two pension funds for Anadolu Hayat Emeklilik while also providing portfolio management services for its corporate and individual customers. The total value of the non-pension fund assets under the Company’s management was TRY 1.308 billion, while the value of the two Anadolu Hayat Emeklilik funds amounted to TRY 30 million. TEB Leasing Founded in 1997, TEB Leasing offers leasing services to corporate and individual investors in a rapidly growing national economy. The rise in investments in line with the growth of the economy in 2010 set the stage for a return to growth for the leasing sector, which had contracted during the last 2 years. In 2010, the leasing market expanded by 54% to reach a total size of US$ 3.2 billion. TEB Leasing’s new business volume, on the other hand, grew by nearly twice as rapidly as the volume in the sector as a whole, to reach € 130 million with its market share rising from 3.2% to 4.7%. According to figures compiled by the Financial Leasing Association, TEB, which had been ranked 11th in the sector at the end of 2009, rose to 7th place in 2010. TEB Leasing’s total assets amounted to TRY 444,241,000 in 2010. Leasing receivables, the most important item in its assets, rose to TRY 368,917,000. Its shareholders’ equity, which is the most important indicator of sound growth, increased by 10% year-on-year to TRY 106,795,000. In 2010, cross-sales were one of the primary areas which the Company focused on. Thanks to various promotions aimed at TEB employees, TEB Leasing was deemed worthy of the Most Innovative and Creative Group Company Award in 2010 TEB Group Innovation Awards. The proportion of TEB Leasing’s total transaction volume that was performed through TEB branches increased from 83% in 2009 to 91% in 2010. Campaigns conducted jointly with the Bank, such as Allstar 2010, TechnoLease, SummerLease and LeasingPlayoffs ensured that public interest in leasing products remained strong. Within the framework of efforts associated with the merger and restructuring of Fortis Bank under TEB, a share sale contracted dated July 12th, 2010 was signed with respect to the transfer of 90.01% of shares representing the capital of TEB Leasing to Fortis Finansal

 

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Kiralama A.Ş. (Fortis Leasing), a subsidiary of BNP Paribas, which is one of the indirect shareholders of our Bank, for a price of TRY 113,345,000. TEB Investment Established in 1996, TEB Investment’s primary field of activity is to engage in capital market operations in accordance with the provisions set forth in the Capital Markets Law no. 2499 and respective legislation. Within this framework, the Company offers its customers services such as brokerage in sale and purchase of previously issued capital market instruments, sale and purchase of capital market instruments through repurchase-resale commitments, investment consultancy, client asset management, and sale on credit, short selling and borrowing and lending transactions of capital market instruments, as well as brokerage in sale and purchase of derivatives both in Turkey and abroad, and related custody services. TEB Investment reaches its domestic and foreign customers through a wide array of products and services and via various service channels which were customized in accordance with client profiles. Various channels, which were customized in accordance with customer-specific solutions, such as investment services (i.e. stocks, mutual funds, bonds-bills and repo, corporate finance, research, international capital markets, investment centers and internet branch), were gathered under the roof of TEB Investment. TEB Investment’s Position in the Sector TEB Investment ranked 9th with a 3.20% market share of ISE equity trading volume as of November 2010, accounting for a total trading volume of TRY 35,997 million. As of the same date, the Company ranked 21st with a 1.35% market share of Turkish Derivatives Exchange trading volume, accounting for a total trading volume of TRY 10,546 million. TEB Investment’s competitive advantages played a significant role in achieving healthy results:

an experienced human resources team, which provide effective services to individual and corporate customers,

skilled research teams composed of specialists in their own fields, and the high quality services they offer, and

local know-how in conjunction with the global partner’s support and experience. The Economy Bank N.V. The Economy Bank NV (TEB NV) was founded in 1998 in the Netherlands. TEB NV’s mission is to be one of the most active and service-focused players in the Turkish and European financial markets as the TEB Group’s specialized service provider in the international trade & commodity finance business line. In 2005, TEB NV became a member of the BNP Paribas Group, which is one of the biggest financial institutions in the world. This development brought a significant contribution to TEB NV’s operations and TEB NV began to offer services in 84 countries around the world. Benefiting from BNP Paribas’ credit-risk analysis systems, the Bank is focused on maintaining its growth trend with an effective business model, in which trade and commodity finance products are held separately.

 

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TEB NV has gained prominence in the sector with its experienced human resources, small and transparent organization structure, strong economic structure which has emerged with risk-monitoring approaches and

practices, and solution-orientated and tailored solutions TEB NV’s performance in 2010 TEB NV raised its pretax profit by 13% year-on-year to € 13.6 million in 2010. Among the most important factors behind this success were the systematic structuring of assets and the Bank’s effective risk management policies. TEB NV attached great importance to risk management throughout the year and adopted credit lending approaches that take risks into account. The Bank’s net interest revenues increased to € 24.9 million in 2010, while its net commission and fee revenues reached to € 9.7 million. The Bank’s loan provisions had become € 1.8 million by the end of 2010. TEB NV’s net profit after tax was realized as € 7.9 million, with a return on equity of 9.45%. TEB NV increased the total trade transaction volume by 41% from € 1.2 million in 2009 to € 1.7 million in 2010. The cost/return ratio slipped slightly by 3.5 percentage points from 45.9% in 2009 to 42.4% in 2010. TEB NV succeeded in keeping its liquidity ratio at a satisfactory level, with a total of € 105 million in liquid deposits at the end of year, thanks to legal requirements and the Bank’s own liquidity policies. This achievement proved that even under challenging market conditions TEB NV can obtain positive results through effective strategies and policies,. Differentiating itself in its sector with its experienced managers and robust performance, TEB NV is determined to achieve successful results in 2011, as well. TEB Factoring Chosen once again as the “Best Export Factoring Company” by FCI in 2010 TEB Factoring was founded in September 1997 as a subsidiary of TEB to offer factoring services in Turkey and abroad. Within the framework of the principles of the TEB Group, the Company aims to offer qualified services which encompass all aspects of factoring to companies of various sizes in different sectors by recognizing customers closely and determining their specific needs directly. Since its foundation, TEB Factoring has primarily aimed to make all types of the factoring instrument available and to expand the market. The Company has placed priority on quality in service in order to ensure that factoring is preferred over other instruments particularly in line with the target of achieving new clients, and being one step ahead of its peers. As one of the 3 biggest companies in the sector, TEB Factoring continued to serve corporate and commercial firms and SMEs and increase its business volume in 2010 with various export, import and domestic factoring products. Despite the negative impacts of the crisis, the Company had already exceeded its annual target by 125% by the end of November..

 

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TEB Factoring, which boasts the highest profitability in the sector, recorded 83% year-on-year increase in its profit in the first 11 months of 2010, while obtaining a return on equity of 34.03% and return on assets of 1.05%. The Company achieved some of the highest levels of productivity in the sector. TEB Factoring increased its total number of clients to nearly 7,500 in 2010. The Company completed the year 2010 with 3,000 active customers, 6 branches and 82 employees. As far as export factoring transaction volume as of December 31st, 2010 is concerned, the Company ranked 3rd by closing the year with nearly US$ 1 billion transaction volume. The Company was awarded the “Best Export Factoring Company” in 2010 by the members of Factors Chain International (FCI) which is the largest and the most important factoring organization in the world. TEB Factoring won this prestigious award 2 years in a row, while Mr. Çağatay Baydar, the Company’s CEO, was again elected as the FCI Vice Chairman.

 

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SECTION II MANAGEMENT AND CORPORATE GOVERNANCE PRACTICES Board of Directors and Audit Committee Name Position Yavuz Canevi Chairman Dr. Akın Akbaygil Deputy Chairman Varol Civil Deputy Chairman Jean-Paul Sabet Executive Member and General Manager Musa Erden Executive Member Yves Paul Henri Martrenchar Member Jean-Milan Charles Dominique Givadinovitch Member Ayşe Aşardağ Member Metin Toğay Member Yavuz Canevi, Chairman 1996 - present Türk Ekonomi Bankası A.Ş. (TEB), Chairman of the Board of Directors 2001 - present TEB Financial Investments Board Member 1998 - present TEB N.V. Hollanda Yönetim Kurulu Başkanı 1993 - 2005 Istanbul Stock Exchange, Vice Chairman and Board Member 1989 - 2005 Euro Turk Bank, Chairman of the Executive Board 1987 - 1989 Türk Eximbank, Chairman 1986 - 1989 Undersecretary of Treasury and Foreign Trade, Prime Minister’s Office 1984 - 1986 Central Bank of Turkey, Governor 1980 - 1984 Central Bank of Turkey, Vice Governor 1979 - 1980 T. Garanti Bankası, Assistant General Manager in Charge of

International Relations 1976 - 1979 Central Bank of Turkey, Director General of Foreign Exchange 1974 - 1975 Ministry of Finance, Tax Inspector

Georgia State University, USA, Faculty Member; University of Southern California (USC), USA; Ankara University, Faculty of Political Science, Department of Public Finance and Economics

Additional Professional Occupations

2004 - 2010 NETAŞ Member of the Board 2001 - present DEİK Holland Member of the Board 2001 - 2010 Hedef Alliance A.Ş. Member of the Board 1996 - present IKV Member of the Board 1993 - present TSKB Member of the Board 1989 - present FNSS Savunma Sistemleri A.Ş. Chairman of the Board 1989 - present TUSİAD Member of High Advisory Council

 

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Dr. Akın Akbaygil, Deputy Chairman 2003 - present TEB A.Ş. Deputy Chairman 2008 - present TEB A.Ş. Audit Committee Vice Chairman 2005 - present TEB Leasing and TEB Factoring, Chairman; TEB Financial

Investments, Board Member 2005- 2010 TEB Leasing Chairman 2004 - 2007 TEB Asset Management, Chairman 2003 - present TEB, Vice Chairman and Executive Member; TEB Financial

Investments, General Manager 2003 - 2005 TEB Financial Investments, Vice Chairman 2001 - 2002 Banks Association of Turkey, Vice Chairman 1999 - present Ekonomi Bank IBU Ltd, Vice Chairman 1998 - present TEB NV, Vice Chairman 1997 - 2005 TEB Insurance, Chairman; TEB Factoring, Board Member,

TEB Factoring, Board Member 1996 - 2005 TEB Leasing, Board Member 1994 - 2001 Banks Association of Turkey, Board Member 1987 - 2003 TEB, Vice Chairman, Executive Member and General Manager 1982 - 1987 TEB, Executive Member 1965 - 1982 Akbank, Director of Foreign Affairs

Istanbul University, Faculty of Economics, BA and PhD

Varol Civil, Executive Board Member and CEO 2003 - present TEB A.Ş. Executive Board Member and CEO 2007 - present TEB Asset Management; TEB Investment, Chairman 2006 - present Banks Association of Turkey, Deputy Chairman of the Board of

Directors 2005 - present TEB Factoring, Vice Chairman 2005- 2010 TEB Leasing Vice Chairman 2005 - 2006 TEB Insurance, Chairman 2003 - 2004 TEB Insurance, Vice Chairman 2003 - present TEB, Board Member and CEO; TEB NV, Board Member 1999 - 2007 TEB Asset Management, Board Member 1999 - 2005 TEB Leasing, Board Member 1998 - 2005 TEB Factoring, Board Member 1998 - 2003 TEB Financial Investments, General Manager; TEB, Board Member

and Vice General Manager 1995 - 1997 Bank Kapital, Board Member and General Manager 1992 - 1995 Arap Türk Bankası, Assistant General Manager 1985 - 1992 Undersecretariat of Treasury and Foreign Trade, Certified Bank

Auditor 1983 - 1984 TEB, Expert in Loan and Insurance Department 1983 - 1984 Istanbul University; Faculty of Social Sciences, Department of Money

and Banking 1992 - 1993 Marmara Üniversitesi, Contemporary Business Management Program 1978 - 1982 Istanbul University, Faculty of Economics, Economics and Business

Administration Department

 

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Jean-Paul Sabet, Deputy Chairman 2010 - present TEB A.Ş. Deputy Chairman

TEB Financial Investments Board Member Fortis Bank Board Member BNP Paribas Retail Banking Turkey BNL Banca Nazionale del Lavoro, Italy Board Member

2006 - 2009 BNL/BNP Paribas Italya, C.O.O 2004 - 2006 BNP Paribas Retain Banking Board Member - Head of BNP Paribas

Finance and Strategy Department 1998 - 2003 KLEPIERRE Fransa, Board Member 1997- present Citrus Lands of Louisiana INC, USA Board Member

Citrus Lands of Louisiana, LLC, USA Board Member Citrus Lands Coal Terminal LLC, USA Board Member Citrus Lands Services LLC, USA Board Member

1988- present LDC Board of Trustees 1976 - 1998 BNP Paribas, Deputy Chairman 1976 H.E.C Ecole des Hautes Etudes Commerciales Musa Erden, Board Member 2008 - present Türk Ekonomi Bankası A.Ş., Executive Director 2010 - present TEB Sh.A Chairman,

TEB Leasing Board Member 2006 - 2008 Türk Ekonomi Bankası A.Ş., Consultant 2006 - 2008 The Ottoman Fund Ltd Board Member 2006 - 2008 Osmanlı Yapı 1 İnş. Tur. San. Tic. A.Ş. Chairman 2006 - 2008 Osmanlı Yapı 2 İnş. Tur. San. Tic. A.Ş. Chairman 2006 - 2008 Osmanlı Yapı 3 İnş. Tur. San. Tic. A.Ş. Chairman 2006 - 2008 Osmanlı Yapı 4 İnş. Tur. San. Tic. A.Ş. Chairman 2005 - 2008 TEB Financial Investments, Auditor 2005 - 2006 TEB A.Ş. Auditor 2003 - 2003 MNG Bank, Board Member 2002 - 2003 Turkish Banking Association, Arbitration Committee Member 1996 - 2001 Osmanlı Bankası A.Ş., Assistant General Manager 1993 - 1996 Osmanlı Bankası A.Ş., Deputy General Manager /BD 1991 -1993 Osmanlı Bankası A.Ş., Deputy General Manager /CM 1988 - 1991 Osmanlı Bankası A.Ş., Deputy General Manager /CM 1986 - 1988 Osmanlı Bankası A.Ş. Coordinator 1985 - 1986 Osmanlı Bankası A.Ş. Şişli Branch Manager 1983 - 1985 Osmanlı Bankası A.Ş. Main Branch 2nd Manager 1979 - 1983 Osmanlı Bankası A.Ş. Personnel 2nd Manager 1976 - 1979 Osmanlı Bankası A.Ş. Inspector 1973 - 1976 Osmanlı Bankası A.Ş. Assistant Inspector 1972 - 1973 Yapı ve Kredi Bankası A.Ş. Officer 1966 -1970 Ankara University, Faculty of Economics and Commerce, Banking

Division

 

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Yves Paul Henri Martrenchar, Board Member 2009 - present Bank of the West USA, Board Member 2007 - present BancWest Corporation USA, Board Member; TEB, Board Member;

Findomestic, Board Member; Head of Distribution, Markets and solutions for BNP Paribas Retail Banking

2006 - present BNP Paribas Assurance, Board Member; 2005 - present BNP Paribas Personal Finance, Board Member 2004 - present BNP Paribas Asset Management, Board Member 2003 - present BNP Paribas Immobilier, Board Member; Partecis, Board Member 2003-2008 Crédit Logement, Chairman 2000-2003 Parvest Luxembourg, Board Member 2000 - present Cortal Consors, Board Member, BNP Paribas permanent

Representative 1996-2003 Head of BDDF Retail (Retail part of FRB) 1989 - 1991 BNP Paribas Securities Services, Luxembourg, Execution General

Manager 1991 - 1993 BNP Paribas Lease Group, Board Member 1987 - 1989 Head of "Distribution, Products and Markets" Department of French

Retail Banking (FRB) 1980 - present Deputy Manager of the Nord Pas-de-Calais Network 1980 Group Head of LILLE Group Branches Jean-Milan Charles Dominique Givadinovitch, Board Member 2010 - present TEB A.Ş., Board Member and Head of Audit Committee

TEB Investment Deputy Chairman TEB Factoring Board Member TEB Asset Management A.Ş. Board Member The Economy Bank N.V. Board Member

2009-2010 TEB A.Ş., Head of Group Risk Manager 2002-2009 Bancwest; General Auditor 1998-2002 Director of Audit and Inspection 1997-1998 BNP Paribas; Deputy Head of Inspection 1992-1997 BNP Paribas; Head of Eastern Asia Pacific Region 1989-1992 BNP Paribas; Deputy General Manager 1985-1989 BNP Paribas; Big Corporates Division; Relationship Manager 1983-1985 BNP Paribas; Inspector and Head of Mission 1981-1983 BNP Paribas; Relationship Manager for Corporate Clients 1997-1998 Corporate Finance Executive 1975-1979 Institut des Techniques de Marche 1975-1978 Institut d'etudes Politiques de Paris; Social Science Master

 

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Ayşe Aşardağ, Board Member 2010 - present TEB A.Ş. Board Member

Fortis Bank A.Ş. Board Member 2009- 2010 TEB Arval Araç Filo Kiralama A.Ş. Board Member 2009 - present TEB JSC (Kosovo); Board Member 2008 - 2009 TEB ARVAL Araç Filo Kiralama A.Ş. Vice Chairman, Etkin Temizlik

Hizmetleri A.Ş. Chairman; 2008-2010 TEB Consumer Financing; Vice Chairman 2007-2009 TEB JSC (Kosovo) Vice Chairman

2007-2008

TEB Insurance; TEB Communication and Publishing Services; Etkin Temizlik Hizmetleri A.Ş. and Etkin Personel Taşıma Hizmetleri A.Ş., Chairman; TEB Consumer Financing, TEB ARVAL Araç Filo Kiralama A.Ş., Board Member

2007-2010 TEB UCB Real Estate Counseling, Chairman 2004-2010 Ege Turizm ve İnşaat A.Ş., Vice Chairman 2003 - present Ekonomi Bank Offshore Ltd., Board Member 2001-2009 TEB Leasing; TEB Factoring; TEB Investment, Auditor

2001-2010 TEB Financial Investments, Budget and Financial Control Coordinator; TEB Auditor

2001-2007 TEB Insurance, Board Member; TEB Asset Management, Auditor 1995-2000 TEB, Budget and Financial Control Unit 1994-1995 University of Glamorgan, Lecturer in Accounting 1987-1994 Price Waterhouse, Istanbul, London, Audit Unit 1992 Institute of Chartered Accountants in England and Wales, ACA

1987 Boğaziçi University, Faculty of Administrative Sciences, Business Administration Department, BS

2007-2009 TEB UCB Real Estate Counseling, Chairman Metin Toğay, Board Member 2005-present BNP Paribas, Regional Director, Turkey

2000-present Banque Paribas, Turkey Representative Office, Assistant of Turkey Representative

1997-2000 Finans Yatırım A.Ş., Istanbul, Turkey, General Manager

1996-1997 Banque Paribas, Paris, France, Head Office, International Executive, Commodities Trade Finance

1994-1996 Ottoman Bank, Istanbul (Subsidiary of Banque Paribas until April 1996), Head Office Manager

1991-1994 Finansbank A.Ş., Corporate Finance Department Manager 1989-1991 Chase Manhattan N.A., Istanbul, Corporate Banking Manager 1986-1989 K-Mart Corporation, Troy-Michigan, USA, Assistant Store Manager 1984-1985 University of Wisconsin, USA, MBA in Marketing

1981 Middle East Technical University (METU), B.Sc. in Business Administration

1980 BNP Paribas, Regional Director, Turkey

 

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Audit Committee Name Position Jean-Milan Charles Dominique Givadinovitch

Head of Audit Committee

Dr. Akın Akbaygil Deputy Head of Audit Committee

Jean-Milan Charles Dominique Givadinovitch, Head of Audit Committee 2010 - present TEB A.Ş., Board Member and Head of Audit Committee

TEB Investment Deputy Chairman TEB Factoring Board Member TEB Asset Management A.Ş. Board Member The Economy Bank N.V. Board Member

2009-2010 TEB A.Ş., Head of Group Risk Manager 2002-2009 Bancwest; General Auditor 1998-2002 Director of Audit and Inspection 1997-1998 BNP Paribas; Deputy Head of Inspection 1992-1997 BNP Paribas; Head of Eastern Asia Pacific Region 1989-1992 BNP Paribas; Deputy General Manager 1985-1989 BNP Paribas; Big Corporates Division; Relationship Manager 1983-1985 BNP Paribas; Inspector and Head of Mission 1981-1983 BNP Paribas; Relationship Manager for Corporate Clients 1997-1998 Corporate Finance Executive 1975-1979 Institut des Techniques de Marche 1975-1978 Institut d'etudes Politiques de Paris; Social Science Master Dr. Akın Akbaygil, Audit Committee Vice Chairman 2003 - present TEB A.Ş. Deputy Chairman 2008 - present TEB A.Ş. Audit Committee Vice Chairman 2005 - present TEB Leasing and TEB Factoring, Chairman; TEB Financial

Investments, Board Member 2005- 2010 TEB Leasing Chairman 2004 - 2007 TEB Asset Management, Chairman 2003 - present TEB, Vice Chairman and Executive Member; TEB Financial

Investments, General Manager 2003 - 2005 TEB Financial Investments, Vice Chairman 2001 - 2002 Banks Association of Turkey, Vice Chairman 1999 - present Ekonomi Bank IBU Ltd, Vice Chairman 1998 - present TEB NV, Vice Chairman 1997 - 2005 TEB Insurance, Chairman; TEB Factoring, Board Member,

TEB Factoring, Board Member 1996 - 2005 TEB Leasing, Board Member 1994 - 2001 Banks Association of Turkey, Board Member 1987 - 2003 TEB, Vice Chairman, Executive Member and General Manager 1982 - 1987 TEB, Executive Member 1965 - 1982 Akbank, Director of Foreign Affairs

Istanbul University, Faculty of Economics, BA and PhD

 

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Executive Management General Manager, Assistant General Managers and Their Responsibilities in the Bank Varol Civil Executive Member and General Manager Nilsen Altıntaş Assistant General

Manager Human Resources Group

Melis Coşan Baban Assistant General Manager

Legal Affairs

Turgut Boz Assistant General Manager

Commercial Banking Group

Levent Çelebioğlu Assistant General Manager

Corporate Banking and Financial Institutions Group

Mustafa Aşkın Dolaştır Assistant General Manager

Financial Control Group

Osman Durmuş Assistant General Manager

Retail and Small Business Credit Group

Turgut Güney Assistant General Manager

Information Technologies Group

İzzet Cemal Kişmir Assistant General Manager

Retail Banking Group

Ümit Leblebici Assistant General Manager

Treasury Group

Saniye Telci Assistant General Manager

Banking Operations Group

Nuri Tuncalı Assistant General Manager

Credit Allocation and Financial

Ömer Abidin Yenidoğan Assistant General Manager

Private Banking

Ayşe Korkmaz Head of Compliance Group and Internal Control Group Hakan Tıraşın Internal Audit Group - IG Hub Turkey

 

 64

  

Varol Civil, Executive Member and General Manager 2003 - present TEB A.Ş. Executive Board Member and CEO 2007 - present TEB Asset Management; TEB Investment, Chairman 2006 - present Banks Association of Turkey, Deputy Chairman of the Board of

Directors 2005 - present TEB Factoring, Vice Chairman 2005- 2010 TEB Leasing Vice Chairman 2005 - 2006 TEB Insurance, Chairman 2003 - 2004 TEB Insurance, Vice Chairman 2003 - present TEB, Board Member and CEO; TEB NV, Board Member 1999 - 2007 TEB Asset Management, Board Member 1999 - 2005 TEB Leasing, Board Member 1998 - 2005 TEB Factoring, Board Member 1998 - 2003 TEB Financial Investments, General Manager; TEB, Board Member

and Vice General Manager 1995 - 1997 Bank Kapital, Board Member and General Manager 1992 - 1995 Arap Türk Bankası, Assistant General Manager 1985 - 1992 Undersecretariat of Treasury and Foreign Trade, Certified Bank

Auditor 1983 - 1984 TEB, Expert in Loan and Insurance Department 1983 - 1984 Istanbul University; Faculty of Social Sciences, Department of Money

and Banking 1992 - 1993 Marmara Üniversitesi, Contemporary Business Management Program 1978 - 1982 Istanbul University, Faculty of Economics, Economics and Business

Administration Department Nilsen Altıntaş, Assistant General Manager, Human Resources Group 2005-present TEB, Assistant General Manager, Human Resources Group

2002-2005 İnovasyon Bilişim Danışmanlık ve Eğitim Hizmetleri (Innovative-HR) Founder, Management and Human Resources Consultant

2000-2002 Eczacıbaşı Holding A.Ş., Human Resources and Corporate Communications

1995-2000 Eczacıbaşı Holding A.Ş., Human Resources Director, Manager and later Coordinator

1990-1995 STFA Holding A.Ş., Organization and Human Resources Coordinator 1987-1990 STFA Holding A.Ş., Investments and Economic Analysis Manager

1979-1987 TÜBİTAK- Marmara Scientific and Technical Research Institute, Chemical Technologies Group, Research Specialist

1987 Boğaziçi University, Associate Professor 1983 Istanbul Technical University, PhD in Industrial Chemical Engineering 1979 Boğaziçi University, MS in Chemical (Process) Engineering 1977 Boğaziçi University, BS in Chemical Engineering

 

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Melis Coşan Baban, Assistant General Manager, Legal Affairs 2008-present TEB, Assistant General Manager, Legal Affairs 2005-present TEB, Chief Legal Advisor, Board General Secretary 2000-2005 Pekin & Pekin Law Firm, Partner 1998-2000 Pekin & Pekin Law Firm, Senior Lawyer 1993-1998 Postacioglu Law Firm, Lawyer 1997 Columbia University, New York, USA, Master of Law ( LL.M.) 1995 Istanbul University Law School, Law Degree 1989 Istanbul American Robert College Turgut Boz, Assistant General Manager, Commercial Banking Group 2003-present TEB, Assistant General Manager, Commercial Banking Group 2004-present TEB Leasing and TEB Factoring, Board Member 2000-2003 Garanti Bankası, Commercial Marketing Unit Head 2000-2000 Osmanlı Bankası, Commercial Banking Coordinator 1995-2000 Finansbank Denizli and Ankara Branch Manager 1994-1995 Ata Invest, Denizli Branch Manager 1989-1994 Egebank, Bornova and Denizli Branch Manager 1986-1989 Pamukbank, Karabağlar Branch Manager 1981-1986 Pamukbank, Audit Department, Internal Auditor

1976-1980 Ankara University, Academy of Economic and Administrative Sciences, Banking and Insurance

Levent Çelebioğlu, Assistant General Manager, Corporate Banking and Financial Institutions Group 2008-present Türk Ekonomi Bankası, Assistant General Manager, Corporate

Banking and Financial Institutions Group, TEB Leasing A.Ş. Board Member

2009-present The Economy Bank N.V. Board Member 2008 -2010 TEB Leasing A.Ş. Board Member 2004-2008 TEB A.Ş. Genel Müdür Yardımcısı, Finansal Kurumlar Grubu

1999-2004 TEB A.Ş. Direktör, Proje Finansmanı ve Yatırımcı İlişkileri Departmanları

1992-1999 TEB A.Ş. Hazine Grubu Bölüm Başkanı 1988-1992 TEB A.Ş. Muhabir İlişkiler Departmanı, Müdür Yardımcısı 1987-1988 Yaşarbank Muhabir İlişkiler Bölümü, Müdür Yardımcısı

1979-1983 9 Eylül Üniversitesi, İktisat Fakültesi, Para İktisadı ve Bankacılık Bölümü

 

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Mustafa Aşkın Dolaştır, Assistant General Manager, Financial Control 2008-present TEB A.Ş.; Assistant General Manager, Financial Control 2007 TEB/Arval/Factoring/Leasing; Chief Financial Officer 1998-2007 The Economy Bank N.V., Amsterdam; Deputy Managing Director 1994-1998 Finansbank (Holland) N.V.; Assistant General Manager

1992-1994 Commercial Union Hayat Sigorta A.Ş.; Assistant General Manager, Financial Control and Administration

1990-1992 Finansbank A.Ş. Istanbul; Group Head, Participations

1986-1989 Arthur Anderson & Co.; Istanbul, Lisbon, London and Cambridge Offices, Senior Auditor

1985-1986 The Central Bank of Turkey; Specialist 1984-1985 Istanbul Technical University; Operations Research Department

1983-1986 Istanbul Technical University Master Degree in Management Engineering

1979-1983 Istanbul Technical University Management Engineering Osman Durmuş, Assistant General Manager, Retail and Small Business Credit Group

2008-present TEB A.Ş., Assistant General Manager, Retail and Small Business Credit Group

1998-2008 HSBC/Demirbank A.Ş., Head of Retail and Small Business Credit and Risk Group

1997-1998 Yapı Kredi Kart Hizmetleri A.Ş., Head of Credit Cards and Risk

1986-1996 Yapı Kredi Bankası A.Ş., Clerk, Chief Assistant, Specialist, Retail Banking Accounting Department Unit Manager

1982-1986 Marmara University, Faculty of Press and Media, Journalism and Public Relations Department

Turgut Güney, Assistant General Manager, Information Technologies Group 2004 - present TEB, Assistant General Manager, Information Technologies Group 2000-2004 TEB, Information Technologies Director 1997-2000 Demirbank, Information Technologies Coordinator 1995-1997 Oracle Consulting Services, USA, Senior Consultant 1994-1995 CTG (Computer Task Group), USA, Senior Consultant 1992-1994 Southern Illinois University, USA, Research Assistant 1990-1992 Türkiye Kalkınma Bankası System Analyst 1992-1994 Southern Illinois University, USA, MS in Computer Science, 1985-1990 Hacettepe University, Computer Science

 

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İzzet Cemal Kişmir, Assistant General Manager, Retail and Small Business Group 2008-present TEB Investment, Board Member 2006-present TEB Asset Management, Vice Chairman 2005-2006 TEB Insurance, Board Member 2005-present TEB, Assistant General Manager, Retail Banking Group

1997-2005

Garanti Bankası, Unit Manager Garanti Bankası, EVP for Retail and Small Business T. Garanti Bankası, EVP for Marketing and CRM Garanti Bankası, EVP for Credit Cards Marketing

1995-1997 University Hartford, Barney School of Business - Executive MBA 1990-1994 Mobil Oil Turkey, Resale Programs Associate 1988-1989 STFA Foreign Trade, Area Coordinator 1987-1988 Tekfen Foreign Trade, Area Manager

1986-1987 Marmara University, "Contemporary Management" Post-graduate Program

1982-1986 Marmara University, Economics and Business Administration Faculty Ümit Leblebici, Assistant General Manager, Treasury Group 2001-present TEB, Assistant General Manager, Treasury Group 1999-2001 TEB A.Ş., Director, Treasury Group 1997-1999 Osmanlı Bankası; Treasury Manager 1997-1997 Ulusal Bank; Treasury Manager 1991-1997 Midland Bank; Treasury Manager 1988-1994 İstanbul University MBA at Finance Major 1984-1988 İstanbul University Faculty of Business Administration Saniye Telci, Assistant General Manager, Banking Operations Group 2005-present TEB A.Ş. Assistant General Manager, Banking Operations Group

1999-2005 TEB, Operations Manager, Branch and Headquarter Operations & Treasury Operations

1997-1999 T. Garanti Bankası A.Ş., Operation Centre, Operations Manager

1994-1997

T. Garanti Bankası A.Ş., Istanbul 1st Region Operations and Kozyatağı Corporate Branch, Operations Manager; Istanbul 2nd Region Operations and Istanbul Corporate Branch, Operations Manager

1991-1994 T. Garanti Bankası A.Ş., Istanbul 3rd Region Operations, Assistant Manager

1987-1991 T. Garanti Bankası A.Ş., Foreign Transactions Department, Assistant Supervisor and Assistant Manager

1984-1987 Anadolu Bank T.A.Ş., Foreign Transactions Department, Foreign Exchange Assistant Expert

1977-1982 Istanbul University, Faculty of Economics

 

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Nuri Tuncalı, Assistant General Manager, Corporate & Commercial Credits Assistant General Manager

2008-present TEB A.Ş. Assistant General Manager, Corporate and Commercial Credits Group

2001-2008 TEB A.Ş. Assistant General Manager, Credit Allocation and Financial Analysis

1999-2001 TEB, Loan Allocation Department, Director 1996-1999 TEB, Loan Allocation Department, Manager

1988-1996 TEB, Loan Control, Gayrettepe Branch, Loan Allocation, Assistant Manager

1986-1988 TEB A.Ş. Board of Inspectors, Inspector 1984-1986 Akbank, Audit Department, Auditor

1978-1982 Boğaziçi University, Faculty of Administrative Sciences, Business Administration Department

Ömer Abidin Yenidoğan, Assistant General Manager, Private Banking 2007-present TEB A.Ş. Assistant General Manager, Private Banking 2003-present TEB Asset Management, General Manager 2001-2003 TEB Retail Banking Marketing and Sales Director

1999-2001 TEB Asset Management, Group Manager responsible for Marketing, Sales, and Business Development

1997-1999 TEB Investment, Unit Manager, Distribution Channel of Investment Funds

1995-1997 Citibank N.A., Credit Card Department, Assistant Manager 1994-1995 University of Nottingham, Nottingham, UK, MBA Finance 1989-1994 Marmara University, Public Administration, Department of Finance 1982-1989 Galatasaray High School

 

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Managers of Internal Systems Ayşe Korkmaz, Head of Compliance Group and Internal Control Group 2010 - present TEB A.Ş. Head of Compliance Group and Internal Control Group 2008-2010 TEB A.Ş. Head of Risk Management and Compliance Group

2006-2008 TEB A.Ş. Chairman of Group Compliance, Internal Control and Operational Risk

2003-2005 TEB Financial Investments, Audit Coordinator 2000-2003 Banking Regulation and Supervision Agency, Certified Bank Auditor 1995-2000 Undersecretariat of the Treasury, Certified Bank Auditor

1991-1995 Ankara University, Faculty of Political Sciences, Department of Business Administration

Hakan Tıraşın, TEB A.Ş. Head of Internal Audit 2006 - present TEB A.Ş. Head of Internal Audit

2004-2005 TEB, Assistant General Manager, Organization, Banknote Markets and Support Services and Secretary General

1992-2004 TEB, Secretary General 1989-1992 TEB, Internal Auditor 1973-1989 Akbank, Branch Manager and Internal Auditor 1972-1977 Istanbul Academy of Economics and Business Administration Statutory Auditors, Terms of Office and Professional Backgrounds Esra Peri Aydoğan, Auditor 2010 - present TEB A.Ş., Auditor 2010- present TEB ARVAL Araç Filo Kiralama A.Ş. Board Member 2009- present TEB Factoring Auditor 2009-2010 TEB Leasing Auditor

Since 2005, TEB Financial Investments, Consultant 2002 - 2004 Ernst & Young (After Andersen integration), Independent Auditing and

Consultancy Services, Partner 1989-2002 Andersen, Bağımsız Independent Auditing and Consultancy Services,

Auditor, Audit Manager and Partner 1989 Boğaziçi University Faculty of Administrative Sciences, Business

Administration Department, BS

 

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Cihat Madanoğlu, Auditor 2006 - present TEB A.Ş., Auditor 2010 - present TEB UCB Real Estate Counseling, Chairman 2009-2010 TEB UCB Real Estate Counseling, Board Member 2009- present TEB Investment, Auditor

TEB ARVAL Araç Filo Kiralama A.Ş. Board Member 2008 - 2009 TEB ARVAL Araç Filo Kiralama A.Ş. Auditor

Tasfiye Halinde Etkin Temizlik Hiz. A.Ş. Deputy Chairman 2007-2010 TEB Consumer Financing, Board Member 2007 - 2009 TEB Asset Management, Auditor 2007 - 2008 TEB Insurance A.Ş., TEB Communication and Publishing Services

A.Ş., Etkin Personel Taşımacılık Hizmetleri A.Ş., Etkin Temizlik Hizmetleri A.Ş. Vice Chairman, TEB UCB Real Estate Counseling A.Ş. ve TEB ARVAL Araç Filo Kiralama A.Ş., Board Member

2007’den bu yana TEB Leasing Board Member TEB Factoring, Auditor

2006 - 2007 TEB Insurance Board Member 2005’ten bu yana Ekonomi Bank IBU Ltd, Board Member 2005 - 2006 TEB Insurance, Auditor 2005 - 2006 TEB Factoring Board Member 2004’ten bu yana Ege Turizm ve İnşaat A.Ş. Board Member 2004 - 2006 TEB Leasing Board Member 2002 - 2006 TEB Investment Auditor 2001’den bu yana TEB Financial Investments, Coordinator 2000 - 2004 TEB Leasing, Auditor 1999 - 2001 TEB Investment, Auditor 1997 - 2005 TEB Insurance, Board Member 1997 - 2005 TEB, Board Member 1997 - 2004 TEB Factoring, Auditor 1997 - 2000 TEB Leasing, Board Member 1997 - 1999 TEB Investment, Board Member 1996 - 2001 TEB, Assistant General Manager 1992 - 1996 Housing Development Administration of Turkey, Director of

Administration and Finance 1989 - 1992 ATAUM, Ankara University, Lecturer in EU Budget and Indirect Tax

Harmonization 1988 - 1992 Ministry of Finance, Chief Public Auditor 1978 - 1988 Ministry of Finance, Public Auditor 1987 Vanderbilt University, Nashville TN U.S.A., Development Economics 1977 Tax Officer 1976 Ankara University Faculty of Political Sciences Department of

Economics and Finance

 

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COMMITTEES OF TÜRK EKONOMİ BANKASI A.Ş. Credit Committee The Credit Committee extends loans in accordance with the rules of the Banking Regulation and Supervision Agency and within the powers and limits specified by the Board of Directors. Chairman : Dr. Akın AKBAYGİL Vice Chairman : Jean-Milan Charles Dominique GIVADINOVITCH Member : Varol CIVIL Audit Committee Purposes of Establishment: To centralize audit systems, validate procedures, monitor and audit risks in the eight

risk categories below: a. Credit and counterparty risk: Default by third parties b. Market and liquidity risk: Market price fluctuations c. Administrative risk: Appropriate administration of operations (including operational

risk) d. Legal risk: Conformity with tax law and other legislation e. Accounting risk: Conformity with regulations and legally acceptable presentation of

accounts f. IT risk: Adequacy and security of systems g. Human resources risk: Adequacy of staff with regard to quality and functions h. Reputation and commercial risk: Damage to Group’s image

Determining risk policies and principles for the appropriate conduct of risk

management, internal audit system and compliance; Monitoring the Group’s adequacy and effectiveness in internal controls and risk

management and auditing accounting and reporting systems Taking necessary measures to ensure that the Board of Directors is informed of any

incident or condition that may prevent the Bank from functioning in an uninterrupted manner or of any event that violates laws and regulations; and making recommendations periodically through reporting to the Board of Directors any measures required to be taken.

The committee meets at least once every two months. Chairman : Jean-Milan Charles Dominique GIVADINOVITCH Vice Chairman : Dr. Akın AKBAYGİL Participation of Board Members and Committee Members in Meetings According to Article 24 of the Articles of Association, in order for a meeting of the Board of Directors to be valid, at least seven (7) members must be present. Decisions shall be adopted by the affirmative votes of at least seven (7) members. The Board of Directors adopted 123 decisions, and the Audit Committee adopted 16 decisions in 2010. The participation of Board Members and Committee Members to meetings was at a satisfactory level.

 

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HUMAN RESOURCES PRACTICES In line with its targets and strategies, it is TEB’s policy to recruit highly qualified employees, preferably university graduates who are able to represent the bank, think analytically and get along well with their co-workers. Appropriately designed selection and assessment systems and tools are employed to ensure that high-potential, promising, creative and innovative people join the Group. Successful employees who have a high potential are promoted both within TEB and within the TEB Financial Services Group following performance assessment.

 

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INFORMATION ON TRANSACTIONS CONDUCTED WITH RELATED PARTIES The Bank is involved in various transactions with the risk group to which TEB is included (related-parties) and these are carried out for commercial purposes and at market prices. The most striking indicator of this well-established policy is that the share of related-party risk in TEB’s total cash and non-cash loans are below 2.5%. Loan transactions with related-parties and their share in the Bank’s total credit risk as of 31 December 2010 and 31 December 2009 were as follows: (%) 31.12.2010 31.12.2009 Share in total cash loans 1.40 0.59 Share in total non-cash loans 3.84 4.09 Share in total cash and non-cash loans 2.03 1.56 Detailed information about the risk group to which TEB is included has been prepared in accordance with the “Communiqué on Financial Statements and Related Explanations and Footnotes Announced to the Public by Banks” and published in Section 4, Paragraph b of the “Annual Report" and was also included in the financial statements as of 31 December 2010 and Section VII, Articles 1 and 2 of the Independent Audit Report. OUTSOURCED SERVICES AND OURSOURCING COMPANIES Because there is no activity requiring formal approval from BRSA within the context of The Regulation on Outsourcing Activities; TEB did not apply for a written permission to BRSA in 2010

 

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AGENDA OF THE ORDINARY GENERAL ASSEMBLY MEETING ON MARCH 31, 2011 “THE AGENDA OF THE ORDINARY GENERAL ASSEMBLY: 1- Opening and formation of the Presiding Board, composed of a Chairman, two vote collectors and two secretaries, 2- Granting authorization to the Presiding Board for signing the meeting minutes, 3- Reading, discussion and approval of the Auditor’s Report and Board of Directors Activity Report for the year 2010, prepared in accordance with the Legislation, 4- Reading, discussion and approval of the 2010 balance sheet and profit and loss statement, and approval, amendment or rejection of the Board of Directors’ proposal on the distribution of profit, discussion of proposals related to the same, 5- Reading of the summary of the annual audit report prepared by the Independent Audit Firm, and approval of the Independent Audit Firm appointed by the Board of Directors for approving and auditing of the 2010 financial statements, 6- Providing information to the General Assembly on the donations made by the Bank in 2011, 7- Release of the members of the Board of Directors and Auditors with respect to their activities in 2010, 8- Determination of term of office and election of the members of the Board of Directors and Auditors, 9- Determination of remuneration and attendance fees to be paid to the Board of Directors and Credit Committee and Auditors, 10- Granting permission to the members of the Board of Directors for performance of the transactions set forth in articles 334-335 of the Turkish Commercial Code.

 

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SUMMARY OF BOARD DIRECTORS’ REPORT PRESENTED TO THE GENERAL ASSEMBLY Dear Shareholders, Reports of the Board of Directors, Independent Auditors and the Profit-and-Loss Statement for 2010 have been presented for your evaluation and approval. In 2010 for the global economy the most important issue was recovery from the economic crisis, strategies employed and their implications. Improvements in the economic indicators in the last 2 quarters of 2009 indicated that 2010 would be a year of recovery. Structural disparities between developed and developing economies increased during this period. Developing economies performed better and continued to be the impulsive force of the economy. Turkey was able to manage global economic fluctuations efficiently and became one of the fastest recovering countries from the economic crises. 6% growth rate in the last quarter of 2009, was a sign Turkey would steer out the recession. In the first 3 quarters of 2010, Turkey’s growth rates were 4.8%, 10.2%, and 5.5% consecutively and due to its outstanding performance Turkey’s sovereign rating note was upgraded. With its solidly built infrastructure, Turkish banking sector has shown a strong performance. Banking sector continued to support SME’s that were most adversely affected from crises, helping the real sector and thus the Turkish economy to gain momentum. TEB continued to add value by utilizing its competitive advantages with regards to competition. With a focus on the dynamics of the market movers to correctly analyze national as well as international markets, TEB was able to meet its 2010,targets and maintain its financial soundness by integrating modern risk management practices into its able and widespread financial services network. Aided by the tenacious support of its shareholders on all of its endeavors TEB was able to undertake which promises to be a very important project for the Turkish banking sector and complete its legal merger with Fortis on February 14, 2011. TEB will continue to penetrate the Turkish market which has a high potential for growth with its added scale and continue to be a strategic growth leverage for BNPP. Regards, Board of Directors

 

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OUR PROPOSAL FOR DISTRIBUTION OF PROFIT TÜRK EKONOMİ BANKASI A.Ş. 2010 DISTRIBUTION OF PROFIT CHART (TRY) 1. Paid-in / Issued Capital 1,100,000,000.00 2. Total legal reserves (According to Legal Records) 45,467,817.17 Information regarding the privilege, if any privilege with respect to distribution of profit is stated in the articles of association According to Legal

Records (“LR”) 3. Profit for the period 366,903,322.76 4. Taxes to be paid ( - ) (66,602,466.19) 5. Net profit for the period ( = ) 300,300,856.57 6. Losses related to the Previous Years ( - ) - 7. Primary Legal Reserve ( - ) (15,015,042.83) 8. NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) 285,285,813.74 9. Donations made within the year ( + ) 10.

Net distributable profit (donations are included) for the period according to which the first divided will be calculated

11. First divided for the shareholders - -Cash - -free of cost - - Total -

12.

Dividend distributed to the holders of the privileged share -

13. Dividend distributed to the Board of Directors members, employees etc. -

14. Dividend distributed to the holders of redeemed share certificates -

15. Second dividend for the shareholders - 16. Secondary Legal Reserves - 17. Statutory Reserves - 18. Special Reserves 57,879,750.09 19. EXTRAORDINARY RESERVES 227,406,063.65 20.

Other resources planned to be distributed - Profit of the previous year - Extraordinary Reserves - Other distributable reserves according to the laws

and articles of association

-

(*) Affiliate means; an affiliate of the main partnership, subsidiary and the partnerships which are subject to common management.

 

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INFORMATION REGARDING THE PERCENTAGE OF THE DISTRIBUTED PROFIT(1) DIVIDEND INFORMATION REGARDING EACH SHARE

GROUP

TOTAL DIVIDEND AMOUNT (TRY)

DIVIDEND CORRESPONDS TO SHARES WITH A NOMINAL VALUE OF TRY 1

AMOUNT(TRY)PERCENTAGE (%)

GROSS - - - NET - - - THE PROPORTION BETWEEN THE DISTRIBUTED SHARE OF PROFIT AND NET DISTRIBUTABLE PROFIT (DONATIONS ARE INCLUDED) FOR THE PERIOD SHARE OF PROFIT DISTRIBUTED TO THE SHAREHOLDERS (TRY)

THE PROPORTION BETWEEN THE DISTRIBUTED SHARE OF PROFIT TO THE SHAREHOLDERS AND NET DISTRIBUTABLE PROFIT (DONATIONS ARE INCLUDED) FOR THE PERIOD (%)

- - (1) If there is a privileged share group in the profit, a group separation shall be realized. Performance and Sales Bonus Total amount of TRY 22.5 million, consisting of TRY 18 million performance bonus and TRY 4.5 million sales bonus is reserved to be paid in 2011.

 

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CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT PART I – SHAREHOLDERS 1. Statement of Compliance with Corporate Governance Principles TEB aims to fully comply with the “Corporate Governance Principles” issued by the Capital Markets Board (CMB) in July 2003 concerning the principles to be observed by listed companies to achieve professional management, transparency and ethical conduct in the course of their activities. As TEB believes that compliance with these principles will become as important as credit valuation (ratings) in the near future, the Board of Directors has set up a Corporate Governance Committee at the Board level through Resolution No: 3609/4 dated 24 January 2004, to regulate and monitor compliance with these principles. The Corporate Governance Committee performs the functions explained below. Although compliance with these principles issued in 2003 requires a process development, it has been noted that complete compliance has been realized without any conflicts of interest. 2. Shareholder Relations Department A Shareholder Relations Department (referred to as the Shareholders Unit in the organizational chart) has been established in an effort to inform registered shareholders about dividends, capital increases and the agenda and resolutions of General Meetings, to maintain the share register in accordance with Article 326/1 of the Turkish Commercial Code and to manage legal and operational relations with shareholders. The contact details of this unit are as follows: Cüneyt Temiztürk (Unit Manager) Phone: +90 212 251 21 21 (extension 1923) Fax: +90 212 249 65 68 This unit reports to the General Secretary of the Board of Directors Additionally, the Bank has an “Investor Relations and Corporate Governance Department” to establish relations with domestic and foreign investors and inform them about the Bank’s activities and financial results. Çiğdem Başaran and Özgün Zaimoğlu are responsible for the overall management of the department. Their contact information is as follows: Çiğdem Başaran (Manager) Phone: 0 216 635 24 63 Fax: 0 216 636 36 36 E-mail: cigdem.basaran@teb.com.tr

 

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Özgün Zaimoğlu (Analyst) Phone: 0 216 635 24 60 Fax: 0 216 636 36 36 E-mail: ozgun.zaimoglu@teb.com.tr 3. Exercise of Shareholders’ Right to Information Investors and the general public are provided with detailed information both in Turkish and in English through the “Investor Relations” and “Corporate Governance” sections on TEB’s website: http://www.teb.com.tr/eng/main/HaritaInvestor_relations_menu.aspx http://www.teb.com.tr/eng/main/HaritaCorporate_governance_menu.aspx Information is available under the following headings: • TEB-BNP Paribas • Share Price Info • Financial Calendar • Ratings • Financial Highlights • Financials • Investor Presentations • Dividends • Annual Reports • Announcements • Research Reports • Broker Forecasts • Press Releases • Frequently Asked Questions • Contact Info • Corporate Governance Principles • Management • General Meetings • Committees • Policies • Annual Reports In addition to meetings, nearly 200 queries about TEB have been answered by telephone and e-mail in 2010. The questions were about various subjects and all requests for information by shareholders were answered as quickly as possible, provided that they are not related to trade secrets or information that is not publicly available. Although Article 36 of the Articles of Association of TEB provides for the appointment of a special auditor, no special auditor was elected in 2010. This article does not define the request for the appointment of a special auditor as an individual right. However, the Articles

 

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of Association does not contain any provisions that contradict with the relevant provision of the Turkish Commercial Code. This right was not exercised in 2010. 4. Information on General Meetings of Shareholders The General Meeting of Shareholders convened to an Ordinary General Meeting which was held on 30 March 2010 and Attendance was 85.%, no media members were present at these events. The General Meeting of Shareholders convened to an Extraordinary General Meeting which was held on 19 October 2010 and attendance was 85.6%, no media members were present at these events. Invitation letters were sent by registered mail at least 15 days prior to the respective meeting dates to the Shareholders in the share register. The meetings were also announced in the Turkish Trade Registry Gazette and a national daily newspaper. In addition, e-mail messages were sent to the shareholders whose e-mail addresses were known. In accordance with the provisions of the 2499 Capital Markets Act temporary article and 294 of Central Register Agency communication, completion of dematerialization of shares is mandatory in order to vote in General Assembly. Unless the dematerialization is completed, attendance of our shareholders to General Assembly is not possible. The shareholders who will attend the Ordinary General Assembly meeting individually or via proxy shall submit the below listed documents, before the meeting date, to the Shareholders Unit of the Bank’s Head Office or to Branches, and obtain the Entrance Cards or shall apply before the establishment of Presidential Board of the General Assembly, at the latest. - Identity documents and/or proxies, - General assembly blocking letters related to the shares that they own, - In addition to the above listed documents, the authorization document of the person who

is authorized by the legal entity shareholders The date, venue, time and agenda of the meeting, as well as sample statements for those who wish to appoint a proxy to attend the meeting on their behalf, are included in the invitation letters, the newspaper announcements and on TEB’s website. Shareholders exercised their right to ask questions at general meetings and their questions were answered informatively. Shareholders tabled motions, which were put to the vote of attending shareholders and accepted. According to the Articles of Association, approval of the General Meeting of Shareholders is not required for decisions concerning spin-offs or the sale, purchase and leasing of material assets. The powers and responsibilities of the Board of Directors in relation to these decisions have been specified in Article 26 of the Articles of Association.

 

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To facilitate attendance at General Meetings of Shareholders, notices are sent out on time, the meetings are held in central locations in Istanbul and the minutes of the meetings are made available at the Shareholders Unit and on the website. 5. Voting Rights and Minority Rights There are no privileges regarding voting rights. Further there are not any cross-shareholding companies. Minority shares are not represented in management; however the views, suggestions and requests of minority shareholders are communicated to the management through the Investor Relations and Corporate Governance Department and the Shareholders Unit. The Articles of Association do not provide for cumulative voting. 6. Dividend Policy and Time of Distributions There are no privileges regarding dividend distribution. TEB’s dividend policy, which was amended on 29 September 2006 and announced to the public, is as follows: Dividend Policy: “Türk Ekonomi Bankası A.Ş. will pay up to 40% of the net distributable profit to its shareholders as a cash dividend or as bonus shares within the context of its Articles of Association. The amount distributable depends on market conditions, maintenance of a comfortable capital adequacy ratio and growth plans of the bank and will be proposed by the Board of Directors to the Ordinary General Meeting of Shareholders every year.” No dividend was distributed for the profit generated in the year 2009. 7. Transfer of Shares Article 9 of the Articles of Association stipulates that: The relevant provisions of the Turkish Commercial Code and other applicable legislation

shall govern share transfers. Transfer of shares at the percentages specified in the Banking Law and transfer of share

certificates that grant usufruct rights shall be subject to the prior permission of the Banking Regulation and Supervision Agency and the Capital Markets Board.

In order for such transfer and assignment to be binding for the company and for third

parties, the share transfer must be approved and certified by the Board of Directors and entered into the share register.

Furthermore, the same article stipulates that the company’s Board of Directors may reject approval and registration without specifying any reason.

 

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PART II - PUBLIC DISCLOSURE AND TRANSPARENCY 8. Disclosure Policy As indicated on its website, TEB has publicly announced the following Disclosure Policy within the context of the Corporate Governance Principles: “Subject to applicable legislation, TEB promptly, accurately and fully discloses any matters concerning its operations for which a disclosure has been requested.” All information that fits the above definition is publicly disclosed by the Investor Relations and Corporate Governance Department or the Official Reporting Department and is subject to the approval of the Board of Directors and the General Management. Announcements made are also reported to the Corporate Governance Committee. 9. Special Circumstances Disclosures TEB made 30 special circumstances disclosures in 2010. None of these was an additional disclosure made in response to the instructions of the Istanbul Stock Exchange (ISE). Since the Bank is listed on the London Stock Exchange (LSE) as well, the material disclosures made to the ISE and the Capital Markets Board (CMB) are also sent simultaneously to the LSE. No disclosures were made to the LSE other than those made to the ISE and the CMB. Since TEB takes the utmost care in its disclosures, the CMB has not imposed any sanctions on the Bank in 2010. All material disclosures are available on TEB’s website. 10. The Website and its Contents TEB’s website is at www.teb.com.tr. TEB monitors similar websites in other countries and constantly updates the information available on its website in accordance with Section II Article 1.11.5 of the Corporate Governance Principles issued by the CMB. The website contains sufficient information to satisfy shareholders and third parties who need information about TEB. 11. Ultimate Controlling Individual Shareholders The shareholding structure of TEB as of 31 December 2010 was as follows: • 84.25% TEB Mali Yatırımlar A.Ş. (TEB Financial Investments) • 15.63% Publicly-traded • 0.12% other shareholders

 

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12. Individuals with Access to Insider Information According to the Banking Law, the law that governs the banking profession and defines its legal and ethical rules, it is forbidden for bank employees to convey to third parties confidential information on the bank or its customers that they acquire during the performance of their duties. Since this obligation continues after the termination of employment, it was not deemed necessary to disclose and publicly announce the list of persons who have access to insider information, in view of the industry practice and employment ethics and work discipline. PART III - STAKEHOLDERS 13. Announcements to Stakeholders Stakeholders are provided information concerning TEB’s activities through special circumstances disclosures, as published on the website and in annual reports. Views, opinions and questions submitted to TEB using the ‘Contact us’ section of the website are referred to the relevant departments and answered within the framework of applicable legislation. 14. Participation of Stakeholders in Management As banking practice and legal rules impose strict restrictions on the appointment of executives, no model has been devised for stakeholders to personally take part in management. TEB believes that this applies equally to other banks in the industry. However, stakeholders can communicate their views, opinions, critiques and demands to the management through the “Investor Relations and Corporate Governance Department”, the “Shareholders Unit” and the “Customer Communications Unit”. 15. Human Resources Policy The main objective of TEB’s Human Resources Group is to adopt the best HR practices in the finance industry. Given this objective, the Bank’s human resource policy assures the following: * Ensuring dynamism and readiness for change in the organizational structure, in line with the strategic plans and goals of the TEB Group. * Within the scope of the TEB Talent Pool, recruiting people for the TEB Group who are well educated, open to innovation and change, have entrepreneurial skills, are energetic, dynamic, who possess potential for self-development, are team players and who can adopt corporate values and commit to them. * Utilizing human resources in the most effective and productive manner in conformity with the Bank’s targets and strategies, supporting employees with development programs that are in line with both professional and personal career goals indicated in employees’ career plans

 

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and creating career opportunities by ensuring employees’ participation in advanced BNP Paribas training courses. * Considering training and development as an investment in human resources and contributing to the development of employees in line with the TEB Group’s targets and strategies within the framework of the “continuous learning and development” philosophy of the TEB Formation Academy, * Training future managers amongst employees within the organization and prioritizing applicants amongst employees within TEB for future open positions, * Improving individual and team performance continuously through quality improving methods and systems, focusing on rewarding schemes in the Performance Assessment System that enables the recognition of superior performance and giving each employee equal opportunity within the context of their career plans, * Contributing to the productivity and performance of the Bank’s employees and branches by providing quick and effective HR support and practices. By the end of 2010, TEB has 5646 personnel and 335 branches. 66.1% of the TEB employees have university degree while 6.3% holds a graduate degree and 0.1 % holds a post graduate degree. Average training time per employee was realized as 32 hours. 16. Relationships with Customers and Suppliers A “Customer Communication Unit” directly reporting to the General Manager was established to maintain customer service quality, measure customer satisfaction and assess the complaints, views and suggestions of customers. TEB also monitors customer expectations and remarks in cooperation with consulting companies and reports findings to the Board of Directors. 17. Social Responsibility As a good corporate citizen that is fully aware of its social responsibilities, TEB strives to be a Bank that upholds the core values and heritage of the society that it conducts business in. To achieve this goal, TEB implements corporate social responsibility projects that contribute to the protection of the environment, the development of SMEs that are the dynamo of the Turkish economy and provide for a large proportion of the country’s employment, and the education of our youth population that will build the future of our country. Planning its corporate social responsibility program in parallel with its business activities, TEB continues to encourage active, voluntary participation of its employees in its projects.

 

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Contributions to the Environment As a pioneer that is aware of its responsibility to contribute to a sustainable environment, TEB developed and deployed an effective and systematic management approach to minimize the environmental impact of its business operations. The Bank aims and undertakes to:

Preserve and effectively use natural resources, Reduce and recycle waste at source, Offer environmental-friendly products, Increase resource savings and energy efficiency, Follow up scientific and technological developments to prevent environmental

pollution and continuously improve its environmental performance, Increase the environment awareness of its employees, suppliers and customers.

As the first deposit bank entitled to receive ISO 14001 Environmental Management Standard Certification, TEB signed a credit agreement worth of 50 million Euro in 2010with AFD, a French Development Bank which supports sustainable development. TEB is the first deposit bank to sign an agreement with AFD in Turkey. The loan wil be extended to companies which invest in energy efficiency and renewable energy resources. Contributions to SMEs With a watchful eye on the development of SMEs, which are the fundamental pillars of the Turkish economy, TEB supports many activities in this area. Since 2005, after forging a strategic partnership with BNP Paribas, the largest bank in the Euro zone, TEB has further contributed to the development of SMEs..The Bank has provided SMEs with knowledge that will help them gain a competitive edge through its own TEB SME Academy-Corporate Development Program, Future Strategy for Provinces Conferences and TEB SME consultants. TEB SME TV and SME CLUB practices, as first implementations in the banking sector, brings many SME’s together playing an important role in enhancing communication and collaboration among them as well as performing an information distributing function. Contributions to Youth Turkey’s Youth are “Inventing” with TEB Recognizing that a large proportion of the Turkish population is composed of youth, TEB organizes an annual innovation competition; “Make an Invention,” in order to encourage the youth population to generate creative and innovative ideas. Serving as a good example of private sector-university cooperation, this TEB-sponsored competition contributes to various topics such as raising awareness among the university students and young professionals on “innovation-creativity,” developing competencies and introducing the finance sector to university students.

 

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PART IV - THE BOARD OF DIRECTORS 18. Structure and Composition of the Board of Directors and Independent Members Members of the Board of Directors and their responsibilities as of 31 December 2010 are listed below: Name Position Yavuz Canevi Chairman Dr. Akın Akbaygil Vice Chairman Jean Paul Sabet Vice Chairman Varol Civil Executive Member and General

Manager Musa Erden Executive Member Yves Paul Henri Martrenchar Member Jean-Milan Charles Dominique Givadinovitch

Member

Ayşe Aşardağ Member Metin Toğay Member An up-to-date list of the members of the Board of Directors and their resumes are available on TEB’s website. The concept of an independent board member has been introduced in Turkey together with the adoption of the corporate governance principles. Corporate governance structures and processes and related principles is to be determined by the Banking Regulation and Supervision Agency after consultation with the Capital Markets Board and associated unions, as specified in Article 22 of Banking Law No: 5411. Since applicable legislation has introduced additional responsibilities for board members, in addition to the requirements foreseen for membership in banks’ Boards of Directors, the number of suitable candidates became limited. Thus, TEB believes that it is going to take some time for the number of independent members on its Board of Directors to reach the requested level. Article 28 of TEB’s Articles of Association on Prohibited Transactions states the following: “Activities and transactions that the Chairman and members of the Board of Directors as well as the Chairman and Members of the Credit Committee may not engage in are specified in the relevant provisions of the Turkish Commercial Code, the Banking Law and the Capital Markets Law.” 19. Qualifications of Board Members The qualifications required for membership in the Board of Directors are specified in Article 22 of the Articles of Association and the relevant provisions of the Banking Law. The

 

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qualifications of TEB board members comply with applicable legislation and the Corporate Governance Principles. 20. Mission, Vision and Strategic Targets As stated in the ‘Corporate Governance’ section of its website, TEB’s mission is defined as follows: TEB is committed to adding value to its stakeholders with its selected customer portfolio and world-class financial services. TEB aspires to maximize customer satisfaction. TEB fully complies with international practices in corporate governance. TEB employs employees who are committed to business ethics, protect the values of the organization and are open to innovation. TEB has been able to achieve its mission due to its shareholders who are strictly committed to their business principles, responsibilities and to employees’ rights. The Bank’s strategic targets and primarily its budget are assessed and approved by the Board of Directors. The extent to which the targets are achieved, as well as the reasons of any failure to achieve targets are evaluated at meetings attended by senior executives, branch managers and other related executives. Targets, strategies and operational results are liaised to the management team at biannual General Management Meetings. 21. Risk Management and Internal Control In accordance with the provisions of the Banking Law No: 5411, the Bank has established an “Audit Committee” reporting to the Board of Directors through two non-executive board members exclusively appointed for this task. The Board of Directors has set up the Audit Committee for the following purposes:

Centralizing audit systems, validating procedures, monitoring and auditing of risks in the eight risk groups below:

a Loans and counter party risk: Default by third parties b Market and liquidity risk: Market price fluctuations c Administrative risk: Appropriate administration of operations (including operational risk) d Legal risk: Compliance with tax laws and other legislation e Accounting risk: Compliance with regulations and legally acceptable presentation of

accounts f IT risk: Adequacy and security of systems g Human resources risk: Adequacy of staff with regard to quality and functioning h Reputation and commercial risk: Damage to the Group’s image Determining risk policies and principles for appropriate risk management, internal audit

and compliance,

 

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Monitoring the Group’s adequacy and effectiveness in terms of internal control and risk

management and auditing accounting and reporting systems, Taking the necessary measures to ensure that the Board of Directors is informed of any

incident or condition that may prevent the Bank from functioning in an uninterrupted manner or of any event that violates the legislation; making recommendations periodically through reporting to the Board of Directors any measures required to be taken.

22. Authority and Responsibilities of Board Members and Executives The authorities and responsibilities of board members and executives are governed by Articles 26 and 30 of the Articles of Association, while issues related to the General Manager and his/her deputies are covered by Articles 32 and 33. 23. Activities of the Board of Directors Meetings of the Bank’s Board of Directors are organized through the General Secretary of the Board of Directors. Members of the Board of Directors submit to the General Secretary any items that they want to be included in the agenda and the final agenda is communicated to the members at least one week before the meeting. The Board of Directors has taken 123 decisions in 2010. As mentioned above, the General Secretary is responsible for the implementation of these matters. All decisions during the reporting period were made unanimously and no dissenting opinion was noted. Members who do not attend a meeting based on a reasonable ground are informed of the resolutions taken in their absence at the first meeting they attend. There are meeting minutes whereby the decisions taken are noted. TEB’s Articles of Association does not contain any provisions on weighted voting rights or negative veto rights. 24. Ban on Dealing and Competing with the Company Members of the Board of Directors have no relationships with TEB that could result in a conflict of interest. 25. Ethical Rules According to Article 75 of Banking Law (No: 5411), banks and their employees shall ensure that activities are performed in compliance with this Law, applicable legislation and the banks’ goals and policies and shall comply with ethical principles that put justice, fairness, honesty and social responsibility at the foundations of management. These principles will be determined by the related agencies in consultation with the Board. As also stated on our website, The Board of Directors complies with the Code of Banking Ethics dated November 1, 2001 and numbered 1012 as prepared and published by the Banks Association of Turkey to which TEB contributes to the activities thereof.

 

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In addition, TEB Group Ethical Principles are defined and delivered to all employees. Ethical pinciples are classified as “Use of Company Resources”, “Relations”, Responsibilities Toward the Company”, “General and Particular Rules” serving as a resource to adopt corporate culture and guide that all employees can consult. 26. Numbers, Structure and Independence of Committees Established by the Board of Directors In accordance with corporate governance principles, the following committees were active in 2009: Corporate Governance Committee Duties: Monitoring and guiding corporate governance practices at the Bank, Convening upon the request of the Chairman. Members: Chairman: Board Member and Audit Committee Chairman (Jean-Milan Charles Dominique Givadinovitch) Members: Chairman (Yavuz Canevi) Head of Internal Audit (Hakan Tıraşın) Chief Legal Advisor, Board General Secretary (Melis Coşan Baban) Audit Committee In accordance with the provisions of the Banking Law No: 5411, the Bank has established an “Audit Committee” reporting to the Board of Directors through two non-executive board members exclusively appointed for this task. The Board of Directors has set up the Audit Committee for the following purposes: Centralizing audit systems, validating procedures, monitoring and auditing of risks in the eight risk groups below: a Loans and counter party risk: Default by third parties b Market and liquidity risk: Market price fluctuations c Administrative risk: Appropriate administration of operations (including operational risk) d Legal risk: Compliance with tax laws and other legislation e Accounting risk: Compliance with regulations and legally acceptable presentation of

accounts f IT risk: Adequacy and security of systems g Human resources risk: Adequacy of staff with regard to quality and functioning h Reputation and commercial risk: Damage to the Group’s image Determining risk policies and principles for appropriate risk management, internal audit

and compliance,

 

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Monitoring the Group’s adequacy and effectiveness in terms of internal control and risk management and auditing accounting and reporting systems,

Taking the necessary measures to ensure that the Board of Directors is informed of any

incident or condition that may prevent the Bank from functioning in an uninterrupted manner or of any event that violates the legislation; making recommendations periodically through reporting to the Board of Directors any measures required to be taken.

The committee meets at least once every two months. Chairman : Jean-Milan Charles Dominique Givadinovitch Vice Chairman : Dr. Akın AKBAYGİL 27. Remuneration of the Board of Directors At the Ordinary General Meeting of Shareholders held on 30 March 2010, it was resolved that no fees be paid to the members of the Board of Directors, who shall continue to perform this duty voluntarily and that a gross monthly fee of TRY 750.- be paid to Statutory Auditors. Remuneration to be paid to Executive Board Members is determined by the Board of Directors in accordance with Article 27 of the Articles of Association and in view of the nature of the duties involved and the time to be spent to fulfill these duties. In 2010, TRY 7,053,000 TL was paid to the Members of the Board of Directors as salaries and attendance fees. Board members may be granted loans within the limits defined by law or may be rewarded depending on the performance of the Bank, the duties vested on them and the time spent by them to fulfill these duties.

 

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SECTION III ASSESSMENT OF FINANCIAL POSITION AND RISK MANAGEMENT AUDITORS REPORT TO THE ORDINARY GENERAL MEETING OF SHAREHOLDERS OF TÜRK EKONOMI BANKASI A.Ş.

10 March 2011 We have examined the financial statements of Türk Ekonomi Bankası A.Ş., of which we are the statutory auditors, for the year ending on 31 December 2010. We confirm that said statements are in compliance with the Banking Law No: 5411, the Regulation on the Procedures and Principles Governing Banks’ Accounting Standards and Safekeeping of Documents, related communiqués and provisions, as well as the Bank’s general policies and regulations Regards, Statutory Auditor Statutory Auditor Esra Peri AYDOĞAN Cihat MADANOĞLU

 

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THE AUDIT COMMITTEE’S ASSESSMENT OF INTERNAL CONTROL, INTERNAL AUDIT AND RISK MANAGEMENT SYSTEMS AND ACTIVITIES DURING THE REPORTING PERIOD The organizational structure at TEB in terms of internal control, internal audit and risk management was implemented in accordance with the “Regulations on the Internal Systems of Banks”. This structure is appropriate in view of the scope and nature of TEB’s activities and can effectively respond to changing conditions. The Risk Management Division, the Internal Control Center and Internal Audit Group, all reporting to the Board of Directors, independent from each other but working in cooperation, have performed their activities in 2010. The Board of Directors has taken the necessary measures regarding the approval of important strategies and policies with regard to control activities and the maintenance of effective internal audit and risk management systems. The internal audit system is organized to cover all activities and units of the Bank. As of year-end, the Group Internal Audit operates with Head of Audit, two deputy heads, one IT and External Reporting and one manager, two supervisor inspectors, one supervisory commision manager, and a staff of 37 internal auditors. The Board of Directors has taken all necessary measures authorizing the Group Internal Audit to conduct its audit activities without any restrictions and covering TEB’s consolidated subsidiaries and their respective units. In 2010, the Group Internal Audit conducted 171 branch audits, 11 Head Office unit audits, 15 subsidiary audits and 8 process audits. Internal control activities are organized as an inseparable part of daily activities and cover all areas of basic control. Following the organizational change during the year, Internal Control and Compliance functions are now structured separately. Within the scope of internal control, daily, weekly, monthly and quarterly controls of critical activities at branches and departments of the headquarters are carried out under the Banking Transactions Control, Treasury Control and Legal Compliance Units. The Compliance function covers the departments of Banking and Tax Legislation Compliance, Operational Risk, Information Security and Work Continuity, parallel to the Internal Systems Regulation of the BRSA. The risk management process is composed of risk definition and measurement, establishing risk policies and procedures, risk analysis and monitoring, reporting, and auditing phases, all in accordance with the principles that are jointly determined by TEB’s senior management and the Risk Management Group and approved by the Board of Directors. The mission of the Group Risk Management function is to ensure, jointly with senior management, that the risks undertaken by the Group comply with the TEB’s policies and procedures and meet the Bank’s profitability criteria and rating.

 

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In 2010, the Risk Management Group, under the Risk Management and Compliance Group had a staff of 13, including the Chairman of Group Risk Management. TEB’s Risk Management Division is composed of 4 departments, namely the Market and Liquidity Risk Department, Credit Risks and Subsidiary Risks Management Department, Operational Risk and Business Continuity departments. Operational Risk and Business Continuity department continued its operations of defining, measuring and reporting risk under risk management and Compliance Group up until 4 July, 2010 with 4 employees. Due to the organizational change, the department became a part of the Internal Audit Group after mentioned date. At its meeting held on 8 November 2005, the Board of Directors convened to establish an Audit Committee responsible for all companies comprising the TEB Group, in accordance with Article 24 of Banking Law No: 5411 and further resolved that the powers of the Senior Risk Committee, which was established in accordance with Law No: 4389, be taken over by the new committee. The Audit Committee has gathered sixteen times during the course of the year 2010. It monitors all risk in a consolidated format at the group level, establishing mechanisms of control, reviewing all written procedures, ensuring coordination between the Internal Audit Group, the Risk Management Group and the Compliance and Internal Control Centre, as well as working toward the establishment of internal control systems at the Bank and at Group companies which are in essence of the same scope. TEB closely follows and implements new legislation and best practices of internal audit and risk management systems. ASSESSMENT OF FINANCIAL POSITION, PROFITABILITY AND DEBT-SERVICING CAPACITY %73 of TEB’s loan portfolio is comprised of corporate, commercial and SME loans. Retail loans and credit card receivables increased by 40% compared to previous year and reached TRY 3.2 millions and their share reached to 25%. Non Performing Loans decreased from 4.64% in 2009 to 3.00% in 2010, which is still below the sector average of %5.2.In other words, regardless of the loan growth and deterioration in the market, asset quality is above the sector average. As of December 2010, 98% of our deposits were granted as loans. TEB meets liquidity requirement primarily from deposits and the share of deposits which is our main source of funding, reached 63% in total liabilities. Demand deposit’s share was realized as 20% in total deposits reaching 2.4 million TRY and thus made a significant contribution towards decreasing our cost of funding TEB diversifies its funding resources by foreign borrowings. Bank utilized further sources of long-term funds through syndications from international markets and other similar sources; additionally, continued to create Turkish Lira funds using derivative instruments. As of December 31, 2010, the Bank has a syndication loan of EUR 190 million and USD 100 million obtained on September 3, 2010, with a maturity date of September 2, 2011.

 

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TEB has 4 outstanding subordinated loan facilities amounting to EUR 110 million and USD 156 million, borrowed from various banks and financial institutions between 2002 and 2007. The repayment of principal amounting 9 million USD is made on October 15, 2009,April 15, 2010, and October 15, 2010. IT expenditures, promotional expenses regarding campaigns supporting the expansion of retail banking activities and specialization of corporate and commercial banking expenses, in addition, Fortis merger expenses regarding restructuring, operational expenses realized as TRY 788 million due to cost efficient policies and savings plan. In 2010, 90,01 % of the share capital of TEB Finansal Kiralama A.Ş. was sold to Fortis Finansal Kiralama A.Ş for a consideration of TRY.113,3 Upon the completion of the sale transaction proceeds from the sale were collected and a profit amount of TRY 77.2 million was reflected to the Income Statement on 30.09.2010. As of 18 October 2010, Türk Ekonomi Bankası A.Ş. has entered into exclusive agency agreements with Cardif Hayat Sigorta A.Ş. for distribution of life insurance products and with Fortis Emeklilik ve Hayat A.Ş. for intermediary services of pension and distribution of life saving products and a total of 180 million TL has been received as a result of these dealings. Changes in the composition of TEB’s balance sheet due to the market conditions and growing number of customers increased fees and commissions income by 10% in comparison to the previous year. The Bank increased its net income, as a result of its operations as a whole, by 43%, from TRY 210.2 million in 2009 to TRY 300.3 million in 2010. RISK MANAGEMENT POLICIES ACCORDING TO VARIOUS TYPES OF RISKS Interest Rate Risk Interest rate risk involves possible losses a bank may incur due to fluctuations and volatility in interest rates, depending on its portfolio positions. At TEB, the Assets and Liabilities Committee manages interest rate risk. The Assets and Liabilities Management Department within the Treasury Group thereupon implements the decisions taken by this committee. Protection against fluctuations in interest rates is a top priority for TEB. Interest rate risk is determined by measuring the rate of sensitivity of assets, liabilities and off-balance sheet items. TEB runs simulations of interest revenues according to estimated macroeconomic indicators. Duration, term and sensitivity analyses are conducted and these calculations are conveyed to the Assets and Liabilities Committee. Interest rate risk is determined by measuring the rate of sensitivity of assets, liabilities and off-balance sheet items. TEB runs simulations of interest revenues according to estimated macroeconomic indicators. Duration, term and sensitivity analyses are conducted and these calculations are conveyed to the Assets and Liabilities Committee. Possible negative effects of interest rate fluctuations on financial position and cash flow are minimized by means of prompt decisions. The management monitors interest rate

 

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movements on a daily basis and makes changes whenever necessary in deposit and loan rates. When determining short, medium and long-term pricing strategies, TEB’s Assets and Liabilities Committee manages maturity incongruity and adopts the principle of working with positive balance sheet margins as its pricing policy. Market Risk Market risk involves possible losses a bank may incur as a result of the exposure of its balance sheet and off-balance sheet accounts to interest rate risk, equity position risk or exchange rate risk resulting from fluctuations in the financial markets, in interest rates, exchange rates or stock prices. TEB’s Board of Directors ensures that the risk management units and senior management take the necessary steps to properly measure, monitor and manage its exposure to market risk. The Board of Directors determines market risk limits and regularly revises these limits in accordance with market conditions and the strategies of TEB. With regard to TEB’s daily transactions, stop-loss and transaction limits are defined for each product. The Board of Directors assigns limits for positions in derivatives and similar contracts. Transactions are carried out within these limits and the limits are monitored and reported daily. The market risk of the Bank is calculated using a standard method and reported to legal authorities. The market risk can influence the Value-at-Risk (VaR) figure, which is also calculated using various financial models. VaR figure is calculated using a variance/co-variance method on the basis of a 250-business-day data and a one-day holding period in a 99% confidence interval. Daily VaR figures are the main drivers of TEB’s internal reports and efforts to monitor market risk. Back testing is periodically performed to validate the accuracy of calculations and the methods used. The VaR figures calculated by internal models to predict losses in the event of a crisis are also verified by scenario analyses and stress tests and are then reported to senior management and the Board of Directors. Scenario analyses and stress tests involve the re-application of past crises to existing portfolios or the observation of likely losses due to interest and foreign exchange shocks. Liquidity Risk Liquidity risk is defined as the risk of failing to fully meet cash obligations in due time, because the bank in question does not possess sufficient cash or is not able to generate

 

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cash when needed, which might result from mismatches between TEB’s cash inflows and outflows. Liquidity risk also includes the risk of loss that may arise when there is an inability to enter or exit the market as needed. When it is not possible for a bank to adequately close positions at favorable prices and at sufficient amounts or as rapidly as required, the lack of sufficient cash may translate into losses. TEB’s policies focus on maintaining the quality of its asset structure, so that liquid assets can meet all obligations. Striving to be one of the most liquid banks in the industry is of utmost importance to TEB. The Board of Directors regularly monitors and determines liquidity ratios and the relevant standards for maintaining high liquidity at all times. TEB has in place an effective management reporting system for the timely reporting of the liquidity position to the Board of Directors, senior management and all related units. Cash flow analyses are carried out for different maturity structures and currency units. Maturity mismatches are monitored and concentrations in funding sources are closely monitored. As a matter of general policy, consistency in maturities and interest rates is maintained in line with Assets and Liabilities Management at all times, and balance sheet positions of TRY and returns on foreign currency mix are continuously managed in the positive. With regard to the sources of funding and liquidity, it is observed that while the greater part of the liquidity requirement of TEB is met by deposits, syndicated loans and pre-financing products are also used at times to obtain funds in addition to deposits. TEB strictly adheres to the policy of maintaining high-quality liquid assets in sufficient amounts. This assures a regular cash flows and strong liquidity position at all times and enables the Bank to be a net lender to the market. Exchange Rate Risk Exchange rate risk is defined as a possible loss that a bank may incur with all of its currency assets and liabilities in the event of changes in exchange rates. In calculating capital adequacy that underlies exchange rate risk risk weighted assets are calculated and reported with the standard method. While doing this TEB takes into account all of its foreign-currency assets, liabilities and forward foreign-currency contracts. Within the limits approved by the Board of Directors, the Treasury Group is responsible for the management of price, liquidity and fulfillment risk arising from fluctuations in local or foreign currency prices in domestic and international markets. Money market risks and risk-bearing transactions are monitored on a daily basis and reported weekly to TEB’s Assets and Liabilities Committee. Position limits determined by the Board of Directors are monitored on a daily basis and possible changes in the Bank’s monetary positions that may come about as a result of routine foreign currency transactions are also examined.

 

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Position limits determined by the Board of Directors are reported on a daily basis. As a part of the Bank’s risk management strategy, every type of borrowings in foreign currency is protected against exchange rate risk by derivative products. Equity interests held in foreign companies are protected against exchange rate risk along the lines of the TEB’s overall strategy. Credit Risk Credit risk is the loss that may be incurred if the other party of the loan relationship fails, partially or entirely, to fulfill its obligations on time. One of the most prominent characteristics at TEB that distinguishes it from the competition is its prudent lending policy and solid asset structure that go hand in hand with a stable growth strategy. The Board of Directors has the final authority in the allocation of loan facilities. This power is delegated to the Credit Committee and the General Manager on certain conditions. The exercise of these delegated powers are regularly monitored and reported by the internal audit and risk management units. Loans are extended within the limits defined for each debtor and group of debtors individually. Every customer that performs a transaction on credit must have a loan facility allocated by the relevant authorities and customers are systematically prevented from exceeding those limits. Branch officers visit loan applicants and obtain financial statements and information related to the potential customer’s activities and plans. A loan proposal is prepared containing a commentary on the company’s financial position, an industry analysis, information about the partners and managers, as well as references from other banks and companies with which the applicant is doing business. This information is then submitted to the Credit Allocation and Financial Analysis Group, which assesses the applicant’s creditworthiness and sends its report to the Credit Committee for approval. In assessing customers, TEB uses an internally developed rating system, which takes into account both financial and non-financial criteria. The rating of the collateral proposed for the loan is also calculated using a system developed by TEB. In accordance with the Bank’s lending policy, overall credit risk is assessed through both debtor and collateral ratings. Developments in the marketplace are closely monitored to minimize credit risk and industry limits are applied. As a result of the prudent policy the Bank adopts, the maximum amount of loan that can be granted to a customer is kept below legal limits, thus minimizing the risk of loan concentration. Limits set by the Board of Directors are regularly monitored and reported. The Risk Management Group, in collaboration with the Credits and Financial Analysis Group, makes assessments of the loan portfolio for the Board of Directors and the Board of Internal Auditors and reports high-risk cases and non-performing loans. The Credit Monitoring and Legal Proceedings Department is structured under the supervision of the General Manager. This Department submits regular reports to the Credit Committee and also to the Board of Directors via the Board of Internal Auditors. After a loan facility is

 

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offered, the Credit Monitoring Department monitors the customer’s repayment capability and the sufficiency and adequacy of the collateral. In this way, any problematic loan is identified at an early stage. Should the credit rating and/or the quality of the collateral raise any doubts, the customer will then be closely reviewed and additional collateral shall be requested. Country risk involves the likelihood of partial or complete failure of the debtor person or company in international loan transactions to fulfill obligations on time, due to economic, political or social incidents taking place in the relevant country. TEB exclusively enters into loan transactions with foreign financial institutions or countries that are rated investment grade by international rating agencies. For this reason, possible risks in such transactions do not pose an important threat for the Bank, given its current financial structure. Operational Risk Operational risk is defined as the risk of loss that may result from inappropriate or malfunctioning practices, or from human and system errors or external reasons. Operational risk can occur along the entire spectrum of banking activities as a result of human and system errors or inappropriate practices. Compliance with legal requirements, adherence to the ethical values of the banking profession, information security, prevention of internal and external fraud, contingency and business continuity plans and “know-your-customer” policies are all fundamental controls for the reduction of operational risk.TEB’s main objectives of operational risk management is identifying the risk profile of the potential and existing customers, then, developing strategies to minimize the risk, integrating them with banking process, and timely reporting for action plans to be done on time. All strategies and their results are regularly reported to related departments and senior management while all actions taken are monitored. Both quantitative and qualitative requirements are complicated of Basel II to use Advanced Measurement Approach. Bank will be able to use method after BRSA ‘s legislation, Business Continuity The Bank has a Corporate Business Continuity Program to protect customers from the negative effects of discontinuance of business, which consists of Emergency Action Plan, Information Systems Recovery Plan, Business Continuity Program and it is directed by a specialists team. Business Continuity Plans allow banking operations that are identified as critical by BRSA to continue depending on the legal requirements and customer needs. Actions and efficiency of the plans are updated and tested regularly. Offices are chosen in locations to eliminate the far reaching effects of natural disasters like earthquakes, and critical systems, communication infrastructures, information storages and system rooms,are backed up and supported for breakdowns.

 

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CREDIT RATINGS ASSIGNED BY RATING AGENCIES AND INFORMATION ON THEIR CONTENTS (*) TEB maintained its position as one of the most highly rated banks in Turkey. As of the end of 2010, TEB’s ratings were as follows:

Moody’s Investor Services: Financial Strength Rating D+ FX Deposits Rating Ba3/NP Outlook Stable Fitch Ratings: Foreign Currency Long-term BBB- Short-term F3 Outlook Positive Turkish Lira Long-term BBB Short-term F3 Outlook Positive National AAA (tur) Outlook Stable Individual Rating C/D Support Points 2

(*) These ratings are not the ratings realized in accordance with BRSA’s “Regulations on Principles of Authorization and Activities of Rating Agencies”.

 

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DONATIONS Date Recipient Amount (TRY)

15 .02.2010 İbrahim Bodur Kaleseramik Education, Health, and Public Welfare Association

189,744.00

24.02.2010 Airport Security Support and Development Association 340.0024.02.2010 Akşehir Police Department Support Association 500.0010.03.2010 Burdur Teacher Training and Support Association 3,000.0023.03.2010 Bolu Youth Club Association 3,000.0018.05.2010 Naval Officer Spouse Help Association 500.0026.11.2010 Malatya Apricot Research & Development Association 13,000.0030.11.2010 Avrupa College, Necati Erbil Ertürk Scholarship 13,674.5028.12.2010 Bosporus University 5,000.0031.12.2010 Sultanhisar Agriculture Corporation 885.7031.12.2010 Iskenderun Police Department 1,004.40Total 230,647.90

 

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FIVE YEAR SUMMARY OF FINANCIAL INFORMATION INCLUDING THE REPORTING PERIOD

Thousand TRY

31.12.2006 31.12.2007 2007-2006 change (%)

31.12.2008 2008-2007 change (%)

31.12.2009 2009-2008 change (%)

31.12.2010 2010-2009 change (%)

Liquid Assets 1,403,098 2,466,589 75.80 3,368,482 36.56 2,610,222 -22.51 2,730,780 4.62Securities

1,612,781 1,779,613 10.34 2,005,641 12.70 2,667,125 32.98 3,725,750 39.59

Loans

4,951,436 6,864,427 38.64 8,550,534 24.56 8,990,715 5.15 11,753,255 30.73

Other Assets 312,24 690,287 121.08 811,398 17.55 795,498 -1.96 821,320 3.51Total Assest 8,279,555 11,800,916 42.53 14,736,055 24.87 15,063,560 2.22 19,031,105 26.34 Demand Deposits

1,012,353 1,393,103 37.61 1,401,191 0.58 2,072,396 47.90 2,436,586 17.57

Time Deposits 4,413,554 5,689,869 28.92 7,870,556 38.33 7,349,239 -6.62 9,562,564 30.12Funds Borrowed

1,989,910 2,894,689 45.47 3,141,402 8.52 3,205,060 2.03 4,151,017 29.51

Other Liabilities 306,062 912,924 198.28 899,287 -1.49 787,413 -12.44 1,068,075 35.64Equity (Excl. profit)

459,895 780,045 69.61 1,259,421 61.45 1,439,285 14.28 1,512,562 5.09

Net Income 97,781 130,286 33.24 164,198 26.03 210,167 28.00 300,301 42.89Total Liabilities

8,279,555 11,800,916 42.53 14,736,055 24.87 15,063,560 2.22 19,031,105 26.34

Selected Ratios (%)

NPL Ratio 0.90 1.75 94.44 2.34 33.60 4.64 98.32 3.00 -35.34Return on Equity

18.89 17.75 -6.03 14.07 -20.73 13.68 -2.79 17.35 26.83

Return on Assets

1.43 1.30 -9.09 1.24 -4.81 1.41 13.98 1.76 24.82

Capital Adequacy Ratio

14.27 14.88 4.27 17.65 18.62 17.70 0.28 14.43 -18.47

 

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Independent Audit Report for 31 December 2010 Non-Consolidated Financial Accounts and Footnotes for the Financial Accounts

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ INDEPENDENT AUDITOR’S REPORT, UNCONSOLIDATED FINANCIAL STATEMENTS AND NOTES FOR THE YEAR ENDED DECEMBER 31, 2010 Translated into English from the

Original Turkish Report

To the Board of Directors of Türk Ekonomi Bankası A.Ş. Istanbul

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ

INDEPENDENT AUDITOR’S REPORT FOR THE YEAR JANUARY 1, 2010 – DECEMBER 31, 2010

We have audited the accompanying balance sheet of Türk Ekonomi Bankası A.Ş. as at December 31, 2010, and the related statements of income, cash flows and changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements The Board of Directors of the Bank is responsible for the preparation and fair presentation of the financial statements in accordance with the regulation on “Procedures and Principles Regarding Banks’ Accounting Practices and Maintaining Documents” published in the Official Gazette dated November 1, 2006 and numbered 26333 and Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”) and other regulations, circulars, communiqués and pronouncements in respect of accounting and financial reporting made by Banking Regulation and Supervision Agency (“BRSA”). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the regulation on “Licensing and Operations of Audit Firms in Banking” published in the Official Gazette no: 26333 on November 1, 2006 and the International Standards on Auditing. We planned and performed our audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the consideration of the effectiveness of internal control and appropriateness of accounting policies applied relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independent Auditor’s Opinion In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Türk Ekonomi Bankası A.Ş. as at December 31, 2010 and the results of its operations and its cash flows for the year then ended in accordance with the prevailing accounting principles and standards set out as per the Article 37 of the Banking Act No: 5411, and other regulations, communiqués and circulars in respect of accounting and financial reporting and pronouncements made by BRSA.

Although our review is not affected, the following issue should be drawn attention: Pursuant to the disclosures made on June 3, 2010 by Fortis Bank A.Ş. and Türk Ekonomi Bankası A.Ş. (“TEB”), it was stated that controlling shareholders of the related banks had reached an agreement under the Memorandum of Understanding, executed by and between Çolakoğlu Group and BNP Paribas Group, on the merger of TEB and Fortis Bank A.Ş. under TEB. An application was filed with the Capital Markets Board (“CMB”) on October 26, 2010, following the Extraordinary General Assemblies of the merging entities dated October 19, 2010. As explained in detail in Section Three, Note XXII, at the meetings held on 25 November 2010, the Board of Directors approved the merger ratio and the exchange ratio determined based on the appraisal reports of the valuers appointed by the commercial court, and the advisors of the merging banks. The merger has been approved by the decision of the CMB dated December 21, 2010 and numbered 37/1145. Following the approval of the BRSA dated December 30, 2010 and numbered 3998 regarding the merger and transfer agreement, the merger of the two banks was approved in the Extraordinary General Assemblies of the merging banks held on January 25, 2011 with the decision to cease the legal entity of Fortis Bank A.Ş. and transfer all of its assets and liabilities with respective rights and obligations to TEB. The merger will be realized after the decision of the BRSA is published in the Official Gazette. Additional paragraph for English translation: The effect of the differences between the accounting principles summarized in Section 3 and the accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (IFRS) have not been quantified and reflected in the accompanying financial statements. The accounting principles used in the preparation of the accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial statements are not intended to present the Bank’s financial position and results of its operations in accordance with accounting principles generally accepted in such countries of users of the financial statements and IFRS. İstanbul, February 10, 2011 DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Hasan Kılıç Partner

THE UNCONSOLIDATED FINANCIAL REPORT OF TÜRK EKONOMİ BANKASI A.Ş. FOR THE YEAR ENDED DECEMBER 31, 2010

Address : Meclis-i Mebusan Caddesi No: 57 Fındıklı 34427 - İstanbul Telephone : (0 212) 251 21 21 Fax : (0 212) 249 65 68 Web Site : www.teb.com.tr E-mail Address : investor.relations@teb.com.tr The year end unconsolidated financial report designed by the Banking Regulation and Supervision Agency in line with Communiqué on Financial Statements to be Publicly Announced and the Related Policies and Disclosures consists of the sections listed below:

• GENERAL INFORMATION ABOUT THE BANK • UNCONSOLIDATED FINANCIAL STATEMENTS OF THE BANK • EXPLANATIONS ON THE CORRESPONDING ACCOUNTING POLICIES APPLIED IN THE

RELATED PERIOD • INFORMATION ON FINANCIAL STRUCTURE OF THE BANK • EXPLANATORY DISCLOSURES AND FOOTNOTES ON UNCONSOLIDATED

FINANCIAL STATEMENTS • OTHER EXPLANATIONS • INDEPENDENT AUDITOR’S REPORT

The unconsolidated financial statements and the explanatory footnotes and disclosures, unless otherwise indicated, are prepared in thousands of Turkish Lira, in accordance with the Communique on Banks’ Accounting Practice and Maintaining Documents, Turkish Accounting Standards, Turkish Financial Reporting Standards, related communiqués and the Banks’ records, have been independently audited and presented as attached. February 10, 2011

Yavuz Canevi

Jean - Milan

Charles Dominique Givadinovitch

Dr. Akın Akbaygil

Varol Civil

M. Aşkın Dolaştır

Göksel Toraman Chairman of the Board of

Directors

Chairman of the Audit Committee

Vice Chairman of the Audit

Committee

General Manager

Assistant General Manager Responsible of

Financial Reporting

Director Responsible of

General Accounting Information related to responsible personnel for the questions can be raised about financial statements:

Name-Surname / Title: Çiğdem Başaran / Investor Relations Manager

Telephone Number :(0212) 251 21 21 Fax Number :(0212) 249 65 68

INDEX Page Number

SECTION ONE General Information

I. History of the Bank, Including its Incorporation Date, Initial Legal Status and Amendments to Legal Status, if any 1 II. Explanation on the Bank’s Capital Structure, Shareholders of the Bank who are in Charge of the Management and/or Auditing of the Bank Directly or

Indirectly, Changes in These Matters (if any), and the Group the Bank Belongs to 1 III. Explanations Regarding the Chairman and the Members of Board of Directors, Audit Committee, General Manager and Assistants and Shares of the Bank

They Possess 2 IV. Information About the Persons and Institutions That Have Qualified Shares 3 V. Summary on the Bank’s Functions and Areas of Activity 3

SECTION TWO Unconsolidated Financial Statements

I. Balance Sheet 4 II. Statement of Off Balance Sheet Contingencies and Commitments 6 III. Statement of Income 7 IV. Statement of Profit and Loss Accounted for Under Equity 8 V. Statement of Changes in Shareholders’ Equity 9 VI. Statement of Cash Flows 11 VII. Profit Distribution Table 12

SECTION THREE

Accounting Principles I. Basis of Presentation 13 II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions 13 III. Explanations on Forward and Option Contracts and Derivative Instruments 14 IV. Explanations on Interest Income and Expenses 14 V. Explanations on Fees and Commission Income and Expenses 15 VI. Explanations on Financial Assets 15 VII. Explanations on Impairment of Financial Assets 17 VIII. Explanations on Offsetting of Financial Assets and Liabilities 17 IX. Explanations on Sales and Repurchase Agreements and Lending of Securities 17 X. Explanations on Assets Held for Sale, Discontinued Operations and Liabilities Related to Those Assets 18 XI. Explanations on Goodwill and Other Intangible Assets 18 XII. Explanations on Tangible Fixed Assets 18 XIII. Explanations on Leasing Transactions 19 XIV. Explanations on Provisions and Contingent Liabilities 19 XV. Explanations on Liabilities Regarding Employee Benefits 20 XVI. Explanations on Taxation 20 XVII. Additional Explanations on Borrowings 21 XVIII. Explanations on Issued Share Certificates 21 XIX. Explanations on Acceptances 21 XX. Explanations on Government Incentives 21 XXI. Explanations on Reporting According to Segmentation 22 XXII. Explanations on Other Matters 23

SECTION FOUR Information on Financial Structure

I. Explanations Related to Capital Adequacy Standard Ratio 26 II. Explanations Related to Credit Risk 29 III. Explanations Related to Market Risk 34 IV. Explanations Related to Operational Risk 35 V. Explanations Related to Currency Risk 35 VI. Explanations Related to Interest Rate Risk 38 VII. Explanations Related to Liquidity Risk 42 VIII. Explanations Related to Presentation of Financial Assets and Liabilities at Fair Value 45 IX. Explanations Related to Transactions Carried out on Behalf of Other Parties and Fiduciary Assets 46

SECTION FIVE Explanations and Disclosures on Unconsolidated Financial Statements

I. Explanations and Disclosures Related to the Assets 47 II. Explanations and Disclosures Related to the Liabilities 64 III. Explanations and Disclosures Related to the Off-Balance Sheet Contingencies and Commitments 73 IV. Explanations and Disclosures Related to the Statement of Income 78 V. Explanations and Disclosures Related to Statement of Shareholders’ Equity Movement 84 VI. Explanations and Disclosures Related to Statement of Cash Flows 85 VII. Explanations on the Risk Group of the Bank 86 VIII. Explanations on the Bank’s Domestic Branches, Agencies and Branches Abroad and Off-shore Branches 87

SECTION SIX Other Explanations

I. Other Explanations on the Operations of the Bank 88

SECTION SEVEN Independent Auditor’s Report

I. Explanations on the Independent Auditor’s Report 88 II. Other Footnotes and Explanations Prepared by the Independent Auditors 88

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

1

SECTION ONE

GENERAL INFORMATION I. History of the Bank, Including its Incorporation Date, Initial Legal Status and

Amendments to Legal Status, if any

Türk Ekonomi Bankası Anonim Şirketi (“the Bank”), which had been a local bank incorporated in Kocaeli in 1927 under the name of Kocaeli Halk Bankası T.A.Ş., was acquired by the Çolakoğlu Group in 1982. Its title was changed as Türk Ekonomi Bankası A.Ş. and its headquarters moved to Istanbul.

II. Explanation on the Bank’s Capital Structure, Shareholders of the Bank who are in Charge

of the Management and/or Auditing of the Bank Directly or Indirectly, Changes in These Matters (if any), and the Group the Bank Belongs to

As of December 31, 2010 and December 31, 2009 the shareholders’ structure and their respective

ownerships are summarized as follows:

Current Period Prior Period Name of shareholders

Paid in capital

%

Paid in capital

%

TEB Mali Yatırımlar A.Ş. 926,796 84.25 926,796 84.25 Publicly Traded 171,966 15.63 171,966 15.63 Other Shareholders 1,238 0.12 1,238 0.12 1,100,000 100.00 1,100,000 100.00

As of December 31, 2010 Bank’s paid-in-capital consists of 1,100,000,000 shares of TRY 1.00 (full

TRY) nominal each.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

2

III. Explanations Regarding the Chairman and the Members of Board of Directors, Audit Committee, General Manager and Assistants and Shares of the Bank They Possess

Name Title Board of Directors; Yavuz Canevi Chairman of the Board of Directors Dr.Akın Akbaygil Member of the Board of Directors, Vice Chairman of the Audit

Committee and Vice Chairman of the Board of Directors Jean-Milan Charles Dominique Givadinovitch (****) (*****)

Member of the Board of Directors, Chairman of the Audit Committee

Jean Paul Sabet (*) (*****) Member of the Board of Directors and Vice Chairman of the Board of Directors

Metin Toğay Member of the Board of Directors Yves Paul Henri Martrenchar Member of the Board of Directors Ayşe Aşardağ (**) Member of the Board of Directors Varol Civil In Charge Member of the Board of Directors and General Manager Musa Erden In Charge Member of the Board of Directors Assistant General Managers;

Mustafa Aşkın Dolaştır Assistant General Manager Responsible from Financial Control İzzet Cemal Kişmir Assistant General Manager Responsible from Consumer Banking and

Business Banking Levent Çelebioğlu Assistant General Manager Responsible from Corporate Banking and

Financial Institutions Nilsen Altıntaş Assistant General Manager Responsible from Human Resources Nuri Tuncalı Assistant General Manager Responsible from Corporate, Commercial

and SME Loans Saniye Telci Assistant General Manager Responsible from Banking Operations Turgut Boz Assistant General Manager Responsible from Commercial Banking and

SME Banking Turgut Güney Assistant General Manager Responsible from Information Technologies Ümit Leblebici Assistant General Manager Responsible from Treasury Ömer Abidin Yenidoğan Assistant General Manager Responsible from Private Banking

(Vicarious) Melis Coşan Baban Chief Legal Counsel and Secretary of the Board of Directors Osman Durmuş Assistant General Manager Responsible from Consumer Loans and

Business Loans Group Heads

Ayşe Korkmaz

Head of Compliance and Internal Control Inspection Committee and Statutory Auditors;

Hakan Tıraşın Chairman of the Inspection Committee Esra Peri Aydoğan (***) Statutory Auditor Cihat Madanoğlu Statutory Auditor

(*) Jean-Jacques Marie Santini left from his position as a member of the board of directors and vice chairman of the board of

directors as of March 30, 2010, and Jean Paul Sabet was appointed as the new vice chairman of the board of directors. (**) Ayşe Aşardağ was appointed as the new member of the board of directors as of September 3, 2010, upon the decease of

Rafael Taranto. (***) Esra Peri Aydoğan was appointed as statutory auditor after Ayşe Aşardağ was appointed as the new member of board of

directors. (****) Patrick Rene Pitton left from his position as member of the board of directors as of November 25, 2010 and Jean-Milan

Charles Dominique Givadinovitch was appointed as a member of the board of director at the same date. (*****) Jean Paul Sabet left from his position as member of the audit committee as of December 2, 2010 and Jean-Milan

Charles Dominique Givadinovitch was appointed as the chairman of the audit committee.

Ünsal Aysun left from his position as assistant general manager responsible from project financing and cash management as of April 1, 2010. Shares of the Bank owned by the above stated Chairman and Members of Board of Directors, General Manager and Assistants are negligible.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

3

IV. Information About the Persons and Institutions That Have Qualified Shares

Name / Commercial Name Share

Amount Share Ratio

Paid up Shares

Unpaid Shares

TEB Mali Yatırımlar A.Ş. 926,796 84.25% 926,796 -

The directly or indirectly authorized company that has the qualified shares in the Bank’s capital is TEB Mali Yatırımlar A.Ş. TEB Mali Yatırımlar A.Ş. is a member of Çolakoğlu and BNP Paribas Group. 50% of the shares of TEB Mali Yatırımlar A.Ş. is controlled by BNP Paribas, while the remaining 50% is controlled by Çolakoğlu Group. As of October 25, 2010, 50% of the shares of TEB Mali Yatırımlar A.Ş. held by BNP Paribas S.A. was transferred to BNP Paribas Fortis Yatırımlar Holding A.Ş.

V. Summary on the Bank’s Functions and Areas of Activity

The Bank’s operating areas include, corporate, retail and private banking as well as project finance, fund management and custody operations. Besides the ordinary banking operations, the Bank is handling agency functions through its branches on behalf of TEB Yatırım Menkul Değerler A.Ş. and Zurich Sigorta A.Ş (formerly TEB Sigorta A.Ş. prior to the title change on August 18, 2008 due to the sale of the entity). As of December 31, 2010, Bank has 331 local branches and 4 foreign branches (31 Aralık 2009 - 330 local branches, 4 foreign branches).

SECTION TWO

UNCONSOLIDATED FINANCIAL STATEMENTS

I. Balance Sheet II. Statement of Off-Balance Sheet Contingencies and Commitments

III. Statement of Income IV. Statement of Profit and Loss Accounted for Under Equity V. Statement of Changes in Shareholders’ Equity

VI. Statement of Cash Flows VII. Profit Distribution Table

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

4

I. BALANCE SHEET – ASSETS (STATEMENT OF FINANCIAL POSITION) Audited Audited Current Period Prior Period 31.12.2010 31.12.2009

Note Ref.

TRY

FC

Total

TRY

FC

Total I. CASH AND BALANCES WITH THE CENTRAL BANK (1) 786,645 1,240,651 2,027,296 344,364 1,167,340 1,511,704 II.

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (Net)

(2) 171,883 23,169 195,052 165,315 22,990 188,305

2.1 Financial assets held for trading 171,883 23,169 195,052 165,315 22,990 188,305 2.1.1 Public sector debt securities 91,124 4,937 96,061 122,146 4,464 126,610 2.1.2 Share certificates - - - - - - 2.1.3 Derivative financial assets held for trading 80,759 18,232 98,991 43,169 18,526 61,695 2.1.4 Other marketable securities - - - - - - 2.2 Financial assets classified at fair value through profit and loss - - - - - - 2.2.1 Public sector debt securities - - - - - - 2.2.2 Share certificates - - - - - - 2.2.3 Loans - - - - - - 2.2.4 Other marketable securities - - - - - - III. BANKS (3) 412,828 290,656 703,484 57,807 345,794 403,601 IV. MONEY MARKET PLACEMENTS - - - 610,110 84,807 694,917 4.1 Interbank money market placements - - - 610,110 84,807 694,917 4.2 Istanbul Stock Exchange money market placements - - - - - - 4.3 Receivables from reverse repurchase agreements - - - - - - V. FINANCIAL ASSETS AVAILABLE FOR SALE (Net) (4) 2,996,143 415,942 3,412,085 1,599,385 62,327 1,661,712 5.1 Share certificates 14,603 2,256 16,859 2,009 2,583 4,592 5.2 Public sector debt securities 2,980,519 413,686 3,394,205 1,597,376 59,744 1,657,120 5.3 Other marketable securities 1,021 - 1,021 - - - VI. LOANS AND RECEIVABLES (5) 9,217,230 2,536,025 11,753,255 7,003,244 1,987,471 8,990,715 6.1 Loans and receivables 9,094,408 2,536,025 11,630,433 6,815,092 1,987,471 8,802,563 6.1.1 Loans to Risk Group of the Bank 142,197 22,700 164,897 22,005 31,260 53,265 6.1.2 Public sector debt securities - - - - - - 6.1.3 Other 8,952,211 2,513,325 11,465,536 6,793,087 1,956,211 8,749,298 6.2 Non-performing loans 360,075 - 360,075 427,991 - 427,991 6.3 Specific provisions (-) (237,253) - (237,253) (239,839) - (239,839) VII. FACTORING RECEIVABLES - - - - - - VIII. HELD TO MATURITY INVESTMENTS (Net) (6) 217,604 - 217,604 880,803 - 880,803 8.1 Public sector debt securities 217,604 - 217,604 880,803 - 880,803 8.2 Other marketable securities - - - - - - IX. INVESTMENTS IN ASSOCIATES (Net) (7) - - - - - - 9.1 Accounted for under equity method - - - - - - 9.2 Unconsolidated associates - - - - - - 9.2.1 Financial investments - - - - - - 9.2.2 Non-financial investments - - - - - - X. INVESTMENTS IN SUBSIDIARIES (Net) (8) 58,436 61,254 119,690 92,667 61,254 153,921 10.1 Unconsolidated financial subsidiaries 58,436 61,254 119,690 92,667 61,254 153,921 10.2 Unconsolidated non-financial subsidiaries - - - - - - XI. ENTITIES UNDER COMMON CONTROL (JOINT VENT.) (Net) (9) 5 - 5 1 - 1 11.1 Consolidated under equity method - - - - - - 11.2 Unconsolidated 5 - 5 1 - 1 11.2.1 Financial subsidiaries - - - - - - 11.2.2 Non-financial subsidiaries 5 - 5 1 - 1 XII. FINANCE LEASE RECEIVABLES (10) - - - - - - 12.1 Finance lease receivables - - - - - - 12.2 Operating lease receivables - - - - - - 12.3 Other - - - - - - 12.4 Unearned income (-) - - - - - - XIII. DERIVATIVE FINANCIAL ASSETS FOR HEDGING PURPOSES (11) 11,114 43 11,157 30,976 354 31,330 13.1 Fair value hedge 11,114 43 11,157 30,976 354 31,330 13.2 Cash flow hedge - - - - - - 13.3 Hedge of net investment risks in foreign operations - - - - - - XIV. TANGIBLE ASSETS (Net) (12) 109,506 - 109,506 134,682 - 134,682 XV. INTANGIBLE ASSETS (Net) (13) 10,156 - 10,156 10,910 - 10,910 15.1 Goodwill - - - - - - 15.2 Other 10,156 - 10,156 10,910 - 10,910 XVI. INVESTMENT PROPERTIES (Net) (14) - - - - - - XVII. TAX ASSET (15) 13,093 - 13,093 7,869 - 7,869 17.1 Current tax asset - - - - - - 17.2 Deferred tax asset 13,093 - 13,093 7,869 - 7,869 XVIII. ASSETS HELD FOR SALE AND DISCONTINUED

OPERATIONS (Net) (16) - - - - - -

18.1 Held for sale - - - - - - 18.2 Discontinued operations - - - - - - XIX. OTHER ASSETS (17) 392,331 66,391 458,722 361,155 31,935 393,090

TOTAL ASSETS

14,396,974 4,634,131 19,031,105 11,299,288 3,764,272 15,063,560

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

5

I. BALANCE SHEET – LIABILITIES AND EQUITY (STATEMENT OF FINANCIAL POSITION) Audited Audited Current Period Prior Period 31.12.2010 31.12.2009 Note Ref. TRY FC Total TRY FC Total

I. DEPOSITS (1) 8,408,010 3,591,140 11,999,150 5,867,274 3,554,361 9,421,635 1.1 Deposits from Risk Group of the Bank 1,180,754 253,759 1,434,513 142,353 286,136 428,489 1.2 Other 7,227,256 3,337,381 10,564,637 5,724,921 3,268,225 8,993,146 II.

DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING

(2) 64,433 31,046 95,479 30,123 21,746 51,869

III. FUNDS BORROWED (3) 2,011,238 1,592,880 3,604,118 787,994 861,621 1,649,615 IV. MONEY MARKET BALANCES 74,357 - 74,357 1,071,971 - 1,071,971 4.1 Interbank money market takings - - - - - - 4.2 Istanbul Stock Exchange money market takings - - - - - - 4.3 Funds provided under repurchase agreements 74,357 - 74,357 1,071,971 - 1,071,971 V. MARKETABLE SECURITIES ISSUED (Net) - - - - - - 5.1 Bills - - - - - - 5.2 Asset backed securities - - - - - - 5.3 Bonds - - - - - - VI. FUNDS - - - - - - 6.1 Borrower funds - - - - - - 6.2 Other - - - - - - VII. SUNDRY CREDITORS 317,031 20,221 337,252 244,767 12,633 257,400 VIII. OTHER LIABILITIES (4) 304,061 1,354 305,415 237,606 388 237,994 IX. FACTORING PAYABLES - - - - - - X. FINANCE LEASE PAYABLES (5) - 13 13 - 30 30 10.1 Finance lease payables - 17 17 - 42 42 10.2 Operating lease payables - - - - - - 10.3 Other - - - - - - 10.4 Deferred finance lease expenses (-) - (4) (4) - (12) (12) XI.

DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING PURPOSES

(6) 56,547 - 56,547 73,493 - 73,493

11.1 Fair value hedge 56,547 - 56,547 73,493 - 73,493 11.2 Cash flow hedge - - - - - - 11.3 Hedge of net investment in foreign operations - - - - - - XII. PROVISIONS (7) 171,507 19,530 191,037 119,850 12,222 132,072 12.1 General loan loss provisions 87,265 19,529 106,794 62,406 12,222 74,628 12.2 Restructuring provisions 228 - 228 - - - 12.3 Reserve for employee benefits 57,073 - 57,073 42,664 - 42,664 12.4 Insurance technical reserves (Net) - - - - - - 12.5 Other provisions 26,941 1 26,942 14,780 - 14,780 XIII. TAX LIABILITY (8) 82,332 - 82,332 34,555 - 34,555 13.1 Current tax liability 82,332 - 82,332 34,555 - 34,555 13.2 Deferred tax liability - - - - - - XIV. PAYABLES RELATED TO ASSETS HELD FOR SALE AND

DISCONTINUED OPERATIONS (Net) (9) - - - - - -

14.1 Held for sale - - - - - - 14.2 Discontinued operations - - - - - - XV. SUBORDINATED LOANS (10) - 472,542 472,542 - 483,474 483,474 XVI. SHAREHOLDERS' EQUITY (11) 1,813,164 (301) 1,812,863 1,644,728 4,724 1,649,452 16.1 Paid-in capital 1,100,000 - 1,100,000 1,100,000 - 1,100,000 16.2 Supplementary capital 95,060 (301) 94,759 19,908 4,724 24,632 16.2.1 Share premium 2,158 - 2,158 2,158 - 2,158 16.2.2 Share cancellation profits - - - - - - 16.2.3 Marketable securities valuation differences 91,976 (301) 91,675 16,824 4,724 21,548 16.2.4 Tangible assets revaluation differences - - - - - - 16.2.5 Intangible assets revaluation differences - - - - - - 16.2.6 Investment property revaluation differences - - - - - - 16.2.7 Bonus shares obtained from associates, subsidiaries and jointly

controlled entities (Joint Vent.) - - - - - -

16.2.8 Hedging funds (Effective portion) - - - - - - 16.2.9 Accumulated valuation differences from assets held for sale and from

discontinued operations - - - - - -

16.2.10 Other capital reserves 926 - 926 926 - 926 16.3 Profit reserves 317,803 - 317,803 314,653 - 314,653 16.3.1 Legal reserves 45,468 - 45,468 34,959 - 34,959 16.3.2 Status reserves - - - - - - 16.3.3 Extraordinary reserves 272,335 - 272,335 279,694 - 279,694 16.3.4 Other profit reserves - - - - - - 16.4 Profit or loss 300,301 - 300,301 210,167 - 210,167 16.4.1 Prior years’ income/ (losses) - - - - - - 16.4.2 Current year income/ (loss) 300,301 - 300,301 210,167 - 210,167 16.5 Minority shares (12) - - - - - - TOTAL LIABILITIES AND EQUITY 13,302,680 5,728,425 19,031,105 10,112,361 4,951,199 15,063,560

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ STATEMENTS OF OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS AS OF DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

6

II. STATEMENT OF OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS

Audited

Current Period 31.12.2010

Audited Prior Period 31.12.2009

Note Ref.

TRY FC TOTAL TRY

FC

TOTAL

A. OFF BALANCE SHEET CONTINGENCIES AND COMMITMENTS (I+II+III)

9,506,454 9,511,892 19,018,346 7,443,468 6,990,647 14,434,115

I. GUARANTEES (1), (3) 1,985,101 2,083,282 4,068,383 1,532,701 1,895,919 3,428,620 1.1 Letters of guarantee 1,754,833 1,266,659 3,021,492 1,415,128 1,263,267 2,678,395 1.1.1 Guarantees subject to State Tender Law 85,204 15,287 100,491 78,334 24,009 102,343 1.1.2 Guarantees given for foreign trade operations 202,716 17,266 219,982 134,913 19,444 154,357 1.1.3 Other letters of guarantee 1,466,913 1,234,106 2,701,019 1,201,881 1,219,814 2,421,695 1.2 Bank loans 345 55,187 55,532 171 39,034 39,205 1.2.1 Import letter of acceptance 345 54,407 54,752 171 36,594 36,765 1.2.2 Other bank acceptances - 780 780 - 2,440 2,440 1.3 Letters of credit 493 676,336 676,829 339 503,069 503,408 1.3.1 Documentary letters of credit 493 553,611 554,104 339 408,795 409,134 1.3.2 Other letters of credit - 122,725 122,725 - 94,274 94,274 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 Factoring guarantees - - - - - - 1.8 Other guarantees 228,526 50,508 279,034 116,803 68,573 185,376 1.9 Other collaterals 904 34,592 35,496 260 21,976 22,236 II. COMMITMENTS (1), (3) 3,300,200 416,634 3,716,834 3,077,874 636,396 3,714,270 2.1 Irrevocable commitments 3,300,200 416,634 3,716,834 3,077,874 636,396 3,714,270 2.1.1 Forward asset purchase commitments 463 363,776 364,239 108,571 235,667 344,238 2.1.2 Forward deposit purchase and sales commitments - - - - 16,814 16,814 2.1.3 Share capital commitment to associates and subsidiaries 2,000 - 2,000 2,000 - 2,000 2.1.4 Loan granting commitments 1,410,868 86 1,410,954 996,619 - 996,619 2.1.5 Securities underwriting commitments - - - - - - 2.1.6 Commitments for reserve deposit requirements - - - 346,683 380,104 726,787 2.1.7 Payment commitment for checks 707,681 - 707,681 650,733 - 650,733 2.1.8 Tax and fund liabilities from export commitments 15,565 - 15,565 14,914 - 14,914 2.1.9 Commitments for credit card expenditure limits 1,152,230 - 1,152,230 956,344 - 956,344 2.1.10 Commitments for promotions related with credit cards and banking

activities 2,986 - 2,986 1,899 - 1,899

2.1.11 Receivables from short sale commitments - - - - - - 2.1.12 Payables for short sale commitments - - - - - - 2.1.13 Other irrevocable commitments 8,407 52,772 61,179 111 3,811 3,922 2.2 Revocable commitments - - - - - - 2.2.1 Revocable loan granting commitments - - - - - - 2.2.2 Other revocable commitments - - - - - - III. DERIVATIVE FINANCIAL INSTRUMENTS (2) 4,221,153 7,011,976 11,233,129 2,832,893 4,458,332 7,291,225 3.1 Derivative financial instruments for hedging purposes 343,443 147,610 491,053 469,988 291,511 761,499 3.1.1 Fair value hedge 343,443 147,610 491,053 469,988 291,511 761,499 3.1.2 Cash flow hedge - - - - - - 3.1.3 Hedge of net investment in foreign operations - - - - - - 3.2 Held for trading transactions 3,877,710 6,864,366 10,742,076 2,362,905 4,166,821 6,529,726 3.2.1 Forward foreign currency buy/sell transactions 464,457 1,566,012 2,030,469 539,048 1,048,584 1,587,632 3.2.1.1 Forward foreign currency transactions-buy 140,012 966,486 1,106,498 355,035 452,209 807,244 3.2.1.2 Forward foreign currency transactions-sell 324,445 599,526 923,971 184,013 596,375 780,388 3.2.2 Swap transactions related to f.c. and interest rates 1,309,178 2,186,284 3,495,462 861,205 1,268,459 2,129,664 3.2.2.1 Foreign currency swap-buy 591,303 879,062 1,470,365 151,511 765,023 916,534 3.2.2.2 Foreign currency swap-sell 385,375 1,225,858 1,611,233 509,694 400,436 910,130 3.2.2.3 Interest rate swaps-buy 166,250 40,682 206,932 100,000 51,500 151,500 3.2.2.4 Interest rate swaps-sell 166,250 40,682 206,932 100,000 51,500 151,500 3.2.3 Foreign currency, interest rate and securities options 2,104,075 2,613,176 4,717,251 962,652 1,366,605 2,329,257 3.2.3.1 Foreign currency options-buy 861,455 1,377,898 2,239,353 440,201 702,193 1,142,394 3.2.3.2 Foreign currency options-sell 978,075 1,217,600 2,195,675 485,796 664,412 1,150,208 3.2.3.3 Interest rate options-buy 264,545 - 264,545 36,655 - 36,655 3.2.3.4 Interest rate options-sell - - - - - - 3.2.3.5 Securities options-buy - - - - - - 3.2.3.6 Securities options-sell - 17,678 17,678 - - - 3.2.4 Foreign currency futures - 498,894 498,894 - 483,173 483,173 3.2.4.1 Foreign currency futures-buy - 246,626 246,626 - 234,791 234,791 3.2.4.2 Foreign currency futures-sell - 252,268 252,268 - 248,382 248,382 3.2.5 Interest rate futures - - - - - - 3.2.5.1 Interest rate futures-buy - - - - - - 3.2.5.2 Interest rate futures-sell - - - - - - 3.2.6 Other - - - - - - B. CUSTODY AND PLEDGED ITEMS (IV+V+VI) 30,506,986 7,581,631 38,088,617 24,027,336 7,443,354 31,470,690 IV. ITEMS HELD IN CUSTODY 7,603,077 568,901 8,171,978 6,213,057 482,176 6,695,233 4.1 Assets under management 1,143,126 - 1,143,126 1,138,296 - 1,138,296 4.2 Investment securities held in custody 2,759,586 111,796 2,871,382 2,175,211 110,097 2,285,308 4.3 Checks received for collection 3,527,213 323,800 3,851,013 2,754,141 229,619 2,983,760 4.4 Commercial notes received for collection 171,883 60,274 232,157 145,063 84,934 229,997 4.5 Other assets received for collection 1,170 73,031 74,201 247 57,526 57,773 4.6 Assets received for public offering - - - - - - 4.7 Other items under custody 99 - 99 99 - 99 4.8 Custodians - - - - - - V. PLEDGED ITEMS 22,863,395 7,004,752 29,868,147 17,788,575 6,957,362 24,745,937 5.1 Marketable securities 548,824 10,852 559,676 266,577 8,351 274,928 5.2 Guarantee notes 11,722,942 5,498,932 17,221,874 8,833,394 5,403,205 14,236,599 5.3 Commodity 38,558 106,280 144,838 7,515 104,472 111,987 5.4 Warranty - - - - - - 5.5 Properties 9,076,441 877,281 9,953,722 7,457,561 1,077,294 8,534,855 5.6 Other pledged items 1,476,630 511,407 1,988,037 1,223,528 364,040 1,587,568 5.7 Pledged items-depository - - - - - - VI. ACCEPTED INDEPENDENT GUARANTEES AND

WARRANTIES 40,514 7,978 48,492 25,704 3,816 29,520

TOTAL OFF BALANCE SHEET ACCOUNTS (A+B) 40,013,440 17,093,523 57,106,963 31,470,804 14,434,001 45,904,805

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

7

III. STATEMENT OF INCOME

The accompanying notes are an integral part of these financial statements.

Audited Current Period

01.01-31.12.2010

Audited Prior Period

01.01-31.12.2009

Note Ref.

Total

Total I. INTEREST INCOME (1) 1,496,478 1,634,755 1.1 Interest on loans 1,203,691 1,268,164 1.2 Interest received from reserve deposits 14,539 27,364 1.3 Interest received from banks 7,166 12,970 1.4 Interest received from money market placements 1,912 26,869 1.5 Interest received from marketable securities portfolio 267,638 289,644 1.5.1 Held-for-trading financial assets 16,184 11,913 1.5.2 Financial assets at fair value through profit and loss - - 1.5.3 Available-for-sale financial assets 199,300 161,630 1.5.4 Investments held-to-maturity 52,154 116,101 1.6 Finance lease Income - - 1.7 Other interest income 1,532 9,744 II. INTEREST EXPENSE (2) 728,569 833,875 2.1 Interest on deposits 495,140 594,338 2.2 Interest on funds borrowed 163,368 174,134 2.3 Interest on money market borrowings 49,498 44,249 2.4 Interest on securities issued - - 2.5 Other interest expense 20,563 21,154 III. NET INTEREST INCOME/EXPENSE (I - II) 767,909 800,880 IV. NET FEES AND COMMISSIONS INCOME/EXPENSE 417,730 238,930 4.1 Fees and commissions received 551,638 359,344 4.1.1 Non-cash loans 40,819 37,969 4.1.2 Other 510,819 321,375 4.2 Fees and commissions paid 133,908 120,414 4.2.1 Non-cash loans 1,172 2,100 4.2.2 Other 132,736 118,314 V. DIVIDEND INCOME (3) 14,458 11,973 VI. NET TRADING INCOME (4) (3,934) 50,162 6.1 Securities trading gains/ (losses) 30,110 60,973 6.2 Gains/ (losses) from derivative financial instruments (210,219) (183,624) 6.3 Foreign exchange gains/ (losses) 176,175 172,813 VII. OTHER OPERATING INCOME (5) 47,486 32,348 VIII. NET OPERATING INCOME (III+IV+V+VI+VII) 1,243,649 1,134,293 IX. PROVISION FOR LOAN LOSSES AND OTHER RECEIVABLES (-) (6) 166,097 176,421 X. OTHER OPERATING EXPENSES (-) (7) 787,821 701,035 XI. NET OPERATING INCOME/(LOSS) (VIII-IX-X) 289,731 256,837 XII. AMOUNT IN EXCESS RECORDED AS GAIN AFTER MERGER - - XIII. GAIN / (LOSS) ON EQUITY METHOD - - XIV. GAIN / (LOSS) ON NET MONETARY POSITION - - XV. PROFIT/(LOSS) FROM CONTINUED OPERATIONS BEFORE TAXES

(XI+…+XIV) (8) 289,731 256,837

XVI. TAX PROVISION FOR CONTINUED OPERATIONS (±) (9) (62,744) (46,670) 16.1 Current income tax (charge)/benefit (83,748) (45,083) 16.2 Deferred tax (charge)/benefit 21,004 (1,587) XVII. NET PROFIT/(LOSS) FROM CONTINUED OPERATIONS (XV±XVI) (10) 226,987 210,167 XVIII. INCOME ON DISCONTINUED OPERATIONS 77,173 - 18.1 Income on assets held for sale - - 18.2 Income on sale of associates, subsidiaries and entities under common control

(Joint vent.) 77,173 -

18.3 Income on other discontinued operations - - XIX. LOSS FROM DISCONTINUED OPERATIONS (-) - - 19.1 Loss from assets held for sale - - 19.2 Loss on sale of associates, subsidiaries and jointly controlled entities (Joint vent.) - - 19.3 Loss from other discontinued operations - - XX. PROFIT / (LOSS) ON DISCONTINUED OPERATIONS BEFORE TAXES

(XVIII-XIX) (8) 77,173 -

XXI. TAX PROVISION FOR DISCONTINUED OPERATIONS (±) (9) (3,859) - 21.1 Current income tax (charge)/benefit (3,859) - 21.2 Deferred tax (charge)/benefit - - XXII. NET PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XX±XXI) (10) 73,314 - XXIII. NET PROFIT/LOSS (XVII+XXII) (11) 300,301 210,167 23.1 Group’s profit/loss 300,301 210,167 23.2 Minority shares - - Earnings per share 0.2730 0.1911

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ STATEMENTS OF PROFIT AND LOSS ACCOUNTED FOR UNDER EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

8

IV. STATEMENT OF PROFIT AND LOSS ACCOUNTED FOR UNDER EQUITY

Audited Current Period

01.01-31.12.2010

Audited Prior Period

01.01-31.12.2009 I. Additions to marketable securities valuation differences for available for sale

financial assets 115,285 74,783

II. Tangible assets revaluation differences - -

III. Intangible assets revaluation differences - -

IV. Foreign exchange differences for foreign currency transactions - -

V. Profit/Loss from derivative financial instruments for cash flow hedge purposes (Effective portion of fair value differences)

- -

VI. Profit/Loss from derivative financial instruments for hedge of net investment in foreign operations (Effective portion of fair value differences)

- -

VII. The effect of correction of errors and changes in accounting policies - -

VIII. Other profit loss items accounted for under equity due to TAS - -

IX. Deferred tax of valuation differences (15,924) (4,106)

X. Total Net Profit/Loss accounted for under equity (I+II+…+IX) 99,361 70,677

XI. Profit/Loss (29,234) (55,011)

11.1 Change in fair value of marketable securities (Transfer to Profit/Loss) (29,234) (55,011)

11.2 Reclassification and transfer of derivatives accounted for cash flow hedge purposes to Income Statement

- -

11.3 Transfer of hedge of net investments in foreign operations to Income Statement - -

11.4 Other - -

XII. Total Profit/Loss accounted for the period (X±XI) 70,127 15,666

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED DECEMBER 31, 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

9

V. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Audited

Note Ref

Paid-in Capital

Effect of Inflation

Accounting on Capital and Other Capital Reserves

Share Premium

Share Certificate

Cancellation Profits

Legal Reserves

Statutory Reserves

Extraordinary Reserves

Other Reserves

Current Period

Net Income/ (Loss)

Prior

Period Net

Income/ (Loss)

Marketable Securities Valuation

Differences

Tangible and

Intangible Assets

Revaluation Differences

Bonus shares obtained

from Associates

Hedging Funds

Acc. val. diff. from assets held for sale and from disc.

op.

Equity Attributable to the Parent

Minority Shares

Total Equity

Prior Period – 01.01.-31.12.2009 I Beginning Balance – 31.12.2008 1,100,000 926 2,158 - 26,750 - 123,705 - - 164,198 5,882 - - - - 1,423,619 - 1,423,619 II. Corrections according to TAS 8 - - - - - - - - - - - - - - - - - - 2.1 The effect of correction of errors - - - - - - - - - - - - - - - - - - 2.2 The effects of changes in accounting policy - - - - - - - - - - - - - - - - - - III. New Balance (I+II) 1,100,000 926 2,158 - 26,750 - 123,705 - - 164,198 5,882 - - - - 1,423,619 - 1,423,619 Changes in period - - - - - - - - - - - - - - - - - - IV. Increase/Decrease related to merger - - - - - - - - - - - - - - - - - - V. Marketable securities valuation differences - - - - - - - - - - 15,666 - - - - 15,666 - 15,666 VI. Hedging Funds (Effective Portion) - - - - - - - - - - - - - - - - - - 6.1 Cash-flow hedge - - - - - - - - - - - - - - - - - - 6.2 Hedge of net investment in foreign operations - - - - - - - - - - - - - - - - - - VII. Tangible assets revaluation differences - - - - - - - - - - - - - - - - - - VIII. Intangible assets revaluation differences - - - - - - - - - - - - - - - - - - IX. Bonus shares obtained from associates, subsidiaries

and entities under common control (Joint vent.) - - - - - - - - - - - - - - - - - - X. Foreign exchange differences - - - - - - - - - - - - - - - - - - XI. The disposal of assets - - - - - - - - - - - - - - - - - - XII. The reclassification of assets - - - - - - - - - - - - - - - - - - XIII. The effect of change in associates’ equity - - - - - - - - - - - - - - - - - - XIV. Capital increase - - - - - - - - - - - - - - - - - - 14.1 Cash - - - - - - - - - - - - - - - - - - 14.2 Internal sources - - - - - - - - - - - - - - - - - - XV. Share premium - - - - - - - - - - - - - - - - - - XVI. Share cancellation profits - - - - - - - - - - - - - - - - - - XVII. Inflation adjustment to paid-in capital - - - - - - - - - - - - - - - - - - XVIII. Other - - - - - - - - - - - - - - - - - - XIX. Period net income/(loss) - - - - - - - - 210,167 - - - - - - 210,167 - 210,167 XX. Profit distribution - - - - 8,209 - 155,989 - - (164,198) - - - - - - - - 20.1 Dividends distributed - - - - - - - - - - - - - - - - - - 20.2 Transfers to reserves - - - - 8,209 - 155,989 - - (164,198) - - - - - - - - 20.3 Other - - - - - - - - - - - - - - - - - - Closing Balance 31.12.2009

(III+IV+V+VI+VII+VIII+IX+X+XI+XII+XIII+XIV+XV+XVI+XVII+XVIII+XIX+XX) 1,100,000 926 2,158 - 34,959 - 279,694 - 210,167 - 21,548 - - - - 1,649,452 - 1,649,452

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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V. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Audited

Note Ref

Paid-in Capital

Effect of Inflation

Accounting on Capital and Other Capital Reserves

Share Premium

Share

Certificate Cancellation

Profits

Legal Reserves

Statutory Reserves

Extraordinary Reserves

Other Reserves

Current Period

Net Income/ (Loss)

Prior Period

Net Income/ (Loss)

Marketable Securities Valuation

Differences

Tangible and Intangible

Assets Revaluation Differences

Bonus shares obtained

from Associates

Hedging Funds

Acc. val.

diff. from assets held for sale and assets from

disc. op.

Equity Attributable to the Parent

Minority Shares

Total Equity

Current Period – 01.01-31.12.2010 I Prior period balance – 31.12.2009 1,100,000 926 2,158 - 34,959 - 279,694 - - 210,167 21,548 - - - - 1,649,452 - 1,649,452 Changes in period - - - - - - - - - - - - - - - - - - II. Increase/Decrease related to merger - - - - - - - - - - - - - - - - - - III. Marketable securities valuation differences - - - - - - - - - - 70,127 - - - - 70,127 - 70,127 IV. Hedging Funds (Effective Portion) - - - - - - - - - - - - - - - - - - 4.1 Cash-flow hedge - - - - - - - - - - - - - - - - - - 4.2 Hedge of net investment in foreign operations - - - - - - - - - - - - - - - - - - V. Tangible assets revaluation differences - - - - - - - - - - - - - - - - - - VI. Intangible assets revaluation differences - - - - - - - - - - - - - - - - - - VII. Bonus shares obtained from associates,

subsidiaries and entities under common control (Joint vent.)

- - - - - - - - - - - - - - - - - - VIII. Foreign exchange differences - - - - - - - - - - - - - - - - - - IX. The disposal of assets - - - - - - - - - - - - - - - - - - X. The reclassification of assets - - - - - - - - - - - - - - - - - - XI. The effect of change in associates’ equity - - - - - - - - - - - - - - - - - - XII. Capital increase - - - - - - - - - - - - - - - - - - 12.1 Cash - - - - - - - - - - - - - - - - - - 12.2 Internal sources - - - - - - - - - - - - - - - - - - XIII. Share premium - - - - - - - - - - - - - - - - - - XIV. Share cancellation profits - - - - - - - - - - - - - - - - - - XV. Inflation adjustment to paid-in capital - - - - - - - - - - - - - - - - - - XVI. Other - - - - - - - - - - - - - - - - - - XVII. Period net income/(loss) - - - - - - - - 300,301 - - - - - - 300,301 - 300,301 XVIII. Profit distribution - - - - 10,509 - (7,359) - - (210,167) - - - - - (207,017) - (207,017) 18.1 Dividends distributed - - - - - - (207,017) - - - - - - - - (207,017) - (207,017) 18.2 Transfers to reserves - - - - 10,509 - 199,658 - - (210,167) - - - - - - - - 18.3 Other - - - - - - - - - - - - - - - - - - Closing Balance 31.12.2010

(I+II+III+IV+V+VI+VII+VIII+IX+X+XI+XII+XIII+XIV+XV+XVI+XVII+XVIII) 1,100,000 926 2,158 - 45,468 - 272,335 - 300,301 - 91,675 - - - - 1,812,863 - 1,812,863

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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VI. STATEMENT OF CASH FLOWS Audited Audited Current Period Prior Period Note Ref. 01.01-31.12.2010 01.01-31.12.2009 A. CASH FLOWS FROM BANKING OPERATIONS 1.1 Operating profit before changes in operating assets and liabilities 451,220 452,431 1.1.1 Interest received 1,438,220 1,785,773 1.1.2 Interest paid (678,427) (1,057,912) 1.1.3 Dividend received 14,458 11,973 1.1.4 Fees and commissions received 551,638 359,344 1.1.5 Other income 278,364 296,268 1.1.6 Collections from previously written off loans 144,042 142,576 1.1.7 Payments to personnel and service suppliers (350,775) (341,878) 1.1.8 Taxes paid (40,067) (42,538) 1.1.9 Others (1) (906,233) (701,175) 1.2 Changes in operating assets and liabilities 623,405 (602,752) 1.2.1 Net (increase) decrease in financial assets held for trading 31,583 (113,289) 1.2.2 Net (increase) decrease in financial assets at fair value through profit or loss - - 1.2.3 Net (increase) decrease in due from banks and other financial institutions 9,999 (6,846) 1.2.4 Net (increase) decrease in loans (2,894,511) (774,949) 1.2.5 Net (increase) decrease in other assets (166,227) (8,083) 1.2.6 Net increase (decrease) in bank deposits 69,989 756,444 1.2.7 Net increase (decrease) in other deposits 1,501,726 297,876 1.2.8 Net increase (decrease) in funds borrowed 1,938,626 (729,848) 1.2.9 Net increase (decrease) in matured payables - - 1.2.10 Net increase (decrease) in other liabilities (1) 132,220 (24,057) I. Net cash provided from banking operations 1,074,625 (150,321) B. CASH FLOWS FROM INVESTING ACTIVITIES II. Net cash provided from investing activities (917,037) (533,859) 2.1 Cash paid for purchase of entities under common control, associates and subsidiaries

(Joint Vent.) (5,963) (2,001)

2.2 Cash obtained from sale of entities under common control, associates and subsidiaries (Joint Vent.)

113,345 -

2.3 Fixed assets purchases (20,262) (18,684) 2.4 Fixed assets sales 220 7,455 2.5 Cash paid for purchase of financial assets available for sale (4,345,559) (2,943,961) 2.6 Cash obtained from sale of financial assets available for sale 2,674,518 2,533,676 2.7 Cash paid for purchase of investment securities - (103,360) 2.8 Cash obtained from sale of investment securities 672,602 - 2.9 Others (1) (5,938) (6,984) C. CASH FLOWS FROM FINANCING ACTIVITIES III. Net cash provided from financing activities (215,646) (4,409) 3.1 Cash obtained from funds borrowed and securities issued - - 3.2 Cash used for repayment of funds borrowed and securities issued (8,613) (4,310) 3.3 Capital increase - - 3.4 Dividends paid (207,017) - 3.5 Payments for finance leases (16) (99) 3.6 Other (1) - - IV. Effect of change in foreign exchange rate on cash and cash equivalents (1) 41,105 (36,272) V. Net increase / (decrease) in cash and cash equivalents (16,953) (724,861) VI. Cash and cash equivalents at beginning of the period 2,336,935 3,061,796 VII. Cash and cash equivalents at end of the period 2,319,982 2,336,935

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ PROFIT DISTRIBUTION TABLES FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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VII. PROFIT DISTRIBUTION TABLE

(*)Audited Audited Current Period Prior Period 31.12.2010 31.12.2009 I. DISTRIBUTION OF CURRENT YEAR INCOME

1.1 CURRENT YEAR INCOME 366,904 256,837 1.2 TAXES AND DUTIES PAYABLE (-) 66,603 46,670 1.2.1 Corporate tax (Income tax) 87,607 45,083 1.2.2 Income witholding tax - - 1.2.3 Other taxes and duties (**) (21,004) 1,587

A. NET INCOME FOR THE YEAR (1.1-1.2) 300,301 210,167

1.3 PRIOR YEARS’ LOSSES (-) - - 1.4 FIRST LEGAL RESERVES (-) - 10,509 1.5 OTHER STATUTORY RESERVES (-) - -

B. NET INCOME AVAILABLE FOR DISTRIBUTION [(A-(1.3+1.4+1.5)] 300,301 199,658

1.6 FIRST DIVIDEND TO SHAREHOLDERS (-) - - 1.6.1 To owners of ordinary shares - - 1.6.2 To owners of preferred shares - - 1.6.3 To owners of preferred shares (preemptive rights) - - 1.6.4 To profit sharing bonds - - 1.6.5 To holders of profit and loss sharing certificates - - 1.7 DIVIDENDS TO PERSONNEL (-) - - 1.8 DIVIDENDS TO BOARD OF DIRECTORS (-) - - 1.9 SECOND DIVIDEND TO SHAREHOLDERS (-) - - 1.9.1 To owners of ordinary shares - - 1.9.2 To owners of preferred shares - - 1.9.3 To owners of preferred shares (preemptive rights) - - 1.9.4 To profit sharing bonds - - 1.9.5 To holders of profit and loss sharing certificates - - 1.10 SECOND LEGAL RESERVES (-) - - 1.11 STATUTORY RESERVES (-) - - 1.12 EXTRAORDINARY RESERVES - 199,658 1.13 OTHER RESERVES - - 1.14 SPECIAL FUNDS - -

II. DISTRIBUTION OF RESERVES

2.1 DISTRIBUTED RESERVES - 207,017 2.2 SECOND LEGAL RESERVES (-) - - 2.3 DIVIDENDS TO SHAREHOLDERS (-) - (207,017) 2.3.1 To owners of ordinary shares(***) - (207,017) 2.3.2 To owners of preferred shares - - 2.3.3 To owners of preferred shares (preemptive rights) - - 2.3.4 To profit sharing bonds - - 2.3.5 To holders of profit and loss sharing certificates - - 2.4 DIVIDENDS TO PERSONNEL (-) - - 2.5 DIVIDENDS TO BOARD OF DIRECTORS (-) -

III. EARNINGS PER SHARE

3.1 TO OWNERS OF ORDINARY SHARES - 0.19 3.2 TO OWNERS OF ORDINARY SHARES ( % ) - 19.11 3.3 TO OWNERS OF PREFERRED SHARES - - 3.4 TO OWNERS OF PREFERRED SHARES ( % ) - - IV. DIVIDEND PER SHARE 4.1 TO OWNERS OF ORDINARY SHARES - 0.19 4.2 TO OWNERS OF ORDINARY SHARES ( % ) - 18.82 4.3 TO OWNERS OF PREFERRED SHARES - - 4.4 TO OWNERS OF PREFERRED SHARES ( % ) - - (*) General Assembly has not been held yet as of the issue date of this report. (**) The amount in other taxes and duties is the deferred tax benefit that is not subject to profit distribution. (***) The Extraordinary General Assembly held on October 19, 2010, approved the proposal of the Board of Directors resolution on the profit distribution no:

4450/93 dated October 1, 2010 to make a profit distribution of TRY 207,017 which is included in the reserves of the 2009 year-end financial statements to the shareholders; and has authorized the Board of Directors in regards to the procedures and transactions relevant to the profit distribution. The profit distribution process started commencing on October 25, 2010.

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

13

SECTION THREE

ACCOUNTING PRINCIPLES

I. Basis of Presentation The Bank prepares financial statements and notes according to Communiqué on Banks’ Accounting Practice and Maintaining Documents, Turkish Accounting Standards (TAS), Turkish Financial Reporting Standards (TFRS), other regulations, communiques and circulars in respect of accounting and financial reporting and pronouncements made by Banking Regulation and Supervision Agency (BRSA), Turkish Commercial Code and Tax Legislation. The prior period financial statements are presented in line with the principles of TAS No:1 “Fundamentals of Preparing and Presenting Financial Statements” published in the Official Gazette on January 16, 2005 with No: 25702, and in accordance with Turkish Accounting Standards and Turkish Financial Reporting Standards; and other principles, methods and explanations about accounting and financial reporting issued by the BRSA. Certain reclassifications have been made to the prior year financial statements in order to comply with the current year presentation whenever required. The reclassifications made in the prior year financial statements are as follows:

31.12.2009 TRY FCASSETS

Tangible Assets (Net) (20,302) - Other Assets 20,302 - LIABILITIES

Provisions - - General loan loss provisions - - Restructuring provisions - - Reserve for employee benefits 25,108 - Insurance technical reserves (Net) - - Other provisions (25,108) -

In the prior year financial statements, the assets held for resale are reclassified from “Tangible Assets” to “Other Assets” and accruals for unused vacation and premiums to be paid to the Bank’s personnel are reclassified from “Other Provisions” to “Reserve for Employee Benefits”.

II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions The Bank aims to develop and promote products for the financial needs of each customer such as SMEs, multinational companies and small individual investors in line with Banking Legislation. The primary objective of the Bank is to increase profitability with optimum liquidity and minimum risk while fulfilling customer needs. Thus, the Bank uses 39% on average of its resources on liquid assets, as well as intending for the highest possible yield with effective maturity management. The Bank aims at creating an optimum maturity risk and working with a positive margin between cost of resource and product yield in the process of asset and liability management. As a component of risk management strategy of the Bank, risk bearing short positions of currency, interest or price movements is performed only by the Treasury Asset-Liability Management using the limits defined by the Board of Directors. The Asset-Liability Committee manages the maturity mismatches while deciding the short, medium and long term strategies as well as adopting the principle of positive balance sheet margin as a pricing policy. The Board of Directors allows a purchase risk in treasury operations and individual limits are defined by the Board of Directors for each product.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

14

II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions (continued)

The Bank’s hedging activities for the currency risk due to foreign currency available-for-sale equity instruments are described under the Currency Risk section; and the Bank’s hedging activities from interest rate risk arising from fixed interest rate deposits and floating interest rate borrowings are described in detail under Interest Rate Risk section. The Bank’s Asset-Liability Committee approves the trading of various derivative instruments such as currency swaps, forwards and similar derivatives to hedge interest and currency exchange risks in line with the balance sheet structure. III. Explanations on Forward and Option Contracts and Derivative Instruments

Fair values of foreign currency forward and swap transactions are determined by comparing the period end Bank foreign exchange rates with the contractual forward rates discounted to the balance sheet date with the prevailing current market rates. The resulting gain or loss is reflected to the income statement. In the assessment of fair value of interest rate swap instruments, interest amounts to be paid or to be received due to/from the fixed rate on the derivative contract are discounted to the balance sheet date with the current applicable fixed rate in the market that is prevailing between the balance sheet date and the interest payment date, whereas interest amounts to be paid or to be received due to/from the floating rate on the derivative contract are recalculated with the current applicable market rates that are prevailing between the balance sheet date and the interest payment date and are discounted to the balance sheet date again with the current applicable market rates that are prevailing between the balance sheet date and the interest payment date. The differences between the fixed rate interest amounts and floating rate interest amounts to be received/paid are recorded in the profit/loss accounts in the current period. The fair value of call and put option agreements are measured at the valuation date by using the current premium values of all option agreements, and the differences between the contractual premiums received/paid and the current premiums measured at valuation date are recognized in the statement of income. Futures transactions are valued on a daily basis by the primary market prices and related unrealized gains or losses are reflected in the income statement. The valuation of CDS transactions are based on discounting the differences between the existing and recalculated payment plans to the valuation date with current CDS interest rates. As of July 1, 2008, the Bank has adopted fair value hedge accounting in order to avoid the effects of interest rate changes in the market by matching a portion of its swap portfolio with its loan portfolio. While the Bank recognizes the fair value changes of the hedged items in the “other interest income” and “other interest expense” accounts, it recognizes the fair value changes of the hedging instruments related to the same period in the “gains/(losses) from derivative financial instruments” account. Additionally, the difference between the fair value and carrying value of the hedged items as of the application date of hedge accounting is amortized based on their maturities and recognized in “other interest income” and “other interest expense” accounts. IV. Explanations on Interest Income and Expenses Interest income and expense are recognized in the income statement for all interest bearing instruments whose cash inflows and outflows are known on an accrual basis using the effective interest method. In accordance with the related regulation, realized and unrealized interest accruals of the non-performing loans are reversed and interest income related to these loans are recorded as interest income only when collected.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

15

V. Explanations on Fees and Commission Income and Expenses Fees for various banking services are recorded as income when collected and prepaid commission income on cash and non-cash loans is recorded as income by using effective interest rate in the related period. Fees and commissions for funds borrowed paid to other financial institutions, as part of the transaction costs, are recorded as prepaid expenses by using effective interest rate and are expensed on the related periods. The dividend income is reflected to the financial statements when the profit distribution is realized by the associates and subsidiaries. VI. Explanations on Financial Assets Financial instruments comprise financial assets, financial liabilities and derivative instruments. Risks related to these activities form a significant part among total risks the Bank undertakes. Financial instruments affect liquidity, market, and credit risks on the Bank’s balance sheet in all respects. The Bank trades these instruments on behalf of its customers and on its own behalf. Basically, financial assets create the majority of the commercial activities of the Bank. These instruments expose, affect and diminish the liquidity, credit and interest risks in the financial statements. All regular way purchases and sales of financial assets are recognized on the settlement date i.e. the date that the asset is delivered to or by the Bank. Settlement date accounting requires (a) accounting of the asset when acquired by the institution and (b) disposing of the asset out of the balance sheet on the date settled by the institution; and accounting of gain or loss on disposal. In case of application of settlement date accounting, the institution accounts for the changes that occur in the fair value of the asset in the period between commercial transaction date and settlement date as in the assets that the institution settles. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. Changes in fair value of assets to be received during the period between the trade date and the settlement date are accounted for in the same way as the acquired assets. The methods and assumptions used in determining the reasonable estimated values of all of the financial instruments are described below. Cash, Banks, and Other Financial Institutions

Cash and cash equivalents comprise cash on hand, demand deposits, and highly liquid short-term investments with maturity of 3 months or less following the purchase date, not bearing risk of significant value change, and that are readily convertible to a known amount of cash. The book value of these assets approximates their fair values.

Financial Assets at Fair Value Through Profit and Loss 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 with a pattern of short-term profit taking.

Trading securities are initially recognized at cost. Transaction costs of the related securities are included in the initial cost. The positive difference between the cost and fair value of such securities is accounted for as interest and income accrual, and the negative difference is accounted for as “Impairment Provision on Marketable Securities”.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

16

VI. Explanations on Financial Assets (continued)

Held to Maturity Investments and Financial Assets Available for Sale

Investments held to maturity include securities with fixed or determinable payments and fixed maturity where there is an intention of holding till maturity and the relevant conditions for fulfillment of such intention, including the funding ability other than loans and receivables. Available for sale financial assets include all securities other than loans and receivables, securities held to maturity and securities held for trading.

Marketable securities are initially recognized at cost including the transaction costs.

After the initial recognition, available for sale securities are measured at fair value and the unrealized gain/loss originating from the difference between the amortized cost and the fair value is recorded in “Marketable Securities Valuation Differences” under the equity. Fair values of debt securities that are traded in an active market are determined based on quoted prices or current market prices. In the absence of prices formed in an active market, fair value of these securities is determined using the prices declared in the Official Gazette or other valuation methods stated in TAS.

After initial recognition, held to maturity investments are measured at amortized cost by using effective interest rate less impairment losses, if any.

The interests received from held to maturity investments are recorded as interest income. There are no financial assets that have been previously classified as held to maturity investments but cannot be currently classified as held to maturity for two years due to “tainting” rule.

The Bank classifies its securities as referred to above at the acquisition date of related assets.

The sale and purchase transactions of the held to maturity investments are recorded on a settlement date basis.

Loans and Provisions for Impairment

Loans are financial assets those generated by lending money and exclude those that are held with the intention of trading or selling in the near future.

The Bank initially records loans and receivables at cost. In subsequent periods, in accordance with TAS, loans are measured at amortized cost using effective interest rate method.

Provision is set for the loans that may be doubtful and the amount is charged in the current period income statement. The provisioning criteria for non-performing loans are determined by the Bank’s management for compensating the probable losses of the current loan portfolio, by evaluating the quality of loan portfolio, risk factors and considering the economical conditions, other facts and related regulations. Specific reserves are provided for Group III, IV and V loans in accordance with the regulation on “Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” published in the Official Gazette No. 26333 dated November 1, 2006 which was amended with the communiqué published in the Official Gazette No. 27119 dated January 23, 2009. These provisions are reflected in the income statement under “Provision and Impairment Expenses - Special Provision Expense". The collections 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 related to loans for which provision is made in the current period are reversed from the “Provision for Loan Losses and Other Receivables” account in the income statement, and related interest income is credited to the “Interest Received from Non-performing Loans” account.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

17

VI. Explanations on Financial Assets (continued) Releases of loan loss provisions are booked in “Other Operating Income” account and reversed from the “Provision and Impairment Expenses - Specific Provision Expense” account in the income statement. In addition to specific loan loss provisions, within the framework of the regulation and principles referred to above; the Bank records general loan loss provision for loans and other receivables. The Bank calculated the general loan provision as 0.5% for cash loans and other receivables, and 0.1% for non-cash loans until November 1, 2006. Subsequent to the change in the regulation on “Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” published in the Official Gazette No. 26333 dated November 1, 2006; Bank started to book general loan loss provision of 1% for cash loans and other receivables; and 0.2% for non-cash loans on the increase in the cash and non-cash loan portfolio as compared to their October 31, 2006 balances whereas allocating 0.5% general loan loss provision for cash loans and other receivables, and 0.1% for non-cash loans for the balances as of October 31, 2006. Together with the change in the same regulation made on February 6, 2008, the Bank started to book general loan loss provision of 2% for cash loans under watch-list and 0.4% for non-cash loans under watch-list.

VII. Explanations on Impairment of Financial Assets

At each balance sheet date, the Bank evaluates the carrying amounts of its financial asset or a group of financial assets to determine whether there is an objective indication that those assets have suffered an impairment loss or not. If any such indication exists, the Bank determines the related impairment.

A financial asset or a financial asset group incurs impairment loss only if there is an objective indicator related to the occurrence (or nonoccurrence) of one or more than one event (“loss event”) after the first journalization of that asset; and such loss event (or events) causes, an impairment as a result of the effect on the reliable estimate of the expected future cash flows of the related financial asset and asset group. Irrespective of high probability the expected losses caused by the future events are not journalized.

VIII. Explanations on Offsetting of Financial Assets and Liabilities

Financial assets and liabilities are offset when the Bank has a legally enforceable right to set off, and the intention of collecting or paying the net amount of related assets and liabilities or the right to offset the assets and liabilities simultaneously. IX. Explanations on Sales and Repurchase Agreements and Lending of Securities The sales and purchase of government securities under repurchase agreements made with the customers are recorded in balance sheet accounts in accordance with the Uniform Chart of Accounts. Accordingly in the financial statements, the government bonds and treasury bills sold to customers under repurchase agreements are classified under securities held for trading, available for sale and held to maturity depending on the portfolio they are originally included in and are valued according to the valuation principles of the related portfolios. Funds obtained from repurchase agreements are classified as a separate sub-account under money markets borrowings account in the liabilities. These transactions are short-term and consist of domestic public sector debt securities. The income and expenses from these transactions are reflected to the “Interest Income on Marketable Securities” and “Interest Expense on Money Market Borrowings” accounts in the income statement. As of December 31, 2010, the Bank does not have any reverse repo transactions (December 31, 2009 - None). As of December 31, 2010, the Bank does not have any marketable securities lending transaction (December 31, 2009 - None).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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X. Explanations on Assets Held for Sale, Discontinued Operations and Liabilities Related to Those Assets

Assets held for sale are those under a plan prepared by the management regarding the sale of the asset to be disposed (or else the group of assets), together with an active program for determination of buyers as well as for the completion of the plan. Also the asset (or else the group of assets) shall be actively marketed in conformity with its fair value. On the other hand, the sale is expected to be journalized as a completed sale within one year after the classification date; and the necessary transactions and procedures to complete the plan should demonstrate the fact that the possibility of making significant changes or canceling the plan is low.

The Bank does not have any assets held for sale.

A discontinued operation is a division of a bank that is either disposed or held for sale. Results of discontinued operations are included in the income statement separately.

The Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345 as of December 31, 2010. The profit amounting to TRY 77,173 resulting from this sale is presented as “Income on Sale of Associates, Subsidiaries and Entities Under Common Control” under the “Income on Discontinued Operations” in the current year income statement.

XI. Explanations on Goodwill and Other Intangible Assets

There is no goodwill regarding the investments in associates and subsidiaries.

Intangible assets are accounted for at restated cost until December 31, 2004 in accordance with inflation accounting and are amortized with straight-line method, after December 31, 2004 the acquisition cost and any other cost incurred so as to prepare the intangible asset ready for use less reserve for impairment, if any, and amortized on a straight-line method. The cost of assets subject to amortization is restated after deducting the exchange differences, capitalized financial expenses and revaluation increases, if any, from the cost of the assets.

The other intangible assets of the Bank comprise mainly software. The requirements of the Turkish Tax Procedural Code are taken into consideration in determining the useful lives and no other specific criteria are used. Useful lives of such assets acquired prior to 2004 are determined as 5 years and for the year 2004 and forthcoming years as 3 years. Software used are mainly developed within the Bank by the Bank’s personnel and the related expenses are not capitalized. Software is purchased only in emergency cases and for special projects.

There are no anticipated changes in the accounting estimates about the amortization rate and amortization method and residual values that would have a significant impact in the current and future periods.

XII. Explanations on Tangible Fixed Assets

Properties are accounted for at their restated costs until December 31, 2004; after December 31, 2004 the acquisition cost and any other cost incurred so as to prepare the fixed asset ready for use are reflected, less reserve for impairment, if any. The straight-line method of depreciation is used for buildings and useful life is considered as 50 years.

Other tangible fixed assets are accounted for at their restated costs until December 31, 2004; afterwards the acquisition cost and any other cost incurred so as to prepare the fixed asset ready for use are reflected less reserve for impairment, if any, and depreciated on a straight-line method. Depreciation of assets held less than one year as of the balance sheet date is accounted for proportionately. No amendment has been made to the depreciation method in the current period. The annual rates used, which approximate rates based on the estimated economic useful lives of the related assets, are as follows:

% Buildings 2 Motor vehicles 20 Furniture, fixtures and office equipment and others 3 – 50

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XII. Explanations on Tangible Fixed Assets (continued) Gain or loss resulting from disposals of the tangible fixed assets is reflected to the income statement as the difference between the net proceeds and net book value. Maintenance costs of tangible fixed assets are capitalized if they extend the economic useful life of related assets. Other maintenance costs are expensed.

There are no pledges, mortgages or other restrictions on the tangible fixed assets.

There are no purchase commitments related to the tangible fixed assets.

There are no anticipated changes in the accounting estimates, which could have a significant impact in the current and future periods.

The Bank employs independent appraisers in determining the current fair values of its real estates at period ends. As of December 31, 2010, there is no provision for impairment loss as per the appraisals performed (December 31, 2009 – None). As per the appraisals performed for the real estates held for resale included in “Other Assets” in the financial statements, there is a provision for impairment loss amounting to TRY 3,380 (December 31, 2009 – TRY 2,608). XIII. Explanations on Leasing Transactions

Tangible fixed assets acquired by financial leases are accounted for in accordance with TAS No:17. In accordance with this standard, the leasing transactions, which consist of only foreign currency liabilities, are translated to Turkish Lira with the exchange rates prevailing at the transaction dates and they are recorded as an asset or a liability. The foreign currency liabilities are translated to Turkish Lira with the Bank’s period end exchange rates. The increases/decreases resulting from the differences in the foreign exchange rates are recorded as expense/income in the relevant period. The financing cost resulting from leasing is distributed through the lease period to form a fixed interest rate.

In addition to the interest expense, depreciation expense is recorded for the depreciable leased assets in each period. The depreciation rate is determined in accordance with TAS No:16 "Accounting Standard for Tangible Fixed Assets" by taking the useful lives into account.

Operating lease payments are recognized as expense in the income statement on a straight line basis over the lease term.

The Bank does not have any leasing transactions as “Lessor”. XIV. Explanations on Provisions and Contingent Liabilities

Provisions are recognized when there is a present obligation, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are determined by using the Bank’s best expectation of expenses in fulfilling the obligation, and discounted to present value if material.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XV. Explanations on Liabilities Regarding Employee Benefits

Defined Benefit Plans

In accordance with existing social legislation in Turkey, the Bank is required to make lump-sum termination indemnities over a 30 day salary to each employee who has completed over one year of service, whose employment is terminated due to retirement or for reasons other than resignation or misconduct, and due to marriage, female employees terminating their employments within a year as of the date of marriage, or male employees terminating their employments due to their military service. The Bank is also required to make a payment for the period of notice calculated over each service year of the employee whose employment is terminated for reasons other than resignation or misconduct. Total benefit is calculated in accordance with TAS No:19 “Turkish Accounting Standard on Employee Benefits”. Such benefit plans are unfunded since there is no funding requirement in Turkey. The cost of providing benefits to the employees for the services rendered by them under the defined benefit plan is determined by independent actuaries annually using the projected unit credit method. All actuarial gains and losses are recognized in the income statement. In calculating the related liability to be recorded in the financial statements for these defined benefit plans, the Bank uses independent actuaries and also makes assumptions and estimation relating to the discount rate to be used, turnover of employees, future change in salaries/limits, etc. In this regard, the actuarial assumptions used for the calculation of the reserve for employee termination benefits are as follows:

The carrying value of provision for employee termination benefits as of December 31, 2010 is TRY 24,178 (December 31, 2009 - TRY 17,556).

Defined Contribution Plans

The Bank pays contributions to Social Security Funds on a mandatory basis. There are no other liabilities related to employee benefits to be provisioned.

XVI. Explanations on Taxation Corporate tax According to the Article 32 of the Corporate Tax Law No. 5520, announced in the Official Gazette dated June 21, 2006, the corporate tax rate is 20%. The tax legislation, requires advance tax of 20% to be calculated and paid based on earnings generated for each quarter. The amounts thus calculated and paid are offset from the final tax liability for the year. Tax returns are required to be filed between the first and twenty-fifth day of the fourth month following the balance sheet date and paid in one installment until the end of the related month. Tax provision related with items that are credited or charged directly to equity are charged or credited to equity. As at December 31, 2010 TRY 21,310 (December 31, 2009 - TRY 5,386) deferred tax which is related with items recorded in the equity was net off under equity in “Marketable Securities Valuation Differences”. According to the Corporate Tax Law, tax losses can be carried forward for a maximum period of five years following the year in which the losses are incurred. Tax authorities can inspect tax returns and the related accounting records for a retrospective maximum period of five years.

December 31, 2010 December 31, 2009Discount Rate (%) 10.00 11.00Expected Inflation Rate (%) 5.10 4.80

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XVI. Explanations on Taxation (continued)

Deferred Tax Liability / Asset

The Bank calculates and reflects deferred tax asset or liability on timing differences which will result in taxable or deductible amounts in determining taxable profit of future periods. As of December 31, 2010 and December 31, 2009, in accordance with TAS No: 12 “Turkish Accounting Standard on Income Taxes” and the changes in the circular of BRSA numbered BDDK.DZM.2/13/1-a-3 dated December 8, 2004, the Bank calculated deferred tax asset on all deductible temporary differences except for general loan reserves, if sufficient taxable profit in future periods to recover such amounts is probable; as well as deferred tax liability on all taxable temporary differences. Deferred tax assets and liabilities are shown in the accompanying financial statements on a net basis. The net deferred tax asset is included in deferred tax asset and the net deferred tax liability is reflected under deferred tax liability on the balance sheet. The deferred tax benefit of TRY 21,004 (December 31, 2009 – TRY 1,587 deferred tax charge) is stated under the tax provision in the income statement. The deferred tax of TRY 21,310 (December 31, 2009 - TRY 5,386) resulting from differences related to items that are debited or charged directly to equity is netted with these accounts. Furthermore, as per the above circular of BRSA, deferred tax benefit balance resulting from netting of deferred tax assets and liabilities should not be used in dividend distribution and capital increase. XVII. Additional Explanations on Borrowings The borrowing costs related to purchase, production, or construction of qualifying assets that require significant time to be prepared for use and sale are included in the cost of assets until the relevant assets become ready to be used or to be sold. Financial investment income obtained by temporary placement of undisbursed investment loan in financial investments is offset against borrowing costs qualified for capitalization All other borrowing costs are recorded to the income statement in the period they are incurred. There are no debt securities issued by the Bank. The Bank has not issued convertible bonds. XVIII. Explanations on Issued Share Certificates None.

XIX. Explanations on Acceptances

Acceptances are realized simultaneously with the payment dates of the customers and they are presented as probable commitments in off-balance sheet accounts. XX. Explanations on Government Incentives

There are no government incentives utilized by the Bank.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XXI. Explanations on Reporting According to Segmentation

The Bank mainly operates in retail and corporate banking segments.

Current Period Retail CorporateTreasury/

Head Office Total Net interest income 125,484 417,556 224,869 767,909Net fees and commissions income and other operating income 86,709 182,297 196,210 465,216Trading profit / loss 4,067 29,304 (37,305) (3,934)Dividend income - - 14,458 14,458Impairment provision for loans and other receivables (-) 26,091 111,454 28,552 166,097Other operating expenses (-) 153,587 280,436 353,798 787,821Income on discontinued operations - - 77,173 77,173Profit from continued&discontinued operations before taxes

36,582 237,267 93,055 366,904

Tax provision for continued &discontinued operations - - (66,603) (66,603) Net profit for the period 36,582 237,267 26,452 300,301

Current Period Retail Corporate

Treasury/Head Office Total

Segment assets 2,669,622 9,100,429 7,141,359 18,911,410Investments in associates, subsidiaries and jointly controlled entities - - 119,695 119,695Total Assets 2,669,622 9,100,429 7,261,054 19,031,105 Segment liabilities 7,080,016 5,110,136 5,028,090 17,218,242Shareholders’ equity - - 1,812,863 1,812,863Total Liabilities 7,080,016 5,110,136 6,840,953 19,031,105

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XXI. Explanations on Reporting According to Segmentation (continued)

Prior Period Retail CorporateTreasury/

Head Office Total Net interest income 115,597 461,247 224,036 800,880Net fees and commissions income and other operating income 81,984 181,097 8,197 271,278Trading profit / loss 2,702 36,786 10,674 50,162Dividend income - - 11,973 11,973Impairment provision for loans and other receivables (-) 51,492 122,184 2,745 176,421Other operating expenses (-) 151,505 284,845 264,685 701,035Income on discontinued operations - - - -Profit from continued&discontinued operations before taxes (2,714) 272,101 (12,550) 256,837Tax provision for continued &discontinued operations - - (46,670) (46,670) Net profit for the period (2,714) 272,101 (59,220) 210,167

Prior Period Retail Corporate

Treasury/Head Office Total

Segment assets 1,924,478 7,219,746 5,765,414 14,909,638Investments in associates, subsidiaries and jointly controlled entities - - 153,922 153,922Total Assets 1,924,478 7,219,746 5,919,336 15,063,560 Segment liabilities 5,046,831 4,625,113 3,742,164 13,414,108Shareholders’ equity - - 1,649,452 1,649,452Total Liabilities 5,046,831 4,625,113 5,391,616 15,063,560

XXII. Explanations on Other Matters BNP Paribas, holding 50% of TEB Mali Yatırımlar A.Ş. which holds the controlling shareholding of 84.25% of the Bank, has acquired 75% of the shares of Fortis Bank Belgium being the main shareholder of Fortis Bank A.Ş. with 94.11% shareholding, from the State of Belgium based on the resolutions taken at Fortis Holding General Assembly of Shareholders held in Belgium and Netherlands on April 28 and 29, respectively. The share transfer procedures were completed as of May 13, 2009. On September 23, 2009, BRSA has announced its consent on indirect acquisition of 70.52% of total shares of Fortis Bank A.Ş. by BNP Paribas with the 18th article of Banking Act No: 5411. BNP Paribas and the Çolakoğlu Group, the indirect controlling shareholders of TEB, have entered into a Memorandum of Understanding concerning the merger of Türk Ekonomi Bankası A.Ş. (“TEB”) and Fortis Bank A.Ş. on June 3, 2010. Under the Memorandum of Understanding, it has been agreed, subject to BRSA approval, that the two banks will be merged under TEB. Upon approval of the regulatory authorities, as a result of share transfers between the main shareholders following the merger, it is contemplated that TEB Mali Yatırımlar A.Ş (‘‘TEB Mali’’) shall remain as the majority shareholder in TEB and that the Colakoglu Group and the BNP Paribas Group will each continue to hold 50% of TEB Mali. The proposed transactions are subject to execution of definitive contracts and receipt of approvals from various regulatory and corporate bodies. The merger is expected to be concluded by the beginning of 2011.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XXII. Explanations on Other Matters (continued) Following the preparatory studies carried out by TEB and Fortis Bank A.Ş. on the merger feasibility report, to commence implementation of the merger and restructuring transactions, the Board of Directors of TEB resolved on July 12, 2010 that; June 30, 2010 financial statements of the respective merging banks will be the basis of the merger, the effects of restructuring transactions taking place following this date on the merger financial statements shall be considered in the audit report and during the valuation studies of appraiser as well as determining the merger ratio, an independent appraiser be appointed to carry out the valuation studies; and accordingly, TEB General Management was authorised to apply to the BRSA for the purposes of obtaining pre-approval as per the relevant regulation of the BRSA to commence and proceed with the merger procedures. As per the Memorandum of Understanding dated June 3, 2010, the indirect controlling shareholders of TEB, BNP Paribas Group and the Çolakoğlu Group, have completed their negotiations and reached to an agreement on the shareholders agreement and other relevant documents on July 24, 2010. Accordingly, subsequent to obtaining all necessary regulatory approvals and respective corporate approvals, the merger will be realized under TEB. TEB Mali Yatırımlar A.Ş. will continue to be the principal shareholder of TEB, and Çolakoğlu Group and BNP Paribas Group will respectively hold 50% shares of TEB Mali Yatırımlar A.Ş. According to resolution of the Banking Regulation and Supervision Agency dated September 21, 2010 and numbered 3859; as per the 19th Article of Banking Act No: 5411 and Article 5 of the Communique on “Merger, Take-over, Division and Transfer of Shares for the Banks”, it was decided to commence the procedures to cease the legal entity of Fortis Bank A.Ş. and transfer all of its assets and liabilities with respective rights and obligations to Türk Ekonomi Bankası A.Ş., provided that all necesarry approvals from other authorities are obtained. As of October 18, 2010, The Bank signed an exclusive agency agreement with Cardif Hayat Sigorta A.Ş. for the distribution of life insurance products and has also signed an exclusive agency agreement with Fortis Emeklilik ve Hayat A.Ş. for the distribution of pension and life saving products, and received TRY 180,000 in consideration of these agreements. The Bank held an Extraordinary General Assembly on October 19, 2010. At this meeting, the appointment of new members of board of directors and statutory auditors were affirmed; financial statements that will be taken as the basis for the merger with Fortis Bank A.Ş. were approved; the draft merger agreement was approved; and the Bank’s Board of Directors was granted with the authorization to finalize and sign the merger agreement and also make the necessary amendments to the articles of association in relation to the merger. In addition, at the same meeting, the Board of Directors accepted the proposed profit distribution based on the resolution no: 4450/93 of the Board of Directors dated October 1, 2010 and approved without any amendments or objections; to make a profit distribution of TRY 207,017 which is included in the reserves of the 2009 year-end financial statements to the shareholders; and has granted authorization to the Board of Directors in regards to the procedures and transactions relevant to the profit distribution. The profit distribution process has started commencing on October 25, 2010. Following the Extraordinary General Assembly held on October 19, 2010 by the merging parties, the related applications were filed to the Capital Markets Board (“CMB”) as at October 26, 2010 in accordance with Article 11 of the Communiqué Serial: I No: 31 of the Capital Markets Board based on the approval requirement of the CMB. Subsequent to the completion of the appraisals of independent valuers and expert appointed by the court, the merger ratio will be evaluated by the Board of Directors of the merging parties before it will be presented to the CMB and will be publicly disclosed. It was resolved at the Board of Directors meeting of the Bank on November 25, 2010 that 49.90% merger and 1.0518 exchange ratios had been determined as fair and reasonable based on the expert reports of İstanbul 10th Commercial Court and Ernst Young Kurumsal Finansman Danışmanlık A.Ş. It was further resolved that as a result of the increased capital of TRY 1,104,390 in TEB due to the merger, it was proposed that 1 Fortis Bank A.Ş. share shall be exchanged for 1.0518 share of TEB.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XXII. Explanations on Other Matters (continued) In the foregoing expert reports, subsequent events after June 30, 2010 affecting the equity and the financial statements of the Bank and Fortis Bank A.Ş. have been taken into account, and calculations have been made based on the “net assets method”, “discounted dividend method” and “market multiples method”. The foregoing merger transaction, the merger ratios, the capital increase amount and the merger agreement were approved by the decision of the CMB dated December 21, 2010 and numbered 37/1145 before the general assemblies of the respective banks. However, it was also stated that this approval was not an official guarantee of the merger to be recognized by the CMB board and the public. Subsequent to the CMB approval, the required merger disclosures have been made publicly. Following the CMB approval described above and the BRSA approval dated December 30, 2010 and numbered 3998, the merger agreement including ratios and increased capital amount were submitted to the approval of the shareholders at the Extraordinary General Assemblies of the respective banks held on January 25, 2011, and the merger of the two banks was approved with the decision to cease the legal entity of Fortis Bank A.Ş. and transfer all of its assets and liabilities with respective rights and obligations to the Bank. 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). 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 financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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SECTION FOUR

INFORMATION ON FINANCIAL STRUCTURE I. Explanations Related to Capital Adequacy Standard Ratio The method used for risk measurement in determining capital adequacy standard ratio; Capital Adequacy Standard Ratio is calculated in accordance with the Communiqué on "Measurement and Assessment of Capital Adequacy of Banks ", which was published on November 1, 2006 in the Official Gazette numbered 26333 and the Communiqué on "The Amendment in the Communiqué on Measurement and Assessment of Capital Adequacy of Banks" which was published on October 10, 2007 in the Official Gazette numbered 26669. The Bank’s unconsolidated capital adequacy ratio in accordance with the related Communiqué is 14.43% at December 31, 2010 (December 31, 2009 - 17.70%). 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 Communiqué on the "Measurement and Assessment of Capital Adequacy of Banks" and is taken into consideration in the capital adequacy standard ratio calculation. The values deducted from the capital base in the shareholders’ equity computation are excluded while calculating risk-weighted assets, non-cash loans and contingent liabilities. Assets subject to depreciation and impairment among risk-weighted assets are included in the calculations over their net book values after deducting the relative depreciations and provisions. While calculating the basis of non-cash loans subject to credit risk, the net receivable amount from the counter parties net of provision amount set in accordance with the “Communiqué on Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” is multiplied by the loan conversion rates presented in the Article 5, the Clause 1 of the Communiqué on "Measurement and Assessment of Capital Adequacy of Banks", and calculated by applying the risk weights presented in the Capital Adequacy Analysis Form. Receivables from counter parties from derivative foreign currency and interest rate transactions are multiplied by the loan conversion rates presented in the Article 5, the Clause 2 of the Communiqué on "Measurement and Assessment of Capital Adequacy of Banks", and calculated by applying the risk weights presented in the Capital Adequacy Analysis Form.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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I. Explanations Related to Capital Adequacy Standard Ratio (continued)

Information related to the capital adequacy ratio: Risk Weight 0% 10% 20% 50% 100% 150% 200%Risk Weighted Assets, Liabilities and Non-Cash Loans

Balance Sheet Items (Net) Cash 315,391 - 9 - - - -Matured Marketable Securities - - - - - - -Due From Central Bank of Turkey 59 - - - - - -Due From Domestic Banks, Foreign Banks, Branches and Head Office Abroad - - 637,315 - 66,023 - -Interbank Money Market Placements - - - - - - -Receivables From Reverse Repo Transactions - - - - - - -Reserve Deposits 1,711,102 - - - - - -Loans 366,790 - 83,279 3,025,487 7,939,622 28,312 327Non-performing loans (Net) - - - - 122,822 - -Financial Lease Receivables - - - - - - -Available-For-Sale Financial Assets 3,242,797 - - - 18,056 - -Held to Maturity Investments 196,825 - - - - - -Receivables From Installment Sales of Assets - - - - - - -Sundry Debtors - - 212,083 - 5,256 - -Interest and Income Accruals 172,746 - 145 28,358 162,304 - -Subsidiaries, Associates and Entities Under Common Control (Joint Vent.) (Net) - - - - 119,695 - -Tangible Assets - - - - 74,622 - -Other Assets 156,847 - - - 70,843 - -

Off-Balance Sheet Items - - - - - - -Guarantees and Commitments 83,679 - 163,087 - 2,672,537 - -Derivative Financial Instruments - - 137,744 - 53,820 - -

Non Risk Weighted Accounts - - - - - - - Total Value at Risk 6,246,236 - 1,233,662 3,053,845 11,305,600 28,312 327Total Risk Weighted Assets - - 246,732 1,526,923 11,305,600 42,468 654

Summary information related to the capital adequacy ratio: Current

Period Prior

Period Total Risk Weighted Assets (TRWA) 13,122,377 10,110,208 Amount Subject to Market Risk (ASMR) 694,138 326,175 Amount Subject to Operational Risk (ASOR) (*) 1,724,813 1,323,618 Shareholders’ Equity 2,242,780 2,082,025 Shareholders’ Equity / (TRWA + ASMR + ASOR) *100 14.43 17.70

TRWA: Total Risk Weighted Assets ASMR: Amount Subject to Market Risk ASOR: Amount Subject to Operational Risk (*) Operational risk has been calculated by using the Basic Indicator Approach.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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I. Explanations Related to Capital Adequacy Standard Ratio (continued)

Information related to the components of shareholders' equity:

Current Period Prior Period CORE CAPITAL Paid-in capital 1,100,000 1,100,000

Nominal capital 1,100,000 1,100,000 Capital commitments (-) - -

Paid-in capital indexation difference 926 926 Share premium 2,158 2,158 Cancellation profits - - Legal reserves 45,468 34,959

First legal reserve (Turkish Commercial Code 466/1) 39,932 29,423 Second legal reserve (Turkish Commercial Code 466/2) 5,536 5,536 Other legal reserve per special legislation - -

Statutory reserves - - Extraordinary reserves 272,335 279,694

Reserves allocated by the General Assembly 272,335 279,694 Retained earnings - - Accumulated losses - - Foreign currency share capital exchange difference - -

Indexation differences of legal, statutory and extraordinary reserves - - Profit 300,301 210,167

Current period net profit 300,301 210,167 Prior years’ profits - -

Provision for possible losses up to 25% of the Core Capital - - Gains on sale of associates and subsidiaries and properties to be added to capital - - Primary subordinated loans up to 15% of the Core Capital 153,760 148,730 Losses that cannot be covered by reserves (-) - -

Net current period loss - - Prior years’ losses - -

Leasehold improvements (-) 34,884 50,395 Prepaid expenses (-) 22,742 29,475 Intangible assets (-) 10,156 10,910 Deferred tax asset exceeding 10% of the Core Capital (-) - - Excess amount in the Article 56, Clause 3 of the Banking Law (-) - - Total Core Capital 1,807,166 1,685,854 SUPPLEMENTARY CAPITAL General loan loss reserves 106,794 74,628 45% of the revaluation reserve for movable fixed assets - - 45% of the of revaluation reserve for properties - - Bonus shares obtained from associates, subsidiaries and entities under common control - - Primary subordinated loans excluded in the calculation of the Core Capital - - Secondary subordinated loans 287,566 311,846 45% of Marketable securities valuation differences 41,254 9,697

Associates and subsidiaries - - Available for sale securities 41,254 9,697

Indexation differences for capital reserves, profit reserves and retained earnings (Except indexation differences for legal reserves, statutory reserves and extraordinary reserves) - - Total Supplementary Capital 435,614 396,171 TIER III CAPITAL - - CAPITAL 2,242,780 2,082,025 DEDUCTIONS FROM THE CAPITAL - - Shareholdings of banks and financial institutions (Domestic, Foreign) from which the Bank keeps ten percent or more of capitals - - Shareholdings of unconsolidated banks and financial institutions (Domestic, Foreign) from which the Bank keeps less than ten percent of capitals which exceed the ten percent of Bank’s Core and Supplementary Capital - - Secondary subordinated loans granted to Banks and Financial Institutions (Domestic, Foreign) or Qualified Shareholders and placements that possess the nature of their Primary or Secondary Subordinated Debt - - Loans granted being non-compliant with the Articles 50 and 51 of the Banking Law - - The net book value of properties exceeding fifty percent of equity and properties held for sale and properties and commodity to be disposed, acquired in exchange of loans and receivables according to the Article 57 of the Banking Law and have not been disposed yet after 5 years after foreclosure - - Other - - Total Shareholders’ Equity 2,242,780 2,082,025

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

29

II. Explanations Related to Credit Risk

Credit risk is the risk that the Bank is a party in a contract whereby the counterparty fails to meet its obligation and cause to incur a financial loss. The credit allocation is performed on a debtor and a debtor group basis within the limits. In the credit allocation process, many financial and non-financial criteria are taken into account within the framework of the internal rating procedures of the Bank. These criteria include geographical and sector concentrations. The sector concentrations for loans are monitored closely. In accordance with the Bank’s loan policy, the rating of the companies, credit limits and guarantees are considered together, and credit risks incurred are monitored. The credit risks and limits related to treasury activities, the limits of the correspondent banks that are determined by their ratings and the control of the maximum acceptable risk level in relation to the equity of the Bank are monitored daily. Risk limits are determined in connection with these daily transactions, and risk concentration is monitored systematically concerning off-balance sheet operations. As prescribed in the Communiqué on “Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves”, the credit worthiness of the debtors of the loans and other receivables is monitored regularly. Most of the statement of accounts for the loans are derived from audited financial statements. The unaudited documents result from the timing differences between the loan allocation and the audit dates of the financial statements of the companies and subsequently the audited financial statements are obtained from the companies. Credit limits are determined according to the audited statement of accounts, and guarantee factors are developed in accordance with the decision of the credit committee considering the characteristics of the transactions and the financial structures of the companies. For the forward transactions and other similar positions of the Bank, operational limits are set by the Board of Directors and the transactions take place within these limits. The fulfillment of the benefits and proceeds related to forward transactions is realized at maturity. However, in order to minimize the risk, counter positions of existing risks are entered into in the market due to necessity. Indemnified non-cash loans are subject to the same risk weight as outstanding loans matured but not yet paid. 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. Financial institutions abroad and country risks of the Bank are generally taken for the financial institutions and countries that are rated at investment level by international rating agencies and which do not have the risk of failing to meet minimum obligations. Therefore, the probable risks are not material when the financial structure of the Bank is concerned. The Bank does not have a material credit risk concentration as an active participant in the international banking market when the financial operations of the other financial institutions are concerned. As of December 31, 2010, the receivables of the Bank from its top 100 cash loan customers amount to TRY 1,898,762 (December 31, 2009 – TRY 1,712,095) with a share of 16.33% in the total cash loans (December 31, 2009 – 19.45%). As of December 31, 2010, the receivables of the Bank from its top 100 non-cash loan customers amount to TRY 1,524,875 (December 31, 2009 – TRY 1,250,742) with a share of 37.48% in the total non-cash loans (December 31, 2009 – 36.48%).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

30

II. Explanations Related to Credit Risk (continued) As of December 31, 2010, the share of cash and non-cash receivables of the Bank from its top 100 customers in total balance sheet and off-balance sheet assets is 17.29%. (December 31, 2009 – 19.22%). As of December 31, 2010, the general loan loss provision related with the credit risk taken by the Bank is TRY 106,794 (December 31, 2009 – TRY 74,628). Credit risk by types of borrowers and geographical concentration:

Loans to Real Persons and Legal Entities

Loans to Banks and Other Financial

Institutions Marketable Securities* Other Loans**

Current Period

Prior Period

Current Period

Prior Period

Current Period

Prior Period

Current Period

Prior Period

Loans according to borrowers

11,349,983 8,796,343 1,106,756 597,973 3,725,750 2,669,125 337,034 349,234

Private Sector 8,235,969 6,579,969 383,387 146,393 - - 275,780 287,980

Public Sector 34,738 4,925 - 16,448 3,707,870 2,664,533 - -

Banks - - 723,369 435,132 - - 61,254 61,254

Retail 3,079,276 2,211,449 - - - - - -

Share Certificates - - - - 17,880 4,592 - -

Information according to geographical concentration 11,349,983 8,796,343 1,106,756 597,973 3,725,750 2,669,125 337,034 349,234

Domestic 11,213,636 8,688,951 859,680 413,881 3,722,362 2,665,463 275,780 287,980

European Union Countries 48,662 43,980 104,947 69,549 - - 61,254 61,254

OECD Countries*** 605 117 5,449 4,550 - - - -

Off-shore Banking Regions 22,821 17,272 86,114 67,203 1,197 1,147 - -

USA, Canada 8,906 5,163 50,289 41,865 2,191 2,515 - -

Other Countries 55,353 40,860 277 925 - - - -

Total 11,349,983 8,796,343 1,106,756 597,973 3,725,750 2,669,125 337,034 349,234 * Includes marketable securities designated at fair value through profit or loss, available-for-sale and held-to-maturity. ** Includes the on balance sheet transactions classified in the Uniform Chart of Accounts except the ones in the first three categories and the transactions defined as loan in the Article 48 of the Banking Act No: 5411. *** OECD countries other than European Union countries, USA and Canada.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

31

II. Explanations Related to Credit Risk (continued) Information according to geographical concentration :

Assets LiabilitiesNon-Cash

LoansEquity

Investments

Net Income/

LossCurrent Period Domestic 18,407,235 12,097,287 3,990,167 - 300,301 European Union Countries 234,627 4,282,946 10,805 - -OECD Countries (*) 10,333 38,416 - - -Off-shore Banking Regions 112,941 239,871 16,123 - -USA, Canada 90,644 364,134 - - -Other Countries 55,630 195,588 51,288 - -Associates, Subsidiaries and Entities Under Common Control (Joint Vent.) - - - 119,695 -Unallocated Assets/Liabilities (**) - - - - -Total 18,911,410 17,218,242 4,068,383 119,695 300,301 Prior Period Domestic 14,518,783 10,962,520 3,383,435 - 210,167European Union Countries 154,280 946,527 12,286 - -OECD Countries (*) 6,795 54,923 8 - -Off-shore Banking Regions 98,555 731,322 10,913 - -USA, Canada 89,440 398,426 - - -Other Countries 41,785 320,390 21,978 - -Associates, Subsidiaries and Entities Under Common Control (Joint Vent.) - - - 153,922 -Unallocated Assets/Liabilities (**) - - - - -Total 14,909,638 13,414,108 3,428,620 153,922 210,167 (*) OECD countries other than EU countries, USA and Canada. (**) Assets and liabilities that cannot be allocated on a coherent basis.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

32

II. Explanations Related to Credit Risk (continued) Sector concentrations for cash loans :

Current Period Prior Period TRY (%) FC (%) TRY (%) FC (%)

Agricultural 351,395 3.86 85,443 3.37 238,642 3.50 70,988 3.57

Farming and Raising Livestock 312,455 3.44 69,417 2.74 203,062 2.98 53,943 2.70 Forestry, Wood and Paper 30,259 0.32 15,857 0.62 24,598 0.36 15,566 0.78 Fishery 8,681 0.10 169 0.01 10,982 0.16 1,479 0.09

Manufacturing 3,184,687 35.02 1,779,644 70.17 2,732,120 40.09 1,484,127 74.67 Mining and Quarry 175,602 1.93 53,291 2.10 187,474 2.75 63,422 3.19 Production 2,997,436 32.96 1,676,625 66.11 2,499,316 36.67 1,366,193 68.74 Electricity, Gas and Water 11,649 0.13 49,728 1.96 45,330 0.67 54,512 2.74

Construction 410,875 4.52 89,223 3.52 328,971 4.83 65,363 3.29 Services 1,797,746 19.77 545,329 21.51 1,140,757 16.74 319,928 16.10

Wholesale and Retail Trade 480,878 5.29 50,846 2.00 296,997 4.35 38,444 1.93 Hotel, Tourism, Food and Beverage Services 123,398 1.36 86,278 3.40

89,020

1.31

66,573

3.35

Transportation and Communication 335,031 3.68 117,564 4.64

238,557

3.50

97,689

4.92

Financial Institutions 488,601 5.37 42,045 1.66 220,707 3.24 23,388 1.18 Real Estate and Renting Services 143,417 1.58 237,524 9.38

114,309

1.68

76,786

3.86

Self-Employment Services 90,466 0.99 1,556 0.06 87,821 1.29 1,135 0.06 Education Services 11,033 0.12 277 0.01 10,052 0.15 207 0.01 Health and Social Services 124,922 1.38 9,239 0.36 83,294 1.22 15,706 0.79

Other(*) 3,349,705 36.83 36,386 1.43 2,374,602 34.84 47,065 2.37 Total 9,094,408 100.00 2,536,025 100.00 6,815,092 100.00 1,987,471 100.00

(*) Accruals are included in other.

The table below shows the maximum exposure to credit risk for the components of the financial statements: Current Period Prior Period Central Bank of Turkey 1,711,896 1,183,741 Due from banks 703,484 403,601 Other money markets - 694,917 Trading financial assets 96,061 126,610 Derivative financial instruments held for trading 98,991 61,695 Derivative financial instruments for hedging purposes

11,157 31,330

Financial assets available-for-sale 3,412,085 1,661,712 Held-to-maturity investments 217,604 880,803 Loans 11,753,255 8,990,715 Total 18,004,533 14,035,124 Contingent liabilities 4,068,383 3,428,620 Commitments 3,716,834 3,714,270 Total 7,785,217 7,142,890 Total credit risk exposure 25,789,750 21,178,014

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

33

II. Explanations Related to Credit Risk (continued) Credit quality per class of financial assets as of December 31, 2010 and December 31, 2009 is as follows:

Current Period

Neither past due nor impaired

Past due or individually impaired Total

Loans and advances to customers Commercial lending 8,100,720 490,009 8,590,729Consumer lending 2,491,312 91,843 2,583,155Credit cards 504,616 74,755 579,371

Total 11,096,648 656,607 11,753,255

Prior Period

Neither past due nor impaired

Past due or individually impaired Total

Loans and advances to customers Commercial lending 6,184,715 541,331 6,726,046Consumer lending 1,696,745 61,846 1,758,591 Credit cards 413,164 92,914 506,078

Total 8,294,624 696,091 8,990,715

Carrying amount per class of financial assets whose terms have been renegotiated: Current Period Prior PeriodLoans and advances to customers

Commercial lending 122,144 122,721Consumer lending 2,957 4,529Credit cards 4,162 8,183

Total 129,263 135,433

Credit Rating System The credit risk is assessed through the internal rating system of the Bank, by classifying loans from highest grade to lowest grade according to the probability of default. As of December 31, 2010, consumer loans and business loans are excluded from the internal rating system of the Bank and those loans are 37% of total loan portfolio. The risks that are subject to rating models can be allocated as follows:

Category Description of Category Share in the Total %

1st Category The borrower has a very strong financial structure 28.56 2nd Category The borrower has a good financial structure 19.63 3rd Category The borrower has an intermediate level of financial structure 33.68 4th Category The financial structure of the borrower has to be closely monitored in the

medium term

18.13

Total 100.00

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

34

III. Explanations Related to Market Risk

The Bank has established market risk management operations and taken the necessary precautions in order to hedge market risk within its financial risk management purposes, in accordance with the Communiqué on “Measurement and Assessment of Capital Adequacy of Banks” issued on Official Gazette dated November 1, 2006 numbered 26333.

The Board of Directors determines the limits for the basic risk that the Bank is exposed to. Those limits are revised periodically in line with the market forces and strategies of the Bank. Additionally, the Board of Directors has ensured that the risk management division and senior management has taken necessary precautions to describe, evaluate, control and manage risks faced by the Bank.

Interest rate and exchange rate risks, arising from the volatility in the financial markets, of the financial positions taken by the Bank related to balance sheet and off-balance sheet accounts are measured, and in the computation of capital adequacy, the amount subject to VAR calculated by using the standard method (summarized below) is taken into consideration. Besides the standard method, VAR is calculated by using internal model as supported by scenario analysis and stress tests. VAR is calculated daily by three different methods which are historic simulation, Monte Carlo simulation and parametric method, and results are reported daily to the management.

a) Information Related to Market Risk

Amount (I) Capital Requirement to be Employed For General Market Risk - Standard Method 47,495 (II) Capital Requirement to be Employed For Specific Risk - Standard Method 1,434 (III) Capital Requirement to be Employed For Currency Risk - Standard Method 6,595 (IV) Capital Requirement to be Employed For Commodity Risk – Standard Method - (V) Capital Requirement to be Employed For Settlement Risk - Standard Method - (VI) Total Capital Requirement to be Employed For Market Risk Resulting From Options - Standard Method 7 (VII) Total Capital Requirement to be Employed For Market Risk in Banks Using Risk Measurement Model - (VIII) Total Capital Requirement to be Employed For Market Risk (I+II+III+IV+V+VI) 55,531 (IX) Amount Subject to Market Risk (12,5 x VIII) or (12,5 x VII) 694,138

b) Average market risk table calculated at month ends during the period:

Current Period Prior Period

Average Maximum Minimum Average Maximum Minimum

Interest Rate Risk 27,944 46,166 16,544 16,089 20,898 9,767

Common Stock Risk 1,266 2,775 288 243 311 210

Currency Risk 6,390 10,040 2,654 8,119 16,912 4,909

Commodity Risk - - - - - -

Settlement Risk - - - - - -

Option Risk 131 645 5 3,250 12,122 5

Total Value Subject to Risk 446,643 694,138 270,800 346,265 456,463 274,263

Other price risks The Bank is not subject to a significant share price risk due to share certificates.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

35

IV. Explanations Related to Operational Risk

a) Operational risk has been calculated using the Basic Indicator Approach. Market risk measurements are performed monthly.

b) The Bank does not use the Standard Approach. V. Explanations Related to Currency Risk Foreign currency risk indicates the probability of loss that banks are subject to due to the exchange rate changes in the market. While calculating the share capital requirement, all foreign currency assets, liabilities and forward transactions of the Bank are taken into consideration and value at risk is calculated by using the standard method.

The Board of Directors sets limits for the positions, which are followed up daily. Any possible value changes in the foreign currency transactions in the Bank’s positions are also monitored.

As an element of the Bank’s risk management strategies, foreign currency liabilities are hedged against exchange rate risk by derivative instruments.

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 within the limits set by the Board of Directors. The monitoring of risk and risk related transactions occurring in the money markets is performed daily and reported to the Bank’s Asset-Liability Committee on a weekly basis.

As of December 31, 2010, the Bank's net long position is TRY 25,496 (December 31, 2009 - TRY 18,435 net long) resulting from short position on the balance sheet amounting to TRY 279,358 (December 31, 2009 - TRY 517,674 short) and long position on the off-balance sheet amounting to TRY 304,854 (December 31, 2009 - TRY 536,109 long). The announced current foreign exchange buying rates of the Bank at December 31, 2010 and the previous five working days in full TRY are as follows:

24.12.2010 27.12.2010 28.12.2010 29.12.2010 30.12.2010 31.12.2010 USD 1.5392 1.5403 1.5416 1.5567 1.5460 1.5376 JPY 0.0185 0.0185 0.0187 0.0189 0.0189 0.0188 EURO 2.0204 2.0260 2.0406 2.0437 2.0491 2.0551

The simple arithmetic averages of the major current foreign exchange buying rates of the Bank for the thirty days before December 31, 2010 are as follows:

Monthly Average Foreign Exchange Rate

USD 1.5127 JPY 0.0181 EURO 2.0000

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

36

V. Explanations Related to Currency Risk (continued) Information on the foreign currency risk of the Bank:

Current Period EUR USD YEN OTHER TOTAL Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased, Precious Metals) and Balances with the Central Bank of Turkey. 524,246 681,955 170 34,280 1,240,651

Banks 103,418 132,365 1,716 53,157 290,656 Financial Assets at Fair Value Through Profit and Loss (*****) 2,818 2,703 - - 5,521 Money Market Placements - - - - - Available-For-Sale Financial Assets 200,369 215,573 - - 415,942 Loans (**) 1,034,010 1,872,105 7,445 405,013 3,318,573 Subsidiaries, Associates and Entities Under Common Control (Joint Vent.) 61,254 - - - 61,254 Held-To-Maturity Investments - - - - - Derivative Financial Assets for Hedging Purposes - 43 - - 43 Tangible Assets - - - - - Intangible Assets - - - - - Other Assets (***) 24,519 41,838 - 29 66,386

Total Assets 1,950,634 2,946,582 9,331 492,479 5,399,026 Liabilities

Bank Deposits 12,472 23,651 40 26,649 62,812 Foreign Currency Deposits (*) 1,221,152 2,080,761 1,131 225,284 3,528,328 Money Market Borrowings - - - - - Funds Provided From Other Financial Institutions 1,429,713 622,621 1,224 11,864 2,065,422 Marketable Securities Issued - - - - - Sundry Creditors 1,571 18,379 - 271 20,221 Derivative Financial Liabilities for Hedging Purposes - - - - -

Other Liabilities (***) 240 1,233 - 128 1,601 Total Liabilities 2,665,148 2,746,645 2,395 264,196 5,678,384 Net Balance Sheet Position (714,514) 199,937 6,936 228,283 (279,358) Net Off-Balance Sheet Position 862,991 (351,932) (7,363) (198,842) 304,854

Financial Derivative Assets (****) 1,706,252 1,827,544 37,037 269,470 3,840,303 Financial Derivative Liabilities (****) 843,261 2,179,476 44,400 468,312 3,535,449 Non-Cash Loans (******) 660,214 1,375,754 1,937 45,377 2,083,282

Prior Period Total Assets 1,621,213 2,421,643 16,767 335,721 4,395,344 Total Liabilities 2,092,184 2,623,357 14,461 183,016 4,913,018 Net Balance Sheet Position (470,971) (201,714) 2,306 152,705 (517,674) Net Off-Balance Sheet Position 503,108 200,149 (5,228) (161,920) 536,109 Financial Derivative Assets (****) 1,024,703 1,316,243 113,943 160,165 2,615,054 Financial Derivative Liabilities (****) 521,595 1,116,094 119,171 322,085 2,078,945 Non-Cash Loans (******) 709,903 1,138,496 3,353 44,167 1,895,919

(*) Precious metal accounts amounting to TRY 129,374 (December 31, 2009 - TRY 23,762) are included in the foreign currency deposits.

(**) Foreign currency indexed loans amounting to TRY 782,548 (December 31, 2009 – TRY 649,252 ) are included in the loan portfolio. (***) TRY 5 (December 31, 2009 – TRY 100) prepaid expenses are deducted from other assets, and TRY 30,813 (December 31, 2009 –

TRY 21,235) expense accruals from derivative financial instruments, and TRY 19,529 (December 31, 2009 – TRY 12,222) provision for general loan losses are deducted from other liabilities.

(****) Forward asset and marketable securities purchase-sale commitments of TRY 181,939 (December 31, 2009 – TRY 117,828) are added to derivative financial assets and TRY 181,837 (December 31, 2009 – TRY 117,839) has been added to derivative financial liabilities.

(*****) TRY 17,648 (December 31, 2009 – TRY 18,080) income accruals from derivative financial instruments is deducted from Financial Assets at Fair Value Through Profit and Loss.

(******)There are no effects on the net off-balance sheet position.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

37

V. Explanations Related to Currency Risk (continued) Foreign currency sensitivity: The Bank is mainly exposed to EUR and USD currency risks. The following table details the Bank’s sensitivity to a 10% increase and decrease in the TRY against USD and EUR. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. A positive number indicates an increase in profit or loss and other equity in the case of short position and a decrease in the case of long position where the TRY strengthens against USD and EUR.

Change in currency rate in %

Effect on profit or loss

Effect on equity (*)

December 31, 2010

December 31, 2009

December 31, 2010

December 31, 2009

USD 10 increase (15,200) (157) 158 396 USD 10 decrease 15,200 157 (158) (396) EUR 10 increase 14,848 3,214 (188) 77 EUR 10 decrease (14,848) (3,214) 188 (77)

(*) The effect on equity does not include the effect of changes in foreign exchange rate on the income statement. The Bank’s sensitivity to foreign currency rates have not changed significantly during the current period. The positions taken in line with market expectations can increase the foreign currency sensitivity from period to period.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

38

VI. Explanations Related to Interest Rate Risk

Interest rate risk shows the probability of loss related to the changes in interest rates depending on the Bank’s position, and it is managed by the Asset-Liability Committee. The interest rate sensitivity of assets, liabilities and off-balance sheet items related to this risk are measured by using the standard method and included in the market risk for capital adequacy. The priority of the risk management department is to protect from interest rate volatility. Duration, maturity and sensitivity analysis performed within this context are calculated by the risk management department and reported to the Asset-Liability Committee. Simulations on interest income are performed in connection with the forecasted economic indicators used in the budget of the Bank. The Bank management monitors the market interest rates on a daily basis and revises the interest rates of the Bank when necessary. Since the Bank does not allow maturity mismatches or imposes limits on mismatch, no significant interest rate risk exposure is expected. Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on repricing dates): Up to 1

Month 1-3

Months 3-12

Months 1-5

Years Over

5 Years Non-interest

Bearing

Total Current Period Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased, Precious Metals) and Balances with the Central Bank of Turkey - - - - - 2,027,296 2,027,296 Banks 502,389 - - - - 201,095 703,484 Financial Assets at Fair Value Through Profit and Loss 51,449 6,470 49,776 5,967 2,882 78,508 195,052 Money Market Placements - - - - - - - Available-For-Sale Financial Assets 278,742 70,438 997,533 1,694,487 353,005 17,880 3,412,085 Loans(*) 4,939,032 867,655 1,521,186 3,601,238 639,156 184,988 11,753,255 Held-To-Maturity Investments 106,040 66,789 44,775 - - - 217,604 Other Assets - 187 2,267 1,091 9 718,775 722,329

Total Assets 5,877,652 1,011,539 2,615,537 5,302,783 995,052 3,228,542 19,031,105 Liabilities

Bank Deposits 1,105,143 5,052 3,156 - - 98,280 1,211,631 Other Deposits 7,197,706 1,128,507 122,969 31 - 2,338,306 10,787,519 Money Market Borrowings 74,357 - - - - - 74,357 Sundry Creditors - - - - - 337,252 337,252 Marketable Securities Issued - - - - - - - Funds Provided From Other Financial Institutions 784,000 1,149,864 1,745,006 24,673 373,117 - 4,076,660 Other Liabilities 39 416 22,000 40,032 28,102 2,453,097 2,543,686

Total Liabilities 9,161,245 2,283,839 1,893,131 64,736 401,219 5,226,935 19,031,105 Balance Sheet Long Position - - 722,406 5,238,047 593,833 - 6,554,286 Balance Sheet Short Position (3,283,593) (1,272,300) - - - (1,998,393) (6,554,286) Off-Balance Sheet Position - - 6,356 4,008 (2,189) - 8,175 Total Position (3,283,593) (1,272,300) 728,762 5,242,055 591,644 (1,998,393) 8,175

(*) Loans with floating interest rates amounting to TRY 3,199,937 are included in “Up to 1 Month” while mark to market differences

from hedged loans amounting to TRY 33,648 are included in “1-5 Years”.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

39

VI. Explanations Related to Interest Rate Risk (continued) Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on repricing dates) (continued): The other assets line in the non-interest bearing column consists of tangible assets amounting to TRY 109,506 intangible assets amounting to TRY 10,156, assets held for resale amounting to TRY 33,982, subsidiaries amounting to TRY 119,690 and entities under common control (joint vent.) amounting to TRY 5 while other liabilities line includes the shareholders’ equity of TRY 1,812,863. Average interest rates applied to monetary financial instruments: EURO

% USD

% YEN

% TRY

% Current Period Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) And Balances With the Central Bank Of Turkey - - - 3.75 Banks 0.19 0.16 - 6.96 Financial Assets At Fair Value Through Profit And Loss 3.18 4.78 - 9.02 Money Market Placements 1.05 - 6.41 Available-For-Sale Financial Assets 3.98 5.72 - 8.39 Loans 4.59 4.11 5.36 12.66 Held-To-Maturity Investments - - - 12.58

Liabilities Bank Deposits 0.51 0.17 - 5.70 Other Deposits 1.99 2.34 0.10 7.18 Money Market Borrowings - - - 6.73 Sundry Creditors - - - - Marketable Securities Issued - - - - Funds Provided From Other Financial Institutions 3.11 2.60 3.10 7.71

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

40

VI. Explanations Related to Interest Rate Risk (continued) Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on repricing dates) (continued): Up to 1

Month 1-3

Months 3-12

Months 1-5

Years Over

5 Years Non-interest

Bearing

Total Prior Period Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased, Precious Metals) and Balances with the Central Bank of Turkey. 737,814 - - - - 773,890 1,511,704 Banks 237,172 7,845 10,582 - - 148,002 403,601 Financial Assets at Fair Value Through Profit and Loss 2,669 1,952 70,618 55,733 2,232 55,101 188,305 Money Market Placements 694,917 - - - - - 694,917 Available-For-Sale Financial Assets 306,546 35,130 723,346 556,398 35,700 4,592 1,661,712 Loans(*) 3,856,153 428,266 1,498,471 2,439,707 519,001 249,117 8,990,715 Held-To-Maturity Investments - 734,782 44,434 101,587 - - 880,803 Other Assets 70 - 231 3,579 19 727,904 731,803

Total Assets 5,835,341 1,207,975 2,347,682 3,157,004 556,952 1,958,606 15,063,560 Liabilities

Bank Deposits 64,525 - - - - 82,854 147,379 Other Deposits 5,977,852 1,194,838 111,955 69 - 1,989,542 9,274,256 Money Market Borrowings 1,071,971 - - - - - 1,071,971 Sundry Creditors - - - - - 257,400 257,400 Marketable Securities Issued - - - - - - - Funds Provided From Other Financial Institutions

922,020

123,847

756,812

5,910

324,500

-

2,133,089

Other Liabilities 6,939 3 4,020 50,825 16,461 2,101,217 2,179,465

Total Liabilities 8,043,307 1,318,688 872,787 56,804 340,961 4,431,013 15,063,560 Balance Sheet Long Position - - 1,474,895 3,100,200 215,991 - 4,791,086 Balance Sheet Short Position (2,207,966) (110,713) - - - (2,472,407) (4,791,086) Off-Balance Sheet Position 13,452 - 8,733 3,564 (3,648) - 22,101 Total Position (2,194,514) (110,713) 1,483,628 3,103,764 212,343 (2,472,407) 22,101 (*) Loans with floating interest rates amounting to TRY 2,311,525 are included in “Up to 1 Month” while mark to market differences

from hedged loans amounting to TRY 46,589 are included in “1-5 Years”.

The other assets line in the non-interest bearing column consists of tangible assets amounting to TRY 134,682; intangible assets amounting to TRY 10,910, assets held for resale amounting to TRY 20,341, subsidiaries amounting to TRY 153,921, entities under common control (joint vent.) amounting to TRY 1 and the other liabilities line includes the shareholders’ equity of TRY 1,649,452.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

41

VI. Explanations Related to Interest Rate Risk (continued)

Average interest rates applied to monetary financial instruments

EURO %

USD %

YEN %

TRY %

Prior Period Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) And Balances With the Central Bank Of Turkey - - - 7.49 Banks 0.39 0.21 - 10.47 Financial Assets At Fair Value Through Profit And Loss 5.69 7.52 - 12.30 Money Market Placements 1.25 0.84 - 11.18 Available-For-Sale Financial Assets 5.27 6.57 - 13.17 Loans 5.67 5.60 4.71 19.69 Held-To-Maturity Investments - - - 13.93

Liabilities Bank Deposits 1.54 1.23 0.25 7.02 Other Deposits 2.90 2.84 0.30 10.29 Money Market Borrowings - - - 8.18 Sundry Creditors - - - - Marketable Securities Issued - - - - Funds Provided From Other Financial Institutions 4.38 4.45 - 13.56

Interest rate sensitivity:

If interest rates had been increased by 0.5% in TRY and FC and all other variables were held constant:

• Net profit of the Bank for the year would have changed by TRY 6,812 (December 31, 2009 – TRY 3,872).

The interest rate sensitivity the Bank is exposed to due to its balance sheet composition is calculated with the net interest income approach. The net interest income is calculated by using the original interest rates until maturity and using market interest curves until the remaining annualized period subject to analysis. This calculation is re-performed by altering the market interest curves based on rate changes accepted by management. The difference between the initial and re-performed calculation is assessed to be the interest sensitivity of the Bank.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

42

VII. Explanations Related to Liquidity Risk Liquidity risk occurs when there is insufficient cash or cash inflows to meet the cash outflows completely and timely. Liquidity risk may also occur when the market penetration is not adequate, when the open positions cannot be closed quickly at suitable prices and sufficient amounts due to barriers and break-ups at the markets. The Bank’s policy is to establish an asset structure that can meet all kinds of liabilities by liquid sources at all times. In this context, liquidity problem has not been faced in any period. In order to maintain this, the Board of Directors of the Bank continuously determines standards for the liquidity ratios, and monitors them. According to the general policies of the Bank, the matching of the maturity and interest rate structure of assets, and liabilities is always established within the asset liability management strategies. A positive difference is tried to be established between the yields of TRY and foreign currency assets and liabilities on the balance sheet and their costs. According to this strategy, the Bank manages its maturity risk within the limits determined by Bank’s Board of Directors. When the funding and liquidity sources are considered, the Bank covers majority of its liquidity need from deposits, and in addition to this source, it makes use of pre-financing and syndication products to generate additional sources. Generally the Bank is in a lender position.

The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Bank. The most important of these is to maintain limits on the ratio of net liquid assets to customer liabilities, set to reflect market conditions. The ratios realized during the year were as follows:

Current Period %

Prior Period %

Average during the period 20 29 Highest 27 39 Lowest 16 20

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

43

VII. Explanations Related to Liquidity Risk (continued) Presentation of assets and liabilities according to their remaining maturities: Current Period

Demand

Up to 1 Month

1-3 Months

3-12 Months

1-5 Years

Over 5 Years

Undistributed (*) Total

Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased, Precious Metals) and Balances with the Central Bank of Turkey 965,010 1,062,286 - - - - - 2,027,296 Banks 201,095 502,389 - - - - - 703,484 Financial Assets at Fair Value Through Profit and Loss - 63,715 21,095 89,400 14,992 5,850 - 195,052 Money Market Placements - - - - - - - - Available-For-Sale Financial Assets 17,880 49,257 - 598,296 1,848,618 898,034 - 3,412,085 Loans(**) - 4,948,191 673,541 1,512,632 3,856,913 639,156 122,822 11,753,255 Held-To-Maturity Investments - 106,040 - - 111,564 - - 217,604 Other Assets - 401,492 187 9,867 1,091 9 309,683 722,329

Total Assets 1,183,985 7,133,370 694,823 2,210,195 5,833,178 1,543,049 432,505 19,031,105 Liabilities

Bank Deposits 98,280 1,105,143 5,052 3,156 - - - 1,211,631 Other Deposits 2,338,306 7,197,706 1,128,507 122,969 31 - - 10,787,519 Funds Provided From Other Financial Institutions - 539,793 1,132,711 1,726,126 131,250 546,780 - 4,076,660 Money Market Borrowings - 74,357 - - - - - 74,357 Marketable Securities Issued - - - - - - - - Sundry Creditors - 337,252 - - - - - 337,252 Other Liabilities - 349,490 11,721 100,681 47,604 30,290 2,003,900 2,543,686

Total Liabilities 2,436,586 9,603,741 2,277,991 1,952,932 178,885 577,070 2,003,900 19,031,105 Liquidity Gap (1,252,601) (2,470,371) (1,583,168) 257,263 5,654,293 965,979 (1,571,395) - Prior Period Total Assets 670,061 6,206,442 927,322 2,519,163 3,633,192 556,952 550,428 15,063,560 Total Liabilities 2,329,796 8,060,023 1,305,989 837,511 157,132 591,585 1,781,524 15,063,560 Liquidity Gap (1,659,735) (1,853,581) (378,667) 1,681,652 3,476,060 (34,633) (1,231,096) -

(*) The assets which are necessary to provide banking services and could not be liquidated in a short term, such as tangible assets,

investments in subsidiaries and associates, office supply inventory, prepaid expenses and non-performing loans, are classified as under undistributed.

(**) Loans with floating interest rates amounting to TRY 3,146,930 (December 31, 2009: TRY 2,311,525) are included in “Up to 1 Month” while mark to market differences from hedged loans amounting to TRY 33,648 (December 31, 2009: TRY 46,589) are included in “1-5 Years”.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

44

VII. Explanations Related to Liquidity Risk (continued) Analysis of financial liabilities by remaining contractual maturities:

Demand Up to 1 Month

1-3 Months

3-12 Months

1-5 Years

Over 5 Years

Adjustments Total

As of December 31, 2010 Money market borrowings - 74,422 - - - - (65) 74,357 Other deposits 2,338,306 7,215,449 1,138,661 124,833 33 - (29,763) 10,787,519 Bank deposits 98,280 1,105,629 5,098 3,271 - - (647) 1,211,631 Funds provided from other financial institutions

-

545,975

1,145,029

1,791,016

254,614

578,936 (238,910)

4,076,660

Total 2,436,586 8,941,475 2,288,788 1,919,120 254,647 578,936 (269,385) 16,150,167

As of December 31, 2009 Money market borrowings - 1,073,776 - - - - (1,805) 1,071,971 Other deposits 1,989,542 5,992,823 1,206,439 116,755 73 - (31,376) 9,274,256 Bank deposits 82,854 64,571 - - - - (46) 147,379 Funds provided from other financial institutions - 649,582 108,072 750,553 223,256 633,259 (231,633) 2,133,089 Total 2,072,396 7,780,752 1,314,511 867,308 223,329 633,259 (264,860) 12,626,695

Analysis of contractual expiry by maturity of the Bank’s derivative financial instruments:

Up to 1 Month

1-3 Months

3-12 Months

1-5 Years

Over 5 Years

Total

As of December 31, 2010 Derivative financial instruments for hedging purposes

Fair value hedge 290 263 137,009 36,878 54,510 228,950 Held for trading transactions

Foreign exchange forward contracts 358,010 264,598 293,792 7,571 - 923,971 Currency swaps 381,910 60,625 670,796 357,236 - 1,470,567 Interest rate swaps 63 9,828 8,651 43,172 5,055 66,769

Foreign currency futures-sell - 25,076 227,192 - - 252,268 Foreign currency options-sell 549,842 530,740 1,073,571 8,621 32,901 2,195,675 Total 1,290,115 891,130 2,411,011 453,478 92,466 5,138,200

As of December 31, 2009 Derivative financial instruments for hedging purposes

Fair value hedge 53,145 1,428 129,455 166,432 62,240 412,700 Held for trading transactions

Foreign exchange forward contracts 341,974 187,673 206,776 43,965 - 780,388 Currency swaps 553,175 89,324 110,916 213,511 - 966,926 Interest rate swaps 117 6,634 5,771 34,064 - 46,586

Foreign currency futures-sell 136,586 55,898 55,898 - - 248,382 Foreign currency options-sell 516,711 340,034 293,463 - - 1,150,208 Total 1,601,708 680,991 802,279 457,972 62,240 3,605,190

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

45

VIII. Explanations Related to Presentation of Financial Assets and Liabilities at Fair Value The table below shows the book value and the fair value of the financial assets and liabilities which are not disclosed at their fair value in the financial statements of the Bank. Current period investment securities are comprised of interest-bearing assets held-to-maturity and interest-bearing assets available-for-sale. The fair value of the held to maturity assets is determined by market prices or quoted market prices of other marketable securities which are subject to redemption with same characteristics in terms of interest, maturity and other similar conditions when market prices cannot be determined. The book value of demand deposits, money market placements with floating interest rate and overnight deposits represents their fair values due to their short-term nature. The estimated fair value of deposits and funds provided from other financial institutions with fixed interest rate is calculated by determining their cash flows discounted by the current interest rates used for other liabilities with similar characteristics and maturity structure. The fair value of loans is calculated by determining the cash flows discounted by the current interest rates used for receivables with similar characteristics and maturity structure. The book value of the sundry creditors reflect their fair values since they are short-term.

Book Value Fair Value Current Period Prior Period Current Period Prior PeriodFinancial Assets 16,086,428 12,631,748 16,233,942 12,487,942

Money Market Placements - 694,917 - 694,917Banks 703,484 403,601 703,484 403,601Available-For-Sale Financial Assets 3,412,085 1,661,712 3,412,085 1,661,712Held-To-Maturity Investments 217,604 880,803 253,460 917,918Loans 11,753,255 8,990,715 11,864,913 8,809,794

Financial Liabilities 16,487,419 12,884,095 16,477,669 12,775,050Bank Deposits 1,211,631 147,379 1,210,800 147,380Other Deposits 10,787,519 9,274,256 10,778,600 9,165,210Funds Borrowed From Other Financial Institutions (*) 4,151,017 3,205,060 4,151,017 3,205,060Marketable Securities Issued - - - -Sundry Creditors 337,252 257,400 337,252 257,400

(*) Funds provided under repo transactions and interbank money market takings are included in funds borrowed from other financial

institutions.

The fair values of financial assets and financial liabilities are determined as follows: • Level 1: The fair value of financial assets and financial liabilities with standard terms and conditions and

traded on active liquid markets are determined with reference to quoted market prices; • Level 2: The fair value of other financial assets and financial liabilities are determined in accordance with

inputs other than quoted prices included within Level 1, that are observable either directly or indirectly in the market.

• Level 3: The fair value of the financial assets and financial liabilities where there is no observable market

data.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

46

VIII. Explanations Related to Presentation of Financial Assets and Liabilities by Fair Value (continued)

The following table shows an analysis of financial instruments recorded at fair value, between those whose fair value is recorded on quoted market prices, those involving valuation techniques where all model inputs are observable in the market and, those where the valuation techniques involves the use of non observable inputs.

December 31, 2010 Level 1 Level 2 Level 3 Total Financial Assets Financial assets at fair value through profit and loss 96,061 98,991 - 195,052

Public sector debt securities 96,061 - - 96,061

Derivative financial assets held for trading - 98,991 - 98,991

Derivative financial assets for hedging purposes - 11,157 - 11,157 Available-for-sale financial assets 3,397,417 14,668 - 3,412,085

Public sector debt securities 3,394,205 - - 3,394,205

Other available-for-sale financial assets 3,212 14,668 - 17,880

Financial Liabilities Derivative financial liabilities held for trading 6,168 89,311 - 95,479 Derivative financial liabilities for hedging purposes - 56,547 - 56,547

December 31, 2009 Level 1 Level 2 Level 3 Total Financial Assets Financial assets at fair value through profit and loss 126,840 61,465 - 188,305

Public sector debt securities 126,610 - - 126,610

Derivative financial assets held for trading 230 61,465 - 61,695

Derivative financial assets for hedging purposes - 31,330 - 31,330 Available-for-sale financial assets 1,659,635 2,077 - 1,661,712

Public sector debt securities 1,657,120 - - 1,657,120

Other available-for-sale financial assets 2,515 2,077 - 4,592

Financial Liabilities Derivative financial liabilities held for trading 14,549 37,320 - 51,869 Derivative financial liabilities for hedging purposes - 73,493 - 73,493 There is no transition between Level 1 and Level 2 in the current year. IX. Explanations Related to Transactions Carried out on Behalf of Other Parties and

Fiduciary Assets The Bank performs buying transactions on behalf of customers, and gives custody, administration and advisory services. The Bank does not deal with fiduciary transactions.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

47

SECTION FIVE

EXPLANATIONS AND DISCLOSURES ON UNCONSOLIDATED FINANCIAL STATEMENTS

I. Explanations and Disclosures Related to the Assets

1.a) Information on Cash and Balances with the Central Bank of Turkey:

Current Period Prior Period TRY FC TRY FC Cash in TRY/Foreign Currency 136,299 151,431 140,473 168,873 Balances with the Central Bank of Turkey 650,346 1,061,550 203,891 979,850 Other - 27,670 - 18,617 Total 786,645 1,240,651 344,364 1,167,340

b) Information related to the account of the Central Bank of Turkey:

Current Period Prior Period TRY FC TRY FC Unrestricted demand deposit 650,346 409,915 203,891 251,831 Unrestricted time deposit - 651,635 - 728,019 Restricted time deposit - - - - Total 650,346 1,061,550 203,891 979,850

TRY 1,061,550 (December 31, 2009: TRY 979,850) foreign currency and TRY 650,287 (December 31, 2009: TRY 203,796) domestic currency unrestricted deposit balance comprises of reserve deposits. Unrestricted TRY deposit balance includes average reserve deposit held in Central Bank. According to the Communique 2010/9 about change in “Required Reserve Ratios” published in the Official Gazette No. 27708 dated September 23, 2010; the interest rates applied for reserve deposits are raised to 6% from 5% for TRY deposits and to 11% from 10% for FC deposits and interest payment to TRY deposits is terminated effective from October 1, 2010 (December 31, 2009 – TRY 5.20%). Reserve deposit rates for TRY liabilities vary from 5% to 12% depending on maturities of liabilities for the reserve deposit calculations commencing on February 4, 2011.

2. Information on financial assets at fair value through profit and loss (net):

a.1) Information on financial assets at fair value through profit and loss given as collateral or blocked: None (December 31, 2009 – None).

a.2) Financial assets at fair value through profit and loss subject to repurchase agreements: None (December 31, 2009 – None).

Net book value of unrestricted financial assets at fair value through profit and loss is TRY 96,061 (December 31, 2009 – TRY 126,610).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

48

I. Explanations and Disclosures Related to the Assets (continued) 2. Information on financial assets at fair value through profit and loss (net): (continued)

a.3) Positive differences related to derivative financial assets held-for-trading:

Current Period Prior Period

TRY FC TRY FC Forward Transactions 5,286 6,117 15,681 14,057 Swap Transactions 39,155 3,908 18,886 1,496 Futures Transactions - - - - Options 36,318 8,207 8,372 2,973 Other - - 230 - Total 80,759 18,232 43,169 18,526

3.a) Information on banks : Current Period Prior Period TRY FC TRY FCBanks Domestic 397,828 79,000 29,559 223,107 Foreign 15,000 211,656 28,248 122,687 Branches and head office abroad - - - -Total 412,828 290,656 57,807 345,794

b) Information on foreign bank accounts: Unrestricted Amount Restricted Amount Current Period Prior Period Current Period Prior PeriodEuropean Union Countries 104,947 37,842 - 31,707 USA and Canada 50,289 41,865 - - OECD Countries (*) 5,449 4,550 - - Off-shore banking regions 65,694 34,046 - - Other 277 925 - - Total 226,656 119,228 - 31,707 (*) OECD countries other than European Union countries, USA and Canada.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

49

I. Explanations and Disclosures Related to the Assets (continued) 4. Information on financial assets available-for-sale:

a.1) Information on financial assets available-for-sale given as collateral or blocked:

Current Period Prior Period TRY FC TRY FC Share certificates - - - - Bond, Treasury bill and similar investment securities

243,848

125,062 124,605 40,373

Other - - - - Total 243,848 125,062 124,605 40,373

a.2) Financial assets available-for-sale subject to repurchase agreements:

Current Period Prior Period TRY FC TRY FC Government bonds - - 526,855 - Treasury bills - - - - Other public sector debt securities - - - - Bank bonds and bank guaranteed bonds - - - - Asset backed securities - - - - Other - - - - Total - - 526,855 -

Net book value of unrestricted financial assets available-for-sale is TRY 3,043,175 (December 31, 2009 – TRY 969,879).

b) Information on financial assets available for sale portfolio: Current Period Prior Period

Debt securities 3,399,812 1,657,700 Quoted on a stock exchange 3,399,812 1,657,700 Not quoted - -

Share certificates 17,880 4,592 Quoted on a stock exchange 3,212 2,515 Not quoted (*)(**) 14,668 2,077

Impairment provision (-) (5,607) (580) Total 3,412,085 1,661,712

(*) In the Board of Directors meeting held on September 23, 2009, the Bank decided to participate in the revised capital structure of Kredi Garanti Fonu A.Ş. including TOBB (Turkish Union of Chambers and Exchange Commodities), KOSGEB (Presidency of Development and Support of Small and Medium-sized Enterprises Administration) and the banks by TRY 4,000. Upon this decision related to the capital increase of Kredi Garanti Fonu A.Ş. on September 11, 2009, the Bank paid TRY 2,000 of its capital commitment of TRY 4,000 on October 14, 2009.

(**)After the sale of the Bank’s 90.01% shares in TEB Finansal Kiralama A.Ş as disclosed in detail in Note 8; the

remaining 9.99% shares are presented as available-for-sale financial assets and accounted for at fair value in accordance with TAS 39. The related amount is TRY 12,594 and valuation difference amounting to TRY 8,575 is accounted for under the “Marketable Securities Valuation Differences” account.

All unquoted available for sale equities are recorded at fair value except for the Bank’s investment of TRY 2,074 which is recorded at cost since its fair value cannot be reliably estimated (December 31, 2009 – TRY 2,077).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

50

I. Explanations and Disclosures Related to the Assets (continued) 5. Information on loans:

a) Information on all types of loans and advances given to shareholders and employees of the Bank: Current Period Prior Period

Cash Loans

Non-Cash Loans

Cash Loans

Non-Cash Loans

Direct loans granted to shareholders 24,509 40,782 1,603 46,004

Corporate shareholders 24,102 40,773 1,603 46,004

Real person shareholders 407 9 - -

Indirect loans granted to shareholders - - - -

Loans granted to employees 22,893 - 22,842 -

Total 47,402 40,782 24,445 46,004

b) Information on the first and second group loans and other receivables including restructured or

rescheduled loans:

Standard Loans and Other Receivables

Loans and Other Receivables Under Close Monitoring (*)

Cash Loans

Loans and Other Receivables

Restructured or Rescheduled

Loans and Other Receivables

Restructured or Rescheduled

Non-specialized loans 11,147,664 - 353,506 129,263Discount notes 178,900 - 5,238 -Export loans 1,098,125 - 37,076 -Import loans - - - -Loans given to financial sector 382,748 - - -Foreign loans 140,212 - 503 154Consumer loans(**) 2,486,836 - 84,377 2,957Credit cards 537,269 - 28,478 4,162Precious metal loans 346,286 - 18,278 -Other 5,977,288 - 179,556 121,990

Specialized loans - - - -Other receivables - - - -Total 11,147,664 - 353,506 129,263 (*) The total principal amount of the loans under close monitoring in accordance with the requirements of the regulation on “Methods and

Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” amended on February 6, 2008.

(**) TRY 33,648 of income accrual resulting from the fair value difference of the hedged item loans is included in the loan balance.

c) Loans and other receivables according to their maturity structure:

Standard Loans and Other Receivables

Loans and Other Receivables Under Close Monitoring

Cash Loans

Loans and Other Receivables

Restructured or Rescheduled

Loans and Other Receivables

Restructured or Rescheduled

Short-term loans and other receivables 6,278,587 - 194,824 13,539

Non-specialized loans 6,278,587 - 194,824 13,539Specialized loans - - - -Other receivables - - - -

Medium and long-term loans and other receivables 4,869,077 - 158,682 115,724

Non-specialized loans 4,869,077 - 158,682 115,724Specialized loans - - - -Other receivables - - - -

Total 11,147,664 - 353,506 129,263

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

51

I. Explanations and Disclosures Related to the Assets (continued)

5. Information on loans: (continued)

d) Information on consumer loans, individual credit cards, personnel loans and credit cards given to

personnel:

Short Term

Medium and Long Term Total

Consumer Loans-TRY 117,425 2,332,787 2,450,212Housing Loans 1,779 1,104,562 1,106,341Vehicle Loans 5,798 221,921 227,719General Purpose Loans 109,848 1,006,304 1,116,152Other - - -

Consumer Loans –Indexed to FC - 35,901 35,901Housing Loans - 27,552 27,552Vehicle Loans - 6,847 6,847General Purpose Loans - 1,502 1,502Other - - -

Consumer Loans-FC (**) 119 9,444 9,563Housing Loans - 1,483 1,483Vehicle Loans - 5,361 5,361General Purpose Loans 119 2,600 2,719Other - - -

Individual Credit Cards-TRY 476,497 - 476,497With Installments 298,423 - 298,423Without Installments 178,074 - 178,074

Individual Credit Cards-FC 3,362 - 3,362With Installments - - -Without Installments 3,362 - 3,362

Personnel Loans-TRY 2,814 9,301 12,115Housing Loans - - -Vehicle Loans - - -General Purpose Loans 2,814 9,301 12,115Other - - -

Personnel Loans- Indexed to FC - - -Housing Loans - - -Vehicle Loans - - -General Purpose Loans - - -Other - - -

Personnel Loans-FC - - -Housing Loans - - -Vehicle Loans - - -General Purpose Loans - - -Other - - -

Personnel Credit Cards-TRY 9,590 - 9,590With Installments 6,152 - 6,152Without Installments 3,438 - 3,438

Personnel Credit Cards-FC 108 - 108With Installments - - -Without Installments 108 - 108

Overdraft Accounts-TRY(Real Persons) (*) 66,328 - 66,328Overdraft Accounts-FC(Real Persons) 51 - 51Total 676,294 2,387,433 3,063,727 (*) Overdraft Accounts include personnel loans amounting to TRY 1,080. (**) Loans granted via branches abroad.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

52

I. Explanations and Disclosures Related to the Assets (continued)

5. Information on loans: (continued) e) Information on commercial loans with installments and corporate credit cards:

Short TermMedium and

Long Term TotalCommercial loans with installment facility-TRY 125,250 1,266,131 1,391,381

Business Loans 106 68,716 68,822Vehicle Loans 16,264 317,258 333,522

General Purpose Loans 108,880 880,157 989,037Other - - -

Commercial loans with installment facility - Indexed to FC 12,789 180,885 193,674Business Loans - 5,171 5,171

Vehicle Loans 2,154 76,301 78,455General Purpose Loans 10,635 99,413 110,048

Other - - -Commercial loans with installment facility –FC 14,169 - 14,169

Business Loans - - -Vehicle Loans 40 - 40

General Purpose Loans 14,129 - 14,129

Other - - -

Corporate Credit Cards-TRY 79,468 - 79,468With Installments 20,225 - 20,225

Without Installments 59,243 - 59,243Corporate Credit Cards-FC 884 - 884

With Installments - - -Without Installments 884 - 884

Overdraft Accounts-TRY(Legal Entities) 146,657 - 146,657Overdraft Accounts-FC(Legal Entities) 1,397 - 1,397

Total 380,614 1,447,016 1,827,630

f) Loans according to borrowers:

Current Period Prior Period Public 34,738 21,373 Private 11,595,695 8,781,190 Total 11,630,433 8,802,563 g) Domestic and foreign loans:

Current Period Prior Period Domestic loans 11,454,413 8,666,490 Foreign loans 176,020 136,073 Total 11,630,433 8,802,563 h) Loans granted to subsidiaries and associates:

Current Period Prior Period Direct loans granted to subsidiaries and associates 275 500 Indirect loans granted to subsidiaries and associates - - Total 275 500

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

53

I. Explanations and Disclosures Related to the Assets (continued)

5. Information on loans: (continued) i) Specific provisions provided against loans:

Current Period Prior Period Specific provisions

Loans and receivables with limited collectability 4,833 12,288 Loans and receivables with doubtful collectability 21,608 46,145 Uncollectible loans and receivables 210,812 181,406

Total 237,253 239,839 j) Information on non-performing loans: (Net):

j.1) Information on loans and other receivables included in non-performing loans which are restructured or rescheduled:

There are no loans or other receivables included in non-performing loans whih are restructured or rescheduled by the Bank (December 31, 2009 – None).

j.2) The movement of non-performing loans:

III. Group IV. Group V. Group Loans and

receivables with limited

collectability

Loans and receivables

with doubtful collectability

Uncollectible

loans and receivables

Prior period end balance 81,297 119,567 227,127

Additions (+) 187,040 1,439 2,880 Transfers from other categories of non-performing loans (+) - 208,495 225,442 Transfers to other categories of non-performing loans (-) 208,495 225,442 - Collections (-) 25,582 44,152 74,308 Write-offs (-)(*) 57 33 115,143

Corporate and commercial loans - - 72,036 Retail loans 53 27 10,881 Credit cards 4 6 32,226 Other - - -

Current period end balance 34,203 59,874 265,998 Specific provision (-) 4,833 21,608 210,812

Net Balances on Balance Sheet 29,370 38,266 55,186

(*) TRY 39,957 of the non-performing loans portfolio of the Bank with TRY 39,321 provision has been sold

to Standart Varlık A.Ş. for TRY 4,125. This balance has been collected as of March 31, 2010 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

TRY 75,008 of the non-performing loans portfolio of the Bank with TRY 75,008 provision has been sold to LBT Varlık Yönetim A.Ş. for TRY 6,500. This balance has been collected as of June 28, 2010 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

j.3) Information on foreign currency non-performing loans and other receivables: None.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

54

I. Explanations and Disclosures Related to the Assets (continued) 5. Information on loans: (continued)

j.4) Information regarding gross and net amounts of non-performing loans with respect to user groups:

III. Group IV. Group V. Group

Loans and receivables with

limited collectability

Loans and receivables with

doubtful collectability

Uncollectible loans and

receivables

Current Period (Net)

Loans to Real Persons and Legal Entities (Gross) 34,203 59,874 265,998

Specific Provision (-) 4,833 21,608 210,812

Loans to Real Persons and Legal Entities (Net) 29,370 38,266 55,186

Banks (Gross) - - -

Specific Provision (-) - - -

Banks (Net) - - -

Other Loans and Receivables (Gross) - - -

Specific Provision (-) - - -

Other Loans and Receivables (Net) - - -

Prior Period (Net)

Loans to Real Persons and Legal Entities (Gross) 81,297 119,567 227,127

Specific Provision (-) 12,288 46,145 181,406

Loans to Real Persons and Legal Entities (Net) 69,009 73,422 45,721

Banks (Gross) - - -

Specific Provision (-) - - -

Banks (Net) - - -

Other Loans and Receivables (Gross) - - -

Specific Provision (-) - - -

Other Loans and Receivables (Net) - - -

k) Main principles of liquidating non performing loans and receivables:

According to the “Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” published on Official Gazette No. 26333 dated November 1, 2006; loans and other receivables for which the collection is believed to be impossible are classified as nonperforming loans by complying with the requirements of the Tax Procedural Law in accordance with the decision of the upper management of the Bank.

l) Explanations on write-off policy:

Unrecoverable non performing loans can be written off with the decision of the Board of Directors.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

55

I. Explanations and Disclosures Related to the Assets (continued) 5. Information on loans: (continued)

m) Other explanations and disclosures: Current Period Commercial Consumer Credit Cards Total Neither past due nor impaired 8,100,720 2,491,312 504,616 11,096,648 Past due not impaired 385,634 82,858 65,293 533,785 Individually impaired 284,242 21,706 54,127 360,075

Total gross 8,770,596 2,595,876 624,036 11,990,508 Less: allowance for individually impaired loans 179,867 12,721 44,665 237,253

Total allowance for impairment 179,867 12,721 44,665 237,253

Total net 8,590,729 2,583,155 579,371 11,753,255

Prior Period Commercial Consumer Credit Cards Total Neither past due nor impaired 6,184,715 1,696,745 413,164 8,294,624 Past due not impaired 378,831 61,415 67,693 507,939 Individually impaired 313,736 34,416 79,839 427,991

Total gross 6,877,282 1,792,576 560,696 9,230,554 Less: allowance for individually impaired loans 151,236 33,985 54,618 239,839

Total allowance for impairment 151,236 33,985 54,618 239,839

Total net 6,726,046 1,758,591 506,078 8,990,715

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

56

I. Explanations and Disclosures Related to the Assets (continued) 5. Information on loans: (continued)

m) Other explanations and disclosures: (continued) A reconciliation of the allowance for impairment losses and advances by classes is as follows;

Commercial Consumer Credit Cards Total

At January 1, 2010 151,236 33,985 54,618 239,839 Charge for the period 137,042 (4,282) 36,831 169,591 Recoveries (36,468) (6,708) (14,672) (57,848) Amounts written off(*) (71,943) (10,274) (32,112) (114,329)

At December 31, 2010 179,867 12,721 44,665 237,253

Commercial Consumer Credit Cards Total

At January 1, 2009 70,681 12,108 23,303 106,092 Charge for the period 112,147 33,310 65,606 211,063 Recoveries (31,592) (6,490) (10,020) (48,102) Amounts written off(**) - (4,943) (24,271) (29,214) At December 31, 2009 151,236 33,985 54,618 239,839

(*) TRY 39,957 of the non-performing loans portfolio of the Bank with TRY 39,321 provision has been sold to Standart

Varlık A.Ş. for TRY 4,125. This balance has been collected as of March 31, 2010 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

TRY 75,008 of the non-performing loans portfolio of the Bank with TRY 75,008 provision has been sold to LBT

Varlık Yönetim A.Ş. for TRY 6,500. This balance has been collected as of June 28, 2010 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

(**) TRY 29,530 of the non-performing loans portfolio of the Bank with TRY 29,214 provision has been sold to LBT

Varlık Yönetim A.Ş. for TRY 1,950. This balance has been collected as of November 9, 2009 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

The fair value of collaterals, capped with the respective outstanding loan balance, that the Bank holds relating to loans individually determined to be impaired at December 31, 2010 is TRY 113,515 (December 31, 2009: TRY 126,343). The fair value of collatreals, capped with the respective outstanding loan balance relating to loans individually determined to be impaired:

Current Period Prior Period Mortgage 91,408 99,867Vehicle 15,820 24,951Cash 7 31Other 6,280 1,494Total 113,515 126,343

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

57

I. Explanations and Disclosures Related to the Assets (continued) 5. Information on loans: (continued) m) Other explanations and disclosures: (continued) Collaterals and credit enhancement as of December 31, 2010 and December 31, 2009:

December 31, 2010 Commercial Consumer Total Residential, commercial or industrial property 30,550 2,988 33,538 Financial assets - - - Other 444 - 444 Total 30,994 2,988 33,982

December 31, 2009 Commercial Consumer Total Residential, commercial or industrial property 18,963 1,339 20,302 Financial assets - - - Other 22 17 39 Total 18,985 1,356 20,341

Aging analysis of past due but not impaired loans per classes of financial statements: December 31, 2010

Less than 30 days

31-60 days

61-90 days

More than 91 days

Total

Loans and receivables

Commercial lending 280,829 64,185 40,620 - 385,634Consumer lending 35,662 36,151 11,045 - 82,858Credit cards 59,836 412 5,045 - 65,293

Total 376,327 100,748 56,710 - 533,785

December 31, 2009

Less than 30 days

31-60 days

61-90 days

More than 91 days

Total

Loans and receivables

Commercial lending 234,858 76,283 67,690 - 378,831Consumer lending 7,825 41,900 11,690 - 61,415 Credit cards 67,580 106 7 - 67,693

Total 310,263 118,289 79,387 - 507,939

Of the total aggregate amount of gross past due but not yet impaired loans and advances to customers, the fair value of collaterals, capped with the respective outstanding total loan balance of the customer, that the Bank held as at December 31, 2010 is TRY 201,268 (December 31, 2009: TRY 311,296).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

58

I. Explanations and Disclosures Related to the Assets (continued) 5. Information on loans: (continued) m) Other explanations and disclosures: (continued) The fair value of collaterals, capped with the respective outstanding loan balance relating to those that are past due but not impaired:

Current Period Prior Period Mortgage 159,122 245,548Vehicle 24,017 41,852Cash 2,134 2,417Other 15,995 21,479Total 201,268 311,296 Loans and receivables amounting to TRY 3,492,330 have floating interest rates (December 31, 2009 – TRY 2,311,525) and the remaining TRY 8,138,103 have fixed interest rates (December 31, 2009 – TRY 6,491,038).

6. Information on held-to-maturity investments :

a.1) Information on held to maturity debt securities:

Current Period Prior Period Government Bonds 217,604 880,803 Treasury bills - - Other public sector debt securities - - Total 217,604 880,803

a.2) Information on held to maturity investments:

Current Period Prior Period Debt securities

Quoted on a stock exchange 217,604 880,803 Unquoted - -

Impairment provision(-) - - Total 217,604 880,803

a.3) Information on held-to-maturity investments given as collateral or blocked:

Current Period Prior Period TRY FC TRY FC Share Certificates - - - - Bond, Treasury bill and similar securities 68,245 - 187,395 - Other - - - - Total 68,245 - 187,395 -

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

59

I. Explanations and Disclosures Related to the Assets (continued) 6. Information on held-to-maturity investments : (continued)

a.4) Held-to-maturity investments subject to repurchase agreements:

Current Period Prior Period TRY FC TRY FC Government bonds 70,042 - 560,365 - Treasury bills - - - - Other public sector debt securities - - - - Bank bonds and bank guaranteed bonds - - - - Asset backed securities - - - - Other - - - - Total 70,042 - 560,365 -

Net book value of unrestricted financial assets available-for-sale is TRY 79,317 (December 31, 2009 – TRY 133,043). b) Movement of public sector debt investments held-to-maturity: Current Period Prior Period Beginning balance 880,803 797,771 Foreign currency differences on monetary assets - - Purchases during the year(*) 9,403 97,111 Disposals through sales and redemptions (672,602) - Impairment provision (-) - - Change in income on redeemed cost adjustments - (14,079) Closing Balance 217,604 880,803 (*) Accruals are included in purchases during the year. 7. Information on associates (Net): a.1) Information on the unconsolidated associates: None (December 31, 2009 - None). b.1) Information on the consolidated associates: None (December 31, 2009 - None).

b.2) Valuation of consolidated associates: None (December 31, 2009 - None).

b.3) Consolidated associates which are quoted on the stock exchange: None (December 31, 2009 - None). 8. Information on subsidiaries (Net):

a) Information on the unconsolidated subsidiaries: None (December 31, 2009 - None).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

60

I. Explanations and Disclosures Related to the Assets (continued) 8. Information on subsidiaries (Net): (continued) b) Information on the consolidated subsidiaries:

b.1) Information on the consolidated subsidiaries:

Description

Address (City/ Country)

Bank’s share percentage-If different voting percentage(%)

Other shareholders’ share percentage (%)

The Economy Bank N.V. Netherlands 100.00 - TEB Faktoring A.Ş. İstanbul/Turkey 100.00 - TEB Yatırım Menkul Değerler A.Ş. İstanbul/Turkey 92.48 7.52 TEB Portföy Yönetimi A.Ş. İstanbul/Turkey 46.77 53.23

Information on the consolidated subsidiaries with the order as presented in the table above:

Total Assets

Shareholders’ Equity

Total Fixed Assets

Interest Income

Income from Marketable

Securities Portfolio

Current Period

Profit / Loss

Prior Period Profit / Loss

(*)

Fair Value

(i) 1,504,699 188,909 8,155 56,760 3,649 15,771 14,351 - (ii) 783,083 25,422 1,391 47,748 - 8,355 7,616 - (ii) 54,412 37,901 1,747 4,077 - 9,603 8,164 - (ii) 14,790 13,210 554 930 429 4,309 5,312 -

(*) Represents the amounts in the financial statements as of December 31, 2009. (i) Represents financial figures of foreign currency statutory financial statements translated at period end foreign exchange rates

for balance sheet and twelve months’ average rates for profit and loss as of December 31, 2010. The Economy Bank NV has two consolidated subsidiaries named Stichting Effecten Dienstverlening and Kronenburg Vastgoed B.V.

(ii) Represents financial figures based on BRSA as of December 31, 2010.

b.2) Information on consolidated subsidiaries:

Current Period Prior Period Balance at the beginning of the period 153,921 153,921 Movements during the period (34,231) -

Purchases (*) 5,959 - Bonus shares obtained - - Share in current year income - - Sales (**) (40,190) - Revaluation increase - - Provision for impairment - -

Balance at the end of the period 119,690 153,921 Capital commitments - - Share percentage at the end of the period (%) - -

(*) The Bank has transferred 17.54% of the shares of TEB Finansal Kiralama A.Ş. in TEB Yatırım Menkul Değerler A.Ş.

amounting to TRY 2,271 in exchange for TRY 5,959 and payment for the related transfer was made after the completion of required procedures as at September 29, 2010.

(**) The Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in

consideration of TRY 113,345. The sale amount was received after the completion of the necessary procedures as of September 30, 2010. The profit amounting to TRY 77,173 resulting from this sale is presented under the “Income on Discontinued Operations” in the current year income statement. The remaining 9.99% shares are classified as “Financial Assets Available for Sale”.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

61

I. Explanations and Disclosures Related to the Assets (continued) 8. Information on subsidiaries (Net): (continued)

b.3) Sectoral information on the consolidated subsidiaries and the related carrying amounts:

Current Period Prior Period Banks / The Economy Bank N.V. 61,254 61,254 Leasing Companies / TEB Finansal Kiralama A.Ş. - 40,190 Factoring Companies / TEB Faktoring A.Ş. 24,037 24,037 Other Financial Subsidiaries / TEB Yatırım Men.Değ. A.Ş. 32,341 26,382 TEB Portföy Yönetimi A.Ş. 2,058 2,058 Total 119,690 153,921

b.4) Consolidated subsidiaries quoted on the stock exchange: None (December 31, 2009 – None). 9. Information on entities under common control (joint ventures):

Description

Address (City/ Country)

Bank’s share percentage-If different voting percentage(%)

Other shareholders’ share percentage (%)

Bantaş Nakit ve Kıymetli Mal Taşıma ve Güvenlik Hizmetleri A.Ş. (*)

İstanbul/Türkiye

0.1

33.3

(*) In the Extraordinary General Assembly held on July 23, 2010, it was decided to increase the paid in capital by TRY 6,000 and the Bank paid its share amounting to TRY 4 on August 2, 2010.

10. Information on finance lease receivables (Net): None (December 31, 2009 – None). 11. Information on derivative financial assets for hedging purposes:

Current Period Prior Period TRY FC TRY FC Fair value hedge 11,114 43 30,976 354 Cash flow hedge - - - - Hedge of net investment in foreign operations - - - - Total 11,114 43 30,976 354

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

62

I. Explanations and Disclosures Related to the Assets (continued) 12. Information on tangible assets :

Opening BalanceDecember 31,

2009 Additions Disposals Other

Ending BalanceDecember 31,

2010Cost:

Land and buildings 9,637 - - - 9,637Leased tangible assets 49,460 - (844) - 48,616Other 253,836 20,262 (3,842) - 270,256

Total Cost 312,933 20,262 (4,686) - 328,509 Opening Balance

December 31, 2009 Period Charge Disposals Other

Ending BalanceDecember 31,

2010Accumulated Depreciation:

Land and buildings (3,537) (200) - - (3,737)Leased tangible assets (38,253) (5,882) 843 - (43,292)Other (136,461) (39,329) 3,816 - (171,974)

Total Accumulated Depreciation (178,251) (45,411) 4,659 - (219,003)

Net Book Value 134,682 (25,149) (27) - 109,506

a) The impairment provision set or cancelled in the current period according to the asset groups not individually significant but materially affecting the overall financial statements, and the reason and conditions for this: None.

b) Pledges, mortgages and other restrictions on the tangible fixed assets, expenses arising from the construction for tangible fixed assets, commitments given for the purchases of tangible fixed assets: None.

13. Information on intangible assets:

Opening BalanceDecember 31, 2009 Additions Disposals Other

Ending BalanceDecember 31, 2010

Cost: Other intangible assets 36,145 5,938 - - 42,083

Total Cost 36,145 5,938 - - 42,083 Opening Balance

December 31, 2009 Period Charge Disposals OtherEnding Balance

December 31, 2010Accumulated Amortization:

Other intangible assets (25,235) (6,692) - - (31,927)Total Accumulated Amortization (25,235) (6,692) - - (31,927)

Net Book Value 10,910 (754) - - 10,156

a) Disclosures for book value, description and remaining useful life for a specific intangible fixed asset that is material to the financial statements: None.

b) Disclosure for intangible fixed assets acquired through government grants and accounted for at fair value at initial recognition: None.

c) The method of subsequent measurement for intangible fixed assets that are acquired through government incentives and recorded at fair value at the initial recognition : None.

d) The book value of intangible fixed assets that are pledged or restricted for use: None. e) Amount of purchase commitments for intangible fixed assets: None.

f) Information on revalued intangible assets according to their types: None.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

63

I. Explanations and Disclosures Related to the Assets (continued) 13. Information on intangible assets: (continued)

g) Amount of total research and development expenses recorded in income statement within the period if any: None.

h) Positive or negative consolidation goodwill on entity basis: Not applicable for the unconsolidated financial statements.

i) Information on goodwill: None.

j) Movements on goodwill in the current period: None. 14. Information on investment property: None (December 31, 2009 – None).

15. Explanations on deferred tax asset:

a) As of December 31, 2010, deferred tax asset computed on the temporary differences and reflected to the balance sheet is TRY 13,093 (December 31, 2009 – TRY 7,869). There are no tax exemptions or deductions over which deferred tax asset is computed.

b) Temporary differences over which deferred tax asset is not computed and recorded in the balance sheet in prior periods: None.

c) Allowance for deferred tax and deferred tax assets from reversal of allowance: None.

d) Movement of deferred tax:

Current Period Prior Period At January 1, 7,869 12,973 Effect of change in tax rate - - Other 144 589 Deferred tax (charge)/benefit 21,004 (1,587) Deferred tax accounted for under equity (15,924) (4,106) Deferred Tax Asset 13,093 7,869

16. Information on assets held for sale and discontinued operations: None (December 31, 2009: None).

17. Information on other assets:

a) Breakdown of other assets

Current Period Prior Period Clearing Account 143,243 112,330 Collateral Given for Derivative Financial Assets 65,579 31,513 Transaction Costs Related to Financial Liabilities 4,794 7,296 Prepaid Rent Expenses 5,121 4,483 Prepaid Insurance Premiums 62 96 Advances Given - 1 Other Prepaid Expenses 12,764 17,600 Receivables from Credit Card Payments 146,994 162,685 Temporary EFT Account 36,456 30,668 Assets Held for Resale (Net) (*) 33,982 20,341 Other 9,727 6,077 Total 458,722 393,090

(*) As of December 31, 2010 there is a provision for impairment loss amounting to TRY 3,380 for real estates held for resale as per the appraisals (December 31, 2009 – TRY 2,608).

b) Other assets which exceed 10% of the balance sheet total (excluding off balance sheet commitments) and breakdown of these which constitute at least 20% of grand total: None.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

64

SECTION FIVE II. Explanations and Disclosures Related to the Liabilities 1. a) Information on maturity structure of deposits:

a.1) Current period:

Demand7 Day Call

AccountsUp to 1Month

1-3Months

3-6Months

6 Month-1 Year

1 Yearand Over

Accumulated Deposits Total

Saving deposits 345,594 - 700,447 2,274,948 243,706 80,810 372 6,381 3,652,258Foreign currency deposits 831,419 - 1,364,222 1,158,564 17,907 22,452 3,134 1,256 3,398,954

Residents in Turkey 773,216 - 1,300,345 1,130,108 17,294 19,105 715 1,256 3,242,039Residents abroad 58,203 - 63,877 28,456 613 3,347 2,419 - 156,915

Public sector deposits 121,698 - 1,208 3,315 43 - - - 126,264Commercial deposits 917,353 - 1,086,547 1,230,715 34,832 45,413 - 30 3,314,890Other institutions deposits 13,730 - 8,707 140,554 2,670 116 2 - 165,779Precious metals deposits 108,512 - 14,962 4,384 1,160 356 - - 129,374Interbank deposits 98,280 - 1,084,434 22,725 3,036 - 3,156 - 1,211,631 Central Bank of Turkey - - - - - - - - -

Domestic Banks - - 28,022 - - - - - 28,022Foreign Banks 18,307 - 1,056,412 22,725 3,036 - 3,156 - 1,103,636Special finance houses 79,973 - - - - - - - 79,973Other - - - - - - - - -

Total 2,436,586 - 4,260,527 4,835,205 303,354 149,147 6,664 7,667 11,999,150

a.2) Prior period:

Demand7 Day Call

AccountsUp to 1Month

1-3Months

3-6Months

6 Month-1 Year

1 Yearand Over

Accumulated Deposits Total

Saving deposits 246,684 - 803,947 2,310,906 66,611 37,413 629 11,414 3,477,604Foreign currency deposits 906,774 - 1,180,905 1,236,085 29,670 68,426 412 2,122 3,424,394

Residents in Turkey 848,068 - 1,139,404 1,202,051 26,835 64,388 336 2,122 3,283,204Residents abroad 58,706 - 41,501 34,034 2,835 4,038 76 - 141,190

Public sector deposits 103,715 - 1,095 1,508 - - 194 - 106,512Commercial deposits 706,228 - 678,394 648,077 14,650 27,444 263 102 2,075,158Other institutions deposits 9,528 - 24,219 87,932 44,702 444 1 - 166,826Precious metals deposits 16,613 - 3,854 2,086 835 374 - - 23,762Interbank deposits 82,854 - 47,681 13,238 3,606 - - - 147,379 Central Bank of Turkey - - - - - - - - -

Domestic Banks - - - 5,068 - - - - 5,068Foreign Banks 32,381 - 47,681 8,170 3,606 - - - 91,838Special finance houses 50,473 - - - - - - - 50,473Other - - - - - - - - -

Total 2,072,396 - 2,740,095 4,299,832 160,074 134,101 1,499 13,638 9,421,635

b) Information on saving deposits under the guarantee of saving deposit insurance:

b.1) Saving deposits exceeding the limit of insurance: i) Information on saving deposits under the guarantee of saving deposit insurance and exceeding the

limit of saving deposit insurance:

Saving Deposits

Under the Guarantee of Insurance(*)

Exceeding the limit of Insurance(*)

Current Period Prior Period Current Period Prior PeriodSaving deposits 1,451,750 1,265,160 2,119,857 2,130,077Foreign currency saving deposits 348,999 379,691 1,233,522 1,302,510Other deposits in the form of saving deposits 12,876 3,372 113,771 18,838Foreign branches’ deposits under foreign authorities' insurance - - - -Off-shore banking regions’ deposits under foreign authorities' insurance - - - -Total 1,813,625 1,648,223 3,467,150 3,451,425

(*) According to the BRSA’s circular no 1584 dated on February 23, 2005, accruals are included in the saving deposit amounts.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

65

II. Explanations and Disclosures Related to the Liabilities (continued)

b.2) Information on the saving deposits of the bank with head office abroad, if the saving deposits in the

branches of the bank located in Turkey are under the guarantee of saving deposit insurance in that country abroad: None.

b.3) Saving deposits not guaranteed by insurance:

i) Deposits of real persons not under the guarantee of saving deposit insurance:

Current Period Prior Period Deposits and accounts in branches abroad 74,905 64,476

Deposits of ultimate shareholders and their close families

251,356

263,013

Deposits of chairman and members of the Board of Directors and their close families

10,805

10,408 Deposits obtained through illegal acts defined in the 282nd Article of the 5237 numbered Turkish Criminal Code dated September 26, 2004. - - Saving deposits in banks established in Turkey exclusively for off shore banking activities - -

2. Information on derivative financial liabilities:

a) Negative differences table related to derivative financial liabilities held-for-trading:

Current Period Prior Period TRY FC TRY FC Forward Transactions 4,156 8,708 2,623 3,014 Swap Transactions 37,448 7,963 20,387 1,262 Futures Transactions - 6,168 - 14,497 Options 22,829 8,207 7,061 2,973 Other - - 52 - Total 64,433 31,046 30,123 21,746

3. a) Information on banks and other financial institutions:

Current Period Prior Period TRY FC TRY FC Loans from Central Bank of Turkey - - - - From Domestic Banks and Institutions 31,102 80,358 41,790 102,481 From Foreign Banks, Institutions and Funds 1,980,136 1,512,522 746,204 759,140 Total 2,011,238 1,592,880 787,994 861,621

As of December 31, 2010 the Bank has borrowings from its related parties amounting to TRY 2,634,729 (December 31, 2009: TRY 996,270).

b) Maturity analysis of borrowings:

Current Period Prior Period TRY FC TRY FC Short-term 1,560,219 1,316,722 784,736 670,914 Medium and long-term 451,019 276,158 3,258 190,707 Total 2,011,238 1,592,880 787,994 861,621

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations and Disclosures Related to the Liabilities (continued)

c) Additional explanation related to the concentrations of the Bank’s major liabilities:

Bank diversifies its funding resources by the customer deposits and by the foreign borrowings. As of December 31, 2010, the Bank has a syndication loan of EUR 190,000,000 and USD 100,000,000, obtained on September 3, 2010 with a maturity of September 2, 2011, under foreign borrowings.

Bank makes analysis of its customers that provide the maximum amount of funds within the branches and throughout the Bank, in consideration of profitability. Bank takes short and long term preventive measures to spread its customers on a wider spectrum on the basis of customer concentration in the branches. Information on funds provided from repurchase agreement transactions:

Current Period Prior Period TRY FC TRY FC

From domestic transactions 74,357 - 1,071,971 - Financial institutions and organizations 73,565 - 1,071,243 - Other institutions and organizations - - - - Real persons 792 - 728 - From foreign transactions - - - - Financial institutions and organizations - - - - Other institutions and organizations - - - - Real persons - - - - Total 74,357 - 1,071,971 -

4. Other liabilities which exceed 10% of the balance sheet total (excluding off-balance sheet

commitments) and the breakdown of these which constitute at least 20% of grand total: None (December 31, 2009 – None).

5. Explanations on financial lease obligations (Net):

a) The general explanations on criteria used in determining installments of financial lease agreements, renewal and purchasing options and restrictions in the agreements that create significant obligations to the bank:

In the financial lease agreements, installments are based on useful life, usage periods and principles of the Tax Procedural Law.

b) The explanation on modifications in agreements and new obligations resulting from such modifications:

None.

c) Explanation on finance lease payables:

Current Period Prior Period Gross Net Gross Net Less than 1 Year 17 13 25 16Between 1-4 Years - - 17 14More than 4 Years - - - -Total 17 13 42 30

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations and Disclosures Related to the Liabilities (continued) 5. Explanations on financial lease obligations (Net): (continued)

d) Explanations regarding operational leases:

Except for the Head-Office-Istanbul and Izmir-Ege Kurumsal Branch buildings, all branch premises of the Bank are leased under operational leases. For the period ended December 31, 2010, operational lease expenses amounting to TRY 76,975 (December 31, 2009 – TRY 74,743) have been recorded in the profit and loss accounts. The lease periods vary between 1 and 10 years and lease agreements are cancelable subject to a certain period of notice.

e) Explanations on the lessor and lessee in sale and lease back transactions, agreement conditions, and major

agreement terms: None.

6. Information on derivative financial liabilities for hedging purposes:

Current Period Prior Period TRY FC TRY FC Fair value hedge (*) 56,547 - 73,493 - Cash flow hedge - - - - Hedge of net investment in foreign operations - - - - Total 56,547 - 73,493 -

(*) Comprised of swaps for hedging purposes. 7. Information on provisions:

a) Information on general provisions:

Current Period Prior Period General Provisions

Provisions for First Group Loans and Receivables 85,445 56,570 Provisions for Second Group Loans and Receivables 9,785 9,225 Provisions for Non-Cash Loans 11,564 8,833 Other - - Total 106,794 74,628

b) Foreign exchange losses on the foreign currency indexed loans and finance lease receivables: The foreign

exchange losses on the foreign currency indexed loans amounting to TRY 24,097 (December 31, 2009 - TRY 26,976) is offset from the loans on the balance sheet.

c) The specific provisions provided for unindemnified non cash loans amount to TRY 18,722 (December 31,

2009 - TRY 10,617).

d) Information on employee termination benefits, premium and unused vacation accrual:

The Bank has calculated reserve for employee termination benefits by using actuarial valuations as set out in the TAS No:19 and reflected this in the financial statements. The actuarial assumptions used for the calculation of the reserve for employee termination benefits are; discount rate of 10% and (December 31, 2009 : 11%) inflation rate of 5.1% (December 31, 2009: 4.8%). As of December 31, 2010, the Bank accrued TRY 10,375 (December 31, 2009 : TRY 8,575) for the unused vacations and TRY 22,520 (December 31, 2009 : TRY 16,533) for premiums to be paid to the Bank’s personnel. Those amounts are classified under “Reserve for Employee Benefits” in the financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations and Disclosures Related to the Liabilities (continued)

7. Information on provisions (continued)

d.1) Movement of employee termination benefits

Current Period Prior Period As of January 1 17,556 13,133 Service cost 3,232 2,542 Interest cost 1,875 1,515 Settlement cost 905 1,473 Actuarial gain / (loss) 2,895 2,115 Benefits paid (2,285) (3,222) Total 24,178 17,556

e) Information on other provisions:

e.1) Provisions for possible losses: None (December 31, 2009 – None).

e.2) The breakdown of the subsidiary accounts if other provisions exceed 10% of the grand total of provisions:

Current Period Prior Period Provision for promotions of credit cards and banking services 4,990 4,163 Provision for unindemnified non-cash loans 18,722 10,617 Other 3,230 - Total 26,942 14,780

f) Liabilities on pension rights:

f.1) Liabilities for pension funds established in accordance with “Social Security Institution": None (December 31, 2009 – None).

f.2) Liabilities resulting from all kinds of pension funds, foundations etc. which provide post retirement

benefits for the employees: None (December 31, 2009 – None).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations and Disclosures Related to the Liabilities (continued) 8. Explanations on taxes payable:

a) Information on current tax liability: a.1) Corporate taxes:

Current Period Prior Period Provision for corporate taxes 50,085 2,545

a.2) Information on taxes payable:

Current Period Prior Period Taxation on Securities 6,461 8,754 Property Tax 1,044 920 Banking Insurance Transaction Tax (BITT) 10,922 9,696 Foreign Exchange Transaction Tax 9 10 Value Added Tax Payable 1,509 605 Other (*) 6,532 6,529 Total 26,477 26,514

(*) Others include income taxes deducted from wages amounting to TRY 6,362 (December 31, 2009 – TRY 5,597) and stamp taxes payable amounting to TRY 732 (December 31, 2009 - TRY 713) while prepaid income tax amounting to TRY 562 is deducted from other.

b) Information on premiums:

Current Period Prior Period Social Security Premiums-Employee 2,537 2,417 Social Security Premiums-Employer 2,700 2,572 Bank Social Aid Pension Fund Premium-Employee - - Bank Social Aid Pension Fund Premium-Employer - - Pension Fund Membership Fees and Provisions-Employee - - Pension Fund Membership Fees and Provisions-Employer - - Unemployment Insurance-Employee 177 169 Unemployment Insurance-Employer 356 338 Other - - Total 5,770 5,496

c) Explanations on deferred tax liabilities, if any: None (December 31, 2009 – None).

9. Information on liabilities regarding assets held for sale and discontinued operations: None (December 31, 2009 – None).

10. Explanations on the number of subordinated loans the Bank used, maturity, interest rate, institution that the loan was borrowed from, and conversion option, if any:

The Bank has signed an agreement with the International Finance Corporation (IFC) on July 17, 2002, for a subordinated loan of USD 15 million. The maturity of the loan is October 15, 2011 and interest rate is LIBOR+2.85%. USD 9 million principle of this subordinated loan was paid in three tranches on October 15, 2009, April 15, 2010 and October 15, 2010 in accordance with the terms of the main agreement.

The Bank has signed another agreement with the IFC on June 27, 2005, for a subordinated loan. The facility is a USD 50 million subordinated loan, with a maturity of July 15, 2015 and with an interest rate of LIBOR+3.18%.

The Bank has signed an agreement with the Economy Luxembourg S.A on October 27, 2006 for a subordinated loan. The facility is a EUR 110 million subordinated loan, with a maturity of October 31, 2016, and with a fixed interest rate of 6.10%.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations and Disclosures Related to the Liabilities (continued) 10. Explanations on the number of subordinated loans the Bank used, maturity, interest rate,

institution that the loan was borrowed from, and conversion option, if any: (continued)

The Bank has obtained a primary subordinated loan by issuing a bond amounting to USD 100 million as of July 31, 2007. The investor of the bond is IFC. The maturity of the borrowing is indefinite with semi-annually interest payment. The interest rate is defined as LIBOR+3.5% until July 31, 2017. In case the borrowed amount is not repaid at that date, the interest rate will be revised as LIBOR + 5.25%.

Each of the four of the above facilities match BRSA’s subordinated loan-capital definitions and contribute to the Bank’s capital adequacy ratio in a positive manner, as well as creating long term financing.

a) Information on subordinated loans:

Current Period Prior Period TRY FC TRY FC From Domestic Banks - - - - From Other Domestic Institutions - - - - From Foreign Banks - - - - From Other Foreign Institutions - 472,542 - 483,474 Total - 472,542 - 483,474

11. Information on Shareholders’ Equity:

a) Presentation of Paid-in Capital:

Current Period Prior Period Common stock 1,100,000 1,100,000 Preferred stock - -

b) Paid-in capital amount, explanation as to whether the registered share capital system is applicable at bank if so amount of registered share capital ceiling:

Capital System Paid-in capital Ceiling Registered Capital System 1,100,000 1,400,000

c) Information on share capital increases and their sources; other information on increased capital shares in

current period: None

d) Information on share capital increases from revaluation funds: None.

e) Capital commitments in the last fiscal year and at the end of the following interim period, the general purpose of these commitments and projected resources required to meet these commitments: None.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations and Disclosures Related to the Liabilities (continued)

11. Information on Shareholders’ Equity: (continued)

f) Indicators of the Bank’s income, profitability and liquidity for the previous periods and possible effects of these future assumptions on the Bank’s equity due to the uncertainty of these indicators:

Prior year income, profitability and liquidity of the Bank is closely monitored and reported to Board of Directors, Asset and Liability Committee, and Risk Management by the Budget and Financial Control Group. This group tries to forecast the effects of interest, currency and maturity fluctuations that change these indicators with static and dynamic scenario analysis. Net asset value, which is defined as the difference of fair values of assets and liabilities, is measured. Expectations are made for Bank’s future interest income via simulations of net interest income and scenario analysis.

g) Information on preferred shares:

7% of the Bank’s remaining net income after tax subsequent to deducting legal reserves and first dividends, corresponding to the Bank’s 60,000 shares of TRY 30 (in full TRY) is distributed to the founder shares.

h) Information on marketable securities valuation differences:

Current Period Prior Period TRY FC TRY FC From Associates, Subsidiaries, and Entities Under Common Control (Joint Vent.) - - - - Valuation Difference 91,976 (301) 16,824 4,724 Foreign Exchange Difference - - - - Total 91,976 (301) 16,824 4,724

Current Period Prior Period Foreign currency marketable securities valuation differences (301) 4,724Foreign exchange gains resulting from foreign currency associates, subsidiaries, and securities held to maturity related to the above amount - - Total (301) 4,724

Information on legal reserves:

Current Period Prior Period First legal reserves 39,932 29,423 Second legal reserves 5,536 5,536 Other legal reserves appropriated in accordance with special legislation

- -

Total 45,468 34,959

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations and Disclosures Related to the Liabilities (continued)

Information on extraordinary reserves:

Current Period Prior Period Reserves appropriated by the General Assembly (*) 272,335 279,694 Retained earnings - - Accumulated losses - - Foreign currency share capital exchange difference - -

Total 272,335 279,694

(*) The Extraordinary General Assembly held on October 19, 2010, approved the proposal of the Board of Directors resolution on the profit distribution no: 4450/93 dated October 1, 2010 to make a profit distribution of TRY 207,017 which is included in the reserves of the 2009 year-end financial statements to the shareholders; and has authorized the Board of Directors in regards to the procedures and transactions relevant to the profit distribution. The profit distribution process started commencing on October 25, 2010.

Other Information on Shareholders’ Equity: The movement of the marketable securities valuation differences is as follows: Current Period Prior Period At January 1 21,548 5,882 Net unrealized gains on available for sale investments 115,285 74,783 Realized gains on available for sale investments recycled to income statement on disposal - - Realized losses on available for sale investments recycled to income statement on disposal and impairment (29,234) (55,011) Tax effect of net gains on available for sale investments (15,924) (4,106) Unrealized gains / (losses) on cash flow hedges - - Gains / (losses) on cash flow hedges recycled to income statement - - Tax effect of gains on cash flow hedges - -

At period end 91,675 21,548 12. Information on minority shares: None (December 31, 2009 – None).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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SECTION FIVE III. Explanations and Disclosures Related to the Off-Balance Sheet Contingencies and

Commitments 1. Information on off-balance sheet liabilities:

a) Nature and amount of irrevocable loan commitments: Credit card expenditure limit commitments are TRY 1,152,230 and TRY 956,344; payment commitments for checks are TRY 707,681 and TRY 650,733 as of December 31, 2010 and December 31, 2009, respectively.

b) Possible losses and commitments related to off-balance sheet items:

b.1) Non-cash loans including guarantees, acceptances, financial guarantee and other letters of credits:

b.2) Guarantees, suretyships, and similar transactions:

c) c.1) Total amount of non-cash loans:

Current Period Prior Period

Non-cash loans given against achieving cash loans 195,074 206,485 With maturity of 1 year or less than 1 year 29,421 39,899 With maturity of more than 1 year 165,653 166,586

Other non-cash loans 3,873,309 3,222,135 Total 4,068,383 3,428,620

Current Period Prior Period

Letters of Credit 676,829 503,408 Bank Acceptances 55,532 39,205 Other Commitments 279,034 185,376 Other Contingencies 35,496 22,236 Total 1,046,891 750,225

Current Period Prior Period Guarantee Letters 2,158,257 1,884,719 Advance Guarantee Letters 285,114 334,945 Guarantee Letters Given for Customs 211,909 145,859 Temporary Guarantee Letters 223,055 178,758 Other Guarantee Letters 143,157 134,114 Total 3,021,492 2,678,395

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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III. Explanations and Disclosures Related to the Off-Balance Sheet Contingencies and Commitments (continued)

1. Information on off-balance sheet liabilities: (continued)

c.2) Information on sectoral risk breakdown of non-cash loans:

Current Period Prior Period TRY (%) FC (%) TRY (%) FC (%)

Agricultural 30,319 1.53 14,411 0.69 22,109 1.44 9,734 0.51 Farming and raising livestock 23,255 1.17 2,699 0.13 16,422 1.07 8,966 0.47 Forestry 6,826 0.35 11,661 0.56 5,180 0.34 768 0.04 Fishery 238 0.01 51 0.00 507 0.03 - -

Manufacturing 1,060,727 53.43 1,143,247 54.88 830,539 54.19 961,807 50.73 Mining 58,762 2.96 37,749 1.81 43,566 2.85 24,103 1.27 Production 984,013 49.57 1,101,093 52.86 767,155 50.05 921,658 48.61 Electric, gas and water 17,952 0.90 4,405 0.21 19,818 1.29 16,046 0.85

Construction 374,732 18.88 305,485 14.66 328,665 21.44 267,409 14.10 Services 487,512 24.56 317,107 15.22 331,611 21.64 272,719 14.39

Wholesale and retail trade 178,561 9.00 44,360 2.13 99,329 6.48 22,991 1.21 Hotel, food and beverage services 13,373 0.67 6,499 0.31 7,139 0.47 3,209 0.17 Transportation and telecommunication 133,277 6.71 207,215 9.95 77,468 5.05 177,007 9.34 Financial institutions 40,641 2.05 31,024 1.49 39,790 2.60 17,756 0.94 Real estate and renting services 35,180 1.77 13,336 0.64 25,949 1.69 22,953 1.21 Self-employment services 53,117 2.68 4,031 0.19 47,328 3.09 10,290 0.54 Education services 461 0.02 891 0.04 564 0.04 579 0.03 Health and social services 32,902 1.66 9,751 0.47 34,044 2.22 17,934 0.95

Other 31,811 1.60 303,032 14.55 19,777 1.29 384,250 20.27 Total 1,985,101 100.00 2,083,282 100.00 1,532,701 100.00 1,895,919 100.00

c.3) Information on I st and II nd Group non-cash loans:

I st Group II nd Group Non-cash loans TRY FC TRY FC Letters of guarantee 1,733,196 1,254,504 21,637 12,155 Bank acceptances 345 55,187 - - Letters of credit 493 671,801 - 4,535 Endorsements - - - - Underwriting commitments - - - - Factoring commitments - - - - Other commitments and contingencies 229,235 84,732 195 368

Total 1,963,269 2,066,224 21,832 17,058

The Bank provided a reserve of TRY 18,722 (December 31, 2009: TRY 10,617) for non-cash loans not indemnified yet amounting to TRY 25,204 (December 31, 2009: TRY 18,361).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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III. Explanations and Disclosures Related to the Off-Balance Sheet Contingencies and Commitments (continued)

2. Information related to derivative financial instruments:

Derivative transactions according to purposes Trading Hedging Current Period Prior Period Current Period Prior PeriodTypes of trading transactions Foreign currency related derivative transactions (I): 10,045,989 6,190,071 - -

Forward transactions 2,030,469 1,587,632 - -Swap transactions 3,081,598 1,826,664 - -Futures transactions 498,894 483,173 - -Option transactions 4,435,028 2,292,602 - -

Interest related derivative transactions (II) : 678,409 339,655 - -Forward rate transactions - - - -Interest rate swap transactions 413,864 303,000 - -Interest option transactions 264,545 36,655 - -Futures interest transactions - - - -

Marketable securities call-put options (III) 17,678 - - -Other trading derivative transactions (IV) - - - -A.Total trading derivative transactions (I+II+III+IV) 10,742,076 6,529,726 - - Types of hedging transactions

Fair value hedges - - 491,053 761,499Cash flow hedges - - - -Net investment hedges - - - -

B.Total hedging related derivatives - - 491,053 761,499

Total Derivative Transactions (A+B) 10,742,076 6,529,726 491,053 761,499

Related to agreements of forward transactions and options; the information based on the type of forward and options transactions are disclosed separately, specified with related amounts, type of agreement, purpose of transaction, nature of risk, strategy of risk management, hedging relationship, possible effects on the Bank’s financial position, timing of cash flows, reasons of unrealized transactions which previously projected to be realized, income and expenses that could not be linked to income statement in the current period because of the agreements: Forward foreign exchange and swap transactions are based on protection from interest and currency fluctuations. According to TAS, they do not qualify as hedging instruments and are remeasured at fair value. As of July 1, 2008, the Bank has started to apply fair value hedge accounting in order to avoid the effects of interest rate changes in the market by matching TRY 491,053 (December 31, 2009 - TRY 761,499) of its swap portfolio with its loan portfolio.

As of December 31, 2010, the Bank has no cash flow hedges. (December 31, 2009: None)

As of December 31, 2010, the Bank has no hedge of net investment in foreign operations. (December 31, 2009: None)

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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III. Explanations and Disclosures Related to the Off-Balance Sheet Contingencies and Commitments (continued)

3. Explanations on contingent liabilities and assets:

a.1) The Bank's share in contingent liabilities arising from entities under common control (joint ventures) together with other venturer: None.

a.2) Share of entity under common control (joint ventures) in its own contingent liabilities: None. a.3) The Bank’s contingent liabilities resulting from liabilities of other venturers in entities under

common control (joint ventures): None. b) Accounting and presentation of contingent assets and liabilities in the financial statements:

b.1) Contingent assets are accounted for, if probability of realization is almost certain. If probability of

realization is high, then it is explained in the footnotes: As of December 31, 2010, there are no contingent assets that need to be explained (December 31, 2009 - None).

b.2) A provision is made for contingent liabilities, if realization is probable and the amount can be

reliably determined. If realization is remote or the amount cannot be determined reliably, then it is explained in the footnotes: As of December 31, 2010 one of the loan customers filed a litigation case against the Bank, however, since the case is still in progress for expertise appointment and gathering supporting documents, the Bank could not yet evaluate the probable effects of the case on financial statements (December 31, 2009 - None).

4. Custodian and intermediary services:

The Bank provides trading and safe keeping services in the name and account of third parties, which are presented in the statement of contingencies and commitments. Investment fund participation certificates held in custody which belong to the customers and the portfolio are accounted for with their nominal values. As of December 31, 2010 the total nominal value and number of certificates are TRY 1,143,126 and 114,312,600 thousand (December 31, 2009 – TRY 1,138,296 and 113,829,615 thousand) and the total fair value is TRY 4,885,303 (December 31, 2009 – TRY 5,627,043).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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III. Explanations and Disclosures Related to the Off-Balance Sheet Contingencies and Commitments (continued)

5. The information on the Bank’s rating by the international rating introductions (*) :

The results of the ratings performed by Moody’s Investor Services and Fitch Ratings are shown below:

Moody’s Investor Services: October 2010 View Stable Bank Financial Strength D+ Foreign Currency Deposits Ba3/NP Fitch Ratings: December 2010 Foreign Currency Commitments Long term BBB- Short term F3 View Positive Turkish Lira Commitments Long term BBB Short term F3 View Positive National AAA (tur) View Stable Individual Rating C/D Support Points 2

(*) Ratings above are not performed based on the “Communiqué for Authorization and Activities of Rating Institutions” published by the Capital Markets Board.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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SECTION FIVE

IV. Explanations and Disclosures Related to the Statement of Income

1. a) Information on interest on loans:

Current Period Prior Period Interest on loans (*) TRY FC TRY FC Short term loans 612,668 72,281 752,817 99,226

Medium and long term loans 457,276 47,566 373,519 35,883

Interest on non-performing loans 13,900 - 6,719 -

Premiums received from Resource Utilization Support Fund

- - - -

Total 1,083,844 119,847 1,133,055 135,109

(*) Includes fees and commissions obtained from cash loans amounting to TRY 50,411 (December 31, 2009: TRY 36,312).

b) Information on interest received from banks: Current Period Prior Period TRY FC TRY FC The Central Bank of Turkey - - - 10 Domestic banks 1,569 76 2,359 44 Foreign banks 3,665 1,856 4,369 6,188 Branches and head office abroad - - - - Total 5,234 1,932 6,728 6,242

c) Interest received from marketable securities portfolio: Current Period Prior Period TRY FC TRY FC Trading securities 15,843 341 11,389 524 Financial assets at fair value through profit and loss - - - - Available-for-sale securities 192,247 7,053 154,787 6,843 Held-to-maturity securities 52,154 - 116,101 - Total 260,244 7,394 282,277 7,367

d) Information on interest income received from associates and subsidiaries:

Current Period Prior Period Interest received from associates and subsidiaries 2,508 2,309

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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IV. Explanations and Disclosures Related to the Statement of Income (continued) 2. a) Information on interest on funds borrowed (*) :

Current Period Prior Period TRY FC TRY FC Banks

The Central Bank of Turkey - - - - Domestic banks 3,240 2,551 7,446 4,089 Foreign banks 105,568 20,219 113,875 14,425 Branches and head office abroad - - - -

Other financial institutions - 31,790 - 34,299 Total 108,808 54,560 121,321 52,813 (*) Includes fees and commission expenses of cash loans amounting to TRY 5,962 (December 31, 2009 : TRY

3,821). b) Information on interest expense to associates and subsidiaries:

Current Period Prior Period Interest expenses to associates and subsidiaries 413 2,791

c) Information on interest expenses to marketable securities issued: None (December 31, 2009 –

None). d) Distribution of interest expenses on deposits based on maturity of deposits:

Time Deposits

Account Name Demand Deposits

Up to 1 Month

Up to 3 Months

Up to 6 Months

Up to 1 Year

More than 1 Year

Accumulated Deposits

Total

TRY Bank deposits - 11,058 648 36 59 156 - 11,957 Saving deposits - 67,035 185,426 12,604 11,211 41 658 276,975 Public sector deposits - 404 212 2 9 - - 627 Commercial deposits 133 65,302 54,957 876 1,353 - - 122,621 Other deposits - 2,176 13,145 3,193 586 2 - 19,102 7 days call accounts - - - - - - - -

Total 133 145,975 254,388 16,711 13,218 199 658 431,282 FC

Foreign currency deposits 42 25,991 35,187 1,367 728 50 24 63,389 Bank deposits 10 92 169 36 - - - 307 7 days call accounts - - - - - - - - Precious metal deposits - 104 37 16 5 - - 162

Total 52 26,187 35,393 1,419 733 50 24 63,858 Grand Total 185 172,162 289,781 18,130 13,951 249 682 495,140

3. Information on dividend income:

Current Period Prior Period Trading Securities - - Financial assets at fair value through profit and loss - - Available-for-sale securities 5 10 Other 14,453 11,963 Total 14,458 11,973

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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IV. Explanations Related to the Statement of Income (continued)

4. Information on net trading income:

Current Period Prior Period Income 2,211,449 2,354,569 Gains on capital market operations 40,542 74,319

Gains on derivative financial instruments (*) 543,052 482,770

Foreign exchange gains 1,627,855 1,797,480

Losses (-) 2,215,383 2,304,407 Losses on capital market operations 10,432 13,346

Losses on derivative financial instruments (*) 753,271 666,394

Foreign exchange losses 1,451,680 1,624,667 (*) Foreign exchange gains on hedging transactions are TRY 4,519 (December 31, 2009 – TRY 1,169), while foreign exchange

losses on hedging transactions are TRY 25,425 (December 31, 2009 – TRY 17,216).

5. Information on other operating income:

The information on the factors affecting the Bank’s income including new developments, and the explanation on nature and amount of income earned from such items: None.

6. Provision expenses of banks for loans and other receivables:

Current Period Prior Period Specific provisions for loans and other receivables 119,848 171,967

III. Group Loans and Receivables 22,723 4,955

IV. Group Loans and Receivables 35,832 28,102

V. Group Loans and Receivables 61,293 138,910

General provision expenses 31,168 (1,610)

Provision expenses for possible losses - -

Marketable securities impairment losses 11,721 2,947

Financial assets at fair value through profit and loss 30 143

Investment securities available for sale 11,691 2,804

Impairment provision expense 3,360 3,117Associates - -Subsidiaries - -Entities under common control (Joint Vent.) - -Investments held to maturity 3,360 3,117

Other - -

Total 166,097 176,421

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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IV. Explanations and Disclosures Related to the Statement of Income (continued)

7. Information on other operating expenses:

Current Period Prior Period Personnel expenses 350,775 341,878 Reserve for employee termination benefits 8,907 7,645 Bank social aid fund deficit provision - - Impairment expenses of fixed assets - - Depreciation expenses of fixed assets 45,411 46,242 Impairment expenses of intangible assets - -

Impairment expense of goodwill - - Amortization expenses of intangible assets 6,692 5,931 Impairment for investments accounted for under equity method - - Impairment expenses of assets to be disposed 2,197 2,106 Depreciation expenses of assets to be disposed 385 - Impairment expenses of assets held for sale and discontinued operations - - Other operating expenses 256,016 243,737

Rent expenses 76,975 74,743 Maintenance expenses 6,757 6,064 Advertisement expenses 23,356 22,940 Other expenses 148,928 139,990

Loss on sales of assets 131 983 Other (*) 117,307 52,513 Total 787,821 701,035

(*) Included in other TRY 11,054 (December 31, 2009 – TRY 9,927) is premiums paid to the Saving Deposit Insurance Fund, TRY 41,817 (December 31, 2009 – TRY 18,617) is other taxes and duties paid and TRY 25,239 is merger and restructuring costs.

8. Information on profit/(loss) from continued and discontinued operations before taxes:

Profit before tax of the Bank consists of net interest income and net fees and commission income amounting to TRY 767,909 (December 31, 2009 - TRY 800,880) and TRY 417,730 (December 31, 2009 - TRY 238,930), respectively; while operating expenses are TRY 787,821 (December 31, 2009 - TRY 701,035). The Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345 as of September 30, 2010. The profit amounting to TRY 77,173 resulting from this sale is presented as “Income on Sale of Associates, Subsidiaries and Entities Under Common Control” under the “Income on Discontinued Operations” in the current year income statement.

9. Information on tax provision for continued and discontinued operations:

a) As of December 31, 2010, the current tax charge is TRY 87,607 (December 31, 2009 – TRY 45,083), and deferred tax benefit is TRY 21,004 (December 31, 2009 – TRY 1,587 deferred tax charge).

b) Deferred tax benefit on temporary differences resulted from continued operations is TRY 21,004

(December 31, 2009 – TRY 1,587 deferred tax charge).

The Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345, and TRY 3,859 tax effect of this sale is presented as “Tax Provision for Discontinued Operations”.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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IV. Explanations and Disclosures Related to the Statement of Income (continued) 9. Information on tax provision: (continued)

c) Tax reconciliation:

Current Period Prior Period Profit before tax 366,904 256,837 Additions 40,866 17,182 Disallowables 5,495 16,887 General loan loss provision 31,928 - Other 3,443 295 Deductions (74,755) (40,671) Dividend income (14,330) (11,921) General loan loss provision - (280) Provision for possible tax disputes - (14,711) Income from branches abroad - (11,993) Income on sale of associates (57,880) - Other (2,545) (1,766) Taxable Profit / (Loss) 333,015 233,348 Corporate tax rate %20 %20

Tax calculated 66,603 46,670

As of December 31, 2010, current tax charge is TRY 87,607 (December 31, 2009 – TRY 45,083) and deferred tax benefit on temporary differences is TRY 21,004 (December 31, 2009 – TRY 1,587 tax charge). Net tax charge recognized in the financial statements is TRY 66,603 (December 31, 2009 – TRY 46,670).

10. Information on net profit/(loss) from continued and discontinued operations:

The Bank’s net profit from continued operations for the year ended December 31, 2010 is TRY 226,987 (December 31, 2009 – TRY 210,167), net profit from discontinued operations is TRY 73,314 (December 31, 2009 – None).

11. The explanations on net income / loss for the period:

a) The nature and amount of certain income and expense items from ordinary operations is disclosed if the disclosure for nature, amount and repetition rate of such items is required for the complete understanding of the Bank's performance for the period: None (December 31, 2009 – None).

b) Effect of changes in accounting estimates on income statement for the current and, if any, for subsequent

periods: None (December 31, 2009 – None).

c) Profit or loss attributable to minority shares: None (December 31, 2009 – None).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

83

IV. Explanations and Disclosures Related to the Statement of Income (continued) 12. If the other items in the income statement exceed 10% of the income statement total, accounts

amounting to at least 20% of these items:

Current Period Prior Period

Other fees and commissions received

Credit cards commissions and fees 174,707 177,022

Import letters of credit commissions 3,432 4,011

Inquiry and company search fees and commissions 23,199 17,920

Fund management commissions 27,349 29,984 Settlement expense provision, eft, swift, agency commissions 10,926 9,915

Insurance commissions 14,369 10,966

Transfer commissions 8,250 6,227

Commissions and fees earned from correspondent banks 7,341 6,389

Other (*) 241,246 58,941

Total 510,819 321,375

Other fees and commissions given

Credit cards commissions and fees 109,132 97,548

Commissions and fees paid to correspondent banks 2,732 2,470

Settlement and swift commissions 4,353 3,808

Other 16,519 14,488

Total 132,736 118,314

(*) As of October 18, 2010, The Bank signed an exclusive agency agreement with Cardif Hayat Sigorta A.Ş. for the distribution of

life insurance products and has also signed an exclusive agency agreement with Fortis Emeklilik ve Hayat A.Ş. for the distribution of pension and life saving products, and received TRY 180,000 in consideration of these agreements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

84

SECTION FIVE V. Explanations and Disclosures Related to Statement of Shareholders' Equity Movement

a) Increase resulting from revaluation of financial assets available for sale is TRY 70,127 (December 31, 2009 – TRY 15,666 increase).

Gain or loss arising from measurement of financial assets available-for-sale included in shareholders' equity in the current period, excluding those related to hedging: Indicated above.

The amount recycled from equity to net income/loss account if the loss or gain related with measurement at fair value is recorded to equity for the financial assets available-for-sale (excluding the assets related to hedging): TRY 29,234 income (December 31, 2009 – TRY 55,011 income).

b) Increase in cash flow risk hedging items: None.

b.1) Reconciliation of beginning and ending balances: None.

b.2) Amount recorded in the current period if a gain or loss from a cash flow hedging derivative or non-derivative financial asset is accounted for under shareholders’ equity: None.

c) The reconciliation related with foreign exchange amounts in the beginning and end of the period: None. d) Dividends declared subsequent to the balance sheet date, but before the announcement of the financial

statements: None.

e) Dividends per share proposed subsequent to the balance sheet date: At the Extraordinary General Assembly held on October 19, 2010; it was decided to make a profit distribution of TRY 207,017 which was included in the reserves of the 2009 year-end financial statements to the shareholders. The dividend per share of TRY 0.19 is made.

f) Proposals to General Assembly for the payment dates of dividends and if it will not be appropriated the

reasons for this: As per the decision taken in the Extraordinary General Assembly held on October 19, 2010 the profit distribution process was commenced on October 25, 2010.

g) Amounts transferred to legal reserves: Amount transferred to legal reserves is TRY 10,509 in 2010

(December 31, 2009 – TRY 8,209).

h) Information on shares issued:

The Bank has not recorded any shares issued in “ Share Premium” account in the current period.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

85

VI. Explanations and Disclosures Related to Statement of Cash Flows

1. The effects of the other items stated in the cash flow statement and the changes in foreign currency exchange rates on cash and cash equivalents:

“Other items” amounting to TRY 906,233 (December 31, 2009 – TRY 701,175) in “Operating profit before changes in operating assets and liabilities” consists of fees and commissions paid and other expenses except for personnel expenses, leasing expenses, reserve for employee termination benefits, depreciation charges and taxes paid.

“Net increase/decrease in other liabilities” amounting to TRY 132,220 (December 31, 2009 – TRY 24,057) in “Changes in operating assets and liabilities” consists of changes in sundry creditors, other liabilities and interbank money market borrowings. “Net increase/decrease in other assets” with a total amount of TRY 166,227 (December 31, 2009 – TRY 8,083) consists of changes in sundry debtors and other assets.

2. Cash and cash equivalents at beginning and end of periods:

The reconciliation of the components of cash and cash equivalents, accounting policies used to determine these components, the effect of any change made in accounting principle in the current period, the recorded amounts of the cash and cash equivalent assets at the balance sheet and the recorded amounts in the cash flow statement:

Beginning of the period Current Period Prior Period Cash 1,250,065 1,796,738 Cash in TRY/Foreign Currency 309,346 251,766 Central Bank – Unrestricted amount 922,102 1,527,735 Other 18,617 17,237 Cash equivalents 1,086,870 1,265,058 Banks 392,094 508,751 Money market placements 694,776 756,307

Total cash and cash equivalents 2,336,935 3,061,796

End of the period Current Period Prior Period Cash 1,616,646 1,250,065 Cash in TRY/Foreign Currency 287,730 309,346 Central Bank – Unrestricted amount 1,301,246 922,102 Other 27,670 18,617 Cash equivalents 703,336 1,086,870 Banks 703,336 392,094 Money market placements - 694,776

Total cash and cash equivalents 2,319,982 2,336,935

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

86

VII. Explanations on the Risk Group of the Bank 1. Volume of related party transactions, income and expense amounts involved and outstanding loan

and deposit balances:

a) Current Period:

Related Parties

Subsidiaries, associates and entities under common

control (Joint Vent.) Direct and indirect

shareholders of the Bank Other entities included

in the risk group Cash Non-cash Cash Non-cash Cash Non-cash Loans and other receivables

Balance at beginning of period 557 7,198 15,688 46,004 57,190 86,909Balance at end of period 331 735 38,643 40,782 142,406 114,606

Interest and commission income 2,508 55 3,439 16 5,407 750

Included in the balances above, the Bank has placements in foreign bank accounts amounting to TRY 56 from subsidiaries and associates, TRY 14,134 under direct and indirect corporate and real person shareholders and TRY 2,293 from other entities included in the risk group.

b) Prior Period:

Related Parties

Subsidiaries, associates and entities under common

control (Joint Vent.) Direct and indirect

Shareholders of the Bank Other entities included

in the risk group Cash Non-cash Cash Non-cash Cash Non-cash Loans and other receivables

Balance at beginning of period 6,285 3,771 82,234 14,059 66,936 6,794Balance at end of period 557 7,198 15,688 46,004 57,190 86,909

Interest and commission income received 2,309 259 6,381 2 3,492 234

Included in the balances above, the Bank has placements in foreign bank accounts amounting to TRY 57 from subsidiaries and associates, TRY 14,085 under direct and indirect corporate and real person shareholders and TRY 6,028 from other entities included in the risk group.

c.1) Information on related party deposits balances:

Related parties

Subsidiaries, associates and entities under common

control (Joint Vent.) Direct and indirect

shareholders of the Bank Other entities included

in the risk group

Deposits Current Period

Prior Period

Current period

Prior period

Current period

Prior period

Balance at beginning of period 18,591 22,816 282,015 189,247 127,883 272,485Balance at end of period 73,452 18,591 1,024,799 282,015 336,262 127,883Interest on deposits 413 2,791 24,761 48,791 3,015 6,466

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

87

VII. Explanations on the Risk Group of the Bank (continued) 1. Volume of related party transactions, income and expense amounts involved and outstanding loan

and deposit balances: (continued) c.2) Information on forward and option agreements and other similar agreements made with related parties:

Related Parties

Subsidiaries, associates and entities under common

control (Joint Vent.) Direct and indirect

shareholders of the Bank Other entities included

in the risk group

Current Period

Prior Period

Current period

Prior period

Current period

Prior Period

Financial Assets at Fair Value Through Profit and Loss

Beginning of period 32,150 141,755 1,508,190 2,401,449 746,942 419,698End of period - 32,150 2,958,850 1,508,190 887,840 746,942Total income/loss - 1,082 (23,146) (43,063) 31,147 (41,922)

Hedging transactions purposes Beginning of period - - 306,331 322,681 - -End of period - - 201,151 306,331 - -Total income/loss - - (169) (14,510) - -

d) As of December 2010, the total amount of remuneration and benefits provided for the senior

management of the Bank is TRY 16,640 (December 31, 2009 – TRY 15,692). VIII. Explanations on the Bank’s Domestic Branches, Agencies and Branches Abroad and

Off-shore Branches 1. Explanations on the Bank’s domestic branches, agencies and branches abroad and off-shore

branches:

Number Employees Domestic branches 331 5,602 Country Rep-offices abroad - - - Total Assets Capital Branches abroad 3 42 Cyprus 198,853 10,000 Off-shore branches 1 2 Bahrain 1,498,870 -

2. Explanations on Branch and Agency Openings or Closings of the Bank: The Bank opened 2 new branches and closed 1 of its branches in 2010.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

88

SECTION SIX

OTHER EXPLANATIONS I. Other Explanations on the Operations of the Bank None.

SECTION SEVEN

INDEPENDENT AUDITOR’S REPORT

I. Explanations on the Independent Auditor’s Report

The unconsolidated financial statements of the Bank were audited by DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. (Member of Deloitte Touche Tohmatsu Limited) and the independent auditor’s report dated February 10, 2011 is presented preceding the financial statements.

II. Other Footnotes and Explanations Prepared by the Independent Auditors

None.

 

 103

  

Independent Audit Report for 31 December 2010, Consolidated Financial Accounts and Footnotes for the Financial Accounts

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ AND ITS FINANCIAL SUBSIDIARIES INDEPENDENT AUDITOR’S REPORT, CONSOLIDATED FINANCIAL STATEMENTS AND NOTES FOR THE YEAR ENDED DECEMBER 31, 2010 Translated into English

from the Original Turkish Report

To the Board of Directors of Türk Ekonomi Bankası A.Ş. Istanbul

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ

AND ITS FINANCIAL SUBSIDIARIES

INDEPENDENT AUDITOR’S REPORT FOR THE YEAR JANUARY 1, 2010 – DECEMBER 31, 2010

We have audited the accompanying consolidated balance sheet of Türk Ekonomi Bankası A.Ş. and its financial subsidiaries (the “Group”) as at December 31, 2010, and the related consolidated statements of income, cash flows and changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements The Board of Directors of the Bank is responsible for the preparation and fair presentation of the financial statements in accordance with the regulation on “Procedures And Principles Regarding Banks’ Accounting Practices And Maintaining Documents” published in the Official Gazette dated November 1, 2006 and numbered 26333 and Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”) and other regulations, circulars, communiqués and pronouncements in respect of accounting and financial reporting made by Banking Regulation and Supervision Agency (“BRSA”). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the regulation on “Licensing and Operations of Audit Firms in Banking” published in the Official Gazette no: 26333 on November 1, 2006 and the International Standards on Auditing. We planned and performed our audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the consideration of the effectiveness of internal control and appropriateness of accounting policies applied relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independent Auditor’s Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group as at December 31, 2010 and the results of its operations and its cash flows for the year then ended in accordance with the prevailing accounting principles and standards set out as per the Articles 37 and 38 of the Banking Act No: 5411, and other regulations, communiqués and circulars in respect of accounting and financial reporting and pronouncements made by BRSA.

Although our review is not affected, the following issue should be drawn attention: Pursuant to the disclosures made on June 3, 2010 by Fortis Bank A.Ş. and Türk Ekonomi Bankası A.Ş. (“TEB”), it was stated that controlling shareholders of the related banks had reached an agreement under the Memorandum of Understanding, executed by and between Çolakoğlu Group and BNP Paribas Group, on the merger of TEB and Fortis Bank A.Ş. under TEB. An application was filed with the Capital Markets Board (“CMB”) on October 26, 2010, following the Extraordinary General Assemblies of the merging entities dated October 19, 2010. As explained in detail in Section Three, Note XXIII, at the meetings held on 25 November 2010, the Board of Directors approved the merger ratio and the exchange ratio determined based on the appraisal reports of the valuers appointed by the commercial court, and the advisors of the merging banks. The merger has been approved by the decision of the CMB dated December 21, 2010 and numbered 37/1145. Following the approval of the BRSA dated December 30, 2010 and numbered 3998 regarding the merger and transfer agreement, the merger of the two banks was approved in the Extraordinary General Assemblies of the merging banks held on January 25, 2011 with the decision to cease the legal entity of Fortis Bank A.Ş. and transfer all of its assets and liabilities with respective rights and obligations to TEB. The merger will be realized after the decision of the BRSA is published in the Official Gazette. Additional paragraph for English translation: The effect of the differences between the accounting principles summarized in Section 3 and the accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (IFRS) have not been quantified and reflected in the accompanying financial statements. The accounting principles used in the preparation of the accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial statements are not intended to present the Banks’s financial position and results of its operations in accordance with accounting principles generally accepted in such countries of users of the financial statements and IFRS. İstanbul, February 10, 2011 DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Hasan Kılıç Partner

THE CONSOLIDATED FINANCIAL REPORT OF TÜRK EKONOMİ BANKASI A.Ş. FOR THE YEAR ENDED DECEMBER 31, 2010

Address : Meclis-i Mebusan Caddesi No: 57 Fındıklı 34427 - İstanbul

Telephone : (0 212) 251 21 21 Fax : (0 212) 249 65 68

Web Site : www.teb.com.tr

E-mail Address : investor.relations@teb.com.tr The year end consolidated financial report designed by the Banking Regulation and Supervision Agency in line with Communiqué on Financial Statements to be Publicly Announced and the Related Policies and Disclosures consists of the sections listed below:

• GENERAL INFORMATION ABOUT THE PARENT BANK • CONSOLIDATED FINANCIAL STATEMENTS OF THE PARENT BANK • EXPLANATIONS ON THE CORRESPONDING ACCOUNTING POLICIES APPLIED IN THE

RELATED PERIOD • INFORMATION ON FINANCIAL STRUCTURE OF THE GROUP WHICH IS UNDER

CONSOLIDATION • EXPLANATORY DISCLOSURES AND FOOTNOTES ON CONSOLIDATED FINANCIAL

STATEMENTS • OTHER EXPLANATIONS • INDEPENDENT AUDITOR’S REPORT

The subsidiaries, associates and jointly controlled entities, financial statements of which are consolidated within the framework of the reporting package are as follows:

The consolidated financial statements and the explanatory footnotes and disclosures, unless otherwise indicated, are prepared in thousands of Turkish Lira, in accordance with the Communique on Banks’ Accounting Practice and Maintaining Documents, Turkish Accounting Standards, Turkish Financial Reporting Standards, related communiqués and the Banks’ records, have been independently audited and presented as attached.

February 11, 2010

Yavuz Canevi

Jean - Milan

Charles Dominique Givadinovitch

Dr. Akın Akbaygil

Varol Civil

M. Aşkın Dolaştır

Göksel Toraman Chairman of the Board of

Directors

Chairman of the Audit Committee

Vice Chairman of the Audit Committee

General Manager

Assistant General Manager Responsible of

Financial Reporting

Director Responsible of

General Accounting Information related to responsible personnel for the questions can be raised about financial statements:

Name-Surname / Title: Çiğdem Başaran / Investor Relations Manager

Telephone Number: (0212) 251 21 21

Fax Number: (0212) 249 65 68

Subsidiaries 1. The Economy Bank N.V. 2. Stichting Effecten Dienstverlening 3. Kronenburg Vastgoed B.V. 4. TEB Faktoring A.Ş. 5. TEB Yatırım Menkul Değerler A.Ş. 6. TEB Portföy Yönetimi A.Ş.

INDEX

Page Number SECTION ONE

General Information

I. History of the Parent Bank, Including its Incorporation Date, Initial Legal Status and Amendments to Legal Status, if any 1 II. Explanation on the Parent Bank’s Capital Structure, Shareholders of the Parent Bank who are in Charge of the Management and/or Auditing of the Parent Bank

Directly or Indirectly, Changes in These Matters (if any), and the Group the Parent Bank Belongs to 1 III. Explanations Regarding the Chairman and the Members of Board of Directors, Audit Committee, General Manager and Assistants and Shares of the Parent Bank

They Possess 2 IV. Information About the Persons and Institutions That Have Qualified Shares in the Parent Bank 3 V. Summary on the Parent Bank’s Functions and Areas of Activity 3

SECTION TWO Consolidated Financial Statements

I. Consolidated Balance Sheet 4 II. Consolidated Statement of Off Balance Sheet Contingencies and Commitments 6 III. Consolidated Statement of Income 7 IV. Consolidated Statement of Profit and Loss Accounted for Under Equity 8 V. Consolidated Statement of Changes in Shareholders’ Equity 9 VI. Consolidated Statement of Cash Flows 11 VII. Consolidated Profit Distribution Table 12

SECTION THREE

Accounting Principles I. Basis of Presentation 13 II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions 13 III. Information about the Parent Bank and its Consolidated Subsidiaries 14 IV. Explanations on Forward and Option Contracts and Derivative Instruments 15 V. Explanations on Interest Income and Expenses 16 VI. Explanations on Fees and Commission Income and Expenses 16 VII. Explanations on Financial Assets 18 VIII. Explanations on Impairment of Financial Assets 19 IX. Explanations on Offsetting of Financial Assets and Liabilities 19 X. Explanations on Sales and Repurchase Agreements and Lending of Securities 19 XI. Explanations on Assets Held For Sale, Discontinued Operations and Liabilities Related to Those Assets 19 XII. Explanations on Goodwill and Other Intangible Assets 20 XIII. Explanations on Tangible Fixed Assets 20 XIV. Explanations on Leasing Transactions 21 XV. Explanations on Provisions and Contingent Liabilities 21 XVI. Explanations on Liabilities Regarding Employee Benefits 21 XVII. Explanations on Taxation 22 XVIII. Additional Explanations on Borrowings 22 XIX. Explanations on Issued Share Certificates 23 XX. Explanations on Acceptances 23 XXI. Explanations on Government Incentives 23 XXII. Explanations on Reporting According to Segmentation 23 XXIII. Explanations on Other Matters 24

SECTION FOUR Information on Consolidated Financial Structure

I. Explanations Related to Consolidated Capital Adequacy Standard Ratio 27 II. Explanations Related to Consolidated Credit Risk 30 III. Explanations Related to Consolidated Market Risk 35 IV. Explanations Related to Consolidated Operational Risk 36 V. Explanations Related to Consolidated Currency Risk 36 VI. Explanations Related to Consolidated Interest Rate Risk 39 VII. Explanations Related to Consolidated Liquidity Risk 43 VIII. Explanations Related to Presentation of Financial Assets and Liabilities at Fair Value 46 IX. Explanations Related to Transactions Carried out on Behalf of Other Parties and Fiduciary Assets 47

SECTION FIVE

Explanations and Disclosures on Consolidated Financial Statements I. Explanations and Disclosures Related to the Consolidated Assets 48 II. Explanations and Disclosures Related to the Consolidated Liabilities 69 III. Explanations and Disclosures Related to the Consolidated Off-Balance Sheet Contingencies and Commitments 78 IV. Explanations and Disclosures Related to the Consolidated Statement of Income 83 V. Explanations and Disclosures Related to the Consolidated Statement of Shareholders’ Equity Movement 90 VI. Explanations and Disclosures Related to the Consolidated Statement of Cash Flows 91 VII. Explanations on the Risk Group of the Parent Bank 92 VIII. Explanations on the Parent Bank’s Domestic Branches, Agencies and Branches Abroad and Off-shore Branches 93

SECTION SIX Other Explanations

I. Explanations on the Operations of the Parent Bank 94

SECTION SEVEN

Independent Auditor’s Report

I. Explanations on the Independent Auditor’s Report 94 II. Other Footnotes and Explanations Prepared by Independent Auditors 94

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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SECTION ONE

GENERAL INFORMATION I. History of the Parent Bank, Including its Incorporation Date, Initial Legal Status and

Amendments to Legal Status, if any

Türk Ekonomi Bankası Anonim Şirketi (“the Bank”), which had been a local bank incorporated in Kocaeli in 1927 under the name of Kocaeli Halk Bankası T.A.Ş., was acquired by the Çolakoğlu Group in 1982. Its title was changed as Türk Ekonomi Bankası A.Ş. and its headquarters moved to Istanbul.

II. Explanation on the Parent Bank’s Capital Structure, Shareholders of the Parent Bank

who are in Charge of the Management and/or Auditing of the Parent Bank Directly or Indirectly, Changes in These Matters (if any), and the Group the Parent Bank Belongs to

As of December 31, 2010 and December 31, 2009 the shareholders’ structure and their respective ownerships are summarized as follows:

Current Period Prior Period

Name of shareholders

Paid in capital

%

Paid in capital

%

TEB Mali Yatırımlar A.Ş. 926,796 84.25 926,796 84.25 Publicly Traded 171,966 15.63 171,966 15.63 Other Shareholders 1,238 0.12 1,238 0.12 1,100,000 100.00 1,100,000 100.00

As of December 31, 2010 Parent Bank’s paid-in-capital consists of 1,100,000,000 shares of TRY 1.00 (full TRY) nominal each.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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III. Explanations Regarding the Chairman and the Members of Board of Directors, Audit Committee, General Manager and Assistants and Shares of the Parent Bank They Possess

Name Title Board of Directors; Yavuz Canevi Chairman of the Board of Directors Dr.Akın Akbaygil Member of the Board of Directors, Vice Chairman of the Audit

Committee and Vice Chairman of the Board of Directors Jean-Milan Charles Dominique Givadinovitch (****) (*****)

Member of the Board of Directors, Chairman of the Audit Committee

Jean Paul Sabet (*) (*****) Member of the Board of Directors and Vice Chairman of the Board of Directors

Metin Toğay Member of the Board of Directors Yves Paul Henri Martrenchar Member of the Board of Directors Ayşe Aşardağ (**) Member of the Board of Directors Varol Civil In Charge Member of the Board of Directors and General Manager Musa Erden In Charge Member of the Board of Directors Assistant General Managers;

Mustafa Aşkın Dolaştır Assistant General Manager Responsible from Financial Control İzzet Cemal Kişmir Assistant General Manager Responsible from Consumer Banking and

Business Banking Levent Çelebioğlu Assistant General Manager Responsible from Corporate Banking and

Financial Institutions Nilsen Altıntaş Assistant General Manager Responsible from Human Resources Nuri Tuncalı Assistant General Manager Responsible from Corporate, Commercial

and SME Loans Saniye Telci Assistant General Manager Responsible from Banking Operations Turgut Boz Assistant General Manager Responsible from Commercial Banking and

SME Banking Turgut Güney Assistant General Manager Responsible from Information Technologies Ümit Leblebici Assistant General Manager Responsible from Treasury

Ömer Abidin Yenidoğan Assistant General Manager Responsible from Private Banking (Vicarious)

Melis Coşan Baban Chief Legal Councel and Secretary of the Board of Directors Osman Durmuş Assistant General Manager Responsible from Consumer Loans and

Business Loans Group Heads

Ayşe Korkmaz

Head of Compliance and Internal Control Inspection Committee and Statutory Auditors;

Hakan Tıraşın Chairman of the Inspection Committee Esra Peri Aydoğan (***) Statutory Auditor Cihat Madanoğlu Statutory Auditor

(*) Jean-Jacques Marie Santini left from his position as a member of the board of directors and vice chairman of the board of

directors as of March 30, 2010, and Jean Paul Sabet was appointed as the new vice chairman of the board of directors. (**) Ayşe Aşardağ was appointed as the new member of the board of directors as of September 3, 2010, upon the decease of

Rafael Taranto. (***) Esra Peri Aydoğan was appointed as statutory auditor after Ayşe Aşardağ was appointed as the new member of board of

directors. (****) Patrick Rene Pitton left from his position as a member of the board of director as of November 25, 2010 and Jean-Milan

Charles Dominique Givadinovitch was appointed as member of the board of directors at the same date. (*****) Jean Paul Sabet left from his position as a member of the audit committee as of December 2, 2010 and Jean-Milan

Charles Dominique Givadinovitch was appointed as the chairman of the audit committee.

Ünsal Aysun left from his position as assistant general manager responsible from project financing and cash management as of April 1, 2010. Shares of the Bank owned by the above stated Chairman and Members of Board of Directors, General Manager and Assistants are negligible.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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IV. Information About the Persons and Institutions That Have Qualified Shares in the Parent Bank

Name / Commercial Name Share

Amount Share Ratio

Paid up Shares

Unpaid Shares

TEB Mali Yatırımlar A.Ş. 926,796 84.25% 926,796 -

The directly or indirectly authorized company that has the qualified shares in the Parent Bank’s capital is TEB Mali Yatırımlar A.Ş. TEB Mali Yatırımlar A.Ş. is a member of Çolakoğlu and BNP Paribas Group. 50% of the shares of TEB Mali Yatırımlar A.Ş. is controlled by BNP Paribas, while the remaining 50% is controlled by Çolakoğlu Group. As of October 25, 2010, 50% of the shares of TEB Mali Yatırımlar A.Ş. held by BNP Paribas S.A. was transferred to BNP Paribas Fortis Yatırımlar Holding A.Ş.

V. Summary on the Parent Bank’s Functions and Areas of Activity

The Parent Bank’s operating areas include corporate, retail and private banking as well as project finance, fund management and custody operations. Beside the ordinary banking operations, the Parent Bank is handling agency functions through its branches on behalf of TEB Yatırım Menkul Değerler A.Ş. and Zurich Sigorta A.Ş. (TEB Sigorta A.Ş. prior to the title change on August 18, 2008 due to the sale of the entity). As of December 31, 2010 the Parent Bank has 331 local branches and 4 foreign branches (December 31, 2009 - 330 local branches, 4 foreign branches).

SECTION TWO

CONSOLIDATED FINANCIAL STATEMENTS

I. Consolidated Balance Sheet

II. Consolidated Statement of Off-Balance Sheet Contingencies and CommitmentsIII. Consolidated Statement of Income IV. Consolidated Statement of Profit and Loss Accounted for Under Equity V. Consolidated Statement of Changes in Shareholders’ Equity

VI. Consolidated Statement of Cash Flows VII. Consolidated Profit Distribution Table

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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I. CONSOLIDATED BALANCE SHEET – ASSETS (STATEMENT OF FINANCIAL POSITION) Audited Audited Current Period Prior Period 31.12.2010 31.12.2009 Note

Ref.

TRY

FC

Total

TRY

FC

Total I. CASH AND BALANCES WITH THE CENTRAL BANK (1) 786,645 1,240,651 2,027,296 344,368 1,167,344 1,511,712 II.

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (Net)

(2) 187,771 28,417 216,188 176,429 23,594 200,023

2.1 Financial assets held for trading 187,771 28,417 216,188 176,429 23,594 200,023 2.1.1 Public sector debt securities 106,786 5,878 112,664 133,230 4,687 137,917 2.1.2 Share certificates - - - - - - 2.1.3 Derivative financial assets held for trading 80,985 22,539 103,524 43,199 18,907 62,106 2.1.4 Other marketable securities - - - - - - 2.2 Financial assets classified at fair value through profit and loss - - - - - - 2.2.1 Public sector debt securities - - - - - - 2.2.2 Share certificates - - - - - - 2.2.3 Loans - - - - - - 2.2.4 Other marketable securities - - - - - - III. BANKS (3) 507,449 515,376 1,022,825 171,832 552,171 724,003 IV. MONEY MARKET PLACEMENTS 238 - 238 619,657 84,807 704,464 4.1 Interbank money market placements - - - 610,110 84,807 694,917 4.2 Istanbul Stock Exchange money market placements - - - 145 - 145 4.3 Receivables from reverse repurchase agreements 238 - 238 9,402 - 9,402 V. FINANCIAL ASSETS AVAILABLE FOR SALE (Net) (4) 2,999,258 515,748 3,515,006 1,605,913 72,979 1,678,892 5.1 Share certificates 14,603 2,256 16,859 2,021 2,583 4,604 5.2 Public sector debt securities 2,982,109 507,298 3,489,407 1,603,892 63,018 1,666,910 5.3 Other marketable securities 2,546 6,194 8,740 - 7,378 7,378 VI. LOANS AND RECEIVABLES (5) 9,321,939 3,557,575 12,879,514 7,077,534 2,788,198 9,865,732 6.1 Loans and receivables 9,199,117 3,552,988 12,752,105 6,889,382 2,787,705 9,677,087 6.1.1 Loans to Risk Group of the Bank 141,923 22,708 164,631 21,507 32,035 53,542 6.1.2 Public sector debt securities - - - - - - 6.1.3 Other 9,057,194 3,530,280 12,587,474 6,867,875 2,755,670 9,623,545 6.2 Non-performing loans 360,075 15,399 375,474 427,991 7,675 435,666 6.3 Specific provisions (-) (237,253) (10,812) (248,065) (239,839) (7,182) (247,021) VII. FACTORING RECEIVABLES (18) 412,868 189,451 602,319 290,066 84,834 374,900 VIII. HELD TO MATURITY INVESTMENTS (Net) (6) 217,604 17,415 235,019 882,324 19,316 901,640 8.1 Public sector debt securities 217,604 17,415 235,019 882,324 19,316 901,640 8.2 Other marketable securities - - - - - - IX. INVESTMENTS IN ASSOCIATES (Net) (7) - - - - - - 9.1 Accounted for under equity method - - - - - - 9.2 Unconsolidated associates - - - - - - 9.2.1 Financial investments - - - - - - 9.2.2 Non-financial investments - - - - - - X. INVESTMENTS IN SUBSIDIARIES (Net) (8) - - - - - - 10.1 Unconsolidated financial subsidiaries - - - - - - 10.2 Unconsolidated non-financial subsidiaries - - - - - - XI. ENTITIES UNDER COMMON CONTROL (JOINT VENT.) (Net) (9) 5 - 5 1 - 1 11.1 Consolidated under equity method - - - - - - 11.2 Unconsolidated 5 - 5 1 - 1 11.2.1 Financial subsidiaries - - - - - - 11.2.2 Non-financial subsidiaries 5 - 5 1 - 1 XII. FINANCE LEASE RECEIVABLES (10) - - - 65,360 341,809 407,169 12.1 Finance lease receivables - - - 79,949 389,180 469,129 12.2 Operating lease receivables - - - - - - 12.3 Other - - - 2,133 406 2,539 12.4 Unearned income ( - ) - - - (16,722) (47,777) (64,499) XIII.

DERIVATIVE FINANCIAL ASSETS FOR HEDGING PURPOSES

(11) 11,114 43 11,157 30,976 354 31,330

13.1 Fair value hedge 11,114 43 11,157 30,976 354 31,330 13.2 Cash flow hedge - - - - - - 13.3 Hedge of net investment risks in foreign operations - - - - - - XIV. TANGIBLE ASSETS (Net) (12) 110,334 7,234 117,568 136,079 7,765 143,844 XV. INTANGIBLE ASSETS (Net) (13) 13,020 921 13,941 14,300 1,183 15,483 15.1 Goodwill 1,205 - 1,205 1,205 - 1,205 15.2 Other 11,815 921 12,736 13,095 1,183 14,278 XVI. INVESTMENT PROPERTIES (Net) (14) - - - - - - XVII. TAX ASSET (15) 15,514 2,119 17,633 48,522 1,536 50,058 17.1 Current tax asset - - - - - - 17.2 Deferred tax asset 15,514 2,119 17,633 48,522 1,536 50,058 XVIII. ASSETS HELD FOR SALE AND DISCONTINUED

OPERATIONS (Net) (16) - - - - - -

18.1 Held for sale - - - - - - 18.2 Discontinued operations - - - - - - XIX. OTHER ASSETS (17) 443,486 71,024 514,510 392,954 36,970 429,924

TOTAL ASSETS

15,027,245

6,145,974

21,173,219

11,856,315

5,182,860

17,039,175

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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I. CONSOLIDATED BALANCE SHEET – LIABILITIES AND EQUITY (STATEMENT OF FINANCIAL POSITION) Audited Audited Current Period Prior Period 31.12.2010 31.12.2009 Note Ref. TRY FC Total TRY FC Total

I. DEPOSITS (1) 8,486,701 4,677,170 13,163,871 5,920,071 4,443,213 10,363,284 1.1 Deposits from Risk Group of the Bank 1,164,992 251,151 1,416,143 169,603 287,471 457,074 1.2 Other 7,321,709 4,426,019 11,747,728 5,750,468 4,155,742 9,906,210 II.

DERIVATIVE FINANCIAL LIABILITIES HELD FOR TRADING

(2) 64,433 32,335 96,768 31,036 26,953 57,989

III. FUNDS BORROWED (3) 2,512,012 1,889,976 4,401,988 1,142,881 1,317,619 2,460,500 IV. MONEY MARKET BALANCES 86,665 - 86,665 1,071,971 - 1,071,971 4.1 Interbank money market takings - - - - - - 4.2 Istanbul Stock Exchange money market takings 12,308 - 12,308 - - - 4.3 Funds provided under repurchase agreements 74,357 - 74,357 1,071,971 - 1,071,971 V. MARKETABLE SECURITIES ISSUED (Net) - - - - - - 5.1 Bills - - - - - - 5.2 Asset backed securities - - - - - - 5.3 Bonds - - - - - - VI. FUNDS - - - - - - 6.1 Borrower funds - - - - - - 6.2 Other - - - - - - VII. SUNDRY CREDITORS 318,596 24,809 343,405 246,316 20,916 267,232 VIII. OTHER LIABILITIES (4) 304,061 1,354 305,415 237,607 388 237,995 IX. FACTORING PAYABLES - - - 272 471 743 X. FINANCE LEASE PAYABLES (5) - 16 16 - - - 10.1 Finance lease payables - 21 21 - - - 10.2 Operating lease payables - - - - - - 10.3 Other - - - - - - 10.4 Deferred finance lease expenses ( - ) - (5) (5) - - - XI.

DERIVATIVE FINANCIAL LIABILITIES FOR HEDGING PURPOSES

(6) 56,547 - 56,547 73,493 - 73,493

11.1 Fair value hedge 56,547 - 56,547 73,493 - 73,493 11.2 Cash flow hedge - - - - - - 11.3 Hedge of net investment in foreign operations - - - - - - XII. PROVISIONS (7) 176,979 28,225 205,204 132,829 18,380 151,209 12.1 General loan loss provisions 88,034 26,079 114,113 70,145 16,681 86,826 12.2 Restructuring reserve 228 - 228 - - - 12.3 Reserve for employee benefits 60,738 2,146 62,884 46,894 1,699 48,593 12.4 Insurance technical reserves (Net) - - - - - - 12.5 Other provisions 27,979 - 27,979 15,790 - 15,790 XIII. TAX LIABILITY (8) 86,463 1,081 87,544 37,244 733 37,977 13.1 Current tax liability 86,463 1,081 87,544 37,244 733 37,977 13.2 Deferred tax liability - - - - - - XIV. PAYABLES RELATED TO ASSETS HELD FOR SALE AND

DISCONTINUED OPERATIONS (Net) (9)

- - - - - -

14.1 Held for sale - - - - - - 14.2 Discontinued operations - - - - - - XV. SUBORDINATED LOANS (10) - 472,542 472,542 - 483,474 483,474 XVI. SHAREHOLDERS' EQUITY (11) 1,837,787 115,467 1,953,254 1,728,644 104,664 1,833,308 16.1 Paid-in capital 1,100,000 - 1,100,000 1,100,000 - 1,100,000 16.2 Supplementary capital 86,999 (823) 86,176 20,119 4,857 24,976 16.2.1 Share premium 2,227 - 2,227 2,227 - 2,227 16.2.2 Share cancellation profits - - - - - - 16.2.3 Marketable securities valuation differences 83,846 (823) 83,023 16,966 4,857 21,823 16.2.4 Tangible assets revaluation differences - - - - - - 16.2.5 Intangible assets revaluation differences - - - - - - 16.2.6 Investment properties revaluation differences - - - - - - 16.2.7 Bonus shares obtained from associates, subsidiaries and jointly

controlled entities (Joint Vent.) - - - - - -

16.2.8 Hedging funds (Effective portion) - - - - - - 16.2.9 Accumulated valuation differences from assets held for sale and from

discontinued operations - - - - - -

16.2.10 Other capital reserves 926 - 926 926 - 926 16.3 Profit reserves 378,169 116,290 494,459 340,621 99,807 440,428 16.3.1 Legal reserves 60,825 - 60,825 57,519 - 57,519 16.3.2 Status reserves - - - - - - 16.3.3 Extraordinary reserves 315,368 116,290 431,658 274,270 99,807 374,077 16.3.4 Other profit reserves 1,976 - 1,976 8,832 - 8,832 16.4 Profit or loss 272,619 - 272,619 267,904 - 267,904 16.4.1 Prior years’ income/ (loss) - - - - - - 16.4.2 Current year income/ (loss) 272,619 - 272,619 267,904 - 267,904 16.5 Minority shares (12) - - - - - -

TOTAL LIABILITIES AND EQUITY

13,930,244

7,242,975

21,173,219

10,622,364

6,416,811

17,039,175

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ CONSOLIDATED STATEMENT OF OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS AS OF DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. CONSOLIDATED STATEMENT OF OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS

Audited Current Period

31.12.2010

Audited Prior Period 31.12.2009

Note Ref.

TRY FC TOTAL TRY

FC

TOTAL

A.

OFF BALANCE SHEET CONTINGENCIES AND COMMITMENTS (I+II+III)

9,679,137 10,767,919 20,447,056 7,540,811 7,977,427 15,518,238

I. GUARANTEES (1), (3) 1,985,101 2,431,209 4,416,310 1,532,701 2,222,970 3,755,671 1.1 Letters of guarantee 1,754,833 1,297,973 3,052,806 1,415,128 1,309,344 2,724,472 1.1.1 Guarantees subject to State Tender Law 85,204 15,287 100,491 78,334 24,009 102,343 1.1.2 Guarantees given for foreign trade operations 202,716 48,580 251,296 134,913 65,521 200,434 1.1.3 Other letters of guarantee 1,466,913 1,234,106 2,701,019 1,201,881 1,219,814 2,421,695 1.2 Bank loans 345 55,187 55,532 171 39,034 39,205 1.2.1 Import letter of acceptance 345 54,407 54,752 171 36,594 36,765 1.2.2 Other bank acceptances - 780 780 - 2,440 2,440 1.3 Letters of credit 493 992,949 993,442 339 784,043 784,382 1.3.1 Documentary letters of credit 493 870,224 870,717 339 689,769 690,108 1.3.2 Other letters of credit - 122,725 122,725 - 94,274 94,274 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 Factoring guarantees - - - - - - 1.8 Other guarantees 228,526 50,508 279,034 116,803 68,573 185,376 1.9 Other collaterals 904 34,592 35,496 260 21,976 22,236 II. COMMITMENTS (1), (3) 3,342,461 430,708 3,773,169 3,110,272 648,459 3,758,731 2.1 Irrevocable commitments 3,342,461 430,708 3,773,169 3,110,272 648,459 3,758,731 2.1.1 Forward asset purchase commitments 463 363,776 364,239 108,571 235,667 344,238 2.1.2 Forward deposit purchase and sales commitments - - - - 16,814 16,814 2.1.3 Share capital commitment to associates and subsidiaries 2,000 - 2,000 2,000 - 2,000 2.1.4 Loan granting commitments 1,410,868 86 1,410,954 996,619 - 996,619 2.1.5 Securities underwriting commitments - - - - - - 2.1.6 Commitments for reserve deposit requirements - - - 346,683 380,104 726,787 2.1.7 Payment commitment for checks 707,681 - 707,681 650,733 - 650,733 2.1.8 Tax and fund liabilities from export commitments 15,565 - 15,565 14,914 - 14,914 2.1.9 Commitments for credit card expenditure limits 1,152,230 1,319 1,153,549 956,344 1,172 957,516 2.1.10 Commitments for promotions related with credit cards and banking

activities 2,986 - 2,986 1,899 - 1,899

2.1.11 Receivables from short sale commitments - - - - - - 2.1.12 Payables for short sale commitments - - - - - - 2.1.13 Other irrevocable commitments 50,668 65,527 116,195 32,509 14,702 47,211 2.2. Revocable commitments - - - - - - 2.2.1 Revocable loan granting commitments - - - - - - 2.2.2 Other revocable commitments - - - - - - III. DERIVATIVE FINANCIAL INSTRUMENTS (2) 4,351,575 7,906,002 12,257,577 2,897,838 5,105,998 8,003,836 3.1 Derivative financial instruments for hedging purposes 343,443 147,610 491,053 469,988 291,511 761,499 3.1.1 Fair value hedge 343,443 147,610 491,053 469,988 291,511 761,499 3.1.2 Cash flow hedge - - - - - - 3.1.3 Hedge of net investment in foreign operations - - - - - - 3.2 Held for trading transactions 4,008,132 7,758,392 11,766,524 2,427,850 4,814,487 7,242,337 3.2.1 Forward foreign currency buy/sell transactions 465,316 1,665,347 2,130,663 550,095 1,105,030 1,655,125 3.2.1.1 Forward foreign currency transactions-buy 140,871 1,015,658 1,156,529 358,911 481,993 840,904 3.2.1.2 Forward foreign currency transactions-sell 324,445 649,689 974,134 191,184 623,037 814,221 3.2.2 Swap transactions related to f.c. and interest rates 1,437,182 2,980,975 4,418,157 915,490 1,860,058 2,775,548 3.2.2.1 Foreign currency swap-buy 665,827 1,243,992 1,909,819 151,511 1,067,639 1,219,150 3.2.2.2 Foreign currency swap-sell 438,855 1,608,351 2,047,206 563,979 653,905 1,217,884 3.2.2.3 Interest rate swaps-buy 166,250 64,316 230,566 100,000 69,257 169,257 3.2.2.4 Interest rate swaps-sell 166,250 64,316 230,566 100,000 69,257 169,257 3.2.3 Foreign currency, interest rate and securities options 2,104,075 2,613,176 4,717,251 962,265 1,366,226 2,328,491 3.2.3.1 Foreign currency options-buy 861,455 1,377,898 2,239,353 440,198 701,814 1,142,012 3.2.3.2 Foreign currency options-sell 978,075 1,217,600 2,195,675 485,412 664,412 1,149,824 3.2.3.3 Interest rate options-buy 264,545 - 264,545 36,655 - 36,655 3.2.3.4 Interest rate options-sell - - - - - - 3.2.3.5 Securities options-buy - - - - - - 3.2.3.6 Securities options-sell - 17,678 17,678 - - - 3.2.4 Foreign currency futures - 498,894 498,894 - 483,173 483,173 3.2.4.1 Foreign currency futures-buy - 246,626 246,626 - 234,791 234,791 3.2.4.2 Foreign currency futures-sell - 252,268 252,268 - 248,382 248,382 3.2.5 Interest rate futures - - - - - - 3.2.5.1 Interest rate futures-buy - - - - - - 3.2.5.2 Interest rate futures-sell - - - - - - 3.2.6 Other 1,559 - 1,559 - - - B. CUSTODY AND PLEDGED ITEMS (IV+V+VI) 31,256,234 7,628,600 38,884,834 24,656,726 7,504,361 32,161,087 IV. ITEMS HELD IN CUSTODY 8,327,805 615,870 8,943,675 6,815,522 543,183 7,358,705 4.1. Assets under management 1,143,167 228 1,143,395 1,144,178 27 1,144,205 4.2. Investment securities held in custody 3,484,273 158,537 3,642,810 2,771,794 171,077 2,942,871 4.3. Checks received for collection 3,527,213 323,800 3,851,013 2,754,141 229,619 2,983,760 4.4. Commercial notes received for collection 171,883 60,274 232,157 145,063 84,934 229,997 4.5. Other assets received for collection 1,170 73,031 74,201 247 57,526 57,773 4.6. Assets received for public offering - - - - - - 4.7. Other items under custody 99 - 99 99 - 99 4.8. Custodians - - - - - - V. PLEDGED ITEMS 22,887,915 7,004,752 29,892,667 17,815,500 6,957,362 24,772,862 5.1. Marketable securities 548,824 10,852 559,676 266,577 8,351 274,928 5.2. Guarantee notes 11,722,942 5,498,932 17,221,874 8,833,394 5,403,205 14,236,599 5.3. Commodity 38,558 106,280 144,838 7,515 104,472 111,987 5.4. Warranty - - - - - - 5.5. Properties 9,094,941 877,281 9,972,222 7,478,811 1,077,294 8,556,105 5.6. Other pledged items 1,482,650 511,407 1,994,057 1,229,203 364,040 1,593,243 5.7. Pledged items-depository - - - - - - VI.

ACCEPTED INDEPENDENT GUARANTEES AND WARRANTIES

40,514 7,978 48,492 25,704 3,816 29,520

TOTAL OFF BALANCE SHEET ACCOUNTS (A+B) 40,935,371 18,396,519 59,331,890 32,197,537 15,481,788 47,679,325

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

7

III. CONSOLIDATED STATEMENT OF INCOME

The accompanying notes are an integral part of these financial statements.

Audited Current Period

01.01-31.12.2010

Audited Prior Period

01.01-31.12.2009

Note Ref

Total

Total I. INTEREST INCOME (1) 1,605,384 1,747,376 1.1 Interest on loans 1,255,710 1,320,122 1.2 Interest received from reserve deposits 14,539 27,364 1.3 Interest received from banks 10,686 19,194 1.4 Interest received from money market placements 2,186 27,755 1.5 Interest received from marketable securities portfolio 271,716 294,747 1.5.1 Held-for-trading financial assets 17,578 12,866 1.5.2 Financial assets at fair value through profit and loss - - 1.5.3 Available-for-sale financial assets 200,930 164,461 1.5.4 Investments held-to-maturity 53,208 117,420 1.6 Finance lease Income - - 1.7 Other interest income 50,547 58,194 II. INTEREST EXPENSE (2) 779,838 885,302 2.1 Interest on deposits 518,351 622,615 2.2 Interest on funds borrowed 191,278 197,278 2.3 Interest on money market borrowings 49,658 44,275 2.4 Interest on securities issued - - 2.5 Other interest expense 20,551 21,134 III. NET INTEREST INCOME/EXPENSE (I - II) 825,546 862,074 IV. NET FEES AND COMMISSIONS INCOME/EXPENSE 463,953 282,423 4.1 Fees and commissions received 602,603 406,831 4.1.1 Non-cash loans 51,283 46,465 4.1.2 Other 551,320 360,366 4.2 Fees and commissions paid 138,650 124,408 4.2.1 Non-cash loans 1,275 2,165 4.2.2 Other 137,375 122,243 V. DIVIDEND INCOME (3) 17 13 VI. NET TRADING INCOME (4) (7,099) 46,773 6.1 Securities trading gains/ (losses) 31,696 62,652 6.2 Gains/ (losses) from derivative financial instruments (203,315) (201,111) 6.3 Foreign exchange gains/ (losses) 164,520 185,232 VII. OTHER OPERATING INCOME (5) 45,068 30,732 VIII. NET OPERATING INCOME (III+IV+V+VI+VII) 1,327,485 1,222,015 IX. PROVISION FOR LOAN LOSSES AND OTHER RECEIVABLES (-) (6) 171,424 183,723 X. OTHER OPERATING EXPENSES (-) (7) 837,379 751,756 XI. NET OPERATING INCOME/(LOSS) (VIII-IX-X) 318,682 286,536 XII. AMOUNT IN EXCESS RECORDED AS GAIN AFTER MERGER - - XIII. GAIN / (LOSS) ON EQUITY METHOD - - XIV. GAIN / (LOSS) ON NET MONETARY POSITION - - XV. PROFIT/(LOSS) FROM CONTINUED OPERATIONS BEFORE TAXES

(XI+…+XIV) (8) 318,682 286,536

XVI. TAX PROVISION FOR CONTINUED OPERATIONS (±) (9) (72,537) (56,978) 16.1 Provision for current income taxes (94,355) (57,476) 16.2 Provision for deferred taxes 21,818 498 XVII. NET PROFIT/(LOSS) FROM CONTINUED OPERATIONS (XV±XVI) (10) 246,145 229,558 XVIII. INCOME ON DISCONTINUED OPERATIONS 88,990 145,019 18.1 Income on assets held for sale - - 18.2 Income on sale of associates, subsidiaries and jointly controlled entities

(Joint vent.) 18,244 -

18.3 Income on other discontinued operations 70,746 145,019 XIX. LOSS FROM DISCONTINUED OPERATIONS (-) 61,672 141,087 19.1 Loss from assets held for sale - - 19.2 Loss on sale of associates, subsidiaries and jointly controlled entities

(Joint vent.) - -

19.3 Loss from other discontinued operations 61,672 141,087 XX. PROFIT / (LOSS) ON DISCONTINUED OPERATIONS BEFORE

TAXES (XVIII-XIX) (8) 27,318 3,932

XXI. TAX PROVISION FOR DISCONTINUED OPERATIONS (±) (9) (844) 34,414 21.1 Provision for current income taxes (4,969) - 21.2 Provision for deferred taxes 4,125 34,414 XXII. NET PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XX±XXI) (10) 26,474 38,346 XXIII. NET PROFIT/LOSS (XVII+XXII) (11) 272,619 267,904 23.1 Group’s profit/loss 272,619 267,904 23.2 Minority shares - - Earnings per share 0.2478 0.2435

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ CONSOLIDATED STATEMENTS OF PROFIT AND LOSS ACCOUNTED FOR UNDER EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

8

IV. CONSOLIDATED STATEMENT OF PROFIT AND LOSS ACCOUNTED FOR UNDER EQUITY

Audited Current Period

01.01-31.12.2010

Audited Prior Period

01.01-31.12.2009 I. Additions to marketable securities valuation differences for available for sale

financial assets

106,840

76,054

II. Tangible assets revaluation differences - -

III. Intangible assets revaluation differences - -

IV. Foreign exchange differences for foreign currency transactions (6,856) 683

V. Profit/Loss from derivative financial instruments for cash flow hedge purposes (Effective portion of fair value differences)

- -

VI. Profit/Loss from derivative financial instruments for hedge of net investment in foreign operations (Effective portion of fair value differences)

- -

VII. The effect of corrections of errors and changes in accounting policies - -

VIII. Other profit loss items accounted for under equity due to TAS - -

IX. Deferred tax of valuation differences (15,239) (4,198) X. Total Net Profit/Loss accounted for under equity (I+II+…+IX) 84,745 72,539

XI. Profit/Loss (30,401) (55,251)

11.1 Change in fair value of marketable securities (Transfer to Profit/Loss) (30,401) (55,251)

11.2 Reclassification and transfer of derivatives accounted for cash flow hedge purposes to Income Statement

- -

11.3 Transfer of hedge of net investments in foreign operations to Income Statement - -

11.4 Other - -

XII. Total Profit/Loss accounted for the Period (X±XI) 54,344 17,288

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED DECEMBER 31, 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

9

V. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Audited

Note Ref

Paid-in Capital

Effect of Inflation Accounting on

Capital and Other Capital Reserves

Share Premium

Share Certificate

Cancellation Profits

Legal Reserves

Statutory Reserves

Extraordinary Reserves

Other Reserves

Current Period

Net Income/ (Loss)

Prior

Period Net

Income/ (Loss)

Marketable Securities Valuation

Differences

Tangible and

Intangible Assets

Revaluation Differences

Bonus shares

obtained from

Associates

Hedging Funds

Acc. Val. diff. from assets held

for sale and from disc. op.

Equity Attributable

to the Parent

Minority Shares

Total Equity

Prior Period – 01.01.-31.12.2009 I. Beginning Balance – 31.12.2008 1,100,000 926 2,227 - 46,693 - 197,905 8,149 - 186,998 5,218 - - - - 1,548,116 - 1,548,116 II.

Corrections according to TAS 8 - - - - - - - - - - - - - - - - - -

2.1 The effect of corrections of errors - - - - - - - - - - - - - - - - - - 2.2 The effects of changes in accounting policy. - - - - - - - - - - - - - - - - - - III. New Balance (I+II) 1,100,000 926 2,227 - 46,693 - 197,905 8,149 - 186,998 5,218 - - - - 1,548,116 - 1,548,116 Changes in period - - - - - - - - - - - - - - - - - - IV. Increase/Decrease related to merger - - - - - - - - - - - - - - - - - - V. Marketable securities valuation differences - - - - - - - - - - 16,605 - - - - 16,605 - 16,605 VI. Hedging Funds (Effective Portion) - - - - - - - - - - - - - - - - - - 6.1 Cash-flow hedge - - - - - - - - - - - - - - - - - - 6.2 Hedge of net investment in foreign operations - - - - - - - - - - - - - - - - - - VII. Tangible assets revaluation differences - - - - - - - - - - - - - - - - - - VIII. Intangible assets revaluation differences - - - - - - - - - - - - - - - - - - IX. Bonus shares obtained from associates,

subsidiaries and entities under common control (Joint vent.)

- - - - - - - - - - - - - - - - - -

X. Foreign exchange differences - - - - - - - 683 - - - - - - - 683 - 683 XI. The disposal of assets - - - - - - - - - - - - - - - - - - XII. The reclassification of assets - - - - - - - - - - - - - - - - - - XIII. The effect of change in associates’ equity - - - - - - - - - - - - - - - - - - XIV. Capital increase - - - - - - - - - - - - - - - - - - 14.1 Cash - - - - - - - - - - - - - - - - - - 14.2 Internal sources - - - - - - - - - - - - - - - - - - XV. Share Premium - - - - - - - - - - - - - - - - - - XVI. Share cancellation profits - - - - - - - - - - - - - - - - - - XVII. Inflation adjustment to paid-in capital - - - - - - - - - - - - - - - - - - XVIII Other - - - - - - - - - - - - - - - - - - XIX. Period net income/(loss) - - - - - - - - 267,904 - - - - - - 267,904 - 267,904 XX. Profit distribution - - - - 10,826 - 176,172 - - (186,998) - - - - - - - - 20.1 Dividends distributed - - - - - - - - - - - - - - - - - - 20.2 Transfers to reserves - - - - 10,826 - 176,172 - - (186,998) - - - - - - - - 20.3 Other - - - - - - - - - - - - - - - - - - Closing Balance 31.12.2009

(III+IV+V+VI+VII+VIII+IX+X+XI+XII+XIII+XIV+XV+XVI+XVII+XVIII+XIX+XX)

1,100,000 926 2,227 - 57,519 - 374,077 8,832 267,904 - 21,823 - - - - 1,833,308 - 1,833,308

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED DECEMBER 31, 2010 Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.

10

V. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Audited

Note Ref

Paid-in Capital

Effect of Inflation Accounting on

Capital and Other Capital Reserves

Share Premium

Share Certificate

Cancellation Profits

Legal Reserves

Statutory Reserves

Extraordinary Reserves

Other Reserves

Current Period

Net Income/ (Loss)

Prior Period

Net Income/ (Loss)

Marketable Securities Valuation

Differences

Tangible and Intangible

Assets Revaluation Differences

Bonus shares

obtained from

Associates

Hedging Funds

Acc. val. diff. from

assets held for sale and

from disc. op.

Equity Attributable

to the Parent

Minority Shares

Total Equity

Current Period – 01.01.-31.12.2010 I. Prior period balance – 31.12.2009 1,100,000 926 2,227 - 57,519 - 374,077 8,832 - 267,904 21,823 - - - - 1,833,308 - 1,833,308 Changes in period - - - - - - - - - - - - - - - - - - II. Increase/Decrease related to merger - - - - - - - - - - - - - - - - - - III. Marketable securities valuation differences - - - - - - - - - - 61,200 - - - - 61,200 - 61,200 IV. Hedging Funds (Effective Portion) - - - - - - - - - - - - - - - - - - 4.1 Cash-flow hedge - - - - - - - - - - - - - - - - - - 4.2 Hedge of net investment in foreign operations - - - - - - - - - - - - - - - - - - V. Tangible assets revaluation differences - - - - - - - - - - - - - - - - - - VI. Intangible assets revaluation differences - - - - - - - - - - - - - - - - - - VII. Bonus shares obtained from associates,

subsidiaries and entities under common control (Joint vent.)

- - - - - - - - - - - - - - - - - -

VIII. Foreign exchange differences - - - - - - - (6,856) - - - - - - - (6,856) - (6,856) IX. The disposal of assets - - - - - - - - - - - - - - - - - - X. The reclassification of assets - - - - - - - - - - - - - - - - - - XI. The effect of change in associates’ equity - - - - - - - - - - - - - - - - - - XII. Capital increase - - - - - - - - - - - - - - - - - - 12.1 Cash - - - - - - - - - - - - - - - - - - 12.2 Internal sources - - - - - - - - - - - - - - - - - - XIII. Share Premium - - - - - - - - - - - - - - - - - - XIV. Share cancellation profits - - - - - - - - - - - - - - - - - - XV. Inflation adjustment to paid-in capital - - - - - - - - - - - - - - - - - - XVI. Other - - - - - - - - - - - - - - - - - - XVII. Period net income/(loss) - - - - - - - - 272,619 - - - - - - 272,619 - 272,619 XVIII. Profit distribution - - - - 3,306 - 57,581 - - (267,904) - - - - - (207,017) - (207,017) 18.1 Dividends distributed - - - - - - (207,017) - - - - - - - - (207,017) - (207,017) 18.2 Transfers to reserves - - - - 3,306 - 264,598 - - (267,904) - - - - - - - - 18.3 Other - - - - - - - - - - - - - - - - - - Closing Balance 31.12.2010

(I+II+III+IV+V+VI+VII+VIII+IX+X+XI+XII+XIII+XIV+XV+XVI+XVII+XVIII) 1,100,000 926 2,227 - 60,825 - 431,658 1,976 272,619 - 83,023 - - - - 1,953,254 - 1,953,254

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

11

VI. CONSOLIDATED STATEMENT OF CASH FLOWS Audited Audited Current Period Prior Period Note Ref 01.01-31.12.2010 01.01-31.12.2009 A. CASH FLOWS FROM BANKING OPERATIONS 1.1 Operating profit before changes in operating assets and liabilities 466,562 493,531 1.1.1 Interest received 1,541,762 1,957,103 1.1.2 Interest paid (740,976) (1,143,386) 1.1.3 Dividend received 17 13 1.1.4 Fees and commissions received 602,603 405,974 1.1.5 Other income 279,887 315,021 1.1.6 Collections from previously written off loans 144,095 142,915 1.1.7 Payments to personnel and service suppliers (383,793) (392,629) 1.1.8 Taxes paid (47,489) (53,651) 1.1.9 Others (1) (929,544) (737,829) 1.2 Changes in operating assets and liabilities 683,866 (981,964) 1.2.1 Net (increase) decrease in financial assets held for trading 29,897 (120,077) 1.2.2 Net (increase) decrease in financial assets at fair value through profit or loss - - 1.2.3 Net (increase) decrease in due from banks and other financial institutions (46,353) (7,377) 1.2.4 Net (increase) decrease in loans (3,150,057) (918,165) 1.2.5 Net (increase) decrease in other assets (423,542) 110,362 1.2.6 Net increase (decrease) in bank deposits 272,752 893,412 1.2.7 Net increase (decrease) in other deposits 1,535,621 (123,805) 1.2.8 Net increase (decrease) in funds borrowed 2,334,177 (784,936) 1.2.9 Net increase (decrease) in matured payables - - 1.2.10 Net increase (decrease) in other liabilities (1) 131,371 (31,378) I. Net cash provided from banking operations (488,433) 1,150,428 B. CASH FLOWS FROM INVESTING ACTIVITIES II. Net cash provided from investing activities (1,018,606) (513,075) 2.1 Cash paid for purchase of entities under common control, associates and subsidiaries

(Joint Vent.) (4) (2,001)

2.2 Cash obtained from sale of entities under common control, associates and subsidiaries (Joint Vent.)

113,345 -

2.3 Fixed assets purchases (20,537) (19,653) 2.4 Fixed assets sales 237 9,918 2.5 Cash paid for purchase of financial assets available for sale (4,504,164) (3,051,654) 2.6 Cash obtained from sale of financial assets available for sale 2,732,698 2,662,878 2.7 Cash paid for purchase of investment securities (9,400) (103,360) 2.8 Cash obtained from sale of investment securities 676,868 - 2.9 Others (1) (7,649) (9,203) C. CASH FLOWS FROM FINANCING ACTIVITIES III. Net cash provided from financing activities (215,646) (4,310) 3.1 Cash obtained from funds borrowed and securities issued - - 3.2 Cash used for repayment of funds borrowed and securities issued (8,613) (4,310) 3.3 Capital increase - - 3.4 Dividends paid (207,017) - 3.5 Payments for finance leases (16) - 3.6 Other (1) - - IV. Effect of change in foreign exchange rate on cash and cash equivalents (1) 48,270 (45,912) V. Net increase / (decrease) in cash and cash equivalents (35,554) (1,051,730) VI. Cash and cash equivalents at beginning of the period 2,666,213 3,717,943 VII. Cash and cash equivalents at end of the period 2,630,659 2,666,213

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ CONSOLIDATED PROFIT DISTRIBUTION TABLES FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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VII. CONSOLIDATED PROFIT DISTRIBUTION TABLE

(*) Audited Audited Current Period Prior Period 31.12.2010 31.12.2009 I. DISTRIBUTION OF CURRENT YEAR INCOME 1.1 CURRENT YEAR INCOME - - 1.2 TAXES AND DUTIES PAYABLE (-) - - 1.2.1 Corporate tax (Income tax) - - 1.2.2 Income witholding tax - - 1.2.3 Other taxes and duties - - A. NET INCOME FOR THE YEAR (1.1-1.2) - - 1.3 PRIOR YEARS’ LOSSES (-) - - 1.4 FIRST LEGAL RESERVES (-) - - 1.5 OTHER STATUTORY RESERVES (-) - - B. NET INCOME AVAILABLE FOR DISTRIBUTION [(A-(1.3+1.4+1.5)] - - 1.6 FIRST DIVIDEND TO SHAREHOLDERS (-) - - 1.6.1 To owners of ordinary shares - - 1.6.2 To owners of preferred shares - - 1.6.3 To owners of preferred shares (preemptive rights) - - 1.6.4 To profit sharing bonds - - 1.6.5 To holders of profit and loss sharing certificates - - 1.7 DIVIDENDS TO PERSONNEL (-) - - 1.8 DIVIDENDS TO BOARD OF DIRECTORS (-) - - 1.9 SECOND DIVIDEND TO SHAREHOLDERS (-) - - 1.9.1 To owners of ordinary shares - - 1.9.2 To owners of preferred shares - - 1.9.3 To owners of preferred shares (preemptive rights) - - 1.9.4 To profit sharing bonds - - 1.9.5 To holders of profit and loss sharing certificates - - 1.10 SECOND LEGAL RESERVES (-) - - 1.11 STATUTORY RESERVES (-) - - 1.12 EXTRAORDINARY RESERVES - - 1.13 OTHER RESERVES - - 1.14 SPECIAL FUNDS - - II. DISTRIBUTION OF RESERVES 2.1 DISTRIBUTED RESERVES - - 2.2 SECOND LEGAL RESERVES (-) - - 2.3 DIVIDENDS TO SHAREHOLDERS (-) - - 2.3.1 To owners of ordinary shares - - 2.3.2 To owners of preferred shares - - 2.3.3 To owners of preferred shares (preemptive rights) - - 2.3.4 To profit sharing bonds - - 2.3.5 To holders of profit and loss sharing certificates - - 2.4 DIVIDENDS TO PERSONNEL (-) - - 2.5 DIVIDENDS TO BOARD OF DIRECTORS (-) - - III. EARNINGS PER SHARE 3.1 TO OWNERS OF ORDINARY SHARES - - 3.2 TO OWNERS OF ORDINARY SHARES ( % ) - - 3.3 TO OWNERS OF PREFERRED SHARES - - 3.4 TO OWNERS OF PREFERRED SHARES ( % ) - - IV. DIVIDEND PER SHARE 4.1 TO OWNERS OF ORDINARY SHARES - - 4.2 TO OWNERS OF ORDINARY SHARES ( % ) - - 4.3 TO OWNERS OF PREFERRED SHARES - - 4.4 TO OWNERS OF PREFERRED SHARES ( % ) - - (*) Based on the local regulations, no profit is distributed from the consolidated income.

The accompanying notes are an integral part of these financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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SECTION THREE

ACCOUNTING PRINCIPLES

I. Basis of Presentation The Parent Bank prepares its financial statements and notes according to Communiqué on Banks’ Accounting Practice and Maintaining Documents, Turkish Accounting Standards (TAS), Turkish Financial Reporting Standards (TFRS), other regulations, communiqués and circulars in respect of accounting and financial reporting and pronouncements made by Banking Regulation and Supervision Agency (BRSA), Turkish Commercial Code and Tax Legislation. The prior period financial statements are presented in line with the principles of TAS No:1 “Fundamentals of Preparing and Presenting Financial Statements” published in the Official Gazette on January 16, 2005 with No: 25702, and in accordance with Turkish Accounting Standards and Turkish Financial Reporting Standards; and other principles, methods and explanations about accounting and financial reporting issued by the BRSA. Certain reclassifications have been made to the prior year financial statements in order to comply with the current year presentation whenever required. The reclassifications made in the prior year financial statements are as follows:

31.12.2009 TRY FCASSETS Tangible Assets (Net) (20,302) - Other Assets 20,302 - LIABILITIES Provisions - - General loan loss provisions - - Restructuring provisions - - Reserve for employee benefits 28,382 1,699 Insurance technical reserves (Net) - - Other provisions (28,382) (1,699)

In the prior year financial statements, the assets held for resale are reclassified from “Tangible Assets” to “Other Assets” and accruals for unused vacation and premiums to be paid to the Group’s personnel are reclassified from “Other Provisions” to “Reserve for Employee Benefits”. II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions The Group aims to develop and promote products for the financial needs of each customer such as SMEs, multinational companies and even small individual investors in line with banking legislation. The primary objective of the Parent Bank is to increase profitability with optimum liquidity and minimum risk while fulfilling customer needs. Thus, the Parent Bank uses 39% on average of its resources on liquid assets, as well as intending for the highest possible yield with effective maturity management. The Group aims at creating an optimum maturity risk and working with a positive margin between cost of resource and product yield in the process of asset and liability management. As a component of risk management strategy of the Group, risk bearing short term positions of currency, interest or price movements is performed only by the Treasury Asset-Liability Management using the limits defined by the Board of Directors. The Asset-Liability Committee of the Parent Bank manages the maturity mismatches while deciding the short, medium and long term strategies as well as adopting the principle of positive balance sheet margin as a pricing policy.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations on Usage Strategy of Financial Assets and Foreign Currency Transactions (continued)

The Board of Directors of the Parent Bank allows a purchase risk in treasury operations and individual limits are defined by the Board of Directors for each product. The Parent Bank’s hedging activities for the currency risk due to foreign currency available-for-sale equity instruments are described under the Currency Risk section; and the Parent Bank’s hedging activities from interest rate risk arising from fixed interest rate deposits and floating interest rate borrowings are described in detail under Interest Rate Risk section. The Parent Bank’s Asset-Liability Committee approves the trading of various derivative instruments such as currency swaps, forwards and similar derivatives to hedge interest and currency exchange risks in line with the Parent Bank’s balance sheet structure. III. Information about the Parent Bank and its Consolidated Subsidiaries

Türk Ekonomi Bankası Anonim Şirketi and its financial institutions, The Economy Bank N.V. (Economy Bank), Stichting Effecten Dienstverlening (Stichting), Kronenburg Vastgoed B.V. (Kronenburg), TEB Finansal Kiralama A.Ş. (TEB Leasing), TEB Faktoring A.Ş. (TEB Faktoring), TEB Yatırım Menkul Değerler A.Ş. (TEB Yatırım) and TEB Portföy Yönetimi A.Ş. (TEB Portföy) are included in the accompanying consolidated financial statements by line-by-line consolidation method. The sale of TEB Finansal Kiralama A.Ş. has been finalized as of September 30, 2010. The accompanying consolidated financial statements are prepared in accordance with “Communiqué on Preparation of Consolidated Financial Statements of Banks” published in the Official Gazette dated November 8, 2006 numbered 26340. The Parent Bank and the entities included in the consolidation are referred to as the “Group” in this report. The financial statements of the subsidiaries, which were prepared in accordance with the prevailing principles and rules regarding financial accounting and reporting standards in their respective country of incorporation and the Turkish Commercial Code and/or Financial Leasing Law and/or communiqués of the Capital Market Board, are duly adjusted in order to present their financial statements in accordance with TAS and TFRS.

Explanations on Consolidation Method and Scope

The commercial names of the entities included in consolidation and the locations of the head offices of these institutions:

Commercial Name Head Office Economy Bank Netherlands Stichting Netherlands Kronenburg Netherlands TEB Faktoring Turkey TEB Yatırım Turkey TEB Portföy Turkey

Line-by-line consolidation method is used for all the financial institutions included in the consolidation.

When there are differences between the accounting policies of the subsidiaries and the Parent Bank, the financial statements are adjusted in accordance with the principle of materiality. The financial statements of the subsidiaries are prepared as of December 31, 2010 and December 31, 2009. The transactions and balances between the consolidated entities and the Parent Bank are eliminated.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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III. Information about the Parent Bank and its Consolidated Subsidiaries (continued)

Explanations on Foreign Currency Transactions Gains or losses arising from foreign currency transactions realized during the year are reflected to the income statement. Foreign currency assets and liabilities at each period-end are translated into Turkish lira at the period-end foreign exchange buying rates and the resulting foreign exchange gains or losses are recorded in the income statement as foreign exchange gain or loss. The EUR exchange rate used for translating foreign currency transactions into Turkish Lira and reflecting these to consolidated financial statements as of December 31, 2010, is TRY 2.0551, in full TRY, while the USD exchange rate is TRY 1.5376, in full TRY (December 31, 2009 – EUR: TRY 2.1427, in full TRY, USD: TRY 1.4873, in full TRY). There are no capitalized foreign exchange differences. The information regarding the principles of foreign currency risk management are stated in Section Four, Note V. 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 income statement. The foreign currency net investment in consolidated foreign subsidiaries are translated into Turkish Lira using the exchange rate prevailing at the balance sheet date for their assets and liabilities and twelve months average exchange rate for their income statement items. The currency translation gain arising from the consolidated subsidiaries’ inflation and devaluation differences amounting to TRY 1,976 (December 31, 2009 - TRY 8,832 currency translation gain) has been recorded in “Other Profit Reserves” under shareholders’ equity. IV. Explanations on Forward and Option Contracts and Derivative Instruments

Fair values of foreign currency forward and swap transactions are determined by comparing the period end Bank foreign exchange rates with the contractual forward rates discounted to the balance sheet date with the prevailing current market rates. The resulting gain or loss is reflected to the income statement. In the assessment of fair value of interest rate swap instruments, interest amounts to be paid or to be received due to/from the fixed rate on the derivative contract are discounted to the balance sheet date with the current applicable fixed rate in the market that is prevailing between the balance sheet date and the interest payment date, whereas interest amounts to be paid or to be received due to/from the floating rate on the derivative contract are recalculated with the current applicable market rates that are prevailing between the balance sheet date and the interest payment date and are discounted to the balance sheet date again with the current applicable market rates that are prevailing between the balance sheet date and the interest payment date. The differences between the fixed rate interest amounts and floating rate interest amounts to be received/paid are recorded in the profit/loss accounts in the current period. The fair value of call and put option agreements are measured at the valuation date by using the current premium values of all option agreements, and the differences between the contractual premiums received/paid and the current premiums measured at valuation date are recognized in the statement of income. Futures transactions are valued on a daily basis by the primary market prices and related unrealized gains or losses are reflected in the income statement. The valuation of CDS transactions are based on the differences between the existing and recalculated payment plans discounted to the valuation date with current CDS interest rates.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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IV. Explanations on Forward and Option Contracts and Derivative Instruments (continued) As of July 1, 2008, the Parent Bank has adopted fair value hedge accounting in order to avoid the effects of interest rate changes in the market by matching a portion of its swap portfolio with its loan portfolio. While the Parent Bank recognizes the fair value changes of the hedged items in the “other interest income” and “other interest expense” accounts, it recognizes the fair value changes of the hedging instruments related to the same period in the “gains/(losses) from derivative financial instruments” account. Additionally, the difference between the fair value and carrying value of the hedged items as of the application date of hedge accounting is amortized based on their maturities and recognized in “other interest income” and “other interest expense” accounts.

V. Explanations on Interest Income and Expenses Interest income and expense are recognized in the income statement for all interest bearing instruments whose cash inflows and outflows are known on an accrual basis using the effective interest method. In accordance with the related regulation, realized and unrealized interest accruals of the non-performing loans are reversed and interest income related to these loans are recorded as interest income only when collected. VI. Explanations on Fees and Commission Income and Expenses Fees for various banking services are recorded as income when collected and prepaid commission income on cash and non-cash loans is recorded as income by using effective interest rate in the related period. Fees and commissions for funds borrowed paid to other financial institutions, as part of the transaction costs, are recorded as prepaid expenses using the effective interest rate and are expensed on the related periods. The dividend income is reflected to the financial statements on a cash basis when the profit distribution is realized by the associates and subsidiaries. VII. Explanations on Financial Assets Financial instruments comprise financial assets, financial liabilities and derivative instruments. Risks related to these activities form a significant part among total risks the Parent Bank undertakes. Financial instruments affect liquidity, market, and credit risks on the Parent Bank’s balance sheet in all respects. The Parent Bank trades these instruments on behalf of its customers and on its own behalf. Basically, financial assets create the majority of the commercial activities of the Group. These instruments expose, affect and diminish the liquidity, credit and interest risks in the financial statements.

All regular way purchases and sales of financial assets are recognized on the settlement date i.e. the date that the asset is delivered to or by the Group. Settlement date accounting requires (a) accounting of the asset when acquired by the institution and (b) disposing of the asset out of the balance sheet on the date settled by the institution; and accounting of gain or loss on disposal. In case of application of settlement date accounting, the institution accounts for the changes that occur in the fair value of the asset in the period between commercial transaction date and settlement date as in the assets that the institution settles. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. Changes in fair value of assets to be received during the period between the trade date and the settlement date are accounted for in the same way as the acquired assets. The methods and assumptions used in determining the reasonable estimated values of all of the financial instruments are described below.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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VII. Explanations on Financial Assets (continued)

Cash, Banks, and Other Financial Institutions

Cash and cash equivalents comprise cash on hand, demand deposits, and highly liquid short-term investments with maturity of 3 months or less following the purchase date, not bearing risk of significant value change, and that are readily convertible to a known amount of cash. The book value of these assets approximates their fair values. Financial Assets at Fair Value Through Profit and Loss 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 with a pattern of short-term profit taking.

Trading securities are initially recognized at cost. Transaction costs of the related securities are included in the initial cost. The positive difference between the cost and fair value of such securities is accounted for as interest and income accrual, and the negative difference is accounted for as “Impairment Provision on Marketable Securities”.

Held to Maturity Investments and Financial Assets Available for Sale Investments held to maturity include securities with fixed or determinable payments and fixed maturity where there is an intention of holding till maturity and the relevant conditions for fulfillment of such intention, including the funding ability other than loans and receivables. Available for sale financial assets include all securities other than loans and receivables, securities held to maturity and securities held for trading. Marketable securities are initially recognized at cost including the transaction costs. After the initial recognition, available for sale securities are measured at fair value and the unrealized gain/loss originating from the difference between the amortized cost and the fair value is recorded in “Marketable Securities Valuation Differences” under the equity. Fair values of debt securities that are traded in an active market are determined based on quoted prices or current market prices. In the absence of prices formed in an active market, fair value of these securities is determined using the prices declared in the Official Gazette or other valuation methods stated in TAS. After initial recognition, held to maturity investments are measured at amortized cost by using effective interest rate less impairment losses, if any. The interests received from held to maturity investments are recorded as interest income. There are no financial assets that have been previously classified as held to maturity investments but cannot be currently classified as held to maturity for two years due to “tainting” rule. The Group classifies its securities as referred to above at the acquisition date of related assets. The sale and purchase transactions of the held to maturity investments are recorded on a settlement date basis. Loans and Provisions for Impairment Loans are financial assets those generated by lending money and exclude those that are held with the intention of trading or selling in the near future. The Group initially records loans and receivables at cost. In subsequent periods, in accordance with TAS, loans are measured at amortized cost using effective interest rate method.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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VII. Explanations on Financial Assets (continued)

Provision is set for the loans that may be doubtful and the amount is charged in the current period income statement. The provisioning criteria for non-performing loans are determined by the Group’s management for compensating the probable losses of the current loan portfolio, by evaluating the quality of loan portfolio, risk factors and considering the economical conditions, other facts and related regulations. Specific reserves are provided for Group III, IV and V loans in accordance with the regulation on “Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” published in the Official Gazette No. 26333 dated November 1, 2006 which was amended with the communiqué published in the Official Gazette No. 27119 dated January 23, 2009. These provisions are reflected in the income statement under “Provision and Impairment Expenses - Special Provision Expense". The collections 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 related to loans for which provision is made in the current period are reversed from the “Provision for Loan Losses and Other Receivables” account in the income statement, and related interest income is credited to the “Interest Received from Non-performing Loans” account. Releases of loan loss provisions are booked in “Other Operating Income” account and reversed from the “Provision and Impairment Expenses - Specific Provision Expense” account in the income statement. In addition to specific loan loss provisions, within the framework of the regulation and principles referred to above; the Parent Bank records general loan loss provisions for loans and other receivables. The Parent Bank calculated the general loan provision as 0.5% for cash loans and other receivables, and 0.1% for non-cash loans until November 1, 2006. Subsequent to the change in the regulation on “Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” published in the Official Gazette No. 26333 dated November 1, 2006; the Parent Bank started to book general loan loss provision of 1% for cash loans and other receivables; and 0.2% for non-cash loans on the increase in the cash and non-cash loan portfolio as compared to their October 31, 2006 balances whereas allocating 0.5% general loan loss provision for cash loans and other receivables, and 0.1% for non-cash loans for the balances as of October 31, 2006. With the change in the same regulation on February 6, 2008, the Parent Bank started to book general loan loss provision of 2% for cash loans under watch-list and 0.4% for non-cash loans under watch-list. Specific reserves are also provided by TEB Faktoring based on the Communiqué on “Methods and Principles for the Determination of Receivables to be Reserved for and Allocation of Reserves of Financial Institutions, Leasing, and Factoring Firms” published in the Official Gazette No: 26588 on July 20, 2007 which was amended with the communiqué published in the Official Gazette No. 27270 dated June 26, 2009 and based on the Communiqué about “The Amendment in the Communiqué on Methods and Principles for the Determination of Receivables to be Reserved for and Allocation of Reserves of Finance Companies, Leasing, and Factoring Firms” published in the Official Gazette No: 26808 on March 6, 2008.

VIII. Explanations on Impairment of Financial Assets

At each balance sheet date, the Group evaluates the carrying amounts of its financial asset or a group of financial assets to determine whether there is an objective indication that those assets have suffered an impairment loss or not. If any such indication exists, the Group determines the related impairment.

A financial asset or a financial asset group incurs impairment loss only if there is an objective indicator related to the occurrence (or nonoccurrence) of one or more than one event (“loss event”) after the first journalization of that asset; and such loss event (or events) causes, an impairment as a result of the effect on the reliable estimate of the expected future cash flows of the related financial asset and asset group. Irrespective of high probability the expected losses caused by the future events are not journalized.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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IX. Explanations on Offsetting of Financial Assets and Liabilities Financial assets and liabilities are offset when a party has a legally enforceable right to set off, the intention of collecting or paying the net amount of related assets and liabilities or the right to offset the assets and liabilities simultaneously. X. Explanations on Sales and Repurchase Agreements and Lending of Securities The sales and purchase of government securities under repurchase agreements made with the customers are recorded in balance sheet accounts in accordance with the Uniform Chart of Accounts by the Group. Accordingly in the financial statements, the government bonds and treasury bills sold to customers under repurchase agreements are classified under securities held for trading, available for sale and held to maturity depending on the portfolio they are originally included in and are valued according to the valuation principles of the related portfolios. Funds obtained from repurchase agreements are classified as a separate sub-account under money markets borrowings account in the liabilities. These transactions are short-term and consist of domestic public sector debt securities. The income and expenses from these transactions are reflected to the “Interest Income on Marketable Securities” and “Interest Expense on Money Market Borrowings” accounts in the income statement. As of December 31, 2010, the Group has reverse repurchase agreements amounting to TRY 238 (December 31, 2009 – TRY 9,402). As of December 31, 2010, the Group does not have any marketable securities lending transaction (December 31, 2009 - None). XI. Explanations on Assets Held for Sale, Discontinued Operations and Liabilites Related to

Those Assets Assets held for sale are those under a plan prepared by the management regarding the sale of the asset to be disposed (or else the group of assets), together with an active program for determination of buyers as well as for the completion of the plan. Also the asset (or else the group of assets) shall be actively marketed in conformity with its fair value. On the other hand, the sale is expected to be journalized as a completed sale within one year after the classification date; and the necessary transactions and procedures to complete the plan should demonstrate the fact that the possibility of making significant changes or canceling the plan is low. The Group does not have any assets held for sale. A discontinued operation is a division of a bank that is either disposed or held for sale. Results of discontinued operations are included in the income statement separately. The Parent Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345 as of December 31, 2010. The profit amounting to TRY 18,244 resulting from this sale is presented as “Income on Sale of Associates, Subsidiaries and Entities Under Common Control” under the “Income on Discontinued Operations” in the current year income statement.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XII. Explanations on Goodwill and Other Intangible Assets

The positive difference of TRY 1,205 (December 31, 2009 - TRY 1,205), between the acquisition cost and share in the equity of acquired subsidiaries is reflected under the intangible fixed assets as goodwill in the accompanying consolidated financial statements.

Intangible assets are accounted for at restated cost until December 31, 2004 in accordance with inflation accounting and are amortized with straight-line method, after December 31, 2004 the acquisition cost and any other cost incurred so as to prepare the intangible asset ready for use less reserve for impairment, if any, and are amortized on a straight-line method. The cost of assets subject to amortization is restated after deducting the exchange differences, capitalized financial expenses and revaluation increases, if any, from the cost of the assets.

The other intangible assets of the Group comprise mainly softwares. The requirements of the Turkish Tax Procedural Code are taken into consideration in determining the useful lives and no other specific criteria are used. Useful lives of such assets acquired prior to 2004 are determined as 5 years and for the year 2004 and forthcoming years as 3 years. Softwares used are mainly developed within the Parent Bank by the Parent Bank’s personnel and the related expenses are not capitalized. Software is purchased only in emergency cases and for special projects.

There are no anticipated changes in the accounting estimates about the amortization rate and amortization method and residual values that would have a significant impact in the current and future periods.

XIII. Explanations on Tangible Fixed Assets

Properties are accounted for at their restated costs until December 31, 2004; afterwards the acquisition cost and any other cost incurred so as to prepare the fixed asset ready for use are reflected, less reserve for impairment, if any. The straight-line method of depreciation is used for buildings and useful life is considered as 50 years.

Other tangible fixed assets are accounted for at their restated costs until December 31, 2004; afterwards the acquisition cost and any other cost incurred so as to prepare the fixed asset ready for use are reflected less reserve for impairment, if any, and depreciated on a straight-line method. Depreciation of assets held less than one year as of the balance sheet date is accounted proportionately. No amendment has been made to the depreciation method in the current period. The annual rates used, which approximate rates based on the estimated economic useful lives of the related assets, are as follows:

% Buildings 2 Motor vehicles 20 Furniture, fixtures and office equipment and others 3 – 50

Gain or loss resulting from disposals of the tangible fixed assets is reflected to the income statement as the difference between the net proceeds and net book value.

Maintenance costs of tangible fixed assets are capitalized if they extend the economic useful life of the related asset. Other maintenance costs are expensed.

There are no pledges, mortgages or other restrictions on the tangible fixed assets.

There are no purchase commitments related to the tangible fixed assets.

There are no anticipated changes in the accounting estimates, which could have a significant impact in the current and future periods.

The Parent Bank employs independent appraisers in determining the current fair values of its real estates at period ends. As of December 31, 2010, there is no provision for impairment loss as per the appraisals performed (December 31, 2009 – None).

As per the appraisals performed for the real estates held for resale included in “Other Assets” in the financial statements, there is a provision for impairment loss amounting to TRY 3,380 (December 31, 2009 – TRY 2,608).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XIV. Explanations on Leasing Transactions Tangible fixed assets acquired by financial leases are accounted for in accordance with TAS No:17. In accordance with this standard, the leasing transactions, which consist only foreign currency liabilities, are translated to Turkish Lira with the exchange rates prevailing at the transaction dates and they are recorded as an asset or a liability. The foreign currency liabilities are translated to Turkish Lira with the Parent Bank’s period end exchange rates. The increases/decreases resulting from the differences in the foreign exchange rates are recorded as expense/income in the relevant period. The financing cost resulting from leasing is distributed through the lease period to form a fixed interest rate. In addition to the interest expense, depreciation expense is recorded for the depreciable leased assets in each period. The depreciation rate is determined in accordance with TAS No:16 "Accounting Standard for Tangible Fixed Assets" by taking the useful lives into account. Operating lease payments are recognized as expense in the income statement on a straight line basis over the lease term. The Group does not have any leasing transactions as “Lessor”. XV. Explanations on Provisions and Contingent Liabilities Provisions are recognized when there is a present obligation, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are determined by using the Group’s best expectation of expenses in fulfilling the obligation as of the balance sheet date, and discounted to present value if material. XVI. Explanations on Liabilities Regarding Employee Benefits Defined Benefit Plans In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination indemnities over a 30 day salary to each employee who has completed over one year of service, whose employment is terminated due to retirement or for reasons other than resignation or misconduct, and due to marriage, female employees terminating their employments within a year as of the date of marriage, or male employees terminating their employments due to their military service. The Group is also required to make a payment for the period of notice calculated over each service year of the employee whose employment is terminated for reasons other than resignation or misconduct. Total benefit is calculated in accordance with TAS No:19 “Turkish Accounting Standard on Employee Benefits”. Such benefit plans are unfunded since there is no funding requirement in Turkey. The cost of providing benefits to the employees for the services rendered by them under the defined benefit plan is determined by independent actuaries annually using the projected unit credit method. All actuarial gains and losses are recognized in the income statement. In calculating the related liability to be recorded in the financial statements for these defined benefit plans, the Group uses independent actuaries and also makes assumptions and estimation relating to the discount rate to be used, turnover of employees, future change in salaries/limits, etc. In this regard, the actuarial assumptions used for the calculation of the reserve for employee termination benefits are as follows:

December 31, 2010 December 31, 2009Discount Rate (%) 10.00 11.00Expected Inflation Rate (%) 5.10 4.80 The carrying value of provision for employee termination benefits as of December 31, 2010 is TRY 25,122 (December 31, 2009 – TRY 18,512).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XVI. Explanations on Liabilities Regarding Employee Benefits (continued)

Defined Contribution Plans

The Group pays contributions to Social Security Funds on a mandatory basis. There are no other liabilities related to employee benefits to be provisioned. XVII. Explanations on Taxation

Corporate tax According to the Article 32 of the Corporate Tax Law No. 5520, announced in the Official Gazette dated June 21, 2006, the corporate tax rate is 20%.

The tax legislation, requires advance tax of 20% to be calculated and paid based on earnings generated for each quarter. The amounts thus calculated and paid are offset against the final tax liability for the year.

Tax returns are required to be filed between the first and twenty-fifth day of the fourth month following the balance sheet date and paid in one installment until the end of the related month.

Tax provision related with items that are credited or charged directly to equity are charged or credited to equity. As of December 31, 2010, TRY 20,706 (December 31, 2009 - TRY 5,467) deferred tax which is related with items recorded in the equity was net off under equity in “Marketable Securities Valuation Differences”.

According to the Corporate Tax Law, tax losses can be carried forward for a maximum period of five years following the year in which the losses are incurred. Tax authorities can inspect tax returns and the related accounting records for a retrospective maximum period of five years.

Deferred Tax Liability / Asset

The Group calculates and reflects deferred tax asset or liability on timing differences which will result in taxable or deductible amounts in determining taxable profit of future periods.

As of December 31, 2010 and December 31, 2009, in accordance with TAS No: 12 “Turkish Accounting Standard on Income Taxes” and the changes in the circular of BRSA numbered BDDK.DZM.2/13/1-a-3 dated December 8, 2004, the Bank calculated deferred tax asset on all deductible temporary differences except for general loan reserves, if sufficient taxable profit in future periods to recover such amounts is probable; as well as deferred tax liability on all taxable temporary differences. Deferred tax assets and liabilities are shown in the accompanying financial statements on a net basis in the standalone financial statements of the consolidated subsidiaries.

The net deferred tax asset is included in deferred tax asset and the net deferred tax liability is reflected under deferred tax liability on the balance sheet. The deferred tax benefit of TRY 25,943 (December 31, 2009 - TRY 34,912 deferred tax benefit) is stated under the tax provision in the income statement. The deferred tax of TRY 20,706 (December 31, 2009 - TRY 5,467) resulting from differences related to items that are credited or charged directly to equity is netted with these accounts.

Furthermore, as per the above circular of BRSA, deferred tax benefit balance resulting from netting of deferred tax assets and liabilities should not be used in dividend distribution and capital increase. XVIII. Additional Explanations on Borrowings

The borrowing costs related to purchase, production, or construction of qualifying assets that require significant time to be prepared for use and sale are included in the cost of assets until the relevant assets become ready to be used or to be sold. Financial investment income obtained by temporary placement of undisbursed investment loan in financial investments is offset against borrowing costs qualified for capitalization. All other borrowing costs are recorded to the income statement in the period they are incurred.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

23

XVIII. Additional Explanations on Borrowings (continued) There are no debt securities issued by the Parent Bank. The Group has not issued convertible bonds. XIX. Explanations on Issued Share Certificates

None. XX. Explanations on Acceptances

Acceptances are realized simultaneously with the payment dates of the customers and they are presented as probable commitments in off-balance sheet accounts. XXI. Explanations on Government Incentives There are no government incentives utilized by the Group. XXII. Explanations on Reporting According to Segmentation The Group mainly operates in retail and corporate banking segments.

Current Period Retail CorporateTreasury/

Head Office Eliminations Total Net interest income 112,415 473,524 239,575 32 825,546Net fees and commissions income and other operating income 88,112 201,197 222,639 (2,927) 509,021Trading profit / loss 4,067 29,601 (40,452) (315) (7,099)Dividend income - - 17,514 (17,497) 17Impairment provision for loans and other receivables (-) 26,091 116,780 28,553 - 171,424Other operating expenses (-) 164,848 298,980 375,378 (1,827) 837,379Income on discontinued operations - 72,071 77,173 (60,254) 88,990Expense on discontinued operations (-) - 63,144 - (1,472) 61,672Profit from continued&discontinued operations before taxes 13,655 297,489 112,518 (77,662) 346,000Tax provision for continued &discontinued operations - - (73,381) - (73,381) Net profit for the period 13,655 297,489 39,137 (77,662) 272,619

Current Period Retail Corporate

Treasury/Head Office Eliminations Total

Segment assets 2,740,271 11,380,596 7,141,799 (89,452) 21,173,214Investments in associates and subsidiaries and jointly controlled entities - - 125,420 (125,415) 5

Total Assets 2,740,271 11,380,596 7,267,219 (214,867) 21,173,219

Segment liabilities 5,730,126 8,535,323 5,044,326 (89,810) 19,219,965Shareholders’ equity - - 2,078,311 (125,057) 1,953,254

Total Liabilities 5,730,126 8,535,323 7,122,637 (214,867) 21,173,219

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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XXII. Explanations on Reporting According to Segmentation (continued)

Prior Period Retail CorporateTreasury/

Head Office Eliminations Total Net interest income 99,838 515,929 246,140 167 862,074 Net fees and commissions income and other operating income 115,893 185,774 13,657 (2,169) 313,155 Trading profit / loss 3,258 34,584 10,095 (1,164) 46,773 Dividend income 1,366 368 11,974 (13,695) 13 Impairment provision for loans and other receivables (-) 51,492 129,486 2,745 - 183,723Other operating expenses (-) 175,641 295,127 280,682 306 751,756Income on discontinued operations - 146,047 - (1,028) 145,019Expense on discontinued operations (-) - 143,285 - (2,198) 141,087Profit from continued&discontinued operations before taxes (6,778) 314,804 (1,561) (15,997) 290,468 Tax provision for continued &discontinued operations - - (22,564) - (22,564)Net profit for the period (6,778) 314,804 (24,125) (15,997) 267,904

Prior Period Retail Corporate

Treasury/Head Office Eliminations Total

Segment assets 1,986,569 9,026,566 6,056,517 (30,478) 17,039,174 Investments in associates and subsidiaries and jointly controlled entities - - 165,606 (165,605) 1

Total Assets 1,986,569 9,026,566 6,222,123 (196,083) 17,039,175

Segment liabilities 5,695,943 5,629,843 3,910,434 (30,353) 15,205,867 Shareholders’ equity - - 1,999,038 (165,730) 1,833,308

Total Liabilities 5,695,943 5,629,843 5,909,472 (196,083) 17,039,175

XXIII. Explanations on Other Matters BNP Paribas, holding 50% of TEB Mali Yatırımlar A.Ş. which holds the controlling shareholding of 84.25% of the Parent Bank, has acquired 75% of the shares of Fortis Bank Belgium being the main shareholder of Fortis Bank A.Ş. with 94.11% shareholding, from the State of Belgium based on the resolutions taken at Fortis Holding General Assembly of Shareholders held in Belgium and Netherlands on April 28 and 29, respectively. The share transfer procedures were completed as of May 13, 2009.

On September 23, 2009, BRSA has announced its consent on indirect acquisition of 70.52% of total shares of Fortis Bank A.Ş. by BNP Paribas with the 18th article of Banking Act No: 5411.

BNP Paribas and the Çolakoğlu Group, the indirect controlling shareholders of TEB, have entered into a Memorandum of Understanding concerning the merger of Türk Ekonomi Bankası A.Ş. (“TEB”) and Fortis Bank A.Ş. on June 3, 2010. Under the Memorandum of Understanding, it has been agreed, subject to BRSA approval, that the two banks will be merged under TEB. Upon approval of the regulatory authorities, as a result of share transfers between the main shareholders following the merger, it is contemplated that TEB Mali Yatırımlar A.Ş (‘‘TEB Mali’’) shall remain as the majority shareholder in TEB and that the Colakoglu Group and the BNP Paribas Group will each continue to hold 50% of TEB Mali. The proposed transactions are subject to execution of definitive contracts and receipt of approvals from various regulatory and corporate bodies. The merger is expected to be concluded by the beginning of 2011.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

25

XXIII. Explanations on Other Matters (continued) Following the preparatory studies carried out by TEB and Fortis Bank A.Ş. on the merger feasibility report, to commence implementation of the merger and restructuring transactions, the Board of Directors of TEB resolved on July 12, 2010 that; June 30, 2010 financial statements of the respective merging banks will be the basis of the merger, the effects of restructuring transactions taking place following this date on the merger financial statements shall be considered in the audit report and during the valuation studies of appraiser as well as determining the merger ratio, an independent appraiser be appointed to carry out the valuation studies; and accordingly, TEB General Management was authorised to apply to the BRSA for the purposes of obtaining pre-approval as per the relevant regulation of the BRSA to commence and proceed with the merger procedures. As per the Memorandum of Understanding dated June 3, 2010, the indirect controlling shareholders of TEB, BNP Paribas Group and the Çolakoğlu Group, have completed their negotiations and reached to an agreement on the shareholders agreement and other relevant documents on July 24, 2010. Accordingly, subsequent to obtaining all necessary regulatory approvals and respective corporate approvals, the merger will be realized under TEB. TEB Mali Yatırımlar A.Ş. will continue to be the principal shareholder of TEB, and Çolakoğlu Group and BNP Paribas Group will respectively hold 50% shares of TEB Mali Yatırımlar A.Ş. According to resolution of the Banking Regulation and Supervision Agency dated September 21, 2010 and numbered 3859; as per the 19th Article of Banking Act No: 5411 and Article 5 of the Communique on “Merger, Take-over, Division and Transfer of Shares for the Banks”, it was decided to commence the procedures to cease the legal entity of Fortis Bank A.Ş. and transfer all of its assets and liabilities with respective rights and obligations to Türk Ekonomi Bankası A.Ş., provided that all necesarry approvals from other authorities are obtained. As of October 18, 2010, the Parent Bank signed an exclusive agency agreement with Cardif Hayat Sigorta A.Ş. for the distribution of life insurance products and has also signed an exclusive agency agreement with Fortis Emeklilik ve Hayat A.Ş. for the distribution of pension and life saving products, and received TRY 180,000 in consideration of these agreements. The Parent Bank held an Extraordinary General Assembly on October 19, 2010. At this meeting, the appointment of new members of board of directors and statutory auditors were affirmed; financial statements that will be taken as the basis for the merger with Fortis Bank A.Ş. were approved; the draft merger agreement was approved; and the Parent Bank’s Board of Directors was granted with the authorization to finalize and sign the merger agreement and also make the necessary amendments to the articles of association in relation to the merger. In addition, at the same meeting, the Board of Directors accepted the proposed profit distribution based on the resolution no: 4450/93 of the Board of Directors dated October 1, 2010 and approved without any amendments or objections; to make a profit distribution of TRY 207,017 which is included in the reserves of the 2009 year-end financial statements to the shareholders; and has granted authorization to the Board of Directors in regards to the procedures and transactions relevant to the profit distribution. The profit distribution process has started commencing on October 25, 2010. Following the Extraordinary General Assembly held on October 19, 2010 by the merging parties, the related applications were filed to the Capital Markets Board (“CMB”) as at October 26, 2010 in accordance with Article 11 of the Communiqué Serial: I No: 31 of the Capital Markets Board based on the approval requirement of the CMB. Subsequent to the completion of the appraisals of independent valuers and expert appointed by the court, the merger ratio will be evaluated by the Board of Directors of the merging parties before it will be presented to the CMB and will be publicly disclosed. It was resolved at the Board of Directors meeting of the Parent Bank on November 25, 2010 that 49.90% merger and 1.0518 exchange ratios had been determined as fair and reasonable based on the expert reports of İstanbul 10th Commercial Court and Ernst Young Kurumsal Finansman Danışmanlık A.Ş. It was further resolved that as a result of the increased capital of TRY 1,104,390 in TEB due to the merger, it was proposed that 1 Fortis Bank A.Ş. share shall be exchanged for 1.0518 share of TEB.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

26

XXIII. Explanations on Other Matters (continued) In the foregoing expert reports, subsequent events after June 30, 2010 affecting the equity and the financial statements of the Parent Bank and Fortis Bank A.Ş. have been taken into account, and calculations have been made based on the “net assets method”, “discounted dividend method” and “market multiples method”. The foregoing merger transaction, the merger ratios, the capital increase amount and the merger agreement were approved by the decision of the CMB dated December 21, 2010 and numbered 37/1145 before the general assemblies of the respective banks. However, it was also stated that this approval was not an official guarantee of the merger to be recognized by the CMB board and the public. Subsequent to the CMB approval, the required merger disclosures have been made publicly. Following the CMB approval described above and the BRSA approval dated December 30, 2010 and numbered 3998, the merger agreement including ratios and increased capital amount were submitted to the approval of the shareholders at the Extraordinary General Assemblies of the respective banks held on January 25, 2011, and the merger of the two banks was approved with the decision to cease the legal entity of Fortis Bank A.Ş. and transfer all of its assets and liabilities with respective rights and obligations to the Bank.

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). 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 financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

27

SECTION FOUR

INFORMATION ON CONSOLIDATED FINANCIAL STRUCTURE OF THE GROUP I. Explanations Related to the Consolidated Capital Adequacy Standard Ratio The method used for risk measurement in determining consolidated capital adequacy standard ratio; Capital Adequacy Standard Ratio is calculated in accordance with the Communiqué on “Measurement and Assessment of Capital Adequacy of Banks”, which was published on November 1, 2006 in the Official Gazette numbered 26333 and the Communiqué on “The Amendment in Measurement and Assessment of Capital Adequacy of Banks” published on October 10, 2007 in the Official Gazette numbered 26669. As of December 31, 2010, the Group’s consolidated capital adequacy ratio in accordance with the related communiqué is 13.64%. (December 31, 2009 – 16.95%). 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 communiqué on the "Measurement and Assessment of Capital Adequacy of Banks" and is taken into consideration in the capital adequacy standard ratio calculation. The values deducted from the capital base in the shareholders’ equity computation are excluded while calculating risk-weighted assets, non-cash loans and contingent liabilities. Assets subject to depreciation and impairment among risk-weighted assets are included in the calculations over their net book values after deducting the relative depreciations and provisions. While calculating the basis of non-cash loans subject to credit risk, the net receivable amount from the counter parties net of provision amount set in accordance with the “Communiqué on Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” is multiplied by the loan conversion rates presented in the Article 5, the Clause 1 of the Communiqué on "Measurement and Assessment of Capital Adequacy of Banks", and calculated by applying the risk weights presented in the Capital Adequacy Analysis Form. Receivables from counter parties from derivative foreign currency and interest rate transactions are multiplied by the loan conversion rates presented in the Article 5, the Clause 2 of the Communiqué on "Measurement and Assessment of Capital Adequacy of Banks", and the related credit risk is calculated by applying the risk weights presented in the Capital Adequacy Analysis Form.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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I. Explanations Related to the Consolidated Capital Adequacy Standard Ratio (continued)

Information related to the consolidated capital adequacy ratio:

Consolidated Parent Bank Risk Weight Risk Weight 0% 10% 20% 50% 100% 150% 200% 0% 10% 20% 50% 100% 150% 200%Risk Weighted Assets, Liabilities and Non-Cash Loans Balance Sheet Items (Net)

Cash 315,391 - 9 - - - - 315,391 - 9 - - - -Matured Marketable Securities - - - - - - - - - - - - - -Due From Central Bank of Turkey 59 - - - - - - 59 - - - - - -Due From Domestic Banks, Foreign Banks, Branches and Head Office Abroad 39,892 - 916,360 - 66,023 - - - - 637,315 - 66,023 - -Interbank Money Market Placements - - - - - - - - - - - - - -Receivables From Reverse Repo Transactions 238 - - - - - - - - - - - - -Reserve Deposits 1,711,102 - - - - - - 1,711,102 - - - - - -Loans(*) 395,459 - 415,449 3,025,487 9,288,967 28,312 327 366,790 - 83,279 3,025,487 7,939,622 28,312 327Non-performing loans (Net) - - - - 137,842 - - - - - - 122,822 - -Financial Lease Receivables - - - - - - - - - - - - - -Available-For-Sale Financial Assets 3,244,302 - 99,816 - 19,581 - - 3,242,797 - - - 18,056 - -Held to Maturity Investments 205,689 - - - 7,924 - - 196,825 - - - - - -Receivables From Installment Sales of Assets - - - - - - - - - - - - - -Sundry Debtors - - 217,899 - 46,938 - - - - 212,083 - 5,256 - -Interest and Income Accruals 173,720 - 833 28,358 165,126 - - 172,746 - 145 28,358 162,304 - -Subsidiaries, Associates and Entities Under Common Control (Joint Vent.) (Net) - - - - 5 - - - - - - 119,695 - -Tangible Assets - - - - 82,452 - - - - - - 74,622 - -Other Assets 161,387 - 381 - 78,137 - - 156,847 - - - 70,843 - -

Off-Balance Sheet Items Guarantees and Commitments 85,303 - 387,106 - 2,779,895 - - 83,679 - 163,087 - 2,672,537 - -Derivative Financial Instruments - - 141,698 - 54,461 - - - - 137,744 - 53,820 - -

Non Risk Weighted Accounts - - - - - - - - - - - - - - Total Value at Risk 6,332,542 - 2,179,551 3,053,845 12,727,351 28,312 327 6,246,236 - 1,233,662 3,053,84511,305,600 28,312 327Total Risk Weighted Assets - - 435,910 1,526,923 12,727,351 42,468 654 - - 246,732 1,526,92311,305,600 42,468 654

(*)Factoring receivables are included.

Summary information related to the consolidated capital adequacy ratio: Consolidated Parent Bank Current Period Prior Period Current Period Prior Period Total Risk Weighted Assets (TRWA) 14,733,306 11,449,496 13,122,377 10,110,208Amount Subject to Market Risk (ASMR) 879,400 458,488 694,138 326,175Amount Subject to Operational Risk (ASOR) (*) 1,917,590 1,492,474 1,724,813 1,323,618Shareholders’ Equity 2,390,329 2,271,620 2,242,780 2,082,025Shareholders’ Equity / (TRWA + ASMR + ASOR) *100 13.64 16.95 14.43 17.70

TRWA: Total Risk Weighted Assets ASMR: Amount Subject to Market Risk ASOR: Amount Subject to Operational Risk (*) Operational risk has been calculated by using the Basic Indicator Approach.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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I. Explanations Related to the Consolidated Capital Adequacy Standard Ratio (continued)

Information related to the components of shareholders' equity:

Consolidated Parent Bank Current Period Prior Period Current Period Prior Period CORE CAPITAL Paid-in capital 1,100,000 1,100,000 1,100,000 1,100,000

Nominal capital 1,100,000 1,100,000 1,100,000 1,100,000 Capital commitments (-) - - - -

Paid-in capital restatement difference 926 926 926 926 Share premium 2,227 2,227 2,158 2,158 Cancellation profits - - - - Legal reserves 60,825 57,519 45,468 34,959

First legal reserve (Turkish Commercial Code 466/1) 47,594 42,642 39,932 29,423 Second legal reserve (Turkish Commercial Code 466/2) 13,231 14,877 5,536 5,536 Other legal reserve per special legislation - - - -

Statutory reserves - - - - Extraordinary reserves 433,634 382,909 272,335 279,694

Reserves allocated by the General Assembly 431,658 374,077 272,335 279,694 Retained earnings - - - - Accumulated losses - - - - Foreign currency share capital exchange difference 1,976 8,832 - -

Restatement differences of legal, statutory and extraordinary reserves - - - - Profit 272,619 267,904 300,301 210,167

Current period net profit 272,619 267,904 300,301 210,167 Prior years’ profits - - - -

Provision for possible losses up to 25% of the Core Capital - - - - Gains on sale of associates and subsidiaries and properties to be added to capital - - - - Primary subordinated loans up to 15% of the Core Capital 153,760 148,730 153,760 148,730 Minority Shares - - - - Losses (-) (that cannot be covered by reserves) - - - -

Net current period loss - - - - Prior years’ losses - - - -

Leasehold improvements (-) 35,116 50,750 34,884 50,395 Prepaid expenses (-) 23,357 30,854 22,742 29,475 Intangible assets (-) 12,736 14,278 10,156 10,910 Deferred tax asset exceeding 10% of the Core Capital (-) - - - - Excess amount in the Article 56, Clause 3 of the Banking Law (-) - - - - Goodwill (Net) (-) 1,205 1,205 - - Total Core Capital 1,951,577 1,863,128 1,807,166 1,685,854 SUPPLEMENTARY CAPITAL

General Loan Loss Reserves 114,113 86,826 106,794 74,628 45% of the revaluation reserve for movable fixed assets - - - - 45% of the of revaluation reserve for properties - - - - Bonus shares obtained from associates, subsidiaries and entities under common control - - - - Primary subordinated loans excluded in the calculation of the Core Capital - - - - Secondary subordinated loans 287,566 311,846 287,566 311,846 45% of Marketable securities valuation differences 37,073 9,820 41,254 9,697

Associates and subsidiaries - - - - Available for sale securities 37,073 9,820 41,254 9,697

Indexation differences for capital reserves, profit reserves and retained earnings (Except indexation differences for legal reserves, statutory reserves and extraordinary reserves) - - - - Minority interest - - - - Total Supplementary Capital 438,752 408,492 435,614 396,171 TIER III CAPITAL - - - - CAPITAL 2,390,329 2,271,620 2,242,780 2,082,025 DEDUCTIONS FROM THE CAPITAL - - - - Shareholdings in unconsolidated banks and financial institutions - - - - Secondary subordinated loans granted to Banks and Financial Institutions (Domestic, Foreign) or Qualified Shareholders and placements that possess the nature of their Primary or Secondary Subordinated Debt and Primary and Secondary loans borrowed from them - - - - Shareholdings in the banks and financial institutions which are accounted for under the equity pick up method but the assets and liabilities are not consolidated. - - - - Loans granted being non-compliant with the Articles 50 and 51 of the Banking Law - - - - The net book value of properties exceeding fifty percent of equity and properties held for sale and properties and commodity to be disposed, acquired in exchange of loans and receivables according to the Article 57 of the Banking Law and have not been disposed yet after 5 years after foreclosure - - - - Other - - - - Total Shareholder’s Equity 2,390,329 2,271,620 2,242,780 2,082,025

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations Related to the Consolidated Credit Risk

Credit risk is the risk that the Group is a party in a contract whereby the counterparty fails to meet its obligation and cause to incur a financial loss. The credit allocation is performed on a debtor and a debtor group basis within the limits. In the credit allocation process, many financial and non-financial criteria are taken into account within the framework of the internal rating procedures of the Parent Bank. These criteria include geographical and sector concentrations. The sector concentrations for loans are monitored closely. In accordance with the Parent Bank’s loan policy, the rating of the companies, credit limits and guarantees are considered together, and credit risks incurred are monitored. The credit risks and limits related to treasury activities, the limits of the correspondent banks that are determined by their ratings and the control of the maximum acceptable risk level in relation to the equity of the Parent Bank are monitored daily. Risk limits are determined in connection with these daily transactions, and risk concentration is monitored systematically concerning off-balance sheet operations. As prescribed in the Communiqué on “Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves”, the credit worthiness of the debtors of the loans and other receivables is monitored regularly. Most of the statement of accounts for the loans has been derived from audited financial statements. The unaudited documents result from the timing differences between the loan allocation and the audit dates of the financial statements of the companies and subsequently the audited financial statements are obtained from the companies. Credit limits are determined according to the audited statement of accounts, and guarantee factors are developed in accordance with the decision of the credit committee considering the characteristics of the transactions and the financial structures of the companies. For the forward transactions and other similar positions of the Parent Bank, operational limits are set by the Board of Directors and the transactions take place within these limits. The fulfillment of the benefits and acquirements related to forward transactions is realized at maturity. However, in order to minimize the risk, counter positions of existing risks are entered into in the market due to necessity. Indemnified non-cash loans are subject to the same risk weight as outstanding loans matured but not yet paid. 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. Financial institutions abroad and country risks of the Parent Bank are generally taken for the financial institutions and countries whose investment level is rated by international rating agencies and which do not have the risk of failing to meet minimum obligations. Therefore, the probable risks are not material when the financial structure of the Parent Bank is concerned. The Parent Bank does not have a material credit risk concentration as an active participant in the international banking market when the financial operations of the other financial institutions are concerned. As of December 31, 2010, the receivables of the Group from its top 100 cash loan customers amount to TRY 2,236,127 (December 31, 2009 – TRY 2,058,182) with a share of 17.54% in the total cash loans (December 31, 2009 – 21.27%). As of December 31, 2010, the receivables of the Group from its top 100 non-cash loan customers amount to TRY 1,635,513 (December 31, 2009 – TRY 1,403,850) with a share of 37.03% in the total non-cash loans (December 31, 2009 – 37.38%).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations Related to Consolidated Credit Risk (continued)

The share of cash and non-cash receivables of the Group from its top 100 customers in total balance sheet and off-balance sheet assets is 17.96% as of December 31, 2010 (December 31, 2009 – 20.20%). As of December 31, 2010, the general loan loss provision related with the credit risk taken by the Group is TRY 114,113 (December 31, 2009 – TRY 86,826). Credit risk by types of borrowers and geographical concentration:

Loans to Real Persons and Legal Entities

Loans to Banks and Other Financial

Institutions Marketable Securities* Other Loans**

Current Period

Prior Period

Current Period

Prior Period

Current Period

Prior Period

Current Period

Prior Period

Loans according to borrowers

12,032,547 9,264,790

1,870,030

1,324,945

3,862,689

2,718,449

819,663 986,784

Private Sector

8,895,689

7,037,974

383,389

146,393

-

-

819,663

954,033

Public Sector 34,738 4,925 39,869 16,448 3,837,090 2,706,467 - 6,773

Banks - - 1,446,772 1,162,104 6,194 7,378 - 25,978

Retail 3,102,120 2,221,891 - - - - - -

Share Certificates - - - - 19,405 4,604 - -

Information according to geographical concentration

12,032,547

9,264,790 1,870,030 1,324,945

3,862,689

2,718,449 819,663

986,784

Domestic

11,422,961

9,007,454

1,094,151

772,989

3,745,266

2,690,093

630,212 901,951

European Union Countries 246,518 114,137 397,205 283,291 96,620 3,861 189,451 84,833

OECD Countries*** 121,100 45,667 7,431 4,653 9,075 - - -

Off-shore Banking Regions 99,025 17,272 182,563 157,472 1,197 1,147 - -

USA, Canada 10,101 5,610 63,717 44,714 2,191 2,515 - -

Other Countries 132,842 74,650 124,963 61,826 8,340 20,833 - -

Total 12,032,547 9,264,790 1,870,030 1,324,945 3,862,689 2,718,449 819,663 986,784

* Includes marketable securities designated at fair value through profit or loss, available-for-sale and held-to-maturity. ** Includes the on balance sheet transactions classified in the Uniform Chart of Accounts except the ones in the first three categories and the transactions defined as loan in the Article 48 of the Banking Act No: 5411. *** OECD countries other than European Union countries, USA and Canada.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

32

II. Explanations Related to Consolidated Credit Risk (continued) Information according to geographical concentration :

Assets LiabilitiesNon-Cash

LoansEquity

Investments

Net Income/

LossCurrent Period Domestic 19,338,211 12,729,463 4,071,851 - 256,745European Union Countries 1,036,112 5,390,678 147,019 - 15,874OECD Countries (*) 141,885 74,963 8,398 - -Off-shore Banking Regions 285,594 318,533 62,459 - -USA, Canada 105,267 457,580 6,087 - -Other Countries 266,145 248,748 120,496 - -Associates, Subsidiaries and Entities Under Common Control (Joint Vent.) - - - 5 -Unallocated Assets/Liabilities (**) - - - - -Total 21,173,214 19,219,965 4,416,310 5 272,619 Prior Period Domestic 16,001,944 11,552,369 3,541,051 - 254,055 European Union Countries 545,913 1,988,246 84,979 - 13,849 OECD Countries (*) 52,449 143,363 62,322 - -Off-shore Banking Regions 188,825 744,537 10,913 - -USA, Canada 92,735 418,453 826 - -Other Countries 157,308 358,899 55,580 - -Associates, Subsidiaries and Entities Under Common Control (Joint Vent.) - - - 1 -Unallocated Assets/Liabilities (**) - - - - -Total 17,039,174 15,205,867 3,755,671 1 267,904

(*) OECD countries other than EU countries, USA and Canada. (**) Assets and liabilities that cannot be allocated on a coherent basis.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

33

II. Explanations Related to the Consolidated Credit Risk (continued) Sector concentrations for cash loans :

Current Period Prior Period TRY (%) FC (%) TRY (%) FC (%)

Agricultural 351,395 3.82 201,279 5.67 238,642 3.45 114,439 4.11

Farming and Raising Livestock 312,455 3.40 156,640 4.42 203,062 2.95 84,420 3.03 Forestry, Wood and Paper 30,259 0.33 44,470 1.25 24,598 0.36 28,540 1.03 Fishery 8,681 0.09 169 0.00 10,982 0.14 1,479 0.05

Manufacturing 3,184,687 34.62 2,073,249 58.35 2,732,120 39.66 1,640,106 58.83 Mining and Quarry 175,602 1.91 53,291 1.50 187,474 2.72 63,422 2.28 Production 2,997,436 32.58 1,871,837 52.68 2,499,316 36.28 1,492,664 53.54 Electricity, Gas and Water 11,649 0.13 148,121 4.17 45,330 0.66 84,020 3.01

Construction 410,875 4.47 90,383 2.54 328,971 4.78 89,515 3.21 Services 1,901,336 20.67 1,062,413 29.90 1,215,030 17.64 812,993 29.16

Wholesale and Retail Trade 480,878 5.23 55,752 1.57 296,997 4.31 41,251 1.48 Hotel, Tourism, Food and Beverage Services

132,639

1.44

97,859

2.75

94,972

1.38

66,573

2.39

Transportation and Communication

335,031

3.64

161,853

4.56

238,557

3.46

142,822

5.12

Financial Institutions 554,128 6.02 498,353 14.03 289,028 4.20 468,513 16.81 Real Estate and Renting Services

143,417

1.56

237,524

6.69

114,309

1.66

76,786

2.75

Self-Employment Services 90,466 0.98 1,556 0.04 87,821 1.27 1,135 0.04 Education Services 11,033 0.12 277 0.01 10,052 0.15 207 0.01 Health and Social Services 153,744 1.68 9,239 0.25 83,294 1.21 15,706 0.56

Other(*) 3,350,824 36.42 125,664 3.54 2,374,619 34.47 130,652 4.69 Total 9,199,117 100.00 3,552,988 100.00 6,889,382 100.00 2,787,705 100.00

(*)Accruals are included in other.

The table below shows the maximum exposure to credit risk for the components of the financial statements: Current Period Prior Period Central Bank of Turkey 1,711,896 1,183,741Due from banks 1,022,825 724,003Other money markets 238 704,464Trading financial assets 112,664 137,917Derivative financial instruments held for trading 103,524 62,106Derivative financial instruments for hedging purposes 11,157 31,330Financial assets available-for-sale 3,515,006 1,678,892Held-to-maturity investments 235,019 901,640Loans (*) 13,481,833 10,647,801Total 20,194,162 16,071,894 Contingent liabilities 4,416,310 3,755,671Commitments 3,773,169 3,758,731Total 8,189,479 7,514,402 Total credit risk exposure 28,383,641 23,586,296 (*) Loans include TRY 602,319 (December 31, 2009: TRY 374,900) factoring receivables and TRY - (December 31, 2009: TRY 407,169)

lease receivables.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

34

II. Explanations Related to the Consolidated Credit Risk (continued) Credit quality per class of financial assets as of December 31, 2010 and December 31, 2009 are as follows: Current Period

Neither past due nor impaired

Past due or individually impaired Total

Loans and advances to customers Commercial lending 9,187,757 506,003 9,693,760Consumer lending 2,514,540 91,843 2,606,383Credit cards 504,616 74,755 579,371

Total 12,206,913 672,601 12,879,514

Prior period

Neither past due nor impaired

Past due or individually impaired Total

Loans and advances to customers Commercial lending 7,047,749 542,302 7,590,051Consumer lending 1,707,757 61,846 1,769,603 Credit cards 413,164 92,914 506,078

Total 9,168,670 697,062 9,865,732

Carrying amount per class of financial assets whose terms have been renegotiated: Current Period Prior Period Loans and advances to customers

Commercial lending 122,144 129,347Consumer lending 2,957 4,529Credit cards 4,162 8,183

Total 129,263 142,059

Credit Rating System The credit risk is assessed through the internal rating system of the Parent Bank, by classifying loans from highest grade to lowest grade according to the probability of default. As of December 31, 2010, consumer loans and business loans are excluded from the internal rating system of the Parent Bank and those loans are 37% of total loan portfolio. The risks that are subject to rating models can be allocated as follows:

Category Description of Category Share in the Total %

1st Category Case where the borrower has a very strong financial structure 28.56 2nd Category Case where the borrower has a good financial structure 19.63 3rd Category Case where the borrower has an intermediate level of financial structure 33.68 4th Category Case where the financial structure of the borrower has to be closely

monitored in the medium run

18.13

Total 100.00

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

35

III. Explanations Related to the Consolidated Market Risk

The Group has established market risk management operations and taken the necessary precautions in order to hedge market risk within its financial risk management purposes, in accordance with the Communiqué on “Measurement and Assessment of Capital Adequacy of Banks” issued on Official Gazette dated November 1, 2006 numbered 26333.

The Board of Directors determines the limits for the basic risk that the Parent Bank is exposed to. Those limits are revised periodically in line with the market forces and strategies of the Parent Bank. Additionally, the Board of Directors has ensured that the risk management division and senior management has taken necessary precautions to describe, evaluate, control and manage risks faced by the Parent Bank.

Interest rate and exchange rate risks, arising from the volatility in the financial markets, of the financial positions taken by the Parent Bank related to balance sheet and off-balance sheet accounts are measured and while calculating the capital adequacy and the amount subject to VAR, as summarized below, is taken into consideration by the standard method. Beside the standard method, VAR is calculated by using internal model as supported by scenario analysis and stress tests. VAR is calculated daily by three different methods which are historic simulation, Monte Carlo simulation and parametric method. These results are also reported daily to the management. a) Information Related to Market Risk

Consolidated Parent Bank (I) Capital Requirement to be Employed For General Market Risk - Standard Method 50,802 47,495(II) Capital Requirement to be Employed For Specific Risk - Standard Method 1,526 1,434(III) Capital Requirement to be Employed For Currency Risk – Standard Method 18,017 6,595(IV) Capital Requirement to be Employed For Commodity Risk – Standard Method - -(V) Capital Requirement to be Employed For Settlement Risk – Standard Method - -(VI) Total Capital Requirement to be Employed For Market Risk Resulting From Options - Standard Method 7 7(VII) Total Capital Requirement to be Employed For Market Risk in Banks Using Risk Measurement Model - -(VIII) Total Capital Requirement to be Employed For Market Risk (I+II+III+IV+V+VI) 70,352 55,531(IX) Amount Subject to Market Risk (12,5 x VIII) or (12,5 x VII) 879,400 694,138

b) Average market risk table calculated at the end of the months during the period:

Current Period Prior Period

Average Maximum Minimum Average Maximum Minimum

Interest Rate Risk 30,619 49,413 18,579 16,485 19,966 10,596

Common Stock Risk 1,793 2,915 744 248 311 216

Currency Risk 17,097 18,017 15,267 16,968 18,160 16,393

Commodity Risk - - - - - -

Settlement Risk - - - - - -

Option Risk 16 41 7 2,570 7,057 9

Total Value Subject to Risk 619,063 879,400 459,738 453,391 516,500 409,063

Other price risks The Group is not subject to a significant share price risk due to share certificates.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

36

IV. Explanations Related to Consolidated Operational Risk

a) Operational risk has been calculated using the Basic Indicator Approach. Market risk measurements are performed monthly.

b) The Group does not use the Standard Approach. V. Explanations Related to the Consolidated Currency Risk

Foreign currency risk indicates the probability of loss that the Group is 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 Group are taken into consideration and value at risk is calculated by using the standard method.

The Board of Directors of the Parent Bank sets limits for the positions, which are followed up daily. Any possible changes in the foreign currency transactions in the Parent Bank’s positions are also monitored.

As an element of the Group’s risk management strategies, foreign currency liabilities are hedged against exchange rate risk by derivative instruments.

The Treasury Department of the Parent 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 within the limits set by the Board of Directors. The monitoring of risk and risk related transactions occurring in the money markets is performed daily and reported to the Parent Bank’s Asset-Liability Committee on a weekly basis. As of December 31, 2010, the Group’s net long position is TRY 163,216 (December 31, 2009 - TRY 143,387 net long) resulting from short position on the balance sheet amounting to TRY 123,084 (December 31, 2009 - TRY 444,614 short) and long position on the off-balance sheet amounting to TRY 286,300 (December 31, 2009 - TRY 588,001 long).

The announced current foreign exchange buying rates of the Parent Bank at December 31, 2010 and the previous five working days in full TRY are as follows:

24.12.2010 27.12.2010 28.12.2010 29.12.2010 30.12.2010 31.12.2010 USD 1.5392 1.5403 1.5416 1.5567 1.5460 1.5376 JPY 0.0185 0.0185 0.0187 0.0189 0.0189 0.0188 EURO 2.0204 2.0260 2.0406 2.0437 2.0491 2.0551

The simple arithmetic averages of the major current foreign exchange buying rates of the Parent Bank for the thirty days before December 31, 2010 are as follows:

Monthly Average Foreign Exchange Rate

USD 1.5127 JPY 0.0181 EURO 2.0000

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

37

V. Explanations Related to the Consolidated Currency Risk (continued)

Information on the foreign currency risk of the Group:

Current Period EUR USD YEN OTHER TOTAL Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased, Precious Metals) and Balances with the Central Bank of Turkey

524,246

681,955

170

34,280

1,240,651

Banks 278,230 178,154 1,919 57,073 515,376 Financial Assets at Fair Value Through Profit and Loss (*****) 6,912 3,816 - 41 10,769 Money Market Placements - - - - Available-For-Sale Financial Assets 296,989 218,759 - - 515,748 Loans (**) 1,251,636 2,649,773 18,374 420,340 4,340,123 Subsidiaries, Associates and Entities Under Common Control - - - - - Held-To-Maturity Investments 8,340 9,075 - - 17,415 Derivative Financial Assets for Hedging Purposes - 43 - - 43 Tangible Assets 7,234 - - - 7,234 Intangible Assets 921 - - - 921 Other Assets (***) 91,940 197,278 - 15,425 304,643

Total Assets 2,466,448 3,938,853 20,463 527,159 6,952,923 Liabilities

Bank Deposits 189,242 107,044 39 26,649 322,974 Foreign Currency Deposits (*) 1,710,263 2,413,989 1,131 228,813 4,354,196 Money Market Borrowings - - - - - Funds Provided From Other Financial Institutions (***) 1,480,306 855,399 1,224 30,980 2,367,909 Marketable Securities Issued - - - - - Sundry Creditors 5,269 19,137 - 403 24,809 Derivative Financial Liabilities for Hedging Purposes - - - - - Other Liabilities (***) 3,804 1,952 161 202 6,119

Total Liabilities 3,388,884 3,397,521 2,555 287,047 7,076,007 Net Balance Sheet Position (922,436) 541,332 17,908 240,112 (123,084) Net Off-Balance Sheet Position 1,210,668 (694,898) (18,485) (210,985) 286,300

Financial Derivative Assets (****) 2,081,024 1,884,693 37,037 275,285 4,278,039 Financial Derivative Liabilities (****) 870,356 2,579,591 55,522 486,270 3,991,739 Non-Cash Loans (******) 713,757 1,670,138 1,937 45,377 2,431,209 Prior Period Total Assets 2,376,324 3,079,193 16,781 355,620 5,827,918 Total Liabilities 2,988,060 3,055,413 14,468 214,591 6,272,532 Net Balance Sheet Position (611,736) 23,780 2,313 141,029 (444,614) Net Off-Balance Sheet Position 781,482 (38,002) (5,211) (150,268) 588,001 Financial Derivative Assets 1,313,600 1,347,192 127,109 176,932 2,964,833 Financial Derivative Liabilities 532,118 1,385,194 132,320 327,200 2,376,832 Non-Cash Loans (******) 752,192 1,423,259 3,353 44,166 2,222,970

(*) Precious metal accounts amounting to TRY 129,374 (December 31, 2009 - TRY 23,762) are included in the foreign currency deposits.

(**) Foreign currency indexed loans amounting to TRY 782,548 (December 31, 2009 – TRY 649,252) are included in the loan portfolio.

(***) TRY 42,054 (December 31, 2009 – TRY 13,986) foreign currency indexed factoring receivables is included in other assets, while TRY 5 (December 31, 2009 – TRY 100) prepaid expenses is deducted from other assets, and TRY 30,813 (December 31, 2009 – TRY 21,235) expense accruals from derivative financial instruments, and TRY 26,079 (December 31, 2009 – TRY 16,681) provision for general loan losses are deducted from other liabilities and TRY 5,391 foreign currency indexed liabilities are included in funds provided from other financial institutions.

(****) Forward asset and marketable securities purchase-sale commitments of TRY 181,939 (December 31, 2009 – TRY 117,828) are added to derivative financial assets and TRY 181,837 (December 31, 2009 – TRY 117,839) has been added to derivative financial liabilities.

(*****) TRY 17,648 (December 31, 2009 – TRY 18,080) income accruals from derivative financial instruments is deducted from Financial Assets at Fair Value Through Profit and Loss.

(******)There is no effect on the net off-balance sheet position.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

38

V. Explanations Related to Consolidated Currency Risk (continued) Foreign currency sensitivity: The Group is mainly exposed to EUR and USD currencies. The following table details the Group’s sensitivity to a 10% increase and decrease in the TRY against USD and EUR. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. A positive number indicates an increase in profit or loss and other equity in the case of short position and a decrease in the case of long position where the TRY strengthens against USD and EUR.

Change in currency rate in %

Effect on profit or loss

Effect on equity (*)

December 31, 2010

December 31, 2009

December 31, 2010

December 31, 2009

USD 10 increase (15,357) (1,422) 151 393 USD 10 decrease 15,357 1,422 (151) (393) EUR 10 increase 28,823 16,975 11,396 10,074 EUR 10 decrease (28,823) (16,975) (11,396) (10,074)

(*) The effect on equity does not include the effect of changes in foreign exchange rate on the income statement. The Group’s sensitivity to foreign currency rates have not changed significantly during the current period. The positions taken in line with market expectations can increase the foreign currency sensitivity from period to period.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

39

VI. Explanations Related to Consolidated Interest Rate Risk

Interest rate risk shows the probability of loss related to the changes in interest rates depending on the Parent Bank’s position, and it is managed by the Asset-Liability Committee. The interest rate sensitivity of assets, liabilities and off-balance sheet items related to this risk are measured by using the standard method and included in the market risk for capital adequacy. The first priority of the risk management department is to protect from interest rate volatility. Duration, maturity and sensitivity analysis performed within this context are calculated by the risk management department and reported to the Asset-Liability Committee.

Simulations on interest income are performed in connection with the forecasted economic indicators used in the budget of the Group.

The Parent Bank management monitors the market interest rates on a daily basis and revises the interest rates of the Bank when necessary.

Since the Group does not allow maturity mismatches or imposes limits on the mismatch, no significant interest rate risk exposure is expected.

Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on repricing dates): Up to 1

Month 1-3

Months 3-12

Months 1-5

Years Over

5 Years Non-interest

Bearing

Total Current Period Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased, Precious Metals) and Balances with the Central Bank of Turkey

-

-

-

-

-

2,027,296

2,027,296 Banks 712,855 98,323 - 7,760 - 203,887 1,022,825 Financial Assets at Fair Value Through Profit and Loss 55,476 8,026 56,349 14,033 3,799 78,505 216,188 Money Market Placements 238 - - - - - 238 Available-For-Sale Financial Assets 279,828 77,008 1,001,539 1,784,220 353,006 19,405 3,515,006 Loans(*) 5,412,693 1,127,568 1,857,960 3,652,561 639,156 189,576 12,879,514 Factoring Receivables 343,666 94,842 162,566 - - 1,245 602,319 Financial Lease Receivables - - - - - - - Held-To-Maturity Investments 106,040 66,789 45,080 17,110 - - 235,019 Other Assets 46,650 187 2,267 1,091 9 624,610 674,814

Total Assets 6,957,446 1,472,743 3,125,761 5,476,775 995,970 3,144,524 21,173,219 Liabilities

Bank Deposits 1,442,067 8,133 3,166 - - 97,896 1,551,262 Other Deposits 7,764,734 1,215,119 289,102 13,860 - 2,329,794 11,612,609 Money Market Borrowings 86,665 - - - - - 86,665 Sundry Creditors - - - - - 343,405 343,405 Marketable Securities Issued - - - - - - - Funds Provided From Other Financial Institutions 1,035,571 1,614,008 1,827,161 24,673 373,117 - 4,874,530 Factoring Payables - - - - - - - Other Liabilities 865 481 22,256 40,182 28,102 2,612,862 2,704,748

Total Liabilities 10,329,902 2,837,741 2,141,685 78,715 401,219 5,383,957 21,173,219 Balance Sheet Long Position - - 984,076 5,398,060 594,751 - 6,976,887 Balance Sheet Short Position (3,372,456) (1,364,998) - - - (2,239,433) (6,976,887) Off-Balance Sheet Position - - 6,356 4,008 (2,190) - 8,174 Total Position (3,372,456) (1,364,998) 990,432 5,402,068 592,561 (2,239,433) 8,174

(*) Loans with floating interest rates of the Parent Bank amounting to TRY 3,199,937 are included in “Up to 1 Month” while mark to market differences from hedged loans amounting to TRY 33,648 are included in “1-5 Years”.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

40

VI. Explanations Related to Consolidated Interest Rate Risk (continued) Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on repricing dates) (continued): The other assets line in the non-interest bearing column consists of tangible assets amounting to TRY 117,568; intangible assets amounting to TRY 13,941, assets held for resale amounting to TRY 33,982, entities under common control (joint vent.) amounting to TRY 5, tax asset amounting to TRY 17,633, and the other liabilities line includes the shareholders’ equity of TRY 1,953,254. Average interest rates applied to monetary financial instruments: EURO

%USD

%YEN

%TRY

%Current Period Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) And Balances With the Central Bank Of Turkey - - - 3.75Banks 0.24 0.16 - 6.95Financial Assets At Fair Value Through Profit And Loss 3.21 4.90 - 9.09Money Market Placements - 1.05 - 6.41Available-For-Sale Financial Assets 3.27 5.71 - 8.39Loans 4.55 4.28 4.49 12.63Leasing Receivables - - - -Factoring Receivables 2.83 2.46 - 10.00Held-To-Maturity Investments 6.59 5.70 - 12.58

Liabilities Bank Deposits 0.80 0.30 - 5.80Other Deposits 2.12 2.28 0.10 7.18Money Market Borrowings - - - 6.73Sundry Creditors - - - -Marketable Securities Issued - - - -Funds Provided From Other Financial Institutions 3.11 2.57 3.10 7.71

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

41

VI. Explanations Related to Consolidated Interest Rate Risk (continued) Information related to the interest rate sensitivity of assets, liabilities and off-balance sheet items (based on repricing dates): (continued) Up to 1

Month 1-3

Months 3-12

Months 1-5

Years Over

5 Years Non-interest

Bearing

Total Prior Period Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased, Precious Metals) and Balances with the Central Bank of Turkey

737,814

-

-

-

-

773,898

1,511,712 Banks 561,176 7,845 10,582 - - 144,400 724,003 Financial Assets at Fair Value Through Profit and Loss

3,119

3,225

77,549

58,649

2,371

55,110

200,023

Money Market Placements 704,464 - - - - - 704,464 Available-For-Sale Financial Assets 306,548 35,229 729,735 566,383 35,700 5,297 1,678,892 Loans(*) 4,104,387 597,379 1,891,437 2,503,918 519,001 249,610 9,865,732 Factoring Receivables 165,045 111,170 97,038 107 - 1,540 374,900 Financial Lease Receivables 33,846 33,290 127,966 193,676 6,045 12,346 407,169 Held-To-Maturity Investments - 736,302 46,750 118,588 - - 901,640 Other Assets 23,811 - 231 3,579 19 643,000 670,640

Total Assets 6,640,210 1,524,440 2,981,288 3,444,900 563,136 1,885,201 17,039,175 Liabilities

Bank Deposits 152,630 60,165 5,231 - - 78,555 296,581 Other Deposits 6,492,489 1,277,476 254,197 64,764 - 1,977,777 10,066,703 Money Market Borrowings 1,071,971 - - - - - 1,071,971 Sundry Creditors 1,854 - - - - 265,378 267,232 Marketable Securities Issued - - - - - - - Funds Provided From Other Financial Institutions

1,267,303

278,339

883,282

190,550

324,500

-

2,943,974

Factoring Payables 743 - - - - - 743 Other Liabilities 14,414 933 4,163 50,799 16,461 2,305,201 2,391,971

Total Liabilities 9,001,404 1,616,913 1,146,873 306,113 340,961 4,626,911 17,039,175 Balance Sheet Long Position - - 1,834,415 3,138,787 222,175 - 5,195,377 Balance Sheet Short Position (2,361,194) (92,473) - - - (2,741,710) (5,195,377) Off-Balance Sheet Position 13,452 54 8,733 3,564 (3,648) - 22,155 Total Position (2,347,742) (92,419) 1,843,148 3,142,351 218,527 (2,741,710) 22,155

(*) Loans with floating interest rates of the Parent Bank amounting to TRY 2,311,525 are included in “Up to 1 Month” while mark to

market differences from hedged loans amounting to TRY 46,589 are included in “1-5 Years”.

The other assets line in the non-interest bearing column consists of tangible assets amounting to TRY 143,844; intangible assets amounting to TRY 15,483, assets held for resale amounting to TRY 20,341, tax asset amounting to TRY 50,058 and the other liabilities line includes the shareholders’ equity of TRY 1,833,308.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

42

VI. Explanations Related to Consolidated Interest Rate Risk (continued) Average interest rates applied to monetary financial instruments

EURO %

USD %

YEN %

TRY %

Prior Period Assets

Cash (Cash In Vault, Foreign Currency Cash, Money In Transit, Cheques Purchased) And Balances With the Central Bank Of Turkey - - - 7.49 Banks 0.35 0.22 - 9.39 Financial Assets At Fair Value Through Profit And Loss 5.69 7.81 - 12.01 Money Market Placements 1.25 0.84 - 8.97 Available-For-Sale Financial Assets 5.60 7.79 - 13.09 Loans 4.62 4.88 3.86 14.10 Leasing Receivables 8.14 7.78 - 21.68 Factoring Receivables 4.06 3.92 - 12.56 Held-To-Maturity Investments 5.25 5.81 - 9.86

Liabilities Bank Deposits 1.38 1.22 0.25 6.62 Other Deposits 2.94 2.21 0.30 8.27 Money Market Borrowings - - - 8.18 Sundry Creditors - - - - Marketable Securities Issued - - - - Funds Provided From Other Financial Institutions 3.56 3.46 - 9.79

Interest rate sensitivity:

If interest rates had been increased by 0.5% in TRY and FC and all other variables were held constant:

• Net profit of the Group for the year would have changed by TRY 5,919 (December 31, 2009 - TRY 4,884).

The interest rate sensitivity the Group is exposed to due to its balance sheet composition is calculated with the net interest income approach. The net interest income is calculated by using the original interest rates until maturity and using market interest curves until the remaining annualized period subject to analysis. This calculation is re-performed by altering the market interest curves based on rate changes accepted by management. The difference between the initial and re-performed calculation is assessed to be the interest sensitivity of the Group.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

43

VII. Explanations Related to Consolidated Liquidity Risk Liquidity risk occurs when there is insufficient cash or cash inflows to meet the cash outflows completely and timely. Liquidity risk may also occur when the market penetration is not adequate, when the open positions cannot be closed quickly at suitable prices and sufficient amounts due to barriers and break-ups at the markets. The Group’s policy is to establish an asset structure that can meet all kinds of liabilities by liquid sources at all times. In this context, liquidity problem has not been faced in any period. In order to maintain this, the Board of Directors of the Parent Bank continuously determines standards for the liquidity ratios, and monitors them. According to the general policies of the Group, the matching of the maturity and interest rate structure of assets, and liabilities is always established within the asset liability management strategies. A positive difference is tried to be established between the yields of TRY and foreign currency assets and liabilities on the balance sheet and their costs. According to this strategy, the Parent Bank manages its maturity risk within the limits determined by Parent Bank’s Board of Directors. When the funding and liquidity sources are considered, the Parent Bank covers majority of its liquidity need by deposits, and in addition to this source, it makes use of pre-financing and syndication products to generate additional sources. Generally the Parent Bank is in a lender position. The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Group. The most important of these is to maintain limits on the ratio of the Parent Bank’s net liquid assets to customer liabilities, set to reflect market conditions. The ratio realized during the year were as follows:

Current Period %

Prior Period %

Average during the period 20 29 Highest 27 39 Lowest 16 20

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

44

VII. Explanations Related to Consolidated Liquidity Risk (continued) Presentation of assets and liabilities according to their remaining maturities: Current Period

Demand

Up to 1 Month 1-3 Months

3-12 Months

1-5 Years

Over 5 Years

Undistributed (*)

Total

Assets

Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased, Precious Metals) and Balances with the Central Bank of Turkey

965,010

1,062,286

-

-

-

-

-

2,027,296 Banks 214,662 702,082 98,323 - 7,758 - - 1,022,825

Financial Assets at Fair Value Through Profit and Loss

-

67,743

22,651

95,973

23,057

6,764

-

216,188

Money Market Placements - 238 - - - - - 238 Available-For-Sale Financial Assets 19,405 50,344 397 602,301 1,944,524 898,035 - 3,515,006 Loans(**) 50,921 5,342,990 927,701 1,839,966 3,951,371 639,156 127,409 12,879,514 Factoring Receivables - 343,666 94,842 162,566 - - 1,245 602,319 Financial Lease Receivables - - - - - - - - Held-To-Maturity Investments - 106,040 - 305 128,674 - - 235,019 Other Assets 3,980 450,311 521 10,090 1,091 9 208,812 674,814

Total Assets 1,253,978 8,125,700 1,144,435 2,711,201 6,056,475 1,543,964 337,466 21,173,219 Liabilities

Bank Deposits 163,107 1,376,856 8,133 3,166 - - - 1,551,262 Other Deposits 2,779,665 7,309,304 1,209,383 231,778 82,479 - - 11,612,609 Funds Provided From Other Financial Institutions - 791,364 1,596,855 1,808,281 131,250 546,780 - 4,874,530 Money Market Borrowings - 86,665 - - - - - 86,665 Marketable Securities Issued - - - - - - - - Factoring Payables - - - - - - - - Sundry Creditors 3,058 340,294 23 15 15 - - 343,405 Other Liabilities - 351,779 12,520 106,018 47,751 30,290 2,156,390 2,704,748

Total Liabilities 2,945,830 10,256,262 2,826,914 2,149,258 261,495 577,070 2,156,390 21,173,219 Liquidity Gap (1,691,852) (2,130,562) (1,682,479) 561,943 5,794,980 966,894 (1,818,924) - Prior Period Total Assets 724,874 6,936,359 1,242,619 3,148,025 3,955,483 563,136 468,679 17,039,175 Total Liabilities 2,744,692 8,580,381 1,587,261 1,082,347 474,446 591,659 1,978,389 17,039,175 Liquidity Gap (2,019,818) (1,644,022) (344,642) 2,065,678 3,481,037 (28,523) (1,509,710) -

(*) The assets which are necessary to provide banking services and could not be liquidated in a short term, such as tangible assets,

investments in subsidiaries and associates, office supply inventory, prepaid expenses and non-performing loans, are classified as under undistributed.

(**) Loans with floating interest rates of the Parent Bank amounting to TRY 3,146,930 (December 31, 2009: TRY 2,311,525) are included in “Up to 1 Month” while mark to market differences from hedged loans amounting to TRY 33,648 (December 31, 2009: TRY 46,589) are included in “1-5 Years”.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

45

VII. Explanations Related to Consolidated Liquidity Risk (continued) Analysis of financial liabilities by remaining contractual maturities:

Demand Up to 1 Month

1-3 Months

3-12 Months

1-5 Years

Over 5 Years

Adjustments Total

As of December 31, 2010 Money market borrowings - 86,762 - - - - (97) 86,665 Other deposits 2,779,665 7,327,309 1,219,961 237,211 90,360 - (41,897) 11,612,609 Bank deposits 163,107 1,377,497 8,187 3,281 - - (810) 1,551,262 Funds provided from other financial institutions

-

797,907

1,612,066

1,874,121

254,614

578,936 (243,114)

4,874,530

Total 2,942,772 9,589,475 2,840,214 2,114,613 344,974 578,936 (285,918) 18,125,066

As of December 31, 2009 Money market borrowings - 1,073,776 - - - - (1,805) 1,071,971 Other deposits 2,389,653 6,094,914 1,282,478 221,423 123,388 - (45,153) 10,066,703 Bank deposits 97,638 133,625 60,256 5,270 - - (208) 296,581 Funds provided from other financial institutions

-

990,406

251,306

893,390

432,782

633,259 (257,169)

2,943,974

Total 2,487,291 8,292,721 1,594,040 1,120,083 556,170 633,259 (304,335) 14,379,229

Analysis of contractual expiry by maturity of the Group’s derivative financial instruments:

Up to 1 Month

1-3 Months

3-12 Months

1-5 Years

Over 5 Years

Total

As of December 31, 2010 Derivative financial instruments for hedging purposes

Fair value hedge 290 263 137,009 36,878 54,510 228,950

Held for trading transactions Foreign exchange forward contracts 389,104 274,816 302,643 7,571 - 974,134

Currency swaps 817,883 60,625 670,796 357,236 - 1,906,540 Interest rate swaps 63 9,828 8,658 43,179 5,055 66,783

Foreign currency futures-sell - 25,076 227,192 - - 252,268 Foreign currency options-sell 549,842 530,740 1,073,571 8,621 32,901 2,195,675 Total 1,757,182 901,348 2,419,869 453,485 92,466 5,624,350

As of December 31, 2009 Derivative financial instruments for hedging purposes Fair value hedge 53,145 1,428 129,455 166,432 62,240 412,700 Held for trading transactions

Foreign exchange forward contracts 352,364 211,116 206,776 43,965 - 814,221 Currency swaps 827,674 118,893 114,647 213,511 - 1,274,725 Interest rate swaps 248 6,740 5,912 34,101 - 47,001

Foreign currency futures-sell 136,586 55,898 55,898 - - 248,382 Foreign currency options-sell 516,327 340,034 293,463 - - 1,149,824 Total 1,886,344 734,109 806,151 458,009 62,240 3,946,853

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

46

VIII. Explanations Related to Presentation of Financial Assets and Liabilities at Fair Value The table below shows the book value and the fair value of the financial assets and liabilities which are not disclosed at their fair value in the financial statements of the Group. Current period investment securities are comprised of interest-bearing assets held-to-maturity and interest-bearing assets available-for-sale. The fair value of the held to maturity assets is determined by market prices or quoted market prices of other marketable securities which are subject to redemption with same characteristics in terms of interest, maturity and other similar conditions when market prices cannot be determined. The book value of demand deposits, money market placements with floating interest rate and overnight deposits represents their fair values due to their short-term nature. The estimated fair value of deposits and funds provided from other financial institutions with fixed interest rate is calculated by determining their cash flows discounted by the current interest rates used for other liabilities with similar characteristics and maturity structure. The fair value of loans is calculated by determining the cash flows discounted by the current interest rates used for receivables with similar characteristics and maturity structure. The book value of the sundry creditors reflect their fair values since they are short-term.

Book Value Fair Value Current Period Prior Period Current Period Prior PeriodFinancial Assets 17,652,602 14,656,800 17,800,946 14,500,199

Money Market Placements 238 704,464 238 704,464 Banks 1,022,825 724,003 1,022,825 724,003 Available-For-Sale Financial Assets 3,515,006 1,678,892 3,515,006 1,678,892Held-To-Maturity Investments 235,019 901,640 271,796 939,553 Loans (**) 12,879,514 10,647,801 12,991,081 10,453,287

Financial Liabilities 18,468,471 14,646,461 18,458,902 14,539,222Bank Deposits 1,551,262 296,581 1,550,402 296,581 Other Deposits 11,612,609 10,066,703 11,603,892 9,959,196 Funds Borrowed From Other Financial Institutions (*) 4,961,195 4,015,945 4,961,203 4,016,213 Marketable Securities Issued - - - -Sundry Creditors 343,405 267,232 343,405 267,232

(*) Funds provided under repo transactions and interbank money market takings are included in funds borrowed from other financial

institutions. (**) Factoring and lease receivables are included in the loans.

The fair values of financial assets and financial liabilities are determined as follows: • Level 1: The fair value of financial assets and financial liabilities with standard terms and conditions and

traded on active liquid markets are determined with reference to quoted market prices; • Level 2: The fair value of other financial assets and financial liabilities are determined in accordance with

inputs other than quoted prices included within Level 1, that are observable either directly or indirectly in the market.

• Level 3: The fair value of the financial assets and financial liabilities where there is no observable market

data.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

47

VIII. Explanations Related to Presentation of Financial Assets and Liabilities by Fair Value (continued)

The following table shows an analysis of financial instruments recorded at fair value, between those whose fair value is recorded on quoted market prices, those involving valuation techniques where all model inputs are observable in the market and, those where the valuation techniques involves the use of non observable inputs.

December 31, 2010 Level 1 Level 2 Level 3 Total Financial Assets Financial assets at fair value through profit and loss 112,664 103,524 - 216,188

Public sector debt securities 112,664 - - 112,664

Derivative financial assets held for trading - 103,524 - 103,524

Derivative financial assets for hedging purposes - 11,157 - 11,157 Available-for-sale financial assets 3,500,338 14,668 - 3,515,006

Public sector debt securities 3,489,407 - - 3,489,407

Other available-for-sale financial assets 10,931 14,668 - 25,599

Financial Liabilities Derivative financial liabilities held for trading 6,168 90,600 - 96,768 Derivative financial liabilities for hedging purposes - 56,547 - 56,547

December 31, 2009 Level 1 Level 2 Level 3 Total

Financial Assets Financial assets at fair value through profit and loss 138,147 61,876 - 200,023

Public sector debt securities 137,917 - - 137,917

Derivative financial assets held for trading 230 61,876 - 62,106

Derivative financial assets for hedging purposes - 31,330 - 31,330 Available-for-sale financial assets 1,676,803 2,089 - 1,678,892

Public sector debt securities 1,666,910 - - 1,666,910

Other available-for-sale financial assets 9,893 2,089 - 11,982

Financial Liabilities Derivative financial liabilities held for trading 14,549 43,440 - 57,989 Derivative financial liabilities for hedging purposes - 73,493 - 73,493

There is no transition between Level 1 and Level 2 in the current year.

IX. Explanations Related to Transactions Carried out on Behalf of Other Parties and

Fiduciary Assets The Group performs trading transactions on behalf of customers, and gives custody, administration and consultancy services. The Group does not deal with fiduciary transactions.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

48

SECTION FIVE

EXPLANATIONS AND DISCLOSURES ON CONSOLIDATED FINANCIAL STATEMENTS I. Explanations and Disclosures Related to the Consolidated Assets

1. a) Information on Cash and Balances with the Central Bank of Turkey:

Current Period Prior Period TRY FC TRY FC Cash in TRY/Foreign Currency 136,299 151,431 140,477 168,877 Balances with the Central Bank of Turkey 650,346 1,061,550 203,891 979,850 Other - 27,670 - 18,617 Total 786,645 1,240,651 344,368 1,167,344

b) Information related to the account of the Central Bank of Turkey:

Current Period Prior Period TRY FC TRY FC Unrestricted demand deposit 650,346 409,915 203,891 251,831 Unrestricted time deposit - 651,635 - 728,019 Restricted time deposit - - - - Total 650,346 1,061,550 203,891 979,850

TRY 1,061,550 (December 31, 2009: TRY 979,850) foreign currency and TRY 650,287 (December 31, 2009: TRY 203,796) domestic currency unrestricted demand deposit balance comprises of reserve deposits. Unrestricted TRY deposit balance also includes average reserve deposit held in Central Bank. According to the Communique 2010/9 about change in “Required Reserve Ratios” published in the Official Gazette No. 27708 dated September 23, 2010; the interest rates applied for reserve deposits are raised to 6% from 5% for TRY deposits and to 11% from 10% for FC deposits and interest payment to TRY deposits is terminated effective from October 1, 2010 (December 31, 2009 – TRY 5.20%). Reserve deposit rates for TRY liabilities vary from 5% to 12% depending on maturities of liabilities for the reserve deposit calculations commencing on February 4, 2011. 2. Information on financial assets at fair value through profit and loss (net):

a.1) Information on financial assets at fair value through profit and loss given as collateral or blocked: None (December 31, 2009 – None).

a.2) Financial assets at fair value through profit and loss subject to repurchase agreements: None (December

31, 2009 – None). Net book value of unrestricted financial assets at fair value through profit and loss is TRY 112,664 (December 31, 2009 – TRY 137,917).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

49

I. Explanations and Disclosures Related to the Consolidated Assets (continued)

2. Information on financial assets at fair value through profit and loss (net): (continued) a.3) Positive differences related to derivative financial assets held-for-trading:

Current Period Prior Period

TRY FC TRY FC Forward Transactions 5,286 6,574 15,696 14,195 Swap Transactions 39,381 7,758 18,899 1,739 Futures Transactions - - - - Options 36,318 8,207 8,374 2,973 Other - - 230 - Total 80,985 22,539 43,199 18,907

3. a) Information on banks: Current Period Prior Period TRY FC TRY FCBanks Domestic 342,535 93,364 37,534 241,727 Foreign 164,914 422,012 134,298 310,444 Branches and head office abroad - - - - Total 507,449 515,376 171,832 552,171

b) Information on foreign bank accounts: Unrestricted Amount Restricted Amount Current Period Prior Period Current Period Prior PeriodEuropean Union Countries 354,995 238,427 - 31,707USA and Canada 63,717 44,714 - -OECD Countries(*) 5,794 4,653 - -Off-shore banking regions 162,143 124,316 - -Other 277 925 - -Total 586,926 413,035 - 31,707 (*) OECD countries other than European Union countries, USA and Canada.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

50

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 4. Information on financial assets available-for-sale:

a.1) Information on financial assets available-for-sale given as collateral or blocked:

Current Period Prior Period TRY FC TRY FC Share certificates - - - - Bond, Treasury bill and similar investment securities 243,848 125,062 124,704 40,373 Other - - - - Total 243,848 125,062 124,704 40,373

a.2) Financial assets available-for-sale subject to repurchase agreements:

Current Period Prior Period TRY FC TRY FC Government bonds - - 526,855 - Treasury bills - - - - Other public sector debt securities - - - - Bank bonds and bank guaranteed bonds - - - - Asset backed securities - - - - Other - - - - Total - - 526,855 -

Net book value of unrestricted financial assets available-for-sale is TRY 3,146,096 (December 31, 2009 – TRY 986,960).

b) Information on financial assets available for sale portfolio:

Current Period Prior Period Debt securities 3,501,207 1,674,868

Quoted on a stock exchange 3,501,207 1,674,868 Not quoted - -

Share certificates 19,405 4,604Quoted on a stock exchange 4,737 2,515 Not quoted (*) (**) 14,668 2,089

Impairment provision(-) (5,606) (580) Total 3,515,006 1,678,892 (*) In the Board of Directors meeting held on September 23, 2009, the Parent Bank decided to participate in the revised capital structure

of Kredi Garanti Fonu A.Ş. including TOBB (Turkish Union of Chambers and Exchange Commodities), KOSGEB (Presidency of Development and Support of Small and Medium-sized Enterprises Administration) and the banks by TRY 4,000. Upon this decision related to the capital increase of Kredi Garanti Fonu A.Ş. on September 11, 2009, the Parent Bank paid TRY 2,000 of its capital commitment of TRY 4,000 on October 14, 2009.

(**) After the sale of the Parent Bank’s 90.01% shares in TEB Finansal Kiralama A.Ş as disclosed in detail in Note 8; the remaining

9.99% shares are presented as available-for-sale financial assets and accounted for at fair value in accordance with TAS 39. The related amount is TRY 12,594.

All unquoted available for sale equities are recorded at fair value except for the Group’s investment of TRY 2,074 which is recorded at cost since its fair value cannot be reliably estimated (December 31, 2009 – TRY 2,089).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

51

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 5. Information on loans:

a) Information on all types of loans and advances given to shareholders and employees of the Bank: Current Period Prior Period

Cash Loans

Non-Cash Loans

Cash Loans

Non-Cash Loans

Direct loans granted to shareholders 24,509 40,782 1,603 46,004 Corporate shareholders 24,102 40,773 1,603 46,004 Real person shareholders 407 9 - -

Indirect loans granted to shareholders - - - -Loans granted to employees 22,893 - 2,842 -Total 47,402 40,782 4,445 46,004 b) Information on the first and second group loans and other receivables including restructured or

rescheduled loans:

Standard Loans and Other Receivables

Loans and Other Receivables Under Close Monitoring (*)

Cash Loans

Loans and Other Receivables

Restructured or Rescheduled

Loans and Other Receivables

Restructured or Rescheduled

Non-specialized loans 12,257,926 - 364,916 129,263

Discount notes 178,900 - 5,238 -Export loans 1,098,124 - 37,076 -Import loans - - - -Loans given to financial sector 657,634 - - -Foreign loans 762,373 - 11,913 154

Consumer loans(**) 2,509,681 - 84,377 2,957

Credit cards 537,269 - 28,478 4,162

Precious metal loans 346,286 - 18,278 -

Other 6,167,659 - 179,556 121,990

Specialized loans - - - -

Other receivables - - - -

Total 12,257,926 - 364,916 129,263 (*) The total principal amount of the loans under close monitoring in accordance with the requirements of the regulation on “Methods and

Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” amended on February 6, 2008.

(**) TRY 33,648 income accrual resulting from the fair value difference of the hedged item loans is included in the loan balance.

c) Loans according to their maturity structure:

Standard Loans and Other Receivables

Loans and Other Receivables Under Close Monitoring

Cash Loans

Loans and Other Receivables

Restructured or Rescheduled

Loans and Other Receivables

Restructured or Rescheduled

Short-term loans and other receivables 7,198,086 - 206,234 13,539

Non-specialized loans 7,198,086 - 206,234 13,539Specialized loans - - - -Other receivables - - - -

Medium and long-term loans and other receivables 5,059,840 - 158,682 115,724

Non-specialized loans 5,059,840 - 158,682 115,724Specialized loans - - - -Other receivables - - - -

Total 12,257,926 - 364,916 129,263

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

52

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 5. Information on loans: (continued)

d) Information on consumer loans, individual credit cards, personnel loans and credit cards given to

personnel:

Short Term

Medium and Long Term Total

Consumer Loans-TRY 118,245 2,332,787 2,451,032Housing Loans 1,779 1,104,562 1,106,341Vehicle Loans 5,798 221,921 227,719General Purpose Loans 110,668 1,006,304 1,116,972Other - - -

Consumer Loans –Indexed to FC - 35,901 35,901Housing Loans - 27,552 27,552Vehicle Loans - 6,847 6,847General Purpose Loans - 1,502 1,502Other - - -

Consumer Loans-FC (**) 21,660 9,928 31,588Housing Loans - 1,483 1,483Vehicle Loans - 5,361 5,361General Purpose Loans 21,660 3,084 24,744Other - - -

Individual Credit Cards-TRY 476,497 - 476,497With Installments 298,423 - 298,423Without Installments 178,074 - 178,074

Individual Credit Cards-FC 3,362 - 3,362With Installments - - -Without Installments 3,362 - 3,362

Personnel Loans-TRY 2,814 9,301 12,115Housing Loans - - -Vehicle Loans - - -General Purpose Loans 2,814 9,301 12,115Other - - -

Personnel Loans- Indexed to FC - - -Housing Loans - - -Vehicle Loans - - -General Purpose Loans - - -Other - - -

Personnel Loans-FC - - -Housing Loans - - -Vehicle Loans - - -General Purpose Loans - - -Other - - -

Personnel Credit Cards-TRY 9,590 - 9,590With Installments 6,152 - 6,152Without Installments 3,438 - 3,438

Personnel Credit Cards-FC 108 - 108With Installments - - -Without Installments 108 - 108

Overdraft Accounts-TRY(Real Persons) (*) 66,328 - 66,328Overdraft Accounts-FC(Real Persons) 51 - 51Total 698,655 2,387,917 3,086,572

(*) Overdraft accounts include personnel loans amounting to TRY 1,080. (**) Loans granted via branches abroad and TEB N.V.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

53

I. Explanations and Disclosures Related to the Consolidated Assets (continued)

5. Information on loans: (continued) e) Information on commercial loans with installments and corporate credit cards:

Short Term

Medium and Long Term Total

Commercial loans with installment facility-TRY 125,250 1,266,131 1,391,381Business Loans 106 68,716 68,822Vehicle Loans 16,264 317,258 333,522General Purpose Loans 108,880 880,157 989,037Other - - -

Commercial loans with installment facility - Indexed to FC 12,789 180,885 193,674Business Loans - 5,171 5,171Vehicle Loans 2,154 76,301 78,455General Purpose Loans 10,635 99,413 110,048Other - - -

Commercial loans with installment facility –FC 14,169 - 14,169Business Loans - - -Vehicle Loans 40 - 40General Purpose Loans 14,129 - 14,129 Other - - 14,169

Corporate Credit Cards-TRY 79,468 - 79,468With Installments 20,225 - 20,225Without Installments 59,243 - 59,243

Corporate Credit Cards-FC 884 - 884With Installments - - -Without Installments 884 - 884

Overdraft Accounts-TRY(Legal Entities) 146,657 - 146,657Overdraft Accounts-FC(Legal Entities) 1,397 - 1,397Total 380,614 1,447,016 1,827,630

f) Loans according to borrowers:

Current Period Prior PeriodPublic 34,738 21,373 Private 12,717,367 9,655,714 Total 12,752,105 9,677,087

g) Domestic and foreign loans:

Current Period Prior PeriodDomestic loans 11,942,515 9,317,509 Foreign loans 809,590 359,578 Total 12,752,105 9,677,087

h) Loans granted to subsidiaries and associates:

Eliminated in consolidated financial statements. i) Specific provisions provided against loans:

Current Period Prior PeriodSpecific provisions

Loans and receivables with limited collectibility 4,833 12,288 Loans and receivables with doubtful collectability 21,608 53,327 Uncollectible loans and receivables 221,624 181,406

Total 248,065 247,021

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

54

I. Explanations and Disclosures Related to the Consolidated Assets (continued)

5. Information on loans: (continued)

j) Information on non-performing loans: (Net):

j.1) Information on loans and other receivables included in non-performing loans which are restructured or reschedule

There are no loans or other receivables included in non-performing loans which are restructured or rescheduled by the group (December 31, 2009 – None).

j.2) The movement of non-performing loans:

III. Group IV. Group V. Group Loans and

receivables with limited

collectibility

Loans and receivables

with doubtful collectibility

Uncollectible

loans and receivables

Prior period end balance 81,297 127,242 227,127

Additions (+) 187,040 1,439 10,657 Transfers from other categories of non-performing loans (+) - 208,495 232,564 Transfers to other categories of non-performing loans (-) 208,495 232,564 - Collections (-) 25,582 44,465 74,048 Write-offs (-) (*) 57 33 115,143

Corporate and commercial loans - - 72,036 Retail loans 53 27 10,881 Credit cards 4 6 32,226 Other - - -

Current period end balance 34,203 60,114 281,157 Specific provision (-) 4,833 21,608 221,624

Net Balances on Balance Sheet 29,370 38,506 59,533

(*) TRY 39,957 of the non-performing loans portfolio of the Parent Bank with TRY 39,321 provision has been sold to Standart

Varlık A.Ş. for TRY 4,125. This balance has been collected as of March 31, 2010 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

TRY 75,008 of the non-performing loans portfolio of the Parent Bank with TRY 75,008 provision has been sold to LBT Varlık Yönetim A.Ş. for TRY 6,500. This balance has been collected as of June 28, 2010 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

j.3) Information on foreign currency non-performing loans and other receivables:

III. Group IV. Group V. Group Loans and

receivables with limited

collectibility

Loans and receivables

with doubtful collectibility

Uncollectible

loans and receivables

Current Period : Current period end balance - - 15,399

Specific provision (-) - - 10,812Net Balance on Balance Sheet - - 4,587Prior Period : Prior period end balance - 7,675 -

Specific provision (-) - 7,182 -Net Balance on Balance Sheet - 493 -

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

55

I. Explanations and Disclosures Related to the Consolidated Assets (continued)

5. Information on loans: (continued)

j.4) Information regarding gross and net amounts of non-performing loans with respect to user groups:

III. Group IV. Group V. Group

Loans and receivables with

limited collectibility

Loans and receivables with

doubtful collectibility

Uncollectible loans and

receivables

Current Period (Net)

Loans to Real Persons and Legal Entities (Gross) 34,203 60,114 281,157

Specific provision (-) 4,833 21,608 221,624

Loans to Real Persons and Legal Entities (Net) 29,370 38,506 59,533

Banks (Gross) - - -

Specific provision (-) - - -

Banks (Net) - - -

Other Loans and Receivables (Gross) - - -

Specific provision (-) - - -

Other Loans and Receivables (Net) - - -

Prior Period (Net)

Loans to Real Persons and Legal Entities (Gross) 81,297 127,242 227,127

Specific provision (-) 12,288 53,327 181,406

Loans to Real Persons and Legal Entities (Net) 69,009 73,915 45,721

Banks (Gross) - - -

Specific provision (-) - - -

Banks (Net) - - -

Other Loans and Receivables (Gross) - - -

Specific provision (-) - - -

Other Loans and Receivables (Net) - - -

k) Main principles of liquidating non performing loans and receivables:

According to the “Methods and Principles for the Determination of Loans and Other Receivables to be Reserved for and Allocation of Reserves” published on Official Gazette No. 26333 dated November 1, 2006; loans and other receivables for which the collection is believed to be impossible are classified as non performing loans by complying with the requirements of the Tax Procedural Law in accordance with the decision of the upper management of the Parent Bank.

l) Explanation related to write-off policy:

Unrecoverable non performing loans can be written off with the decision of the Board of Directors.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

56

I. Explanations and Disclosures Related to the Consolidated Assets (continued)

5. Information on loans: (continued)

m) Other explanations and disclosures:

Current Period Commercial Consumer Credit Cards Total Neither past due nor impaired 9,187,757 2,514,540 504,616 12,206,913 Past due not impaired 397,041 82,858 65,293 545,192 Individually impaired 299,641 21,706 54,127 375,474 Total gross 9,884,439 2,619,104 624,036 13,127,579

Less: allowance for individually impaired loans 190,679 12,721 44,665 248,065 Total allowance for impairment 190,679 12,721 44,665 248,065 Total net 9,693,760 2,606,383 579,371 12,879,514

Prior Period Commercial Consumer Credit Cards Total Neither past due nor impaired 7,047,749 1,707,757 413,164 9,168,670 Past due not impaired 379,309 61,415 67,693 508,417 Individually impaired 321,411 34,416 79,839 435,666 Total gross 7,748,469 1,803,588 560,696 10,112,753

Less: allowance for individually impaired loans

158,418 33,985 54,618 247,021

Total allowance for impairment 158,418 33,985 54,618 247,021 Total net 7,590,051 1,769,603 506,078 9,865,732

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

57

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 5. Information on loans: (continued)

m) Other explanations and disclosures: (continued) A reconciliation of the allowance for impairment losses and advances by classes is as follows;

Commercial Consumer Credit Cards Total

At January 1, 2010 158,418 33,985 54,618 247,021

Charge for the year 140,838 (4,282) 36,831 173,387

Recoveries (36,468) (6,708) (14,672) (57,848) Amounts written off (*) (71,943) (10,274) (32,112) (114,329)

Exchange differences (166) - - (166)

At December 31, 2010 190,679 12,721 44,665 248,065

Commercial Consumer Credit Cards Total

At January 1, 2009 75,278 12,108 23,303 110,689 Charge for the year 115,060 33,310 65,606 213,976 Recoveries (31,931) (6,490) (10,020) (48,441) Amounts written off(**) - (4,943) (24,271) (29,214) Exchange differences 11 - - 11

At December 31, 2009 158,418 33,985 54,618 247,021

(*) TRY 39,957 of the non-performing loans portfolio of the Parent Bank with TRY 39,321 provision has been sold to Standart Varlık

A.Ş. for TRY 4,125. This balance has been collected as of March 31, 2010 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

TRY 75,008 of the non-performing loans portfolio of the Parent Bank with TRY 75,008 provision has been sold to LBT Varlık

Yönetim A.Ş. for TRY 6,500. This balance has been collected as of June 28, 2010 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

(**) TRY 29,530 of the non-performing loans portfolio of the Parent Bank with TRY 29,214 provision has been sold to LBT Varlık

Yönetim A.Ş. for TRY 1,950. This balance has been collected as of November 9, 2009 with the completion of the necessary procedures, and the related non-performing loans have been written off from the records.

The fair value of collaterals, capped with the respective outstanding loan balance, that the Parent Bank holds relating to loans individually determined to be impaired at December 31, 2010 is TRY 120,349 (December 31, 2009: TRY 126,773). The fair value of collaterals, capped with the respective outstanding loan balance relating to loans individually determined to be impaired:

Current Period Prior Period Mortgage 97,707 100,297Vehicle 15,820 24,951Cash 7 31Other 6,815 1,494Total 120,349 126,773

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

58

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 5. Information on loans: (continued)

m) Other explanations and disclosures: (continued) Collaterals and credit enhancement obtained by the Group during the year:

December 31, 2010 Commercial Consumer Total Residential, commercial or industrial property 30,550 2,988 33,538 Financial assets - - -

Other 444 - 444

Total 30,994 2,988 33,982

December 31, 2009 Commercial Consumer Total

Residential, commercial or industrial property 18,963 1,339 20,302 Financial assets - - - Other 22 17 39

Total 18,985 1,356 20,341

Aging analysis of past due but not impaired loans per classes of financial statements:

December 31, 2010

Less than 30 days

31-60 days

61-90 days

More than 91 days

Total

Loans and receivables

Commercial lending 292,236 64,185 40,620 - 397,041

Consumer lending 35,662 36,151 11,045 - 82,858

Credit cards 59,836 412 5,045 - 65,293

Total 387,734 100,748 56,710 - 545,192

December 31, 2009

Less than 30 days

31-60 days

61-90 days

More than 91 days

Total

Loans and receivables

Commercial lending 235,336 76,283 67,690 - 379,309

Consumer lending 7,825 41,900 11,690 - 61,415

Credit cards 67,580 106 7 - 67,693

Total 310,741 118,289 79,387 - 508,417

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

59

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 5. Information on loans: (continued) m) Other explanations and disclosures: (continued) Of the total aggregate amount of gross past due but not yet impaired loans and advances to customers, the fair value of collaterals, capped with the respective outstanding total past due and not past due loan balances of the customer, that the Group held as at December 31, 2010 is TRY 209,674 (December 31, 2009: TRY 311,296). The fair value of collaterals, capped with the respective outstanding loan balance relating to those that are past due but not impaired:

Current Period Prior Period Mortgage 167,528 245,548Vehicle 24,017 41,852Cash 2,134 2,417Other 15,995 21,479Total 209,674 311,296 Loans and receivables amounting to TRY 3,612,208 have floating interest rates (December 31, 2009 – TRY 2,486,750) and the remaining TRY 9,139,897 have fixed interest rates (December 31, 2009 – TRY 7,190,337).

6. Information on held-to-maturity investments : a.1) Information on held to maturity debt securities:

Current Period Prior PeriodGovernment bonds 235,019 882,324 Treasury bills - 1,999 Other public sector debt securities - 17,317 Total 235,019 901,640

a.2) Information on held to maturity investments:

Current Period Prior PeriodDebt securities

Quoted on a stock exchange 235,019 901,640 Unquoted - -

Impairment provision(-) - - Total 235,019 901,640

a.3) Information on held-to-maturity investments given as collateral or blocked:

Current Period Prior Period TRY FC TRY FC Share Certificates - - - - Bond, Treasury bill and similar securities 68,245 - 187,395 - Other - - - - Total 68,245 - 187,395 -

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

60

I. Explanations and Disclosures Related to the Consolidated Assets (continued)

6. Information on held-to-maturity investments: (continued)

a.4) Held-to-maturity investments subject to repurchase agreements:

Current Period Prior Period TRY FC TRY FC Government bonds 70,042 - 560,365 - Treasury bills - - - - Other public sector debt securities - - - - Bank bonds and bank guaranteed bonds - - - - Asset backed securities - - - - Other - - - - Total 70,042 - 560,365 -

Net book value of unrestricted financial assets held-to-maturity is TRY 96,732 (December 31, 2009 –

TRY 153,880).

b) Movement of held-to-maturity investments:

Current Period Prior Period Beginning balance 901,640 818,811 Foreign currency differences on monetary assets 293 (183) Purchases during year(*) 9,954 97,111Disposals through sales and redemptions (676,868) -Impairment provision (-) - -Change in income on redeemed cost adjustments - (14,099) Closing Balance 235,019 901,640

(*) Accruals are included in purchases during the year.

7. Information on associates (Net):

a.1) Information on the unconsolidated associates: None (December 31, 2009 – None).

b.1) Information on the consolidated associates: None (December 31, 2009 – None). b.2) Valuation of consolidated associates: None (December 31, 2009 – None). b.3) Consolidated associates which are quoted on the stock exchange: None (December 31, 2009 –

None).

8. Information on subsidiaries (Net): a) Information on the unconsolidated subsidiaries: None (December 31, 2009 – None).

b) Information on the consolidated subsidiaries:

b.1) Information on the consolidated subsidiaries:

Description Address

(City/ Country) Bank’s share percentage-If

different voting percentage(%) Other shareholders’

share percentage (%) The Economy Bank N.V. Netherlands 100.00 - TEB Faktoring A.Ş. İstanbul/Turkey 100.00 - TEB Yatırım Menkul Değerler A.Ş. İstanbul/Turkey 92.48 7.52 TEB Portföy Yönetimi A.Ş. İstanbul/Turkey 46.77 53.23

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

61

I. Explanations and Disclosures Related to the Consolidated Assets (continued)

8. Information on subsidiaries (Net): (continued)

Information on the consolidated subsidiaries with the order as presented in the table above:

Total Assets

Shareholders’ Equity

Total Fixed Assets

Interest Income

Income from Marketable

Securities Portfolio

Current Period

Profit / Loss

Prior Period Profit / Loss

(*)

Fair

Value (i) 1,504,699 188,909 8,155 56,760 3,649 15,771 14,351 -

(ii) 783,083 25,422 1,391 47,748 - 8,355 7,616 - (ii) 54,412 37,901 1,747 4,077 - 9,603 8,164 - (ii) 14,790 13,210 554 930 429 4,309 5,312 -

(*) Represents the amounts in the financial statements as of December 31, 2009.

(i) Represents financial figures of foreign currency statutory financial statements translated at period end foreign exchange rates for balance sheet and twelve months’ average rates for profit and loss as of December 31, 2010. The Economy Bank NV has two consolidated subsidiaries named Stichting Effecten Dienstverlening and Kronenburg Vastgoed B.V.

(ii) Represents financial figures based on BRSA regulations as of December 31, 2010.

b.2) Information on consolidated subsidiaries:

Current Period Prior Period Balance at the beginning of the period 165,912 165,910 Movements during the period (40,203) 2

Purchases - - Bonus shares obtained - - Share in current year income - - Sales (*) (40,190) - Revaluation increase - 2 Provision for impairment (13) -

Balance at the end of the period 125,709 165,912 Capital commitments - - Share percentage at the end of the period (%) - -

(*) The Parent Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345. The sale amount was received after the completion of the necessary procedures as of September 30, 2010. The profit amounting to TRY 18,244 resulting from this sale is presented under the “Income on Discontinued Operations” in the current year income statement. The remaining 9.99% shares are classified as “Financial Assets Available for Sale”.

b.3) Sectoral information on the consolidated subsidiaries and the related carrying amounts:

Current Period Prior Period Banks / The Economy Bank N.V. 61,254 61,254 Leasing Companies / TEB Finansal Kiralama A.Ş (***) - 40,190 Factoring Companies / TEB Faktoring A.Ş. 24,037 24,037 Other Financial Subsidiaries / TEB Yatırım Menkul Değerler A.Ş. (**) 34,770 34,770 TEB Portföy Yönetimi A.Ş. 5,354 5,354 Stichting Effecten Dienstverlening (*) 257 268 Kronenburg Vastgoed B.V. (*) 37 39 Total 125,709 165,912 (*) Fully consolidated toThe Economy Bank NV.

(**) The Parent Bank has transferred 17.54% of the shares of TEB Finansal Kiralama A.Ş. in TEB Yatırım Menkul Değerler A.Ş. amounting to TRY 2,271 in exchange for TRY 5,959 and payment for the related transfer was made after the completion of required procedures as at September 29, 2010.

(***) The Parent Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345. The sale amount was received after the completion of the necessary procedures as of September 30, 2010. The profit amounting to TRY 18,244 resulting from this sale is presented under the “Income on Discontinued Operations” in the current year income statement. The remaining 9.99% shares are classified as “Financial Assets Available for Sale”.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

62

I. Explanations and Disclosures Related to the Consolidated Assets (continued)

8. Information on subsidiaries (Net): (continued)

The carrying amounts of the subsidiaries above have been eliminated in the consolidated financial statements.

b.4) Consolidated subsidiaries quoted on the stock exchange: None (December 31, 2009 – None). 9. Information on entities under common control (Joint Vent.):

Description

Address (City/ Country)

Bank’s share percentage-If different voting percentage(%)

Other shareholders’ share percentage (%)

Bantaş Nakit ve Kıymetli Mal Taşıma ve Güvenlik Hizmetleri A.Ş. (*)

İstanbul/Türkiye

0.1

33.3

(*) In the Extraordinary General Assembly held on July 23, 2010, it was decided to increase the paid in capital by TRY 6,000 and the Parent Bank paid its share amounting to TRY 4 on August 2, 2010.

10. Information on finance lease receivables (Net): a) Maturity Analysis:

Current Period Prior Period Gross Net Gross NetLess than 1 year - - 230,115 195,102 Between 1-4 years - - 215,413 187,146 Over 4 years - - 36,041 34,822 Specific provisions - - (9,901) (9,901) Total - - 471,668 407,169

b) Other explanations and disclosures:

The Parent Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345 as of September 30, 2010.

December 31, 2009 Commercial Consumer Total

Neither past due nor impaired

303,605 - 303,605

Past due not impaired 91,218 - 91,218 Individually impaired 22,247 - 22,247 Total gross 417,070 - 417,070

Less: allowance for individually impaired loans

9,901 - 9,901 Total allowance for impairment 9,901 - 9,901 Total net 407,169 - 407,169

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

63

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 10. Information on finance lease receivables (Net): (continued)

b) Other explanations and disclosures: (continued)

A reconciliation of the allowance for impairment losses and advances by classes is as follows; The Parent Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345 as of September 30, 2010.

Commercial Consumer Total At January 1, 2009 5,015 - 5,015 Charge for the year 17,359 - 17,359

Recoveries (4,421) - (4,421)

Amounts written off (8,052) - (8,052)

At December 31, 2009 9,901 - 9,901

Aging analysis of past due but not impaired loans per classes of financial statements:

December 31, 2009

Less than 30 days

31-60 days

61-90 days

More than 91 days

Total

Loans and receivables

Commercial lending 38,199 28,110 12,061 12,848 91,218

Consumer lending - - - - -

Total 38,199 28,110 12,061 12,848 91,218

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

64

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 11. Information on derivative financial assets for hedging purposes:

Current Period Prior Period TRY FC TRY FC Fair value hedge 11,114 43 30,976 354 Cash flow hedge - - - - Hedge of net investment in foreign operations - - - - Total 11,114 43 30,976 354

12. Information on tangible assets:

Opening

Balance December 31,

2009

Additions

Disposals

Other

Effect of the

Sale of the Subsidiary

Ending Balance

December 31, 2010

Cost: Land and Buildings 18,336 - - (356) - 17,980 Leased Tangible Assets 52,426 - (844) (2,966) - 48,616 Other Total Cost

263,642 334,404

20,537 20,537

(3,865) (4,709)

2,800 (522)

(857) (857)

282,257 348,853

Opening

Balance December 31,

2009

Period Charge

Disposals

Other

Effect of the

Sale of the Subsidiary

Ending Balance

December 31, 2010

Accumulated Depreciation: Land and buildings (4,778) (340) - 46 - (5,072) Leased tangible assets (41,219) (5,882) 843 2,966 - (43,292) Other (144,563) (39,941) 3,824 (2,804) 563 (182,921)

Total Accumulated Depreciation (190,560) (46,163) 4,667 208 563 (231,285)

Net Book Value 143,844 (25,626) (42) (314) (294) 117,568

a) The impairment provision set or cancelled in the current period according to the asset groups not individually significant but materially affecting the overall financial statements, and the reason and conditions for this: None

b) Pledges, mortgages and other restrictions on the tangible fixed assets, expenses arising from the construction for tangible fixed assets, commitments given for the purchases of tangible fixed assets: None.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

65

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 13. Information on intangible assets:

Opening BalanceDecember 31, 2009 Additions Disposals Other

Effect of the Sale of the Subsidiary

Ending BalanceDecember 31, 2010

Cost: Other intangible assets 44,176 7,649 - 849 (2,439) 50,235

Total Cost 44,176 7,649 - 849 (2,439) 50,235

Opening BalanceDecember 31, 2009

Period Charge Disposals Other

Effect of the Sale of the Subsidiary

Ending BalanceDecember 31, 2010

Accumulated Amortization: Other intangible assets (28,693) (7,590) - (905) 894 (36,294)

Total Accumulated Amortization (28,693) (7,590) - (905) 894 (36,294)

Net Book Value 15,483 59 - (56) (1,545) 13,941

a) Disclosures for book value, description and remaining useful life for a specific intangible fixed asset that

is material to the financial statements: None.

b) Disclosure for intangible fixed assets acquired through government grants and accounted for at fair value at initial recognition: None.

c) The method of subsequent measurement for intangible fixed assets that are acquired through government incentives and recorded at fair vale at the initial recognition: None.

d) The book value of intangible fixed assets that are pledged or restricted for use: None.

e) Amount of purchase commitments for intangible fixed assets: None.

f) Information on revalued intangible assets according to their types: None.

g) Amount of total research and development expenses recorded in income statement within the period if any: None.

h) Positive or negative consolidation goodwill on entity basis: There is a positive goodwill of TRY 1,205 (December 31, 2009 – TRY 1,205) arising from the purchase of TEB Portföy by TEB Yatırım on February 27, 2005.

i) Movements on goodwill in the current period:

Current Period Prior PeriodGross value at the beginning of the period 1,685 1,685

Accumulated depreciation (-) 480 480Impairment provision (-) - -

Movements within the period : - -Additional goodwill - -Corrections arising from the changes in value of assets and liabilities - -Goodwill written off due to discontinued operations in current period or complete /partial sale of an asset (-) - -Amortization (-) - -Impairment provision (-) - -Reversal of impairment provision (-) - -Other differences occurred in the book value - -

Gross value at the end of the period 1,685 1,685Accumulated amortization (-) 480 480Impairment provision (-) - -

Net book value at the end of the period 1,205 1,205

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

66

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 14. Information on investment property: None (December 31, 2009 – None). 15. Explanations on deferred tax asset:

a) As of December 31, 2010, deferred tax asset computed on the temporary differences and reflected to the balance sheet is TRY 17,633 (December 31, 2009 – TRY 50,058). There are no tax exemptions or deductions over which deferred tax asset is computed.

b) Temporary differences over which deferred tax asset is not computed and recorded in the balance sheet in

prior periods: None. c) Allowance for deferred tax and deferred tax assets from reversal of allowance: None.

d) Movement of deferred tax:

Current Period Prior Period At January 1 50,058 18,762 Effect of change in tax rate (43) 2 Other 144 589 Effect of the sale of the subsidiary (43,230) - Deferred tax (charge)/benefit 25,943 34,903 Deferred tax accounted for under equity (15,239) (4,198) Deferred Tax Asset 17,633 50,058

Current Period Prior Period At January 1 (Deferred Tax Liability) - (9) Effect of change in tax rate - - Deferred tax (charge)/benefit - 9 Deferred tax (charge)/benefit (Net) - 9 Deferred tax accounted for under equity - - Deferred Tax Liability - -

16. Information on assets held for sale and discontinued operations : None (December 31, 2009: None). 17. Information on other assets:

a) Breakdown of other assets:

Current Period Prior Period Clearing Account 143,243 112,330 Receivables From Securities Transactions 46,651 23,365 Leasing Contracts in Progress - 930 Collateral Given for Derivative Financial Assets 65,797 31,743 Advances Given 21 3,424 Transaction Costs Related to Financial Liabilities 4,794 7,296 Prepaid Rents 5,162 4,515 Prepaid Insurance Premiums 161 99 Other Prepaid Expenses 13,241 18,944 Receivables from Credit Cards Payments 146,994 162,685 Temporary EFT Account 36,456 30,668 Assets Held for Resale (Net) (*) 33,982 20,341 Other 18,008 13,584 Total 514,510 429,924

(*) As of December 31, 2010 there is a provision for impairment loss amounting to TRY 3,380 for real estates held for resale as

per the appraisals (December 31, 2009 – TRY 2,608).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

67

I. Explanations and Disclosures Related to the Consolidated Assets (continued) 17. Information on other assets: (continued)

b) Other assets which exceed 10% of the balance sheet total (excluding off balance sheet commitments) and breakdown of these which constitute at least 20% of grand total: None.

18. Information on factoring receivables of Group:

a) Maturity Analysis:

Current Period Prior Period TRY FC TRY FCShort term 420,963 190,544 297,787 85,225

Medium and Long Term - - 107 -

Specific provisions (8,095) (1,093) (7,828) (391)

Total 412,868 189,451 290,066 84,834

b) Other explanations and disclosures:

Current Period Commercial Consumer Total Neither past due nor impaired 588,451 - 588,451Past due not impaired 12,623 - 12,623Individually impaired 10,433 - 10,433Total gross 611,507 - 611,507

Less: allowance for individually impaired loans 9,188 - 9,188 Total allowance for impairment 9,188 - 9,188 Total net 602,319 - 602,319

Prior Period Commercial Consumer Total Neither past due nor impaired 345,006 - 345,006Past due not impaired 28,354 - 28,354Individually impaired 9,759 - 9,759

Total gross 383,119 - 383,119

Less: allowance for individually impaired loans 8,219 - 8,219 Total allowance for impairment 8,219 - 8,219 Total net 374,900 - 374,900

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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I. Explanations and Disclosures Related to the Consolidated Assets (continued)

18. Information on factoring receivables: (continued) b) Other explanations and disclosures: (continued) A reconciliation of the allowance for impairment losses of factoring receivables by classes is as follows;

Commercial Consumer Total

At January 1, 2010 8,219 - 8,219 Charge for the period 1,331 - 1,331

Recoveries (362) - (362) Amounts written off - - -

At December 31, 2010 9,188 - 9,188

Commercial Consumer Total

At January 1, 2009 6,522 - 6,522 Charge for the period 2,499 - 2,499 Recoveries (802) - (802) Amounts written off - - -

At December 31, 2009 8,219 - 8,219

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

69

SECTION FIVE II. Explanations and Disclosures Related to the Consolidated Liabilities 1. a) Information on maturity structure of deposits:

a.1) Current period:

Demand7 Day Call

AccountsUp to 1month

1-3Month

3-6Month

6 Month-1 Year

1 Yearand Over

Accumulated Deposits Total

Saving deposits 371,489 - 700,447 2,274,948 243,706 80,810 367 6,381 3,678,148Foreign currency deposits 1,247,287 - 1,404,584 1,239,712 97,258 56,941 177,784 1,256 4,224,822

Residents in Turkey 826,710 - 1,319,916 1,176,226 59,688 23,898 13,949 1,256 3,421,643Residents abroad 420,577 - 84,668 63,486 37,570 33,043 163,835 - 803,179

Public sector deposits 121,698 - 1,208 3,315 43 - - - 126,264Commercial deposits 916,949 - 1,071,743 1,216,309 37,484 45,702 - 30 3,288,217Other institutions deposits 13,730 - 8,707 140,554 2,670 119 4 - 165,784Precious metals deposits 108,512 - 14,962 4,384 1,160 356 - - 129,374Interbank deposits 163,107 - 1,261,546 115,783 7,660 - 3,166 - 1,551,262 Central Bank of Turkey - - - - - - - - -

Domestic Banks 53,919 - 57,895 - - - - - 111,814Foreign Banks 29,215 - 1,203,651 115,783 7,660 - 3,166 - 1,359,475Special finance houses 79,973 - - - - - - - 79,973Other - - - - - - - - -

Total 2,942,772 - 4,463,197 4,995,005 389,981 183,928 181,321 7,667 13,163,871

a.2) Prior period:

Demand7 Day Call

AccountsUp to 1month

1-3Month

3-6Month

6 Month-1 Year

1 Yearand Over

Accumulated Deposits Total

Saving deposits 270,084 - 803,947 2,310,906 66,611 37,413 629 11,414 3,501,004 Foreign currency deposits 1,283,739 - 1,186,456 1,338,293 79,720 147,897 161,371 2,122 4,199,598

Residents in Turkey 925,985 - 1,142,739 1,286,703 64,399 74,596 24,790 2,122 3,521,334 Residents abroad 357,754 - 43,717 51,590 15,321 73,301 136,581 - 678,264

Public sector deposits 103,715 - 1,095 1,508 - - 194 - 106,512 Commercial deposits 705,974 - 670,802 649,711 14,650 27,499 263 102 2,069,001 Other institutions deposits 9,528 - 24,219 87,932 44,702 444 1 - 166,826 Precious metals deposits 16,613 - 3,854 2,086 835 374 - - 23,762 Interbank deposits 97,638 - 91,200 34,046 64,623 9,057 17 - 296,581 Central Bank of Turkey - - - - - - - - -

Domestic Banks 14,862 - - 5,068 - - - - 19,930 Foreign Banks 32,303 - 91,200 28,978 64,623 9,057 17 - 226,178 Special finance houses 50,473 - - - - - - - 50,473 Other - - - - - - - - -

Total 2,487,291 - 2,781,573 4,424,482 271,141 222,684 162,475 13,638 10,363,284

b) Information on saving deposits under the guarantee of saving deposit insurance:

b.1) Saving deposits exceeding the limit of insurance: i) Information on saving deposits under the guarantee of saving deposit insurance and exceeding the

limit of saving deposit insurance:

Saving Deposits

Under the Guarantee of Insurance(*)

Exceeding the limit of Insurance(*)

Current Period Prior Period Current Period Prior PeriodSaving deposits 1,451,750 1,265,160 2,119,857 2,130,077Foreign currency saving deposits 348,999 379,691 1,233,522 1,302,510Other deposits in the form of saving deposits 12,876 3,372 113,771 18,838Foreign branches’ deposits under foreign authorities' insurance - - - -Off-shore banking regions’ deposits under foreign authorities' insurance - - - -Total 1,813,625 1,648,223 3,467,150 3,451,425

(*) According to the BRSA’s circular no 1584 dated on February 23, 2005, accruals are included in the saving deposit amounts.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

70

II. Explanations and Disclosures Related to the Consolidated Liabilities (continued) b.2) Information on the saving deposits of the bank with head office abroad, if the saving deposits in the

branches of the bank located in Turkey are under the guarantee of saving deposit insurance in that country abroad: None.

b.3) Saving deposits not guaranteed by insurance:

i) Deposit of real persons not under the guarantee of saving deposit insurance:

Current Period Prior Period Deposits and accounts in branches abroad 74,905

64,476

Deposits of ultimate shareholders and their close families 251,356 263,013 Deposits of chairman and members of the Board of Directors and their close families 10,805

10,408

Deposits obtained through illegal acts defined in the 282nd Article of the 5237 numbered Turkish Criminal Code dated September 26, 2004.

-

- Saving deposits in banks established in Turkey exclusively for off shore banking activities

-

-

2. Information on derivative financial liabilities:

a) Negative differences table related to derivative financial liabilities held-for-trading:

Current Period Prior Period TRY FC TRY FC Forward Transactions 4,156 9,332 2,629 3,341 Swap Transactions 37,448 8,628 21,294 6,142 Futures Transactions - 6,168 - 14,497 Options 22,829 8,207 7,061 2,973 Other - - 52 - Total 64,433 32,335 31,036 26,953

3. a) Information on banks and other financial institutions:

Current Period Prior Period TRY FC TRY FC Loans from Central Bank of Turkey - - - - From Domestic Banks and Institutions 416,517 80,358 279,972 165,273 From Foreign Banks, Institutions and Funds 2,095,495 1,809,618 862,909 1,152,346 Total 2,512,012 1,889,976 1,142,881 1,317,619

As of December 31,2010 the Group has borrowings from its related parties amounting to TRY 3,097,866 (December 31, 2009: TRY 1,368,651).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations and Disclosures Related to the Consolidated Liabilities (continued)

b) Maturity analysis of borrowings:

Current Period Prior Period TRY FC TRY FC Short-term 2,060,993 1,613,819 1,130,992 873,061 Medium and long-term 451,019 276,157 11,889 444,558 Total 2,512,012 1,889,976 1,142,881 1,317,619

c) Additional explanation related to the concentrations of the Parent Bank’s major liabilities:

The Parent Bank diversifies its funding resources by the customer deposits and by the foreign borrowings. As of December 31, 2010, the Parent Bank has a syndication loan of EUR 190,000,000 and USD 100,000,000, obtained on September 3, 2010 with a maturity of September 2, 2011, under foreign borrowings.

The Parent Bank makes analysis of its customers that provide the maximum amount of funds within the branches and throughout the Parent Bank, in consideration of profitability. The Parent Bank takes short and long term preventive measures to spread its customers on a wider spectrum on the basis of customer concentration in the branches.

Information on funds provided from repurchase agreement transactions:

Current Period Prior Period TRY FC TRY FC

From domestic transactions 74,357 - 1,071,971 - Financial institutions and organizations 73,565 - 1,071,243 - Other institutions and organizations - - - - Real persons 792 - 728 - From foreign transactions - - - - Financial institutions and organizations - - - - Other institutions and organizations - - - - Real persons - - - - Total 74,357 - 1,071,971 -

4. Other liabilities which exceed 10% of the balance sheet total (excluding off-balance sheet

commitments) and the breakdown of these which constitute at least 20% of grand total: None (December 31, 2009 – None).

5. Explanations on financial lease obligations (Net):

a) The general explanations on criteria used in determining installments of financial lease agreements, renewal and purchasing options and restrictions in the agreements that create significant obligations to the group: In the financial lease agreements, installments are based on useful life, usage periods and provisions of the Tax Procedural Law.

b) The explanation on modifications in agreements and new obligations resulting from such modifications:

None.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

72

II. Explanations and Disclosures Related to the Consolidated Liabilities (continued) 5. Explanations on financial lease obligations (Net): (continued)

c) Explanation on finance lease payables: Current Period Prior Period Gross Net Gross Net Less than 1 Year 21 16 - -Between 1-4 Years - - - -More than 4 Years - - - -Total 21 16 - -

d) Explanations regarding operational leases:

Except for the Head-Office-Istanbul and Izmir-Ege Kurumsal Branch buildings, all branch premises of the Parent Bank are leased under operational leases. For the period ended December 31, 2010, operational lease expenses amounting to TRY 77,890 (December 31, 2009 – TRY 75,757) have been recorded in the profit and loss accounts. The lease periods vary between 1 and 10 years and lease agreements are cancelable subject to a certain period of notice.

e) Explanations on the lessor and lessee in sale and lease back transactions, agreement conditions, and major

agreement terms: None.

6. Information on derivative financial liabilities for hedging purposes:

Current Period Prior Period TRY FC TRY FC Fair value hedge (*) 56,547 - 73,493 - Cash flow hedge - - - - Hedge of net investment in foreign operations - - - -

Total 56,547 - 73,493 -

(*) Comprised of swaps for hedging purposes.

7. Information on provisions:

a) Information on general provisions:

Current Period Prior Period General Provisions

Provisions for First Group Loans and Receivables 91,995 61,030 Provisions for Second Group Loans and Receivables 9,785 9,225 Provisions for Non-Cash Loans 11,564 8,833 Other 769 7,738 Total 114,113 86,826

b) Foreign exchange losses on the foreign currency indexed loans and finance lease receivables: The foreign

exchange losses on the foreign currency indexed loans amounting to TRY 24,097 (December 31, 2009 - TRY 26,976) is netted off from loans on the balance sheet.

c) The specific provisions provided for unindemnified non cash loans amount to TRY 18,722 (December 31,

2009 - TRY 10,617).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

73

II. Explanations and Disclosures Related to the Consolidated Liabilities (continued) 7. Information on provisions: (continued)

d) Information on employee termination benefits, premium and unused vacation accrual:

The Group has calculated reserve for employee termination benefits by using actuarial valuations as set out in the TAS No:19 and reflected this in the financial statements. The actuarial assumptions used for calculation of the reserve for employee termination benefits are; discount rate of 10% and (December 31, 2009 : 11%) inflation rate of 5.1% (December 31, 2009: 4.8%) .

As of December 31, 2010, the Group accrued TRY 10,985 (December 31, 2009 - TRY 9,476) for the unused vacations and TRY 26,777 (December 31, 2009 – TRY 20,605) for premiums to be paid to the Group’s personnel. Those amounts are classified under “Reserve for Employee Benefits” in the financial statements.

d.1) Movement of employee termination benefits

Current Period Prior Period As of January 1 18,512 13,795 Service cost 3,391 2,676 Interest cost 1,973 1,591 Settlement cost 953 1,473 Actuarial (gain)/loss 3,001 2,410 Benefits paid (2,460) (3,433) Effect of the sale of the subsidiary (248) - Total 25,122 18,512

e) Information on other provisions:

e.1) Provisions for possible losses: None (December 31, 2009 – None).

e.2) The breakdown of the subsidiary accounts if other provisions exceed 10% of the grand total of provisions:

Current Period Prior Period

Provision for promotions of credit cards and banking services

4,990

4,163

Provision for unindemnified non-cash loans 18,722 10,617

Other 4,267 1,010

Total 27,979 15,790

f) Liabilities on pension rights:

f.1) Liabilities for pension funds established in accordance with “Social Security Institution": None (December 31, 2009 – None).

f.2) Liabilities resulting from all kinds of pension funds, foundations etc, which provide post retirement

benefits for the employees: None (December 31, 2009 – None).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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II. Explanations and Disclosures Related to the Consolidated Liabilities (continued) 8. Explanations on taxes payable:

a) Information on current tax liability:

a.1) Corporate taxes:

Current Period Prior Period Provision for Corporate Taxes 53,476 3,913

a.2) Information on taxes payable:

Current Period Prior Period Taxation on Securities 6,757 9,088 Property Tax 1,044 920 Banking Insurance Transaction Tax (BITT) 11,307 10,050 Foreign Exchange Transaction Tax 9 10 Value Added Tax Payable 1,715 735 Other (*) 7,199 7,436 Total 28,031 28,239

(*) Others include income taxes deducted from wages amounting to TRY 6,756 (December 31, 2009 – TRY 6,108) and stamp taxes payable amounting to TRY 830 (December 31, 2009 - TRY 782) while prepaid income tax amounting to TRY 562 is deducted from other.

b) Information on premiums:

Current Period Prior Period Social Security Premiums-Employee 2,653 2,563 Social Security Premiums-Employer 2,822 2,723 Bank Social Aid Pension Fund Premium-Employee - - Bank Social Aid Pension Fund Premium-Employer - - Pension Fund Membership Fees and Provisions-Employee - - Pension Fund Membership Fees and Provisions-Employer - - Unemployment Insurance-Employee 185 180 Unemployment Insurance-Employer 374 359 Other 3 - Total 6,037 5,825

c) Explanations on deferred tax liabilities, if any: None (December 31, 2009 – None).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

75

II. Explanations and Disclosures Related to the Consolidated Liabilities (continued) 9. Information on liabilities regarding assets held for sale and discontinued operations: None

(December 31, 2009 – None).

10. Explanations on the number of subordinated loans the Parent Bank used, maturity, interest rate, institution that the loan was borrowed from, and conversion option, if any:

The Parent Bank has signed an agreement with the International Finance Corporation (IFC) on July 17, 2002, for a subordinated loan of USD 15 million. The maturity of the loan is October 15, 2011 and interest rate is LIBOR+2.85%. USD 9 million principle of this subordinated loan was paid in three tranches on October 15, 2009, April 15, 2010 and October 15, 2010 in accordance with the terms of the main agreement.

The Parent Bank has signed another agreement with the IFC on June 27, 2005, for a subordinated loan. The facility is a USD 50 million subordinated loan, with a maturity of July 15, 2015 and with an interest rate of LIBOR+3.18%. The Parent Bank has signed an agreement with the Economy Luxembourg S.A on October 27, 2006 for a subordinated loan. The facility is a EUR 110 million subordinated loan, with a maturity of October 31, 2016, and with an interest rate of 6.10%. The Parent Bank has obtained a primary subordinated loan by issuing a bond amounting to USD 100 million as of July 31, 2007. The investor of the said bond is IFC. The maturity of the borrowing is indefinite with semi-annually interest payment. The interest rate is defined as LIBOR+3.5% until July 31, 2017. In case the borrowed amount is not repaid at that date, the interest rate will be revised as LIBOR+5.25%. Each of the four of the above facilities match BRSA’s subordinated loan-capital definitions and positively contribute the Parent Bank’s capital adequacy ratio in a positive manner as well as creating long term financing.

a) Information on subordinated loans:

Current Period Prior Period TRY FC TRY FC From Domestic Banks - - - - From Other Domestic Institutions - - - - From Foreign Banks - - - - From Other Foreign Institutions - 472,542 - 483,474 Total - 472,542 - 483,474

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

76

II. Explanations and Disclosures Related to the Consolidated Liabilities (continued)

11. Information on Shareholders’ Equity:

a) Presentation of Paid-in capital:

Current Period Prior Period Common stock 1,100,000 1,100,000 Preferred stock - -

b) Paid-in capital amount, explanation as to whether the registered share capital system is applicable at bank if so amount of registered share capital ceiling:

Capital System Paid-in capital Ceiling Registered Capital System 1,100,000 1,400,000

c) Information on share capital increases and their sources; other information on increased capital shares in

current period: None

d) Information on share capital increases from revaluation funds: None.

e) Capital commitments in the last fiscal year and at the end of the following interim period, the general purpose of these commitments and projected resources required to meet these commitments: None.

f) Indicators of the Parent Bank’s income, profitability and liquidity for the previous periods and possible effects of these future assumptions due to the uncertainty of these indicators on the Parent Bank’s equity:

Prior year income, profitability and liquidity of the Parent Bank is closely monitored and reported to Board of Directors, Asset and Liability Committee, and Risk Management by the Budget and Financial Control Group. This group tries to forecast the effects of interest, currency and maturity fluctuations that change these indicators with static and dynamic scenario analysis. Net asset value, which is defined as the difference of fair values of assets and liabilities, is measured. Expectations are made for the Parent Bank’s future interest income via simulations of net interest income and scenario analysis.

g) Information on preferred shares:

7% of the Parent Bank’s remaining net income after tax subsequent to deducting legal reserves and first dividends, corresponding to the Parent Bank’s 60,000 shares of TRY 30 (in full TRY) is distributed to the founder shares.

h) Information on marketable securities valuation differences:

Current Period Prior Period TRY FC TRY FC From Associates, Subsidiaries, and Entities Under Common Control (Joint Vent.) - -

-

-

Valuation Difference 83,846 (823) 16,966 4,857 Foreign Exchange Difference - - - - Total 83,846 (823) 16,966 4,857

Current Period Prior Period

Foreign currency marketable securities valuation differences (823) 4,857 Foreign exchange gains resulting from foreign currency associates, subsidiaries, and securities held to maturity related to the above amount - -

Total (823) 4,857

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

77

II. Explanations and Disclosures Related to the Consolidated Liabilities (continued) 11. Information on Shareholders’ Equity: (continued)

Information on legal reserves:

Current Period Prior Period First legal reserves 47,594 42,642 Second legal reserves 13,231 14,877 Other legal reserves appropriated in accordance with special legislation - -

Total 60,825 57,519

Information on extraordinary reserves:

Current Period Prior Period Reserves appropriated by the General Assembly (*) 431,658 374,077 Retained earnings - - Accumulated losses - - Foreign currency share capital exchange difference - -

Total 431,658 374,077

(*) The Extraordinary General Assembly held on October 19, 2010, approved the proposal of the Board of Directors resolution on the profit distribution no: 4450/93 dated October 1, 2010 to make a profit distribution of TRY 207,017 which is included in the reserves of the 2009 year-end financial statements to the shareholders; and has authorized the Board of Directors in regards to the procedures and transactions relevant to the profit distribution. The profit distribution process started commencing on October 25, 2010.

Other Information on Shareholders’ Equity:

The movement of the marketable securities valuation differences is as follows: Current Period Prior Period At January 1 21,823 5,218 Net unrealized gains on available for sale investments 106,840 76,054 Realized gains on available for sale investments recycled to income statement on disposal - - Realized losses on available for sale investments recycled to income statement on disposal and impairment (30,401) (55,251) Tax effect of net gains on available for sale investments (15,239) (4,198) Unrealized gains / (losses) on cash flow hedges - - Gains / (losses) on cash flow hedges recycled to income statement - - Tax effect of net gains on cash flow hedges - -

At period end 83,023 21,823 12. Information on minority shares: None (December 31, 2009 – None). 13. Explanations on factoring payables: None (December 31, 2009 – TRY 743).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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SECTION FIVE III. Explanations and Disclosures Related to the Consolidated Off-Balance Sheet

Contingencies and Commitments 1. Information on off-balance sheet liabilities:

a) Nature and amount of irrevocable loan commitments: Credit card expenditure limit commitments are TRY 1,153,549 and TRY 957,516; payment commitments for checks are TRY 707,681 and TRY 650,733 as of December 31, 2010 and December 31, 2009 respectively.

b) Possible losses and commitments related to off-balance sheet items including items listed below:

The Group, within the context of banking activities, undertakes certain commitments, consisting of loan commitments, letters of guarantee, acceptance credits and letters of credit.

b.1) Non-cash loans including guarantees, acceptances, financial guarantee and other letters of credits:

b.2) Guarantees, suretyships, and similar transactions:

c) c.1) Total amount of non-cash loans:

Current Period Prior Period Non-cash loans given against achieving cash loans 196,698 206,721

With maturity of 1 year or less than 1 year 31,045 40,135 With maturity of more than 1 year 165,653 166,586

Other non-cash loans 4,219,612 3,548,950 Total 4,416,310 3,755,671

Current Period Prior Period

Letters of Credit 993,442 784,382 Bank Acceptances 55,532 39,205 Other Commitments 279,034 185,376 Other Contingencies 35,496 22,236 Total 1,363,504 1,031,199

Current Period Prior Period Guarantee Letters 2,189,571 1,930,796 Advance Guarantee Letters 285,114 334,945 Guarantee Letters Given for Customs 211,909 145,859 Temporary Guarantee Letters 223,055 178,758 Other Guarantee Letters 143,157 134,114 Total 3,052,806 2,724,472

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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III. Explanations and Disclosures Related to the Consolidated Off-Balance Sheet Contingencies and Commitments (continued)

1. Information on off-balance sheet liabilities: (continued) c.2) Information on sectoral risk breakdown of non-cash loans:

Current Period Prior Period TRY (%) FC (%) TRY (%) FC (%)

Agricultural 30,319 1.53 54,876 2.26 22,109 1.44 39,986 1.80 Farming and raising livestock 23,255 1.17 35,701 1.47 16,422 1.07 23,166 1.04 Forestry 6,826 0.35 19,124 0.79 5,180 0.34 16,820 0.76 Fishery 238 0.01 51 - 507 0.03 - -

Manufacturing 1,060,727 53.43 1,305,830 53.71 830,539 54.19 1,142,034 51.37 Mining 58,762 2.96 37,749 1.55 43,566 2.85 24,103 1.08 Production 984,013 49.57 1,263,676 51,98 767,155 50.05 1,101,885 49.57 Electric, gas and water 17,952 0.90 4,405 0.18 19,818 1.29 16,046 0.72

Construction 374,732 18.88 315,761 12.99 328,665 21.44 280,978 12.64 Services 487,512 24.56 403,385 16.59 331,611 21.64 335,758 15.10

Wholesale and retail trade 178,561 9.00 45,528 1.87 99,329 6.48 23,038 1.04 Hotel, food and beverage services 13,373 0.67 6,499 0.27 7,139 0.47 3,209 0.14 Transportation and telecommunication 133,277 6.71 207,215 8.52 77,468 5.05 177,007 7.96 Financial institutions 40,641 2.05 116,134 4.78 39,790 2.60 80,748 3.63 Real estate and renting services 35,180 1.77 13,336 0.54 25,949 1.69 22,953 1.03 Self-employment services 53,117 2.68 4,031 0.17 47,328 3.09 10,290 0.46 Education services 461 0.02 891 0.04 564 0.04 579 0.03 Health and social services 32,902 1.66 9,751 0.40 34,044 2.22 17,934 0.81

Other 31,811 1.60 351,357 14.45 19,777 1.29 424,214 19.09 Total 1,985,101 100.00 2,431,209 100.00 1,532,701 100.00 2,222,970 100.00

c.3) Information on I st and II nd Group non-cash loans:

I st Group II nd Group Non-cash loans TRY FC TRY FC Letters of guarantee 1,733,196 1,285,818 21,637 12,155 Bank acceptances 345 55,187 - - Letters of credit 493 988,414 - 4,535 Endorsements - - - - Underwriting commitments - - - - Factoring commitments - - - - Other commitments and contingencies 229,235 84,732 195 368 Total 1,963,269 2,414,151 21,832 17,058

The Parent Bank provided a reserve of TRY 18,722 (December 31, 2009 – TRY 10,617) for non-cash loans not indemnified yet amounting to TRY 25,204 (December 31, 2009 - TRY 18,361).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

80

III. Explanations and Disclosures Related to the Consolidated Off-Balance Sheet Contingencies and Commitments (continued)

2. Information related to derivative financial instruments:

Derivative Transactions According to Purposes Trading Hedging Current Period Prior Period Current Period Prior PeriodTypes of trading transactions Foreign currency related derivative transactions (I) 11,021,610 6,867,168 - -

Forward transactions 2,130,663 1,655,125 - -Swap transactions 3,957,025 2,437,034 - -Futures transactions 498,894 483,173 - -Option transactions 4,435,028 2,291,836 - -

Interest related derivative transactions (II) 725,677 375,169 - -Forward rate transactions - - - -Interest rate swap transactions 461,132 338,514 - -Interest option transactions 264,545 36,655 - -Futures interest transactions - - - -

Marketable securities call-put options (III) 17,678 - - -Other trading derivative transactions (IV) 1,559 - - -A.Total trading derivative transactions (I+II+III+IV) 11,766,524 7,242,337 - - Types of hedging transactions

Fair value hedges - - 491,053 761,499Cash flow hedges - - - -Net investment hedges - - - -

B.Total hedging related derivatives - - 491,053 761,499

Total Derivative Transactions (A+B) 11,766,524 7,242,337 491,053 761,499

Related to agreements of forward transactions and options; the information based on the type of forward and options transactions are disclosed separately, specified with related amounts, type of agreement, purpose of transaction, nature of risk, strategy of risk management, hedging relationship, possible effects on the Bank’s financial position, timing of cash flows, reasons of unrealized transactions which previously projected to be realized, income and expenses that could not be linked to income statement in the current period because of the agreements: Forward foreign exchange and swap transactions are based on protection from interest and currency fluctuations. According to TAS, they do not qualify as hedging instruments and are remeasured at fair value.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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III. Explanations and Disclosures Related to the Consolidated Off-Balance Sheet Contingencies and Commitments (continued)

2. Information related to derivative financial instruments: (continued)

As of July 1, 2008, the Parent Bank has started to apply fair value hedge accounting in order to avoid the effects of interest rate changes in the market by matching TRY 491,053 of its swap portfolio (December 31, 2009: TRY 761,499) with its loan portfolio.

As of December 31, 2010, the Group has no cash flow hedges. (December 31, 2009 – None)

As of December 31, 2010, the Group has no hedge of net investment. (December 31, 2009 – None)

3. Explanations on contingent liabilities and assets:

a.1) The Group's share in contingent liabilities arising from entities under common control together with other venturers: None.

a.2) Share of entity under common control (joint ventures) in its own contingent liabilities: None.

a.3) The Group’s contingent liabilities resulting from liabilities of other venturers in entity under common control (joint ventures): None.

b) Accounting and presentation of contingent assets and liabilities in the financial statements:

b.1) Contingent assets are accounted for, if probability of realization is almost certain. If probability of realization is high, then it is explained in the footnotes. As of December 31, 2010 there are no contingent assets that need to be explained (December 31, 2009 – None).

b.2) A provision is made for contingent liabilities, if realization is probable and the amount can be

reliably determined. If realization is remote or the amount cannot be determined reliably, then it is explained in the footnotes: As of December 31, 2010 one of the loan customers filed a litigation case against the Parent Bank, however, since the case is still in progress for expertise appointment and gathering supporting documents, the Parent Bank could not yet evaluate the probable effects of the case on financial statements (December 31, 2009 - None).

4 . Custodian and intermediary services:

The Group provides trading and safe keeping services in the name and account of third parties, which are presented in the consolidated statement of contingencies and commitments.

Investment fund participation certificates held in custody which belong to the customers and the portfolio are accounted for with their nominal values. As of December 31, 2010, the total nominal value and the number of certificates are TRY 1,143,395 and 114,328,700 thousand (December 31, 2009 – TRY 1,144,205 and 113,835,511 thousand) and the total fair value is TRY 4,898,915 (December 31, 2009 – TRY 5,645,247).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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III. Explanations and Disclosures Related to the Consolidated Off-Balance Sheet Contingencies and Commitments (continued)

5. The information on the Bank’s rating by the international rating introductions (*) :

The results of the ratings performed by Moody’s Investor Services and Fitch Ratings for the Parent Bank are shown below:

Moody’s Investor Services: October 2010 View Stable Bank Financial Strength D+ Foreign Currency Deposits Ba3/NP Fitch Ratings: December 2010 Foreign Currency Commitments Long term BBB- Short term F3 View Positive Turkish Lira Commitments Long term BBB Short term F3 View Positive National AAA (tur) View Stable Individual Rating C/D Support Points 2 (*) Ratings above are not performed based on the “Communiqué for Authorization and Activities of

Rating Institutions” published by the Capital Markets Board.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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SECTION FIVE

IV. Explanations and Disclosures Related to the Consolidated Statement of Income

1. a) Information on interest on loans:

Current Period Current Period Prior Period Interest on loans (*) TRY FC TRY FC Short term loans 622,656 103,773 759,821 140,645

Medium and long term loans 457,276 58,105 373,519 39,418

Interest on non-performing loans 13,900 - 6,719 -

Premiums received from Resource Utilization Support Fund - -

-

-

Total 1,093,832 161,878 1,140,059 180,063

(*) Includes fees and commissions obtained from cash loans amounting to TRY 56,352 (December 31, 2009: TRY 39,848).

b) Information on interest received from banks: Current Period Prior Period TRY FC TRY FC The Central Bank of Turkey - - - 10 Domestic banks 1,621 151 2,100 60 Foreign banks 6,337 2,577 5,315 11,709 Branches and head office abroad - - - - Total 7,958 2,728 7,415 11,779

c) Interest received from marketable securities portfolio: Current Period Prior Period TRY FC TRY FC Trading securities 17,191 387 12,219 647 Financial assets at fair value through profit and loss - - - - Available-for-sale securities 192,774 8,156 156,467 7,994 Held-to-maturity securities 52,206 1,002 116,283 1,137 Total 262,171 9,545 284,969 9,778

d) Information on interest income received from associates and subsidiaries:

Interest income received from associates and subsidiaries are eliminated in the consolidated financial statements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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IV. Explanations and Disclosures Related to the Consolidated Statement of Income (continued)

2. a) Information on interest on funds borrowed (*):

Current Period Prior Period TRY FC TRY FC Banks

The Central Bank of Turkey - - - - Domestic banks 19,220 2,557 17,378 4,102 Foreign banks 115,747 21,964 121,269 20,230 Branches and head office abroad - - - -

Other financial institutions - 31,790 - 34,299 Total 134,967 56,311 138,647 58,631

(*) Includes fees and commission expenses of cash loans amounting to TRY 5,962 (December 31, 2009: TRY 3,821). b) Information on interest expenses to associates and subsidiaries: Interest income received from associates and subsidiaries are eliminated in the consolidated financial statements. c) Information on interest expenses to marketable securities issued: None (December 31, 2009 –

None). d) Distribution of interest expense on deposits based on maturity of deposits:

Time Deposits

Account Name Demand Deposits

Up to 1 Month

Up to 3 Months

Up to 6 Months

Up to 1 Year

More than 1 Year

Accumulated Deposits

Total

TRY Bank deposits 2,430 11,155 739 36 59 274 - 14,693 Saving deposits 1,793 67,124 186,238 12,660 11,212 41 658 279,726 Public sector deposits - 404 212 2 9 - - 627 Commercial deposits 176 64,714 54,957 876 1,353 - - 122,076 Other deposits - 2,176 13,145 3,193 586 2 - 19,102 7 days call accounts - - - - - - - -

Total 4,399 145,573 255,291 16,767 13,219 317 658 436,224 FC

Foreign currency deposits

714 26,626 43,113 1,958 2,109 5,844 24 80,388

Bank deposits 116 632 477 69 283 - - 1,577 7 days call accounts - - - - - - - - Precious metal deposits - 104 37 16 5 - - 162

Total 830 27,362 43,627 2,043 2,397 5,844 24 82,127 Grand Total 5,229 172,935 298,918 18,810 15,616 6,161 682 518,351

3. Information on dividend income:

Current Period Prior Period

Trading securities - - Financial assets at fair value through profit and loss - - Available-for-sale securities 17 13 Other - - Total 17 13

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

85

IV. Explanations and Disclosures Related to the Consolidated Statement of Income (continued)

4. Information on net trading income:

Current Period Prior Period

Income 2,243,790 2,394,576 Gains on capital market operations 42,542 76,133 Gains on derivative financial instruments (*) 551,324 481,694 Foreign exchange gains 1,649,924 1,836,749 Losses (-) 2,250,889 2,347,803 Losses on capital market operations 10,846 13,481 Loss on derivative financial instruments (*) 754,639 682,805 Foreign exchange losses 1,485,404 1,651,517 (*) Foreign exchange gains on hedging transactions are TRY 4,519 (December 31, 2009 – TRY 1,169), while foreign exchange

losses on hedging transactions are TRY 25,425 (December 31, 2009 – TRY 17,216).

5. Information on other operating income:

The information on the factors affecting the Bank’s income including new developments, and the explanation on nature and amount of income earned from extraordinary such items: None

6. Provision expenses of banks for loans and other receivables:

Current Period Prior PeriodSpecific provisions for loans and other receivables 123,644 174,541

III. Group Loans and Receivables 22,723 4,955 IV. Group Loans and Receivables 35,832 30,676 V. Group Loans and Receivables 65,089 138,910

General provision expenses 31,730 1,421 Provision expenses for possible losses - -Marketable securities impairment losses 11,721 2,947

Financial assets at fair value through profit and loss 30 143 Investment securities available for sale 11,691 2,804

Impairment provision expense 3,360 3,117Associates - -Subsidiaries - -Entities under common control (Joint Vent.) - -Investments held to maturity 3,360 3,117

Other 969 1,697Total 171,424 183,723

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

86

IV. Explanations and Disclosures Related to the Consolidated Statement of Income (continued)

7. Information on other operating expenses:

Current Period Prior Period Personnel expenses 379,813 371,181 Reserve for employee termination benefits 9,265 8,012 Bank social aid fund deficit provision - -Impairment expenses of fixed assets - -Depreciation expenses of fixed assets 46,088 47,094Impairment expenses of intangible assets - -

Impairment expense of goodwill - -Amortization expenses of intangible assets 7,288 6,463Impairment for investments accounted for under equity method - -Impairment expenses of assets to be disposed 2,197 2,106Depreciation expenses of assets to be disposed 385 -Impairment expenses of assets held for sale and discontinued operations - -Other operating expenses 269,724 258,593

Rent expenses 77,890 75,757 Maintenance expenses 7,165 6,306 Advertisement expenses 24,461 23,617 Other expenses 160,208 152,913

Loss on sales of assets 131 983Other(*) 122,488 57,324 Total 837,379 751,756 (*) Included in other TRY 11,054 (December 31, 2009 – TRY 9,927) is premiums paid to Saving Deposit Insurance Fund, TRY

43,122 (December 31, 2009 – 20,039 TL) is other taxes and duties paid and TRY 25,239 is merger and restructuring costs.

8. Information on profit/(loss) from continued and discontinued operations before taxes:

Profit before tax consists of net interest income and net fees and commission income amounting to TRY 825,546 (December 31, 2009 - TRY 862,074) and TRY 463,953 (December 31, 2009 - TRY 282,423), respectively; while operating expenses are TRY 837,379 (December 31, 2009 - TRY 751,756). The Parent Bank sold 90.01% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345 as of September 30, 2010. The profit amounting to TRY 18,244 resulting from this sale is presented as “Income on Sale of Associates, Subsidiaries and Entities Under Common Control” under the “Income on Discontinued Operations” in the current year income statement.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

87

IV. Explanations and Disclosures Related to the Consolidated Statement of Income (continued)

8. Information on profit/(loss) from continued and discontinued operations before taxes: Income and expenses on discontinued operations for the period ended December 31, 2010 and December 31, 2009 are as follows: Current Period Prior PeriodIncome and Expense on Discontinued Operations Net Interest Income / Expense 19,661 29,313

Interest Income 35,371 55,509Interest Expense 15,710 26,196

Net Fees and Commission Income 197 266Dividend Income 1,292 859Trading Income / Loss (net) (338) (2,378)Other Operating Income 13 163Net Operating Income 20,825 28,223Provision for Loan Losses and other receivables (-) 3,628 15,429Other Operating Expenses (-) 8,270 10,032Profit / Loss on Discontinued Operations before Taxes 8,927 2,762Tax Provision (**) 3,015 34,414Net Profit / Loss from Discontinued Operations 11,942 37,176Effect of the Eliminations 147 1,170Gain on Sale of Discontinued Operations 18,244 -Tax Charge of Gain on Sale of Discontinued Operations (**) (3,859) -Profit (*) 26,474 38,346

(*) The current period profit includes the income and expense items of TEB Finansal Kiralama A.Ş. until the sale date

(September 30, 2010), the net gain on sale of this subsidiary and the respective tax charge. (**) The current income tax charge amounting to TRY 3,859 related with the sale of subsidiary and income tax benefit of the

subsidiary until the sale amounting to TRY 3,015 are presented under “Tax Provision for Discountinued Operations” as a net of TRY 844 tax charge.

9. Information on tax provision for continued and discontinued operations:

a) As of December 31, 2010, continuing operations’ current tax charge is TRY 94,355 (December 31, 2009 – TRY 57,476 tax charge) and deferred tax benefit is TRY 21,818 (2008 – TRY 498 deferred tax benefit), discontinuing operations’ current tax charge is TRY 4,969 (December 31, 2009 – None) and deferred tax benefit is TRY 4,125 (December 31, 2009 – TRY 34,414).

b) Deferred tax benefit of discontinuing operations’ temporary differences is TRY 21,818 (December 31,

2009 – TRY 498).

The Parent Bank sold 90% shares of its subsidiary TEB Finansal Kiralama A.Ş. to Fortis Finansal Kiralama A.Ş. in consideration of TRY 113,345, and TRY 3,859 tax effect of this sale is presented as “Tax Provision for Discontinued Operations”.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

88

IV. Explanations and Disclosures Related to the Consolidated Statement of Income (continued)

9. Information on tax provision: (continued)

c) Tax reconciliation:

Current Period Prior Period Profit on continued and discontinued operations before taxes 346,000 290,468 Additions 59,841 93,444 Disallowables 5,815 17,180 General loan loss provision 31,926 3,916 Provision for possible tax disputes - 735 Effect of different tax rate 8,638 63,364 Other 13,462 8,249 Deductions (38,938) (271,092) General loan loss provision (180) (280) Provision for possible tax disputes - (14,711) Income from branches abroad - (11,993) Unused investment incentive (31,585) (239,181) Other (7,173) (4,927) Taxable Profit / (Loss) 366,903 112,820 Corporate tax rate %20 %20 Tax calculated for continued and discontinued operations 73,381 22,564

As of December 31, 2010, current tax charge is TRY 99,324 (December 31, 2009 – TRY 57,476 current tax charge) and deferred tax benefit on temporary differences is TRY 25,943 (December 31, 2009 – TRY 34,912 deferred tax benefit). Net tax charge recognized in the financial statements is TRY 73,381 (December 31, 2009 – TRY 22,564 net tax charge).

10. Information on net operating income after taxes: The Group net profit from continued operations is TRY 246,145 (December 31, 2009 – TRY 229,558) and net profit from discontinued operations is TRY 26,474 for the year ended December 31, 2010 (December 31, 2009 – TRY 38,346).

11. The explanations on net income / loss for the period:

a) The nature and amount of certain income and expense items from ordinary operations is disclosed if the disclosure for nature, amount and repetition rate of such items is required for the complete understanding of the Bank's performance for the period: None (December 31, 2009 – None).

b) Effect of changes in accounting estimates on income statement for the current and, if any, for subsequent

periods: None (December 31, 2009 – None).

c) Profit or loss attributable to minority shares: None (December 31, 2009 – None).

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

89

IV. Explanations and Disclosures Related to the Consolidated Statement of Income (continued)

12. If the other items in the income statement exceed 10% of the income statement total, accounts

amounting to at least 20% of these items:

Current Period Prior Period

Other interest income

Factoring interest income 45,205 45,692

Mark to market differences of the hedged item - 8,724

Other 5,342 3,778

Total 50,547 58,194

Current Period Prior Period

Other fees and commissions received

Brokerage commissions received 23,880 22,032

Credit cards commissions and fees 174,707 177,022

Fund management commissions 39,606 43,066

Import letters of credit commissions 3,432 4,011

Inquiry and company search fees and commissions 23,199 17,920

Settlement expense provision, eft, swift, agency commissions 9,955 9,915

Insurance commissions 14,369 10,966

Transfer commissions 9,452 7,506

Commissions and fees earned from correspondent banks 7,341 6,389

Consultancy fees 609 1,149

Other (*) 244,770 60,390

Total 551,320 360,366

Other fees and commissions given

Credit cards commissions and fees 109,132 97,548

Commissions and fees paid to correspondent banks 8,741 8,306

Settlement and swift commissions 4,810 3,873

Other 14,692 12,516

Total 137,375 122,243

(*) As of October 18, 2010, The Parent Bank signed an exclusive agency agreement with Cardif Hayat Sigorta A.Ş. for the distribution of life insurance products and has also signed an exclusive agency agreement with Fortis Emeklilik ve Hayat A.Ş. for the distribution of pension and life saving products, and received TRY 180,000 in consideration of these agreements.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

90

SECTION FIVE

V. Explanations and Disclosures Related to the Consolidated Statement of Shareholders' Equity Movement

a) Increase resulting from revaluation of financial assets available for sale is TRY 61,200 (December 31, 2009 – TRY 16,605 increase).

Gain or loss arising from measurement of financial assets available-for-sale included in shareholders' equity in the current period, excluding those related to hedging: Indicated above.

The amount recycled from equity to net income/loss account if the loss or gain related with measurement at fair value is recorded to equity for the financial assets available-for-sale (excluding the assets related to hedging): TRY 30,401 income (December 31, 2009 – TRY 55,251 income).

b) Increase in cash flow risk hedging items: None.

b.1) Reconciliation of beginning and ending balances: None.

b.2) Amount recorded in the current period if a gain or loss from a cash flow hedging derivative or non-derivative financial asset is accounted for under shareholders’ equity: None.

c) The reconcilation related with foreign exchange amounts in the beginning and end of the period: None. d) Dividends declared subsequent to the balance sheet date, but before the announcement of the financial

statements: None,

e) Dividends per share proposed subsequent to the balance sheet date: At the Extraordinary General Assembly held on October 19, 2010; it was decided to make a profit distribution of TRY 207,017 which was included in the reserves of the 2009 year-end financial statements to the shareholders. The dividend per share of TRY 0.19 is made.

f) Proposals to General Assembly for the payment dates of dividends and if it will not be appropriated the

reasons for this: As per the decision taken in the Extraordinary General Assembly held on October 19, 2010 the profit distribution process was commenced on October 25, 2010.

g) Amounts transferred to legal reserves: Amount transferred to legal reserves is TRY 3,306 in 2010

(December 31, 2009 – TRY 10,826).

h) Information on shares issued:

The Group has not recorded any shares issued in “ Share Premium” account in the current period.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

91

VI. Explanations and Disclosures Related to the Consolidated Statement of Cash Flows

1. The effects of the other items stated in the cash flow statement and the changes in foreign currency exchange rates on cash and cash equivalents:

“Other items” amounting to TRY 929,544 (December 31, 2009 – TRY 737,829) in “Operating profit before changes in operating assets and liabilities” consists of fees and commissions paid and other expenses except for personnel expenses, leasing expenses, reserve for employee termination benefits, depreciation charges and taxes paid.

“Net increase/decrease in other liabilities” amounting to TRY 131,371 (December 31, 2009 – TRY 31,378) in “Changes in operating assets and liabilities” consists of changes in sundry creditors, other liabilities and interbank money market borrowings. “Net increase/decrease in other assets” with a total amount of TRY 423,542 (December 31, 2009 – TRY 110,362) consists of changes in sundry debtors and other assets.

2. Cash and cash equivalents at beginning and end of periods:

The reconciliation of the components of cash and cash equivalents, accounting policies used to determine these components, the effect of any change made in accounting principle in the current period, the recorded amounts of the cash and cash equivalent assets at the balance sheet and the recorded amounts in the cash flows statement:

Beginning of the period Current Period Prior Period Cash 1,250,073 1,796,800 Cash in TRY/Foreign Currency 309,354 251,828 Central Bank – Unrestricted amount 922,102 1,527,735 Other 18,617 17,237 Cash equivalents 1,416,140 1,921,143 Banks 711,676 1,164,620 Money market placements 704,464 756,523

Total cash and cash equivalents 2,666,213 3,717,943

End of the period Current Period Prior Period Cash 1,616,646 1,250,073 Cash in TRY/Foreign Currency 287,730 309,354 Central Bank – Unrestricted amount 1,301,246 922,102 Other 27,670 18,617 Cash equivalents 1,014,013 1,416,140 Banks 1,013,775 711,676 Money market placements 238 704,464

Total cash and cash equivalents 2,630,659 2,666,213

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

92

VII. Explanations on the Risk Group of the Parent Bank

1. Volume of related party transactions, income and expense amounts involved and outstanding loan and deposit balances:

a) Current Period:

Related Parties

Subsidiaries, associates and entities under common

control (Joint Vent.) Direct and indirect

shareholders of the Bank Other entities included

in the risk group Cash Non-cash Cash Non-cash Cash Non-cash Loans and other receivables

Balance at beginning of period - - 15,688 46,004 60,793 88,948 Balance at end of period - - 38,643 40,782 208,651 117,172

Interest and commission income - - 3,512 16 5,609 750

Included in the balances above, the Group has placements in foreign bank accounts amounting to TRY 14,134 with respect to direct and indirect corporate and real person shareholders and TRY 68,529 other entities included in the risk group.

b) Prior Period:

Related Parties

Subsidiaries, associates and entities under common

control (Joint Vent.) Direct and indirect

shareholders of the Bank Other entities included

in the risk group Cash Non-cash Cash Non-cash Cash Non-cash Loans and other receivables

Balance at beginning of period - - 82,234 14,059 121,993 7,573 Balance at end of period - - 15,688 46,004 60,793 88,948

Interest and commission income received - - 6,561 2 5,108 234

Included in the balances above, the Parent Bank has placements in foreign bank accounts amounting to TRY 14,085 with respect to direct and indirect corporate and real person shareholders and TRY 8,854 other entities included in the risk group.

c.1) Information on related party deposits balances:

Related parties

Subsidiaries, associates and entities under common

control (Joint Vent.) Direct and indirect

shareholders of the Bank Other entities included

in the risk group

Deposits Current Period

Prior Period

Current period

Prior period

Current period

Prior Period

Balance at beginning of period - - 282,015 189,247 175,059 836,370Balance at end of period - - 1,024,799 282,015 391,344 175,059Interest on deposits - - 24,869 48,906 5,353 6,466

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

93

VII. Explanations on the Risk Group of the Parent Bank (continued) c.2) Information on forward and option agreements and other similar agreements made with related parties:

Related Parties

Subsidiaries, associates and entities under common

control (Joint Vent.) Direct and indirect

shareholders of the Bank Other entities included

in the risk group Current Period Prior Period Current Period Prior Period Current Period Prior Period Financial Assets at Fair Value Through Profit and Loss

Beginning of period - - 1,649,880 2,401,449 746,942 419,698End of period - - 3,178,878 1,649,880 887,840 746,942Total income/loss - - (23,285) (43,062) 30,877 (41,922)

Hedging transactions purposes Beginning of period - - 306,331 322,681 - -End of period - - 201,151 306,331 - -Total income/loss - - (169) (14,510) - -

d) As of December 31, 2010, the total amount of remuneration and fees provided for the senior management of the Group is TRY 24,358 (December 31, 2009 – TRY 25,024).

VIII. Explanations on the Parent Bank’s Domestic Banches, Agencies and Branches Abroad

and Off-shore Branches 1. Explanations on the Bank’s domestic branches, agencies and branches abroad and off-shore

branches:

Number Employees Domestic branches 331 5,602 Country Rep-offices abroad - - Total Assets Capital Branches abroad 3 42 Cyprus 193,853 10,000 Off-shore branches 1 2 Bahrain 1,498,870 -

2. Explanations on Branch and Agency Openings or Closings of the Parent Bank: The Parent Bank opened 2 new branches and closed 1 of its branches in 2010.

TÜRK EKONOMİ BANKASI ANONİM ŞİRKETİ NOTES AND DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

94

SECTION SIX

OTHER EXPLANATIONS

I. Explanations on the Operations of the Parent Bank

None.

SECTION SEVEN

INDEPENDENT AUDITOR’S REPORT

I. Explanations on the Independent Auditor’s Report

The consolidated financial statements of the Group were audited by DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. (Member of Deloitte Touche Tohmatsu Limited) and the independent auditor’s report dated February 10, 2011 is presented preceding the financial statements.

II. Other Footnotes and Explanations Prepared by Independent Auditors

None.

 

 104

  

DIRECTORY Türk Ekonomi Bankası A.Ş.

Head Office Adress: Meclis-i Mebusan Caddesi No: 57 Fındıklı 34427 İSTANBUL - TURKEY Phone: +90 212 251 21 21 Fax: +90 212 249 65 68 Web: www,teb,com,tr E-mail: investorrelations@teb,com,tr

www.teb.com.tr